Attached files
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EX-32.1 - CERTIFICATION - New Global Energy, Inc. | ngey_ex321.htm |
EX-31.2 - CERTIFICATION - New Global Energy, Inc. | ngey_ex312.htm |
EX-31.1 - CERTIFICATION - New Global Energy, Inc. | ngey_ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ___________ to ___________
333-179669
Commission file number
NEW GLOBAL ENERGY, INC. |
(Exact name of small business issuer as specified in its charter) |
Wyoming | 45-4349842 | |
(State of incorporation) | (IRS Employer Identification Number) |
109 East 17th StreetSuite 4217
Cheyenne, WY 82001
(Address of principal executive office)
(307) 633-9192
(Issuer's telephone number)
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 the filing requirement for at least the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $.0001 per share 14,116,582 outstanding shares as of September 11, 2016.
NEW GLOBAL ENERGY, INC. AND SUBSIDIARY
FORM 10-Q
June 30, 2016
2 |
Table of Contents |
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
|
|
|
|
|
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| ||
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| As of |
| |||||
|
| June 30, 2016 |
|
| December 31, 2015 |
| ||
ASSETS |
| (Unaudited) |
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| ||
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| ||
CURRENT ASSETS: |
|
|
|
|
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| ||
Cash |
| $ | 14,252 |
|
| $ | 124,746 |
|
Accounts receivable |
|
| 18,824 |
|
|
| 2,373 |
|
Inventory |
|
| 189,866 |
|
|
| 8,937 |
|
Deferred commissions - related party |
|
| 834,168 |
|
|
| 370,740 |
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
| 1,057,110 |
|
|
| 506,796 |
|
|
|
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|
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|
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|
Property and equipment, net |
|
| 4,414,260 |
|
|
| 4,646,151 |
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OTHER ASSETS: |
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|
|
|
|
|
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|
Goodwill |
|
| 3,680,283 |
|
|
| 3,680,283 |
|
Deposits |
|
| 21,238 |
|
|
| 6,981 |
|
|
|
|
|
|
|
|
|
|
Total Other Assets |
|
| 3,701,521 |
|
|
| 3,687,264 |
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Total Assets |
| $ | 9,172,891 |
|
| $ | 8,840,211 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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|
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|
|
|
|
Bank overdraft |
| $ | 1,573 |
|
| $ | - |
|
Accounts payable |
|
| 152,848 |
|
|
| 342,588 |
|
Accrued expenses |
|
| 265,629 |
|
|
| 181,163 |
|
Accrued expenses - related parties |
|
| 814,260 |
|
|
| 474,116 |
|
Notes payable - related parties |
|
| 187,936 |
|
|
| 261,936 |
|
Notes payable - current portion |
|
| 781,884 |
|
|
| 824,575 |
|
Derivative liability |
|
| - |
|
|
| 10,935 |
|
Accrued loss on presold fish |
|
| 600,492 |
|
|
| - |
|
Deferred revenue |
|
| 2,039,788 |
|
|
| 881,218 |
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
| 4,844,410 |
|
|
| 2,976,531 |
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|
|
|
|
|
|
|
|
|
OTHER LIABILITIES: |
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|
|
|
|
|
|
|
Notes payable - net of current portion |
|
| 64,981 |
|
|
| 86,569 |
|
|
|
|
|
|
|
|
|
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Total Liabilities |
|
| 4,909,391 |
|
|
| 3,063,100 |
|
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COMMITMENTS AND CONTINGENCIES (Note 6) |
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STOCKHOLDERS' EQUITY: |
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Equity attributable to owners of the company: |
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Preferred stock ($0.0001 par value; 25,000,000 shares authorized; 21,100 and 20,000 shares issued and |
|
|
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|
outstanding at June 30, 2016 and December 31, 2015, respectively; liquidation preference of $3,165,000) |
|
| 2 |
|
|
| 2 |
|
Common stock ($0.0001 par value; 100,000,000 shares authorized; 13,961,582 and 13,861,582 |
|
|
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shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively) |
|
| 1,396 |
|
|
| 1,386 |
|
Additional paid-in capital |
|
| 43,990,280 |
|
|
| 43,013,191 |
|
Common stock subscription receivable - related party |
|
| (353,200 | ) |
|
| (353,200 | ) |
Accumulated deficit |
|
| (39,427,256 | ) |
|
| (36,950,311 | ) |
Total equity attributable to owners of the company |
|
| 4,211,222 |
|
|
| 5,711,068 |
|
Non-controlling interest |
|
| 52,278 |
|
|
| 66,043 |
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
|
| 4,263,500 |
|
|
| 5,777,111 |
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|
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Total Liabilities and Stockholders' Equity |
| $ | 9,172,891 |
|
| $ | 8,840,211 |
|
See condensed notes to unaudited consolidated financial statements.
3 |
Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
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| For the Three Months Ended June 30, |
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| For the Six Months Ended June 30, |
| ||||||||||
|
| 2016 |
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| 2015 |
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| 2016 |
|
| 2015 |
| ||||
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REVENUES |
| $ | 26,715 |
|
| $ | 9,391 |
|
| $ | 39,803 |
|
| $ | 29,638 |
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|
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COSTS AND EXPENSES: |
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|
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|
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Costs of goods sold |
|
| 26,068 |
|
|
| 9,913 |
|
|
| 26,426 |
|
|
| 17,932 |
|
Depreciation |
|
| 111,239 |
|
|
| 62,356 |
|
|
| 222,391 |
|
|
| 95,684 |
|
Management and other fees - related parties |
|
| 1,044,926 |
|
|
| 35,000 |
|
|
| 1,290,230 |
|
|
| 116,851 |
|
Professional fees |
|
| 77,788 |
|
|
| 15,148 |
|
|
| 204,830 |
|
|
| 81,706 |
|
Provision for loss on presold fish |
|
| 127,940 |
|
|
| - |
|
|
| 600,492 |
|
|
| - |
|
Research and development |
|
| 6,688 |
|
|
| - |
|
|
| 32,812 |
|
|
| - |
|
General and administrative |
|
| (30,552 | ) |
|
| 98,274 |
|
|
| 115,223 |
|
|
| 188,471 |
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Total Operating Costs and Expenses |
|
| 1,364,097 |
|
|
| 220,691 |
|
|
| 2,492,404 |
|
|
| 500,644 |
|
|
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LOSS FROM OPERATIONS |
|
| (1,337,382 | ) |
|
| (211,300 | ) |
|
| (2,452,601 | ) |
|
| (471,006 | ) |
|
|
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OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on derivative valuation |
|
| 6,907 |
|
|
| 83,699 |
|
|
| 10,935 |
|
|
| 228,803 |
|
Interest expense |
|
| (16,317 | ) |
|
| (41,923 | ) |
|
| (36,044 | ) |
|
| (69,803 | ) |
Loss on settlement of debt |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,992,732 | ) |
Loss on disposal of fixed asset |
|
| - |
|
|
| - |
|
|
| (13,000 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
Total Other Income (Expense), net |
|
| (9,410 | ) |
|
| 41,776 |
|
|
| (38,109 | ) |
|
| (1,833,732 | ) |
|
|
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LOSS BEFORE INCOME TAXES |
|
| (1,346,792 | ) |
|
| (169,524 | ) |
|
| (2,490,710 | ) |
|
| (2,304,738 | ) |
|
|
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|
|
|
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|
|
|
|
|
|
|
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|
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Provision for income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
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|
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NET LOSS |
| $ | (1,346,792 | ) |
| $ | (169,524 | ) |
| $ | (2,490,710 | ) |
| $ | (2,304,738 | ) |
|
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NON-CONTROLLING INTEREST: |
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|
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|
|
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NET LOSS |
| $ | (1,346,792 | ) |
| $ | (169,524 | ) |
| $ | (2,490,710 | ) |
| $ | (2,304,738 | ) |
|
|
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|
|
|
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|
|
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LESS: NET LOSS ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST |
|
| 9,877 |
|
|
| 185,673 |
|
|
| 13,765 |
|
|
| 226,633 |
|
|
|
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|
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NET (LOSS) INCOME ATTRIBUTABLE TO OWNERS OF THE COMPANY |
| $ | (1,336,915 | ) |
| $ | 16,149 |
|
| $ | (2,476,945 | ) |
| $ | (2,078,105 | ) |
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NET LOSS PER COMMON SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY |
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|
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Basic and diluted |
| $ | (0.10 | ) |
| $ | 0.00 |
|
| $ | (0.18 | ) |
| $ | (0.16 | ) |
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and diluted |
|
| 13,986,582 |
|
|
| 13,097,365 |
|
|
| 13,916,527 |
|
|
| 13,097,365 |
|
See condensed notes to unaudited consolidated financial statements.
