All Energy Corp - FORM 10-Q - May 21, 2012
Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
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[ X ]
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended March 31, 2012
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[ ]
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Commission File No. 0-29417
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All Energy Corporation
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(Exact name of registrant as specified in its
charter)
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(State or Other Jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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6165 N.W. 86th Street, Johnston, Iowa 50131
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(Address of principal executive offices, including
zip code)
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(Issuer’s telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
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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):
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ] (Do not check if a smaller reporting
company)
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Smaller reporting company
[ X ]
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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 [ ] No [ X ]
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As of May 14, 2012, there were 21,266,413 shares of the issuer’s common stock outstanding.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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INDEX TO FINANCIAL STATEMENTS
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Consolidated Balance Sheets as of March 31, 2012 (unaudited), and December 31,
2011
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3
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Consolidated Statements of Operations for the Three Months Ended March 31, 2012
and 2011 (unaudited), and the Period from Commencement of Development Stage
(June 7, 2004) to March 31, 2012 (unaudited)
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4
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Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012
(unaudited) and 2011 (unaudited), and the Period from Commencement of
Development Stage (June 7, 2004) to March 31, 2012 (unaudited)
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5
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Notes to Consolidated Financial Statements
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7
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(a development stage company)
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CONSOLIDATED BALANCE SHEETS
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March 31, 2012, and December 31,
2011
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3/31/12
(unaudited)
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12/31/11
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Cash and cash equivalents
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$133,391
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$2,978
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Total current assets
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133,391
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2,978
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Property and equipment - at cost
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Oil and gas property
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6,650
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6,650
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Less accumulated depreciation
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(3,170)
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(2,990)
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Total property and equipment - net
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6,813
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6,993
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Total assets
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$140,204
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$9,971
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Accounts payable and accrued expenses
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$63,504
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$76,831
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Accrued expenses - related party
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148,805
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70,734
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Notes payable and convertible notes, net of unamortized
discounts of $132,405
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161,893
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187,588
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Note payable - third party
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15,500
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541,350
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Total current liabilities
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389,702
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876,503
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Preferred stock, $.01 par value; 50,000,000 shares
authorized, -0- and -0- shares issued and outstanding
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---
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---
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Common stock, $.01 par value; 700,000,000 shares
authorized, 21,216,413 and 1,820,196 shares issued in 2012
and 2011, respectively; and 21,075,413 and 1,679,196 shares
outstanding in 2012 and 2011, respectively
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212,125
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18,202
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Additional paid-in capital
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18,272,565
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17,320,667
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Treasury stock, at cost; 141,000 and 141,000 shares
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(150,000)
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(150,000)
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Subscription receivable
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(150,000)
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---
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Receivable from shareholder
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(50,000)
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(50,000)
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Accumulated deficit
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(6,423,944)
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(6,423,944)
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Deficit accumulated during the development stage
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(11,960,244)
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(11,581,457)
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Total stockholders’ equity (deficit)
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(249,498)
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(866,532)
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Total liabilities and stockholders’ equity
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$140,204
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$9,971
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The accompanying notes are an integral part of these statements.
