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EX-32 - MOMENTUM BIOFUELS, INC.ex32.txt
EX-31 - MOMENTUM BIOFUELS, INC.ex31.txt



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

                                    FORM 10-Q
(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the quarterly period ended: September 30, 2011

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

    For the transition period from _____________________ to ________________

                        Commission file number 000-50619

                             MOMENTUM BIOFUELS, INC.
                             -----------------------
                       (Name of registrant in its Charter)


            COLORADO                                 84-1069035
            --------                                 ----------
   (STATE OR OTHER JURISDICTION                    (I.R.S. EMPLOYER
 OF INCORPORATION OR ORGANIZATION)              IDENTIFICATION NUMBER)

                       7450 West 52nd Avenue, Suite M-115
                                Arvada, CO 80002
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (303) 421-1656
                    ( TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter  period that the registrant was required
to file such reports),  and (2) has been subject to the 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 (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files). Yes [X ] No [ ]

Indicate by check mark whether the  registrant is a large  accelerated  file, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated  filer [ ] (Do
not check if a smaller reporting company) Smaller reporting company [X]




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X] As of November 18, 2011, there were 93,224,444 shares of the registrant's sole class of common shares outstanding.
PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page ---- Consolidated Balance Sheets -September 30, 2011 (Unaudited) and December 31, 2010 (Audited) F-1 Consolidated Statements of Operations (Unaudited) - Three and Nine months ended September 30, 2011 and 2010 and From January 1, 2010 (Inception) through September 30, 2011 F-2 Consolidated Statements of Changes in Shareholders' Equity - From January 1, 2010 (Inception) through September 30, 2011 (Unaudited) F-3-4 Consolidated Statements of Cash Flows (Unaudited) - Nine months ended September 30, 2011 and 2010 and From January 1, 2010 (Inception) through September 30, 2011 F-5 Notes to the Unaudited Consolidated Financial Statements F-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1 Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not Applicable Item 4. Controls and Procedures 4 PART II - OTHER INFORMATION Item 1. Legal Proceedings - Not Applicable 5 Item 1A. Risk Factors - Not Applicable Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 5 - Not Applicable Item 3. Defaults Upon Senior Securities - Not Applicable 5 Item 4. (Removed and Reserved) 5 Item 5. Other Information - Not Applicable 6 Item 6. Exhibits 6 SIGNATURES 7
PART I -- FINANCIAL INFORMATION Item 1. Financial Statements.
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Balance Sheets September 30, 2011 December 31, 2010 --------------------- ------------------- (Unaudited) (Audited) LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 1,922,374 $ 1,856,576 Accrued expenses - 17,500 Advances - related parties 234,361 204,336 --------------------- ------------------- Total current liabilities 2,156,735 2,078,412 --------------------- ------------------- Stockholders' deficit Common stock, $0.01 par value; 500,000,000 shares authorized, 93,224,444 and 93,224,444 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively 932,244 932,244 Additional paid-in capital 16,378,498 16,378,498 Accumulated deficit (19,135,592) (19,135,592) Deficit accumulated during development stage (331,885) (253,562) --------------------- ------------------- Total stockholders' deficit (2,156,735) (2,078,412) --------------------- ------------------- Total liabilities and stockholder's deficit $ - $ - ===================== =================== See the accompanying notes to the consolidated financial statements. F-1
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Statements of Operations (Unaudited) For the three months ended September For the nine months ended September From Inception 30, 30, (August 21, 2009) ------------------------------------- ----------------------------------- to 2011 2010 2011 2010 September 30,2011 ------------------- --------------- ---------------- ---------------- ----------------- Operating expenses General and administrative 14,690 34,606 78,323 150,268 258,674 ------------------ --------------- ---------------- ---------------- ------------- Total operating expenses 14,690 34,606 78,323 150,268 258,674 ------------------ --------------- ---------------- ---------------- -------------- Interest and penalties - - - - 73,211 ----------------- --------------- ---------------- ---------------- -------------- Total other expense - - - - 73,211 ----------------- --------------- ---------------- ---------------- -------------- Net loss $(14,690) $ (34,606) $ (78,323) $ (150,268) $ (331,885) ================= =============== ================ ================ ============== Net loss per common share - basic $ 0.00 $ 0.00 $ 0.00 $ 0.00 ================= =============== ================ ================ Weighted average number of common shares outstanding - basic 93,224,444 93,224,444 93,224,444 93,224,444 ================= =============== ================ ================ See the accompanying notes to the consolidated financial statements. F-2