4 |
Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
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|
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| ||
|
| For the Six Months Ended June 30, |
| |||||
|
| 2016 |
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| 2015 |
| ||
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|
|
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|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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|
|
|
|
| ||
Net loss |
| $ | (2,490,710 | ) |
| $ | (2,304,738 | ) |
Adjustments to reconcile net loss from operations to net cash |
|
|
|
|
|
|
|
|
used in operating activities: |
|
|
|
|
|
|
|
|
Gain on derivative valuation |
|
| (10,935 | ) |
|
| (228,803 | ) |
Loss realized upon settlement of debt |
|
| - |
|
|
| 1,992,732 |
|
Loss realized upon disposal of fixed asset |
|
| 13,000 |
|
|
| - |
|
Depreciation |
|
| 222,391 |
|
|
| 95,684 |
|
Stock based compensation and fees |
|
| 896,567 |
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (16,451 | ) |
|
| 3,661 |
|
Inventory |
|
| (180,929 | ) |
|
| 37,043 |
|
Deferred commissions - related party |
|
| (463,428 | ) |
|
| - |
|
Deposits |
|
| (14,257 | ) |
|
| - |
|
Accounts payable |
|
| (189,740 | ) |
|
| 59,957 |
|
Accrued expenses |
|
| 84,466 |
|
|
| (13,829 | ) |
Accrued expenses - related party |
|
| 348,576 |
|
|
| - |
|
Accrued loss on presold fish |
|
| 600,492 |
|
|
| - |
|
Deferred revenue |
|
| 1,158,570 |
|
|
| - |
|
|
|
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|
|
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|
NET CASH USED IN OPERATING ACTIVITIES |
|
| (42,388 | ) |
|
| (358,293 | ) |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (3,500 | ) |
|
| - |
|
|
|
|
|
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|
|
NET CASH USED IN INVESTING ACTIVITIES |
|
| (3,500 | ) |
|
| - |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Increase in bank overdraft |
|
| 1,573 |
|
|
| - |
|
Proceeds from issuance of preferred/common stock |
|
| 100 |
|
|
| 155,500 |
|
Proceeds from related party notes payable |
|
| - |
|
|
| 259,800 |
|
Repayments of notes payable |
|
| (64,279 | ) |
|
| (73,504 | ) |
Repayments on related party notes payable |
|
| (2,000 | ) |
|
| (2,000 | ) |
|
|
|
|
|
|
|
|
|
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
|
| (64,606 | ) |
|
| 339,796 |
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| (110,494 | ) |
|
| (18,497 | ) |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - beginning of period |
|
| 124,746 |
|
|
| 25,008 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - end of period |
| $ | 14,252 |
|
| $ | 6,511 |
|
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|
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|
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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|
|
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Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
| $ | - |
|
| $ | - |
|
Income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Fair value of preferred/common stock issued upon settlement of debt |
| $ | - |
|
| $ | 2,333,530 |
|
Note principal converted to common/preferred stock |
| $ | - |
|
| $ | 340,800 |
|
Preferred stock issued upon settlement of related party debt |
| $ | 80,432 |
|
| $ | - |
|
See condensed notes to unaudited consolidated financial statements.
5 |
Table of Contents |
NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
New Global Energy, Inc. ("NGE" or the "Company") was organized on January 24, 2012. NGE's executive offices are located in Brevard County, Florida. The Company is focused on the development of its Global Energy Plantation ("GEP") Platform which combines alternative energy production, sustainable agriculture and aquaculture. It anticipates the use of non-centralized power plants, primarily concentrated solar power, Jatropha based biofuels and aquaculture operations to produce power for its own use and to feed into the power grid serving local power needs while producing farm grown fish and shrimp as food products. Management has begun to execute this plan through the purchase of a controlling interest in Aqua Farming Tech, Inc. ("AFT"). The Company is in the process of raising additional capital to support the completion of its acquisition and development activities. Furthermore, beginning in the 4th quarter 2015, the Company commenced the sale of future contracts for the sale of fish, with the actual fish to be delivered before the end of 2016. These presales have generated cash to support the Company's day-to-day operations. The Company's activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company.
On February 1, 2016, the Company incorporated Moringa Reserve, LLC, a Florida limited liability company, to develop, operate, distribute and sell Moringa-based products to U.S. retail markets. Moringa Reserve, LLC will be operated as a joint venture and be owned equally by the Company and Moringa Energy, LLC, whose principals are the owners of a large Moringa farm located in Leon, Nicaragua. The 180-acre farm is a leading source of nutrient rich Moringa and will provide Moringa Reserve access to quality Moringa in sufficient supplies to meet demand. The members signed a definitive operating agreement and production is expected to begin in the second quarter of 2017.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. For the six months ended June 30, 2016, the Company had a net loss and net cash used in operations of $2,490,710 and $42,388, respectively. The Company has earned little revenue since inception, and supports its continued operations through debt financing, related party loans, the sale of equity and from the collection of funds from the presale of fish. As of June 30, 2016, the Company had a working capital deficit of $3,787,300 and an accumulated deficit of $39,427,256. As of August 31, 2016, the Company had cash of approximately $94,000 and through June 30, 2016 has collected $2,039,788 from the presale of fish which the Company has an obligation to deliver to its customers. These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern.
