UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

(Mark One)

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2011

 

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from   [   ] to [   ]

 

Commission file number 000-52767

 

SUNERGY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

14362 N. Frank Lloyd Wright Blvd., Suite 1000, Scottsdale, AZ		85260
(Address of principal executive offices)		(Zip Code)

 

Registrant's telephone number, including area code:

480.477.5810

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class		Name of Each Exchange On Which Registered
N/A		N/A

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 par value

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes o   No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act   Yes o  No x

 

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 last 90 days. Yes o No x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration statement was required to submit and post such files).Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)  is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	£	Accelerated filer	£
Non-accelerated filer	£	Smaller reporting company	S

 

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

 

The aggregate market value of Common Stock held by non-affiliates of the Registrant on June 30, 2011 was $14,899,338 based on a $0.0122 closing price per share. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
1,567,282,115 as of  June 15, 2012

 

 

Explanatory Paragraph:

 

We are providing this amendment to our Form 10-K Annual Report, specifically Item 8, for the fiscal year ended December 31, 2011 filed on July 2, 2012 in order to eliminate references to accounting periods not presented and as previously contained in the report of De Joya Griffith & Company as of and for the fiscal year ended December 31, 2010. This amendment does not impact our previously reported financial position, results of operations, or cash flows for any of the periods presented. Further, this amendment does not impact the previously issued audit report of Ingenium Accounting Associates as of and for the fiscal year ended December 31, 2011, inclusive of an explanatory paragraph related to the uncertainty surrounding our ability to continue as a going concern, dated June 27, 2012.

 

This amendment does not impact information previously disclosed under other Items contained in our Form 10-K for the fiscal year ended December 31, 2011 as filed on July 2, 2012, and correspondingly, that information has been omitted from this amendment.

 

 

  

 

Item 8.  Financial Statements and Supplementary Data

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of

  Sunergy, Inc.

 

We have audited the accompanying consolidated balance sheet of Sunergy, Inc. (an exploration stage company) as of December 31, 2011 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended and from inception (January 28, 2003) to December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sunergy, Inc. as of December 31, 2011, and the results of its consolidated operations and cash flows for the year then ended and inception to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 of the accompanying consolidated financial statements, the Company has incurred losses, has not generated any revenue, and has negative operating cash flows since the inception of the exploration activities. These factors, and the need for additional financing in order for the Company to meet its business plans, raise substantial doubt about its ability to continue as a going concern. Management’s plan to continue as a going concern is also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s:/ Ingenium Accounting Associates

 

Reno, Nevada

June 27, 2012

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Sunergy, Inc.

 

We have audited the accompanying consolidated balance sheet of Sunergy, Inc. (the “Company”) (A Exploration Stage Company) as of December 31, 2010 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sunergy, Inc. (A Exploration Stage Company) as of December 31, 2010 and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ De Joya Griffith & Company, LLC

Henderson, Nevada

December 15, 2011

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

CONSOLIDATED BALANCE SHEETS

 

		December 31,				December 31,
		2011				2010
Assets
Current assets:
Cash and cash equivalents		$	85,515			$	97,251
Deposits			-				50,000
Total current assets			85,515				147,251
Long-term assets:
Exploratory properties			1,753,497				1,753,497
Property and equipment, net			225,007				2,254
Total assets		$	2,064,019			$	1,903,002
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities		$	205,089			$	7,601
Accrued interest			101,700				-
Accounts payable-related parties			172,202				83,991
Notes payable			65,585				-
Total current liabilities			544,576				91,592
Total liabilities			544,576				91,592
Commitments and contingencies			-				-
Stockholders' equity:
Common Stock, authorized 3,750,000,000 shares, par value $0.001, issued and outstanding on December 31, 2011 and December 31, 2010 is 1,557,717,831 and 1,046,197,880, respectively			1,557,718				1,046,198
Additional paid in capital			3,787,902				2,709,122
Subscriptions payable			-				414,861
Deficit accumulated during exploration stage			(3,826,177	)			(2,358,771	)
Total stockholders' equity			1,519,443				1,811,410
Total liabilities and stockholders' equity		$	2,064,019			$	1,903,002

 

The accompanying notes are an integral part of these statements.

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

										From Inception
		Year Ended								January 28, 2003
		December 31,								to December 31,
		2011				2010				2011
Income		$	-			$	-			$	-
Operating Expenses
General and administrative			225,763				143,043				459,801
Management salary			141,000				368,500				662,500
Depreciation			38,007				-				38,007
Professional fees			262,298				71,809				647,217
Exploration costs			534,848				107,989				681,457
Total expenses			1,201,916				691,341				2,488,982
Net loss from operations			(1,201,916	)			(691,341	)			(2,488,982	)
Other expenses
Interest expense			(265,490	)			(1,043,627	)			(1,337,195	)
Total other expenses			(265,490	)			(1,043,627	)			(1,337,195	)
Net loss		$	(1,467,406	)		$	(1,734,968	)		$	(3,826,177	)
Loss per share-basic		$	(0.00	)		$	(0.00	)
Weighted average number of shares-basic and diluted			1,361,932,928				723,220,692

 

The accompanying notes are an integral part of these statements.