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(a development stage company)
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CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three Months Ended March 31, 2012 and 2011, and the
Period from Commencement of Development Stage (June 7, 2004)
to March 31, 2012
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Three Months Ended
March 31,
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2012
(unaudited)
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2011
(unaudited)
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Period
from
Commence-ment
of
Development
Stage
(June 7,
2004) to
3/31/12
(unaudited)
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Revenues
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$---
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$---
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$8,092
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Operating Costs and
Expenses
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Consulting
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143
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4,214
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7,772,046
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Legal and professional
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7,618
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15,090
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1,320,318
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Impairment charge
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---
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---
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333,540
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Depreciation
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180
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216
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9,096
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General and
administrative
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303,043
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83,570
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2,560,481
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Total operating
expenses
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310,984
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103,090
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11,995,481
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Beneficial conversion
exercise
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---
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(3,889)
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(171,000)
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Interest expense
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(7,097)
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(3,575)
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(111,106)
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Interest income
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2
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6
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51,376
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Rental income
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---
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---
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66,250
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Loss on sale of
investment
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---
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---
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(125,000)
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Loss on sale of land
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---
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---
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(1,278)
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Forgiveness of debt
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---
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---
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97,831
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Convertible debt /
warrant expense
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(60,708)
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---
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(259,356)
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Equity loss in
subsidiary
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---
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---
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(233,340)
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Total other income
(expense)
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(67,803)
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(7,458)
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(685,623)
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Net loss
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$(378,787)
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$(110,548)
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$(12,673,012)
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Diluted
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$(0.009)
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$(0.072)
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Weighted average
number of shares
outstanding:
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Basic
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15,993,229
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1,294,322
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Diluted
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41,031,627
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1,527,729
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The accompanying notes are an integral part of these statements.
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(a development stage company)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Three Months Ended March 31, 2012 and 2011, and the
Period from Commencement of Development Stage (June 7, 2004)
to March 31, 2012
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Three Months Ended
March 31,
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2012
(unaudited)
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2011
(unaudited)
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Period
from
Commencement of
Development
Stage (June
7,
2004) to
3/31/12
(unaudited)
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CASH FLOWS FROM OPERATING
ACTIVITIES
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Net loss
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$(378,787)
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$(110,548)
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$(12,673,012)
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Adjustments to reconcile net loss to cash
used for
operating activities:
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Loss on sale of land
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---
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---
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1,278
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Loss on disposition of fixed assets
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---
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---
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187
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Depreciation and amortization
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180
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216
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9,096
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Forgiveness of debt
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---
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---
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97,831
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Equity loss on subsidiary
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---
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---
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14,485
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Non-cash beneficial conversion
expense
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---
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3,889
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171,000
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Options issued for compensation
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---
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---
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6,999,585
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Stock issued for services and
compensation
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193,900
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500
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1,438,545
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Non-cash warrant expense
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60,708
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---
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259,356
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Loss on investment
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---
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---
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125,000
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Impairment charge
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---
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---
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333,540
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Decrease (increase) in prepaids
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---
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18,807
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(87,820)
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Increase in accounts payable
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66,412
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77,772
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586,179
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Net cash used for operating activities
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57,587
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(9,364)
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(2,724,750)
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CASH FLOWS FROM INVESTING
ACTIVITIES
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Purchase of land
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---
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---
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(951,238)
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Investment in Treaty Energy Belize LTD.
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---
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---
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(125,000)
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Investment in oil and gas property
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---
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---
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(6,650)
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Increase in accrued liabilities - related
party
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---
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---
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40,056
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Proceeds from sale of land
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---
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---
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461,960
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Purchase of office equipment
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---
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---
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(4,160)
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Payments on construction-in-progress
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---
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---
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(193,720)
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Net cash used for investing activities
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---
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---
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(778,752)
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The accompanying notes are an integral part of these statements.
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(a development stage company)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Three Months Ended March 31, 2012 and 2011, and the
Period from Commencement of Development Stage (June 7, 2004)
to March 31, 2012 (cont.)
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Three Months Ended
March 31,
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2012
(unaudited)
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2011
(unaudited)
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Period
from
Commencement of
Development
Stage (June
7,
2004) to
3/31/12
(unaudited)
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CASH FLOWS FROM FINANCING
ACTIVITIES
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Proceeds from sale of common stock for
cash
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150,000
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---
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2,853,623
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Principal payments on related party
advances
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---
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---
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(3,988)
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Proceeds from notes payable - third party
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48,000
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---
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438,700
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Proceeds from notes payable - related
party
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---
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---
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78,000
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Payments on notes payable - related party
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(10,000)
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---
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(67,500)
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Proceeds from long-term debt, net of
deferred borrowing costs
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---
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---
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483,120
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Purchase of treasury stock
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---
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---
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(150,000)
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Contributions from shareholders
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---
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---
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950
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Net cash provided by financing activities
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188,000
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---
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3,632,905
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NET CHANGE IN CASH
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130,413
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(9,364)
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129,403
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Cash, beginning of period
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2,978
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31,243
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3,988
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Cash, end of period
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$133,391
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$21,879
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$133,391
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The accompanying notes are an integral part of these statements.
