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EXCEL - IDEA: XBRL DOCUMENT - VRDT CorpFinancial_Report.xls
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________

FORM 10-Q
______________________
 
[x]
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOR ENDED SEPTEMBER 30, 2011
 
[  ]
TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITIION PERIOD FROM ____________ TO ____________

Commission File number: 000-52677

VERDANT AUTOMOTIVE CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
 
45-2405975
(State or other jurisdiction
Of incorporation)
 
(I.R.S. Employer
Identification No.)

12223 Highland Avenue, Suite 106-542, Rancho Cucamonga, California  91739
(Address of principal executive offices)

(909)786-1981
(Issuer’s telephone number)
 
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer
[  ]
Accelerated filer  
[  ]
Non-accelerated filer
[  ]
Smaller reporting company     
[x]

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

 
1

 
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.      

Not applicable.

APPLICABLE ONLY TO CORPORATE ISSUERS

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

As of October 31, 2011, the Company has  94,925,640 shares of Class A Common Stock outstanding and no other classes of common stock.

TABLE OF CONTENTS

VERDANT AUTOMOTIVE CORPORATION
(A DEVELOPMENT STAGE COMPANY)

  Part I – Financial Information
     
Item 1
Financial Statements
 
     
 
Balance Sheets as of September 30, 2011 and March 31, 2011
3
     
 
Statements of Operations for the Six Months Ended September 30, 2011, and 2010 and for the Period from Inception, August 19, 1999, through September 30, 2011
4
     
 
Statements of Cash Flows for the Six Months Ended September 30, 2011, and 2010 and the Period from Inception, August 19, 1999, through September 30, 2011
5
     
 
Notes to the Financial Statements
6
     
Item 2
Management’s Discussion and Analysis of Financial Condition and  Results of Operations
10
     
Item 3
Quantitative and Qualitative Disclosures about Market Risk
15
     
Item 4
Controls and Procedures
15
     
  Part II – Other Information
     
Item 1
Legal Proceedings
16
     
Item 2
Unregistered Sales Of Equity Securities And Use Of Proceeds
16
     
Item 3
Defaults Upon Senior Securities
17
     
Item 4
Submission Of Matters To A Vote Of Security Holders
17
     
Item 5
Other Information
17
     
Item 6
Exhibits
18
 
 
2

 
 
PART I
 
ITEM 1.
FINANCIAL STATEMENTS
 
The Financial Statements of the Company required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Company.

Verdant Automotive Corporation
Balance Sheet
 
 
   
September 30, 2011
   
March 31, 2011
 
ASSETS
           
             
CURRENT ASSETS:
           
Cash
    58,797       101  
Prepaid expenses
    4,729,964       3,472  
Total Current Assets
    4,788,761       3,573  
                 
PROPERTY AND EQUIPMENT, NET
    8,621       0  
                 
OTHER ASSETS
               
Goodwill
    0       0  
Deposits
    2,188          
Total Other Assets
    2,188       0  
                 
TOTAL ASSETS
    4,799,570       3,573  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY / (DEFICIT)
               
                 
CURRENT LIABILITIES:
               
Accounts payable and accrued expenses
    1,765,265       147,498  
Accounts payable and accrued expenses - Related party
    10,513       3,768  
Deposits from stockholders
               
Notes Payable
    145,000          
Notes Payable - Related parties
    992,759       142,759  
Total Current Liabilities
    2,913,537       294,025  
                 
STOCKHOLERS' EQUITY / (DEFICIT)
               
Preferred stock, $.001 par value; 5 shares issued and outstanding at September 30, 2011
    0       0  
Common Stock, .001 par value: 999,999,995 shares authorized: 91,976,640 and 3,700,726 share issed and 91,976,640 and 3,700,726 shares outstanding at September 30, 2011 and March 31, 2011, respectively
    91,977       3,701  
Additional paid-in capital
    17,471,613       8,414,039  
Warrants (300,000 warrants issued and outstanding at September 30, 2011)
    0       0  
Treasury stock
    (850,000 )     0  
Deficit accumulated during the development stage
    (14,827,557 )     (8,708,192 )
Total Stockholders' Equity / (Deficit)
    1,886,033       (290,452 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY / (DEFICIT)
    4,799,570       3,573  
 
