Attached files
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| EXCEL - IDEA: XBRL DOCUMENT - Sovereign Lithium, Inc. | Financial_Report.xls |
| EX-31.1 - CERTIFICATION - Sovereign Lithium, Inc. | srbl_ex311.htm |
| EX-32.1 - CERTIFICATION - Sovereign Lithium, Inc. | srbl_ex321.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2011
o REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________________ to ______________
Commission file number: 333-142516
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Great American Energy, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware
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333-142516
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20-8602410
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(State or other jurisdiction of
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(Commission
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(IRS Employer
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incorporation or organization)
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File Number)
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Identification No.)
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999 18th Street, Suite 3000
Denver, Colorado 80202
(Address of Principal Executive Offices)
(303) 952-0455
(Issuer Telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller Reporting Company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o Noþ
As of November 16, 2011, there were 88,000,000 shares issued and outstanding of the registrant’s common stock.
INDEX
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PART I — FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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F-1
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Item 2.
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Management’s Discussion and Analysis or Plan of Operation.
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3 | |||
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Item 3.
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Quantitative and Qualitative Disclosure about Market Risk
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6 | |||
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Item 4.
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Controls and Procedures.
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6 | |||
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PART II — OTHER INFORMATION
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Item 1.
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Legal Proceedings.
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7 | |||
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Item 1A.
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Risk Factors
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7 | |||
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds.
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7 | |||
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Item 3.
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Defaults Upon Senior Securities.
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7 | |||
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Item 4.
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(Removed and Reserved).
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7 | |||
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Item 5.
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Other Information.
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7 | |||
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Item 6.
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Exhibits.
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7 | |||
2
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Great American Energy, Inc. (formerly Southern Bella, Inc.)
| Unaudited Balance Sheets as of September 30, 2011 and December 31, 2010 | F-2 | |||
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Unaudited Statements of Operations for the three and nine months ended September 30, 2011 and 2010
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F-3 | |||
| Unaudited Statements of Cash Flows for the nine months ended September 30, 2011 and 2010 | F-4 | |||
| Unaudited Notes to the Financial Statements | F-5 – F-9 |
F-1
GREAT AMERICAN ENERGY, INC.
(formerly Southern Bella, Inc.)
BALANCE SHEETS
SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
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ASSETS
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Unaudited
September 30, |
December 31,
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2011
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2010
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CURRENT ASSETS
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Cash
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$ | 1,852 | $ | 506 | ||||
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Total current assets
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1,852 | 506 | ||||||
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TOTAL ASSETS
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$ | 1,852 | $ | 506 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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CURRENT LIABILITIES
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Accounts payable
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$ | - | $ | 12,211 | ||||
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Credit card payable
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- | 5,414 | ||||||
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Deferred revenue
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13,225 | 17,500 | ||||||
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Accrued liabilities
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12,798 | 12,798 | ||||||
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Total current liabilities
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26,023 | 47,923 | ||||||
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STOCKHOLDERS' EQUITY (DEFICIT)
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Preferred stock, $0.000001 par value, 20,000,000 authorized,
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none issued and outstanding
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Common stock, $0.000001 par value, 1,000,000,000 shares authorized, 95,566,667
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issued and 88,000,000 and 95,566,667 outstanding at September 30, 2011 and
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December 31, 2010, respectively
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96 | 96 | ||||||
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Treasury Stock, 7,566,667 and 0 at September 30, 2011 and December 31, 2010, respectively
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- | - | ||||||
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Additional paid in capital
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671,794 | 590,921 | ||||||
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Accumulated earnings (deficit)
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(696,061 | ) | (638,434 | ) | ||||
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Total stockholders' equity (deficit)
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(24,171 | ) | (47,417 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$ | 1,852 | $ | 506 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
GREAT AMERICAN ENERGY, INC.
