UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

 

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

 

For the fiscal year ended December 31, 2014

 

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

 

For the transition period from [   ] to [   ]

 

Commission file number 000-52767

 

SUNERGY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

14362 N. Frank Lloyd Wright Blvd., Suite 1000, Scottsdale, AZ		85260
(Address of principal executive offices)		(Zip Code)

 

Registrant's telephone number, including area code:

480.477.5810

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class		Name of Each Exchange On Which Registered
N/A		N/A

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 par value

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes o No x

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 registration statement was required to submit and post such files). Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)  is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

 

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

 

The aggregate market value of Common Stock held by non-affiliates of the Registrant on June 30, 2014 was $7,429,268 based on a $0.0028 closing price per share. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

2,653,310,103 as of April 5, 2015  

 

 

TABLE OF CONTENTS

 

 

PART I	1
Item 1.  Business	1
Item 1A.  Risk Factors	4
Item 1B.  Unresolved Staff Comments	11
Item 2.  Properties	11
Item 3.  Legal Proceedings	11
Item 4.  (Removed and Reserved)	11
PART II	12
Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
Item 6.  Selected Financial Data	13
Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk	18
Item 8.  Financial Statements and Supplementary Data	18
Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	35
Item 9A(T).  Controls and Procedures	35
Item 9B.  Other Information	56
PART III	37
Item 10.  Directors, Executive Officers and Corporate Governance	37
Item 11.  Executive Compensation	39
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	40
Item 13.  Certain Relationships and Related Transactions, and Director Independence	41
Item 14.  Principal Accounting Fees and Services	41
PART IV	42
Item 15.  Exhibits, Financial Statement Schedules	42
SIGNATURES	43

 

 

PART I

 

Item 1. Business

 

In this Annual Report on Form 10-K, references to “dollars” and “$” are to the United States dollars and, unless the context otherwise requires, Sunergy, Inc., and its consolidated subsidiaries are referred to in this report as the “Sunergy,” the “Company,” “we,” “our” or “us.” In addition to historical information, this Annual Report on Form 10-K (“Annual Report”) for Sunergy contains “forward-looking” statements, including statements regarding the growth of product lines, optimism regarding the business, expanding sales and other statements. Words such as expects, anticipates, intends, plans, believes, sees, estimates, predicts”, “potential” or “continue” or the negative of these terms and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Actual results could vary materially from the description contained herein based on (i) the uncertain global economic environment and the timing and strength of a recovery in the markets we serve, and the extent to which adverse economic conditions continue to affect our exploration activities and results, or increase competitive pressures within the mining industry, (ii) the impact of governmental initiatives in Ghana and Sierra Leone West Africa to spur economic activity, including the effects of significant government monetary or other market interventions on inflation, and price control, (iii) our anticipated cash needs in light of our liquidity, (iv) the continued price of gold and rare earth elements, (v) trends and other factors affecting our financial condition or results of operations from period to period, including severe weather conditions or natural disasters and the availability of sufficient labor during the exploration period, (vi) the impact of foreign currency fluctuations, (vii) our plans for expansion of our business and exploration, (viii) our ability to successfully integrate our mining explorations into the existing natural environment and economic climate of our concessions, and (ix ) the cost and other implications of changes in regulations applicable to our business, including potential legislative or regulatory initiatives in Ghana and Sierra Leone West Africa or elsewhere directed at mining and mineral concessions, currency and the free exchange (including without limitation import and exports) of goods and raw materials (including without limitation gold and rare earth elements) from one county to another, and other risk factors listed in the section of this Annual Report titled “Risk Factors” and elsewhere in this Annual Report. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors,” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Each forward-looking statement should be read in context with, and with an understanding of, the various disclosures concerning our business made elsewhere in this Annual Report, as well as other public reports filed by us with the United States Securities and Exchange Commission. Readers should not place undue reliance on any forward-looking statement as a prediction of actual results of developments. All forward-looking statements in this Annual Report are based on information available to us on the date hereof, and we undertake no obligation to update or revise any forward-looking statement contained in this Annual Report . We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.

 

As used in this current report and unless otherwise indicated, the terms "we", "us", "our", "our Company" and "Sunergy" mean Sunergy, Inc.

 

General Overview

 

We were incorporated in the State of Nevada, USA, on January 28, 2003. We are an exploration stage company engaged in the acquisition and exploration of mineral properties with a view to exploiting any mineral deposits we discover that demonstrate economic feasibility.

 

 

Our Current Business

 

We are an exploration stage mining company engaged in the exploration of minerals on properties located in, Sierra Leone, Liberia and Ghana, West Africa. Our 150 sq.km. Nyinahin mining concession in Ghana and the 140.1 sq. km. Pampana River mining concession in Sierra Leone have been the focus of our immediate exploration and development activities since 2008 and 2010 respectively. In 2013, we opened operations in Liberia, focusing on Gold and Diamond recovery in sponsorship arrangements with local artisanal miners. These arrangements are negotiated on a confidential basis and no two agreements are exactly the same. Often, participation is measured by who brings what to the table and how advanced the given license is as far as known content of gold or diamonds. In general, these agreements range from 75% our company 25% license holder or lower for license holder depending on productivity of particular area. These agreements typically contain options for us to buy the % of gold and diamonds earned from the artisanal license holder at local prices. To disclose exact terms would severely hamper our ability to negotiate going forward. We currently have four such agreements, two in Sierra Leone and two in Liberia and operate 4 dredges.

 

Ebola Virus Epidemic

 

During 2014, West Africa was nearly devastated by the Ebola Virus. During this period, Management made the decision to re-focus its efforts on cash producing mining activities. Exploration licenses themselves do not allow for sales of the materials recovered as samples or from operations. The three above projects are discussed in detail below.

 

Pampana River Concession, Sierra Leone

 

We completed the advanced mineralogical work on our Pampana River Project to determine the economics of mineral separation which will allow for marketability of the various rare earth’s and precious metals already discovered This was evidenced by the Hazen report and they supported the development of our recoverable gold mineralization and suggested gravity separation of the rare earth concentrates. Preliminary separations with an Australian equipment company selected to build our proposed pilot plant showed us that rare earth separation would be very expensive in the field. We deferred decisions on deploying the proposed Pilot Plant until we investigated the gold recovery aspect on our Pampana River Concession. Because we wished to be able to sell the recovered gold, we elected to enter into sponsorship agreements with local Artisanal miners. Under these agreements we are allowed to sell the recovered minerals. We subsequently sold 27.5 tons of concentrated Black sands containing the Rare Earth Elements and some gold for a base price of $1,200/ ton with a 50/50 participation in the profit in excess of the base price, less costs associated with final recovery. After many months, we have never received any further payments on those sands. The sands were determined to also contain small amounts of Uranium and Thoreum, both radioactive elements. This added significant cost to both transportation and handling and this is what caused lack of any additional payments. From May 2014 we have operated dredges on the Pampana concession for gold recovery in sponsorship relationships with local Artisanal miners. The gold recovered has been sold locally to pay for operations and has been treated as an offset to operating expenses rather than being reported as revenue. Management has determined during the first quarter of 2015 its focus in the future will be on diamond production and sales and the Pampana is not a diamond producing river in economic quantities. We are considering making an exchange for a diamond bearing concession before end of Q2 2015. Due the current status of the economic environment, Management evaluated the ability to provide ongoing exploration and operations and funding and for the achievement of positive cash flows from operations on the Pampana Concession and determined that the future cash flows were less than the current carrying value of the project. As such, Management recorded a charge to impairment for $753,497 as of the end of the year. The Company continues to seek alternatives to trade into a diamond bearing concession as it reenergizes its focus on generating cash flow to continue to fund operations.

 

In December 2014 we shipped our first diamond parcel to our foreign buyers and in 2015 we have shipped 1 additional parcel and will show income from the diamond sale in Q2, 2015.

 

 

Liberia Mining Operations 2014

 

Our operations in Liberia started in late 2013 and continues. We have acquired 3 prospecting licenses and are in sponsorship agreements operating our 2, 6” Keene dredges in the Lofa river. During 2014, the Ebola Virus devastated Liberia. Our people continue to stay in country and help the local communities. In 2014 we purchased 2 dredges and a large wash plant and loader. The wash plant and loader were always scheduled to be moved to Sierra Leone, but early rains and bad roads did not allow that to happen. We are now making arrangements to move that equipment to Sierra Leone in May 2015. This equipment will be deployed immediately in support of our mining and sponsorship operations in Sierra Leone.

 

Future Mining Operations Plans

 

Management is considering the consolidation of all mining operations activities to be headquartered in Sierra Leone and to focus on larger scale diamond and gold operations both alluvial and kimberlite development where available. This decision shall be finalized during Q2 2015.

 

Nyinahin Mining Concession - Ghana, West Africa

 

Sunergy’s Nyinahin concession is located in Ghana’s Ashanti Region, ca. 50 km southwest of Kumasi. The Kumasi-Bibiani road cuts NE-SW across the northwest part of the concession. The concession is irregularly shaped and is approximately bounded by 6o29’ and 6o37’ North Latitude and 2o01’and 2o12’ West Longitude. The concession consists of 150 km2 of gently rolling secondary forest and slash-and-burn farming areas containing some cocoa farms and oil-palm plantations. The Offin River valley follows a roughly 10 km meandering NE-SW course through the southeastern part of the concession approximately 60 km upstream from the Central Region town of Dunkwa-on-Offin (also known as Dunkwa). Regional Geology

 

2014 EXPLORATION ACTIVITIES AND FUTURE ACTIVITIES & PLANS

 

During 2014, while Ebola did not affect Ghana as severely as Liberia and Sierra Leone. The Ghana economy suffered severely and several large international mining companies ceased exploration activities and also ceased all purchase of exploration company properties as well as closed marginal mining production operations. Our efforts to find a suitable Joint Venture partner have not come to fruition and we have not engaged in any substantial further exploration activities during 2014. As such, due the factors indicated above, Management evaluated the feasibility of sufficient funds to either finance further development and exploration or feasibility in receiving funds from a joint venture partner or acquirer to recover our acquisition costs and determined based upon the remote likelihood of the aforementioned factors that the property was impaired from its current carrying value and has recorded a charge to impairment against the exploratory property for $1,000,000. In 2015, management is considering closing its Ghana Exploration activities.

 

Compliance with Government Regulation

 

We are committed to complying with and are, to our knowledge, in compliance with, all governmental and environmental regulations applicable to our company and our properties. Permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. We cannot predict the extent to which these requirements will affect our company or our properties if we identify the existence of minerals in commercially exploitable quantities. In addition, future legislation and regulation could cause additional expense, capital expenditure, restrictions and delays in the exploration of our properties.

 

 

Employees

 

Currently, we do not have any employees. Our directors and certain contracted individuals play an important role in the running of our company. We do not expect any material changes in the number of employees over the next 12 month period. We do and will continue to outsource contract employment as needed.

 

We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs. During the mining season in Sierra Leone, we typically employ in excess of 50 local people.

 

Subsidiaries

 

We have three subsidiaries, Allied Mining and Supply, LLC a Nevada Limited Liability Company and Mikite Gold Resources, LTD, a Ghana corporation, and Sunergy Liberia LTD, a Liberia corporation which was formed in December 2013 to handle our Liberia operations. Allied Mining and Supply, LLC has one subsidiary, Allied Mining and Supply Ltd, a Sierra Leone Corporation.

 

Intellectual Property

 

We do not own, either legally or beneficially, any patent or trademark.

 

Item 1A. Risk Factors

 

Our business operations are subject to a number of risks and uncertainties, including, but not limited to those set forth below:

 

Risks Associated With Mining

 

Our properties are in the pre-exploration stage. There is no assurance that we can establish the existence of any mineral resource on our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.

 

Despite pre-exploration work on our mineral properties, we have not established that they contain any mineral reserve, and there can be no assurance that we will be able to do so. If we do not, our business could fail.

 

A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7 (which can be viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a "reserve" that meets the requirements of the Securities and Exchange Commission's Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any 'reserve' and any funds that we spend on exploration will probably be lost.

 

Even if we do eventually discover a mineral reserve on one of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

 

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

 

 

Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.

 

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral property or for the construction and operation of a mine on our property at economically viable costs. If we cannot accomplish these objectives, our business could fail.

 

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

 

If we establish the existence of a mineral resource on one of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.

 

If we do discover mineral resources in commercially exploitable quantities on our property, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.

 

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our company.

 

Mineral exploration, development and production involve many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.

 

Mineral prices are subject to dramatic and unpredictable fluctuations.

 

We expect to derive revenues, if any, either from the sale of our mineral resource property or from the extraction and sale of precious and base metals. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and therefore the economic viability of any of our exploration properties and projects, cannot accurately be predicted.

 

 

The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring mineral claims. If we cannot continue to acquire properties to explore for mineral resources, we may be required to reduce or cease operations.

 

The mineral exploration, development, and production industry is largely un-integrated. We compete with other exploration companies looking for mineral resource properties. While we compete with other exploration companies in the effort to locate and acquire mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce.

