FUTURELAND CORP. - FORM 10-Q - November 19, 2014

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

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

COMMISSION FILE NUMBER: 000-53377
 
AEGEA, INC.
 (Exact Name of Registrant as specified in its charter)

 Colorado
41-2230041
(State or other jurisdiction
(I.R.S. Employer Identification No.)
of incorporation of organization) 
  
 
772 U.S. Highway One, Suite 200
North Palm Beach, FL   33408
(Address of principal executive offices) 
 
(561) 287-5422
 (Registrant's telephone number, including area code)
 
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)

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 þ No o

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

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.

Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
(Do not check if smaller reporting company)
o
Smaller reporting company
þ

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  119,499,261 shares of common stock are issued and outstanding as of November 19, 2014.
 
 
 
 
 
 
AEGEA, INC.
FORM 10-Q
September 30, 2014

TABLE OF CONTENTS
 
 
    Page No. 
 PART I. - FINANCIAL INFORMATION
Item 1.
Financial Statements.
4
 
Consolidated Balance Sheets as of September 30, 2014 (Unaudited) and December 31, 2013
 4
 
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 (Unaudited)
5
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)
 6
 
Notes to Unaudited Consolidated Financial Statements.
 7-13
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
14
Item 3
Quantitative and Qualitative Disclosures About Market Risk.
17
Item 4
Controls and Procedures.
17
 
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings.
18
Item 1A.
Risk Factors.
18
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
19
Item 3.
Defaults Upon Senior Securities.
19
Item 4.
Mine Safety Disclosures.
19
Item 5.
Other Information.
19
Item 6.
Exhibits.
20
 
 

 
- 2 -
 
 
 
FORWARD LOOKING STATEMENTS
 
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
 
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K as filed with the Securities and Exchange Commission on April 11, 2014, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC.   You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
 
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
 
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
 
 
- 3 -
 
 
 
PART I FINANCIAL INFORMATION

Item 1. Financial Statements
 
AEGEA, INC. AND SUBSIDIARIES
  
Consolidated Balance Sheets
  
             
   
September 30,
    
December 31,
  
   
2014
    
2013
  
   
(Unaudited)
        
Assets
            
             
Current Assets:
            
Cash
   $ 18,238     $ 8,476  
Vacant land deposit
     -       250,000  
                 
Total Current Assets
     18,238       258,476  
                 
Total Assets
   $ 18,238     $ 258,476  
                 
Liabilities and Stockholders' Deficit
                
                 
Current Liabilities:
                
Accounts payable
   $ 63,366     $ 140,986  
Accrued expenses
     27,666       27,288  
Short-term loans - related parties
     73,807       160,000  
Convertible debenture payable, net of premium and discount
     183,456       105,706  
Accrued interest
     20,617       3,769  
Line of credit - related party
     250,000       250,000  
Accrued interest - related party
     115,601       81,851  
Derivative liability
     15,358       -  
                 
Total Current Liabilities
     749,871       769,600  
                 
Stockholders' Equity (Deficit):
                
Preferred stock, No par value; 100,000,000 shares authorized;
     -       -  
Series A convertible preferred Stock, $0.0001 no par value; 200,000 shares authorized, no shares issued and outstanding at September 30, 2014 and December 31, 2013, repectively
     2,150       2,150  
Series B convertible preferred Stock, $0.0001 no par value; 1,000 shares authorized, 1,000 shares issued and outstanding at September 30, 2014 and December 31, 2013, repectively
                
Common stock, no par value; 1,000,000,000 shares authorized, 119,499,261 and 117,112,619 shares issued and outstanding at September 30, 2014 and December 31, 2013, repectively
     1,012,846       894,506  
Additional paid-in capital
     764,934       605,976  
Accumulated deficit
     (2,511,563 )     (2,013,756 )
                 
Total Stockholders' Deficit
     (731,633 )     (511,124 )
                 
Total Liabilities and Stockholders' Deficit
   $ 18,238     $ 258,476  
                 
See accompanying notes to the unaudited consolidated financial statements.
  
 
 
- 4 -
 
 
AEGEA, INC. AND SUBSIDIARIES
  
Consolidated Statements of Operations
  
                         
                         
                         
   
For the Three Months Ended
    
For the Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2014
    
2013
    
2014
    
2013
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
                         
Revenue
   $ -     $ -     $ -     $ -  
                                 
Operating Expenses:
                                
General and administrative
     8,145       68,508       64,890       79,985  
Professional fees
     18,356       513,822       299,408       608,104  
Research and development expenses
     17,772       27,858       32,265       40,478  
                                 
Total Operating Expenses
     44,273       610,188       396,563       728,567  
                                 
Loss from Operations
     (44,273 )     (610,188 )     (396,563 )     (728,567 )
                                 
Other Income (Expenses):
                                
Gains on settlement of liabilities
     -       -       7,913       -  
   Interest expense
     (17,066 )     (46,600 )     (109,252 )     (72,139 )
   Change in fair value of derivative liability
     95       -       95       -  
                                 
Total Other Expenses
     (16,971 )     (46,600 )     (101,244 )     (72,139 )
                                 
Net Loss
   $ (61,244 )   $ (656,788 )   $ (497,807 )   $ (800,706 )
                                 
Net Loss Per Common Share:
                                
Basic and Diluted
   $ (0.00 )   $ (0.01 )   $ (0.00 )   $ (0.01 )
                                 
Weighted Average Number of Common Shares Outstanding:
                                
Basic and Diluted
     119,499,261       110,065,217       119,081,516       99,413,919  
                                 
                                 
See accompanying notes to unaudited consolidated financial statements.
  