(formerly Southern Bella, Inc.)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
(UNAUDITED)
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NINE MONTHS
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THREE MONTHS
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ENDED
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ENDED
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SEPTEMBER 30, 2011
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SEPTEMBER 30, 2010
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SEPTEMBER 30, 2011
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SEPTEMBER 30, 2010
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REVENUE
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$ | 162,221 | $ | 235,180 | $ | 40,072 | $ | 147,529 | ||||||||
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COST OF REVENUES
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89,263 | 231,033 | 25,852 | 114,242 | ||||||||||||
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OPERATING EXPENSES
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Payroll expenses
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24,522 | 45,764 | 7,500 | 14,670 | ||||||||||||
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Officers compensation
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996 | 3,955 | - | 2,433 | ||||||||||||
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General and administrative
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105,067 | 36,624 | 58,910 | 17,332 | ||||||||||||
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Total operating expenses
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130,585 | 86,343 | 66,410 | 34,435 | ||||||||||||
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NET INCOME (LOSS) FROM OPERATIONS
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$ | (57,627 | ) | $ | (82,196 | ) | $ | (52,190 | ) | $ | (1,148 | ) | ||||
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BASIC AND DILUTED EARNINGS PER SHARE
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
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92,989,011 | 55,566,667 | 88,000,000 | 55,566,667 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
GREAT AMERICAN ENERGY, INC.
(formerly Southern Bella, Inc.)
STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
(UNAUDITED)
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NINE MONTHS ENDED
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SEPTEMBER 30, 2011
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SEPTEMBER 30, 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (57,627 | ) | $ | (82,196 | ) | ||
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Adjustment to reconcile net loss to net cash used in operating activities:
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Donated rent
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5,400 | - | ||||||
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Contributed capital - expenses paid
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44,923 | - | ||||||
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Changes in operating assets and liabilities:
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Increase or (decrease) in accounts payable
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(12,211 | ) | (17 | ) | ||||
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Increase or (decrease) in credit card payable
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(5,414 | ) | - | |||||
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Increase or (decrease) in deferred revenue
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(4,275 | ) | (39,550 | ) | ||||
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Net cash used in operating activities
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(29,204 | ) | (121,763 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Capital contribution
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30,550 | 129,101 | ||||||
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Net cash provided by financing activities
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30,550 | 129,101 | ||||||
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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1,346 | 7,338 | ||||||
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CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
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506 | 3,912 | ||||||
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CASH AND CASH EQUIVALENTS - END OF PERIOD
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$ | 1,852 | $ | 11,250 | ||||
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
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Interest paid
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$ | - | $ | - | ||||
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Income taxes paid
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$ | - | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
GREAT AMERICAN ENERGY, INC.
(formerly Southern Bella, Inc.)
BALANCE SHEETS
SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
Great American Energy, Inc.
Notes to the Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Great American Energy, Inc. (the “Registrant,” the “Company,” or “Great American Energy”) was incorporated under the name Southern Bella, Inc. in Delaware on February 22, 2007.
Uptone Pictures, Inc. (“Uptone”) was incorporated in North Carolina on March 27, 2006. Uptone is an entertainment company, which specializes in the creation, production and distribution of content.
On December 17, 2010 (the “Closing”), the Registrant closed a reverse take-over transaction by which it acquired Uptone. Pursuant to a Share Exchange Agreement (the “Exchange Agreement”) between the Registrant and Uptone, Viola J. Heitz, shareholder of the Registrant, and Wendi Davis, sole shareholder of Uptone, the Registrant acquired 100% of Uptone’s issued and outstanding common stock.