 

In identifying and acquiring mineral resource properties, we compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future. Accordingly, there can be no assurance that we will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.

 

Risks Related To Our Company

 

We have a limited operating history on which to base an evaluation of our business and prospects.

 

We have been in the business of exploring mineral resource properties since 2003 and we have not yet located any mineral reserve. As a result, we have never had any revenues from our operations. In addition, our operating history has been restricted to the acquisition and exploration of our mineral properties and this does not provide a meaningful basis for an evaluation of our prospects if we ever determine that we have a mineral reserve and commence the construction and operation of a mine. We have no way to evaluate the likelihood of whether our mineral property contains any mineral reserve or, if it does that we will be able to build or operate a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period when we are exploring our properties. We therefore expect to continue to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from mining operations and any disposition of our property, we will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition. There is no history upon which to base any assumption as to the likelihood that we will prove successful and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.

 

The fact that we have not earned any operating revenues since our incorporation raises substantial doubt about our ability to continue to explore our mineral properties as a going concern.

 

We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on our mineral property and build and operate a mine. We will have to raise additional funds to meet our currently budgeted operating requirements for the next 12 months. As we cannot assure a lender that we will be able to successfully explore and develop our mineral property, we will probably find it difficult to raise debt financing from traditional lending sources. We have traditionally raised our operating capital from sales of equity and debt securities, but there can be no assurance that we will continue to be able to do so. If we cannot raise the money that we need to continue exploration of our mineral property, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, there is a substantial risk that our business would fail.

 

These circumstances led our independent registered public accounting firm, in their report dated June 27, 2012, to comment about our company’s ability to continue as a going concern.  Management has plans to seek additional capital through private placements of our capital stock, however, we currently have no firm commitments. Although there are no assurances that management’s plans will be realized, management believes that our company will be able to continue operations in the future.

 

 

Risks Associated with Our Common Stock

 

Our common stock is quoted on the OTCQB. Trading in stock quoted on the OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTCQB is not a stock exchange, and trading of securities on the OTCQB is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like Amex.

 

The market price of Sunergy’s common shares is subject to high volatility and could cause investor loss.

 

The market price of a publicly traded stock, especially a resource issuer like Sunergy, is affected by many variables in addition to those directly related to exploration successes or failures. Such factors include the general condition of market for resource stocks, the strength of the economy generally, the availability and attractiveness of alternative investments and the breadth of the public market for the stock. The effect of these and other factors on the market price of Sunergy’s common shares suggests Sunergy’s shares will continue to be volatile. Therefore, investors could suffer significant losses if Sunergy’s shares are depressed or illiquid when an investor seeks liquidity and needs to sell Sunergy shares.

 

We may issue shares of our capital stock or debt securities to complete a transaction, which would reduce the equity interest of our stockholders or subject our company to risks upon default.

 

We may issue our securities to acquire companies or assets, such as other concessions. If we issue additional shares of our common stock, the equity interest of our existing stockholders may be reduced significantly, and the market price of our common stock may decrease. If we issue debt securities as part of a transaction and we are unable to generate sufficient operating revenues to pay the principal amount and accrued interest on that debt, we may be forced to sell all or a significant portion of our assets to satisfy our debt service obligations, unless we are able to refinance or negotiate an extension of our payment obligation. Even if we are able to meet our debt service obligations as they become due, the holders of that debt may accelerate payment if we fail to comply with, and/or are unable to obtain waivers of, covenants that require us to maintain certain financial ratios or reserves or satisfy certain other financial restrictions. In addition, financial and other covenants in the agreements we may enter into to secure debt financing may restrict our ability to obtain additional financing and our flexibility in operating our business.

 

Our stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.

 

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

 

 

In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

 

Other Risks

 

Trends, Risks and Uncertainties

 

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

 

Risks Related To Assets and Operations in Ghana and Sierra Leone, Africa.

 

Substantially all of our assets and our operations are located outside of the United States, and all of our current exploratory activities are conducted outside of the United States subjecting us to risks associated with doing business in Ghana and Sierra Leone, Africa.

 

Our operations in Ghana and Sierra Leone subject us to the laws and regulations of Ghana and Sierra Leone. In addition, we are subject to risks inherent in international business activities, including:

 

·

changes in overseas economic conditions,

 

·

fluctuations in currency exchange rates,

 

·

potentially weaker intellectual property protections,

 

·

changing and conflicting local laws and other regulatory requirements,

 

·

trade agreements,

 

·

political and economic instability,

 

·

war, civil war, acts of terrorism or other hostilities,

 

·

potentially adverse tax consequences, or

 

·

Difficulties in staffing and managing foreign operations.

 

However, Ghana is Africa's second largest gold producer after South Africa and the world's second largest producer of cocoa, and its economy is one of the fastest growing in Africa. Ghana became independent from England in 1957. According to an article in BBC's World News on June 19, 2012, Ghana is "A well-administered country by regional standards, Ghana is often seen as a model for political and economic reform in Africa."

 

 

According to the web site of U.S.' Central Intelligence Agency last updated on June 20, 2012, Sierra Leone:

 

" ... is an extremely poor nation with tremendous inequality in income distribution. While it possesses substantial mineral, agricultural, and fishery resources, its physical and social infrastructure has yet to recover from the civil war, and serious social disorders continue to hamper economic development. Nearly half of the working-age population engages in subsistence agriculture. Manufacturing consists mainly of the processing of raw materials and of light manufacturing for the domestic market. Alluvial diamond mining remains the major source of hard currency earnings, accounting for nearly half of Sierra Leone's exports. The fate of the economy depends upon the maintenance of domestic peace and the continued receipt of substantial aid from abroad, which is essential to offset the severe trade imbalance and supplement government revenues. The IMF completed a Poverty Reduction and Growth Facility program that helped stabilize economic growth and reduce inflation and in 2010 approved a new program worth $45 million over three years. Political stability has led to a revival of economic activity such as the rehabilitation of bauxite and rutile mining, which are set to benefit from planned tax incentives. A number of offshore oil discoveries were announced in 2009 and 2010. The development on these reserves, which could be significant, is still several years away."

 

We have limited financial resources which prevents us from securing our mining concessions in Ghana and Sierra Leone from bandits and other detrimental threats, particularly during the rainy season when we have minimal exploration activities.

 

We do not have the financial resources to adequately protect our African mining concessions from potential “claim jumping” and other threats to the betterment of our concessions predominantly due to the respective land size of these concessions of approximately 150 sq. km each. We attempt to mitigate these threats through relationships with local tribal Chiefs who report intruders to local Assembly officials trying to mine in the area without a License, in addition to reporting the threat to our Country Directors. 

 

The minerals commissions in both countries do not police or enforce the propriety of these concessions.  It is the sole responsibility of the concession owner.

 

Significant unauthorized mining or other unauthorized activities may result in our inability to develop any commercially viable resources in Africa.

 

Limitations on Ghana and Sierra Leone economic market reforms may discourage foreign investment in Ghana and Sierra Leone businesses.

 

The value of investments in Ghana and Sierra Leone mining concession businesses could be adversely affected by political, economic and social uncertainties in Ghana and Sierra Leone.

 

Any material change in policy by the Ghana and Sierra Leone governments could adversely affect investments in our business operations.

 

As developing nations, Ghana's and Sierra Leone's economies are more volatile than that of developed Western industrial economies.  There differ significantly from that of the U.S. or a Western European country in such respects as structure, level of development, capital reinvestment, legal recourse, resource allocation and self-sufficiency.

 

Actions by the central governments of Ghana and Sierra Leone could have a significant adverse effect on economic conditions in the country as a whole and on the economic prospects for our operations. Changes in policy could result in imposition of restrictions on currency conversion, imports or the source of supplies, as well as new laws affecting joint ventures and foreign-owned enterprises doing business in Ghana and/or Sierra Leone. Accordingly, there can be no assurance that reforms to Ghana 's and/or Sierra Leone's economic systems will occur or that we will not be adversely affected by changes in their political, economic, and social conditions and by changes in policies of those governments, such as changes in laws and regulations, measures which may be introduced to control inflation, changes in the rate or method of taxation, imposition of additional restrictions on currency conversion and remittance abroad, imposition of restrictions on mining concessions and reduction in tariff protection and other import restrictions.

 

 

Uncertainties with respect to the legal systems in Ghana and Sierra Leone could limit the legal protections available to you and us.

 

We conduct substantially all of our business through our operating subsidiaries in Ghana and Sierra Leone, Africa. Our operating subsidiaries are generally subject to laws and regulations applicable to foreign investments in Ghana and Sierra Leone and, in particular, laws applicable to foreign-invested enterprises. The legal systems are based on written statutes, and prior court decisions may be cited for reference but may have limited precedential value. However, since the legal systems continue to evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in either Ghana or Sierra Leone may be protracted and result in substantial costs and diversion of resources and management attention.

 

The legal system in Ghana is based on British common law, customary (traditional) law, and the 1992 constitution. Court hierarchy consists of the Supreme Court of Ghana (its highest court), courts of appeal, and high courts of justice. Beneath these bodies are circuit, magisterial, and traditional courts. Extrajudicial institutions include public tribunals. Since independence in 1957, courts have been relatively independent. Lower courts are being redefined and reorganized under the Republic. Customary (traditional) law is a type of legal system that serves as the basis of, or has influenced, the present-day laws in approximately 40 countries - mostly in Africa, but some in the Pacific islands, Europe, and the Near East. Customary law is also referred to as "primitive law," "unwritten law," "indigenous law," and "folk law." There is no single history of customary law such as that found in Roman civil law, English common law, Islamic law, or the Napoleonic Civil Code. The earliest systems of law in human society were customary, and usually developed in small agrarian and hunter-gatherer communities. As the term implies, customary law is based upon the customs of a community. Common attributes of customary legal systems are that they are seldom written down, they embody an organized set of rules regulating social relations, and they are agreed upon by members of the community. Although such law systems include sanctions for law infractions, resolution tends to be reconciliatory rather than punitive.

 

The legal system in Sierra Leone is a mixed legal system of English common law and customary law.

 

Restrictions under Ghana and Sierra Leone laws which may limit or restrict our ability to make dividends and other distributions from Ghana and/or Sierra Leone to the U.S. could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our businesses.

 

Substantially all of our revenues, if any, will be earned in Ghana and Sierra Leone, Africa. Any limitations on our ability to transfer funds to the U.S from Ghana and Sierra Leone could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

 

Our results of operations may be adversely impacted by currency fluctuations.

 

Substantially all of our operations are in Ghana and Sierra Leone West Africa. Because our financial statements are reported in United States dollars, fluctuations in currencies in Ghana and Sierra Leone against the United States dollar may cause us to recognize foreign currency translation gains and losses, which may be material to our operations and impact our reported financial condition and results of operations.

 

As a U.S. public company we are subject to the Foreign Corrupt Practices Act of 1977.

 

The anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. There is no materiality to the FCPA, thus making it illegal to offer anything of value as a bribe, including cash or non-cash items. The government focuses on the intent of the bribery rather than on the amount.

 

The FCPA also requires companies whose securities are listed in the U. S. to meet its accounting provisions, such as those set forth in 15 U.S.C. §78. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

 

We do not have a written compliance program, but our Code of Ethic is designed, in part, to prohibit conduct that is made unlawful under the FCPA. We believe we are in full compliance with the FCPA.

 

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

Executive Offices

 

Our executive office is located at 14362 N. Frank Lloyd Wright Blvd., Suite 1000, Scottsdale, Arizona, 85260.  We rent an executive suite at a cost of $99 per month.

 

Mineral Properties

 

As of the date of this annual report on Form 10-K, we have two mining concessions, the Nyinahin Mining Concession in Ghana West Africa and the Pampana River Concession in Sierra Leone Africa.

 

Item 3. Legal Proceedings

 

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

 

Item 4. Mine Safety Disclosure

 

Not applicable at our current phase of exploration.

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Our common shares are quoted under the symbol “SNEY.PK” on the OTC Pink market operated by OTC Markets Group Inc. The following quotations, obtained from Market Watch, reflect the high and low bids for our common shares based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

The high and low bid prices of our common stock for the periods indicated below are as follows:

 

OTC Markets(1) (2) (3)

 

Quarter Ended	High	Low
December 31, 2014	$0.0025	$0.0009
September 30, 2014	$0.0032	$0.0016
June 30, 2014	$0.0077	$0.0024
March 31, 2014	$0.0057	$0.0007
December 31, 2013	$0.0013	$0.0010
September 30, 2013	$0.0010	$0.0009
June 30, 2013	$0.0015	$0.0014
March 31, 2013	$0.0012	$0.0010

_________________

(1) Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.

(2) Our common stock was quoted on the Over-the-Counter Bulletin Board on October 22, 2007.

(3) The first trade in our common stock occurred on October 29, 2008.

 

Our common shares are issued in registered form. Clear Trust, LLC 16540 Pointe Village Drive, Suite 201, Lutz, Florida 33558, Tel (813) 235-4490, Fax (813) 388-4549 is the registrar and transfer agent for our common shares.