 
 
- 5 -
 
 
AEGEA, INC. AND SUBSIDIARIES
  
Consolidated Statements of Cash Flows
  
             
             
   
For the Nine
    
For the Nine
  
   
Months Ended
    
Months Ended
  
   
September 30,
    
September 30,
  
   
2014
    
2013
  
   
(Unaudited)
    
(Unaudited)
  
Cash Flows from Operating Activities:
            
Net loss
   $ (497,807 )   $ (800,706 )
Adjustments to reconcile net loss to net cash used in operating activities:
                
Common stock issued for services
     100,940       492,150  
Contributed rent and services
     141,506       -  
Amortization of discount and premium related to convertible debt
     58,655       30,000  
Change in fair value of derivative
     (95 )        
Loss on settlement of inventory
     -       247  
Gain on debt conversion
     (52 )     -  
Changes in operating assets and liabilities:
                
Accounts payable
     (60,168 )     (18,694 )
Accrued expenses
     378       20,698  
Accrued interest - line of credit
     16,848       4,398  
Accrued interest - related party
     33,750       37,741  
                 
Net Cash Used in Operating Activities
     (206,045 )     (234,166 )
                 
Cash Flows from Investing Activities:
                
Acquisition of cash in recapitalization
     -       172  
Refund of vacant land deposit
     250,000       -  
                 
Net Cash Provided by Investing Activities
     250,000       172  
                 
Cash Flows from Financing Activities:
                
Bank overdraft
     -       (656 )
Proceed from convertible debentures
     52,000       130,000  
Proceed from short-term loans - related party
     159,915       60,000  
Repayment of short-term loans - related party
     (246,108 )     -  
Proceed from line of credit - related party
     -       23,940  
Proceed from capital contributions
     -       40,200  
                 
Net Cash (Used in) Provided by Financing Activities
     (34,193 )     253,484  
                 
Net Increase in Cash
     9,762       19,490  
                 
Cash, beginning of period
     8,476       -  
                 
Cash, end of period
   $ 18,238     $ 19,490  
                 
Cash Paid for:
                
Interest
   $ -     $ -  
Income taxes
   $ -     $ -  
                 
Non-cash Investing and Financing Activities:
                
Common stock issued for convertible debt
   $ 17,400     $ -  
Put premium reclassified to additional paid-in capital
   $ 17,452     $ -  
Transfer of line of credit to equity
   $ -     $ 10,000  
 Increase in debt discount and derivative liability
   $ 15,453     $ -  
                 
See accompanying notes to the unaudited consolidated financial statements.
  
 
 
- 6 -
 
 
AEGEA, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)


NOTE 1: NATURE OF OPERATIONS, BASIS OF PRESENTATION, RECAPITALIZATION, AND GOING CONCERN

Nature of Operations

Aegea, Inc., (“the Company”) began operations on February 3, 2012 with the purpose of developing a mega-resort city in South Florida that will become an international community and leisure destination worldwide. The resort will offer residents and guests a unique living environment, integrating residential and hospitality with attractions and entertainment, and will include theme parks, a sports and education complex, and various venues for music and the arts. The character of the project will be marked by a network of canals and lagoons with authentic immersive architecture from around the world. Aegea’s shopping, dining and hospitality will become a global marketplace for domestic and international brands. The Company has no revenues and activities consist of organizational activities, capital raising, and developing the business plan.

Recapitalization

On July 22, 2013, members of Aegea, LLC exchanged 100% of the membership interests in Aegea, LLC for 94,000,000 shares of Aegea, Inc. common stock, no par value per share, representing approximately 88.7% of Aegea, Inc.’s issued and outstanding shares of common stock (the “Exchange”). The Exchange was made pursuant to the terms of the June 5, 2013 Amended and Restated Share Exchange Agreement by and among Aegea, LLC, its members, Aegea, Inc., Energis Petroleum, LLC, a Florida limited liability company (“Energis”) and the members of Energis. The former members of Aegea, LLC obtained voting and management control of Aegea, Inc. upon completion of the Exchange.

Aegea, Inc.’s acquisition of Aegea, LLC was accounted for as a recapitalization of Aegea LLC since the members of Aegea, LLC obtained voting and managing control of Aegea, Inc. Aegea, LLC was the acquirer for financial reporting purposes and Aegea, Inc. was the acquired company. Consequently, the consolidated financial statements after completion of the acquisition include the assets and liabilities of both Aegea, LLC and Aegea, Inc., the historical operations of Aegea, LLC and their consolidated operations from the July 22, 2013 closing date of the acquisition. Aegea, LLC retroactively applied its name change and recapitalization pursuant to the terms of the Share Exchange Agreement for all periods presented in the accompanying consolidated financial statements.

Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries Florida Heartland EB-5 Regional Center LLC, and Aegea, LLC. All inter-company balances and transactions have been eliminated in consolidation.