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(a development stage company)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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March 31, 2012
(unaudited)
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Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim financial statements of All Energy Corporation (the
“Company”) have been prepared by the Company in accordance with accounting principles generally
accepted in the United States of America, pursuant to the Securities and Exchange Commission rules
and regulations. In management’s opinion all adjustments necessary for a fair presentation of the
results for interim periods have been reflected in the interim financial statements. The results of
operations for any interim period are not necessarily indicative of the results for a full year. All
adjustments to the financial statements are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or omitted. Such
disclosures are those that would substantially duplicate information contained in the most recent
audited financial statements of the Company, such as significant accounting policies and stock
options. Management presumes that users of the interim statements have read or have access to the
audited financial statements and notes thereto included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2011.
Note 2. Going Concern
The Company has incurred losses totaling $12,673,012 through March 31, 2012, and had a working
capital deficit of $256,311 at March 31, 2012. Because of these conditions, the Company will
require additional working capital to continue operations and develop its business. The Company
intends to raise additional working capital either through private placements, public offerings and/or
bank financing.
There are no assurances that the Company will be able to achieve a level of revenues adequate to
generate sufficient cash flow from operations or obtain additional financing through private
placements, public offerings and/or bank financing necessary to support the Company’s working
capital requirements. To the extent that funds generated from 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
not continue its operations or execute its business plan.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Note 3. Management’s Plans for Liquidity
In August 2011, the Company obtained loans from third parties in the total amount of $220,700 for
use in its current operations, including its efforts to locate and acquire business opportunities in the
oil and natural gas industry.
The Company will require significant additional capital with which to acquire interests in oil and
natural gas properties. While the Company’s management believes it will be able to secure the
financing, in the form of debt, equity or a combination thereof, necessary to complete any such
proposed acquisition, there is no assurance that such will be the case. In addition, the Company will
require additional funds, in order to sustain its operations through the remainder of 2012. The
Company believes it will be able to secure the financing, in the form of debt, equity or a combination
thereof, necessary to complete these opportunities. The Company does not have a current
commitment for an equity investment or a loan in any amount.
During the remainder of 2012, the Company intends to commit its available capital, if any, to its
pursuit of the acquisition of one or more business opportunities in the oil and natural gas industry.
The needed funding will be sought from third parties.
Note 4. Business of the Company
Until August 2011, the Company actively pursued the acquisition of one or more ethanol plants. As
of August 2011, the Company’s efforts in this regard had not been successful.
In August 2011, the Company changed its business to the exploration, development, acquisition and
production of crude oil and natural gas within the United States.
Note 5. Oil and Gas Investments
The Company owns 4% of the outstanding shares in Treaty Belize Energy, LTD (“TBE”), a Belize
corporation that is seeking to development an oil and gas property located in Belize, for a cash
investment of $100,000. In addition, the Company holds an option to purchase up to 15% ownership
of Paradise Energy, LTD for up to one year at a cost of $360,000, $25,000 of which has been paid
by the Company as a deposit. The Company also holds an option to purchase additional shares up
to10% of TBE, at a total cost of approximately $500,000.
In January 2012, TBE reported that it had drilled its initial well near Independence Village, Belize,
located adjacent to the Port of Big Creek in the Stann Creek District, and that oil in commercial
quantities had been detected. The defined producing zone is between 1,235 and 1,290 feet. There
is no assurance that this well will produce oil and/or gas in such quantities as would benefit the
Company. A second, deeper well on the lease owned by TBE is planned for an as-yet determined
date. There is no assurance that the second well will produce oil and/or gas. Due to these
circumstances, the Company recognized a loss on these investments for the year ended December
31, 2011, in the amount of $125,000.