While the Company is ramping up its operations and revenue generating activities, the Company's cash position is not sufficient enough to support the Company's operations for the next twelve months. Management intends to raise funds by way of a public or private offering as well as fish presales based on expected fish output in the next year. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate revenues.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern
Basis of Presentation: The accompanying condensed consolidated financial statements as of June 30, 2016 and for the six months ended June 30, 2016 and 2015 have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or any future period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2015, included in the Company's Annual Report on Form 10-K covering that period.
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
In the opinion of management, the information furnished in these condensed consolidated financial statements reflect all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and six-month periods ended June 30, 2016 and 2015. All such adjustments are of a normal recurring nature. The consolidated financial statements do not include some information and notes necessary to conform to annual reporting requirements.
Principles of Consolidation: The consolidated financial statements include the accounts of New Global Energy, Inc., and its majority-owned subsidiary, AFT, a California corporation. All significant inter-company balances and transactions have been eliminated.
Use of Estimates: The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to intangible assets, income taxes, inventory valuation, stock-based compensation, loss on future fish contracts, and derivative liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.
Fair Value of Financial Instruments: FASB ASC 825, "Financial Instruments," requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At June 30, 2016 and December 31, 2015, the carrying value of certain financial instruments (cash and cash equivalents, accounts receivable, inventory, deferred commissions – related party, bank overdrafts, accounts payable, accrued expenses, notes payable, and deferred revenue) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.
The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2: Inputs to the valuation methodology include:
| · | Quoted prices for similar assets or liabilities in active markets; |
· | Quoted prices for identical or similar assets or liabilities in inactive markets; | |
· | Inputs other than quoted prices that are observable for the asset or liability; | |
· | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used.
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the six months ended June 30, 2016 and 2015, there were no transfers of financial assets or financial liabilities between the hierarchy levels.
The following table summarizes assets and liabilities remeasured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015:
|
| June 30, 2016 |
| |||||||||||||
Description of assets: |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
None |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Description of liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
| December 31, 2015 |
| |||||||||||||
Description of assets: |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
None |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Description of liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
| $ | - |
|
| $ | - |
|
| $ | 10,935 |
|
| $ | 10,935 |
|
Cash and Cash Equivalents: For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents as of June 30, 2016 and December 31, 2015.
Inventory: The Company's inventory consists of live fish and is stated at the lower of cost or market. Costs included in inventory consists of cost of feed, labor costs and utility costs and other maintenance costs through the balance sheet date.
Property and Equipment: Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.
Goodwill: Impairment of Goodwill and Other Intangible Assets. As of June 30, 2016 and December 31, 2015, goodwill recorded on our consolidated balance sheets aggregated $3.68 million (the entirety of this amount relates to the Company's completed acquisition of AFT). The AFT acquisition and its related operations constitute a reporting unit and we must make various assumptions in determining their estimated fair values. We perform an annual impairment review in the fourth quarter of each fiscal year.
Valuation of Long-Lived Assets: We review the recoverability of our long-lived assets including land, equipment, goodwill and investments, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations. No impairment was recognized during the six month ended June 30, 2016 and 2015.
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
Bank overdrafts: Bank overdrafts represent outstanding checks in excess of funds on deposit at the Company’s bank account.
Revenue Recognition and Related Deferred Revenue: The Company recognizes revenue during the period in which fish are delivered to the customer. Sale proceeds received in the current period, for which delivery has not occurred, are recorded as deferred revenue until the fish are delivered to the customer.
Beginning in the 4th quarter 2015, the Company commenced the sale of future contracts for the sale of fish, with the actual fish to be delivered over a period of one year beginning from the contract date and when the fish reach one pound or greater in weight. The Company records the sale of fish for which delivery of the product has not yet occurred as deferred revenue in the current liabilities section of the consolidated financial statements.
Provision for Estimated Losses on Presold Fish: The Company records a provision for total anticipated losses on the future delivery of presold fish by considering total estimated costs to develop and deliver the fish compared to total anticipated revenues in the period in which such losses are identified. The provisions for estimated losses on the future delivery of presold fish requires the Company to make certain estimates and assumptions, including those with respect to the future cost to grow the fish to maturity. Estimates of the future cost include assumptions as to costs of feed, utilities, labor and other indirect costs. If any of these or other assumptions and estimates do not materialize in the future, the Company may be required to record additional provisions for estimated losses on the future delivery of presold fish. During the six months ended June 30, 2016, management analyzed the estimated loss per pound from all outstanding future fish contracts. After management's review, for the three and six months ended June 30, 2016, the Company recognized a loss of $127,940 and $600,492 on the future fish contracts, respectively. At June 30, 2016 and December 31, 2015, accrued losses on presold fish amounted to $600,492 and zero, respectively.
Deferred Commissions – Related Party: In connection with commencement of the future contracts for the sale of fish, the Company pays a 40% commission to a related party. The Company records the commission paid or due for which delivery of the product has not yet occurred as deferred commission – related party in the current assets section of the consolidated financial statements. For the six months ended June 30, 2016, the Company paid this related party $571,520 of which $101,462 was for reimbursement of expenses, and has paid this related party a total of $935,630 since the inception of the future fish contract program.
Stock-Based Compensation: Stock-based awards are accounted for using the fair value method in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification (ASC) 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options and warrants.
Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The measurement date fair value is then recognized over the service period as if the Company has paid cash for such service. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.
Research and development: Expenditures for research and product development costs are expensed as incurred. For the six months ended June 30, 2016 and 2015, research and development expense amounted to $6,688 and $32,812, respectively.
Earnings per Common Share: We compute net loss per share in accordance with FASB ASC 260, Earning per Share. FASB ASC 260 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 available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period.
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
For the six months ended June 30, 2016 and 2015, the following potentially dilutive securities have been excluded from the calculation of diluted loss per share because their impact was antidilutive.
|
| 2016 |
|
| 2015 |
| ||
Preferred Stock |
|
| 3,218,483 |
|
|
| 1,701,504 |
|
Warrants |
|
| 111,716 |
|
|
| 211,716 |
|
Options |
|
| 2,828,530 |
|
|
| - |
|
|
|
| 6,158,729 |
|
|
| 1,913,220 |
|
Recent Accounting Pronouncements: The Company has evaluated new relevant accounting for possible impact on our consolidated financial statements and deemed their impact to be immaterial or non-applicable to the Company.
Reclassifications: Certain reclassifications has been made in prior period’s consolidated financial statements to conform to the current period’s financial presentation. These reclassifications did not change the Company’s financial position or results of operations.