Basis for Presentation for Interim Financial Statements

These unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (”SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by "GAAP” for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The accounting policies and procedures used in the preparation of these unaudited consolidated financial statements have been derived from the audited consolidated financial statements of the Company for the year ended December 31, 2013. The consolidated balance sheet as of December 31, 2013 was also derived from those audited consolidated financial statements. The results of operations for the nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year. The Company retroactively applied its name change and recapitalization per the share exchange agreement for all periods presented in the accompanying unaudited consolidated financial statements.
 
Going Concern
 
As reflected in the accompanying unaudited consolidated financial statements, the Company had a net loss and net cash used in operations of $497,807 and $206,045, respectively, for the nine months ended September 30, 2014 and a working capital deficit, stockholders’ deficit, and accumulated deficit of $731,633, $731,633, and $2,511,563, respectively, at September 30, 2014 and has no revenues. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise additional capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
 
- 7 -
 
 
AEGEA, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)


 
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with maturities of three months or less at the time of purchase.

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 revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of equity issued for services. Actual results could differ from these estimates.

Fair Value Measurements and Fair Value of Financial Instruments

The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3: Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
 
ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We did not elect to apply the fair value option to any outstanding instruments.

The following table reflects changes for nine months ended September 30, 2014 for all financial assets and liabilities categorized as Level 3 as of September 30, 2014.

Liabilities:
      
Balance of derivative liabilities as of December 31, 2013
  
$
-
  
Initial fair value of derivative liability associated with convertible note
    
15.453
  
Gain from change in the fair value of derivative liabilities
    
(95
)
Balance of derivative liabilities as of September 30, 2014
  
$
15,358
  

Net Loss per Common Share
 
The Company computes net earnings (loss) per share in accordance with ASC 260-10, “Earnings per Share.” ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. At September 30, 2014 and December 31, 2013, we excluded 1,000 shares of Series B Preferred Stock convertible into 1,000 shares of common stock and approximately 4,498,384 shares of the Company’s common stock reserved for issuance upon conversion of convertible notes as their effect was anti-dilutive.

Income Taxes
 
The Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
 
- 8 -
 
 
AEGEA, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)
 
 
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-based Compensation

ASC 718, “Compensation-Stock Compensation” requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). We measure the cost of employee services received in exchange for an award based on the grant-date fair value of the award.
 
We account for non-employee share-based awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.” ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the vesting date, which is presumed to be the date performance is complete.

Derivative Liability

We evaluate convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”  The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

Research and Development

In accordance with ASC 730-10, expenditures for research and development are expensed when incurred and are included in operating expenses. The Company recognized research and development costs of $17,772 and $32,265 for the three and nine months ended September 30, 2014, respectively, relating to contract services performed for architectural and creative design.

Recent Accounting Pronouncements

ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements”. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 for the interim reporting period ended September 30, 2014.
 
In August 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This update requires management of the Company to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern. This update is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company does not expect this standard to have an impact on the Company’s consolidated financial statements upon adoption.

Other accounting standards which were not effective until after December 31, 2013 are not expected to have a material impact on the Company’s consolidated financial position or results of operations.
 
 
- 9 -
 

AEGEA, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)

 
 
NOTE 3: CONCENTRATIONS

Concentrations of Credit Risk

The Company maintains accounts with financial institutions. All cash in checking accounts is non-interest bearing and is fully insured by the Federal Deposit Insurance Corporation (FDIC). At times, cash balances in money market accounts may exceed the maximum coverage provided by the FDIC on insured depositor accounts. The Company believes it mitigates its risk by depositing its cash and cash equivalents with major financial institutions. There were no cash deposits in excess of FDIC insurance at September 30, 2014.
 
NOTE 4: VACANT LAND DEPOSIT

On October 28, 2013, the Company entered into a Vacant Land Contract (the “Agreement”) with an unrelated third party to acquire approximately 2,200 acres of land in South Florida. The purchase price of the land is $13,350,000, payable $250,000 no later than October 28, 2013, $750,000 no later than February 18, 2014 and the balance of $12,350,000 in cash at closing, which was required to have occurred on or before March 10, 2014. On October 28, 2013, the Company paid the initial $250,000 refundable deposit and by written notice dated February 17, 2014 has terminated the Agreement, without liability or cost, within the applicable feasibility study period as provided for in the Agreement. The $250,000 was refunded to the Company upon termination of this agreement.
 

NOTE 5: SHORT-TERM LOAN – RELATED PARTIES
 
Short-term loans amounted to $73,807 and $160,000 as of September 30, 2014, and December 31, 2013, respectively. During the nine months ended September 30, 2014, the Company has received short-term loans from related parties totaling $159,915 and repaid $246,108. The loans are non-interest bearing and are due on demand (see Note 9).
 