 

On April 15, 2015, our shareholders' list showed 124 registered shareholders and 2,626,057,989 common shares of stock outstanding of which 1,551,000,000 were considered free trading.

 

Dividend Policy

 

We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

 

Equity Compensation Plan Information

 

We currently do not have any formal stock option or equity compensation plans or arrangements; however, from time to time we issue equity instruments as compensation to both contract employees and non-employees. These issuances are approved by our Board of Directors.

 

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

Other than as set out below, we did not sell any equity securities which were not registered under the Securities Act during the year ended December 31, 2014 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended December 31, 2014.

 

During the quarter ended March 31, 2014, the Company issued 28,620,690 shares upon the conversion of the note payable #2 dated June 2013 for outstanding principal balance of $15,500; 30,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $30,000; 9,999,998 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $15,000, the Company issued 5,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $25,000 valued at $0.001 per share or $5,000.

 

 

During the quarter ended June 30, 2014, the Company issued 12,004,808 shares upon the conversion of the note payable #3 dated October 2013 for outstanding principal balance of $32,500; 60,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $60,000; 52,099,999 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $78,200; 32,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.004 per share for total cash of $64,000; 3,200,000 equity units at $0.0025 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.005 per share for total cash of $8,000; 2,857,142 equity units at $0.0035 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.007 per share for total cash of $10,000; the Company issued 5,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $25,000 valued at $0.0015 per share or $7,500; the Company issued 5,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $25,000 valued at $0.0025 per share or $12,500.

 

During the quarter ended September 30, 2014, the Company issued 23,333,333 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $35,000; 5,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.004 per share for total cash of $10,000; 28,333,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.001 per share for settlement of outstanding principal of $25,000 and accrued interest of $3,333; 5,000,000 equity units at $0.0031 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.0025 per share for services valued at $15,500 at the date of issuance.

 

During the quarter ended December 31, 2014, the Company issued 7,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $10,500; the Company issued 49,702,688 shares upon the conversion of the note payable #2014-1 dated April 2014 for outstanding principal balance of $41,500; 5,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for services valued at $7,500 at the date of issuance; the Company issued 2,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $10,000 valued at $0.002 per share or $4,000; the Company issued 43,359,350 shares upon the conversion of the note payable #2014-2 dated May 2014 for outstanding principal balance of $32,500; the Company issued 2,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $3,000; the Company issued 5,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $5,000; the Company issued 4,000,000 equity units at $0.0015 for total cash of $6,000; the Company issued 2,000,000 equity units at $0.0015 for total cash of $3,000; 10,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for services valued at $15,000 at the date of issuance.

 

Item 6. Selected Financial Data

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENTS

 

This annual and audited report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

 

Our audited financial statements are stated in United States dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report.

 

In this annual and audited report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common stock" refer to the common shares in our capital stock.

 

As used in this annual and audited report, the terms "we", "us", "our", "our company" and "Sunergy" mean Sunergy, Inc. and our wholly owned subsidiaries, Mikite Gold Resources Limited, a Ghanaian company and Allied Mining and Supply LLC, a Nevada limited liability, unless otherwise stated.

 

Overview and Current Business

 

We were incorporated in the State of Nevada, USA, on January 28, 2003. We are an exploration stage mining company engaged in the exploration of minerals on properties located in Ghana, Liberia and Sierra Leone West Africa. Our mining concession in Ghana and our mining concession in Sierra Leone have been the focus of our immediate exploration and development activities historically. In mid 2013, due to the fact that exploration funding was virtually non-existent for small mining companies, we changed our focus and operating model from doing exploration activities to pursuing cash flow from putting our existing equipment, 3 dredges, vehicles and our wash plant in Sierra Leone to work in licensed mining activities capable of generating cash flow. These licensed activities involve sponsorship relationships with local artisanal miners and Chiefs where we use our equipment, trained personnel and financial support and earn an interest in their operations. We were invited to Liberia to pursue the same business model there and we have started operations there as well.

 

Nyinahin Concession, Ghana:

 

We continue to see a reliable and substantial Joint Venture partner to handle alluvial gold extraction and recovery, but have not been able to finalize any contract to date. Additional licensing and permitting are required to do so, and we have not had adequate funding to do so.

 

The Nyinahin concession is located between two geological gold belts, the Bibiani Belt to the west and the Asankrangwa to the east.  The license allows for the exploration and mining of gold, silver, base metals and diamonds. About 80% of the Nyinahin concession lies to the west of the Offin River within the Ashanti region of Ghana. There are several historical pits and adits with a strong clustering of artisan pits located along the Offin River. Three old gold prospects exist on the concession. The property is accessed via the main Kumasi-Bibiani trunk road. It falls under the jurisdiction of the Atwima Mponua District Assembly with headquarters at Nyinahin. The Offin River area offers strong alluvial operations potential as well as the underlying bedrock is a continuation of the Keegan Esaase-Jeni Project. The large area west of the Offin River area contain some significant geological anomalies that warrant additional exploration activities. In the overall, this concession represents a significant future development opportunity for our Company.

 

Pampana River Concession, Sierra Leone:

 

The Pampana River concession is an alluvial mining concession consisting of Exploration License No. EXPL 5/2009 which was issued to Allied Mining and Supply Ltd. (AMS) on August 12, 2009. In July 2013, we have submitted an application for the renewal of such license with the Sierra Leone Ministry of Mines. During this process of renewal, we were required to identify certain areas that could be shed from the exploration licenses as part of the requirement of renewal. We identified approximately 25 sq km of non-river and non-gold bearing land that was shed in the pending application.

 

The renewable exploration license is located in the Kholifa Rowalla, Kafe Simiria and Tane Chiefdoms in the Tonkolili District of the Northern Province of Sierra Leone covering an area of 115 km2. The concession is situated on the western fringes of the southern Sula Mountains greenstone belt and for most of the northern and central part it straddles the Pampana River. On the west of the southern part, the concession runs along the Pampana River. The property is south of the Sula Mountains in the Greenstone belt, around 120 miles east of the capital, Freetown.

 

When we purchased the Pampana River concession Allied Mining and Supply had been conducting exploration there for two years and had laid out a program to exploit the newly discovered rare earth elements in the heavy mineral sands that exist in association with the gold.

 

 

Rare earth elements are a unique group of chemical elements that exhibit a range of special electronic, magnetic, optical and catalytic properties. REEs are used in a wide range of alloys and compounds, and can greatly affect the performance of complex engineered systems. They occur in a variety of chemical forms and have a wide variety of applications, including the processing of materials. REEs are used in components in engineered products, and their uses include fluid cracking catalysts, automotive catalytic convertors, polishing materials, permanent magnets, energy storage, phosphors, and glass additives. In modern society, many of these uses are critical for high tech devices including electronics, jet planes and rocks, and vital engineered components.

 

Our work in 2014 consisted of focusing our efforts on cash producing mining activities through sponsorships within the concession. Preliminary separations with an Australian equipment company selected to build our proposed pilot plant showed us that rare earth separation would be very expensive in the field. We deferred decisions on deploying the proposed Pilot Plant until we investigated the gold recovery aspect on our Pampana River Concession. Because we wished to be able to sell the recovered gold, we elected to enter into sponsorship agreements with local Artisanal miners. Under these agreements we are allowed to sell the recovered minerals.

In December 2014 we shipped our first diamond parcel to our foreign buyers and in 2015we have shipped 1 additional parcel and will show income from the diamond sale in Q2 2015. Our expenditures for the next 12 months from December 31, 2014 are projected to be approximately $250,000 inclusive of operations and equipment purchases.

 

Allied/Sunergy's steadfast commitment to community development has led to our current standing in the district of Tonkolli which has never been higher. Our employees, some of whom have been with us for three years, are capable, hard working and well respected among the villages on our concession. Allied has typically employed 70 to 80 men and women each year during the mining season. Most are full-time, while others are part-time or temporary help. This effort is important to maintain a high level of confidence in the communities and the country of Sierra Leone, which gives Sunergy a strong foundation to develop additional business in the Country.

 

Liberia, Sunergy Liberia Limited

 

In addition, we continue our development work of relationships across the African region which included the opening of a wholly-owned subsidiary in Liberia, Sunergy Liberia Ltd. We started visiting Liberia in October 2013, pursuant to an invitation by a local businessman to come and see what mining and business opportunities were available. Since that time, we have entered into formal agreements to engage in support of existing artisanal (Class C) licensed operations. We now have two dredges that we own operating in Liberia, one vehicle and a larger wash plant capable of processing from 50 tons/hour up to 300tons/hour. In 2014 we purchased 2 dredges and a large wash plant and loader. The wash plant and loader was always scheduled to be moved to Sierra Leone, but early rains and bad roads did not allow that to happen. We are now making arrangements to move that equipment to Sierra Leone in May 2015. This equipment will be deployed immediately in support of our mining and sponsorship operations in Sierra Leone. Our expenditures for the 12 months from December 31, 2014 are budgeted to be $250,000 inclusive of operations and equipment purchases.

 

Results of Operations

 

The following discussion should be read in conjunction with our audited financial statements and the related notes contained in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed in this annual report.

 

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

 

Operations for Year Ended December 31, 2014 and 2013 as follows:

 

		Year Ended
		December 31,
		2014				2013
Revenue		$	–			$	–
Operating Expenses			691,921				629,749
Net Loss		$	691,921			$	649,749

 

Expenses

 

Our operating expenses for the year ended December 31, 2014 and December 31, 2013 are outlined in the table below:

 

		Year Ended
		December 31,
		2014				2013
General and administrative		$	209,453			$	223,784
Depreciation			68,697				52,783
Management salary			42,000				42,000
Professional fees			174,723				218,555
Exploration costs			197,048				112,627

 

Operating expenses for the year ended December 31, 2014, increased by approximately 6.5% as compared to the comparative period in 2013 primarily as a result of our focus on generating cash producing mining activities and travel to country. Management Salary costs remained constant year to year. We anticipate an increase in exploration and development costs for the next twelve months as the Company works towards cash producing mining activities starting dredging operations in Liberia and further exploration work in Sierra Leone. With over 40 KM of river on our concession, future exploration designed to develop resources and reserves will be undertaken, limited only by our future financial capabilities.

 

Revenue

 

We earned other income during the year ended December 31, 2014 for the shipment of our first parcel of diamonds in the amount of $12,490. No revenue was earned for the year ended December 31, 2014. We currently are seeking ways to initiate cash producing mining activities but do not anticipate earning revenues until such time as we have entered into commercial production on the Nyinahin or Pampana River concessions. We have not concluded the exploration stage of our business and can provide no assurance that we will discover economic mineralization on the property, or if such minerals are discovered, that we will enter into commercial production.

 

Equity Compensation

 

We currently do not have any formalized stock option or equity compensation plans or arrangements, however, from time to time we settle obligations via the issuance of equity and equity-linked instruments.

 

Liquidity and Financial Condition

 

Working Capital

 

		2014				2013				Change
Current Assets		$	13,213			$	2,463			$	10,750
Current Liabilities			1,850,994				1,285,596				(565,398	)
Working Capital Deficit		$	(1,837,781	)		$	(1,283,133	)		$	(554,648	)

 

 

Cash Flows

 

		Year Ended
		December 31,
		2014				2013
Net Cash Used in Operating Activities		$	(477,091	)		$	(252,660	)
Net Cash Used in Investing Activities			(115,303	)			(5,358	)
Net Cash Provided by Financing Activities			590,452				260,030
(Decrease)/ increase in Cash During the Period		$	(1,942	)		$	2,012

 

Contractual Obligations

 

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

 

Off-Balance Sheet Arrangements

 

We have no significant 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 are material to stockholders.

 

Critical Accounting Policies

 

The Company has on occasion issued equity and equity linked instruments to non-employees in lieu of cash to various vendors for the receipt of goods and services and, in certain circumstances the settlement of short-term loan arrangements. The applicable GAAP establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

 

In these transactions, we issue unregistered and restricted equity instruments along with equity-linked instruments (warrants) that are convertible into unregistered and restricted shares of our common stock.

 

While we have 1,551,000,000 shares of freely-traded stock with a quoted market price (a Level 1 input within the GAAP hierarchy). The fair value of the unregistered and restricted shares issued from December 13, 2010 through the present as valued by the quoted market price does not reflect the economic substance of the transactions, correspondingly, the quoted market price is not the most reliably measurable fair value.  We made this determination based upon the significant liquidity restrictions placed upon our unregistered restricted equity instruments since December 13, 2010 with the issuance of the Caveat Emptor For additional specific discussion related to these restrictions, see Item – 1A Risk Factors.

 

When unregistered common shares and equity-linked instruments convertible into unregistered common shares are issued for the settlement of short-term financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.

 

In situations in which we issue unregistered restricted common shares and equity-linked instruments in exchange for goods and services, and the value of the goods and services are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy).  We have determined this methodology reflects the risk adjusted fair value of our unregistered restricted equity instruments using a commercially reasonable valuation technique.  