 
 
3

 
 
Verdant Automotive Corporation
Statement of Operations
For the Six Months Ended Setptember 30, 2011
 
 
     Three Months Ended September 30,     Six Months Ended September 30,        
Description
 
2011
   
2010
   
2011
   
2010
   
April 19. 1999
to September 30,
2011
 
                               
Sales
    0       0       0       0       370,800  
Cost of sales
    0       0       0       0       0  
                                         
Gross profit
                    0       0       370,800  
                                         
Operating Expenses
                                       
Depreciation and amortization
    788       0       838       0       838  
General and administrative expenses
    1,619,659       4,759       2,269,512       30,901       9,205,952  
Impairment of goodwill
    0       0       3,833,722       0       3,833,722  
Impairment of long-lived assets
    0       0       0       0       855  
Impairment of loan receivable
    0       0       0               130,000  
                                         
Total operating expenses
    1,620,447       4,759       6,104,072       30,901       13,171,367  
                                         
Income / (Loss) from Operations
    (1,620,447 )     (4,759 )     (6,104,072 )     (30,901 )     (12,800,567 )
                                         
Other Income / (Expense)
                                       
Other income
                                    56,889  
Loss from conversion of shareholder debt
    0       0       0       0       (1,506,528 )
Interest (expense)
    (4,195 )     (2,226 )     (8,549 )     (4,111 )     (554,949 )
Interest (expense) - Related parties
    (2,474 )             (6,745 )     0       (22,403 )
Total Other Income / (Expense)
    (6,669 )     (2,226 )     (15,294 )     (4,111 )     (2,026,991 )
                                         
Income / (Loss) before Income Taxes
    (1,627,116 )     (6,985 )     (6,119,366 )     (35,012 )     (14,827,558 )
                                         
Provisions for Income Taxes
    0       0       0       0       0  
                                         
Net Income / (Loss)
    (1,627,116 )     (6,985 )     (6,119,366 )     (35,012 )     (14,827,558 )
                                         
Net Income / (Loss) Per Share:
                                       
Basic and Diluted
    (0.02 )     (0.00 )     (0.12 )     (0.01 )        
                                         
Weighted Average Shares Outstanding
                                       
Basic and Diluted
    73,112,717       3,700,726       49,186,046       3,700,726          
 
 
 
 
4

 
 
Verdant Automotive Corporation
Statement of Cash Flows
For the Six Months Ended Setptember 30, 2011
 
 
   
Sep 30, 11
   
Sep 30, 10
   
April 19. 1999
to September 30,
2011
 
                   
CASH FLOWS FROM OPERATIONS:
                 
Net Income / (Loss)
    (6,119,366.00 )     (35,012.00 )     (14,827,558.00 )
Adjustments to reconcile net income / (loss) to net cash used in operating activities:
                       
Depre & Amort
    838.00               53,627.00  
Impairment of GW
    3,833,722.00               3,833,722.00  
Impairment of Long-Lived Assets
                    855.00  
Impairment of Loan Rec
                    130,000.00  
Accrued Interest on payable converted to debt
                    209,817.00  
Issurance of warrants for services
                    79,500.00  
Common stock issued for services
    537,800.00               661,399.00  
Loss on conversion of stockholder debt to C/Stock
                    1,506,528.00  
Expense paid by stockholder and affiliate
                    636,796.00  
Payables and servcies converted to C/Stock
                    770,674.00  
Assumption of liabilities over value of assets
    (833,722.00 )             (833,722.00 )
Changes in Assets & Liabilities:
                       
 Decrease / (Increase) in prepaid expenses
    (153,680.00 )     (7,434.00 )     (157,152.00 )
(Decrease) / Increase in accounts payable and accrued expenses
    1,624,513.00       20,000.00       2,120,790.00  
(Decrease) / Increase in shareholder deposits
                    0.00  
(Decrease) / Increase in interest payable to stockholder
            4,111.00       0.00  
Net cash provided by operating activities
    (1,109,895.00 )     (18,335.00 )     (5,814,724.00 )
                         
CASH FLOWS FROM INVESTING:
                       