 
NOTE 6: CONVERTIBLE DEBENTURES AND NOTES

At September 30, 2014 and December 31, 2013, the Company had convertible debt consisting of the following:

   
September 30,
2014
    
December 31,
2013
  
Convertible debt
   $ 168,000     $ 108,000  
Plus: put premium
     35,000       33,000  
Less: debt discount
     (19,544 )     (35,294 )
Convertible debt, net
   $ 183,456     $ 105,706  

In October and November 2013, the Company entered into nine (9) separate convertible debentures for the total sum of $110,000. The Company agreed to pay interest and outstanding principal at the rate of eight percent (8%) per annum on the total amount of these debentures and an additional thirty-two percent (32%) strictly in common stock on two of these debentures totaling $20,000 beginning on the date of each agreement and due on the maturity date of one year from the date of the agreements. Beginning on the date of issuance, the Company has the right of prepayment at any time. Beginning on the date of issuance, the holder also has the right to convert all of the outstanding debt into shares of the Company’s Common Stock at the Conversion Price using the volume weighted average price of the Company’s Common Stock over seven (7) trading days prior to the Conversion Date then multiplying the result by 50%. These notes will be considered a stock settled debt since any future stock issued upon conversion will have a fair value of $220,000. The Company therefore accreted a premium of $110,000 into interest expense immediately since these notes are convertible on the issuance date. In November and December 2013, the Company converted debt from five (5) of these convertible debentures totaling $50,000 and accrued interest of $112 into 44,742 shares at the conversion rate of $1.12 per share and two (2) of these convertible debentures totaling $40,000 and accrued interest of $381 into 555,074 shares at the conversion rate of $0.73 per share per the terms of the agreements. At September 30, 2014 and December 31, 2013, the outstanding principal balance due pursuant to this convertible debenture amounted to $20,000 and $20,000, respectively.

On October 29, 2013, the Company issued a convertible debenture for the sum of $75,000. The Company agreed to accrue interest on outstanding principal at the rate of twenty-five percent (25%) per annum beginning on October 29, 2013 and payable in quarterly payments at the end of each calendar quarter until the maturity date of February 25, 2014. Upon maturity, the Holder is entitled to convert all amounts due into shares of the Company’s Common Stock at the Conversion Price of $0.33 per share, or to request repayment in cash.  A beneficial conversion feature (BCF) value was recorded as debt discount in the amount of $75,000. Since the actual intrinsic value exceeds the face value of the debt, the BCF equals the amount of the convertible debt. The Company recorded $39,706 of amortization of the debt discount into interest expense at December 31, 2013. In February 2014, the maturity date of the convertible debenture was extended until August 31, 2014. During the nine months ended September 30, 2014 the remaining debt discount of $35,294 was amortized into interest expense. At September 30, 2014 and December 31, 2013, the outstanding principal balance due pursuant to this convertible debenture amounted to $75,000 and $75,000, respectively.
 
 
- 10 -
 

AEGEA, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)

 
 
NOTE 6: CONVERTIBLE DEBENTURES AND NOTES (continued)

In October 2013, the Company issued two (2) convertible debentures for the total sum of $13,000. The Company agreed to pay interest and outstanding principal at the rate of eight percent (8%) in cash and seventeen percent (17%) in common stock per annum on the total amount of these debentures beginning on the date of each agreement and due on the maturity date of one year from the date of the agreements. Beginning on the date of issuance, the Company has the right of prepayment at any time. Beginning on the date of issuance, the holder also has the right to convert all of the outstanding debt into shares of the Company’s Common Stock at the Conversion Price using the volume weighted average price of the Company’s Common Stock over seven (7) trading days prior to the Conversion Date then multiplying the result by 50%. These notes will be considered a stock settled debt since any future stock issued upon conversion will have a fair market value of $26,000. The Company therefore accreted a premium of $13,000 into interest expense immediately since these notes are convertible on the issuance date. At September 30, 2014 and December 31, 2013, the outstanding principal balance due pursuant to this convertible debenture amounted to $13,000 and $13,000, respectively.
 
In March 2014, the Company issued a convertible debenture for $2,000. The Company agreed to pay interest and outstanding principal at the rate of eight percent (8%) per annum on the total amount of the debenture beginning on the date of the agreement and due on the maturity date of one year from the date of the agreement. Beginning on the date of issuance, the Company has the right of prepayment at any time. Beginning on the date of issuance, the holder also has the right to convert all of the outstanding debt into shares of the Company’s Common Stock at the Conversion Price using the volume weighted average price of the Company’s Common Stock over seven (7) trading days prior to the Conversion Date then multiplying the result by 50%. These notes will be considered a stock settled debt since any future stock issued upon conversion will have a fair market value of $4,000. The Company therefore accreted a premium of $2,000 into interest expense immediately since these notes are convertible on the issuance date. At September 30, 2014, the outstanding principal balance due pursuant to this convertible debenture amounted to $2,000.

On March 21, 2014, the Company issued a convertible debenture for $17,452 in exchange for settlement of accounts payable totaling $18,259. The Company agreed to pay interest and outstanding principal at the rate of eight percent (8%) per annum on the total amount of the debenture beginning on the date of the agreement and due on the maturity date of one year from the date of the agreement. Beginning on the date of issuance, the Company has the right of prepayment at any time. Beginning on the date of issuance, the holder also has the right to convert all of the outstanding debt into shares of the Company’s Common Stock at the Conversion Price using the volume weighted average price of the Company’s Common Stock over seven (7) trading days prior to the Conversion Date then multiplying the result by 50%. These notes will be considered a stock settled debt since any future stock issued upon conversion will have a fair value of $34,904. The Company therefore accreted a premium of $17,452 into interest expense immediately since these notes are convertible on the issuance date. In March 2014 and May 2014, this note was converted into an aggregate of 944,642 shares of common stock. (See Note 8).

