U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2014

 

Commission File No. 000-52438

 

Cirque Energy, Inc. (F/K/A Green Energy Renewable Solutions, Inc.)

(Exact name of small business issuer as specified in its charter)

 

Florida		65-0855736
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

 

Penobscot Building, 645 Griswold Street, Suite 3274, Detroit, MI 48226

(Address of Principal Executive Offices)

 

888-963-2622

(Issuer’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

 

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value per share

 

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 ¨   No x

 

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 ¨   No x

 

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 ¨	Accelerated Filer ¨
Non-Accelerated Filer ¨	Smaller Reporting Company x

 

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

 

There were 192,532,405 shares of common stock outstanding as of February 2, 2015.

 

Documents incorporated by reference:  None

 

 

TABLE OF CONTENTS

 

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	24
Item 4.	Controls and Procedures.	24
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults upon Senior Securities.	25
Item 4.	Mine Safety Disclosures.	25
Item 5.	Other Information.	25
Item 6.	Exhibits	25
SIGNATURES		26

 

 

FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Form 10-Q is filed, and we do not intend to update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to confirm these statements to actual results, unless required by law.

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

Cirque Energy, Inc.

Consolidated Balance Sheets

(Unaudited)

 

		June 30				December 31
		2014				2013
Assets:
Current assets:
Cash		$	12,741			$	8,841
Total current assets			12,741				8,841
Land			-				27,752
Equipment, net			8,671				4,637
Total Assets		$	21,412			$	41,230
Liabilities and Stockholders' Deficit:
Current liabilities:
Accounts and other payables		$	411,919			$	287,292
Accounts and other payables - related party			8,029				5,129
Accrued salaries and wages - related party			130,308				224,758
Accrued interest			67,184				22,013
Notes payable			305,423				358,923
Convertible notes - (net of $369,938 and $360,986 unamortized discount)			600,915				116,918
Derivative liability			1,105,954				1,055,755
Total current liabilities			2,629,732				2,070,788
Total Liabilities			2,629,732				2,070,788
Stockholders' Deficit
Preferred Stock, $0.001 par value;19,924,047 shares authorized
Class A Convertible Preferred stock, $10 stated value, 13,420 shares authorized, issued, and outstanding			134,200				134,200
Class B Convertible Preferred stock, $10 stated value, 100,000 shares authorized; 38,193 shares issued and outstanding			381,930				-
Class C Convertible Preferred stock, $10 stated value, 100,000 shares authorized; 24,340 shares issued and outstanding			204,850				-
Common stock, $0.001 par value , 300,000,000 shares authorized; 192,132,774 and 163,934,049 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively			192,130				163,931
Additional paid-in capital			9,434,730				8,748,320
Stock payable			526,575				429,075
Accumulated deficit			(13,482,735	)			(11,505,084	)
Total Stockholders' Deficit			(2,608,320	)			(2,029,558	)
Total Liabilities and Stockholders' Deficit		$	21,412			$	41,230

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Cirque Energy, Inc.

Consolidated Statements of Operations

(Unaudited)

 

		For the quarter ended June 30,								For the six months ended June 30,
		2014				2013 Restated				2014				2013 Restated
Sales		$	-			$	-			$	-			$	-
Cost of sales			-				-				-				-
Gross profit			-				-				-				-
Bank service charges			1,157				766				2,483				1,460
Development projects			28,598				-				66,680				-
Office and miscellaneous			13,306				4,442				22,870				7,572
Executive and directors compensation			209,033				162,294				434,870				308,127
Professional fees			70,690				105,026				142,997				183,256
Investor relations			4,463				10,334				96,597				10,701
Travel			15,251				4,970				32,355				5,694
Forfieture of deposit on landfill							150,000								150,000
Property taxes			14,960				-				14,960				-
Other financing costs			253,500				-				346,250				-
Total operating expense			610,958				437,832				1,160,062				666,810
Operating loss			(610,958	)			(437,832	)			(1,160,062	)			(666,810	)
Other Income							-								317
Gain on sale of assets			2,078				-				2,078
Amortization of debt discount			(223,827	)			(142,998	)			(541,408	)			(203,341	)
Derivative expense			(110,972	)			(326,378	)			(191,921	)			(366,419	)
Gain on settlement of debt			21,000				-				(171,564	)			-
Loss on settlement of promissory convertible notes			(83,376	)			(273,285	)			(324,082	)			(321,624	)
Gain on derivative liability			(83,192	)			196,577				677,082				237,151
Interest expense			(258,087	)			15,224				(267,774	)			9,321
Total other (income) expense			(736,376	)			(530,860	)			(817,589	)			(644,595	)
Net loss		$	(1,347,334	)		$	(968,692	)		$	(1,977,651	)		$	(1,311,405	)
Net loss per common share		$	(0.007	)		$	(0.011	)		$	(0.011	)		$	(0.017	)
Weighted average common shares outstanding			186,781,386				85,848,996				178,502,729				75,608,802

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Cirque Energy, Inc.

Consolidated Statements of Stockholders’ Deficit

 

		Preferred Stock A								Preferred Stock B								Preferred Stock C								Common Stock
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Additional Paid-In Capital				Stock Payable				Accumulated Deficit				Total Equity
Balance at December 31, 2011			-			$	-																				18,505,052			$	9,252			$	4,356,027			$	-			$	(5,004,798	)		$	(639,519	)
Shares issued for services			-				-																				1,610,824				886				114,675				-				-				115,561
Shares issued for asset purchase			-				-																				9,209,334				4,605				340,745				-				-				345,350
Shares issued for secured note default penalty			-				-																				7,311,640				3,656				179,135				-				-				182,791
Subsidiary spin-out share distribution			-				-																				-				-				259,028				-				-				259,028
Shares issued for compensation			-				-																				13,000,000				6,500				1,651,000				-				-				1,657,500
Shares issued to settle debt			-				-																				13,000,000				6,500				318,500				-				-				325,000
Stock dividend/split			-				-																				-				31,237				(31,237	)			-				-				-
Shares to be issued for cash			-				-																				-				-				-				150,000				-				150,000
Shares to be issued for services			-				-																				-				-				-				83,607				-				83,607
Beneficial conversion feature for convertible note			-				-																				-				-				5,000				-				-				5,000
Net loss			-				-																				-				-				-				-				(3,296,408	)			(3,296,408	)
Balance at December 31, 2012 (Restated)			-				-				-				-				-				-				62,636,850				62,636				7,192,873				233,607				(8,301,206	)			(812,090	)
Shares issued for debt conversion			-				-																				101,297,199				101,295				1,326,620				-				-				1,427,915
Forfeiture and purchase of subscription agreement deposit and receivable			-				-																				-				-				225,000				(150,000	)			-				75,000
Shares to be issued for services			-				-																				-				-				-				10,000				-				10,000
Forgiveness of related party debt related to issuance of stock for payables			-				-																				-				-				3,828				-				-				3,828
Shares issued for related party payable conversions			13,420				134,200																				-				-				-				22,968				-				157,168
Shares to be issued for officer and directors liabilities			-				-																				-				-				-				312,500				-				312,500
Net loss			-				-																				-				-				-				-				(3,203,878	)			(3,203,878	)
Balance at December 31, 2013			13,420.00			$	134,200				-			$	-				-			$	-				163,934,049			$	163,931			$	8,748,321			$	429,075			$	(11,505,084	)		$	(2,029,557	)
Shares issued for debt conversion																											32,108,059			$	32,108			$	497,785												529,893
Shares to be issued for services																											20,000,000			$	20,000			$	319,500			$	-								339,500
Forgiveness of related party debt related to issuance of stock for payables																																															-
Loan of stock to company at market value																											(23,909,334	)		$	(23,909	)		$	(323,441	)		$	213,750								(133,600	)
Shares issued for related party payable conversions											38,193				381,930				24340				204850											$	192,565			$	(312,500	)							466,845
Shares to be issued for officer and directors liabilities																																						$	196,250								196,250
Net loss																																										$	(1,977,651	)			(1,977,651	)
Balance at June 30, 2014 (unaudited)			13,420			$	134,200				38,193			$	381,930				24,340			$	204,850				192,132,774			$	192,130			$	9,434,730			$	526,575			$	(13,482,735	)		$	(2,608,320	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Cirque Energy, Inc.