On May 13, 2011, the Registrant entered into a Subsidiary Put Option Agreement (the “Put Option Agreement”) with Wendi and Michael Davis (the “Purchasers”). As of May 13, 2011, the Purchasers were members of the Registrant’s Board of Directors (the “Board”). On such date, the Purchasers were the beneficial holders of 8,166,667 shares of the Registrant’s common stock, par value $0.000001 per share, or 94% of the Registrant’s issued and outstanding common stock (the “Davis Shares”). Subsequently, the Davis Shares were sold to Geoff Evett pursuant to the terms of a stock purchase agreement further described below. Under the terms of the Put Option Agreement, the Registrant acquired a put option (the “Put Option”) obligating the Purchasers to purchase the Registrant’s holdings of 100 shares of common stock of Uptone, such shares constituting all of the issued and outstanding shares of Uptone (the “Uptone Shares”) for a total price of $100. The Registrant is under no obligation to exercise the Put Option and the decision to exercise the Put Option is in the sole discretion of the Registrant. Under the terms of the Put Option, the Registrant is required to obtain Board and stockholder approval prior exercising the Put Option. The Put Option will expire on May 13, 2014 (the “Option Termination Date”), unless it is terminated earlier under the terms of the Put Option Agreement.
Pursuant to the terms of the Put Option Agreement, the Purchasers will indemnify the Registrant for any costs, expenses, liabilities or claims incurred by Uptone before, by and through and after the option period (the period from May 13, 2011 to the Option Termination Date or earlier termination as provided in the Put Option Agreement).
The Registrant entered into the Put Option Agreement in connection with a stock purchase agreement that the Purchasers separately entered into with Geoff Evett on May 13, 2011 (the “Stock Purchase Agreement”), which closed on May 16, 2011 (the “SPA Closing”). On the SPA Closing, the Purchasers sold 100% of the Davis Shares to Mr. Evett for an aggregate cash payment of $220,000. On the SPA Closing, the Purchasers, who were previously the Registrant’s officers, resigned from such positions and Mr. Evett was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary. On the Closing, the Purchasers submitted resignation letters from their positions as directors which were effective 10 days after the filing and mailing to the Registrant’s stockholders of an Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14f-1 promulgated thereunder. Mr. Evett became the Registrant’s sole director on May 27, 2011.
On June 29, 2011, the Registrant approved the Certificate of Amendment to change its name to Great American Energy, Inc. The name change was effective as of August 26, 2011.
F-5
BASIS OF PRESENTATION
The Company follows accounting principles generally accepted in the United States of America. 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 periods presented have been reflected herein.
REVENUE RECOGNITION
Revenue is recognized when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, goods have been provided, and collectability is reasonably assured. With respect to revenues for the purchase of air time in advance, these criteria are assumed to have been met if a customer orders air time, payment for the time clears, and the entire air time purchased is available to the customer. Other revenue that is billed in advance such as recurring weekly or monthly services are initially deferred and recognized as revenue over the period until the goods are provided. There was deferred revenue of $13,225 and $17,500 for the nine month period ending September 30, 2011 and the year ending December 31, 2010, respectively.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS
These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of September 30, 2011 and December 31, 2010, there were no cash equivalents.
FINANCIAL INSTRUMENTS
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
F-6
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, credit cards payable and deferred revenue. Pursuant to ASC 820 and 825, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
INCOME TAXES
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
BASIC AND DILUTED NET LOSS PER COMMON SHARE
Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the year. The per share amounts include the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share is the same due to the anti dilutive nature of potential common stock equivalents. Great American Energy had no common stock equivalents outstanding at September 30, 2011 and December 31, 2010.
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.
F-7
In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.
In October 2009, FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.
In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations
NOTE 2 – GOING CONCERN
The Company’s financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As of September 30, 2011, the Company has a working capital deficit of $24,171 and has an accumulated deficit of $696,061. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – DEFERRED REVENUE
At September 30, 2011, deferred revenue consists of $13,225 of a $25,000 contract for air time from June 1, 2009 through May 30, 2014. At December 31, 2010, deferred revenue consists of $17,500 of that same contract.
F-8
NOTE 4 – COMMON STOCK
Geoff Evett owns 48,000,000 shares of common stock at .000001 par value. During the first two quarters of 2011, the Company received $30,550 of contributed capital from two related parties.
On June 29, 2011, the Company entered into a contribution agreement with the President, Geoff Evett, where Mr. Evett returned 7,566,667 pre-dividend shares of common stock to the Company as a contribution to the Company’s capital.