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

 Consolidated Statement of Stockholders' Equity (Deficit)

 

																		Deficit
																		Accumulated
																		During the
		Common Stock								Paid in				Subscriptions				Exploration				Total
		Shares				Amount				Capital				Payable				Stage				Equity
Balance at inception, January 28, 2003			-			$	-			$	-			$	-			$	-			$	-
Common shares issued for cash			500,000,000				500,000				(490,000	)			-				-				10,000
Common shares issued for cash			6,975,000				6,975				6,975				-				-				13,950
Net Loss			-				-				-				-				(30,313	)			(30,313	)
Balance, December 31, 2003			506,975,000				506,975				(483,025	)			-				(30,313	)			(6,363	)
Contributed Capital			-				-				401				-				-				401
Net Loss			-				-				-				-				(41,362	)			(41,362	)
Balance, December 31, 2004			506,975,000				506,975				(482,624	)			-				(71,675	)			(47,324	)
Contributed Capital			-				-				938				-				-				938
Net Loss			-				-				-				-				(26,093	)			(26,093	)
Balance, December 31, 2005			506,975,000				506,975				(481,686	)			-				(97,768	)			(72,479	)
Contributed Capital			-				-				1,959				-				-				1,959
Net Loss			-				-				-				-				(39,746	)			(39,746	)
Balance, December 31, 2006			506,975,000				506,975				(479,727	)			-				(137,514	)			(110,266	)
Net Loss			-				-				-				-				(55,103	)			(55,103	)
Balance, December 31, 2007			506,975,000				506,975				(479,727	)			-				(192,617	)			(165,369	)
Common shares issued for cash			6,000,000				6,000				144,000				-				-				150,000
Common shares issued to acquire mineral property			20,000,000				20,000				480,000				-				-				500,000
Common shares subscribed			-				-				-				5,000				-				5,000
Net Loss			-				-				-				-				(98,445	)			(98,445	)
Balance, December 31, 2008			532,975,000				532,975				144,273				5,000				(291,062	)			391,186
Common shares subscribed			-				-				-				138,400				-				138,400
Common shares issued for services			5,000,000				5,000				195,000				-				-				200,000
Contributed Capital			-				-				1,010				-				-				1,010
Net Loss			-				-				-				-				(332,741	)			(332,741	)
Balance, December 31, 2009			537,975,000				537,975				340,283				143,400				(623,803	)			397,855
Contributed Capital			-				-				8,960				-				-				8,960
Common shares issued for services			20,000,000				20,000				110,000				-				-				130,000
Common shares issued to settle debt			75,000,000				75,000				357,500				-				-				432,500
Common shares issued for subscriptions			40,992,880				40,993				102,407				(143,400	)			-				-
Common shares issued for services			25,000,000				25,000				142,500				-				-				167,500
Common shares issued to settle debt			39,980,000				39,980				135,810				-				-				175,790
Common shares issued to settle debt			14,700,000				14,700				44,100				-				-				58,800
Common shares issued to settle debt			17,650,000				17,650				52,950				-				-				70,600
Common shares issued to settle debt			150,000,000				150,000				574,000				-				-				724,000
Common shares issued for services			10,800,000				10,800				32,400				-				-				43,200
Common shares issued to settle debt			14,100,000				14,100				197,401				-				-				211,501
Common shares and warrants issued to acquire exploration property and assets			-				-				420,811				-				-				420,811
Common shares subscribed			-				-				-				313,500				-				313,500
Common shares to be issued to settle debt			-				-				-				47,500				-				47,500
Common shares to be issued for services			-				-				-				53,861				-				53,861
Common shares and warrants issued to acquire exploration property and assets			100,000,000				100,000				190,000				-				-				290,000
Net Loss			-				-				-				-				(1,734,968	)			(1,734,968	)
Balance, December 31, 2010			1,046,197,880				1,046,198				2,709,122				414,861				(2,358,771	)			1,811,410
Common shares and warrants issued to payable			125,400,000				125,400				188,100				(313,500	)			-				-
Common shares issued to settle debt			19,000,000				19,000				28,500				(47,500	)			-				-
Common shares issued for services			18,779,960				18,780				28,170				(43,861	)			-				3,089
Common shares issued for services			4,000,000				4,000				6,000				(10,000	)			-				-
Common shares issued to settle operational advances			15,440,000				15,440				23,160				-				-				38,600
Common shares issued for services			2,500,000				2,500				3,750				-				-				6,250
Common shares issued for services			10,000,000				10,000				15,000				-				-				25,000
Common shares issued for exercise of warrants			1,000,000				1,000				4,000				-				-				5,000
Common shares issued for financing costs			13,300,000				13,300				21,250				-				-				34,550
Common shares and warrants issued for cash			7,714,285				7,714				19,286				-				-				27,000
Common shares and warrants issued for cash			1,200,000				1,200				1,800				-				-				3,000
Common shares and warrants issued for cash			27,928,567				27,929				69,821				-				-				97,750
Common shares and warrants issued for cash			100,000,000				100,000				250,000				-				-				350,000
Common shares issued for financing costs			900,000				900				2,250				-				-				3,150
Common shares issued for exercise of warrants			18,000,000				18,000				47,000				-				-				65,000
Common shares issued for services			3,000,000				3,000				7,500				-				-				10,500
Common shares and warrants issued for cash			10,357,142				10,357				25,893				-				-				36,250
Common shares and warrants issued to settle debt			22,000,000				22,000				47,000				-				-				69,000
Common shares and warrants issued to settle debt			7,000,000				7,000				17,500				-				-				24,500
Common shares and warrants issued for cash			1,428,571				1,429				3,571				-				-				5,000
Common shares issued for warrant exercise			5,000,000				5,000				7,500				-				-				12,500
Common shares issued for services			4,500,000				4,500				11,250				-				-				15,750
Common shares and warrants issued for services			6,000,000				6,000				15,000				-				-				21,000
Common shares issued for warrant exercise			2,000,000				2,000				8,000				-				-				10,000
Common shares issued for cash			28,199,998				28,200				64,600				-				-				92,800
Common shares issued for warrant exercise			16,300,000				16,300				61,450				-				-				77,750
Common shares and warrants issued to settle debt			40,571,428				40,571				101,429				-				-				142,000
Net Loss			-				-				-				-				(1,467,406	)			(1,467,406	)
Balance, December 31, 2011			1,557,717,831			$	1,557,718			$	3,787,902			$	-			$	(3,826,177	)		$	1,519,443

 

The accompanying notes are an integral part of these statements.

 

 

 

 

SUNERGY, INC.