Consolidated Statements of Cash Flows

(unaudited)

 

		For the six months ended June 30,
		2014				2013 Restated
Operating Activities
Cash flows from operating activities :
Net loss		$	(1,977,651	)		$	(1,311,405	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			547				-
Addition to Convertible promissory notes for default			211,722				-
Amortization of debt discount			541,408				203,341
Issuance of common stock for services			339,500				10,000
Issuance of common stock for executive and director compensation			-				125,000
Forfieture of deposit on landfill			-				150,000
Loss on settlement of debt			171,564				-
Loss on settlement of convertible promissory notes			324,082				321,624
Derivative expense			191,921				366,419
Gain on derivatives			(677,082	)			(237,151	)
Gain on sale of land			(2,078	)			-
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities			215,374				42,285
Accrued Interest			-				41,435
Accrued salaries and wages			(33,883	)			108,772
Accounts payable-related parties			-				-
Cash used in operating activities			(694,576	)			(179,680	)
Investing Activities:
Deposit on purchase of Davison landfill			-				(150,000	)
Proceeds from sale of land			5,000				-
Purchase of equipment			(4,581	)			-
Cash used in investing activities			419				(150,000	)
Financing Activities:
Stock payable			267,500				36,000
Proceeds from convertible promissory notes			425,188				149,000
Proceeds from promissory notes			75,000
Proceeds from convertible note - related party							150,500
Proceeds from related party			2,900
Payoff of convertible promissory note			(72,531	)
Cash provided by financing activities			698,057				335,500
Increase in cash			3,900				5,820
Cash, beginning of period			8,841				1,005
Cash, end of period		$	12,741			$	6,825
Supplemental Disclosures of Cash Flow Information:
Cash paid during the peirod for:
Interest		$	-			$	-
Income tax		$	-			$	-
Non-cash investing and financing activities:
Shares issued for settlement of convertible notes payable		$	529,893			$	168,125
Class B preferred shares issued to settle stock payable		$	381,930			$	-
Class C preferred shares issued to settle stock payable		$	204,850			$	-
Convertible notes issued to settle notes payable		$	128,500			$	-
Stock payable issued to settle accounts payable - related party		$	-			$	137,997

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Notes to Financial Statements

 

Note 1 – Nature of Operations

 

The Company was incorporated in Florida on July 16, 1998 under the name of Salty’s Warehouse, Inc. and was engaged in selling name brand consumer products over the Internet. The Company focused on selling consumer electronics and audio-video equipment such as speakers, amplifiers, and tuners, although the Company also sold assorted other goods such as watches, sunglasses and sports games. On December 11, 2006, owners of an aggregate of 22,450,000 shares of common stock, of Salty’s Warehouse, Inc. sold in a private transaction all of the shares held by them to a group of approximately 54 purchasers. As a result of this transaction, a change of control in the Company occurred resulting in a change in the name of the Company to E World Interactive, Inc. (the “Company” or “E World”). At that time, E World mainly engaged in selling of online game services and media production business in Mainland China.

 

Having operated in this sector for some time, the Company then disposed of its subsidiaries Shanghai E World China Information Technologies Co., Ltd (“E World China”) and Mojo Media Works Limited in August 2008, and following this ceased all business in online game and media production business and became a dormant shell company.

 

In March of 2009, the Company entered into a stock purchase agreement with Blue Atelier, Inc. Blue Atelier acquired 25,000,000 newly authorized and issued common stock of E World Interactive Inc. (“EWRL”) after E World executed a forty to one reverse split of the issued and outstanding common stock and also entered into a series of agreements with various holders of Convertible Notes to convert its notes payable plus accumulated interest to E World Common Stock in the aggregate to 6,872,830 shares of common stock. As a result of this transaction, a change of control in the Company occurred in E World Interactive, Inc. with Blue Atelier then owning 75% of the outstanding common stock of E World.

 

In May 2010, the Company acquired 100% of the outstanding common stock of Media and Technology Solutions, Inc., a Nevada corporation with a variety of media and related interests in rights and emerged from dormant shell status. The consideration for the purchase of Media and Technology was 10,000,000 shares of E World Common Stock and Blue Atelier Inc., the principle shareholder of Media and Technology is also the largest shareholder in E World. Following this acquisition, E World moved its principal office to Las Vegas, Nevada. The acquisition of Media and Technology has been accounted for similar to a pooling in accordance with GAAP because the entities were under common control.

 

On September 17, 2011, E World entered into a letter of intent (the “LOI”) with Green Renewable Energy Solutions, Inc. (“GRES”) the purpose of which is to acquire the assets of GRES which included certain contracts for the acceptance, processing and disposal of construction and demolition waste and as part of this agreement, E World changed its name to Green Energy Renewable Solutions (“Green Energy Renewable Solutions” or “GERS”), effective December 12, 2011. As part of this LOI, Green Energy Renewable Solutions (F/K/A E World Interactive, Inc.) would complete a 5 to 1 reverse split, spin-out its subsidiary company E World Corp and Media and Technology Solutions, Inc. and complete the transaction with the issuance of stock for the purchase of the assets of Green Renewable Energy Solutions, Inc.

 

On January 26, 2012, Green Energy Renewable Solutions, Inc. (F/K/A E World Interactive, Inc.) completed the 5 to 1 reverse split and on February 1, 2012 eWorld Corp. including its subsidiary company, Media and Technology Solutions, Inc. was spun-out as a separate private company by way of share dividend with one E World Corp. share issued for every share held on the date of the reverse split approval. FINRA approved the name change and reverse split on January 26, 2012.

 

On February 4, 2012, Green Renewable Energy Solutions, Inc. executed the Asset Purchase Agreement with Green Energy Renewable Solutions, Inc. (F/K/A E World Interactive, Inc.), the issuer herein. Under the terms of the Asset Purchase Agreement Green Energy Renewable Solutions (F/K/A E World Interactive, Inc.), purchased all of the assets of Green Renewable Energy Solutions, Inc. for 4,604,667 common shares of Green Energy Renewable Solutions, Inc. (F/K/A E World Interactive, Inc.) and a further 2,302,333 common shares of deferred consideration.

 

On April 29, 2013, the Company formed Green Harvest Landfill, LLC as a Delaware limited liability company to be a solely owned subsidiary for the sole purpose of acquiring the Davison Landfill. An offer was made and accepted by the bankruptcy trustee who was in possession of the Davison landfill. Subsequently, the transaction did not close and the Green Harvest Landfill, LLC lays dormant.

 

On May 15, 2013, the Company entered into a contribution agreement with Cirque Energy II, LLC whereby Cirque Energy II, LLC would contribute all of its assets in exchange for stock in the Company. Included in Cirque Energy II, LLC assets were three subsidiary limited liability companies; The Prototype Company LLC, Gaylord Power Station, LLC, and Midland Renewable Energy Station, LLC. The transaction awaits regulatory approval of language to be included in a proxy statement for approval of 300,000,000 additional authorized shares of common stock and is currently not reflected in the financial statements.

 

 

In July 2013, Green Energy Renewable Solutions, Inc. requested a name change to Cirque Energy Inc. (the “Company”) by amending its articles of incorporation with the State of Florida, which was granted. FINRA approval of the name change and change in trading symbol continues to be pending.

 

Cirque Energy, Inc.’s key area of business is focused on the securing of waste streams, including but not limited to: construction, demolition, and municipal solid waste streams and maximizing their values by recycling and waste to energy opportunities.

 

On November 14, 2013, Cirque Energy, Inc. and Northrop Grumman Systems Corporation entered into a Joint Development Agreement to continue the technology development of a Deployable Gasification Unit (DGU) and towards this end, to develop a DGU prototype for testing and demonstration. In consideration for Cirque Energy, Inc. to fund and develop a test unit, Northrop Grumman wishes to permit its intellectual Property to be used by Cirque Energy and, provided a prototype is a success and the device is deemed viable, a division of responsibilities, obligations and customer sales privileges will be outlined in a mutually drafted and agreed to Business and Marketing Plan that will further define the intent of this Joint development agreement.

 

On February 1, 2014, Cirque Energy, Inc. changed its head office to 645 Griswold, Suite 3274, Detroit, MI 48226 from 243 W. Congress, Suite 350, Detroit, MI 48226.