Purchase of property pland and equip
    (9,459.00 )     0.00       (63,103.00 )
Loan receivable
            0.00       (130,000.00 )
Net cash used in investing activities
    (9,459.00 )     0.00       (193,103.00 )
                         
CASH FLOWS FROM FINANCING:
                       
Proceeds from parent company
                    697,193.00  
Proceeds from notes payable - other
    145,000.00               530,000.00  
Proceeds from notes payable - shareholder
            18,360.00       1,911,907.00  
Proceeds from notes payable - affiliates
                    2,564,191.00  
Payments on notes payable - other
                    (338,018.00 )
Payments on notes payable - shareholder
                    (190,699.00 )
Payments on notes payable - affiliates
                    (141,000.00 )
Proceeds from inssuance of common stock
    1,033,050.00               1,033,050.00  
Net cash from financing activities
    1,178,050.00       18,360.00       6,066,624.00  
                         
Net Increase / (Decrease) in cash
    58,696.00       25.00       58,797.00  
                         
CASH AT BEGINNING OF PERIOD
    101.00       38.00       0.00  
                         
CASH AT END OF PERIOD
    58,797.00       63.00       58,797.00  
                         
SUPPLEMENTAL CASH FLOW INFORMATION:
                       
Cash paid for Interest
    0.00               0.00  
Cash paid for Income Taxes
    0.00               0.00  
Converson of related party payable to notes payable to shareholder
    0.00               0.00  
Conversion of notes payable to common stock
    0.00               0.00  
Issurance of common stock for goodwill
    3,000,000.00               3,000,000.00  
Common stock issued for services
    4,900,000.00               4,900,000.00  
Issurance of note payable for treasury stock
    850,000.00               850,000.00  
 
 
 
 
5

 
 
NOTE 1.                      BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

The accompanying unaudited financial statements of Verdant Automotive Corporation (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The results of operations for the interim period ended September 30, 2011 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending March 31, 2012. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position and cash flows. The Company has reclassified certain amounts previously reported in our financial statements to conform to the current presentation. The unaudited interim financial statements should be read in conjunction with the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011, and Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
NOTE 2.                      REVENUE RECOGNITION
 
The Company recognizes revenue in accordance with the Securities and Exchange Commission Staff Accounting Bulletin (SAB) number 104, which states that revenues are generally recognized when it is realized and earned.  Specifically, the Company recognizes revenue when services are performed and projects are completed and accepted by the customer.  Revenues are earned from the sale of electric vehicles and other related technologies and services.
 
NOTE 3.                      DEVELOPMENT STAGE COMPANY

The Company is a development stage company. The Company is subject to risks and uncertainties, including new product development, actions of competitors, reliance on the knowledge and skills of its employees to be able to service customers, and availability of sufficient capital and a limited operating history. Accordingly, the Company presents its financial statements in accordance with the accounting principles generally accepted in the United States of America that apply in establishing new operating enterprises. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the accumulated statement of operations and cash flows from inception of the development stage to the date on the current balance sheet. Contingencies exist with respect to this matter, the ultimate resolution of which cannot presently be determined.
 
 
6

 
 
NOTE 4.                      RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
 
There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on our financial statements, from those disclosed in the our Annual Report on Form 10-K for the year ended March 31, 2011.
 
NOTE 5.                      RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 6.                      GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company sustained losses of $6,119,365 and $115,118 for the six months ended September 30, 2011 and the year ended March 31, 2011, respectively.  The Company had an accumulated deficit of $14,827,557 at September 30, 2011.    These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company is highly dependent on its ability to continue to obtain investment capital and loans from an affiliate and shareholder in order to fund the current and planned operating levels.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital to sustain its current level of operations.   No assurance can be given that the Company will be successful in these efforts.
 
Management intends to raise additional operating funds through equity and/or debt offerings.  However, there can be no assurance management will be successful in its endeavors.  Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern.
 
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements.  To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital.  No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company.  If adequate working capital is not available, the Company may be required to curtail its operations. 
 
NOTE 7.                      GOODWILL

Goodwill represents the excess of the cost of the amount paid over the acquired assets over the fair value of their net assets at the dates of acquisitions, plus the assumption of certain liabilities. Under ASC 350, Goodwill and Other Intangible Assets, the Company is required to annually assess the carrying value of goodwill to determine if impairment in value has occurred.