On August 29, 2011, the Company declared a 79-for-1 stock dividend payable on August 30, 2011 to shareholders of record on August 29, 2011. This dividend is shown retroactively.
NOTE 5 – RELATED PARTY TRANSACTIONS
During the first three quarters of 2011, the Company received $30,550 of contributed capital from three related parties: $23,050 from 7Worldwide, owned by the former President, Mike Davis, $7,500 from MedPlus, owned by the former Secretary’s father. During the third quarter, the Company received $44,923 of contributed capital from Metlera Capital SL, owned equally by Geoff Evett and his wife.
The Company conducts its operations from facilities located in Wake Forest, North Carolina. This office is provided to the Company by its former President, Mike Davis, for which the company recognizes expenses of $900 per month through July 1, 2012. Rent expense for the nine month period ending September 30, 2011 and for the year of 2010 was $8,100 and $10,800, respectively.
NOTE 6 – SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date the financial statements were available to be issued.
F-9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Overview
Great American Energy, Inc. (“Great American Energy” or the “Registrant”) was incorporated under the name Southern Bella, Inc. in Delaware on February 22, 2007. The Registrant was organized to acquire catering companies throughout the United States. The first catering company acquired by the Registrant was Dupree Catering, Inc. (“Dupree”). Dupree is a Kentucky corporation, formed on October 28, 1991. On March 1, 2007, the Registrant acquired all of the shares of stock of Dupree for $110,000 and Dupree became the wholly-owned subsidiary of the Registrant. The Registrant sold all of the assets of Dupree on July 1, 2008.
On December 17, 2010 the Registrant, closed a reverse take-over transaction by which it acquired 100% of the issued and outstanding common stock of Uptone Pictures, Inc., a North Carolina corporation (“Uptone”) which specializes in the creation, production and distribution of content.
Prior to the reverse take-over of Uptone, the Registrant was a public reporting “shell company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a result of the reverse take-over transaction, Uptone became the Registrant’s wholly-owned subsidiary, and the Registrant acquired the business and operations of Uptone. Except as otherwise indicated by the context, references to “we,” “us,” and “our” hereinafter in this Form 10-Q are to the consolidated business of Uptone, except that references to “our common stock”, “our shares of common stock” or “our capital stock” or similar terms shall refer to the common stock of the Registrant.
We specialize in the creation, production and distribution of media content and have developed a number of entertainment products which include:
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National Television shows
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Docu-dramas
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Music Videos
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Feature Films
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Specialty content for various other electronic platforms
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On April 20th 2010, we entered into a Production Agreement with Moving Box Entertainment LLC, a North Carolina limited liability company for the production of A Box For Rob (the “Movie”).
3
Under the Production Agreement, Moving Box provided cash financing in the amount of $264,200 and Uptone provided in-kind services valued at approximately $32,800. The Movie was completed on April 20, 2011 and since that time, we have focused on securing distribution for the Movie. We have engaged in discussions with several distribution companies, however, we have not secured any contracts, agreements, or commitments for any distribution of the Movie.
Recent Developments
On May 13, 2011, the Registrant entered into a Subsidiary Put Option Agreement (the “Put Option Agreement”) with Wendi and Michael Davis (the “Purchasers”). As of May 13, 2011, the Purchasers were members of the Registrant’s Board of Directors (the “Board”). On such date, the Purchasers were the beneficial holders of 8,166,667 shares of the Registrant’s common stock, par value $0.000001 per share, or 94% of the Registrant’s issued and outstanding common stock (the “Davis Shares”). Subsequently, the Davis Shares were sold to Geoff Evett pursuant to the terms of a stock purchase agreement further described below. Under the terms of the Put Option Agreement, the Registrant acquired a put option (the “Put Option”) obligating the Purchasers to purchase the Registrant’s holdings of 100 shares of common stock of Uptone, such shares constituting all of the issued and outstanding shares of Uptone (the “Uptone Shares”) for a total price of $100. Under the terms of the Put Option, the Registrant is required to obtain Board and stockholder approval prior exercising the Put Option. The Put Option will expire on May 13, 2014 (the “Option Termination Date”), unless it is terminated earlier under the terms of the Put Option Agreement.