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Statement of Stockholders' Deficit (Unaudited) Deficit Accumulated During Common Stock Additional Paid-In Accumulated Deficit Development Shares Amount In Capital Stage ----------------- ---------------- ----------------- ------------------ ---------------- Balance - January 1, 2011 93,224,444 $ 932,244 $ 16,378,498 $ (19,135,592) $ (253,562) Net loss - - - - (78,323) ----------------- ---------------- ----------------- ------------------ ---------------- Balance - September 30, 2011 93,224,444 $ 932,244 $ 16,378,498 $ (19,135,592) $ (331,885) ================= ================ ================= ================== ================ See the accompanying notes to the consolidated financial statements. F-3
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Statement of Stockholders' Deficit (Unaudited) (continued) Total ----------------- Balance - January 1, 2011 $ (2,078,412) Net loss (78,323) ----------------- Balance - September 30, 2011 $ (2,156,735) ================= F-4
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited) For the nine months ended September From Inception (August 21, 30, 2009) to September 2011 2010 30, 2011 ----------------- ---------------- ----------------------- Cash flows used in operating activities Net loss $ (78,323) $ (150,268) $ (331,885) Changes in operating assets and liabilities Accounts payable 65,798 (70,090) 108,425 Accrued expenses (17,500) - - ----------------- ---------------- ----------------------- Net cash used in operating activities (30,025) (220,358) (223,460) Cash flows from financing activities Advances from related party 30,025 220,358 218,894 ----------------- ---------------- ----------------------- Net cash provided by financing activities 30,025 220,358 218,894 ----------------- ---------------- ----------------------- Net change in cash - - (4,566) Cash at the beginning of the period - - 4,566 ----------------- ---------------- ----------------------- Cash at the end of the period $ - $ - $ - ================= ================ ======================= See the accompanying notes to the consolidated financial statements. F-5
Momentum Biofuels, Inc. (A Development Stage Company) Notes to Consolidated Financial Statements (Unaudited) Note 1 - Organization and Basis of Operation The accompanying unaudited financial statements include the accounts of Momentum Biofuels, Inc. (the Company), a Colorado corporation and its wholly-owned subsidiary, Momentum Biofuels, Inc., a Texas corporation ("Momentum -Texas"). On August 21, 2009, Momentum Biofuels, Inc. ("Momentum-Texas"), a Texas corporation, entered into an Agreement with Hunt Global Resources, Inc. ("Hunt"), under the terms of which Hunt agreed to assume the obligations of Momentum-Texas and Momentum Biofuels, Inc., a Colorado corporation ("Momentum-Colorado") through the assignment of a certain Senior Secured Promissory Note in the amount of $600,000 issued by Momentum-Colorado to a group of investors arranged by Bathgate Capital Partners, LLC, of Denver, Colorado. Hunt further agreed to assume Momentum-Texas obligations under a sub-lease agreement between Momentum-Texas and Brand Infrastructure and Services, Inc., including all past due rent, assessments, and other charges related to the property covered by the sub-lease agreement, all in exchange for a conveyance of all of the rights, title, and interest of Momentum-Texas, in and to all of its' physical assets, including the biodiesel plant located in Pasadena, Texas and all intellectual property, processes, techniques and formulas for creating Biofuels and related products. Further, Momentum-Texas entered into a License Agreement with Hunt, which provided that in exchange for a grant of a license to use, improve, sublicense, and commercialize the intellectual property described in the Agreement, in exchange for an agreement by Hunt to pay to Momentum-Texas, a royalty of 3% of the gross and collected revenue received by Hunt from the sale of bio-diesel and related products and from revenues received by Hunt from its proposed Commercial Sand business. Momentum-Texas assigned its rights to receive the royalty described in the License Agreement to its parent, Momentum-Colorado in exchange for common shares of Momentum-Colorado equal to 39% of the issued and outstanding stock at such date, or 40,000,000 shares, whichever sum is greater. Such shares were to be issued by Momentum-Colorado as fully paid, non-assessable and subject to a non-dilution agreement in favor of Hunt. On October 9, 2009, the agreements between Hunt, Momentum-Texas and Momentum-Colorado were consummated upon the execution of additional agreements and the issuance of the shares of common stock by Momentum-Colorado to Hunt on December 31, 2009. Note 2 - Summary of Significant Accounting Policies Basis of Presentation Interim Presentation The accompanying unaudited interim financial statements of Momentum Biofuels, Inc. the Company), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (SEC), and should be read in conjunction with the audited financial statements and notes thereto contained in Momentum's Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for the year ended December 31, 2010, as reported in the Form 10-K have been omitted. F-6