 

Note 2 - Summary of Significant Accounting Policies

 

a)

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

Significant accounting policies followed by the Company in the preparation of the accompanying consolidated financial statements are summarized below.

 

b)

Principles of Consolidation

The consolidated financial statements include the accounts of Cirque Energy Inc. and its wholly owned subsidiaries. On July 27, 2011 the Company incorporated a new wholly owned subsidiary eWorld Corp. and on May 24, 2010, the company had acquired 100% of the outstanding stock of Media and Technology Solutions, Inc. On the date of acquisition, Media and Technology was 95% owned by Blue Atelier, Inc., the majority shareholder of the Company and the acquisition was accounted by means of a pooling of the entities from the date of inception of Media and Technology on February 1, 2010 because the entities were under common control. All significant inter-company transactions and balances have been eliminated. Ownership of Media and Technology Solutions, Inc. was transferred to E World Corp., a transaction which had no effect on the consolidated financial statements at December 31, 2011. On February 4, 2012, E World Corp. was spun-out of the Company. On April 29, 2013, the Company formed Green Harvest Landfill, LLC as a Delaware limited liability company to be a solely owned subsidiary for the sole purpose of acquiring the Davison Landfill. All significant inter-company transactions and balances have been eliminated.

 

c)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents.

 

d)

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and footnotes thereto. Actual results could differ from those estimates.

 

e)

Significant Risks and Uncertainties

The Company's management believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position, results of operations or cash flows: the Company's limited operating history; the Company’s ability to acquire new companies with profitable operations; the company’s ability to generate revenue and positive cash flow; advances and trends in new technologies and industry standards; competition from other competitors; regulatory related factors; risks associated with the Company's ability to attract and retain employees necessary to support its growth; and risks associated with the Company's growth strategies.

 

  

f)

Impairment of Long-Lived Assets and Intangible Assets

Long-lived assets and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses the recoverability of the long-lived assets and intangible assets (other than goodwill) by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. The Company recognizes impairment of long-lived assets and intangible assets in the event that the net book value of such assets exceeds the estimated future undiscounted cash flow attributed to such assets. The Company uses estimates and judgments in its impairment tests and if different estimates or judgments had been utilized, the timing or the amount of the impairment charges could be different.

 

g)

Leases

Leases for which substantially all of the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases.

 

h)

Taxation

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 740, “Income Taxes”. Under ASC 740, income taxes are accounted for under the asset and liability method. Deferred taxes are determined based upon differences between the financial reporting and tax bases of assets and liabilities at currently enacted statutory tax rates for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period of change. A valuation allowance is provided on deferred tax assets to the extent that it is more likely than not that such deferred tax assets will not be realized. The total income tax provision includes current tax expenses under applicable tax regulations and the change in the balance of deferred tax assets and liabilities. The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on technical merits. Income tax provisions must meet a more likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods.

 

i)

Basic and Diluted Net Earnings (Loss) Per Share

The Company computes net income (loss) per share in accordance with ASC 205-10, which 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 shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive and is not presented in the accompanying statements.

 

 

j)

Fair value of Financial Instruments

The carrying value of the Company’s financial instruments, including cash, amounts due to shareholders/related parties and accounts and other payables approximate their respective fair values due to the immediate or short-term maturity of these instruments.

 

It is management’s opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments.

 

k)

Concentration of Credit Risk

Financial instruments that potentially expose the Company to significant concentrations of credit risk consist principally of cash. The Company places its cash with financial institutions with high-credit ratings.

 

l)

Stock-Based Compensation

The Company has adopted FASB Accounting Standards Codification Topic 718-10, “Compensation- Stock Compensation” (“ASC 718-10”) which requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors. Under the fair value recognition provisions of ASC 718-10, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period.

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

 

  

m)

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-10, “Development Stage Entities”. The amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP.  In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements from the Company.

 

Note 3 – Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. The Company has reported no sales during the periods presented and has an accumulated deficit of $13,482,735. Our ability to continue as a going concern is dependent upon the creation of profitable operations. The Company has operated principally with the assistance of interest free loan advances and convertible debt from its major shareholders. We also intend to use other borrowings and security sales to mitigate the effects of our cash position, however, no assurance can be given that debt or equity financing, if and when required, will be available. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

Note 4 – Related Party Transactions

 

The Company records transactions of commercial substance with related parties at fair value as determined with management. Amounts due to shareholders/related parties are non-interest bearing, unsecured, and due upon demand.

 

The following is a list of related party balances as of June 30, 2014 and June 30, 2013:

 

		June 30				December, 31
		2014				2013
Accounts and other payable, due to related parties			8,029				5,129
Accrued salaries and wages - related party			130,308				224,758
		$	138,337			$	229,887

 

During the calendar year of 2013, E World Corp. and Blue Atelier Inc. ceased to be a related party and the disclosures above reflect that change. The secured note due to E World Corp. was paid during 2013 as described in Note 7 below. The “due to E World” was reduced by $20,000 during 2013 and was converted into a note in February 2014 as described in Note 7 below.

 

Related party transactions during the period include salary and consultancy fees for the quarter ended June 30, 2014 and 2013 as follows:

 

		For the six months ended June 30,
		2014				2013  Restated
Joe DuRant: CEO, Director		$	156,791			$	125,000
Frank O Donnell: Executive VP Business Development, Director			-				62,500
Roger Silverthorn: CFO, Director (effective February 1, 2013)			151,583				114,583
Richard Fosgitt, Director			116,496				6,044
Thomas Cote': Director			10,000				-
Total		$	434,870			$	308,127

 

 

The Company has recorded $3,984 in payroll tax liabilities during the quarter ended June 30, 2014 related to payments made to its executives.

 

		Accrued Compensation issued in Class B Preferred Shares				Class B Convertible Preferred Issued ($10 Par)				Common Stock after Conversion
Joe DuRant: CEO, Director		$	139,068				13,907				9,595,710
Roger Silverthorn: CFO, Director			159,525				15,953				11,007,225
Richard Fosgitt, Director			72,917				7,292				5,031,250
Thomas Cote': Director			10,417				1,042				718,750
		$	381,927				38,194				26,352,935

 

The accrued compensation obligation of $381,927 is recorded as accrued salaries and wages for $69,427 and stock payable for $312,500 at December 31, 2013 on the consolidated balance sheet. On January 20, 2014, the Board of Directors approved the issue of 38,194 shares of Class B preferred stock in satisfaction of the $381,927 obligation due to the above officers and directors.

 

Blue Atelier Inc. Promissory Note May 20, 2013

 

On May 20, 2013 the Company received funding pursuant to a promissory note in the amount of $150,000. The promissory note is secured by the break-up fee in the Asset purchase Agreement and Bid Procedures agreement in relation to the purchase of the Davison landfill, preferential payment from funding on any lending agreements related to the purchase of the Davison landfill, and 10,000,000 shares of Company stock. The promissory note bears interest at 6% interest, has a loan premium of $75,000 and matures on July 1, 2013. As of December 31, 2013, $75,000 of discount has been amortized and included in the consolidated statement of operations.

 

On December 30, 2013, the $50,000 of cash proceeds received from the issuance of LG Capital Funding, LLC Promissory Note VIII (See Note 7) was used to pay Blue Atelier Inc. outstanding principal and interest. At December 31, 2013, $175,500 principal plus accrued interest of $8,332 is outstanding.

 

On January 21, 2014, the $30,000 of cash proceeds received from the issuance of GEL Properties, LLC Promissory Note was used to pay Blue Atelier Inc. outstanding principal and interest.

 

On April 2, 2014, the $105,000 of cash proceeds received from the issuance of Union Capital, LLC Promissory Note was used to pay Blue Atelier Inc. outstanding principal and interest.

 

On June 27, 2014, the $53,771 of cash proceeds received from the issuance of Union Capital, LLC Promissory Note was used to pay Blue Atelier Inc. outstanding principal upon which the Blue Atelier, Inc. Promissory Note of May 20, 2013 was paid in full.