(An Exploration Stage Company)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

										From Inception
		Year Ended								January 28, 2003
		December 31,								to December 31,
		2011				2010				2011
Operations
Net loss		$	(1,467,406	)		$	(1,734,968	)		$	(3,826,177	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation			38,007				-				38,007
Stock based compensation			120,188				297,500				460,889
Non cash interest expense			82,700				1,033,627				1,116,327
Amortized prepaid expense			-				33,333				200,000
Changes in assets and liabilities
Increase in accounts payable and accruals			197,488				136,419				415,788
Increase in accrued interest payable			179,700								179,700
Increase in accounts payable-related party			88,211				61,041				172,202
Net cash used in operations			(761,112	)			(173,048	)			(1,243,264	)
Investing
Acquisition of property and equipment			(210,759	)			(2,254	)			(225,513	)
Deposit for purchase of dredge			-				(50,000	)			(50,000	)
Cash acquired through acquisition of subsidiary			-				39				39
Net cash used in investing			(210,759	)			(52,215	)			(275,474	)
Financing
Proceeds from sale of common stock			782,050				313,500				1,412,900
Proceeds from notes payable			210,000				-				210,000
Repayment of related party notes			(31,915	)							(31,915	)
Contributed capital			-				8,960				13,268
Net cash provided by financing			960,135				322,460				1,604,253
Net change in cash and cash equivalents			(11,736	)			97,197				85,515
Cash and cash equivalents, beginning of period			97,251				54				-
Cash and cash equivalents, end of period		$	85,515			$	97,251			$	85,515
Supplemental disclosure of cash flows for:
Interest		$	-			$	-			$	-
Income taxes		$	-			$	-			$	-
Supplemental disclosure of non-cash financing and investing:
Shares issued to settle debt		$	157,500			$	784,124			$	941,624
Debt issued to acquire assets		$	-			$	-			$	487,500
Stock issued to acquire assets		$	-			$	-			$	500,000
Assets acquired through acquisition of subsidiary		$	-			$	753,497			$	753,497
Liabilities assumed through acquisition of subsidiary		$	-			$	42,725			$	42,725
Shares issued to acquire subsidiary		$	-			$	290,000			$	290,000
Warrants issued to acquire subsidiary		$	-			$	420,811			$	420,811

 

The accompanying notes are an integral part of these statements.

 

SUNERGY, INC.

(An Exploration Stage Company)

Notes to the Financial Statements

December 31, 2011

 

 

NOTE 1.                      GENERAL ORGANIZATION AND BUSINESS

 

SUNERGY, Inc. (The Company) was organized in the state of Nevada on January 28, 2003 and is an exploration phase mineral and mining company.

 

The Company has mineral properties located in the Republic of Ghana and has not yet determined whether these properties contain reserves that are economically recoverable.  The recoverability of amounts from these properties will be dependent upon the discovery of economically recoverable reserves located within the property interests held by the Company, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreements to complete the development of the properties and upon future profitable production or proceeds for the sale thereof.

 

On October 18, 2010, the Company acquired Allied Mining and Supply LLC., a Nevada limited liability company.  Allied Mining and Supply LLC also has one subsidiary, a Sierra Leone company, Allied Mining and Supply Ltd.  As part of the acquisition the Company now has a concession in Sierra Leone. The Company has been in the exploration phase of this concession since the purchase.  No revenues have been generated as of yet.  This concession, if determined to be economically feasible, may produce gold and rare metals.

 

 

NOTE  2.                      SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

 

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Sunergy, Inc and its wholly-owned subsidiaries Mikite Gold Resources Limited, a Ghanaian company, Allied Mining and Supply LLC, a Nevada limited liability company.    Allied Mining and Supply LLC also has one 100% owed subsidiary, a Sierra Leone company, Allied Mining and Supply Ltd.  All material inter-company accounts and transactions have been eliminated.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks and financial instruments which mature within three months of the date of purchase.

 

Accounting Basis

 

The statements were prepared following generally accepted accounting principles of the United States of America (“GAAP”).  The Company operates on a December 31 fiscal year end.

 

 

 

NOTE  2.                      SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Cont.)

 

Earnings per Share

 

Basic earnings per share excludes dilution and is computed by dividing net income (loss) by the weighted-average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.  The Company has potentially dilutive common shares consisting of warrants, which are excluded from the diluted earnings per share computation in periods where the Company has incurred net loss.

 

Dividends

 

The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid during the periods shown.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period.  Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. Fair value of financial instruments is the amount at which the instruments could be exchanged in a current transaction between willing parties. The Company considers the carrying amounts of cash, certificates of deposit, accounts receivable, accounts payable, notes payable, related party and other payables, customer deposits, and short term loans approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. The Company considers the carrying amount of notes payable to approximate their fair values based on the interest rates of the instruments and the current market rate of interest.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

 

NOTE  2.                      SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Cont.)

 

Stock Based Compensation

 

The Company has on occasion issued equity and equity linked instruments to non-employees in lieu of cash to various vendors for the receipt of goods and services and, in certain circumstances the settlement of short-term loan arrangements.   The applicable GAAP establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

 

In these transactions, we issue unregistered and restricted equity instruments along with equity-linked instruments that are convertible into unregistered and restricted shares of our common stock.

 

While we have 619,504,339 shares of freely-traded stock with a quoted market price (a Level 1input within the GAAP hierarchy).  The fair value of the unregistered and restricted shares issued from December 13, 2010 through the present as valued by the quoted market price does not reflect the economic substance of the transactions, correspondingly, the quoted market price is not the most reliably measurable fair value.   We made this determination based upon the significant liquidity restrictions placed upon our unregistered restricted equity instruments since December 13, 2010.   For additional specific discussion related to these restrictions, see Item – 1A Risk Factors.

 

When unregistered common shares and equity-linked instruments convertible into unregistered common shares are issued for the settlement of short-term financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.