On August 13, 2014 the Company issued a convertible note for $58,000 from a Lender (the “Lender”) in exchange for $58,000 less an original issue discount of $5,000 and legal fees of $3,000. The convertible note bears interest at the rate of 10% per annum beginning on August 13, 2014 with a maturity date of nine months from the date of the agreement. The Company may make optional prepayment to the Lender of an amount in cash equal to 125% multiplied by the then outstanding balance of this note. The note is unsecured. The note provides for conversion to common stock monthly commencing 90 days from the date of the agreement at a conversion price is $0.05 (the “Lender Conversion Price”). Additionally, beginning on the date that is six months after August 13, 2014 and on the same day of each month thereafter until the Maturity Date (each, an “Installment Date”), the Company shall pay to Lender the applicable Installment Amount due on such date.  At the Company’s option, payments of each Installment Amount may be made (a) in cash, or (b) by converting such Installment Amount into shares of the Company’s common stock. The conversion price for each installment shall be the lesser of (i) the lender conversion Price of $0.05, and (ii) 70% of the average of the three (3) lowest closing bid prices in the twenty trading days immediately preceding the applicable conversion, provided that if at any time the average of the three lowest closing bid prices in the twenty Trading Days immediately preceding any date of measurement is below $0.01, then in such event the then-current conversion factor shall be reduced to 65% for all future Conversions. If the Company, at any time this Note is outstanding, shall sell or issue any Common Stock to the Lender or any third party for a price that is less than the then effective Lender’s Conversion Price, then such Lender Conversion Price shall be automatically reduced and only reduced to equal such lower issuance price. The Company has established a reserve of a minimum of 15,000,000 common shares in connection with this convertible note agreement. Due to the price protection on the Lender’s Conversion Price, the Company has classified this note as a derivative financial instrument in accordance with ASC Topic 815, Derivatives and Hedging, requiring bifurcation from the note and is accounted for as a derivative liability The fair value of derivatives granted is calculated using the Black-Scholes method, which requires the use of subjective assumptions including volatility, expected term, risk-free rate, and the fair value of the underlying common stock. Accordingly, at the date of the agreement, the Company recorded, using the Black Scholes method, a debt discount of $15,453 and a derivative liability of $15,453.
 
 
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AEGEA, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)
 
 
NOTE 6: CONVERTIBLE DEBENTURES AND NOTES (continued)

For the three and nine months ended September 30, 2014, the Company recorded a gain of $95 from the change in fair value of derivative liability, and at September 30, 2014, derivative liability amounted to $15,358. The debt discount consisting of the original issue discount, legal fees, and fair value derivative liability at the date of the note aggregating $23,453 is being amortized over the term of the note and amounted to $3,909 for the three and nine month ending September 30, 2014 and is included in interest expense on the accompanying consolidated statement of operations.
 

NOTE 7: LINE OF CREDIT – RELATED PARTY

A shareholder of the Company has committed to loan the Company up to $250,000 cash on an as needed basis (the “Line of Credit”). The line of credit bears interest at 18% per annum and all principal and accrued and unpaid interest is due in full on demand at any time on or after June 30, 2014. At September 30, 2014 and December 31, 2013, the outstanding balance was $250,000 and $250,000, and accrued interest payable amounted to $115,601 and $81,851, respectively.
 

NOTE 8: STOCKHOLDERS’ DEFICIT

Preferred Stock
 
On October 4, 2013, the Company filed a Certificate of Designations under its Amended and Restated Articles of Incorporation (the “Certificate of Designations”) with the State of Colorado to (a) designate 200,000 shares of its previously authorized Preferred Stock as Series A Convertible Preferred Stock and (b) designate 1,000 shares of its previously authorized Preferred Stock as Series B Preferred Stock. The Certificate of Designations and their filing were approved by the board of directors of the Company on September 30, 2013 without shareholder approval as provided for in the Company’s articles of incorporation and under Colorado law.
 
·
the stated value of each share is $500,
·
the holder of the shares will be entitled to vote, on a one-for-one basis, with the holders of our common stock on all corporate matter on which common shareholder are entitled to vote,
·
the shares pay quarterly dividends in arrears at the rate of 4% per annum based on the stated value of each share,
·
each share is convertible into shares of our common stock at a conversion price of $5.00 per share, subject to adjustment, at any time upon : (I) the seventh anniversary of the original issue date of Series A Preferred Stock or (ii) the date the beneficial holder qualifies as a Permanent U.S. resident, whichever occurs earliest,
·
the shares are redeemable by us under certain conditions, and
·
the conversion price of the Series A Convertible Preferred stock is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.
 
Description of Series B Convertible Preferred Stock
 
The 1,000 shares of Series B Convertible Preferred Stock have the following the designations, rights and preferences: 
 
·
The Company is not permitted to pay or declare dividends or other distributions to the holders of the Series B Preferred Stock, whether in liquidation or otherwise,

·
the holder of the shares will be entitled to vote, on a one million-for-one basis, with the holders of our common stock on all corporate matter on which common shareholders are entitled to vote, and
·
each share is convertible into one share of our common stock.
 
On September 30, 2013, the Company issued 1,000 shares of its Series B Preferred Stock to certain related party officers and directors valued at $2,150 based on the common stock quoted trading value of $2.15 at the grant date and a one to one conversion rate of the Series B shares into common stock.
 