 

E World Corp. Promissory Note February 2, 2014

 

On February 2, 2014, the Company entered into a Convertible Promissory Note (“ Note”) with E World Corp. in the principal amount of $181,662 bearing an 6% annual interest rate, unsecured and maturing February 2, 2016. The Note was in exchange for an accounts payable of the same amount. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 60% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date

 

 

Note 5– Operating Lease Commitments

 

On February 1, 2014, the Company entered into a twelve month lease for office space for its head office at 645 Griswold, Suite 3274, Detroit, Michigan 48226. The monthly lease payment is $1,200.

 

Note 6 – Convertible Notes

 

Asher Enterprises Promissory Note VII June 26, 2013

On June 26, 2013, the Company entered into a Convertible Promissory Note (“Note”) with Asher Enterprises, Inc. (“Holder”) in the original principle amount of $32,500 bearing an 8% annual interest rate, unsecured and maturing March 26, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 58% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $32,500 in connection with the initial valuation of the derivative liability of the Note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $75,198 and derivative expense of $42,498 based on the Black Scholes Merton pricing model.

 

On November 7, 2013, this Note was assigned to Matthew Morris by the Holder.

 

In accordance with the terms of the Note, the holder fully converted the Note on March 31, 2014 for 4,500,000 shares of common stock for principal of $32,500 as disclosed in Note 7. During the six months ended June 30, 2014, a gain in the change of the fair value of derivative of $60,064, amortization of debt discount of $10,119 and loss on settlement of promissory convertible notes of $35,000.

 

Asher Enterprises Promissory Note VIII July 10, 2013

On July 10, 2013, the Company entered into a Convertible Promissory Note (“Note”) with Asher Enterprises, Inc. (“Holder”) in the original principle amount of $32,500 bearing an 8% annual interest rate, unsecured and maturing April 8, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 58% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $32,500 in connection with the initial valuation of the derivative liability of the Note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $68,097 and derivative expense of $35,597 based on the Black Scholes Merton pricing model.

 

On November 7, 2013, this Note was assigned to Matthew Morris by the Holder.

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $16,250 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

As of June 30, 2014, $32,500 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $48,428 resulting in a gain on the change in fair value of the derivative of $12,059. The Note is shown net of a debt discount of $1,186 at June 30, 2014.

 

Asher Enterprises Promissory Note IX December 23, 2013

On December 23, 2013, the Company entered into a Convertible Promissory Note (“Note”) with Asher Enterprises, Inc. (“Holder”) in the original principle amount of $47,500 bearing an 8% annual interest rate, unsecured and maturing September 23, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 58% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $47,500 in connection with the initial valuation of the derivative liability of the Note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $69,489 and derivative expense of $21,989 based on the Black Scholes Merton pricing model.

 

In a negotiated settlement of the Note, on April 23, 2014 the holder was paid $72,531 for principal of $47,500 resulting in a loss on settlement of $21,281. During the six months ended June 30, 2014, a gain in the change of the fair value of derivative of $108,282, amortization of debt discount of $30,511and loss on settlement of promissory convertible notes of $35,000.

 

 

JMJ Financial Promissory Note III May 30, 2013

On May 30, 2013, the Company received cash proceeds of $25,000 with an original issue discount of $7,481 on the third tranche of the Convertible Note (“Note”) with JMJ Financial. The Company recorded a debt discount in the amount of $32,481 in connection with the initial valuation of the derivative liability of the Note to be amortized utilizing the effective interest method of accretion over the term of the Note. Further, the Company recognized a derivative liability of $280,960 and derivative expense of $255,960 based on the Black Scholes Merton pricing model.

In accordance with the terms of the Note, the JMJ Financial partially converted the Note on December 2, 2013 for 7,400,000 shares of common stock for principal and interest of $28,897 as disclosed in Note 8 resulting in a loss on settlement of promissory convertible notes of $252,303.

 

In accordance with the terms of the Note, the holder fully converted the Note on December 2, 2013 for 7,400,400 shares, and on April 3, 2014 for 919,671 shares of common stock for principal of $32,481 as disclosed in Note 7. During the six months ended June 30, 2014, a gain in the change of the fair value of derivative of $6,622, amortization of debt discount of $13,348 and loss on settlement of promissory convertible notes of $8,093.

 

JMJ Financial Promissory Note IV August 18, 2013

 

On August 18, 2013, the Company received cash proceeds of $30,000 with an original issue discount of $5,377 on the fourth tranche of the Convertible Note (“Note”) with JMJ Financial. The Company recorded a debt discount in the amount of $35,377 in connection with the initial valuation of the derivative liability of the Note to be amortized utilizing the effective interest method of accretion over the term of the Note. Further, the Company recognized a derivative liability of $51,643 and derivative expense of $21,643 based on the Black Scholes Merton pricing model.

 

.In accordance with the terms of the Note, the holder fully converted the Note on March 6, 2014 for 2,500,400 shares and on April 3, 2014 for 4,278,860 shares of common stock for principal of $35,377 as disclosed in Note 7. During the six months ended June 30, 2014, a loss in the change of the fair value of derivative of $74,290, amortization of debt discount of $22,292 and loss on settlement of promissory convertible notes of $58,791.

 

JMJ Financial Promissory Note V September 25, 2013

On September 25, 2013, the Company received cash proceeds of $25,000 with and original issue discount of $4,481 on the fifth tranche of the Convertible Note (“Note”) with JMJ Financial. The Company recorded a debt discount in the amount of $29,481 in connection with the initial valuation of the derivative liability of the Note to be amortized utilizing the effective interest method of accretion over the term of the Note. Further, the Company recognized a derivative liability of $47,618 and derivative expense of $22,618 based on the Black Scholes Merton pricing model.

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $14,741 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

As of June 30, 2014, $22,454 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $64,438 resulting in a gain on the change in fair value of the derivative of $1,123. The Note is shown net of a debt discount of $7,027 at June 30, 2014.

 

JMJ Financial Promissory Note VI December 9, 2013

On December 9, 2013, the Company received cash proceeds of $50,000 with an original issue discount of $8,962 on the sixth tranche of the Convertible Note (“Note”) with JMJ Financial. The Company recorded a debt discount in the amount of $58,962 in connection with the initial valuation of the derivative liability of the Note to be amortized utilizing the effective interest method of accretion over the term of the Note. Further, the Company recognized a derivative liability of $434,130 and derivative expense of $384,130 based on the Black Scholes Merton pricing model.

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $29,481 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

As of June 30, 2014, $32,793 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $132,785 resulting in a loss on the change in fair value of the derivative of $2,089. The Note is shown net of a debt discount of $26,169 at June 30, 2014.

 

 

LG Capital Funding, LLC Promissory Note II July 18, 2013

On July 18, 2013, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $26,500 bearing an 8% annual interest rate, unsecured and maturing April 16, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 50% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $26,500 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $84,191 and derivative expense of $57,691 based on the Black Scholes Merton pricing model.

 

In accordance with the terms of the Note, the holder fully converted the Note on January 30, 2014 for 3,566,996 shares of common stock for principal of 26,500 and interest of $1,144 as disclosed in Note 8. During the six months ended June 30, 2014, a gain in the change in the fair value of derivative of $60,192, amortization of debt discount of $10,445and loss on settlement of promissory convertible notes of $19,440 for this Note was recorded.

 

LG Capital Funding, LLC Promissory Note III August 30, 2013

On August 30, 2013, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $32,000 bearing an 8% annual interest rate, unsecured and maturing May 27, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 50% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $32,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $66,705 and derivative expense of $34,705 based on the Black Scholes Merton pricing model.

 

. In accordance with the terms of the Note, the holder fully converted the Note on March 31, 2014 for 5,536,088 shares of common stock for principal of 32,000 and interest of $1,493 as disclosed in Note 8. During the six months ended June 30, 2014, a gain in the change in the fair value of derivative of $74,338, amortization of debt discount of $17,582 and loss on settlement of promissory convertible notes of $91,069 for this Note was recorded.

 

LG Capital Funding, LLC Promissory Note IV September 18, 2013

On September 18, 2013, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $26,500 bearing an 8% annual interest rate, unsecured and maturing June 27, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 50% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $26,500 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $45,285 and derivative expense of $18,785 based on the Black Scholes Merton pricing model.