 

In situations in which we issue unregistered restricted common shares and equity-linked instruments in exchange for goods and services, and the value of the goods and services are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy).   We have determined this methodology reflects the risk adjusted fair value of our unregistered restricted equity instruments using a commercially reasonable valuation technique.   

 

Exploration Stage Company

 

The Company is considered to be an exploration stage entity in accordance with GAAP. All losses accumulated since inception have been considered as part of the Company’s exploration stage activities.

 

The Company is subject to several categories of risk associated with its exploration stage activities.  Mineral exploration and production is a speculative business, and involves a high degree of risk.  Among the factors that have a direct bearing on the Company’s prospects are uncertainties inherent in estimating mineral deposits, future mining production, and cash flows, particularly with respect to properties that have not been fully proven with economic mineral reserves; access to additional capital; changes in the price of the underlying commodity; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.

 

Mineral Property Costs

 

Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred.  The Company assesses the carrying costs for impairment at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

 

 

NOTE  2.                      SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Cont.)

 

Environmental Costs

 

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate.  Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed.  Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated.  Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts.

 

Asset Retirement Obligation

 

The Company records asset retirement obligations as a liability in the period in which a legal obligation associated with the retirement of tangible long-lived assets result from the acquisition, construction, development and/or normal use of the assets.  At December 31, 2011, the Company had not undertaken any drilling activity on its properties and had not incurred significant reclamation obligations. Consequently no asset retirement obligation was accrued in the financial statements for the years ended December 31, 2011 and December 31, 2010.

 

Property, Plant and Equipment

Property and equipment are recorded at historical cost.  Minor additions and renewals are expensed in the year incurred.  Major additions and renewals are capitalized and depreciated over their estimated useful lives.  When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.  Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes.  The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate.  The estimated useful life for property and equipment held at December 31, 2011 and 2010 is five years.

 

Impairment of Long-Lived Assets

 

The Company reviews the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things, assumptions about future operating performance, and may differ from actual cash flows. Long-lived assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.  If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made.  No impairment was recognized for the periods presented.

 

Recent Accounting Guidance Not Yet Adopted

 

The Company has reviewed recently issued accounting pronouncements and does not expect any to have a material impact on our financial position, results of operations, or cash flows.

 

Reclassifications

 

Certain reclassifications have been made to the prior period financial statement presentation in order to conform to the current year presentation.  For purposes of the statement of cash flows, accounts payable due to related parties (classified as operational advances for 2010 reporting purposes) has been reclassified from financing activities to operating activities to conform to the current year presentation based on the substance of the underlying transactions being operational in nature.

 

The above and other reclassifications had no effect on the previously reported financial position, results of operations, or cash flows.

 

 

NOTE 3.                      GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  Since inception, the Company has not identified any proven or probable reserve and correspondingly has not generated any revenue during its exploration stage.  This raises substantial doubt about the Company’s ability to continue as a going concern. These financials do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. The Company needs to raise additional funds to continue as a going concern.

 

NOTE 4                       PURCHASE OF ALLIED MINING AND SUPPLY LLC.

 

On October 18, 2010, the Company entered into a membership purchase agreement with Allied Mining and Supply, LLC for the purchase of 100% of the issued and outstanding membership interest of Allied Mining, a Nevada Limited Liability company, which owns the rights to Exploration License #EXPL 5/2009 on the 140 sq km Pampana River concession in Sierra Leone, West Africa along with various exploration equipment.

 

In consideration for the purchase of the membership interests, the Company agreed to issue 100,000,000 units at a market price of $0.0029 to Allied Mining.  Each unit consists of one share of restricted stock, one 12 month share purchase warrant exercisable at $0.0025 per share and one 12 month share purchase warrant exercisable at $0.005 per share.  The value of the purchase is based on the market price of the stock issued and the fair value of the warrants as calculated using the Black-Sholes option pricing model

 

Because the shares were not issued until January 2011 the Company recorded the purchase allocating market value of the stock to Stock Payable and the value of the warrants to Additional Paid in Capital as follows:

 

Cash		$	39
Pampana river concession			753,497
TOTAL ASSETS		$	753,536
Accounts payable			42,725
TOTAL LIABILITIES		$	42,725
Net Assets in excess of liabilities		$	710,811
Common Stock		$	100,000
Additional paid in capital			610,811
TOTAL COST OF ACQUSITION		$	710,811

 

The condensed pro forma balance sheets and statements of operations as of and for the year ended December 31, 2010 are as follows:

 

		Year Ended December 31, 2010
Balance Sheet						Allied
						Mining &
		Sunergy, Inc.				Supply LLC				Purchase				Pro
		Actual				Actual				Adjustments				Forma
ASSETS
Current Assets
Cash and cash equivalents		$	47,401			$	49,850			$	-			$	97,251
Deposits			-				50,000				-				50,000
Long Term Assets
Exploratory properties			1,000,000				-				753,497				1,753,497
Property, plant and equipment			-				2,254				-				2,254
Total Assets		$	1,047,401			$	102,104			$	753,497			$	1,903,002
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities		$	(35,124	)		$	42,725			$	-			$	7,601
Accruals - Related Party			-				-				-				-
Operational Advances - Related Party			83,991				-				-				83,991
Total Current Liabilities			48,867				42,725				-				91,592
Stockholders' Equity
Common Stock			946,198				-				100,000				1,046,198
Additional paid in capital			1,781,661				316,650				610,810				2,709,121
Prepaid expense-stock related			-				-				-				-
Subscriptions payable			414,861				-				-				414,861
Accumulated deficit during															-
development stage			(2,144,186	)			(257,271	)			42,686				(2,358,770	)
Total stockholders' deficit			998,534				59,379				753,497				1,811,410
Total Liabilities and stockholders' deficit		$	1,047,401			$	102,104			$	753,497			$	1,903,002

 

 

 