NOTE 2 - PROPERTY AND EQUIPMENT
The Company's property and equipment consisted of the following as of June 30, 2016 and December 31, 2015:
|
| Useful Lives |
| June 30, 2016 |
|
| December 31, 2015 |
| ||
Land |
| Indefinite |
| $ | 2,128,000 |
|
| $ | 2,128,000 |
|
Building and Improvements |
| 7 years |
|
| 2,269,866 |
|
|
| 2,269,866 |
|
Equipment & Solar Panels |
| 10 years |
|
| 776,477 |
|
|
| 776,477 |
|
Vehicles |
| 5 years |
|
| 119,000 |
|
|
| 128,500 |
|
|
|
|
|
| 5,293,343 |
|
|
| 5,302,843 |
|
Accumulated depreciation |
|
|
|
| (879,083 | ) |
|
| (656,692 | ) |
|
|
|
| $ | 4,414,260 |
|
| $ | 4,646,151 |
|
For the six months ended June 30, 2016, and 2015, depreciation expense totaled $222,391 and $95,684, respectively.
10 |
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
NOTE 3 - NOTES PAYABLE
At June 30, 2016 and December 31, 2015, notes payable outstanding consisted of the following:
|
| June 30, 2016 |
|
| December 31, 2015 |
| ||
Note 1 |
| $ | 6,000 |
|
| $ | 6,000 |
|
Note 2 |
|
| 91,361 |
|
|
| 111,361 |
|
Note 3 |
|
| 477,767 |
|
|
| 498,459 |
|
Note 4 |
|
| 114,637 |
|
|
| 136,224 |
|
Note 5 |
|
| 25,000 |
|
|
| 25,000 |
|
Note 6 |
|
| 22,100 |
|
|
| 22,100 |
|
Note 7 |
|
| 93,000 |
|
|
| 95,000 |
|
Note 8 |
|
| 10,000 |
|
|
| 10,000 |
|
Note 9 |
|
| 7,000 |
|
|
| 7,000 |
|
Total |
|
| 846,865 |
|
|
| 911,144 |
|
Less: current portion of notes payable |
|
| (781,884 | ) |
|
| (824,575 | ) |
Notes payable – long-term |
| $ | 64,981 |
|
| $ | 86,569 |
|
Note 1 - Note payable for vehicle financing with a balance of $6,000 as of June 30, 2016 and December 31 2015, bearing annual interest at 10% and due on demand. This note matured on September 10, 2010 and is currently in default.
Note 2 - Note payable pursuant to a 2010 settlement with a balance of $91,361 and $111,361, as of June 30, 2016 and December 31, 2015, respectively, due on December 15, 2015, and non-interest bearing. This note is currently in default.
Note 3 - Note payable to a bank dated March 10, 2015 with interest at a variable interest rate equal to 3.5% and 3.5% at June 30, 2016 and December 31, 2015, respectively, and a maturity date of March 10, 2017. The note had a balance of $477,767 and $498,459 as of June 30, 2016 and December 31, 2015, respectively, and is in default under the terms of the loans covenants, and therefore is included in current liabilities as of June 30, 2016.
Note 4 - Note payable for solar system array at the Thermal, California property with a balance of $114,637 and $136,225 as of June 30, 2016 and December 31, 2015, respectively, with interest rate at 2.8% due in monthly installments of $4,138 through March of 2018.
Note 5 – Note payable for solar installation at the Thermal property, with a balance of $25,000 as of June 30, 2016 and December 31, 2015 and an interest rate at 10%. This note is currently in default.
Note 6 to Note 9 – Notes payable with interest at 10%, in default and payable on demand.
11 |
Table of Contents |
NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
The Company has recognized $25,689 and $14,043, in interest expense for the six months ended June 30, 2016 and 2015, respectively, related to notes payable and was included in interest expense on the accompanying consolidated statements of operations. At June 30, 2016 and December 31, 2015, accrued interest payable on notes payable, included in accrued expenses on the condensed consolidated balance sheets, amounted to $125,650 and $99,961, respectively.
Future maturity of notes payable is as follows:
Due in Twelve-month Periods Ending June 30, |
|
| Amount |
| |
2017 |
|
| $ | 781,884 |
|
2018 |
|
|
| 49,656 |
|
2019 |
|
|
| 15,325 |
|
Total |
|
| $ | 846,865 |
|
NOTE 4 - STOCKHOLDERS' EQUITY
Preferred Stock
The Company is currently authorized to issue up to 25,000,000 shares of preferred stock which are designated as Series A Convertible Preferred Stock, with a $0.0001 par value. All issued shares of Series A Convertible Preferred Stock are entitled to vote on a 1 share/1 vote basis. The currently issued preferred shares carry a liquidation preference of $150 per preferred share.
Each share of Series A Convertible Preferred Stock shall be convertible, at the option of the holder, at any time into such number of fully paid and non-assessable shares of Common Stock as is determined by multiplying the number of issued and outstanding shares of the Corporation's Common Stock by .0000110. Provided however, that such number of common shares into which each share of Series A Preferred Stock may be converted shall not exceed 220.
Preferred stock issued for debt settlement
On June 15, 2016, the Company and a related party entered into a debt settlement agreement. In accordance with the debt settlement agreement, debt in the principal amount of $74,000 and accrued and unpaid interest on the debt of $6,432 were settled for 1,100 shares of the Company’s preferred stock. The Company recorded this debt settlement as a reduction of debt and interest due and an increase in equity for the capital contribution of $80,432.
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
Common Stock
We are currently authorized to issue up to 100,000,000 shares of $ 0.0001 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/1 vote basis.
Common stock issued for warrants exercise
On March 23, 2016, a warrant holder exercised 100,000 common stock warrants for proceeds of $100 and received 100,000 common shares.
Warrants
Warrant activities for the six months ended June 30, 2016 were as follows:
|
| Number of Warrants |
|
| Weighted Average Exercise Price |
| ||
Balance at December 31, 2015 |
|
| 211,716 |
|
| $ | 1.58 |
|
Issued |
|
| - |
|
|
| - |
|
Exercised |
|
| (100,000 | ) |
|
| 0.001 |
|
Balance at June 30, 2016 |
|
| 111,716 |
|
|
| 3.00 |
|
Warrants exercisable at June 30, 2016 |
|
| 111,716 |
|
| $ | 3.00 |
|
There was no intrinsic value for the warrants at June 30, 2016.