 

The Company has entered into short-term convertible promissory notes and security purchase agreements accounted for under ASC 470. Under accounting for convertible debt, applicable accounting guidance would provide that the debt is recorded with is principal amount and its unamortized discount and a net carrying value. Additionally, the agreements indicate that the discounted conversion price continuously resets resulting in both a fixed and variable component. We account for such agreements as stock-settled debt with the variable component being re-valued each quarter and at the balance sheet date and/or just prior to conversion using the black scholes model and the remaining term of the note.

 

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 8. Financial Statements and Supplementary Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Sunergy, Inc.

 

We have audited the accompanying consolidated balance sheets of Sunergy, Inc. (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended December 31, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits include examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our audits also include assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2014 and 2013, and the results of its consolidated operations and its cash flows for the year then ended December 31, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has an accumulated deficit of $9,171,714. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans concerning these matters are also described in Note 3, which includes the raising of additional equity financing. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Anton & Chia LLP

Newport Beach, CA

April 15, 2015

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

CONSOLIDATED BALANCE SHEET

 

		December 31,				December 31,
		2014				2013
ASSETS
Current assets
Cash and cash equivalents		$	521			$	2,463
Accounts receivable			12,490			$	–
Prepaid expenses			202				–
Total current assets			13,213				2,463
Long-term assets
Exploratory properties			–				1,753,497
Property and equipment, net			179,924				128,621
Other assets			70,303				–
Total long-term assets			250,227				1,882,117
Total assets		$	263,440			$	1,884,580
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities
Accounts payable and accrued liabilities		$	697,201			$	436,543
Notes payable, current portion			266,336				48,085
Convertible debt, net of discount			67,500				128,246
Accrued interest			776,205				537,488
Accounts payable to related parties			43,752				110,944
Derivative liability			–				23,531
Total current liabilities			1,850,994				1,284,837
Total liabilities			1,850,994				1,284,837
Commitments and Contingencies
Stockholders' equity
Common stock, authorized 3,750,000,000 shares, par value $0.001, issued and outstanding on December 31, 2014 and December 31, 2013 is 2,573,976,770 and 2,136,465,762 respectively			2,573,979				2,136,467
Additional paid-in capital			5,010,180				4,580,399
Accumulated deficit			(9,171,714	)			(6,117,123	)
Total stockholders' equity			(1,587,555	)			599,743
Total liabilities and stockholders' equity		$	263,439			$	1,884,580

 

The accompanying notes are an integral part of these consolidated statements.

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Year ended December 31,
		2014				2013
Revenue		$	–			$	–
Operating expenses
Depreciation and amortization			68,697				52,783
General and administrative			209,453				223,784
Management salary			42,000				42,000
Exploration and development			197,048				112,627
Professional fees			174,723				218,555
Total expenses			691,921				649,749
(Loss) from operations			(691,921	)			(649,749	)
Other income (expenses)
Other income			12,490				–
Interest expense			(459,676	)			(266,623	)
Financing costs			(5,608	)			(4,000	)
Derivative expense			(92,600	)			(12,079	)
Loss on impairment of exploratory properties			(1,753,497	)			–
Loss on extinguishment of debt			(113,604	)			–
Gain/(Loss) on change in fair value of derivatives			49,825				5,552
Gain on extinguishment of debt			–				8,755
Gain on sale of fixed assets			–				1,142
(Loss) before income taxes			(3,054,591	)			(917,002	)
Provision for income taxes			–				–
Net (loss)		$	(3,054,591	)		$	(917,002	)
Loss per common share:
Basic & Diluted		$	(0.00	)		$	(0.00	)
Weighted average shares outstanding:
Basic & Diluted			2,355,756,875				1,959,007,504

 

The accompanying notes are an integral part of these consolidated statements.

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

Consolidated Statement of Stockholders' Equity (Deficit)

 

		Common Stock								Paid in				Subscriptions				Deficit Accumulated During the Exploration				Total
		Shares				Amount				Capital				Payable				Stage				Equity
Balance at inception, January 28, 2003			–			$	–			$	–			$	–			$	–			$	–
Common shares issued for cash			500,000,000				500,000				-490,000	)			–				–				10,000
Common shares issued for cash			6,975,000				6,975				6,975				–				–				13,950
Net Loss			–				–				–				–				-30,313	)			(30,313
Balance, December 31, 2003			506,975,000				506,975				(483,025	)			–				-30,313	)			(6,363
Contributed Capital			–				–				401				–				–				401
Net Loss			–				–				–				–				(41,362	)			(41,362
Balance, December 31, 2004			506,975,000				506,975				(482,624	)			–				(71,675	)			(47,324
Contributed Capital			–				–				938				–				–				938
Net Loss			–				–				–				–				(26,093	)			(26,093
Balance, December 31, 2005			506,975,000				506,975				(481,686	)			–				(97,768	)			(72,479
Contributed Capital			–				–				1,959				–				–				1,959
Net Loss			–				–				–				–				(39,746	)			(39,746
Balance, December 31, 2006			506,975,000				506,975				(479,727	)			–				(137,514	)			(110,266
Net Loss			–				–				–				–				(55,103	)			(55,103
Balance, December 31, 2007			506,975,000				506,975				(479,727	)			–				(192,617	)			(165,369
Common shares issued for cash			6,000,000				6,000				144,000				–				–				150,000
Common shares issued to acquire mineral property			20,000,000				20,000				480,000				–				–				500,000
Common shares subscribed			–				–				–				5,000				–				5,000
Net Loss			–				–				–				–				(98,445	)			(98,445
Balance, December 31, 2008			532,975,000				532,975				144,273				5,000				(291,062	)			391,186
Common shares subscribed			–				–				–				138,400				–				138,400
Common shares issued for services			5,000,000				5,000				195,000				–				–				200,000
Contributed Capital			–				–				1,010				–				–				1,010
Net Loss			–				–				–				–				(332,741	)			(332,741
Balance, December 31, 2009			537,975,000				537,975				340,283				143,400				(623,803	)			397,855
Contributed Capital			–				–				8,960				–				–				8,960
Common shares issued for services			20,000,000				20,000				110,000				–				–				130,000
Common shares issued to settle debt			75,000,000				75,000				357,500				–				–				432,500
Common shares issued for subscriptions			40,992,880				40,993				102,407				(143,400	)			–				–
Common shares issued for services			25,000,000				25,000				142,500				–				–				167,500
Common shares issued to settle debt			39,980,000				39,980				135,810				–				–				175,790
Common shares issued to settle debt			14,700,000				14,700				44,100				–				–				58,800
Common shares issued to settle debt			17,650,000				17,650				52,950				–				–				70,600
Common shares issued to settle debt			150,000,000				150,000				574,000				–				–				724,000
Common shares issued for services			10,800,000				10,800				32,400				–				–				43,200
Common shares issued to settle debt			14,100,000				14,100				197,401				–				–				211,501
Common shares and warrants issued to acquire exploration property and assets			–				–				420,811				–				–				420,811
Common shares subscribed			–				–				–				313,500				–				313,500
Common shares to be issued to settle debt			–				–				–				47,500				–				47,500
Common shares to be issued for services			–				–				–				53,861				–				53,861
Common shares and warrants issued to acquire exploration property and assets			100,000,000				100,000				190,000				–				–				290,000
Net Loss			–				–				–				–				(1,734,968	)			(1,734,968	)
Balance, December 31, 2010			1,046,197,880				1,046,198				2,709,122				414,861				-2,358,771				1,811,410
Common shares and warrants issued to payable			125,400,000				125,400				188,100				(313,500	)			–				–
Common shares issued to settle debt			19,000,000				19,000				28,500				(47,500	)			–				–
Common shares issued for services			18,779,960				18,780				28,170				(43,861	)			–				3,089
Common shares issued for services			4,000,000				4,000				6,000				(10,000	)			–				–
Common shares issued to settle operational advances			15,440,000				15,440				23,160				–				–				38,600
Common shares issued for services			2,500,000				2,500				3,750				–				–				6,250
Common shares issued for services			10,000,000				10,000				15,000				–				–				25,000
Common shares issued for exercise of warrants			1,000,000				1,000				4,000				–				–				5,000
Common shares issued for financing costs			13,300,000				13,300				21,250				–				–				34,550
Common shares and warrants issued for cash			7,714,285				7,714				19,286				–				–				27,000
Common shares and warrants issued for cash			1,200,000				1,200				1,800				–				–				3,000
Common shares and warrants issued for cash			27,928,567				27,929				69,821				–				–				97,750
Common shares and warrants issued for cash			100,000,000				100,000				250,000				–				–				350,000
Common shares issued for financing costs			900,000				900				2,250				–				–				3,150
Common shares issued for exercise of warrants			18,000,000				18,000				47,000				–				–				65,000
Common shares issued for services			3,000,000				3,000				7,500				–				–				10,500
Common shares and warrants issued for cash			10,357,142				10,357				25,893				–				–				36,250
Common shares and warrants issued to settle debt			22,000,000				22,000				47,000				–				–				69,000
Common shares and warrants issued to settle debt			7,000,000				7,000				17,500				–				–				24,500
Common shares and warrants issued for cash			1,428,571				1,429				3,571				–				–				5,000
Common shares issued for warrant exercise			5,000,000				5,000				7,500				–				–				12,500
Common shares issued for services			4,500,000				4,500				11,250				–				–				15,750
Common shares and warrants issued for services			6,000,000				6,000				15,000				–				–				21,000
Common shares issued for warrant exercise			2,000,000				2,000				8,000				–				–				10,000
Common shares issued for cash			28,199,998				28,200				64,600				–				–				92,800
Common shares issued for warrant exercise			16,300,000				16,300				61,450				–				–				77,750
Common shares and warrants issued to settle debt			40,571,428				40,571				101,429				–				–				142,000
Net Loss			–				–				–				–				(1,467,406	)			(1,467,406	)
Balance, December 31, 2011			1,557,717,831				1,557,718				3,787,902				–				(3,826,177	)			1,519,443
Common shares issued for cash			14,992,854				14,993				36,282												51,275
Common shares issued for services			6,000,000				6,000				9,000												15,000
Change in value of previously issued warrants on modification											160,281												160,281
Common shares issued for cash			35,599,998				35,600				66,114												101,714
Common shares issued for services			10,500,000				10,500				15,750												26,250
Common shares and warrants issued to settle debt			142,400,000				142,400				213,600												356,000
Common shares issued for cash			12,632,500				12,633				27,449												40,082
Common shares issued for services			5,000,000				5,000				7,500												12,500
Common shares issued to settle debt			24,000,000				24,000				36,000												60,000
Common shares issued for services			5,000,000				5,000				7,500												12,500
Common shares issued for financing costs			2,000,000				2,000				3,000												5,000
Common shares issued to settle debt			21,445,800				21,446				32,169												53,615
Common shares issued to settle debt			5,000,000				5,000				7,500												12,500
Common shares issued for services			10,000,000				10,000				15,000												25,000
Net (Loss)																			(1,373,944	)
Total comprehensive income (loss)			–				–				–				–								(1,373,944	)
Balance, December 31, 2012			1,852,288,983				1,852,290				4,425,047				–				(5,200,121	)			1,077,216
Common shares issued for cash			2,500,000				2,500				2,500												5,000
Common shares issued for services			5,000,000				5,000				7,500												12,500
Common shares issued for financing costs			2,000,000				2,000				2,000												4,000
Common shares issued for cash			1,333,333				1,333				667												2,000
Common shares issued for services			15,000,000				15,000				15,000												30,000
Common shares issued for cash			1,666,666				1,667				833												2,500
Common shares issued to settle debt			30,000,000				30,000				30,000												60,000
Common shares issued for cash			2,500,000				2,500				2,500												5,000
Common shares issued for cash			1,333,333				1,333				667												2,000
Common shares issued for cash			1,333,000				1,333				667												2,000
Common shares issued for cash			6,700,000				6,700				3,300												10,000
Common shares issued for services			5,000,000				5,000				5,000												10,000
Common shares issued for services			10,000,000				10,000				5,000												15,000
Common shares issued to settle accounts payable			6,400,000				6,400				3,269												9,669
Common shares issued for cash			3,333,333				3,333				1,667												5,000
Common shares issued to settle accounts payable			40,000,000				40,000				20,000												60,000
Common shares issued to settle accounts payable			8,000,000				8,000				4,000												12,000
Common shares issued to settle accounts payable			13,333,333				13,333				6,667												20,000
Common shares issued to settle debt			13,333,333				13,333				6,667												20,000
Common shares issued to settle debt			30,000,000				30,000				–												30,000
Common shares issued for cash			5,000,000				5,000				–												5,000
Forgiveness of prior year related party payables			–				–				28,500												28,500
Common shares issued for cash			25,000,000				25,000				–												25,000
Common shares issued for cash			25,000,000				25,000				–												25,000
Common shares issued for services			7,500,000				7,500				–												7,500
Change in value of derivative liability upon conversion			–				–				14,860												14,860
Common shares issued in conversion of debt			17,910,448				17,910				(5,910	)											12,000
Common shares issued for services			5,000,000				5,000				–												5,000
Net (Loss)																			(917,002	)
Total comprehensive income (loss)			–				–				–				–								(917,002	)
Balance, December 31, 2013			2,136,465,762				2,136,467				4,580,399				–				(6,117,123	)			599,743
Change in value of derivative liability upon conversion			0				0				23,065												23,065
Common shares issued in conversion of debt			28,620,690				28,621				-13,121												15,500
Common shares issued for cash			20,000,000				20,000				0												20,000
Common shares issued for financing costs			5,000,000				5,000				0												5,000
Common shares issued for cash			10,000,000				10,000				0												10,000
Common shares issued for cash			1,666,666				1,667				833												2,500
Common shares issued for cash			1,666,666				1,667				833												2,500
Common shares issued for cash			6,666,666				6,667				3,333												10,000
Common shares issued for cash			3,333,333				3,333				1,667												5,000
Common shares issued for financing costs			5,000,000				5,000				2,500												7,500
Common shares issued for cash			1,200,000				1,200				1,800												3,000
Common shares issued for cash			13,300,000				13,300				6,700												20,000
Common shares issued for cash			2,000,000				2,000				3,000												5,000
Common shares issued for cash			3,333,333				3,333				1,667												5,000
Common shares issued for cash			3,333,333				3,333				1,667												5,000
Change in value of derivative liability upon conversion			0				0				33,197												33,197
Common shares issued in conversion of debt			7,692,308				7,692				12,308												20,000
Common shares issued for cash			6,666,667				6,667				3,333												10,000
Common shares issued for cash			1,428,571				1,429				3,571												5,000
Common shares issued in conversion of debt			4,312,500				4,313				8,188												12,500
Common shares issued for cash			1,428,571				1,429				3,571												5,000
Common shares issued for cash			5,000,000				5,000				5,000												10,000
Common shares issued for cash			10,000,000				10,000				10,000												20,000
Common shares issued for cash			2,000,000				2,000				2,000												4,000
Common shares issued for cash			30,000,000				30,000				0												30,000
Common shares issued for cash			9,900,000				9,900				0												9,900
Common shares issued for cash			19,000,000				19,000				0												19,000
Common shares issued for cash			2,500,000				2,500				2,500												5,000
Common shares issued for cash			1,100,000				1,100				0												1,100
Common shares issued for cash			3,400,000				3,400				1,700												5,100
Common shares issued for financing costs			5,000,000				5,000				7,500												12,500
Common shares issued for cash			17,333,333				17,333				8,667												26,000
Common shares issued for cash			12,500,000				12,500				12,500												25,000
Common shares issued for cash			1,400,000				1,400				700												2,100
Common shares issued for services			5,000,000				5,000				10,500												15,500
Common shares issued for cash			3,333,333				3,333				1,667												5,000
Common shares issued for cash			5,000,000				5,000				2,500												7,500
Common shares issued for cash			5,000,000				5,000				5,000												10,000
Common shares issued to settle debt			28,333,000				28,333				0												28,333
Common shares issued for cash			5,000,000				5,000				2,500												7,500
Common shares issued for cash			5,000,000				5,000				2,500												7,500
Common shares issued for cash			5,000,000				5,000				2,500												7,500
Common shares issued for cash			7,000,000				7,000				3,500												10,500
Change in value of derivative liability upon conversion			0				0				25,594												25,594
Warrants issued in inducement of debt			0				0				5,709
Common shares issued in conversion of debt			10,000,000				10,000				0												10,000
Common shares issued in conversion of debt			10,752,688				10,753				-753												10,000
Common shares issued for services			5,000,000				5,000				2,500												7,500
Common shares issued for financing costs			2,000,000				2,000				2,000												4,000
Change in value of derivative liability upon conversion											30,663												30,663
Common shares issued in conversion of debt			28,950,000				28,950				-7,450												21,500
Change in value of derivative liability upon conversion											23,887												23,887
Common shares issued in conversion of debt			18,292,683				18,293				-3,293												15,000
Common shares issued for cash			2,000,000				2,000				1,000												3,000
Change in value of derivative liability upon conversion											18,832												18,832
Common shares issued in conversion of debt			25,066,667				25,067				-7,567												17,500
Common shares issued for cash			5,000,000				5,000				0												5,000
Common shares issued for cash			4,000,000				4,000				2,000												6,000
Common shares issued for services			10,000,000				10,000				5,000												15,000
Common shares issued for cash			2,000,000				2,000				1,000												3,000
Warrants issued in inducement of debt			0				0				115,813												115,813
Warrants issued in inducement of debt			0				0				17,500												17,500
Warrants issued in inducement of debt			0				0				5,500												5,500
Warrants issued in inducement of debt			0				0				12,500												12,500
Net (Loss)																			-3,054,591
Total comprehensive income (loss)			–				–				–				–								-3,054,591	)
Balance, December 31, 2014			2,573,976,770				2,573,979				5,010,180				–				(9,171,714	)			(1,593,264)