NOTE 4                                PURCHASE OF ALLIED MINING AND SUPPLY LLC. (Cont)

 

Statement of Operations		Year Ended December 31, 2010
						Allied
						Mining &
		Sunergy, Inc.				Supply LLC				Purchase				Pro
		Actual				Actual				Adjustments				Forma
Income		$	-			$	-			$	-			$	-
Operating Expenses
General and administrative			143,043				-				-				143,043
Management salary			71,000				-				-				71,000
Fair value differential for stock issued to
Settle management compensation			297,500												297,500
Professional fees			71,809				-				-				71,809
Exploration costs			27,556				255,119				(174,686	)			107,989
Total expenses			610,908				255,119				(174,686	)			691,341
Net loss from operations			(610,908	)			(255,119	)			(174,686	)			(691,341	)
Other expenses
Interest expense-related party							-				-				-
Interest expense			(1,043,628	)			-				-				(1,043,627	)
Total other expenses			(1,043,628	)			-				-				(1,043,627	)
Net loss		$	(1,654,536	)		$	(255,119	)		$	(174,686	)		$	(1,734,968	)

 

The $174,686 purchase adjustment is the accumulated deficit thru the date of purchase of October 18, 2010.

 

NOTE 5.                      PROPERTY, PLANT AND EQUIPMENT

 

Property, Plant and Equipment consisted of the following at December 31, 2011 and 2010:

 

		December 31,				December 31,
		2011				2010
Exploration equipment		$	247,260			$	-
Rolling stock			13,500				-
Office furniture and equipment			2,254				2,254
Subtotal		$	263,014			$	2,254
Less accumulated depreciation			(38,007	)			-
Property, and equipment - net		$	225,007			$	2,254

 

 

 

NOTE 6.                      MINERAL PROPERTIES

 

Nyinahin Mining Concession

 

Through its wholly-owned subsidiary, Mikite Gold Resources Limited, the Company holds a 100% interest in a mineral concession located in the Ashanti region of Ghana, known as the Nyinahin concession.  The Company acquired the concession for total consideration of $1,000,000 in 2008.

 

As of December 31, 2011 the Company has not identified any proven or probable reserves within the Nyinahin Concession, correspondingly, all exploration activities since the acquisition have been expensed.

 

Additionally, the prior concession owner retained a 5% net smelter royalty for future production from the property, if any.

 

Pampana River Concession

 

On October 18, 2010, the Company entered into a membership purchase agreement with Allied Mining and Supply, LLC for the purchase of 100% of the issued and outstanding membership interest of Allied Mining, a Nevada Limited Liability company, which owns the rights to Exploration License #EXPL 5/2009 on the 140 sq km Pampana River concession in Sierra Leone, West Africa.

 

The Company issued 100,000,000 equity units for total consideration of $753,497 to acquire the Pampana River concession.

 

As of December 31, 2011 the Company has not identified any proven or probable reserves within the Pampana River Concession, correspondingly, all exploration activities since the acquisition have been expensed.

 

See Note 4 for additional detail related to the acquisition of the Pampana River Concession.

 

NOTE 7.                      STOCKHOLDERS’ EQUITY

 

Common Stock

 

The Company originally had 75,000,000 shares of common stock authorized at a $0.001 par value and on September 16, 2006 executed a 5:1 forward stock split bringing the authorized common shares to 375,000,000 with a par value of $0.001 per share and the issued and outstanding shares as of September 16, 2006 from 10,139,500 to 50,697,500 shares.  On August 17, 2010 the Company executed a 10:1 forward stock split increasing the authorized common shares to 3,750,000,000 and the then issued and outstanding shares from 94,619,788 to 946,197,880 shares.  The stock splits are retroactively applied to these financial statements resulting in an increase in the number of shares outstanding and a decrease in issued price per share.

 

A summary of shares issued follows:

 

·	On January 31, 2003 the Company issued 500,000,000 common shares to the founders for $10,000 cash.

 

·	On September 22, 2003, the Company issued 6,975,000 common shares for $13,950 cash.

 

·	On October 10, 2008, the Company issued 6,000,000 common shares plus an equal number of two-year detachable warrants exercisable at $0.025 per share in a private placement for $150,000 or $0.025 per share.

 

·	On December 10, 2008, the Company issued 20,000,000 common shares valued at $0.025 per share or $500,000 as partial payment for the acquisition of the Nyinahin Mining Concession.

 

·	On March 1, 2009, the Company issued 5,000,000 common shares valued at $0.04 per share or $200,000 for one year consulting services and recorded as prepaid expense.

 

 

 

NOTE 7.                      STOCKHOLDERS’ EQUITY (Cont.)

 

·	On June 3, 2010 the Company issued 20,000,000 common shares valued at $0.0065 per share to its officers for executive services with an aggregate market value of $130,000.

 

·	On June 30, 2010 the Company issued 75,000,000 common shares valued $0.0058 per share or $432,500 in full settlement of a $250,000 note and $12,500 accumulated interest and $170,000 additional interest resulting from the fair value differential.

 

·	On June 3, 2010 the Company issued 40,992,880 common shares at $0.0035 per share for the $143,400 stock payable.

 

·	On July 30, 2010, the Company issued 25,000,000 common shares at $0.0067 per share to its officers for executive services. A total value of $167,500 was recorded as compensation expense.

 

·	Between July 15 and July 22, 2010, the Company issued 39,980,000 common shares to settle $67,980 worth of debts.  The fair value of the shares on the date of issuance was $0.004 per share for a total value of $175,790 which was allocated as $67,980 to the debt and $107,810 to interest expense.

 

·	On July 15, 2010, the Company issued 14,700,000 common shares to settle $24,990 debt.  The fair value of the shares on the date of issuance was $0.004 per share total value of $58,800 which was allocated as $24,990 to the debt and $33,810 to interest expense.