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $13,250 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

As of June 30, 2014, $26,499 of the debt discount has been amortized. The fair value of the derivative liability at June 302014 is $54,475 resulting in a loss on the change in fair value of the derivative of $8,232. The Note is shown net of a debt discount of $0 at June 30, 2014.

 

LG Capital Funding, LLC Promissory Note VI November 18, 2013

On November 18, 2013, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $30,000 bearing an 8% annual interest rate, unsecured and maturing August 18, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 50% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $30,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $77,099 and derivative expense of $47,099 based on the Black Scholes Merton pricing model.

 

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $15,000 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

As of June 30, 2014, $24,615of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $59,066 resulting in a loss on the change in fair value of the derivative of $21,180. The Note is shown net of a debt discount of $5,385 at June 30, 2014.

 

LG Capital Funding, LLC Promissory Note VII November 27, 2013

On November 27, 2013, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $26,500 bearing an 8% annual interest rate, unsecured and maturing August 27, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 50% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $26,500 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $214,287 and derivative expense of $187,787 based on the Black Scholes Merton pricing model.

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $13,250 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

As of June 30, 2014, $20,869 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $43,905 resulting in a loss on the change in fair value of the derivative of $27,685. The Note is shown net of a debt discount of $5,630 at June 30, 2014.

 

LG Capital Funding, LLC Promissory Note VIII December 30, 2013

On December 30, 2013, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $50,000 bearing an 8% annual interest rate, unsecured and maturing September 30, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 50% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $50,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $136,117 and derivative expense of $86,117 based on the Black Scholes Merton pricing model.

 

On December 30, 2013, the $50,000 of cash proceeds received from the issuance of LG Capital Funding, LLC Promissory Note VIII was used to pay Blue Atelier Inc. outstanding principal and interest.

 

In accordance with the terms of the Note, the holder fully converted the Note on January 9, 2014 and January 16, 2014 for 5,124,544 shares of common stock for principal and interest of $50,000 as disclosed in Note 8. During the six months ended June 30, 2014, a gain in the change in the fair value of derivative of $135,553, amortization of debt discount of $49,818 and loss on settlement of promissory convertible notes of $54,585 for this Note was recorded.

 

LG Capital Funding, LLC Promissory Note IX January 6, 2014

 

On January 6, 2014, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $52,000 bearing an 8% annual interest rate, unsecured and maturing September 30, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 50% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $52,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $98,265 and derivative expense of $46,265 based on the Black Scholes Merton pricing model.

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $26,000 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

 

As of June 30, 2014, $33,879 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $103,261 resulting in a gain on the change in fair value of the derivative of $5,404. The Note is shown net of a debt discount of $18,121 at June 30, 2014.

 

Matthew Morris Promissory Note I November 8, 2013

 

On November 8, 2013, the Company entered into a Convertible Promissory Note (“Note”) with Matthew Morris (“Holder”) in the original principle amount of $46,500 bearing an 8% annual interest rate, unsecured and maturing August 8, 2014. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price which means average trading price during the three trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $46,500 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $62,721 and derivative expense of $16,221 based on the Black Scholes Merton pricing model.

  

As of June 30, 2014, $39,857 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $43,514 resulting in a gain on the change in fair value of the derivative of $16,858. The Note is shown net of a debt discount of $6,643 at June 30, 2014.

 

GEL Properties, LLC Promissory Note I January 20, 2014

 

On January 20, 2014, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $30,000 bearing an 6% annual interest rate, unsecured and maturing January 21, 2015. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $30,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $43,649 and derivative expense of $13,649 based on the Black Scholes Merton pricing model.

 

In accordance with the terms of the Note, the holder fully converted the Note on January 30, 2014, February 27, 2014, and March 11, 2014 for 3,751,895 shares of common stock for principal and interest of $30,000 as disclosed in Note 8. During the six months ended June 30, 2014, a gain in the change in the fair value of derivative of $43,649, amortization of debt discount of $30,000 and gain on settlement of promissory convertible notes of $3,600 for this Note was recorded.

 

GEL Properties, LLC Promissory Note II January 21, 2014

 

On January 21, 2014, the Company entered into a Convertible Promissory Note (“Note”) with LG Capital Funding, LLC (“Holder”) in the original principle amount of $65,000 bearing an 6% annual interest rate, unsecured and maturing January 21, 2015. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $65,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $86,035 and derivative expense of $21,035 based on the Black Scholes Merton pricing model.

 

As of June 30, 2014, $28,493 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $63,082 resulting in a loss on the change in fair value of the derivative of $22,953. The Note is shown net of a debt discount of $36,507 at June 30, 2014.

 

 

 

Typenex Co-Investment, LLC Promissory Note I February 13, 2014

 

On February 13, 2014, the Company entered into a Convertible Promissory Note (“Note”) with Typenex Co-Investment, LLC (“Holder”) in the initial principle amount of $150,000 bearing an 10% annual interest rate, unsecured and maturing May 13, 2015. Typenex Co-Investment is committed to issue additional Convertible Promissory Notes in $50,000 traunche’ up to a total investment of $550,000. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a fixed conversion price of $0.025 per share subject to a reduction if the Company share price falls below the conversion price. The Investor will receive a warrant to purchase shares of the Company exercisable for a period of 5 years from the closing. The number of warrants will be calculated at 30% of the maturity amount of the traunche’s exercised by the Company. The exercise price of the warrant we be $0.025 per share. The Company recorded a debt discount in the amount of $112,688 and a debt discount for the note and $51,484 for the warrants in connection with the initial valuation of the derivative liability of the note and warrants to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $51,484 for the warrants at inception, a derivative liability of $112,688 for the conversion at inception, and derivative expense of $23,770 based on the Black Scholes Merton pricing model.

 

As of April 15, 2014 the Company failed to file its annual report with the Securities and Exchange Commission thus creating a default according to the terms of the Note. In accordance to the terms of the Note, the default provision requires a penalty of $83,750 to be added the principal of the note. This same amount has been expensed as additional interest expense.

 

As of June 30, 2014, $44,869 of the debt discount for the Note and warrants has been amortized. The fair value of the derivative liability of the Note and the warrants at June 30, 2014 is $164,130 and $39,428, respectively, resulting in a gain on the change in fair value of the derivative of $51,442 on the Note and a loss on the change in fair value of the derivative of $12,056 on the warrants. The Note and warrants are shown net of a debt discount of $105,131 at June 30, 2014.

 

Union Capital, LLC Promissory Note I April 2, 2014

 

On April 2, 2014, the Company entered into a Convertible Promissory Note (“Note”) with Union Capital, LLC (“Holder”) in the original principle amount of $100,000 bearing an 9% annual interest rate, unsecured and maturing April 2, 2015. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 58% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $100,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $148,053 and derivative expense of $48,053 based on the Black Scholes Merton pricing model.

 

As of June 30, 2014, $24,384 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $128,862 resulting in a loss on the change in fair value of the derivative of $19,191. The Note is shown net of a debt discount of $75,616 at June 30, 2014.

 

Union Capital, LLC Promissory Note III April 2, 2014

 

On April 2, 2014, the Company entered into a Convertible Promissory Note (“Note”) with Union Capital, LLC (“Holder”) in the original principle amount of $100,000 bearing an 9% annual interest rate, unsecured and maturing April 2, 2015. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 58% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $105,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $155,456 and derivative expense of $50,456 based on the Black Scholes Merton pricing model.

 

In accordance with the terms of the Note, the Union Capital, LLC partially converted the Note on April 3, 2014 for 1,930,005shares of common stock for principal of $15,000 as disclosed in Note 8 resulting in a loss on settlement of promissory convertible notes of $12,599.

 

As of June 30, 2014, $25,603 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $113,935 resulting in a loss on the change in fair value of the derivative of $41,521. The Note is shown net of a debt discount of $79,397 at June 30, 2014.

 

Union Capital, LLC Promissory Note II April 2, 2014

 

On June 30, 2014, the Company entered into a Convertible Promissory Note (“Note”) with Union Capital, LLC (“Holder”) in the original principle amount of $34,188 bearing an 9% annual interest rate, unsecured and maturing June 30, 2015. This Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 58% of the market price which means the lowest trading price during the ten trading day period ending on the latest complete trading day prior to the conversion date. The Company recorded a debt discount in the amount of $34,188 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $46,651 and derivative expense of $12,463 based on the Black Scholes Merton pricing model.