Note 2 - Summary of Significant Accounting Policies (Continued) Development Stage Company The Company has returned to a development stage company due to the change of business plan and strategies on August 21, 2009. Accordingly, the Company's activities have been accounted for as those of a "Development Stage Company." Therefore, the Company's financial statements of operations, stockholders' deficit, and cash flows disclose activity since the date of the Company's entry into the development stage. The Company, after the disposal of its prior operating activities purchased by Hunt Group, has changed its operational focus to being an intellectual property company owning specific royalty agreements as its sole source of revenue. It is the intent of management to pursue additional royalty and licensing agreements in the furtherance of its business objectives to maximize shareholder value and profitability. Management is also considering other opportunities in other non-related businesses. No additional agreements have been entered into at the time of this filing. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Momentum and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash and cash equivalents For purposes of the statements of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Our significant estimates primarily relate to the assessment of warrants and debt and equity transactions and the estimated lives and methods used in determining depreciation of fixed assets. Actual results could differ from those estimates. Share-Based Compensation Momentum measures all share-based payments, including grants of employee and non employee stock options, using a fair-value based method under ASC 718 and 505. The cost of services received in exchange for awards of equity instruments is recognized in the statement of operations based on the grant date fair value of those awards amortized over the requisite service period. Momentum utilizes a standard option pricing model, the Black-Scholes model, to measure the fair value of stock options granted. Income Taxes Momentum and its subsidiary file a consolidated federal tax return. Momentum uses the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities are recognized for temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, and are measured using the tax rates expected to be in effect when the differences reverse. Deferred tax assets are also recognized for operating loss and tax credit carry forwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is used to reduce deferred tax assets when uncertainty exists regarding their realization. F-7
Note 2 - Summary of Significant Accounting Policies (Continued) Net Loss per Common Share Basic net loss per common share is calculated by dividing the net loss applicable to common shares by the weighted average number of common and common equivalent shares outstanding during the period. For the nine months ended September 30, 2011 and 2010, there were no potential common equivalent shares used in the calculation of weighted average common shares outstanding as the effect would be anti-dilutive because of the net loss. Description 2011 2010 ------------------------------------------------------------------------- Weighted average shares used to compute basic and diluted net loss per common share: 93,244,444 93,244,444 Securities convertible into shares of common stock, not used Stock warrants for common stock 1,032,000 1,032,000 Options awarded to executives and consultants 9,250,000 9,250,000 ------------- ------------- Total securities convertible into shares of common stock 10,402,000 10,402,000 ============= ============= Concentration of Credit Risk At various times during the year, Momentum may have bank deposits in excess of the FDIC insurance limits. Momentum has not experienced any losses from maintaining cash accounts in excess of the federally insured limit. Management believes that it is not exposed to any significant credit risk on cash accounts as the Company does not currently have bank deposits. Recent Accounting Pronouncements The Company has evaluated recent accounting pronouncements through ASU 2011-05 and believes that none of them will have a material effect on the Company's financial statements. Note 3 - Going Concern Momentum has incurred significant losses from operations since inception and has limited financial resources. These factors raise substantial doubt about Momentum's ability to continue as a going concern. Momentum's financial statements for the three and six month ended September 30, 2011 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 currently has an accumulated deficit of $19,135,592 and an accumulated deficit during development stage of $331,885 at September 30, 2011. Momentum's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and, ultimately, achieve profitable operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. F-8