Also, the Company has entered into a participation agreement with respect to an oil and gas property
located in Louisiana, pursuant to which the Company holds a 5% interest in such property and has
made payments totaling $6,650.
Note 6. Notes Payable - Related Parties
From the third quarter of 2009 through July 2011, the Company obtained $73,000 in loans from one
of its directors, the proceeds from which provided the Company with a portion of the capital needed
to sustain its operations. On the dates of issuance, these promissory notes were convertible into a
total of 7,100,000 shares of Company common stock. Until August 2011, these loans were payable
on demand, bore interest at 10% per annum and were convertible, at the director’s option, into shares
of the Company’s common stock at the rate of one share for every $.01 of debt converted. In August
2011, each of these loans was revised and extended to September 2012.
At December 31, 2011, $520,850 in accrued officer salary and interest is included in Note Payable -
Related Parties. In January 2012, the entire amount was converted into a total of 15,097,101 shares
of Company common stock, pursuant to a debt conversion agreement.
Note 7. Notes Payable - Third Party
In January 2010, the Company borrowed $65,000 from a third party, and in May 2010, the Company
borrowed $35,000 from the same third party, through the issuance of convertible promissory notes,
payable in October 2010 (which was not extended and the balance due as of December 31, 2010, is
$92,500) and February 2011, respectively, bearing interest at 8% per annum, and convertible into
a number of shares based on the market price of the Company’s common stock. On the dates of
issuance, these promissory notes were convertible into an aggregate of approximately 16,000,000
shares of Company common stock. The first of these convertible promissory notes has been partially
converted as follows: (i) in August 2010, $7,500 was converted into 2,508,361 shares of the
Company’s common stock; (ii) in January 2011, $6,000 was converted into 3,000,000 shares of the
Company’s common stock; and (iii) in July 2011, $4,000 was converted into 3,076,923 shares of the
Company’s common stock. On August 15, 2011, the Company entered into an assignment
agreement with this third party where they would assign their debt to five third party note holders
in the amount of $90,000 for the unpaid principal and interest owed to them. In connection with this
assignment the Company had debt forgiveness income in the amount of $3,266 which has been
reflected in the accompanying financial statements.
In April 2011, the Company borrowed $20,000 from a third party, through the issuance of a
convertible promissory note, payable on demand, bearing interest at 10% per annum, and
convertible, at the third party’s option, into shares of the Company’s common stock at the rate of one
share for every $.01 of debt converted. On the date of issuance, this promissory note was convertible
into 2,000,000 shares of Company common stock. In August 2011, this loan was revised and
extended to September 2012.
Also in April 2011, the Company borrowed $5,000 from a third party for use as working capital,
through the issuance of a convertible promissory note, payable on demand, bearing interest at 10%
per annum, and convertible, at the third party’s option, into shares of the Company’s common stock
at the rate of one share for every $.01 of debt converted. On the date of issuance, these promissory
notes were convertible into a total of 1,000,000 shares of Company common stock. In August 2011,
this loan was revised and extended to September 2012.
In August 2011, the Company issued convertible promissory notes with an aggregate principal
amount of $220,700. These notes mature on September 1, 2013, accrue interest at 8% per annum
and are payable at maturity, unless converted by the holder into shares of Company common stock
at a conversion rate of $0.0345 per share.
During the three months ended March 31, 2012, a total of $131,069 of such indebtedness was
converted into a total of 3,799,116 shares of Company common stock.
Simultaneously with their notes, each party was issued Series A Warrants and Series B Warrants.