 

·	On July 10, 2010, the Company issued 17,650,000 common shares to settle $30,000 debt.  The fair value of the shares on the date of issuance was $0.004 per share total value of $70,600 which was allocated as $30,000 to the debt and $40,600 to interest expense.

 

·

On August 13, 2010, the Company issued 150,000,000 common shares to settle $255,000 debt.  The fair value of the shares issued on the date of each individual settlement was $724,000 resulting in the company allocating $237,500 to the note, $17,500 to accrued interest and $469,000 to interest expense.

 

·

On August 19, 2010, the Company issued 10,800,000 common shares at $0.004 per share for $18,361 executive services with a fair value of $43,200. Also, the Company issued 14,100,000 common shares to settle $23,932 in debt.  The fair value of the shares on the dates of issuance was $0.015 per share with a total value of $211,500 which was allocated as $23,932 to the debt and $187,568 to interest expense.

 

·

On October 18, 2010, the Company agreed to issue 100,000,000 units which consist of one share of common stock, one 12 month warrant exercisable at $0.0025 and one 12 month warrant exercisable at $0.005 per share.  The fair value of the shares issued on the date of the agreement plus the value of the warrants was $710,811.  The 100,000,000 shares were valued as of the closing price on October 18, 2010 of $.0029 resulting in a value of $290,000.  The shares were not issued until January 2011 and thus have been recorded as stock payable at December 31, 2010. The warrants were valued using the Black-Scholes pricing model using a one year term, 231% volatility and a .23% risk free rate.  The total value of the warrants is $420,811 and recorded in additional paid in capital. See Note 4 for further information regarding the purchase price allocation.

 

·

During the last quarter of 2010, the Company received cash in the amount of $313,500 for prepaid stock subscriptions at $0.0025.  On January 11, 2011, the Company issued 125,400,000 units consisting of one common share and one 12 month warrant exercisable at $0.05 per share to satisfy the subscriptions.

 

·

On December 15, 2010, the Company settled $47,500 in accounts payable through the execution of a subscription to issue 19,000,000 shares of stock at $.0025.  The fair value was based on private subscriptions as the settlement was finalized concurrent with the sale of stock to private investors. The shares were not issued as of December 31, 2010 and consequently have been recorded as stock payable.

 

 

 

NOTE 7.                      STOCKHOLDERS’ EQUITY (Cont.)

 

·

On January 11, 2011 the Company issued 125,400,000 units consisting of one common share and one 12 month warrant exercisable at $0.005 for $0.0025 per share for $313,500 cash.  The Company entered into various transactions to issue equivalent units of one common stock and one 12 month purchase warrant exercisable at $0.005 during the quarter.

 

·	On January 11, 2011 the Company settled $47,500 in accounts payable through the issuance of 19,000,000 units at $0.0025 with each unit consisting of one common share and one 12 month warrant exercisable at $0.005.

 

·	On January 11, 2011 the Company issued 18,779,960 units consisting of one common share and one 12 month warrant exercisable at $0.005 for total consideration of $44,861.

 

·	On January 11, 2011 the Company issued 4,000,000 units consisting of one common share and one 12 month warrant exercisable at $0.005 for total consideration of $10,000.

 

·	On January 11, 2011 the Company issued 15,440,000 units consisting of one common share and one 12 month warrant exercisable at $0.005 for total consideration of $38,600 to accounts payable due to a related party.

 

·	On January 11, 2011 the Company issued 2,500,000 units consisting of one common share and one 12 month warrant exercisable at $0.005 for total consideration of $6,250 of consulting services.

 

·	On February 24, 2011 the Company issued 10,000,000 shares of common stock valued at $0.0025 per share or $25,000 for consulting services recorded in exploration expense.

 

·	On May 3, 2011 the Company issued 1,000,000 shares of common stock for $5,000 cash in the exercise of 1,000,000 warrants.

 

·	On June 22, 2011, the Company issued 13,300,000 units consisting of one common share and one 12 month warrant with 13,000,000 warrants exercisable at $0.005 and 300,000 warrants exercisable at $0.0075 per share as incentive to enter into note payable agreements. The shares were valued at $34,550.

 

·	On June 22, 2011, the Company issued 7,714,285 units for $27,000 cash consisting of one common share and one 12 month warrant exercisable at $0.006.

 

·

On June 22, 2011, the Company issued 1,200,000 units for $3,000 cash at $0.025 per unit with each unit consisting of one common share and one 12 month warrant exercisable at $0.005 and 27,928,567 units for $97,750 cash at $0.0035 per unit with each unit consisting of one common share and one 12 month warrant exercisable at $0.006.

 

·

On June 22, 2011, the Company issued 100,000,000 units at $0.0035 for $350,000 cash with each unit consisting of one common share and one 12 month warrant exercisable at$0.007 per share.  Upon exercise each original warrant will be issued an incentive warrant if exercised within seven months.  The number of incentive warrants issued for each original warrant exercised will decrease to 80%, 70%, 60%, 50%, and 40% if exercised on the 8th, 9th, 10th, 11th or 12th month respectively.  Incentive warrants will be exercisable at a 30% discount of the preceding five day average price per share.

 

·

On June 22, 2011, the Company issued 900,000 units consisting of one share of common stock and one 12 month warrant exercisable at $0.0075 per share, as incentive to enter into various loan agreements. The units were valued at $3,350 based on the $0.0035 unit price from subscriptions sold for cash in the same period.

 

 

NOTE 7.                      STOCKHOLDERS’ EQUITY (Cont.)

 

·	During the third quarter of 2011, the Company issued 10,000,000 common shares at $0.0025 for $25,000 cash and 8,000,000 common shares at $0.005 for $40,000 cash for the exercise of warrants.

 

·	During the third quarter of 2011, the Company issued 3,000,000 common shares for various services.  These shares were valued at $10,500 based on the $0.0035 cash subscription price for shares sold during the same period.