 

The accompanying notes are an integral part of these consolidated statements.

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Year ended December 31,
		2014				2013
Operating activities
Net loss		$	(3,054,591	)		$	(917,002	)
Adjustments to reconcile net loss
Stock-based compensation			38,000				101,250
Non-cash financing costs and amortization of debt discount			65,687				–
Non-cash financing cost for warrants issued as inducement			157,021				–
Common stock issuance for non-cash financing costs			29,000				–
Depreciation and amortization			68,697				52,783
Other-than-temporary-Impairment of Long-lived assets			1,753,497				–
Gain on sale of fixed asset			–				(1,142	)
Non-cash interest expense			–				50,835
Gain on extinguishment of debt			–				(8,755	)
Gain/Loss on change in fair value of derivative liability			(49,825	)			(5,552	)
Derivative expense			92,600				12,079
Change in assets and liabilities
(Increase)/decrease in accounts receivable
(Increase)/decrease in accounts receivable			(12,490	)			–
(Increase)/decrease in prepaid expenses			(202	)			1,000
Increase/(decrease) in accrued interest payable			242,050				219,788
Increase/(decrease) in accounts payable and accrued liabilities			260,658				251,089
Increase/(decrease) in accrued-related party			(67,192	)			(9,033	)
Net cash used by operating activities			(477,091	)			(252,660	)
Investment activities
Investments:
Investment in Lahontan			(70,303	)
Acquisition of property and equipment			(45,000	)			(6,500	)
Proceeds from sale of fixed assets			–				1,142
Net cash used by investment activities			(115,303	)			(5,358	)
Financing activities
Repayments of loans from related parties			–				(67,000	)
Repayments of convertible debt			(106,000	)			(66,970	)
Proceeds from issuance of debt			245,251				92,000
Repayments of debt			(28,000	)
Proceeds from issuance of convertible debt			141,500				213,500
Proceeds from the sale of stock			337,701				88,500
Net cash provided by financing activities			590,452				260,030
Net increase / (decrease) in cash			(1,942	)			2,012
Cash, beginning of period			2,463				451
Cash, end of period		$	521			$	2,463
Supplemental Information:
Interest paid		$	54,424			$	–
Income taxes paid		$	–			$	–
Non-cash activities:
Financed procurement		$	75,000			$	–
Stock issued to settle related party payables		$	–			$	20,000
Stock issued to settle accrued interest		$	3,333			$	101,669
Stock issued to settle debt		$	25,000			$	110,000
Forgiveness of related party payables		$	–			$	28,500

 

The accompanying notes are an integral part of these statements

 

 

SUNERGY, INC.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2014

 

NOTE 1. GENERAL ORGANIZATION AND BUSINESS

 

Sunergy, Inc. (The Company) was organized in the state of Nevada on January 28, 2003 and is an exploration phase mineral and mining company.

 

The Company has mineral properties located in the Republic of Ghana and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of amounts from these properties will be dependent upon the discovery of economically recoverable reserves located within the property interests held by the Company, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreements to complete the development of the properties and upon future profitable production or proceeds for the sale thereof.

 

On October 18, 2010, the Company acquired Allied Mining and Supply LLC., a Nevada limited liability company. Allied Mining and Supply LLC also has one subsidiary, a Sierra Leone company, Allied Mining and Supply Ltd. As part of the acquisition the Company now has a concession in Sierra Leone. The Company has been in the exploration phase of this concession since the purchase. The Company has three subsidiaries, Allied Mining and Supply, LLC a Nevada Limited Liability Company and Mikite Gold Resources, LTD, a Ghana corporation, and Sunergy Liberia LTD, a Liberia corporation which was formed in December 2013. During December 2014, we generated other income $12,490 from the delivery of our first parcel of diamonds, which was not related to our development in mining concession. No material revenues have been generated as of yet. This concession, if determined to be economically feasible, may produce gold and rare metals.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Sunergy, Inc. and its wholly-owned subsidiaries Mikite Gold Resources Limited, a Ghanaian company, Allied Mining and Supply LLC, a Nevada limited liability company. Allied Mining and Supply LLC also has one 100% owned subsidiary, a Sierra Leone company, Allied Mining and Supply Ltd. All material inter-company balances and transactions have been eliminated.

 

Cash

 

Cash and cash equivalents include cash in banks and financial instruments which mature within three months of the date of purchase. There were no cash equivalents held by the Company at December 31, 2014.

 

Basis of Presentation

 

The statements were prepared following generally accepted accounting principles of the United States of America (“GAAP”). The Company operates on a December 31 fiscal year end.

 

Loss per Share

 

The Company computes net loss per share in accordance US GAAP. This requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period under the treasury stock method using the if-converted method. All periods presented reflect net losses, therefore, all instruments convertible to common shares are considered anti-dilutive. As of December 31, 2014 and 2013, there are 262,523,472 and 256,266,331 of warrants outstanding exercisable into one common share of the Company which are anti-dilutive and not included in the calculation of loss per share. In addition, as of December 31, 2014, there are an additional 100,446,429 shares that would be anti-dilutive on an “if-converted” basis in conjunction with the potential conversion of the convertible promissory notes payable if the notes remain unpaid after six months from the date of issuance

 

Dividends

 

The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid during the periods shown.

 

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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

  

Fair Value of Financial Instruments

 

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. Fair value of financial instruments is the amount at which the instruments could be exchanged in a current transaction between willing parties. The Company considers the carrying amounts of cash, certificates of deposit, accounts receivable, accounts payable, notes payable, related party and other payables, customer deposits, and short term loans approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. The Company considers the carrying amount of notes payable to approximate their fair values based on the interest rates of the instruments and the current market rate of interest.

 

Income Taxes

 

The Company recognizes deferred tax liabilities and assets using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statements carrying values and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. In determining the future tax consequences of events that have been recognized in the financial statements or tax returns, judgment and interpretation of statutes is required. Judgments and interpretation of statutes are inherent in this process. Future income tax assets are recorded in the financial statements if realization is considered more likely than not.

 

For previously taken tax positions considered to be uncertain, the Company prescribes a recognition threshold and measurement attribute. In the event certain tax positions do not meet the appropriate recognition threshold, de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions is required.

 

The Company files income tax returns in the U.S. federal jurisdiction and various states. With limited exception, the Company is no longer subject to U.S. federal, state and local tax audits by taxing authorities for years 2005 and before.

 

Stock Based Compensation

 

The Company has on occasion issued equity and equity linked instruments to non-employees in lieu of cash to various vendors for the receipt of goods and services and, in certain circumstances the settlement of short-term loan arrangements. The applicable GAAP establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

 

In these transactions, we issue unregistered and restricted equity instruments along with equity-linked instruments that are convertible into unregistered and restricted shares of our common stock.

 

While we have in excess of 1,551,000,000 shares of freely-traded stock with a quoted market price (a Level 1 input within the GAAP hierarchy). The fair value of the unregistered and restricted shares issued from December 13, 2010 through the present as valued by the quoted market price does not reflect the economic substance of the transactions, correspondingly, the quoted market price is not the most reliably measurable fair value.  We made this determination based upon the significant liquidity restrictions placed upon our unregistered restricted equity instruments since December 13, 2010.  For additional specific discussion related to these restrictions, see Item – 1A Risk Factors.

 

When unregistered common shares and equity-linked instruments convertible into unregistered common shares are issued for the settlement of short-term financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.

 

In situations in which we issue unregistered restricted common shares and equity-linked instruments in exchange for goods and services, and the value of the goods and services are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy).  We have determined this methodology reflects the risk adjusted fair value of our unregistered restricted equity instruments using a commercially reasonable valuation technique.

 

 

Exploration Stage Company

 

The Company is considered to be an exploration stage entity in accordance with GAAP. All losses accumulated since inception have been considered as part of the Company’s exploration stage activities.

 

The Company is subject to several categories of risk associated with its exploration stage activities. Mineral exploration and production is a speculative business, and involves a high degree of risk. Among the factors that have a direct bearing on the Company’s prospects are uncertainties inherent in estimating mineral deposits, future mining production, and cash flows, particularly with respect to properties that have not been fully proven with economic mineral reserves; access to additional capital; changes in the price of the underlying commodity; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.