Series A Warrants provide the holders the right to purchase up to a total of 2,000,000 share of
Company common stock at an exercise price of $0.25 per share and Series B Warrants that provide
the holders the right to purchase up to a total of 2,000,000 shares of Company common stock at an
exercise price of $0.375 per share. The warrants have a four year life. The values in 2011 were
based upon Black-Scholes computations with the following ranges of assumptions: Volatility
41.568%, interest rate 0.67%, expected term of 4 years and stock prices from $0.006.
The Company recorded $171,060 in 2011 for the relative fair value of the warrants and $220,700 as
a Debt Discount which is to be amortized over the term of the two year notes. As of March 31, 2012,
and December 31, 2011, $60,708 and $27,588, respectively, of amortization has been recorded
related to the debt discount.
Note 8. Loans on Open Account
During the three months ended March 31, 2012, the Company obtained loans on open account in the
total amount of $48,000. These loans on open account are payable on demand and the Company
accrues interest on these loans at 8%.
Note 9. Capital Stock
Common Stock Issued under Debt Conversion Agreement
During the three months ended March 31, 2012, $520,850 in accrued officer salary and interest was
converted into a total of 15,097,101 shares of Company common stock, pursuant to a debt
conversion agreement, a per share price of $.0345.
Common Stock Issued on Convertible Promissory Notes
During the three months ended March 31, 2012, a total of $131,069 of indebtedness evidenced by
convertible promissory notes was converted into a total of 3,799,116 shares of Company common
stock, a per share price of $.0345.
Common Stock Issued for Note Extensions
During the three months ended March 31, 2012, a total of 196,000 shares were issued pursuant to
four separate promissory note extension agreements.
Common Stock for Director Bonus
During the three months ended March 31, 2012, the Company issued a total of 100,000 shares of its
common stock as bonuses to two of its directors. These shares were valued at $1.54 per share, or
$154,000, in the aggregate.
Common Stock for Services
During the first three months of 2011, the Company issued 50,000 shares of common stock in
payment of $500 in consulting services.
Common Stock Options for Services; Subscription Receivable; Exercise of Stock Options
In February 2012, the Company entered into a consulting agreement with a third party. This
consultant’s sole compensation was the issuance of stock options to purchase 200,000 shares of
Company common stock at an exercise price of $1.50 per share. In advance of payment therefor,
all 200,000 shares underlying such options were issued by the Company. As of March 31, 2012, a
total of $150,000 had been received by the Company in payment of 103,333 of such shares. Thus,
at March 31, 2012, the accompanying balance sheet includes a stock subscription receivable in the
amount of $150,000, which relates to 100,000 of such shares.
Note 10. Subsequent Events
Consulting Agreement
In April 2012, the Company entered into a consulting agreement with its legal counsel. Pursuant to
such agreement, the Company issued 50,000 shares with an aggregate value of $25,500, or $.51 per
share. In addition, under such consulting agreement, the Company issued stock options to purchase
50,000 shares of Company common stock at an exercise price of $1.00 per share, 50,000 shares of
Company common stock at an exercise price of $1.25 per share and 50,000 shares of Company
common stock at an exercise price of $1.50 per share.
Purchase of Oil and Gas Lease
In April 2012 (and amended in May 2012), the Company entered into a purchase and sale agreement
relating to the purchase of an oil and gas lease located in Taylor County, Texas, which contains
approximately 40 acres and a single producing oil well. Under the purchase and sale agreement, the
purchase price for the subject lease is $250,000: $50,000 in cash was paid upon execution of the
purchase and sale agreement, $50,000 in cash was paid in May 2012 and $150,000 in cash is payable
at the closing, which is estimated to occur in June 2012. In addition to the lease, under the purchase
and sale agreement, the Company is to acquire a consent to inject salt water, with respect to a nearby
salt water disposal well.
Issuance of Promissory Notes
In May 2012, the Company issued two promissory notes both with $100,000 face amounts in
consideration of two loans of the same amount. Each such promissory note is due in June 2012 with
$1,000 in interest due on each at their respective due dates.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Significant 2011 Transactions
Change in Control. In August 2011, our company, certain of our affiliates and certain third
parties entered into and completed a series of transactions (collectively, the “Transaction”).