The Company determined that its goodwill was impaired and recorded an impairment charge of $3,833,721.69.
 
NOTE 8.                      NOTES PAYABLE-RELATED PARTIES
 
The Company’s related party notes payable, all due currently, consists of the following:
 
   
September 30, 2011
   
March 31, 2011
 
             
Note Payable, 12% interest, principle and interest due February 18, 2012(1)
  $ 142,759     $ 142,759  
                 
Note Payable, payments are due monthly at 5% of the monthly gross
               
monies raised with the balance due no later that April 29, 2012
    850,000          
                 
    $ 992,759     $ 142,759  
 
(1)
The above listed note is convertible into 881,744 shares of common stock for its cancellation and the conversion price is based on the 10 day VWAP of the Company’s common stock or, $.016.  The accrued interest shall be converted at the same rate.
 
 
7

 
 
NOTE 9.                      NOTES PAYABLE
 
The Company’s notes payable consists of the following:
 
   
September 30,2011
 
Notes payable, 15% interest, principle and interest due April 19, 2012
 
$
 45,000
 
         
Note payable, 10% interest, principle and interest due March 4, 2012
   
 50,000
 
         
Note payable, 10% interest, principle and interest due March 18, 2012
   
 50,000
 
   
$
145,000
 
 
The Company has issued 2 unsecured convertible promissory notes for a cumulative total of $95,000, which are convertible to common stock of the Company at one-tenth of one percent of the Company’s initial private placement offering, which, in this case, was $0.10 per share.  As such, the notes are convertible to common stock of the Company at $0.01 per share.  If not converted within 6 months of the date of execution, the notes bear interest at the rate of 10% per annum.  The notes are scheduled to be converted on or before February 27, 2012.
 
The Company has issued 1 secured convertible promissory note for a total of $50,000, which is convertible to common stock of the Company at one-tenth of one percent of the Company’s initial private placement offering, which, in this case, was $0.10 per share.  As such, the notes are convertible to common stock of the Company at $0.01 per share.  The note is secured by any tangible property owned by the Company, bears interest at 10% per annum and is scheduled to be converted on or before March 18, 2012.

NOTE 10.                      INCOME TAXES

Effective January 1, 2007, the Company adopted the provisions of ASC 740-10 (formerly known as FIN No. 48, Accounting for Uncertainty in Income Taxes). ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740-10 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The application of income tax law is inherently complex. Laws and regulation in this area are voluminous and are often ambiguous. As such, the Company is required to make many subjective assumptions and judgments regarding the income tax exposures. Because interpretations of, and guidance surrounding, income tax laws and regulations change over time, changes in the subjective assumptions and judgments can materially affect amounts recognized in the balance sheets and statements of income.
 
 
8

 
 
At the adoption date of January 1, 2007, the Company had no unrecognized tax benefit, which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit during the three months ended September 30, 2011.

NOTE 11.                      SUBSEQUENT EVENTS

Subsequent to the quarter ended September 30, 2011, and through October 31, 2011, the Company sold 2,970,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.20 per share for a total consideration of $594,000.  Subsequent to the quarter ended September 30, 2011, and through October 31, 2011, the Company sold 10,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.50 per share for a total consideration of $5,000.

Except as provided herein, the Company has evaluated its activities, pursuant to ASC 855, and has determined that there are no additional reportable subsequent events.

NOTE 12.                      STOCKHOLDERS' EQUITY

Common Stock

The Company has authorized 989,999,995 shares of common stock, of which  94,925,640 shares of Class A Common Stock have been issued and are outstanding as of October 31, 2011.

On August 8, 2011, the Company granted a cumulative total of 42,000,000 shares of restricted common stock to 24 key employees, executives, and directors.  The grant of the restricted shares are exempt from registration as not constituting sales for value within the meaning of Section 2(a)(3) of the Securities Act.