The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at June 30, 2016:
Warrants Outstanding |
|
| Warrants Exercisable |
| ||||||||||||||||||
Range of Exercise Price |
|
| Number Outstanding at June 30, 2016 |
|
| Range of Weighted Average Remaining Contractual Life (Months) |
|
| Weighted Average Exercise Price |
|
| Number Exercisable at June 30, 2016 |
|
| Weighted Average Exercise Price |
| ||||||
$ | 3.00 |
|
|
| 111,716 |
|
|
| 0.6 |
|
| $ | 3.00 |
|
|
| 111,716 |
|
| $ | 3.00 |
|
Options
On April 28, 2016 and May 2, 2016, the Company granted a total of 2,828,530 options to three separate related parties and the Company’s CEO at a fixed exercise price of $0.30 per share. The 800,000 options granted to the Company’s CEO and an additional 1,600,000 options granted to two related parties are exercisable at tiered intervals beginning June 1, 2016. The remaining 428,530 options granted to the Company’s partner in a joint venture are also exercisable at tiered intervals beginning May 1, 2016. The fair value of the options of $864,267 was determined using the Black-Scholes option-pricing model using the following assumptions: Dividend rate - 0; Terms (in years) 5.0 to 10.0; Volatility – 249.5%; Risk-free interest rate – 1.32% to 1.84%. In connection with the option grant, for the six months ended June 30, 2016, the Company recognized management and other fees – related parties of $864,267 on the accompanying consolidated statements of operations because the options were deemed fully earned and non-cancellable on the grant date.
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Table of Contents |
NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
Option activities for the six months ended June 30, 2016 were as follows:
|
| Number of Options |
|
| Weighted Average Exercise Price |
| ||
Balance at December 31, 2015 |
|
| - |
|
| $ | - |
|
Issued |
|
| 2,828,530 |
|
|
| 0.30 |
|
Balance at June 30, 2016 |
|
| 2,828,530 |
|
|
| 0.30 |
|
Option exercisable at June 30, 2016 |
|
| 1,250,000 |
|
| $ | 0.30 |
|
There was no intrinsic value for the options at June 30, 2016.
The following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at June 30, 2016:
Options Outstanding |
|
| Options Exercisable |
| ||||||||||||||||||
Range of Exercise Price |
|
| Number Outstanding at June 30, 2016 |
|
| Range of Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price |
|
| Number Exercisable at June 30, 2016 |
|
| Weighted Average Exercise Price |
| ||||||
$ | 0.30 |
|
|
| 1,050,000 |
|
|
| 4.9 |
|
| $ | 0.30 |
|
|
| 1,050,000 |
|
| $ | 0.30 |
|
| 0.30 |
|
|
| 750,000 |
|
|
| 5.9 |
|
|
| 0.30 |
|
|
| - |
|
|
| - |
|
| 0.30 |
|
|
| 600,000 |
|
|
| 6.9 |
|
|
| 0.30 |
|
|
| - |
|
|
| - |
|
| 0.30 |
|
|
| 428,530 |
|
|
| 9.8 |
|
|
| 0.30 |
|
|
| 200,000 |
|
|
| 0.30 |
|
$ | 0.30 |
|
|
| 2,828,530 |
|
|
| 6.4 |
|
| $ | 0.30 |
|
|
| 1,250,000 |
|
| $ | 0.30 |
|
NOTE 5 - DERIVATIVE AND WARRANT LIABILITIES
During the six months ended June 30, 2016, the fair value of warrant derivatives were estimated using the Black-Scholes option-pricing model with the following assumptions:
Risk-free interest rate | 0.36% |
Warrant life is the remaining contractual life of the warrants | 0.30 to 0.05 months |
Volatility | 247.13% to 253.12% |
Dividend rate | 0 |
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
The aggregate fair value of the warrants was determined to be $0 and $10,935 respectively, at June 30, 2016 and December 31, 2015, respectively. The following table summarizes the changes in the derivative liabilities for the six months ended June 30, 2016.
|
| Warrants |
| |
Fair value at December 31, 2015 |
| $ | 10,935 |
|
Adjustment to fair value during the six months ended June 30, 2016 |
|
| (10,935 | ) |
Fair value at June 30, 2016 |
| $ | - |
|
NOTE 6- DEFERRED REVENUE AND COMMISSIONS
Deferred revenue represents amounts billed and collected for the future delivery of fish in accordance with contractual terms. These advance payments relate solely to the Company's future fish contract program. Beginning in the 4th quarter 2015, the Company commenced the sale of future contracts for the delivery of fish, with the actual fish to be delivered over a period of one year beginning from the contract date and when the fish reach one pound or greater in weight. The amounts represented below shows the results of the presales.
|
| Year ended December 31, 2015 |
|
| Six Months Ended June 30, 2016 |
|
| Deferred Revenue at June 30, 2016 |
| |||
Pounds of fish presold |
|
| 520,711 |
|
|
| 576,274 |
|
|
| 1,096,985 |
|
Average sale price per pound (varies between $1.50 to $2.00) |
| $ | 1.79 |
|
| $ | 2.01 |
|
| $ | 1.86 |
|
Increase on deferred revenue from future fish contracts |
| $ | 881,218 |
|
| $ | 1,158,570 |
|
| $ | 2,039,788 |
|
Fish delivered pursuant to future fish contracts |
|
| - |
|
|
| - |
|
|
| - |
|
Total deferred revenue |
| $ | 881,218 |
|
| $ | 1,158,570 |
|
| $ | 2,039,788 |
|
In addition, the Company has signed a commission agreement with a related party and beneficial shareholder in connection with the future fish contracts. Per this agreement, the related party introduces the futures buyers to the Company and receives a 40% flat commission on all future fish contract sales. As of June 30, 2016 and December 31, 2015, the related party has received $834,168 and $370,740, respectively, in commissions which are reflected as deferred commissions – related party on the accompanying consolidated balance sheets until the period in which the related revenue is recognized. Additionally, the Company paid $101,462 of related costs to this related party during the six months ended June 30, 2016.
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Table of Contents |
NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
NOTE 7 - RELATED PARTY TRANSACTIONS
Notes Payable - Related Parties
The balances of related party notes as of June 30, 2016 and December 31, 2015 follows:
|
| Interest Rate |
|
| Maturity |
| June 30, 2016 |
|
| December 31, 2015 |
| |||
Related Party Note A |
|
| 10 | % |
| In Default |
| $ | 15,000 |
|
| $ | 15,000 |
|
Related Party Note B |
|
| 10 | % |
| In Default |
|
| 130,000 |
|
|
| 130,000 |
|
Related Party Note C |
|
| 10 | % |
| In Default |
|
| - |
|
|
| 74,000 |
|
Related Party Note D |
|
| 10 | % |
| In Default |
|
| 13,069 |
|
|
| 13,069 |
|
Related Party Note E |
| None |
|
| On Demand |
|
| 14,458 |
|
|
| 14,458 |
| |
Related Party Note F |
| None |
|
| On Demand |
|
| 15,409 |
|
|
| 15,409 |
| |
Total |
|
|
|
|
|
|
| $ | 187,936 |
|
| $ | 261,936 |
|
On June 15, 2016, the Company and the noteholder of Related Party Note C, Bio-Global Resources, Inc., entered into a debt settlement agreement whereby the Company issued 1,100 shares of its preferred stock upon the conversion of note payable – related party of $74,000 and accrued interest – related party of $6,432. The Company recorded this debt settlement as a reduction of debt and interest due and an increase in equity for a capital contribution of $80,432.