Pursuant to the Transaction, one of our officers and directors obtained control of our
company. However, our management did not change in connection with the Transaction.
Change of Business Plan. In connection with the Transaction and because we had been
unable to acquire an ethanol plant, our management has changed our plan of business from the
acquisition of an ethanol plant to the exploration, development, acquisition and production of crude
oil and natural gas within the United States.
Reverse Split. On August 12, 2011, our board of directors authorized a 50-to-1 reverse split
of our outstanding common stock. The effective date of this reverse split was January 17, 2012.
Financing Transactions and Issuances of Securities. In connection with the Transaction, we
entered into a series of financing-related agreements and issued securities thereunder.
Critical Accounting Policies
While we believe that the factors considered provide a meaningful basis for the accounting
policies applied in the preparation of the condensed consolidated financial statements, we cannot
guarantee that our estimates and assumptions will be accurate. If such estimates and assumptions
prove to be inaccurate, we may be required to make adjustments to these estimates in future periods.
Litigation and Tax Assessments. Should we become involved in lawsuits, we intend to assess
the likelihood of any adverse judgments or outcomes of any of these matters as well as the potential
range of probable losses. A determination of the amount of accrual required, if any, for these
contingencies will be made after careful analysis of each matter. The required accrual may change
from time to time, due to new developments in any matter or changes in approach (such as a change
in settlement strategy) in dealing with these matters.
Additionally, in the future, we may become engaged in various tax audits by federal and state
governmental authorities incidental to our business activities. We anticipate that we will record
reserves for any estimated probable losses for any such proceeding.
Stock-Based Compensation. We account for stock-based compensation based on the
provisions of Accounting Standard Codification (“ASC”) 718 Share Based Payments. ASC 718
requires companies to apply a fair-value-based measurement method in accounting for share-based
payment transactions with employees and to record compensation cost for all stock awards granted
after the required effective date and for awards modified, repurchased or cancelled after that date.
The scope of ASC 718 encompasses a wide range of share-based compensation arrangements,
including share options, restricted share plans, performance-based awards, share appreciation rights
and employee share purchase plans.
Recent Accounting Pronouncements. There were no recent accounting pronouncements that
our company has not implemented that materially affect our financial statements.
Results of Operations - First Quarter 2012 vs. First Quarter 2011
Revenues. During the First Quarter 2012 and the First Quarter 2011, we generated no
revenues. During the First Quarter 2012, our monthly cash operating expenses, which include costs
associated with the pursuit of oil and gas opportunities, averaged approximately $30,000. As we
begin to acquire additional oil and gas properties, our operating expenses will increase, although we
are unable to predict the amount of such increase.
Expenses. Our cash outlays for operating expenses during the First Quarter 2012 were
$57,587, up from $9,364 for the First Quarter 2011. Our non-cash operating expenses for the First
Quarter 2012, which include $193,200 in stock issued for services and $61,408 in warrant expense,
totaled $254,608; our non-cash operating expenses for the First Quarter 2011, which include stock
issued for services, totaled $500.
Financial Condition
At March 31, 2012, we had $133,391 in cash and a working capital deficit of $256,311. At
December 31, 2011, our cash position was $2,978 and our working capital deficit was $873,525.
Currently, we possess approximately $150,000 in cash. Our current cash position is adequate to
sustain our current level of operations for approximately six months.
As part of the Transaction, we obtained loans in the total amount of $220,700 for use in our
current operations, including its efforts to locate and acquire a business opportunity in the oil and
gas industry. In connection with these loans, we issued convertible promissory notes with an
aggregate principal amount of $220,700. These convertible promissory notes mature on September
1, 2013, accrue interest at 8% per annum and are payable at maturity, unless converted by the holder
into shares of common stock at a conversion rate of $0.0345 per share. During the First Quarter
2012, a total of approximately $131,070 of such convertible promissory notes had been converted
into a total of approximately 3,799,116 shares of our common stock.