 

 

As of June 30, 2014, $0 of the debt discount has been amortized. The fair value of the derivative liability at June 30, 2014 is $46,646 resulting in a loss on the change in fair value of the derivative of $5. The Note is shown net of a debt discount of $34,188 at June 30, 2014.

 

The derivative liability of the Notes was measured using the Black-Scholes model based on the following assumptions:

Stock price – closing price of the Company stock on the valuation date ($0.0038-$0.145)

Exercise price – based on conversion formula on the valuation date ($0.0013-$0.1073)

Volatility – expected standard deviation based on historical volatility of the stock (213% - 546%)

Expected life – remaining life to the maturity date (0.23 years – 1.0 years)

Discount rate – Treasury bill rates based for the expected life on the valuation date (0.09%-0.15%)

 

Note 7 – Stockholders' Equity

 

The Company is authorized to issue an aggregate of 300,000,000 shares of common stock with a par value of $0.001. The Company is also authorized to issue 20,000,000 shares of undesignated par value $0.001 preferred stock, of which 13,420 shares of Class A preferred stock (“Class A”) with a stated value of $10; 100,000 shares of Class B (“Class B”) preferred stock with a stated value of $10; and 100,000 shares of Class C (“Class C”) preferred stock with a stated value of $10 have been designated and authorized..

 

The preference term of the Class A and Class B is five years with conversion rights to common shares at any time after six months. Each Class A, Class B, and Class C is convertible into 2,857.14, 690 shares, and 592 shares of common stock, respectively. Each Class A, each Class B, and each Class C share is entitled to 2,857.14 votes, 3,450 votes, and 592 votes, respectively, on any matter that is brought to a vote of the common stock holders.

 

Other Stock Issuances

 

On January 26, 2012, FINRA approved the 5 to 1 reverse stock split of our issued and outstanding common stock. The stock split has been retroactively applied to these financial statements resulting in a decrease in the number of shares of common stock outstanding with a corresponding increase in additional paid-in capital. All shares amounts have been retroactively restated to reflect this reverse stock split.

 

On April 3, 2012, the Company settled accounts payable totalling $131,878 of amounts outstanding since 2009. On April 19, 2012, the accounts payable totalling $121,878 were settled through the issuance of 13,000,000 shares of common stock. On the date of settlement the closing price of the Company’s common stock was $0.10 per share, resulting in a loss on settlement of $518,122 during the year ended December 31, 2012.

 

On April 17, 2012, the Board of Directors of the Company approved the issuance of 13,000,000 shares of restricted common stock to key executives and directors of the Company as a bonus incentive.

 

On June 27, 2012 the Company announced that its Board of Directors approved a one share for one share stock dividend of the Company’s common stock, regarding this as an effective forward split. Each shareholder of record at the close of business on June 29, 2012 received one additional share for every outstanding share held on the record date. The Articles were amended to reflect this on July 16, 2012 and this received FINRA approval on July 27, 2012.

 

On June 27, 2012, the Company entered into a stock purchase agreement with Diamond Transport Ltd. under which the company will sell one million shares of common stock at $0.50 per share with a closing of the sale on or before July 15, 2012 with $100,000 to be received as an advance payment on July 05, 2012. The advance payment of $100,000 was received on July 20, 2012 and a further $50,000 received on August 20, 2012 and the closing date of the transaction will be upon receipt of the outstanding balance of $350,000. As of December 31, 2012, the shares have not been issued, and as such the Company has recorded $150,000 as stock payable.

 

On January 22, 2013, the Company entered into an assignment agreement with E World Corp., an entity under common control, whereby E World Corp. agreed to purchase the outstanding subscription agreement from Diamond Transport Ltd. for $75,000 payable in three monthly cash installments of $25,000, with the last payment due on March 22, 2013. As of December 31, 2013, the Company has received $75,000 cash from eWorld Corp. The Company recorded the cash receipt of $75,000 as additional paid-in capital as of December 31, 2013, due to the related party relationship. The $150,000 stock payable to Diamond Transport was reversed and any further liability to Diamond Transport Ltd. was assumed by eWorld Corp.

 

On April 22, 2013, the Board of Directors approved the issue of 6,880 Class A Preferred Shares at $10 par value to Frank A. O’Donnell and 6,540 Class A Preferred Shares at $10 par value to Joseph L. DuRant for the conversion of debt totaling $134,200. The fair value of the shares issued was $134,200 based on the quoted market price of the shares on the date of approval on an as converted basis.

 

 

On January 20, 2014, the Board of Directors approved the issue of 38,194 of Class B Preferred Shares at $10 par value as described in Note 4.

 

On April 2, 2014, pursuant to an agreement, the Board of Directors approved the issue of 8,783 of Class C Preferred Shares at $10 par value to Joseph L. DuRant in exchange for the voluntary surrender of 5,200,000 shares of common stock.

 

On April 3, 2014, pursuant to an agreement, the Board of Directors approved the issue of 15,557 of Class C Preferred Shares at $10 par value to Green Renewable Energy Solutions, Inc. in exchange for the voluntary surrender of 9,209,334 shares of common stock. Green Renewable Energy Solutions, Inc. is wholly owned by Joseph L. DuRant, president of the Company.

 

On February 13, 2014, pursuant to an agreement, Carmel Advisors LLC was issued 5,000,000 shares of common stock as payment for consulting services to be provided by Carmel Advisors LLC. The services shall include, but are not limited to, the development, implementation and maintenance of an ongoing program to increase the investment community’s awareness of the Company’s activities and to stimulate the investment community’s interest in the Company.

 

On May 2, 2014, pursuant to an agreement, the Board of Directors approved the issue of 15,000,000 shares of common stock as partial payment for an Equity Purchase Agreement with Kodiak Capital Group, LLC. The final terms of the agreement were met by the Company on October 20, 2014. The Equity Purchase Agreement with Kodiak Capital Group, LLC, provides the Company the right to sell up to $5,000,000 of the Company’s common stock, subject to conditions the Company must satisfy as set forth in the Agreement.

 

Stock issued during the quarter to date ending June 30, 2014 was valued at the closing market price of the shares on either the date approved by the Board of Directors, the date of settlement, or the date the services have been deemed rendered.

 

Stock Issued for Settlement of Convertible Notes Payable

 

Date of Issue		Stock Issues for year ended December 31, 2014		Number of Shares issued				Purpose of Issue		Conversion Price based on the Conversion Formula in the Notes				Principal and Interest Converted
January 9, 2014		LG Capital Funding, LLC			2,094,241			Debt Conversion		$	0.010			$	20,000
January 16, 2014		LG Capital Funding, LLC			3,030,303			Debt Conversion		$	0.010			$	30,000
January 30, 2014		LG Capital Funding, LLC			3,566,996			Debt Conversion		$	0.008			$	27,644
January 30, 2014		GEL Properties, LLC			2,000,000			Debt Conversion		$	0.008			$	16,796
February 27, 2014		GEL Properties, LLC			1,500,000			Debt Conversion		$	0.008			$	11,301
March 6, 2014		JMJ Financial			2,500,000			Debt Conversion		$	0.005			$	13,613
March 11, 2014		GEL Properties, LLC			251,895			Debt Conversion		$	0.008			$	1,903
March 21, 2014		LG Capital Funding, LLC			5,536,088			Debt Conversion		$	0.006			$	33,493
March 31, 2014		Matthew Morris			4,500,000			Debt Conversion		$	0.007			$	32,500
April 3, 2014		JMJ Financial			5,198,531			Debt Conversion		$	0.006			$	28,592
April 3, 2014		Union Capital, LLC			1,930,005			Debt Conversion		$	0.008			$	15,000
Total					32,108,059									$	230,841

 

Date of Issue		Stock Issues for year ended December 31, 2014		Number of Shares issued				Purpose of Issue		Price on date of issue				Market value of shares issued
March 31, 2014		Carmel Advisors, LLC			5,000,000			Services		$	0.017			$	86,000
May 2, 2014		Kodiak Capital			15,000,000			Services		$	0.017			$	253,500
Totals					52,108,059									$	570,341

 

 

 

During the six months ended June 30, 2014, the Company issued at total of 32,108,059 shares of common stock for debt conversion for an aggregate fair value of $529,894 based on the closing price the date the stock was issued. The difference between the fair value of the shares of common stock issued of $529,894 and the principal and interest converted of $230,842 is recorded as a loss on settlement of promissory notes and interest of $299,052 in the consolidated statements of operations.