On September 20, 2011 following an amendment to Registrant’s Certificate of Incorporation, the Registrant issued five (5) shares of authorized Class A Preferred Stock to four officers of the Registrant and one existing shareholder of the Registrant in consideration of service performed for the Registrant. The shares of Class A Preferred Stock so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

Inclusive of those amounts set forth as subsequent events in the Company’s Form 10-Q for the quarter ending June 30, 2011, during the quarter ended September 30, 2011, the Company sold 4,922,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.10 per share for a total consideration of $492,200.  During the quarter ended September 30, 2011, the Company sold 387,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.50 per share for a total consideration of $193,500.  During the quarter ended September 30, 2011, the Company also granted 2,500 shares of restricted common stock to an existing investor.

As set forth as a subsequent event in the Company’s Form 10-Q for the quarter ending June 30, 2011, on August 10, 2011, the Company issued 300,000 shares of restricted common stock pursuant to a consulting agreement. The Restricted Shares so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
 
 
9

 
 
During the quarter ended September 30, 2011, the Company issued 1,500,000 shares of restricted common stock to A.C. Green, pursuant to a written director services agreement.  The Restricted Shares so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

During the quarter ended September 30, 2011, the Company issued 750,000 shares of restricted common stock to Don Driftmier pursuant to a written director services agreement.  The Restricted Shares so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

Subsequent to the quarter ended September 30, 2011, and through October 31, 2011, the Company sold 2,970,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.20 per share for a total consideration of $594,000.  Subsequent to the quarter ended September 30, 2011, and through October 31, 2011, the Company sold 10,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.50 per share for a total consideration of $5,000.

Preferred Stock

The Company has five (5) shares of preferred stock, designated as Class A Convertible Preferred Stock, authorized, issued and outstanding.

As reported in Current Report on Form 8-K, filed by the Company on October 4, 2011, and incorporated by reference herein, on September 20, 2011, the Company amended its Articles of Incorporation to reflect a change in the authorized number of shares to include ten million five (10,000,005) shares of preferred stock with a par value of One Thousandths of One Cent ($0.001).

By shareholder and director consent, the Company created and designated a class of Series B Convertible Preferred Stock, consisting of one million (1,000,000) shares of preferred stock.  As of the date of this Report, none of the Series B Convertible Preferred Stock has been issued.

Treasury Stock

During the quarter ended September 30, 2011, there were no changes in the Company’s treasury stock.

Subsequent to the quarter ended September 30, 0211, and through October 31, 2011, the Company repurchased a cumulative total of 31,000 shares of restricted common stock from a total of three (3) investors.

Warrants

During the quarter ended September 30, 2011, and through October 30, 2011, the Company did not issue any warrants. Prior to the acquisition of Verdant Industries, Inc., as set forth in the Company’s Current Report on Form 8-K, filed May 12, 2011,  Verdant Industries, Inc. issued 300,000 warrants, having a de minimus value, to a member of its advisory board.  The warrants were assumed by the Company during the acquisition of the assets and liabilities of Verdant Industries, Inc.  The warrants are convertible to common stock of the Company at a strike price of $0.01 per share and, as of the date of this Report, have not yet been exercised.
 
 
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Forward-looking Statements

Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.
 
 
10

 
 
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.

Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Plan of Operations

The Company is a strategic organization and holding company for clean technology, transportation and infrastructure related ventures and initiatives designed to disrupt the current status quo in energy distribution and usage.  The Company’s goal is to eliminate all of the barriers to the electrification of transportation
 
A significant part of the Company’s solution is the introduction of compelling electric vehicles that encourage consumers to make the switch to EV technology.  The business model creates economies of scale and leverages advanced technologies to achieve this solution and to allow the Company to present a diverse portfolio for its investors.
 
Among the Company’s contemplated acquisitions are electric, CNG and gasoline vehicle offerings to aid in the transition to electric powered automobiles and keep its product line diverse and robust in this evolving market.  The Company is also negotiating licensing and acquisitions of battery and technology companies that offer compelling opportunities to enter and expand the market.  These acquisitions and strategic partnerships, as well as development of the Company’s own branded products, will lead to significant job creation within the United States.
 
Verdant services complete the EV experience through large-scale deployment and maintenance of charging infrastructure, grid management and energy storage solutions utilizing advanced battery technology that significantly outperforms technology in broad use today.  This creates a new industry segment that will also create a substantial amount of new jobs in the United States and abroad.
 
Constructing a charging station infrastructure and partnerships with retail installations will provide additional point of sale revenue for the Company. Because the equipment stores energy, it can also be used in peak mitigation and energy backup during power failures bringing additional value to the customer.
 