Prior to the Transaction, we owed our officer, Dean E. Sukowatey, a total of $535,650 in
accrued and unpaid salary. In connection with the Transaction, our company and this officer entered
into a debt conversion agreement with respect to $534,650 of such accrued and unpaid salary.
Pursuant to the debt conversion agreement, this officer agreed to convert, and did so convert during
the First Quarter 2012, the $534,650 in accrued and unpaid salary into shares of our common stock
at a conversion price of $0.0345 per share, a total of 15,497,101 shares.
Management’s Plans Relating to Future Liquidity
In August 2011, as part of the Transaction, we obtained loans from third parties in the total
amount of $220,700 for use in our current operations, including efforts to locate and acquire business
opportunities in the oil and natural gas industry.
We will require significant additional capital with which to acquire interests in oil and natural
gas properties. While our management believes we will be able to secure the financing, in the form
of debt, equity or a combination thereof, necessary to complete any such proposed acquisition, there
is no assurance that such will be the case. In addition, we will require additional funds, in order to
sustain our operations through the remainder of 2012. We believe it will be able to secure the
financing, in the form of debt, equity or a combination thereof, necessary to complete these
opportunities. We do not have a current commitment for an equity investment or a loan in any
amount.
In connection with the Transaction, we issued Series A Warrants that provide the holders the
right to purchase up to a total of 2,000,000 shares of common stock at an exercise price of $0.25 per
share and Series B Warrants that provide the holders the right to purchase up to a total of 2,000,000
shares of common stock at an exercise price of $0.375 per share. We expect that these warrants will
provide a source of funds to our company during the twelve months ending April 30, 2012.
However, there is no assurance that any of these warrants will be exercised.
During the remainder of 2012, the Company intends to commit its available capital, if any,
to its pursuit of the acquisition of one or more business opportunities in the oil and natural gas
industry. The needed funding will be sought from third parties.
Capital Expenditures
During the First Quarter 2012 and the First Quarter 2011, we made no capital expenditures.
Subsequent to March 31, 2012, we entered into a purchase and sale agreement relating to the
purchase of an oil and gas lease located in Taylor County, Texas, which contains approximately 40
acres and a single producing oil well. Under the purchase and sale agreement, the purchase price for
the subject lease is $250,000: $50,000 in cash was paid upon execution of the purchase and sale
agreement, $50,000 in cash was paid in May 2012 and $150,000 in cash is payable at the closing,
which is estimated to occur in June 2012. In addition to the lease, under the purchase and sale
agreement, the Company is to acquire a consent to inject salt water, with respect to a nearby salt
water disposal well. We cannot predict the amount of any future capital expenditures, if any.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Our Chief Executive Officer/Acting Chief Financial Officer, after evaluating the
effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the
Securities Exchange Act of 1934 has concluded that, as of the end of the fiscal quarter covered by
this report on Form 10-Q, our disclosure controls and procedures were effective to provide
reasonable assurances that information required to be disclosed in the reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and forms and such
information is accumulated and communicated to management, including the Chief Executive
Officer/Acting Chief Financial Officer, as appropriate, to allow timely decisions regarding
disclosures.
There was no change in our internal control over financial reporting during the quarter ended
March 31, 2012, that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are the plaintiff in a lawsuit styled ALL Fuels & Energy Corporation v. Energetix,
LLC, Energetix Holdings II, LLC and Mitch Miller, Case No. 4:11-CV-00617-JEG-CFB, in the U.S.
District Court for the Southern District of Iowa, Central Division. We sued the defendants for
violating the terms of a non-circumvention agreement relating to the acquisition of an ethanol plant.
We believe this lawsuit has merit and are committed to pursuing our causes of action aggressively.