 
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AEGEA, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)
 
 
 
NOTE 8: STOCKHOLDERS’ DEFICIT (continued)
 
Common Stock
 
On January 21, 2014, the Company issued 1,442,000 shares of common stock for services and valued at $100,940 based on the quoted trading price of $0.07 per share on the grant date.

In March 2014 and May 2014, the Company issued an aggregate of 944,642 shares of common stock in exchange for conversion of a $17,452 convertible note (See Note 6).
 
 
NOTE 9: RELATED PARTIES

Short-term loans made to the Company by directors of the Company or corporations owned by them totaled $159,915 and $246,108 was repaid during the nine months ended September 30, 2014. (See Note 5).  At September 30, 2014 and December 31, 2013, short-term loans related parties amounted to $73,807 and $160,000, respectively.

At September 30, 2014 the line of credit payable to related party who is a substantial shareholder of the Company was $250,000, and accrued interest was $115,601. (See Note 7).

During the nine months ended September 30, 2014, two officers of the Company contributed their time valued at $60,000 each and another officer contributed time and services valued at $18,506, totaling $138,506 in contributed service expense for the nine months ended September 30, 2014. Rent expense of $1,500 and $3,000 was recognized for the three and nine months ended September 30, 2014 for contribution of office space by an officer of the Company. The Board of Directors valued the contribution of rent and services based on the prevailing rates for similar rent and services in the local area and believes the estimates are reasonable.
 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results
 
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. A list of factors that could cause our actual results of operations and financial condition to differ materially is set forth below:
 
 
●
Our limited operating history, ability to achieve profitability and history of losses.
 
●
Our need for significant additional capital to fund our business plan.
 
●
Our ability to respond to changes in consumer preferences.
 
●
Our dependence on a limited number of personnel and third parties who develop, operate and maintain our proposed resort community and sports memorabilia business.
 
●
Our ability to respond to changes in consumer preferences.
 
●
Economic conditions, particularly in the United States, that have an adverse effect on the leisure industry.
 
●
The ability of our stockholders to sell their common stock may be limited because we are listed on the OTCQB Tier of the OTC Markets and do not meet the criteria to list our securities on an exchange such as The NASDAQ Stock Market.
 
●
The effects on our stock price as a result of sales of our common stock by existing shareholders pursuant to Rule 144.
 
We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
 
Our History
 
Our company was originally named Forever Valuable Collectibles, Inc. and was incorporated in Colorado on November 29, 2007. Prior to completion of our acquisition of AEGEA, LLC, a Delaware limited liability company (“AEGEA, LLC”) on July 22, 2013 discussed below, we exclusively engaged in the business of buying and reselling commemorative professional and college sports memorabilia. Following the acquisition of AEGEA, LLC, we are continuing AEGEA, LLC’s historical and proposed resort development businesses separately from our historical sports memorabilia business.

AEGEA, LLC Acquisition
 
On July 22, 2013, we completed the acquisition of a 100% interest in AEGEA, LLC pursuant to the terms of the March 30, 2013 Share Exchange Agreement (the “Share Exchange Agreement”) by and among us, AEGEA, LLC, the members of AEGEA (the “AEGEA Members”), Energis Petroleum, LLC, a Florida limited liability company (“Energis”) and the members of Energis, as amended by the Amended and Restated Share Exchange Agreement among the parties dated as of June 5, 2013. Pursuant to the Share Exchange Agreement, we issued 94,000,000 shares of our common stock, no par value per share, representing approximately 88.7% of our issued and outstanding shares of common stock in exchange for 100% of the membership interests of AEGEA, LLC. AEGEA, LLC is now our wholly-owned subsidiary.
 
 
- 14 -
 
 
AEGEA's Business

Through the acquisition of AEGEA, LLC, we plan to develop a first-class mega-resort destination and international community in the heart of South Florida called AEGEA. This city will blend the components of theme park entertainment design and residential development, offering guests and residents an idyllic lifestyle inspired by the lost ancient civilization of AEGEA. Along with the theme park and entertainment components, we have planned various themed resort areas, an Olympic-style sport and education complex, an equestrian village and a variety of residential developments. This resort community is planned to become an exciting place to live and among the most popular vacation destinations in the world, not only because of its planned spectacular amenities, but its integration of authentic organically-designed architecture with crystal blue water in the form of waterways and lagoons. The goal is to attract at least 20 million annual visitors. AEGEA will cover a large area of land to be acquired and developed in phases over many years.

 The origin of AEGEA dates back 4,000 years to one of the greatest and most advanced civilizations on earth, which dominated the eastern Mediterranean region between Greece and Turkey. This area was the crossroads of the world at that time, a land bridge between the Far East, Middle East and Europe. The Aegean’s were an industrious and peaceful society, highly skilled in architecture, rich in knowledge, sophisticated in culture, and masters of the sea. Their legacy includes the alphabet, literature, the theatre, hospitality, and the Olympic games. An intriguing mystery still surrounds the disappearance of the Aegean civilization. It is believed that a single cataclysmic event caused this world to disappear into the depths of the sea. The guiding principles of this lost world remain the foundation of our planned city and includes healthy living (mind, body and spirit), harmony with nature, peaceful coexistence, music and the arts, sports and education, architecture and the life-giving essence of water. Since these fundamentals are a unifying factor for all cultures throughout the world, we have the opportunity to unite the world in AEGEA.