The Company intends to form strategic relationships with prominent universities and colleges to research and develop its technologies.  As such, the Company will gain access to advanced laboratory facilities to develop new and innovative technologies. The Company’s technology and IP development will provide it with additional tangible assets that improve investor valuation and the Company’s position in the global marketplace as a leader in automotive and alternative fuel and energy management.
 
 
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Results of Operations for the Three Months Ended September 30, 2011 as Compared to the Three Months Ended September 30, 2010.

Overview

Total revenues did not change from $0 for the three months ended September 30, 2011 from $0 for the three months ended September 30, 2010.

Total operating expenses increased to $ 1,620,447 for the three months ended September 30, 2011 from $4,759 for the three months ended September 30, 2010. This increase was primarily attributable to the increase costs to enter into the new business activities and hiring personnel.

Results of Operations for the Six Months Ended September 30, 2011 as Compared to the Six Months Ended September 30, 2010.

Overview

Total revenues did not change from $0 for the six months ended September 30, 2011 from $0 for the six months ended September 30, 2010.

Total operating expenses increased to $ 6,104,072 for the six months ended September 30, 2011 from $30,901 for the six months ended September 30, 2010. This increase was primarily attributable to the increase costs to enter into the new business activities, hiring personnel and the impairment of goodwill.
 
Liquidity and Capital Resources

As of September 30, 2011, the Company had cash of $58,797 and working capital of $ 1,875,224. Net loss was $ 6,119,365 for the six months ended September 30, 2011. The Company generated a negative cash flow from operations of $ 1,109,895 for six months ended September 30, 2011. The negative cash flow from operating activities for the period is primarily attributable to the Company’s increase in accrued salaries and consulting fees.  During the quarter ended September 30, 2011, the Company raised $685,700 from a private placement it made by selling 5,309,000 shares of its common stock. Subsequent to the quarter ending September 30, 2011, and through October 31, 2011, the Company has sold 2,980,000 shares of its common stock for an additional $599,000.  The Company will continue to raise capital to cover its cost of operations until it enters into its proposed operations and obtains cash positive and profitable operations from its business.

Going Concern

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company sustained income of $0 and losses of $1,627,116 for the three months ended September 30, 2011 compared to income of $0 and losses of $6,985 for the three months ended September 30, 2010.  The Company had an accumulated deficit of $14,827,557 at September 30, 2011.  These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company is highly dependent on its ability to continue to obtain investment capital in order to fund the current and planned operating levels.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital to sustain its current level of operations.  No assurance can be given that the Company will be successful in these efforts.

 
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OUR BUSINESS IS SUBJECT TO MANY RISK FACTORS, INCLUDING THE FOLLOWING (REFERENCES TO "OUR," "US," "WE," AND WORDS OF SIMILAR MEANING IN THESE RISK FACTORS REFER TO THE COMPANY).

We have not paid any cash dividends in the past and have no plans to issue cash dividends in the future, which could cause the value of our common stock to have a lower value than other similar companies which do pay cash dividends.

We have not paid any cash dividends on our common stock to date and do not anticipate any cash dividends being paid to holders of our common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of the business, it is anticipated that any earnings will be retained to finance our future expansion. As we have no plans to issue cash dividends in the future, our common stock could be less desirable to other investors and as a result, the value of our common stock may decline, or fail to reach the valuations of other similarly situated companies who have historically paid cash dividends in the past.

The Company has entered into indemnification agreements with the officers and directors and we may be required to indemnify our Directors and Officers, and if the claim is greater than $1,000,000, it may create significant losses for the Company.