 

As of June 30, 2014 and December 31, 2013, the Company had 192,132,774 and 163,934,049 shares of common stock outstanding respectively..

 

Stock Payable

 

On August 14, 2012, the Company entered into 6 month professional services agreement, whereby the Company pays the consultant $5,000 cash and $5,000 worth of common stock each month. As of June 30, 2014 and December 31, 2013, the Company has recorded $30,000 in stock payable related to this contract.

 

On July 1, 2012, the Company entered into a nine month professional services agreement, whereby the Company pays the consultant 250,000 share of common stock. As of June 30, 2014 and December 31, 2013, the Company has an obligation for 120,000 shares of common stock valued at $6,612.

 

On November 1, 2012, the Company entered into a professional services agreement, whereby the Company agreed to pay the consultant $50,000 for services for the Company's common stock. As of June 30, 2014 and December 31, 2013, the no shares have been issued and the obligation has been recorded as stock payable.

 

On September 20, 2012, the Company entered into an employment agreement whereby the Company agreed to issue 50,000 shares of common stock valued at $6,995 as a commencement bonus. As of June 30, 2014 and December 31, 2013, no shares have been issued and the obligation has been recorded as stock payable.

 

On April 22, 2013, the Board of Directors approved the issue of 5,714,286 shares of common stock to E World Corp. and 1,941,714 shares of common stock to Blue Atelier, Inc. for settlement of accounts payable totaling $26,796. The fair value of the shares to be issued is $22,968 based on the quoted market price of the shares on the date of approval. The excess of the accounts payable settled over the fair value of the shares issue of $3,828 is recorded as additional paid-in capital due to the related party relationship. As of June 30, 2014 and December 31, 2013, no shares were issued and the $22,968 for this obligation was recorded as stock payable.

 

At January 20, 2014, the Board of Directors approved the issue of 38,193 shares of Class B preferred stock for officer compensation for services provided in 2013 and were issued. The fair value of the shares to be issued is $574,495 based on the quoted market price of the shares on the date of approval. The excess of the accrued wages over the fair value of the shares issued of $192,565 is recorded as additional paid-in capital due to the related party relationship. As of December 31, 2013, no shares were issued and the $312,500 for this obligation was recorded as stock payable. As of June 30, 2014 the preferred shares had been issued and removed from stock payable.

 

On January 10, 2014, the Board of Directors approved the issue of capital stock as additional compensation for the officers and Board of Director members. The amount of dollars authorized, to whom they are authorized, and the dollar amount of shares each represent is shown in the chart below. As of June 30, 2014 this amount of $196,250 was recorded as stock payable.

 

		Accrued Compensation to be issued in Capital Stock				Accrued Board of Director Fee to be issued in Capital Stock				Total				Shares of Common Stock to be issued at June 30, 2014 Market Price
Joe DuRant: CEO, Director		$	62,500			$	10,000			$	72,500				2,900,000
Roger Silverthorn: CFO, Director			62,500				10,000			$	72,500				2,900,000
Richard Fosgitt, Director			31,250				10,000			$	41,250				1,650,000
Thomas Cote': Director			-				10,000			$	10,000				400,000
		$	156,250			$	40,000			$	196,250				7,850,000

 

 

On March 12, 2014 two shareholders loaned their shares to the company in exchange for a note. The note is payable when shares are available and will be paid at a 50% premium. The total shares returned to treasury were 9,500,000 shares and will be repaid with 14,250,000 shares when available and are recorded as stock payable for $213,750. The premium has been expensed as other financing costs. The shares were valued at the fair value on the day of the transaction.

 

Note 9 - Subsequent Events

 

On May 16, 2013, the Company and Cirque Energy II, LLC announced a commitment to a merger. The Members of the Cirque Energy II, LLC will receive 43,359,487 shares of the Company’s common stock at closing and another 43,359,487 shares of common stock at such time as the stock price reaches $0.50 per share. As of September 30, 2014, the merger has not closed.

 

On June 27, 2014, the Company received funding pursuant to a convertible promissory note with Union Capital, LLC in the amount of $34,188. The promissory note is unsecured, bears interest at 9% per annum, and matures on June 27, 2015.

 

On August 5, 2014, the Company received funding pursuant to a convertible promissory note with Blue Atelier, Inc. in the amount of $35,000. The promissory note is unsecured, bears interest at 9% per annum, and matures on September 30, 2014.

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Background

Cirque Energy, Inc. (“Cirque,” the “Company,” “we,” “us” or “our company”) was originally incorporated in Florida on July 16, 1998 under the name of Salty’s Warehouse, Inc. and was engaged in selling name brand consumer products over the Internet. The Company focused on selling consumer electronics and audio-video equipment such as speakers, amplifiers, and tuners, though the Company also sold assorted other goods such as watches, sunglasses and sports games. On December 11, 2006, owners of an aggregate of 22,450,000 shares of our common stock sold all of the shares held by them to a group of approximately 54 purchasers. As a result of this transaction, a change of control in the Company occurred resulting in a change in its name to E World Interactive, Inc. (“E World”). At that time, E World mainly engaged in sales of online game services and media production business in mainland China.

 

Having operated in this sector for some time, the Company then disposed of its subsidiaries Shanghai E World China Information Technologies Co., Ltd (“E World China”) and Mojo Media Works Limited in August 2008, and following this ceased all business in online game and media production business and became a dormant shell company.

 

In March 2009, the Company entered into a stock purchase agreement with Blue Atelier, Inc. Blue Atelier acquired 25,000,000 newly issued common stock of E World after it had executed a forty to one reverse split of its issued and outstanding common stock and also entered into a series of agreements with various holders of convertible notes to convert its notes payable plus accumulated interest to E World common stock in the aggregate to 6,872,830 shares of common stock. As a result of this transaction, a change of control in E World occurred with Blue Atelier then owning 75% of the outstanding common stock of E World.

 

In May 2010, the Company acquired 100% of the outstanding common stock of Media and Technology Solutions, Inc., a Nevada corporation with a variety of media and related interests in rights and emerged from dormant shell status. The consideration for the purchase of Media and Technology was 10,000,000 shares of E World common stock. Blue Atelier Inc., the principal shareholder of Media and Technology, is also the largest shareholder in E World. Following this acquisition, E World moved its principal office to Las Vegas, Nevada. The acquisition of Media and Technology was accounted for in a manner similar to a pooling of interests in accordance with United States generally accepted accounting principles (“GAAP”) because the entities were under common control.

 

 

On September 17, 2011 E World entered into a letter of intent (the “LOI”) with Green Renewable Energy Solutions, Inc. (“GRES”), the purpose of which to acquire the assets of GRES which included certain contracts for the acceptance, processing and disposal of construction and demolition waste. FINRA approved the name change to Green Energy Renewable Solutions, Inc. (“GERS”) and reverse split on January 26, 2012. On January 26, 2012 GERS completed a five-for-one reverse split and on February 4, 2012 E World, including its subsidiary company, Media and Technology Solutions, Inc., was spun out as a separate private company by way of share dividend with one E World share issued for every share held on the date of the reverse split approval. On February 4, 2012 GRES executed the asset purchase agreement (the “Purchase Agreement”) with GERS. Under the terms of the Purchase Agreement, GERS acquired all of the assets of GRES for 6,209,334 shares of its common stock and a further 4,604,666 common shares of deferred consideration.

 

GERS’ key area of business is focused on the acquisition of waste streams and maximizing their value utilizing recycling, renewable energy production, and environmentally responsible disposal strategies. On June 27, 2012, the Company approved a one-for-one stock dividend for shares held on June 29, 2012 and the dividend shares were issued following FINRA approval on July 27, 2012.

 

On May 15, 2013 the Company entered into a contribution agreement with Cirque Energy II, LLC (“Cirque LLC”) whereby Cirque LLC would contribute all of its assets in exchange for common stock in the Company. Included in Cirque LLC’s assets were three subsidiary limited liability companies: The Prototype Company, LLC, Gaylord Power Station, LLC, and Midland Renewable Energy Station, LLC. This contribution agreement has not yet been consummated.