Note 4 - Equity Transactions During the nine months ended September 30, 2011, Momentum did not issue any shares of its common stock. Note 5 - Related Party Transactions During the nine months ended September 30, 2011 and 2010, Hunt Global Resources, Inc., the Company's majority shareholder, advanced funds to the Company totaling $30,025 and $220,358, respectively to support its legal and accounting functions. These funds are unsecured, non interest bearing and due on demand. The Company has Advances-related party balances of $234,361 and $204,336 as of September 30, 2011 and December 31, 2010, respectively. Note 6 - Litigation Momentum-Texas is a defendant in the following legal proceedings: Jason Gehrig v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This lawsuit involves a claim for breach of an employment contract. Depositions were completed over a year ago and there has been no activity in this litigation since. Harris County Tax Authority v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for property taxes in the amount of approximately $88,600. The Company has been negotiating a payment plan and expects to be able to pay the taxes due from royalties and licensing fees. At the time of this filing, the Company has not received any royalties and/or licensing fees and therefore is not able to make any such payments. Stuart Cater and James O'Neil v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for payment under the terms of employment settlement agreements. The issues were the subject of arbitration in mid-2009 which resulted in an award of $52,500 for each of the claimants and attorney's fees of $30,000. Arbitration award was reduced to a judgment and a Receiver was appointed to collect the judgment. Quality Carriers, Inc. v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for rental fees for tank trailers in the amount of $19,000 and seeks legal fees in the amount of $6,335. LaPorte Independent School District v. Momentum Biofuels, Inc. - This suit involves a claim for property taxes on behalf of the school district and the Clear Lake City Water Authority in the amount of approximately $108,500. The litigation is pending in the District Court of Harris County, Texas. American National Insurance Company v. Momentum Biofuels, Inc. in connection with a breach of an office lease agreement. A default judgment was entered in this case in the amount of $261,294 together with attorney's fees of $6,627. F-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS CAUTIONARY This Item 2 and the report on Form 10-Q for the period ended June 30, 2011 may contain "forward-looking statements" regarding Momentum Biofuels, Inc. (the "Company" or "Momentum"). In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, and competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. Changes in the circumstances upon which we base our predictions and/or forward-looking statements could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: (1) our limited operating history; (2) our ability to pay down existing debt; (3) the risks inherent in the mutual performance of such supplier and distributor contracts (including the Company's production performance (4) the Company's ability to secure and retain management capable of managing growth; (5) the Company's ability to raise necessary financing to execute the Company's business plan; (6) potential litigation with our shareholders, creditors and/or former or current investors; (7) the Company's ability to comply with all applicable federal, state and local government and international rules and regulations; and (8) other factors over which we have little or no control. The independent registered public accounting firm's report on the Company's financial statements as of December 31, 2010, includes a "going concern" explanatory paragraph that describes substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 3 to the unaudited quarterly financial statements. OPERATIONS The Company, after the disposal of its prior operating activities purchased by Hunt Global Resources, Inc., has changed its operational focus to being an intellectual property company owning specific royalty agreements as its sole source of revenue. It is the intent of management to pursue additional royalty and licensing agreements in the furtherance of its business objectives to maximize shareholder value and profitability. Management is also considering other opportunities in other non-related businesses. No additional agreements have been entered into at the time of this filing. We intend to seek, investigate, and, if such investigation warrants, acquire royalty and license agreements. We will not restrict our search to any specific business, industry or geographical location, and we may participate in business ventures of virtually any nature. This discussion of our proposed business is purposefully general and is not meant to be restrictive of our unlimited discretion to search for and enter into potential business opportunities. We anticipate that we may be able to participate in only one potential business venture because of our lack of financial resources. 1