We have authority under Delaware and California law to indemnify our directors and officers to the extent provided in that statute. Our Bylaws require the Company to indemnify each of our directors and officers against liabilities imposed upon them (including reasonable amounts paid in settlement) and expenses incurred by them in connection with any claim made against them or any action, suit or proceeding to which they may be a party by reason of their being or having been a director or officer of the company. We maintain officer's and director's liability insurance coverage with limits of liability of $1,000,000. Consequently, if such judgment exceeds the coverage under the policy, the Company may be forced to pay such difference. We have entered into indemnification agreements with each of our officers and directors containing provisions that may require us, among other things, to indemnify our officers and directors against certain liabilities that may arise by reason of their status or service as officers or directors (other than liabilities arising from willful misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. Management believes that such indemnification provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. We are subject to claims arising from disputes with employees, vendors and other third parties in the normal course of business. These risks may be difficult to assess or quantify and their existence and magnitude may remain unknown for substantial periods of time. If the plaintiffs in any suits against us were to successfully prosecute their claims, or if we were to settle such suits by making significant payments to the plaintiffs, our operating results and financial condition would be harmed. In addition, our organizational documents require us to indemnify our senior executives to the maximum extent permitted by Delaware and California law. If our senior executives were named in any lawsuit, our indemnification obligations could magnify the costs of these suits.

Future changes in financial accounting standards and other applicable regulations by various governmental regulatory agencies may cause lower than expected operating results and affect our reported results of operations.

Changes in accounting standards and their application may have a significant effect on our reported results on a going forward basis and may also affect the recording and disclosure of previously reported transactions. New standards have occurred and will continue to occur in the future. For example, in December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), as amended, “Share Based Payment” (“SFAS No. 123R”), which requires us to expense stock options at fair value effective January 1, 2006. Under SFAS No. 123R, the recognition of compensation expense for the fair value of stock options reduces our reported net income and net income per share subsequent to implementation; however, this accounting change will not have any impact on the cash flows of our business. Under the prior rules, expensing of the fair value of the stock options was not required and therefore, no compensation expense for stock options was included in reported net income and net income per share in fiscal 2006. The Company issued 100,000 shares of stock options in fiscal 2007, recognizing $24,150 of compensation expense. Any future issuances of stock options, in addition to the fiscal 2006 issuances, will cause additional compensation expense to be recognized. As of September 31, 2011, there are no outstanding stock options.
 
 
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The Sarbanes-Oxley Act of 2002 and various new rules subsequently implemented by the Securities and Exchange Commission (“SEC”) and the NASDAQ National Market have imposed additional reporting and corporate governance practices on public companies.

In addition, if we do not adequately continue to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in the future, we may not be able to accurately report our financial results or prevent error or fraud, which may result in sanctions or investigation by regulatory authorities, such as the SEC. Any such action could harm our business, financial results or investors’ confidence in our company, and could cause our stock price to fall.

If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures. Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. In addition, if we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the independent accountant certifications required by such act, which may preclude us from keeping our filings with the SEC current and may adversely affect any market for, and the liquidity of, our common stock.

Public company compliance may make it more difficult for us to attract and retain officers and directors.

The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

The nature of our businesses exposes us to the risk of litigation and liability under environmental, health and safety and product liability laws.

Certain aspects of our business involve risks of liability. In general, litigation in our industry, including class actions that seek substantial damages, arises with increasing frequency. Claims may be asserted under environmental, labor, health and safety or product liability laws. Litigation is invariably expensive, regardless of the merit of the plaintiffs’ claims.  Given the general risks, as stated, there is a chance that the Company could be named as a defendant in the future, and there can be no assurance that regardless of the merit of such claims, we will not be required to make substantial settlement payments in the future.
 
 
14

 
 
If the Company decides to operate internationally, there are risks which could adversely affect operating results.

Currently, we have no projects, projections or foreign interest involving international operations.  However, the Company may in the future, given the opportunity, decide to pursue projects, business, or otherwise conduct operations internationally.  Doing business in foreign countries does subject the Company to additional risks, any of which may adversely impact future operating results, including:

-
International, political, economic and legal conditions;
 
-
Our ability to comply with foreign regulations and laws affecting operations and projects;
 
-
Difficulties in attracting and retaining staff to operate internationally;
 
-
Language and cultural barriers;
 
-
Seasonal reductions in business activities and operations at project locations;
 
-
Integration of foreign operations;
 
-
Potentially adverse tax consequences; and
 
-
Potential foreign currency fluctuations.
 
ITEM 3.  
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
As the Company is a “smaller reporting company,” this item is inapplicable.
 
ITEM 4.  
CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the year ending September 30, 2011 covered by this Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of its management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.
 