As of June 30, 2016 and December 31, 2015, the Company owed various related parties $187,936 and $261,936, respectively, of which, $158,069 and $232,069, respectively, represents notes payable due to related parties that bear interest at 10% and are in default, and the remainder of $29,867 and $29,867, respectively, bears no interest and are due on demand.
The Company has recognized $10,355 and $55,760 in interest expense related to the notes held by related parties for the six months ended June 30, 2016 and 2015, respectively, which was included in interest expense on the accompanying condensed consolidated statements of operations. At June 30, 2016 and December 31, 2015, accrued interest payable on notes payable amounted to $80,661 and $76,738, respectively, and is included in accrued expenses – related parties on the accompanying condensed consolidated balance sheets.
Management Fee and Reimbursement of Expenses to our Chief Executive Officer
The Company reimburses its chairman and chief executive officer for all direct and indirect costs of services provided, including the costs of employee, officer and director compensation and benefits allocable to us, and all other expenses necessary or appropriate to the conduct of our business. Total costs paid by the Company, for legal and management services provided by our chairman and chief executive officer related to contractual agreements, fundraising and general day to day business activities, were $151,980 and $88,851 for the six months ended June 30, 2016 and 2015, respectively. Additionally, on May 2, 2016, the Company granted its chief executive officer 800,000 options at a fixed exercise price of $0.30 per share. In connection with this option grant, for the six months ended June 30, 2016, the Company recognized management and other fees – related parties of $246,675 on the accompanying consolidated statements of operations (see Note 4). At June 30, 2016, the Company owes $170,349 to the CEO which has been reflect in accrued expenses – related parties on the accompanying condensed consolidated balance sheet.
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
Bio Global Resources, Inc.
The Company has entered into the following transactions with a company owned by a shareholder of the Company:
| · | Settled $74,000 of outstanding note principal (Related Party Note C) and $6,432 accrued interest related to this note in exchange for issuing 1,100 shares of the Company’s Series A Convertible Preferred Stock during the six months ended June 30, 2016. As of June 30, 2016, $19,026 of interest related to this related party note has been accrued and outstanding. The CEO of this note holder personally provided $15,409 in cash advances to the Company during 2015 and the entire balance remains outstanding as of June 30, 2016 and December 31, 2015 (Related Party Note F). These advances are non-interest bearing and due on demand. |
| · | Received 15,840 shares of Series A preferred stock in exchange for $792,000. As of June 30, 2016 and December 31, 2015, the Company has received $438,800 related to the agreement and recorded $353,200 in stock subscription receivable. |
| · | Received 40% of tilapia futures sales on a commission basis of $834,168 (See Note 6). |
| · | Was paid $101,462 for services and expenses provided to the Company related to tilapia future sales during the six months ended June 30, 2016. |
| · | On October 1, 2015, the Company entered into a consulting agreement with related party to provide leads on potential asset and business acquisitions, commercial customers, channel partners, service providers and investors to the Company in exchange for a tiered success fee in the event their efforts secure capital investment or revenue partners for the Company. |
| · | The related party consultant is paid $10,000 for each month of advisory services provided to the Company. For the six months ended June 30, 2016 and 2015, consulting fees amounted to $60,000 and zero, respectively, and is included in management fees and other fees – related parties on the accompanying statement of operations. At June 30, 2016 and December 31, 2015, in connection with this agreement, the Company reflected accrued expenses – related parties of $90,000 and $30,000, respectively. |
| · | On May 2, 2016, the Company granted this consultant 800,000 options at a fixed exercise price of $0.30 per share. In connection with this option grant, for the six months ended June 30, 2016, the Company recognized management and other fees – related parties of $246,675 (see Note 4). |
XL Biofuels, Inc.
In September 2013, the Company entered into a consulting agreement with a related party company for farm management and development services provided. Pursuant to the agreement, this related party consultant receives $10,000 per month plus expenses for farm-related consulting services. For the six months ended June 30, 2016 and 2015, consulting fees amounted to $60,000 and zero, respectively, and is included in management fees and other fees – related parties on the accompanying statement of operations. At June 30, 2016 and December 31, 2015, in connection with this agreement, the Company reflected accrued expenses – related parties of $90,000 and $30,000, respectively.
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NEW GLOBAL ENERGY, INC. AND SUBSIDIARY JUNE 30, 2016 |
Additionally, the Company has entered into the following transactions with this related party:
| · | Holds two notes payable from the Company. The first note has a balance of $13,069 (Related Party Note D) as of June 30, 2016 and December 31, 2015, and bears interest at 10%. This note has accrued $5,387 in related party interest as of June 30, 2016. The 2nd note is a cash advance from this related party totaling $14,458 (Related Party Note E) as of June 30, 2016 and December 31, 2015. This note bears no interest and is due on demand. |
| · | A cosigner and guarantor on the bank loan for the 221-kW DC solar photovoltaic electric system on the Thermal farm. These panels are owned and the current loan is paid for by AFT. As of June 30, 2016 and December 31, 2015, $477,767 and $498,459 was still owed on this loan, respectively. |
| · | Owner of a 174.37 kW-DC Photovoltaic System on the Mecca farm, land owned by AFT and leased to the related party for a period of 10 years at a total cost of $1.00, designed to cover 90% of energy required by the Mecca farm. This system is subject to an agreement between this related party and AFT. For the six months ended June 30, 2016 and 2015, fees amounted to $10,500 and zero, respectively, and is included in management fees and other fees – related parties on the accompanying statement of operations. At June 30, 2016 and December 31, 2015, the Company has accrued $57,750 and $47,250 for the amounts due related to this agreement, respectively, and is included in accrued expenses - related parties and on the accompanying consolidated balance sheets. |
| · | On May 2, 2016, the Company granted this consultant 800,000 options at a fixed exercise price of $0.30 per share. In connection with this option grant, for the six months ended June 30, 2016, the Company recognized management and other fees – related parties of $246,675 (see Note 4). |
Other
During the six months ended June 30, 2016 and 2015, the Company incurred farm management and accounting services of $42,000 and $28,000, respectively, to prior owners of AFT who are now beneficial shareholders of the Company and acting president of AFT. At June 30, 2016 and December 31, 2015, amounts due to this related beneficial shareholder amounted to $325,500 and $283,000, respectively, and are included in accrued expenses – related parties on the accompanying consolidated balance sheets. Additionally, the related party is a cosigner and guarantor on the bank loan for the 221-kW DC solar photovoltaic electric system on the Thermal farm. These panels are owned and the current loan is paid for by AFT. As of June 30, 2016 and December 31, 2015, $477,767 and $498,459 was still owed on this loan, respectively.