 

Mineral Property Costs

 

Mineral property acquisition costs are capitalized. Exploration and development costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

 

Environmental Costs

 

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts.

 

Long-Lived Assets

 

The carrying value of long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. As of December 31, 2014, management believed impairment was warranted for our long-lived assets. Please refer to footnote 5 for details.

 

Reclamation Liabilities and Asset Retirement Obligations

 

Minimum standards for site reclamation and closure have been established by various government agencies that affect certain of our operations. The Company calculates estimates of reclamation liabilities based on current laws and regulations and the expected undiscounted future cash flows to be incurred in reclaiming, restoring, and closing of operating mine sites. US GAAP requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. It further requires us to record a liability for the present value of our estimated environmental remediation costs and the related asset created with it when a recoverable asset (long-lived asset) can be realized.

 

Property and Equipment

 

Property and equipment are recorded at historical cost. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful life for property and equipment held at December 31, 2014 and 2013 is five years.

 

Recent Accounting Guidance Not Yet Adopted

 

The Company has reviewed recently issued accounting pronouncements and does not expect any to have a material impact on our financial position, results of operations, or cash flows.

 

 

NOTE 3. GOING CONCERN

 

The Company sustained operating losses during the years ended December 31, 2014 and 2013 and incurred negative cash flows from operations in both years. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing, as may be required.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. Management’s plans concerning these matters include the raising of additional equity financing.

 

NOTE 4. PROPERTY AND EQUIPMENT

 

Property, Plant and Equipment consisted of the following at December 31, 2014 and 2013:

 

		December 31,				December 31,
		2014				2013
Exploration equipment		$	373,759			$	253,759
Rolling stock			13,500				13,500
Office furniture and equipment			4,753				4,753
Subtotal		$	272,012			$	272,012
Less accumulated depreciation			(212,088	)			(143,391	)
Property, and equipment - net		$	179,924			$	128,621

 

NOTE 5. MINERAL PROPERTIES

 

Nyinahin Mining Concession

 

Through its wholly-owned subsidiary, Mikite Gold Resources Limited, the Company holds a 100% interest in a mineral concession located in the Ashanti region of Ghana, known as the Nyinahin concession. The Company acquired the concession for total consideration of $1,000,000 in 2008.

 

As of December 31, 2014, the Company has not identified any proven or probable reserves within the Nyinahin Concession, correspondingly, all exploration activities since the acquisition have been expensed.

 

Additionally, the prior concession owner retained a 5% net smelter royalty for future production from the property, if any.

 

Management evaluated the feasibility of sufficient funds to either finance further development and exploration or feasibility in receiving funds from a joint venture partner or acquirer to recover our acquisition costs and determined based upon the remote likelihood of the aforementioned factors that the property was impaired from its current carrying value and has recorded a charge to impairment against the exploratory property for $1,000,000.

 

Pampana River Concession

 

On October 18, 2010, the Company entered into a membership purchase agreement with Allied Mining and Supply, LLC for the purchase of 100% of the issued and outstanding membership interest of Allied Mining, a Nevada Limited Liability company, which owns the rights to Exploration License #EXPL 5/2009 on the 140 sq km Pampana River concession in Sierra Leone, West Africa.

 

The Company issued 100,000,000 equity units for total consideration of $753,497 to acquire the Pampana River concession. The warrants issued in conjunction with the purchase were not exercised and have since expired.

 

As of December 31, 2014 the Company has not identified any proven or probable reserves within the Pampana River Concession, correspondingly, all exploration activities since the acquisition have been expensed.

 

Due the current status of the economic environment, Management evaluated the ability to provide ongoing exploration and operations funding and for the achievement of positive cash flows from operations on the Pampana Concession and determined that the future cash flows were less than the current carrying value of the project. As such, Management recorded a charge to impairment for $753,497 as of the end of the year. The Company continues to seek alternatives to trade into a diamond bearing concession as it reenergizes its focus on generating cash flow to continue to fund operations.

 

 

NOTE 6. STOCKHOLDERS’ EQUITY

 

Common Stock

 

The Company is authorized to issue 3,750,000,000 common shares with a par value of $0.001 per share at December 31, 2014.

  

During the quarter ended March 31, 2013, the Company issued 2,500,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.005 per share for total cash of $5,000; , the Company issued 5,000,000 equity units at $0.0025 per unit for prepaid consulting services with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.005 per share.; the Company issued 2,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.004 per share for incentive to provide short-term commercial financing in the amount of $25,000.

 

During the quarter ended June 30, 2013, the Company issued 12,366,332 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $18,500; the Company issued 2,500,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $5,000; the Company issued 20,000,000 equity units at $0.002 per unit for consulting services with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share; the Company issued 30,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share to settle $60,000 in outstanding notes payable.

 

During the quarter ended September 30, 2013, the Company issued 3,333,333 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $5,000; the Company issued 5,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $5,000; the Company issued 10,000,000 equity units at $0.0015 per unit for consulting services with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share equivalently $15,000; the Company issued 67,733,333 equity units at $0.0015 per unit to settle outstanding accounts payable with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share equivalently $101,669; the Company issued 13,333,333 equity units at $0.0015 per unit to settle outstanding related party payables with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share or $20,000 equivalently; the Company issued 30,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share to settle $30,000 in outstanding notes payable. During the third quarter of 2013, the former chairman of the Board of Directors forgave outstanding amounts owed under his compensation due for 2012. The amount forgiven, $28,500, has been recorded as an increase in additional paid-in capital.

 

During the quarter ended December 31, 2013, the Company issued 50,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $50,000; the Company issued 7,500,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for services at a value of $7,500; the Company issued 17,910,448 shares of common stock in conversion of the convertible note dated June 13, 2013; the Company issued 5,000,000 shares of common stock at $0.001 for services valued at $5,000. In addition, the Company recognized a change in additional paid-in capital on the fair value of the derivative liability on the date it became convertible of $14,860 as an increase and a change in the fair value of that derivative on the date of conversion of a reduction of paid-in capital of $5,910.

 

During the quarter ended March 31, 2014, the Company issued 28,620,690 shares upon the conversion of the note payable #2 dated June 2013 for outstanding principal balance of $15,500; 30,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $30,000; 9,999,998 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $15,000, the Company issued 5,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $25,000 valued at $0.001 per share or $5,000. 

 

During the quarter ended June 30, 2014, the Company issued 12,004,808 shares upon the conversion of the note payable #3 dated October 2013 for outstanding principal balance of $32,500; 60,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $60,000; 52,099,999 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $78,200; 32,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.004 per share for total cash of $64,000; 3,200,000 equity units at $0.0025 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.005 per share for total cash of $8,000; 2,857,142 equity units at $0.0035 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.007 per share for total cash of $10,000; the Company issued 5,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $25,000 valued at $0.0015 per share or $7,500; the Company issued 5,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $25,000 valued at $0.0025 per share or $12,500.

 

 

During the quarter ended September 30, 2014, the Company issued 23,333,333 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $35,000; 5,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.004 per share for total cash of $10,000; 28,333,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.001 per share for settlement of outstanding principal of $25,000 and accrued interest of $3,333; 5,000,000 equity units at $0.0031 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.0025 per share for services valued at $15,500 at the date of issuance.   

 

During the quarter ended December 31, 2014, the Company issued 7,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $10,500; the Company issued 49,702,688 shares upon the conversion of the note payable #2014-1 dated April 2014 for outstanding principal balance of $41,500; 5,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for services valued at $7,500 at the date of issuance; the Company issued 2,000,000 common shares as an incentive to provide short-term commercial financing in the amount of $10,000 valued at $0.002 per share or $4,000; the Company issued 43,359,350 shares upon the conversion of the note payable #2014-2 dated May 2014 for outstanding principal balance of $32,500; the Company issued 2,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $3,000; the Company issued 5,000,000 equity units at $0.001 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.002 per share for total cash of $5,000; the Company issued 4,000,000 equity units at $0.0015 for total cash of $6,000; the Company issued 2,000,000 equity units at $0.0015 for total cash of $3,000; 10,000,000 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for services valued at $15,000 at the date of issuance.

 

Outstanding Warrants

 

On December 31, 2014 and 2013, the Company had warrants outstanding for the purchase of an aggregate of 262,523,472 and 256,266,331 shares of its common stock, which are summarized in the table below:

 

Warrants				Exercise				Expiration
Outstanding				Price				Date
	20,000,000				0.002				7-Mar-15
	10,000,000				0.002				13-Mar-15
	1,666,666				0.003				17-Mar-15
	1,666,666				0.003				24-Mar-15
	6,666,666				0.003				28-Mar-15
	3,333,333				0.003				1-Apr-15
	1,200,000				0.005				2-Apr-15
	2,000,000				0.005				4-Apr-15
	3,333,333				0.003				7-Apr-15
	3,333,333				0.003				8-Apr-15
	6,666,667				0.003				17-Apr-15
	1,428,571				0.007				23-Apr-15
	1,428,571				0.007				29-Apr-15
	5,000,000				0.004				6-May-15
	10,000,000				0.004				6-May-15
	2,000,000				0.004				9-May-15
	30,000,000				0.002				9-May-15
	9,900,000				0.002				9-May-15
	19,000,000				0.002				12-May-15
	2,500,000				0.004				12-May-15
	1,100,000				0.002				12-May-15
	3,400,000				0.003				21-May-15
	17,333,333				0.003				6-Jun-15
	12,500,000				0.004				6-Jun-15
	1,400,000				0.003				16-Jun-15
	5,000,000				0.0025				18-Jun-15
	3,333,333				0.003				8-Jul-15
	5,000,000				0.003				11-Jul-15
	5,000,000				0.004				11-Jul-15
	28,333,000				0.001				18-Jul-15
	5,000,000				0.003				22-Jul-15
	5,000,000				0.003				29-Aug-15
	5,000,000				0.003				17-Sep-15
	7,000,000				0.002				30-Sep-15
	5,000,000				0.0025				24-Oct-15
	5,000,000				0.003				5-Nov-15
	2,000,000				0.003				26-Nov-15
	5,000,000				0.003				17-Dec-15
	262,523,472

 

 

Information relating to warrant activity during the reporting period follows:

 

Weighted

Average

Number of

Contingent

Exercise

Warrants

Warrants

Price

Total Warrants outstanding at December 31, 2012

347,092,849

–

0.0053

Plus: Warrants Issued

261,266,331

–

0.0023

Less: Warrants Exercised

–

–

–

Less: Warrants Expired

(352,092,849

)

–

0.0053

Total Warrants outstanding at December 31, 2013

256,266,331

–

0.0023

Plus: Warrants Issued

264,523,472

–

0.00261

Less: Warrants Exercised

–

–

–

Less: Warrants Expired

(258,266,331

)

–

0.00273

Total Warrants outstanding at December 31, 2014

262,523,472

–

0.0026

 

The average remaining contractual life of stock warrants as of December 31, 2014 was 0.25 years.

 

NOTE 7. NOTES PAYABLE

 

During 2013, we entered into a short-term commercial financing agreement to fund $67,000 to the Company to pay back the convertible promissory note entered into in April 2013 that was to mature in January 2014, but held a pre-payment period up through 180 days from the issuance and funding of the convertible promissory note. Thus the Company entered into a financing agreement with shareholders to repay funds received under the convertible promissory note. The Company repaid the short-term commercial financing agreement within 30 days of issuance and the note holder was due no interest under the short-term agreement.

 

In addition, the Company issued 30,000,000 shares at $0.002 in May 2013 to repay the $50,000 short-term commercial agreement from 2013 plus accrued interest.

 

On February 20, 2014, the Company entered into a short-term commercial financing agreement for the placement of dredging machinery in country in the amount of $20,000 due and payable in monthly installments of $4,000 per month or 15% of net profit from operations, whichever is greater over the next six months until $24,000 is repaid. Loan was repaid in full during the year.

 

On March 7, 2014, the Company entered into a short-term commercial financing agreement for the placement of dredging machinery in country in the amount of $25,000 due and payable in monthly installments beginning 60 days after funding of $5,000 per month or 15% of net profit from operations, whichever is greater over the next six months until $30,000 is repaid. The agreement was collateralized by 25,000,000 shares and warrants at 0.001. Starting at 90 days after issuance at the election of the lender, they may convert into collateral shares and warrants at $0.001. On July 11, 2014, the lender elected to convert the entire balance of $25,000 and accrued interest of $3,333 into 28,333,000 collateral shares of the Company.

 

On March 17, 2014, the Company entered into a short-term commercial financing agreement for the placement of dredging machinery in country in the amount of $25,000 due and payable in monthly installments of $5,000 per month or 15% of net profit from operations, whichever is greater over the next six months until $30,000 is repaid. The agreement is collateralized by 25,000,000 shares and warrants at 0.0025. Starting at 90 days after issuance at the election of the lender, they may convert into collateral shares and warrants at $0.001. The Company issued 5,000,000 shares as inducement to enter into the transaction.