This lawsuit is in the early stages and no prediction can be made with respect to its outcome.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
1. (a) Securities Sold. In January 2012, 15,097,101 shares of common stock were issued; (b)
Underwriter or Other Purchasers. Such shares of common stock were issued to Dean E. Sukowatey;
(c) Consideration. Such shares of common stock were issued on conversion of debt pursuant to a
debt conversion agreement in the amount of $520,850; and (d) Exemption from Registration
Claimed. These securities are exempt from registration under the Securities Act of 1933, as
amended, pursuant to the provisions of Section 4(2) thereof, as a transaction not involving a public
offering. This purchaser was an accredited investor capable of evaluating an investment in our
company.
2. (a) Securities Sold. In February 2012, 2,755,638 shares of common stock were issued; (b)
Underwriter or Other Purchasers. Such shares of common stock were issued to Acadia Life Limited
(1,157,368 shares), Lazy Bear, LLC (360,529 shares), Lee Bear I, LLC (548,005 shares), Joseph R.
Lee (173,054 shares) and Equity Highrise, Inc. (516,682) shares; (c) Consideration. Such shares of
common stock were issued upon partial conversion of convertible promissory notes in the aggregate
amount of $95,070; and (d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(2)
thereof, as a transaction not involving a public offering. These purchasers were sophisticated
investors capable of evaluating an investment in our company.
3. (a) Securities Sold. In February 2012, 200,000 shares of common stock were issued; (b)
Underwriter or Other Purchasers. Such shares of common stock were issued to Dean E. Sukowatey
(50,000 shares), Galen Knaack (50,000 shares), Brad Knaack (50,000 shares) and Russell Duncan
(50,000 shares); (c) Consideration. Such shares of common stock were issued pursuant to note
extension agreements and were valued at $1.54 per share; and (d) Exemption from Registration
Claimed. These securities are exempt from registration under the Securities Act of 1933, as
amended, pursuant to the provisions of Section 4(2) thereof, as a transaction not involving a public
offering. These purchasers were accredited investors capable of evaluating an investment in our
company.
All other unregistered sales of equity securities since the beginning of 2012 have been
reported previously.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to our shareholders, during the three months ended March 31, 2012.
Item 5. Other Information.
Acquisition of Oil and Gas Lease
On April 18, 2012, we entered into a purchase and sale agreement relating to our purchase
of an oil and gas lease located in Taylor County, Texas, which contains approximately 40 acres and
a single producing oil well. The term of this lease will extend for so long as oil and/or gas is
produced therefrom. This lease is burdened with a 12.5% landowner’s royalty and a 12.5%
overriding royalty. Under the purchase and sale agreement, the purchase price for the subject lease
is $250,000: $50,000 in cash was paid upon execution of the purchase and sale agreement and
$200,000 in cash is payable within 30 days.
In addition to the lease, under the purchase and sale agreement, we are to acquire a Consent
to Inject Salt Water, with respect to a nearby salt water disposal well.
The $50,000 paid upon the execution of the purchase and sale agreement came from funds
on hand. Funds necessary to pay the remaining $200,000 owed is expected to be obtained by us from
third-parties in the form of debt or equity, or a combination thereof. There is no assurance that we
will be successful in obtaining the amount required to complete the purchase and sale transaction.
A failure to obtain such funding would result in the loss of this purchase opportunity and a loss of
the $50,000 already paid.
Item 6. Exhibits.
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10.1 *
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Purchase and Sale Agreement between All Energy Corporation and
Gerald R. Holden.
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31.1 *
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Certification of Chief Executive Officer and Principal Financial and
Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
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32.1 *
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Certification of Chief Executive Officer and Principal Financial and
Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
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In accordance with the requirements of the Securities Exchange Act of 1934, Registrant has duly
caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
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Date: May 21, 2012.
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ALL ENERGY CORPORATION
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By:
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/s/ DEAN E. SUKOWATEY
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Dean E. Sukowatey, President and
Acting Chief Financial Officer
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