On May 2, 2016, the Company granted to a company who is considered a related party and is the Company’s joint venture partner in a certain project, 800,000 options at a fixed exercise price of $0.30 per share. In connection with this option grant, for the six months ended June 30, 2016, the Company recognized management and other fees – related parties of $246,675 (see Note 4).
NOTE 8 - SUBSEQUENT EVENTS
On July 22, 2016, the Company and a third party entered into a debt settlement agreement. Pursuant to the agreement, debt of $69,000 was settled for 100,000 shares of the Company’s common stock, resulting in a gain on this settlement of $53,000.
On August 17, 2016, the Company issued 55,000 shares of common stock to a consultant for services rendered. The shares were valued at their fair value using the quoted share price on the date of grant of $0.16 per common share. Accordingly, the Company recorded stock-based consulting fees of $8,800.
Subsequent to June 30, 2016, the Company received $296,000 from the sale of future contracts for the delivery of fish, with the actual fish to be delivered over a period of one year beginning from the contract date and when the fish reach one pound or greater in weight.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein. In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this Form 10-Q.
Overview and Financial Condition
New Global Energy, Inc. ("NGE" or the "Company") is a sustainable agriculture and aquaculture company organized as a Wyoming corporation on January 24, 2012 with executive offices located in Brevard County, Florida. The Company focuses on the use of advanced technology and farming techniques with the goal of increasing production and decreasing costs. The Company is focused on internal growth and growth through the acquisition of high-growth firms, assets and properties in the Green market space; industry segments of interest to the Company include sustainable agriculture, aquaculture and solar. Management is targeting growth stage assets, operations and companies that possess proprietary market edge and demonstrate solid opportunity to scale their business. We expect to pursue special opportunities that are anticipated to accelerate shareholder value by consolidating certain tiers of the $5 Trillion per year fragmented Green and Renewable Energy industry.
The first portion of the Company's development plan includes the development of its Global Energy Plantation ("GEP") using its Global Cell concept which combines alternative energy (source of usable energy intended to replace fuel sources without the undesired consequences of the replaced fuels) production, sustainable agriculture (practice of farming using principles of ecology, the study of relationships between organisms and their environment) and aquaculture (the processes of farming of aquatic organisms such as fish, crustaceans, mollusks and aquatic plants). In summation, our development plan will utilize non centralized solar panels to produce power for its own use and to feed into the power grid serving local power needs while producing farm grown fish, a process currently in operation, and, in future operations after the current year, shrimp.
Aqua Farming Tech, Inc. ("AFT") continued during the reported period to replace its existing brood stock used in its Tilapia production. It addition, in furtherance of the development of its feed development program, AFT planted Moringa on available acreage on the Company's "Thermal" property to be used and has been using it as a component of the feed used in its own aquaculture operations.
Important Note about Forward Looking Statements
Forward-looking statements such as this are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by a forward-looking statement. These risks and uncertainties include, without limitation: (1) the potential acquisitions or mergers may not be consummated in a timely manner, if at all; (2) any merger agreement may be terminated in circumstances that require the Company to pay a termination fee or reimburse certain expenses; (3) the diversion of management's attention from the Company's ongoing business operations; (4) the ability of the Company to retain and hire key personnel; (5) the effect of the announcement of any acquisition or Merger on the Company's business relationships, operating results and business generally; (6) competitive responses to any proposed Merger; and (7) the failure to obtain any requisite approvals to any Merger, such as stockholder approval. The Company expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Results of Operations for the Three and Six Months Ended June 30, 2016 compared to the Three and Six Months Ended June 30, 2015
We had revenues for the three months ended June 30, 2016 of $26,715, as compared to revenues of $9,391 for the three months ended June 30, 2015, an increase of $17,324. The Company had revenues for the six months ended June 30, 2016 of $39,803, as compared to $29,638 for the six months ended June 30, 2015, an increase of $10,165. The 2016 revenue increases result mainly from the sale of live fish including Tilapia and Silver Carp, and to a lesser extent, Moringa leaves cultivated from plants grown on AFT property.
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Cost and expenses for the three months ended June 30, 2016 were $1,364,097 as compared to $220,691 for the three months ended June 30, 2015, an increase of $1,143,406. Costs and expenses for the six months ended June 30, 2016 were $2,492,404 as compared to $500,644 for the six months ended June 30, 2015, an increase of $1,991,760 These increases were primarily associated with an increase in costs of sales related to an increase in sales, an increase in depreciation expense, an increase in management and other fees – related party of $864,268 related to the granting of stock options to management and related party consultants in May 2016, an increase in provision for loss on future delivery of presold fish, and an increase in general and administrative expenses related to increased operations as compared to the comparable periods in the previous year. During 2016, we recorded a provision for total anticipated losses on the future delivery of presold fish by considering total estimated costs to develop the fish for sale compared to total anticipated revenues in the period in which such losses are identified. The provisions for estimated losses on the future delivery of presold fish requires us to make certain estimates and assumptions, including those with respect to the future cost to grow the fish to maturity. Estimates of the future cost include assumptions as to costs of feed, utilities, labor and other indirect costs. If any of these or other assumptions and estimates do not materialize in the future, we may be required to record additional provisions for estimated losses on the future delivery of presold fish. During the six months ended June 30, 2016, management analyzed the estimated loss per pound from all outstanding future fish contracts. After management's review, for the three and six months ended June 30, 2016, the Company recognized a loss of $127,940 and $600,492 on the future fish contracts, respectively.
Other income (expenses) for the three months ended June 30, 2016 were $(9,410) as compared to $41,776 for the three months ended June 30, 2015, a change of $(51,186) attributable to a decrease in gain on derivative valuation of $76,792 and a decrease in interest expense of $25,606. Other expenses for the six months ended June 30, 2016 were $38,109 as compared to $1,833,732 for the six months ended June 30, 2015, a decrease of $1,795,623 attributable to a decrease in loss on settlement of debt recorded in the 2015 period of $1,992,732 to zero in the 2016 period, a decrease in gain on derivative valuation of $217,868 related to the valuation of derivative liabilities and a decrease in interest expense of $33,759, offset by an increase in loss on disposal of fixed assets of $13,000.
For the three months ended June 30, 2016, we incurred a net loss of $1,346,792 or $0.10 per common share (basic and diluted) as compared to a net loss of $169,524 or $0.00 per common share (basic and diluted) for the three months ended June 30, 2015, an increased net loss of $1,177,268. For the six months ended June 30, 2016, we incurred a net loss of $2,490,710 or $0.18 per common share (basic and diluted) as compared to a net loss of $2,304,738 or $0.16 per common share (basic and diluted) for the six months ended June 30, 2015, an increased net loss of $185,972.
Emerging Growth Company
We qualify as an "emerging growth company" under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.