 

On March 27, 2014, the Company entered into a short-term commercial financing agreement for the placement of dredging machinery in country in the amount of $20,000 due and payable in monthly installments of $500 interest only per month with the the note to be paid in full on October 1, 2014. As of December 31, 2014, this note remains unpaid.

 

On April 30, 2014, the Company entered into an agreement for the purchase of a backhoe and certain dredging equipment which included a down payment of $15,000 and a note payable in the amount of $75,000. Monthly payments of $7,500 were to begin on June 15, 2014 and continue through March 15, 2015. Due to the ongoing ebola epidemic, the payments were note made due to inability to operate machinery in country. As of December 31, 2014, the entire note payable remains outstanding.

 

On October 24, 2014, the Company entered into a short-term commercial financing agreement in the amount of $15,000 bearing interest of 15% and due within 180 days for the funding of investment in an outside group in further housing projects in African nations for which the Company would receive a commission on sold units. The Company issued 5,000,000 warrants at $0.0025 as incentive to the lien holder to enter into the financing arrangement. The agreement is collateralized by 15,000,000 shares and 15,000,000 warrants at 0.0025.

 

 

On October 27, 2014, the Company entered into a short-term commercial financing agreement in the amount of $8,000 for investment in an outside group in furthering housing projects in African nations. The note was payable within 7 days of issuance including a $1,000 expediting fee. The note was repaid in full including the fee which was recorded to interest expense on October 29, 2014.

 

On October 27, 2014, the Company entered into a short-term commercial financing agreement in the amount of $20,000 for investment in an outside group in furthering housing projects in African nations. The note was payable within 45 days of issuance including a $2,000 expediting fee. As of December 31, 2014, this note remains unpaid and the expediting fee has been accrued.

 

On November 18, 2014, the Company entered into a short-term commercial financing agreement in the amount of $25,000 bearing interest of 15% and due within 180 days for the funding of investment in an outside group in further housing projects in African nations for which the Company would receive a commission on sold units. The Company issued 5,000,000 common shares $0.002 as incentive to the lien holder to enter into the financing arrangement. The agreement is collateralized by 50,000,000 shares at 0.005.

 

On November 18, 2014, the Company entered into a short-term commercial financing agreement in the amount of $10,000 bearing interest of 15% and due within 180 days for the funding of investment in an outside group in further housing projects in African nations for which the Company would receive a commission on sold units. The Company issued 2,000,000 common shares $0.002 as incentive to the lien holder to enter into the financing arrangement. The agreement is collateralized by 20,000,000 shares at 0.005.

 

On December 11, 2014, the Company entered into a short-term commercial financing agreement in the amount of $25,000 for the term of 45 days bearing a 20% premium. The note was used to smooth the operation in Sierra Leone.

 

A summary of the outstanding balance for the periods ended December 30, 2014 and December 31, 2013 follows:

 

		December 31,				December 31,
		2014				2013
Notes Payable		$	126,415			$	100,585
Cash Received			509,400				67,000
Cash payments made			(134,000	)			(67,000	)
Equity Loan Settlements			(150,330	)			(60,000	)
Total Notes Payable		$	351,485			$	48,085
Less discounts on notes payable			(17,916	)			–
Total Notes Payable		$	333,836			$	48,085

 

Convertible Promissory notes

 

During 2014, the Company entered into three separate convertible promissory notes and security purchase agreements (referred to as Convertible Note #1 to #4).

 

The Company entered into Convertible Note #1 dated April 2014, Convertible Note#2 dated May 2014, Convertible #3 dated July 2014, and Convertible #3 dated November 2014. The notes had a principal amount of $41,500, $32,500, $32,500, and $35,000 respectively.

 

On January 6, 2014, the convertible note #2013-2 holder converted the remaining unpaid principal balance of $15,500 into 28,620,690 common shares of our stock. On the date of conversion, we recognized a gain in the change of the fair value of the derivative of $465. In addition, we recognized an additional interest expense of $846 related to the conversion of the note.

 

Convertible Note #2013-3 became convertible in April 2014 at which time we recognized a derivative liability of $65,346 with an offset to debt discount of $32,500 and a derivative expense of $32,846. Additionally, we recognized $1,289 of interest expense related to the debt discount. On April 16, the convertible note holder converted $20,000 of the unpaid principal balance into 7,692,308 shares of common stock. On the date of conversion, we recognized a gain in the change of the fair value of the derivative of $11,401. In addition, we recognized an additional interest expense of $1,092 related to the conversion of the note. On April 23, the convertible note holder converted $12,500 of the unpaid principal balance into 4,312,500 shares of common stock. On the date of conversion, we recognized a loss in the change of the fair value of the derivative of $3,181. In addition, we recognized an additional interest expense of $682 related to the conversion of the note.

 

 

On May 12, 2014, the Company elected to exercise its right to extinguish the convertible note #2013-4 in the principal amount of $53,000. Under the terms of the agreement, the Company had to repay 145% of principal plus accrued interest. On May 12, 2014, the Company paid $78,895 in settlement of principal and accrued interest with the difference recorded to interest expense.

 

On June 6, 2014, the Company elected to exercise its right to extinguish the convertible note #2013-5 in the principal amount of $53,000. Under the terms of the agreement, the Company had to repay 145% of principal plus accrued interest. On June 6, 2014, the Company paid $78,929 in settlement of principal and accrued interest with the difference recorded to interest expense.

 

Convertible Note #2014-1 became convertible in October 2014 at which time we recognized a derivative liability of $69,553 with an offset to debt discount of $41,500 and a derivative expense of $28,053. Additionally, we recognized $1,646 of interest expense related to the debt discount. On October 22, the convertible note holder converted $10,000 of the unpaid principal balance into 10,000,000 shares of common stock. On the date of conversion, we recognized a gain in the change of the fair value of the derivative of $14,145. In addition, we recognized an additional interest expense of $82 related to the conversion of the note. On October 29, the convertible note holder converted $10,000 of the unpaid principal balance into 10,752,688 shares of common stock. On the date of conversion, we recognized a gain in the change of the fair value of the derivative of $3,494. In addition, we recognized an additional interest expense of $64 related to the conversion of the note. On November 6, the convertible note holder converted the remaining $21,500 of the unpaid principal balance into 28,950,000 shares of common stock. On the date of conversion, we recognized a loss in the change of the fair value of the derivative of $4,342. In addition, we recognized an additional interest expense of $73 related to the conversion of the note.

 

Convertible Note #2014-2 became convertible in November 2014 at which time we recognized a derivative liability of $64,200 with an offset to debt discount of $32,500 and a derivative expense of $31,700. Additionally, we recognized $1,289 of interest expense related to the debt discount. On November 24, the convertible note holder converted $15,000 of the unpaid principal balance into 18,292,683 shares of common stock. On the date of conversion, we recognized a gain in the change of the fair value of the derivative of $12,445. In addition, we recognized an additional interest expense of $64 related to the conversion of the note. On December 1, the convertible note holder converted the remaining $17,500 of the unpaid principal balance into 25,066,667 shares of common stock. On the date of conversion, we recognized a gain in the change of the fair value of the derivative of $9,036. In addition, we recognized an additional interest expense of $50 related to the conversion of the note.

 

On Convertible Notes #3 through #4, the Company has recognized accrued interest of $1,470 through December 31, 2014. Interest is recognized over the life of the note which is 9 months from the date of issuance. As of December 31, 2014, Convertible Note #3 may be converted into approximately 48,363,095 common shares of the Company beginning at day 181 since date of issuance and up until the date maturity of the note. As of December 31, 2014, Convertible Note #4 and Convertible may be converted into approximately52,083,333 common shares per note, for a total of 100,446,428, of the Company beginning at day 181 since date of issuance and up until the date maturity of the note.

 

 

NOTE 8. RELATED PARTY TRANSACTIONS

 

Certain related parties assist in financing operations by personally paying expenses which the Company considers as short-term non-interest bearing operational loans and are recorded as related party accounts payable. These expenses are incurred within the normal course of business of the Company.

 

The Company accrues unpaid management and director fees. A summary of related party transactions for the years ended December 31, 2014 and 2013 follow:

 

		December 31,				December 31,
		2014				2013
Accounts Payable-Related Party		$	43,752			$	110,944
Total Related Party		$	43,752			$	110,944

 

Additionally, as of December 31, 2014, our current CEO is owed $156,393 for compensation accrued for prior months and reimbursements related to ongoing operations of the business. These amounts are included in accounts payable and accrued liabilities.

 

NOTE 9. PROVISION FOR INCOME TAXES

 

The Company provides for income taxes under ASC 740 “Income Taxes” which requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the temporary differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.

 

The standard requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded. The total deferred tax asset is $1,641,401 which is calculated by multiplying a 35% estimated tax rate by the cumulative NOL of $4,689,718. The total valuation allowance is also $1,641,401. Details for the years ended December 31, 2014 and 2013 follow:

 

		December 31,				December 31,
		2014				2013
Deferred Tax Asset		$	842,579			$	1,643,598
Valuation Allowance			(842,579	)			(1,643,598	)
Income Tax Expense		$	–			$	–

 

The components of income tax expense for years ended December 31, 2014 and 2013 respectively are as follows:

 

		December 31,				December 31,
		2014				2013
Change in Net Operating Loss		$	195,982			$	312,800
Change in Valuation Allowance			(195,982	)			(312,800	)
Income Tax Expense		$	–			$	–

  

The differences between the statutory income tax rates computed at the U.S. federal statutory rate and our effective rate were the following:

 

		Rate
Federal Statutory Rate			34%
Current Loss and NOL Carry Forward			-34%
Net Rate			0%

 

 

Below is a chart showing the estimated federal net operating losses and the years in which they will expire.

 

Period		Net Operating Loss				Expiration
2003		$	30,313				2023
2004			41,362				2024
2005			26,093				2025
2006			39,746				2026
2007			55,103				2027
2008			98,445				2028
2009			122,873				2029
2010			370,508				2030
2010 “True –up”			169,556				2030
2011 Est.			1,467,405				2031
2012			1,380,887				2032
2013			893,702				2033
2014			195,982				2034
Total NOL		$	4,891,975

 

The Company has immaterial differences between book and tax income due primarily to permanent differences related to meals and entertainment and temporary differences related to depreciation on property, plant and equipment. All items of differences have been reflected in calculations of net operating losses and deferred tax assets.

 

The Company does not currently have any uncertain tax positions.

 

The Company’s tax returns currently subject to audit by the Internal Revenue Service are for the periods ended December 31, 2007 and subsequent.

 

NOTE 10. SUBSEQUENT EVENTS

 

On February 10, 2014, the Company received $20,000 in a loan from a shareholder to be repaid in 6 equal monthly installments of $4,000. On March 7, 2014, we received $25,000 in a loan from a shareholder to finance purchase of a six inch dredge which shall be repaid starting in 60 days at monthly payments of at least $5,000 or 15% of net profits from operations whichever is greater until a total of $30,000 of payments are made. On March 7 and 13, we received $30,000 from an accredited investor for placement of equity units consisting of one common share at $0.001 and one common share purchase warrant exercisable at $0.002 for one year. On March 17, 2014 we entered into a short-term commercial finance agreement for $25,000 for the purchase of a dredge with a full amount of $30,000 to be repaid within 270 days with first payment due in 60 days after funding of the note. Full funding on the note has been received as of the date of this filing. On March 25, 2014, we received $5,000 from an investor in the exercise of common share purchase warrants at $0.0015 for warrants issued in 2014. On March 27, 2014, we received $20,000 in a short-term commercial finance agreement from a shareholder. On March 28, 2014, we received $10,000 in private placement for the purchase of 6,666,666 equity units consisting of one common share at $0.0015 and one common share purchase warrant exercisable for one year at $0.0015. On April 1, 2014, we received $5,000 from an accredited investor for private placement of 3,333,333 equity units consisting of one common share at $0.0015 and one common share purchase warrant exercisable at $0.0015 for one year. On April 2, 2014, we received $19,940 from an accredited investor for private placement of 13,300,000 equity units consisting of one common share and one common share purchase warrant exercisable at $0.0015 for one year. On April 2, 2014, we received $3,000 from an accredited investor for private placement of 1,200,000 equity units consisting of one common share at $0.0025 and one common share purchase warrant exercisable at $0.005 for one year. On April 4, 2014, we received $5,000 from accredited investors for private placement of 2,000,000 equity units consisting of one common share at $0.0025 and one common share purchase warrant exercisable at $0.0025 for one year. On April 5, 2014, we received $5,000 from an accredited investor in the exercise of common share purchase warrants at $0.0015 that were issued in 2014. On April 8, 2014, we received $5,000 from accredited investors for private placement of 2,000,000 equity units consisting of one common share at $0.0025 and one common share purchase warrant exercisable at $0.0025 for one year.

 

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

None

 

Item 9A(T). Controls and Procedures

 

Management’s Report on Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (who is acting as our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As of December 31, 2012, the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision and with the participation of our President (acting as our principal executive officer) and our Chief Financial Officer (acting as our principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our President and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance’s with US generally accepted accounting principles due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.  