Pursuant to the terms of the Put Option Agreement, the Purchasers will indemnify the Registrant for any costs, expenses, liabilities or claims incurred by Uptone before, by and through and after the option period (the period from May 13, 2011 to the Option Termination Date or earlier termination as provided in the Put Option Agreement).
We entered into the Put Option Agreement in connection with a stock purchase agreement that the Purchasers separately entered into with Geoff Evett on May 13, 2011 (the “Stock Purchase Agreement”), which closed on May 16, 2011 (the “SPA Closing”). On the SPA Closing, the Purchasers sold 100% of the Davis Shares to Mr. Evett for an aggregate cash payment of $220,000. On the SPA Closing, the Purchasers, who were previously our officers, resigned from such positions and Mr. Evett was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary. On the Closing, the Purchasers submitted resignation letters from their positions as directors which were effective 10 days after the filing and mailing to our stockholders of an Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14f-1 promulgated thereunder. Mr. Evett became our sole director on May 27, 2011.
On June 29, 2011, the Registrant entered into a contribution agreement (the “Contribution Agreement”) with Geoff Evett, our sole director, president, and largest shareholder. Pursuant to the Contribution Agreement, Mr. Evett returned 7,566,667 shares of our common stock to us as a contribution to our capital. Prior to the execution of the Contribution Agreement, Mr. Evett held 8,166,667 shares of our common stock representing approximately 94.23% of our issued and outstanding shares. Following the execution of the Contribution Agreement, Mr. Evett holds 600,000 shares of our common stock representing approximately 54.54% of our issued and outstanding shares.
On June 29, 2011, the Registrant approved the Certificate of Amendment to change its name to Great American Energy, Inc. The name change was effective as of August 26, 2011.
On August 30, 2011, the Registrant effected a 79-for-1 stock-on-stock dividend for all of the issued and outstanding shares of common stock on the record date of August 29, 2011 (the “Dividend”). Following the Dividend, the Registrant has 88,000,000 shares of common stock outstanding.
We are considering the possibility of acquiring an existing company. Although no specific companies have been identified for such an acquisition, we are focusing on the mineral exploration and development industry. Should we proceed with an acquisition in the mineral exploration and development industry, we may exercise the Put Option in order to focus on the line of business of such a newly acquired subsidiary.
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Results of Operations
Revenue for the three months ended September 30, 2011 was $40,072 as compared with $147,592 for the same period in 2010. The 72.84% decrease was due reduced sales. Cost of revenues for the three months ended September 30, 2011 was $25,852 as compared with $114,242 for the three months ended September 30, 2010. The 77.37% decrease was due to reduced sales and sales efforts. Payroll expenses for the three months ended September 30, 2011 were $7,500 as compared to $14,670 for the three months ended September 30, 2010. The 48.88% decrease was due to the layoffs of part time workers . Officers compensation for the three months ended September 30, 2011 was $0 as compared to $2,433 for the three months ended September 30, 2010. This decrease was due to reductions in the number of officers and reduced compensation for remaining officers. General and administrative expenses increased from $17,332 to $58,910. This 239.89% increase was due to increased general and administrative expenses relating to recent corporate transactions. Net income from operations for the three months ended September 30, 2011 were $(52,190) as compared to $(1,148) for the three months ended September 30, 2010. The decrease of $51,042 was due to reduced sales and increased general and administrative expenses.