The Company has implemented all new relevant accounting pronouncements that are in effect through the date of these financial statements. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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Cash Flows for the Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015
The following summarizes the key components of our cash flows for the six months ended June 30, 2016 and 2015:
|
| Six Months Ended June 30, |
| |||||
|
| 2016 |
|
| 2015 |
| ||
Net cash used in operating activities |
| $ | (42,388 | ) |
| $ | (358,293 | ) |
Net cash used in investing activities |
|
| (3,500 | ) |
|
| - |
|
Net cash (used in) provided by financing activities |
|
| (64,606 | ) |
|
| 339,796 |
|
Net decrease in cash |
| $ | (110,494 | ) |
| $ | (18,497 | ) |
Although consolidated financials with Aqua Farming Tech, Inc. show revenues, the Company's cash position is not sufficient enough to support the Company's daily operations for the next twelve months. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate revenues.
Beginning in the 4th quarter 2015, the Company commenced the sale of future contracts for the sale of fish, with the actual fish to be delivered within one year of each respective future fish contract. In connection with the sale of future fish contracts, we have collected approximately $2,040,000 in cash through June 30. 2016. These funds have been used for working capital purposes including for the purchase of fish food, the payment of a 40% commission on all future fish contract sales to a related party, payment of management and other fees – related parties, for professional fees and other general and administrative expenses.
Net cash flow used in operating activities was $42,388 for the six months ended June 30, 2016 as compared to $358,293 for the six months ended June 30, 2015, a decrease of $315,905.
| ● | Net cash flow used in operating activities for the six months ended June 30, 2016 primarily reflected net loss of approximately $2,491,000 and the add-back of non-cash items consisting of a gain on derivative valuation of approximately $11,000, and changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of approximately $16,000, an increase in deferred commissions – related party of approximately $463,000 related to the prepayment of commissions on future fish sales, an increase in deposits of approximately $14,000, and a decrease in accounts payable of approximately $189,740, offset by non-cash items, consisting of loss realized upon disposal of fixed assets of $13,000, depreciation of $222,391, and stock based compensation and fees of $896,567, and changes in operating assets and liabilities primarily consisting of an increase in accrued expenses of approximately $84,000, an increase in accrued expenses – related party of approximately $349,000, an increase in accrued loss of future delivery of presold fish of $600,492, and an increase in deferred revenue of approximately $1,159,000. |
| ● | Net cash flow used in operating activities for the six months ended June 30, 2015 primarily reflected net loss of approximately $2,305,000 and the add-back of non-cash items mainly consisting of gain on derivative valuation of approximately $229,000, and change in operating assets and liabilities consisting of a decrease in accrued expenses of approximately $14,000, offset by non-cash items primarily consisting of loss realized upon settlement of debt of approximately $1,993,000, and depreciation of approximately $96,000, and changes in operating assets and liabilities primarily consisting of a decrease in inventory of approximately $37,000 and an increase in accounts payable of approximately $60,000. |
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Net cash flow used in investing activities was $3,500 for the six months ended June 30, 2016 which reflected in purchase of property and equipment. We did not incur any investing activities for the six months ended June 30, 2015.
Net cash flow used in financing activities was $64,606 for the six months ended June 30, 2016 as compared to net cash flow provided by financing activities of $339,796 for the six months ended June 30, 2015. During the six months ended June 30, 2016, we made repayments on debt of approximately $64,000, and repayments on related party debt of approximately $2,000, offset by proceeds from increase in bank drafts of approximately $2,000. During the six months ended June 30, 2015, we received proceeds from issuance of preferred and common stock of approximately $156,000, and proceeds from related party notes payable of approximately $260,000, offset by repayments on debt of approximately $74,000, and repayments on related party debt of approximately $2,000.
The Company has historically met its cash needs through a combination of cash flows from operating activities along with long and short term borrowings and through the sale of its stock and the sale of future fish contracts.
Contractual Obligations
Commitments and Contingencies and Capital Expenditures
In August 2015, the Company entered into a sales commission agreement with a related party for the sale of tilapia futures. Per the agreement the related party is entitled to 40% of all futures sales when the buyer is referred by the related party. As of June 30, 2016, the Company has paid $834,168 to the related party, which is recorded as deferred commission as a result of $2,039,788 in future fish sales. The payments received will be held as deferred revenue and the commissions paid as a deferred commission on the Company's balance sheet until the fish are delivered.
The Company had no material commitments for capital expenditures as of June 30, 2016.
Off-Balance Sheet Arrangements
Mecca Solar Panels
On December 11, 201l, the Company's subsidiary, Aqua Farming Technologies, Inc. "AFT", entered into a land lease and solar panel easement agreement with a related party. Per the agreement, AFT leased land under its ownership, called Mecca, to the related party for a 10 year period beginning at the date of solar panel installation in 2014 and at a total cost of $1.00 for the entire lease period. In exchange for the lease agreement, the related party purchased, at a cost of $540,987, a solar panel array installed at the Mecca property. As a fee for the energy provided to AFT's farm and equipment by the installed solar panels, AFT is committed to pay $3,130 per month for 72 months, beginning at installation date, to the builder of the solar array, Sun Valley Solar, Inc. or its assignee. In addition, on October 1, 2016, AFT will begin paying the related party $2,500 a month for the rest of the useful life of the solar array.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
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ITEM 4. Controls and Procedures
We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our Disclosure Controls were not effective as of the end of the period covered by this report.
Our disclosure controls and procedures are not effective as a result of the following material weaknesses:
a) | The Company lacks the financial infrastructure to account for complex transactions which may result in a greater than normal risk that material errors may occur in the financial statements and not be detected timely. | |
b) | The Company does not have a full time CFO, and currently relies upon independent financial reporting consultants for review of critical accounting areas and disclosures of material non-standard transactions. | |
c) | The Company lacks sufficient personnel to allow for proper segregation of duties. | |
| d) | The Company does not have an independent audit committee to provide oversight of management. |
Changes in Internal Controls
We have also evaluated our internal control for financial reporting and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.
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There are no pending legal proceedings. The Company may subject to other legal proceedings that arise in the ordinary course of its business and from prior management activities. Other than as previously disclosed, in the opinion of present management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect our financial position, results of operations or cash flows.
Not required for smaller reporting companies.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 2, 2016, we issued 100,000 common shares for warrants exercised on March 23, 2016.
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Mine Safety Disclosures
Not applicable
None
a) Exhibits
31.1 | Section 302 Certification By Chief Executive Officer |
| |
31.2 | Section 302 Certification By Principal Financial Officer |
32.1 | Section 906 Certification of Principal Executive Officer and Principal Financial Officer |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEW GLOBAL ENERGY, INC. | |||
Dated: September 12, 2016 | By: | /s/ Perry D. West | |
Perry D. West | |||
CEO, CFO and Director (Principal Executive and Accounting Officer) |
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