 

Management’s Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management evaluated, under the supervision and with the participation of our principal executive and principal accounting officer, the effectiveness of our internal control over financial reporting as of December 31, 2014.

 

Based on its evaluation under the framework in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management, with the participation of our principal executive and principal accounting officer concluded that our internal controls over financial reporting were not effective as of December 31, 2014, due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

 

This annual report does not include an attestation report of our company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only management’s report in this annual report.

 

 

Material Weaknesses Identified

 

Based on our management’s evaluation required by paragraph (d) of Rule 13a-15 and of Rule 15d-15 of the Exchange Act, certain significant deficiencies in internal control became evident to management that our management believes represent material weaknesses, including:

 

(i)

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended December 31, 2014, we had limited staff that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected;

 

(ii)

There is a lack of sufficient supervision and review by our management;

 

(iii)

Insufficient corporate governance policies. Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management; and

 

Plan for Remediation of Material Weaknesses

 

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies as our funding permits.

 

We have implemented certain remediation measures and are in the process of designing and implementing additional remediation measures for the material weaknesses described in this annual report. Such remediation activities include the following:

 

(1)	We intend to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes, as well obtain additional oversight from our Board of Directors.

 

Inherent limitations on effectiveness of controls

 

Our principal executive and principal accounting officers do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the fiscal year ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

 

Name	Position Held with our Company	Age	Date First Elected or Appointed
Robert A. Levich	Director	68	December 21, 2009
Larry Bigler	Director	64	August 17, 2012
Garrett Hale	President and CEO	46	January 28, 2013

 

Business Experience

 

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

 

Robert A. Levich – Director

 

Mr. Levich retired from the U.S. Department of Energy (DOE) at the end of 2004, after more than 30 years of Federal Service, starting in 1963 as a Peace Corps Geologist assigned to Ghana’s Geological Survey Department in West Africa. He studied uranium resources for more than eight years with DOE’s Grand Junction Office in Texas and Oklahoma, the Appalachian Basin from New York to Alabama, and the four Northwestern States. He also spent more than 20 years studying the deep geologic disposal of high-level nuclear waste for DOE at the Chicago Operations Office in Illinois, and in Las Vegas, Nevada. At the Yucca Mountain Project in Nevada, Mr. Levich served as Chief of the Technical Analysis Branch, International Programs Manager (where he served as DOE Representative to working groups of the OECD’s Nuclear Energy Agency in Paris, and developed technical cooperative programs with several foreign nations), and was responsible for developing the Yucca Mountain Site Description. He has also been Northwest Region Manager in Spokane, Washington for Apache Energy & Minerals Company; Geologist for the Ghana Geological Survey at Sunyani, Brong-Ahafo, Ghana; and Consultant Expert for the International Atomic Energy Agency (IAEA) for uranium resource evaluations in Uganda and Somalia, East Africa; and deep geologic disposal of high-level nuclear waste in the granites of the Gobi Desert in Northwest China.

 

Mr. Levich holds a Bachelor’s Degree in Geology from Brooklyn College of the City University of New York, and a Master’s Degree in Geological Sciences from the University of Texas at Austin. He is a Certified Professional Geologist by the American Institute of Professional Geologists, and licensed as a European Geologist by the European Federation of Geologists. Mr. Levich is a Fellow of both the Geological Society of America and the Society of Economic Geologists, as well as a Member of the Association of Geoscientists for International Development. Mr. Levich has been Listed in Who’s Who in America, and Who’s Who in Science and Engineering, and has received more than 20 Awards from the U.S. Department of Energy, plus several awards from the American Institute of Professional Geologists. He has authored or edited over 40 Publications on economic geology, uranium resources, and nuclear waste management.

 

Larry Bigler – Director

 

Larry Max Bigler has lived in Reno, Nevada for the past 25 years and has over 30 years of mining experience. Mr. Bigler is a practicing Certified Public Accountant with many mining clients, retail, rental and individual clients. Mr. Bigler is currently a director and chairman of the Audit Committee for General Metals (GNMT). He formerly was CFO, Vice President, and Director for Oro Nevada Resources and was instrumental in raising C$ 40 million from an initial public offering. From 1987 until 1992 he was Treasurer and Controller for Getchell Gold (formerly First Miss Gold) where he completed an initial public offering and a gold loan (150,000 oz AU). He has degrees in economics and accounting and has published many articles on mining financial issues.

 

Garrett Hale – President and CEO

 

Long term resident and leader in the Napa, California community. He is a successful business owner, entrepreneur and investor in start-up companies, who also played a major role in the initial financing of Allied Mining. Mr. Hale will assist in company financing, investor relations and will assist in operations and humanitarian activities in support of the people of Sierra Leone.

 

 

Family Relationships

 

There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past ten years:

1.	any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.	any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offences;
3.	being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.	being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.

 

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2011, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with.

 

Code of Ethics

 

Effective April 14, 2009, our company's board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, our company's president (being our principal executive officer, principal financial officer and principal accounting officer), as well as persons performing similar functions.  As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

1.	honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2.	full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;
3.	compliance with applicable governmental laws, rules and regulations;
4.	the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and
5.	accountability for adherence to the Code of Business Conduct and Ethics.

 

Our Code of Business Conduct and Ethics requires, among other things, that all of our company's personnel shall be accorded full access to our president and secretary with respect to any matter which may arise relating to the Code of Business Conduct and Ethics.

 

 

Further, all of our company's personnel are to be accorded full access to our company's board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our Company officers. In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles and federal and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company's president or secretary. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the president or secretary, the incident must be reported to any member of our board of directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Business Conduct and Ethics by another. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests may be sent in writing to Sunergy Inc., 14362 N. Frank Lloyd Wright Blvd., Suite 1000, Scottsdale, AZ. 58260.

 

Audit Committee and Audit Committee Financial Expert

 

As of December 31, 2014, our board of directors determined that one member of our audit committee, consisting of Larry Bigler, qualified as "audit committee financial experts" as defined in Item 407(d)(5)(ii) of Regulation S-K, and Larry Bigler has been determined to be independent.

 

Item 11. Executive Compensation

 

The particulars of the compensation paid to the following persons:

 

(a)  our principal executive officer;

 

(b)  each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended December 31, 2013; and

 

(c)  up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended December 31, 2013 and 2012, who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:

 

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Robert A. Levich (1) Director	2013 2014	24,000 24,000	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	24,000 24,000
Garrett Hale, President, Director (2)	2013 2014	38,500 42,000	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	38,500 42,000
Gary Houck, Director(3)	2013 2013	21,000 Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	21,000 Nil
Larry Bigler, Director (4)	2013 2014	38,500 24,000	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	Nil Nil	38,500 24,000

_______________

(1)

Mr. Levich was appointed as director of our company on December 21, 2009.

 

(2)

Mr. Hale was appointed to the Board of Directors and as President of the Company on January 28, 2013.

 

(3)

Mr. Houck was appointed a member of the Board of Directors on October 16, 2012. Mr Houck resigned from the Board of Directors in August 2013.

 

(4)

On August 17, 2012, Mr. Bigler was appointed as President and Director. Mr. Bigler resigned as President on January 28, 2013 but remains a director of the company.

 

Stock Option Grants to our Named Executive Officers

 

Our company did not grant any stock options to any named executive officers during the year ended December 31, 2014.

 

 

Outstanding Equity Awards at Fiscal Year End

 

There were no outstanding equity awards granted to any named executive officer as of December 31, 2014.

 

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values

 

There were no options outstanding, and hence no options exercised, by any named executive officers during the year ended December 31, 2014.

 

Compensation of Directors

 

As of December 31, 2014 and through the date of this report, our Directors receive annual compensation of $24,000 with the exception of the Chairman who receives $30,000 annually.

 

Pension, Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

 

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

 

None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or obligation currently outstanding.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth, as of December 31, 2014, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

 

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (Common Shares)	Percentage and Class (1)
Garrett Hale	21,945,333	1.01%
Larry Bigler (2)	24,000,000	1.11%
Robert A. Levich (3)	44,685,000	2.06%
Directors and Officers as a Group	90,630,333	4.17%
Holder of 10% of more	Nil	Nil

_______________

(1)

Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares.  Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided.  In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.  As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on December 31, 2014.  As of December 31, 2014, there were 2,573,976,770 shares of our company’s common stock issued and outstanding.

 

(2)

Mr. Bigler was appointed as our President and Director on August 12, 2012 and resigned as our President in January 2013.

 

(3)

Mr. Levich was appointed as director of our company on December 21, 2009.

 

(4)

Mr. Hale was appointed as President and Director on January 28, 2013.

 

Changes in Control

 

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.

 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended December 31, 2008, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year -end for the last three completed fiscal years.

 

During the years ended December 31, 2014 and 2013 we received operational advances from certain members of our Board and Advisory Board. As of December 31, 2014 and 2013 we had outstanding obligations of $43,752 and $110,944 due to these individuals. The transactions were incurred by these members in the form of direct payment of Company related operating expenses and were approved by the Board of Directors.

 

Director Independence

 

We currently act with four (3) directors, consisting of Larry Bigler, Robert A. Levich, and Garrett Hale.  We have determined that Mr. Bigler is an “independent director” as defined in NASDAQ Marketplace Rule 4200(a)(15).

 

Item 14. Principal Accounting Fees and Services

 

The aggregate fees billed for the most recently completed fiscal year ended December 31, 2014 and for fiscal year ended December 31, 2013 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

 

		Year Ended
		December 31, 2014				December 31, 2013
Audit Fees		$	69,160			$	50,000
Audit Related Fees			Nil				Nil
Tax Fees			Nil				Nil
All Other Fees			Nill				Nil
Total		$	69,160			$	50,000

 

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our independent auditors are engaged by us to render any auditing or permitted non-audit related service, the engagement be approved by our audit committee; or entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors' responsibilities to management.

 

Our audit committee pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the audit committee either before or after the respective services were rendered.

 

Our audit committee and board of directors has considered the nature and amount of fees billed by our independent auditors and believes that no services have been performed that would potential impair the independence of our independent auditors.

 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

(a) Financial Statements

 

(1) Financial statements for our company are listed in the index under Item 8 of this document

 

(2) All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.

 

(b) Exhibits

 

Exhibit Number		Description
(3)		Articles of Incorporation and By-laws
3.1		Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on February 23, 2004)
3.2		Bylaws (incorporated by reference from our Registration Statement on Form SB-2 filed on February 23, 2004)
(10)		Material Contracts
10.1		Mineral Property Staking and Purchase Agreement dated April 10, 2003 (incorporated by reference from our Registration Statement on Form SB-2/A filed on June 30, 2004)
10.2		Mining Acquisition Agreement dated October 31, 2008 between our company and General Metals Corporation (incorporated by reference from our Current Report on Form 8-K filed on December 10,2008)
10.3		Amending Agreement to the Mining Acquisition Agreement dated December 5, 2008 between our company and General Metals Corporation. (incorporated by reference from our Current Report on Form 8-K filed on December 10, 2008)
10.4		Membership Purchase Agreement dated October 18, 2010 between our company and Allied Mining and Supply, LLC. (incorporated by reference as exhibit 10.1 of the Form 8-K filed on February 4, 2011)
(14)		Code of Ethics
14.2		Code of Ethics and Business Conduct
16.1		Letter from BDO Canada LLP to the Securities and Exchange Commission (incorporated by reference as exhibit 16.1 from our Form 8-K filed on January 18, 2011).
(31)		Rule 13a-14(d)/15d-14(d) Certifications
31.1*		Section 302 Certification of Principal Executive Officer, Principal Accounting Officer and Principal Financial Officer
(32)		Section 1350 Certifications
32.1*		Section 906 Certification of Principal Executive Officer, Principal Accounting Officer and Principal Financial Officer
99.1		Form 8-K dated the earliest date of March 19, 2011 advising that we dismissed Gruber & Company, LLC, as the independent certified accountants for the Company, with whom there were no disagreements (incorporated by reference as exhibit 162 from our Form 8-K filed on May 26, 2011).
99.2		Form 8-K dated the earliest date of May 2, 2012 advising that we dismissed DeJoya Griffith & Company LLC, as the independent registered accountants for the Company, with whom there were no disagreements (incorporated by reference as exhibit 16.3 from our Form 8-K filed on May 4, 2012).
101.INS**		XBRL Instance Document
101.SCH**		XBRL Extension Schema
101.CAL**		XBRL Calculation Linkbase
101.DEF**		XBRL Definition Linkbase
101.LAB**		XBRL Label Linkbase
101.PRE**		XBRL Presentation Linkbase

______________________

* Filed herewith.

** To be filed by amendment 

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

SUNERGY, INC.

 

 

By: /s/ Garrett Hale

Garrett Halle,

President and Director,

(Principal Executive Officer and Principal Accounting Officer)

  

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By: /s/ Garrett Hale Garrett Hale, President and Director   Date: April 15, 2015	By: /s/ Larry Bigler Larry Bigler Director   Date: April 15, 2015
By: /s/ Robert A. Levich Robert A. Levich Director Date: April 15, 2015