We intend to participate in a business opportunity only after the negotiation and execution of appropriate written business agreements. Although the terms of such agreements cannot be predicted, generally we anticipate that such agreements will (i) require specific representations and warranties by all of the parties; (ii) specify certain events of default; (iii) detail the terms of closing and the conditions which must be satisfied by each of the parties prior to and after such closing; (iv) outline the manner of bearing costs, including costs associated with the Company's attorneys and accountants; (v) set forth remedies on defaults; and (vi) include miscellaneous other terms. The Company is dependent on raising additional equity and/or debt to fund any negotiated settlements with its outstanding creditors and meet the Company's ongoing operating expenses. There is no assurance that Momentum will be able to raise the necessary equity and/or debt that it will need to be able to negotiate acceptable settlements with its outstanding creditors or fund its ongoing operating expenses. Momentum cannot make any assurances that it will be able to raise funds through such activities. There can be no assurance that the Company will be able to carry out its business plan. Historically, our cash needs have been satisfied primarily through proceeds from private placements of our equity securities and debt instruments, but we cannot guarantee that such financing activities will be sufficient to fund our current and future projects and our ability to meet our cash and working capital needs. No commitments to provide additional funds have been made by management or other stockholders. RESULTS OF OPERATIONS Results of Operations for Three Months Ended September 30, 2011 Compared to the Three months Ended September 30, 2010. During the three months ended September 30, 2011 and 2010, the Company did not recognize any revenues from its operational activities. During the three months ended September 30, 2011, the Company incurred $14,690 in expenses compared to expenses of $34,606 during the three months ended September 30, 2010. The decrease in total expenses of $19,916 is a result of a decrease in the Company's administrative activities over the prior period. During the three months ended September 30, 2011, the Company recognized a net loss of $14,690 compared to a net loss of $34,606 during the three months ended September 30, 2010. The $19,916 decrease in net loss is a result of the decrease in operational expenses as a result of the Company's decrease in administrative activities. Management of the Company does not expect these expenses to continue to decrease as it explores business plan opportunities. Results of Operations For Nine months Ended September 30, 2011 Compared To The Nine months Ended September 30, 2010. During the nine months ended September 30, 2011 and 2010, the Company did not recognize any revenues from its operational activities. During the nine months ended September 30, 2011, the Company incurred $78,323 in expenses compared to expenses of $150,268 during the nine months ended September 30, 2010. The decrease in total expenses of $71,945 is a result of a decrease in the Company's legal expenses over the prior period. During the nine months ended September 30, 2011, the Company recognized a net loss of $78,323 compared to a net loss of $150,268 during the nine months ended September 30, 2010. The $71,945 decrease in net loss is a result of the decrease in operational expenses as a result of the Company's decrease in legal expenses. Management of the Company does not expect these expenses to continue to decrease as it explores business plan opportunities. 2
LIQUIDITY AND CAPITAL RESOURCES At September 30, 2011, the Company had no assets with which to conduct its operations. At September 30, 2011, the Company had total liabilities of $2,156,735, consisting of accounts payable of $1,922,374 and related party advances of $234,361. There can be no assurance that the Company will be able to carry out its business plan. Historically, our cash needs have been satisfied primarily through proceeds from private placements of our equity securities and debt instruments, but we cannot guarantee that such financing activities will be sufficient to fund our current and future projects and our ability to meet our cash and working capital needs. No commitments to provide additional funds have been made by management or other stockholders. Net cash used in operating activities during the nine months ended September 30, 2011 was $30,025. During the nine months ended September 30, 2010, the Company used net cash of $220,358 in operating activities. During the nine months ended September 30, 2011 and 2010, net losses of $78,323 and $150,268, were not adjusted for any non-cash items. During the nine months ended September 30, 2011 and 2010, the Company did not receive or use any funds in its investing activities. Net cash provided by financing activities during the nine months ended September 30, 2011 and 2010, was $30,025 and $220,358, respectively from advances from its majority shareholder. This was made up of advances from its majority shareholder Hunt Global Resources, Inc. At September 30, 2011, the Company owed Hunt Global Resources, Inc. $234,361, due on demand. There can be no assurance that Hunt Global Resources, Inc. will continue to provide us with further funding on an ongoing basis. Management will need to seek and obtain additional funding, via loans or private placements of stock, for future operations and to provide required working capital. Management cannot make any assurances it will be able to complete such a transaction. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements included in this Quarterly Report on Form 10-Q requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The more significant accounting estimates inherent in the preparation of the Company's financial statements include estimates as to the valuation of equity related instruments issued, and valuation allowance for deferred income tax assets. Our accounting policies are described in the notes to financial statements included in this Interim Report on Form 10-Q. The more critical accounting policies are as described below. 3
The Company believes that the following are some of the more significant accounting policies and methods used by the Company: o share-based compensation SHARE-BASED COMPENSATION The Company measures all share-based payments, including grants of employee and non-employee stock options, using a fair-value based method under ASC 718 and 505. The cost of services received in exchange for awards of equity instruments is recognized in the statement of operations based on the grant date fair value of those awards amortized over the requisite service period. The Company utilizes a standard option pricing model, the Black-Scholes model, to measure the fair value of stock options granted. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company has reviewed recently issued accounting pronouncements and the Company does not expect that the adoption of recently issued accounting pronouncements will have a material impact on its financial position, results of operations or cash flows. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - NOT APPLICABLE ITEM 4 CONTROLS AND PROCEDURES Disclosures Controls and Procedures We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures are not effective in timely alerting them to material information required to be included in our periodic SEC filings, as a result of material weaknesses in our internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 4
PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Momentum-Texas is a defendant in the following legal proceedings: Jason Gehrig v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This lawsuit involves a claim for breach of an employment contract. Depositions were completed over a year ago and there has been no activity in this litigation since. Harris County Tax Authority v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for property taxes in the amount of approximately $88,600. The Company has been negotiating a payment plan and expects to be able to pay the taxes due from royalties and licensing fees. At the time of this filing, the Company has not received any royalties and/or licensing fees and therefore is not able to make any such payments. Stuart Cater and James O'Neil v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for payment under the terms of employment settlement agreements. The issues were the subject of arbitration in mid-2009 which resulted in an award of $52,500 for each of the claimants and attorney's fees of $30,000. Arbitration award was reduced to a judgment and a Receiver was appointed to collect the judgment. Quality Carriers, Inc. v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for rental fees for tank trailers in the amount of $19,000 and seeks legal fees in the amount of $6,335. LaPorte Independent School District v. Momentum Biofuels, Inc. - This suit involves a claim for property taxes on behalf of the school district and the Clear Lake City Water Authority in the amount of approximately $108,500. The litigation is pending in the District Court of Harris County, Texas. American National Insurance Company v. Momentum Biofuels, Inc. in connection with a breach of an office lease agreement. A default judgment was entered in this case in the amount of $261,294.30 together with attorney's fees of $6,627.22. ITEM 1A. RISK FACTORS. Not applicable to smaller reporting companies. Liabilities for the above judgments are included in accounts payable within the financial statements. ITEM 1A. RISK FACTORS. Not applicable to smaller reporting companies. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. REMOVED AND RESERVED. 5
ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. 31.1 Certification by the Chief Executive and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification by the Chief Executive and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 101.INS XBRL Instance Document (1) 101.SCH XBRL Taxonomy Extension Schema Document (1) 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1) 101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1) 101.LAB XBRL Taxonomy Extension Label Linkbase Document (1) 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1) (1) Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. *Filed herewith.
SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MOMENTUM BIOFUELS, INC. (The Registrant) Date: November 21, 2011 By: /s/George Sharp --------------- George Sharp, Chief Executive Officer, and Principal Accounting Officer