 
15

 
 
Management is still in the process of evaluating its internal controls over financial reporting, based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this ongoing evaluation, management has concluded that the Company’s internal control over financial reporting were not effective as of September 30, 2011 under the criteria set forth in the Internal Control—Integrated Framework.  The determination was made partially due to the small size of the company and a lack of segregation of duties.

Changes in Internal Control over Financial Reporting

Except as set forth above, there were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Limitations on the Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.  Further, the design of the control system must reflect that there are resource constraints and that the benefits 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 the 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 simple error or mistake.  Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls.  The design of any system of controls is based in part on 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.  Projections of any evaluation of controls effectiveness to future periods are subject to risks.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II - OTHER INFORMATION

ITEM 1.  
LEGAL PROCEEDINGS
 
None.

ITEM 2.  
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
On August 8, 2011, the Company granted a cumulative total of 42,000,000 shares of restricted common stock to 24 key employees and executives.  The grant of the restricted shares are exempt from registration as not constituting sales for value within the meaning of Section 2(a)(3) of the Securities Act.

On September 20, 2011 following an amendment to Registrant’s Certificate of Incorporation, the Registrant issued five (5) shares of Class A Preferred Stock to four officers of the Registrant and one existing shareholder of the Registrant in consideration of service performed for the Registrant. The shares of Class A Preferred Stock so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

Inclusive of those amounts set forth as subsequent events in the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2011, during the quarter ended September 30, 2011, the Company sold 4,922,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.10 per share for a total consideration of $492,200.  During the quarter ended September 30, 2011, the Company sold 387,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.50 per share for a total consideration of $193,500.  During the quarter ended September 30, 2011, the Company also granted 2,500 shares of restricted common stock to an existing investor.
 
 
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As set forth as a subsequent event in the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2011, on August 10, 2011, the Company issued 300,000 shares of restricted common stock pursuant to a consulting agreement. The Restricted Shares so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

During the quarter ended September 30, 2011, the Company issued 1,500,000 shares of restricted common stock to A.C. Green, pursuant to a written director services agreement.  The Restricted Shares so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

During the quarter ended September 30, 2011, the Company issued 750,000 shares of restricted common stock to Don Driftmier pursuant to a written director services agreement.  The Restricted Shares so issued were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

Subsequent to the quarter ended September 30, 2011, and through October 31, 2011, the Company sold 2,970,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.20 per share for a total consideration of $594,000.  Subsequent to the quarter ended September 30, 2011, and through October 31, 2011, the Company sold 10,000 shares of restricted common stock through a private placement, pursuant to the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, at a valuation of $0.50 per share for a total consideration of $5,000.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
 
None.

ITEM 4.  
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
Pursuant to stockholder and director consent granted in June 2011, the Registrant filed an amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware on September 20, 2011, designating a class of preferred stock as Class A Convertible Preferred Stock, consisting of five shares, the rights and obligations of which were previously set forth in the Registrant’s Current Report on Form 8-K filed on June 9, 2011.

Pursuant to stockholder and director consent granted in September 20, 2011, the Registrant filed a Certificate of Amendment amending the Certificate of Incorporation amending the authorized capital stock of Registrant to include 10,000,005 shares of authorized preferred stock and authorizing the issuance of “blank check” preferred stock.

The foregoing actions by stockholder consent were taken pursuant to Section 228(a) of the Delaware General Corporation Law and Section 9 of Registrant’s Bylaws, which allow the stockholders constituting a majority of the outstanding shares entitled to vote at a meeting of the stockholders to take any action, in lieu of a meeting, without prior notice and without a vote, by written consent. Each written consent of stockholders was executed by stockholders holding shares representing a majority of the outstanding shares entitled to vote on such matter.
 
ITEM 5.  
OTHER INFORMATION

None.
 
 
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ITEM 6.  
EXHIBITS

Number
Description
31.1
Certification of Chief Executive Officer of the Company as required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer of the Company as required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
32.2
Certification of Chief Financial Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

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


         
VERDANT AUTOMOTIVE CORPORATION
   
  
     
Date: November 10, 2011
By:  
/s/ Daniel Elliott
   
Daniel Elliott
   
Chief Executive Officer
     
Date: November 10, 2011
By:  
/s/ Dennis Hogan
   
Dennis Hogan
   
Chief Financial Officer


 
 
 
 
18