 

·	During the third quarter 2011, 10,357,142 units were issued for $36,250 cash at $0.0035 per unit with each unit consisting of one common share and one 12 month warrant exercisable at $0.007 per share.

 

·	On July 30, 2011, the Company issued 22,000,000 units to settle $52,500 of debt and $16,500 accumulated interest.  Each unit consists of one common share and one 12 month warrant with 14,000,000 exercisable at $0.0075 and 8,000,000 exercisable at $0.005 per share.

 

·	On September 26, 2011, the Company issued 7,000,000 units to settle $17,500 of debt and $7,000 accumulated interest.  Each unit consists of one common share and one 12 month warrant exercisable at $0.0075 per share.

 

·	On September 30, 2011, the Company issued 1,428,571 units were issued for cash at $0.0035 per unit with each unit consisting of one common share and one 12 month warrant exercisable at $0.007 per share.

 

·	On September 30, 2011, 5,000,000 common shares were issued for cash in the exercise of warrants at $0.0025 per share.

 

·	On September 30, 2011, the Company issued 4,500,000 shares for consulting services at $0.0035 per share.

 

·	On September 30, 2011, 6,000,000 units were issued for consulting services at $0.0035 per unit with each unit consisting of one common share and one 12 month warrant exercisable at $0.005 per share.

 

·	On December 17, 2011 the Company issued 2,000,000 common shares for cash in the exercise of warrants at $0.005 per share.

 

·	During December 2011, the Company issued 22,299,998 units for cash at $0.0035 per unit with each unit consisting of one common share and one 12 month share purchase warrant with 14,642,855 exercisable at $0.005.

 

·	During December 2011, the Company issued 5,900,000 shares in the exercise of warrants at $0.0025 per share.

 

·	During December 2011, the Company issued 1,500,000 common shares in the exercise of warrants at $0.025 per share and 14,800,000 common shares in the exercise of warrants at $0.005 per share.

 

·	During December 2011, the Company issued 40,571,428 units at $0.0035 to settle debt with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.005.

 

·	During the first quarter of 2012, the Company issued 36,100,000 shares in the exercise of warrants at $0.0025 per share and 4,000,000 shares in the exercise of warrants at $0.005 per share.

 

·	During the first quarter of 2012, the Company issued 2,428,570 units for cash at $0.0035 per unit, with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.007 per share

 

 

NOTE 7.                      STOCKHOLDERS’ EQUITY (Cont.)

 

·	During the first quarter of 2012, the Company issued 6,000,000 units at $0.0025 per share for consulting services with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.005 per share.

 

·	During the second quarter of 2012, the Company issued 7,592,857 units for cash at $0.0035 per unit with each unit consisting of one common share and one 12 month share purchase warrant.  Of the warrants issued 7,142,857 are exercisable at $0.007 and 450,000 are exercisable at $0.005 per share.

 

Contributed Capital

 

·	During the year ended 2004, an officer donated services valued at $401 which was treated as contributed capital.

 

·	During the year ended 2005, an officer donated services valued at $938 which was treated as contributed capital.

 

·	During the year ended 2006, an officer donated services valued at $1,959 which was treated as contributed capital.

 

·	During the year ended 2009, an officer donated services valued at $1,010 which was treated as contributed capital.

 

·	During the quarter ended March 31, 2010, an officer paid expenses on behalf of the Company valued at $4,000 which was treated as contributed capital.

 

·	During the quarter ended June 30, 2010, an officer paid expenses on behalf of the Company valued at $4,960 which was treated as contributed capital.

 

Outstanding Warrants

 

On December 31, 2011 the Company had warrants outstanding for the purchase of an aggregate of 592,319,951 shares of its common stock, which are summarized in the table below:

 

		Warrants				Exercise			Expiration
		Outstanding				Price			Date
			71,900,000				0.0025		16-Jul-2012
			100,000,000				0.005		16-Jul-2012
			157,819,960				0.005		16-Jul-2012
			14,200,000				0.005		22-Dec-2012
			31,642,852				0.006		22-Dec-2012
			100,000,000				0.007		22-Dec-2012
			1,200,000				0.0075		22-Dec-2012
			10,357,142				0.007		31-Jan-2013
			82,771,426				0.005		31-Dec-2013
			1,428,571				0.007		31-Dec-2013
			21,000,000				0.0075		31-Dec-2013
Total			592,319,951

 

 

 

NOTE 7.                      STOCKHOLDERS’ EQUITY (Cont.)

 

Information relating to warrant activity during the reporting period follows:

 

										Weighted
										Average
		Number of				Contingent				Exercise
		Warrants				Warrants				Price
Total Warrants outstanding at December 31, 2010*			200,000,000				-				0.00375
Plus:  Warrants Issued			451,719,951				100,000,000				0.0057
Less:  Warrants Exercised			(59,400,000	)
Less: Warrants Expired
Total Warrants outstanding at December 31, 2011			592,319,951				100,000,000				0.0050

 

* All warrants outstanding at December 31, 2010 were issued as part of the acquisition of Allied Mining and Supply.  No other warrant activity took place for the year ended December 31, 2010.

 

NOTE 8.                      NOTES PAYABLE

 

During the year ended December 31, 2011 we issued $255,000 in note payables to various investors for the purchase of equipment used in exploration.  The notes consisted of $210,000 in loans and $45,000 in the form of an original issue discount due at maturity.  As an incentive for the note holders we also issued 14,200,000 units with each unit consisting of one restricted share of common stock and one 12 month common share purchase warrant valued at $37,700 and recorded as prepaid financing cost.  As of December 31, 2011, the Company has amortized the entire $37,700 prepaid financing cost and $45,000 original issue discount.

 

Of the above loans, $105,500 were collateralized by 34,000,000 equity units with each unit consisting of one share of common stock and a one year warrant.  Of the 34,000,000 warrants 14,000,000 are exercisable at $0.005 per share, 15,000,000 are exercisable at $0.0075, and 5,000,000 are exercisable at $0.007 per share.