The entire city is planned to be pedestrian friendly and totally connected with the goal of parking only once, however, a network of waterways is planned as the primary transportation system. The various resort areas will integrate hotels, residential, restaurants, retail, entertainment and cultural exhibits with an Olympic-style sports complex, themed attraction areas and an equestrian village. Quaint romantic villages with authentic architecture will be the residential neighborhoods throughout AEGEA each showcasing the unique architecture, culture, entertainment, shops, restaurants, hotels and residences specific to particular areas of the world. A myriad of attractions will provide constant entertainment with an array of planned theme parks.

Results of Operations
 
The following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. The results discussed below are for the three and nine months ended September 30, 2014 and 2013. For comparative purposes, we are comparing the three and nine months ended September 30, 2014 to the three and nine months ended September 30, 2013. The following discussion should be read in conjunction with the Company’s consolidated financial statements and the related notes included in this report.

Revenue. No revenue was generated for the three and nine months ended September 30, 2014 and 2013.

Total Operating Expenses. For the three months ended September 30, 2014, total operating expenses amounted to $44,273 as compared to $610,188 for the same period in 2013, a decrease of $565,915. For the nine months ended September 30, 2014, total operating expenses amounted to $396,563 as compared to $728,567 for the same period in 2013, a decrease of $332,004. This three and nine month decrease was primarily due to significant reductions in professional fees of $495,466 and $308,696, respectively.  General and administrative expenses and research and development expenses decreased by an aggregate of $70,449 and $23,308 for the three and nine months ended September 30, 2014, respectively.

Total Other Expenses. For the three months ended September 30, 2014, total other expenses decreased by $29,629 as compared to the same period in 2013. For the nine months ended September 30, 2014, total other expenses increased by $29,105 as compared to the same period in 2013. The (decrease) increase in the three and nine month periods was primarily due to a (decrease) increase in interest expense $(29,534) and $37,113, respectively. Additionally, for the nine months ended September 340, 2014, we had a gain on settlement of liabilities of $7,913 as compared to $0 during the same period in the 2013.

Net Loss. For the three months ended September 30, 2014 and 2013, net loss amounted to $61,244, or $0.00 per common share (basic and diluted), and $656,788 or $0.01 per common share (basic and diluted), respectively. For the nine months ended September 30, 2014 and 2013, net loss amounted to $497,807, or $0.00 per common share (basic and diluted), and $800,706 or $0.01 per common share (basic and diluted), respectively.
 
 
- 15 -
 
 
 Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had a working capital deficit of $731,633 and $18,238 of cash as of September 30, 2014 and a working capital deficit of $511,124 and $8,476 of cash as of December 31, 2013. As a result, the Company’s current cash position is not sufficient to fund its cash requirements during the next twelve months, including operations and capital expenditures.
 
Net cash used in operating activities was $206,045 for the nine months ended September 30, 2014, compared to $234,166 for the same period in 2013, a decrease of $28,121.

Net cash provided by investing activities during the nine months ended September 30, 2014 was $250,000 compared to $172 for the same period in 2013.  The increase is a result of a return of deposit on a real estate contract that was cancelled during the current period of $250,000.
 
Net cash used in financing activities during the nine months ended September 30, 2014, was $34,193 compared to net provided by financing activities of $253,484 for the same period in 2013. For the nine months ended September 30, 2014, cash used in financing activities were primarily a result of the net repayment of short term loans - related party of $86,193 offset by net proceeds from convertible debentures of $52,000.
 
Cash Requirements
 
The Company’s future capital requirements will depend on numerous factors, including the extent it continues development of its planned resort community and its ability to control costs. The Company will be reliant upon shareholder loans, private placements or public offerings of debt and equity to fund its resort development plans.

The Company does not currently have any contractual restrictions on its ability to incur debt and, accordingly the Company could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict the Company’s operations.
 
 Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
Going Concern

           As reflected in the unaudited consolidated financial statements of the Company included in this report, we reported a net loss and net cash used in operating activities of $497,807 and $206,045, respectively, for the nine months ended September 30, 2014, has a working capital deficit, stockholders’ deficit and accumulated deficit of $731,633, $731,633 and $2,511,563, respectively, and has no revenues.  These matters raise substantial doubt about our ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on our ability to further implement our business plan, raise additional capital, and generate revenues.  The unaudited consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Critical Accounting Policies
 
We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.

Use of Estimates in the Preparation of Financial Statements
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
 
- 16 -
 
 
Stock-based Compensation

ASC 718, “Compensation-Stock Compensation” requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). We measure the cost of employee services received in exchange for an award based on the grant-date fair value of the award. We account for non-employee share-based awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.” ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the vesting date, which is presumed to be the date performance is complete.

Derivative Liability

We evaluate our convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”  The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense).  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.
 
Revenue Recognition
 
We had no revenue during the three months ended September 30, 2014. Anticipated future operating revenue will represent revenue upon admission into our planned parks, provision of our services, or when products are delivered to our customer.

 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This item is not applicable to smaller reporting companies.

 
 ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and our Chief Financial Officer, CFO, to allow timely decisions regarding required disclosure. Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2014. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of June 30, 2014. We have identified the following material weaknesses as of June 30, 2014:

1. Management does not have procedures implemented to identify the proper application of generally accepted accounting principles related to debt instruments issued.
 
2. Management has not implemented procedures to identify and properly monitor the identification of liabilities that required to be accrued at the end of a reporting period.