Revenue for the nine months ended September 30, 2011 was $162,211 as compared with $235,180 for the same period in 2010. The 31.03% decrease was due reduced sales. Cost of revenues for the nine months ended September 30, 2011 was $89,263 as compared with $231,033 for the nine months ended September 30, 2010. The 61.36% decrease was due to reduced sales and sales efforts. Payroll expenses for the nine months ended September 30, 2011 were $24,522 as compared to $45,764 for the nine months ended September 30, 2010. The 46.42% decrease was due to the layoffs of part time workers. Officers compensation for the nine months ended September 30, 2011 was $996 as compared to $3,995 for the nine months ended September 30, 2010. This decrease of $2,999 was due to reductions in the number of officers and reduced compensation for remaining officers. General and administrative expenses were $105,067 for the nine months ended September 30, 2011 as compared with $36,624 for the same period in 2010. This 186.88% increase was due to increased general and administrative expenses relating to recent corporate transactions. Net income from operations for the nine months ended September 30, 2011 were $(57,190) as compared to $(82,196) for the nine months ended September 30, 2010. The increase of $25,006 was due to reduced costs of revenue and payroll expenses.
Liquidity and Capital Resources
We generated net losses for the period ending September 30, 2011 and the year ending December 31, 2010, and had a deficit accumulated through September 30, 2011 of $696,061. We had a working capital deficit of $24,171 for the period ending September 30, 2011 and $47,417 at December 31, 2010. We have no long term obligations.
We had a cash balance of $1,852 at September 30, 2011 and $506 at December 31, 2010. For the nine month period ended September 30, 2011 we had net cash inflows of $1,346. Cash flows used in operations for the nine month period ended September 30, 2011 were ($29,204) compared with ($121,763) for the same period in 2010, a decrease which was primarily due to reduced operations. Cash flows used in operations for the nine month period ending September 30, 2011 consisted primarily of decreases in accounts payable ($12,211), credit cards payable ($5,414) and deferred revenue ($4,275). We had net cash provided by financing activities of $30,550 for the nine month period ended September 30, 2011.
During the remaining fiscal year 2011, we expect that our operations will be funded by advances from management and financing activities. However, there is no assurance that we will be able to obtain sufficient funds to support our operations as planned. We are dependent on the continued support of our creditors and our ability to raise further capital to fund ongoing expenditures. In current market conditions there is uncertainty that the necessary funding can be obtained as needed, raising substantial doubt as to our to continue operating as a going concern. In the event we are unable to raise additional capital, we will not be able to meet our obligations and will be required to further curtail or terminate some of our projects and/or activities.
All of our costs associated with complying with the securities laws, rules, and regulations applicable to public companies, estimated to be less than $25,000 annually, will be funded by a loan from management, to the extent that funds are available to do so. However, management is not obligated to provide these or any other funds. If we fail to secure such funding, we may fail to meet our reporting obligations as a public company and could lose our eligibility for the quotation of our stock on the over the counter bulletin board. Should this occur, investors may have increased difficulty selling their stock.
Our independent auditors have indicated in their audit report for the years ended December 31, 2010 that there is substantial doubt about our ability to continue as a going concern over the next twelve months.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that information required to be disclosed in this quarterly report on Form 10-Q was properly recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Our controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officers to allow timely decisions regarding required disclosure.
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) at September 30, 2011 based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer/Chief Financial Officer concluded that, at and as of September 30, 2011, our disclosure controls and procedures are not effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(a) Unregistered Sales of Equity Securities.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. (REMOVED AND RESERVED).
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS.
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Exhibit
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Item
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3.1
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Articles of Incorporation(1)
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3.2
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Bylaws(1)
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10.1
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Subsidiary Put Option Agreement dated May 13, 2011(2)
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10.2
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Contribution Agreement dated June 29, 2011(3)
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Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002*
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Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002*
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* Filed herewith.
(1) Incorporated by reference to the exhibit to the registrant’s registration statement on Form SB-2 filed with the SEC on November 14, 2007.
(2) Incorporated by reference to the exhibit to the registrant’s current report on Form 8-K filed with the SECon May 18, 2011.
(3) Incorporated by reference to the exhibit to the registrant’s current report on Form 8-K filed with the SEC on July 6, 2011.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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GREAT AMERICAN ENERGY, INC.
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Date: November 20, 2011
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By:
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/s/ Geoff Evett | |
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Geoff Evett
(Authorized Officer/Principal Executive Officer,
Principal Financial Officer/Principal Financial Officer)
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