 

As of December 31, 2011, the Company was in default on all of the remaining outstanding notes payable totaling $65,585.  The Company accrues interests on these notes currently in default at rates ranging from $100 to $500 per day.  As of December 31, 2011 the Company had accrued interest of $101,700 related to the outstanding notes payable.

 

On July 30, 2011 the Company issued 8,000,000 equity units with each unit consisting of one common share and one twelve month warrant exercisable at $0.005 per share to settle $17,500 note and $2,500 accrued interest.

 

On September 26th, 2011 the Company issued 7,000,000 equity units with each unit consisting of one common share and one twelve month warrant exercisable at $0.0075 per share to settle $17,500 note and $7,000 accrued interest.

 

On October 11, 2011 the Company issued 14,000,000 equity units with each unit consisting of one common share and one twelve month warrant exercisable at $0.0075 per share to settle two $17,500 notes and $14,000 accrued interest and penalty.

 

 

NOTE 8.                      NOTES PAYABLE (Cont.)

 

During December 2011 the Company issued 10,000,000 equity units with each unit consisting of one common share and one twelve month warrant exercisable at $0.005 per share to settle a $25,000 note and $15,500 accrued interest and penalty.

 

During December 2011 the Company issued 30,571,428 equity units with each unit consisting of one common share and one twelve month warrant exercisable at $0.005 per share to settle a $62,500 note and $44,500 accrued interest and penalty.

 

A summary of the outstanding balance for the periods ended September 30, 2011 and December 31, 2010 follows:

 

		December 31,				December 31,
		2011				2010
Notes Payable		$	255,000			$	-
Cash Payments			(31,915	)
Equity Loan Settlements			(157,500	)			-
Total Notes Payable		$	65,585			$	-

 

NOTE 9.                      RELATED PARTY TRANSACTIONS

 

Certain related parties assist in financing operations by personally paying expenses which the Company considers as short-term non-interest bearing operational loans and are recorded as related party accounts payable.  These expenses are incurred within the normal course of business of the Company.

 

The Company accrues unpaid management and director fees.  A summary of related party transactions for the years ended December 31, 2011 and 2010 follow:

 

		December 31,				December 31,
		2011				2010
Accounts Payable-Related Party		$	172,202			$	83,991
Total Related Party		$	172,202			$	83,991

 

 

 

NOTE 10.                      PROVISION FOR INCOME TAXES

 

The Company provides for income taxes under ASC 740 “Income Taxes” which requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the temporary differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.

 

The standard requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset.  Accordingly, a valuation allowance equal to the deferred tax asset has been recorded.  The total deferred tax asset is $847,491 which is calculated by multiplying a 35% estimated tax rate by the cumulative NOL of $2,421,404.  The total valuation allowance is also $847,491.  Details for the years ended December 31, 2011 and 2010 follow:

 

		Period				Year
		Ended				Ended
		31-Dec-11				31-Dec-10
Deferred Tax Asset		$	847,491			$	274,555
Valuation Allowance			(847,491	)			(274,555	)
Income Tax Expense		$	-			$	-

 

 

		Period				Year
		Ended				Ended
		31-Dec-11				31-Dec-10
Change in Net Operating Loss		$	572,936			$	129,678
Change in Valuation Allowance			(572,936	)			(129,678	)
Income Tax Expense		$	-			$	-

 

 

 

NOTE 10.                      PROVISION FOR INCOME TAXES (Cont.)

The differences between the statutory income tax rates computed at the U.S. federal statutory rate and our effective rate were the following:

 

		Rate
Federal Statutory Rate			35	%
Current Loss and NOL Carry Forward			-35	%
Net Rate			0	%

 

Below is a chart showing the estimated federal net operating losses and the years in which they will expire.

 

Period		Net Operating Loss				Expiration
2003		$	30,313				2023
2004			41,362				2024
2005			26,093				2025
2006			39,746				2026
2007			55,103				2027
2008			98,445				2028
2009			122,873				2029
2010			370,508				2030
2010 “True –up”			169,556				2030
2011 Est.			1,467,405				2031
Total NOL		$	2,421,404

 

The Company is in the process of filing an amended 1120 for the year ended December 31, 2010.  The main items of amendment relate to the adequacy of the reporting of the foreign subsidiaries.  The Company accrued $60,000 in estimated penalties included in accounts payable at December 31, 2011 and general and administrative expenses for the year then ended.  The settlement of the accrued penalties will be recognized in the period in which the facts and circumstances indicate that it is more likely than not the Company’s position will be sustained.

 

The Company does not currently have any uncertain tax positions.

 

The Company’s tax returns currently subject to audit by the Internal Revenue Service are for the periods ended December 31, 2005 and subsequent.

 

NOTE 11.                      SUBSEQUENT EVENTS

 

During the first quarter of 2012, the Company issued 29,850,000 shares for the exercise of warrants at $0.0025 per share and 4,000,000 shares in the exercise of warrants at $0.005 per share.

 

During the first quarter of 2012, the Company issued 2,428,570 units for cash at $0.0035 per unit with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.007 per share.

 

During the first quarter of 2012, the Company issued 6,000,000 units at $0.0025 per share for consulting services with each unit consisting of one common share and one 12 month share purchase warrant exercisable at $0.005 per share.

 

During the second quarter of 2012, the Company issued 13,307,141 units for $46,575 cash at $0.0035 per unit with each unit consisting of one common share and one 12 month share purchase warrant.  Of the warrants issued, 7,142,857 are exercisable at $0.007 per share and 6,164,284 exercisable at $0.005 per share.

 

 

  

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

SUNERGY, INC.

 

By:  /s/ Larry M. Bigler Larry M. Bigler Interim President (Principal Executive Officer), Chief Financial Officer (Principal Accounting Officer) and Director

Dated: November 26, 2012