Remediation of Material Weakness in Internal Control
 
We believe the following actions we have taken and are taking will be sufficient to remediate the material weaknesses described above:
 
 
- 17 -
 

·
Management has begun the development and implementation of policies and procedures for reviewing and monitoring the application of generally accepted accounting principles related to debt instruments issued. 

·
Management has begun the development and implementation of policies and procedures which include use of a checklist that will be monitored and reviewed on a periodic basis to identify and record liabilities on a timely basis as they occur to make sure they are recorded accurately.  The procedures will include a search for unrecorded liabilities on a quarterly basis.  Management currently monitors liabilities by checking them against the accounts payable register to make sure they are legitimate and recorded properly.
   
·
 We recently retained an accounting consulting firm to ensure our financial statements contain all necessary adjustments to conform to U.S. GAAP and assist us with the implementation of the above remediation measures.

Management believes the actions described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We expect the material weaknesses will be remediated by December 31, 2014.

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
 
Changes in Internal Control
 
There were no changes identified in connection with our internal control over financial reporting during the three months ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.
 
We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.


ITEM 1A. RISK FACTORS.
 
Not applicable to smaller reporting companies.

 
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
 
On August 13, 2014 we issued a convertible note for $58,000 from a Lender (the “Lender”) in exchange for $58,000 less an original issue discount of $5,000 and legal fees of $3,000. The convertible note bears interest at the rate of 10% per annum beginning on August 13, 2014 with a maturity date of nine months from the date of the agreement. We may make optional prepayment to the Lender of an amount in cash equal to 125% multiplied by the then outstanding balance of this note. The note is unsecured. The note provides for conversion to common stock monthly commencing 90 days from the date of the agreement at a conversion price is $0.05 (the “Lender Conversion Price”). Additionally, beginning on the date that is six months after August 13, 2014 and on the same day of each month thereafter until the Maturity Date (each, an “Installment Date”), we shall pay to Lender the applicable Installment Amount due on such date. At our option, payments of each Installment Amount may be made (a) in cash, or (b) by converting such Installment Amount into shares of the Company’s common stock. The conversion price for each installment shall be the lesser of (i) the lender conversion Price of $0.05, and (ii) 70% of the average of the three (3) lowest closing bid prices in the twenty trading days immediately preceding the applicable conversion, provided that if at any time the average of the three lowest closing bid prices in the twenty Trading Days immediately preceding any date of measurement is below $0.01, then in such event the then-current conversion factor shall be reduced to 65% for all future Conversions. If we, at any time this Note is outstanding, shall sell or issue any Common Stock to the Lender or any third party for a price that is less than the then effective Lender’s Conversion Price, then such Lender Conversion Price shall be automatically reduced and only reduced to equal such lower issuance price.
 
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5. OTHER INFORMATION

None.

 
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 ITEM 6. EXHIBITS
 
 
Exhibit
Number
   Description  
3.1(a)
  
Amended and Restated Articles of Incorporation of Forever Valuable Collectibles, Inc. (Incorporated herein by reference to Appendix A as part of the Company’s Schedule 14C filed with the Commission on July 2, 2013).
  
3.1(b)
  
Certificate of Designation of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the Commission on October 4, 2013).
  
3.1(c)
  
Certificate of Designation of Series B Preferred Stock (Incorporated herein by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K as filed with the Commission on October 4, 2013).
  
3.2
  
Bylaws (Incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form SB-2 as filed with the Commission on January 30, 2008).
  
10.1
  
Share Exchange Agreement among AEGEA, LLC. and its members, Forever Valuable Collectibles, Inc., and Energis Petroleum, LLC, and its members dated March 30, 2013 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on April 4, 2013).
  
10.2
  
Amended and Restated Share Exchange Agreement among AEGEA, LLC. and its members, Forever Valuable Collectibles, Inc., and Energis Petroleum, LLC, and its members dated June 7, 2013 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on June 12, 2013).
  
10.3+
  
Vacant Land Contract (Incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K as filed with the Commission on November 1, 2013).
  
10.4.*
  
Securities Purchase Agreement among AEGA, Inc. and ST. George Investments LLC dated August 13, 2014 *
  
10.5*
  
Convertible Promissory Note among AEGA, Inc. and ST. George Investments LLC dated August 13, 2014 *
  
31.1*
  
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
  
31.2*
  
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
  
32.1*
  
Section 1350 Certifications
  
101.INS*
  
XBRL Instance Document
  
101.SCH*
  
XBRL Taxonomy Extension Schema
  
101.CAL*
  
XBRL Taxonomy Extension Calculation
  
101.DEF*
  
XBRL Taxonomy Extension Definition
  
101.LAB*
  
XBRL Taxonomy Extension Labels
  
101.PRE*
  
XBRL Taxonomy Extension Presentation Linkbase
  
       
 +
  
Portions of this agreement have been omitted and redacted and separately filed with the Securities and Exchange Commission.
*
  
Filed Herewith
     
 
 

 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on

Date:  November 19, 2014
AEGEA, INC.
     
 
By:   
/s/ Keith Duffy
   
Keith Duffy,
Chief Executive Officer
 (Principal Executive Officer)
     
Date: November 19, 2014
By:   
/s/ Keith Duffy
   
Keith Duffy,
Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
 


 
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