 

In July 2013, Green Energy Renewable Solutions, Inc. changed its name to Cirque Energy, Inc. FINRA approval of the name change and change in the Company’s trading symbol is pending.

 

Plan of Operations

Cirque’s core business components include proprietary deployable gasification unit (“DGU”) technology and the delivery of clean energy generation solutions as an energy services company (“ESCO”).

 

DGU Business

 

·

Under a contract with the Northrop Grumman Corporation, Cirque Energy investigated, obtained research and technical data on the ability to produce a mobile, deployable gasification unit capable of producing field electricity for use by the U.S. Military and other government users.

·

The goal of this engagement was to determine the potential ability to develop, engineer and fabricate a DGU or system capable of converting the currently available byproducts or wastes generated by the U.S. Military in a typical forward operating base (FOB) into electricity. Specifically, waste volumes of between one and ten tons per day.

·

Goal is to make systems simple to operate, highly transportable, reliable, and have minimal special training and maintenance requirements.

·

Northrop Grumman and Cirque Energy are committed to continue technology development for the DGU towards commercialization.

·

Northrop Grumman in partnership with Cirque Energy is producing the first working DGU prototypes for testing and demonstration for military, government, and commercial customers.

·

We anticipate the deployment or the DGU prototypes.

·

Under the agreement, Cirque Energy will lead development, manufacturing, and testing of the initial demonstration DGU’s, with input from Northrop Grumman.

·

Upon successful demonstration, Northrop Grumman will manufacture DGU’s for exclusive sale by Northrop Grumman and Cirque Energy.

 

Clean Energy Generation Solutions as Energy Services Company (“ESCO”)

 

Delivery of clean energy Combined Heat and Power (“CHP”) projects, to industrial, commercial, and municipalities, universities, schools, hospitals (“MUSH”) market customers as well as local, state, and federal governments.

 

·

Projects to be developed and owned by Cirque Energy.

·

Energy sold to Customer using various structures which required little or no capital outlay by Customer:

·

ESPC – Energy savings performance contract; customer pays Cirque money which otherwise would have gone to utility company in exchange for guaranteed savings.

·

PPA – traditional power purchase agreement.

·

Services contract – energy purchased as a service, thereby allowing customer to treat project as “off-credit.”

·

Lease – Cirque to design, build, finance and lease system to customer.

 

 

The Company anticipates acquiring Cirque LLC. Management expects that this acquisition will provide the new entity with several benefits:

 

·

Strengthen management team to execute our business plan, includes plant operations, project development, construction, start-up, commissioning, fuel procurement and transportation.

·

Skill sets of the new team mitigate execution risk.

·

New and expanded pipeline of projects and programs in various stages of development.

·

Expanded client relationships, large industrial clients, universities, hospitals, and utilities resulting in more opportunities.

·

Expanded network of project finance relationships and contacts.

·

Our team has vast experience in development, design, financing, construction, and operations, which positions us to successfully take a potential energy project from a vision to completion.

 

Results of Operations

Below is a comparison of results of operations for the three months ended June 30, 2014 and June 30, 2013.

 

The Company reported a net loss of $1,347,334 for the three months ended June 30, 2014 versus a net loss of $968,692 for the six months ended June 30, 2013.

 

For the three months ended June 30, 2014, the primary contributors to the net loss of $1,347,334 were executive compensation for the management team of $209,033, professional fees of $70,690, other financing costs of $253,500, project development costs of $28,958, amortization of debt expense of $223,827, derivative expense of $110,972, loss on settlement of promissory convertible notes of $83,376, loss on derivative liability of $83,192, and interest expense of $258,087. For the three months ended June 30, 2013, primary contributors to the net loss of $968,692 were executive compensation for the management team of $162,294, professional fees of $105,026, forfeiture of deposit on landfill of $150,000, amortization of debt discount of $142,998, derivative expense of $326,378, loss on settlement of promissory convertible notes of $273,285, and gain on derivative liability of $196,577.

 

The Company reported a net loss of $1,977,651 for the six months ended June 30, 2014 versus a net loss of $1,311,405 for the six months ended June 30, 2013.

 

For the six months ended June 30, 2014, the primary contributors to the net loss of $1,977,651 were executive compensation for the management team of $434,870, professional fees of $142,997, investor relations costs of $96,597, other financing costs of $346,250, project development costs of $66,680, amortization of debt expense of $541,408, derivative expense of $191,921, loss on settlement of debt of $171,564, loss on settlement of promissory convertible notes of $324,082, gain on derivative liability of $677,082, and interest expense of $267,774. For the six months ended June 30, 2013, primary contributors to the net loss of $1,311,405 were executive compensation for the management team of $308,127, professional fees of $183,256, forfeiture of deposit on landfill of $150,000, amortization of debt discount of $203,341, derivative expense of $366,419, loss on settlement of promissory convertible notes of $321,624, and gain on derivative liability of $237,151.

 

Prior period comparisons of results are impacted by developing operations during the periods covered.

 

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported.  Note 2 of the accompanying notes to the consolidated financial statements describe the significant accounting policies used in the preparation of the financial statements.  Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

   

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations.  Specifically, critical accounting estimates have the following attributes:

 

o

We are required to make assumptions about matters that are highly uncertain at the time of the estimate; and

 

o

Different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

 

Estimates and assumptions about future events and their effects cannot be determined with certainty.  We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances.  These estimates may change as new events occur, as additional information is obtained and as our operating environment changes.  These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known.  Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.

 

a)

Impairment of Long-Lived Assets and Intangible Assets

Long-lived assets and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses the recoverability of the long-lived assets and intangible assets (other than goodwill) by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. The Company recognizes impairment of long-lived assets and intangible assets in the event that the net book value of such assets exceeds the estimated future undiscounted cash flow attributed to such assets. The Company uses estimates and judgments in its impairment tests and if different estimates or judgments had been utilized, the timing or the amount of the impairment charges could be different.

 

 

b)

Share-based Payments

The Company records stock-based compensation issued to non-employees or other external entities for goods and services at either the fair market value of the shares issued or the value of the services received, whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505-50-30.

 

Liquidity and Capital Resources

During the six months ended June 30, 2014, net cash used in operating activities totaled $(694,576). Cash generated by financing activities was $698,057, resulting primarily from the issuance of convertible promissory notes and the addition to stock payable, and cash used in investing activities totaled $(419). Increase in cash for the period was $3,900.

 

During the six months ended June 30, 2013, net cash used in operating activities totaled $(179,680). Cash generated by financing activities was $335,500, resulting primarily from the issuance of convertible promissory notes, and the addition to stock payable and cash used in investing activities totaled $(150,000). Increase in cash for the period was $5,820.

 

Cash Flow Requirements for Operations

As of June 30, 2014 the Company had available cash of $12,741. Based on our historical cash needs and our business plan, we require approximately $1,200,000 for operations for the 2014. We currently have legal and accounting expenses with no revenue generating operations. We rely primarily on the issuance of convertible debt and the sale of our common shares to fund our operating needs.

 

Going Concern

Our continuation as a going concern is dependent upon obtaining the additional working capital necessary to sustain our current status. As shown in the accompanying financial statements, the Company has an accumulated deficit of $13,482,735 at June 30, 2014. The future of the Company is dependent upon its ability to obtain additional financing. Management plans to seek additional financing through debt or the sale of the Company’s common stock through private placements. There is no assurance that the Company will raise sufficient funds to continue. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements or financing activities with special purpose entities.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2014. This evaluation was carried out under the supervision of the Company’s Principal Executive Officer and its Principal Financial Officer. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, 2014, our disclosure controls and procedures were not effective.

 

We performed analysis and other post-closing procedures to ensure that our financial statements are prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations, changes in stockholders’ deficit and cash flows for the periods presented.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure. Such disclosure controls and procedures are limited in their effect by the limitation of the numbers of staff available to allow for the desirable level of division of responsibilities and oversight of the controls and procedures.

 

 

A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

Inherent Limitations on the Effectiveness of Controls

A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors 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 systems 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. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

 

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

Changes in Internal Controls

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, performed an evaluation to determine whether any change in our internal controls over financial reporting occurred during the three month period ended June 30, 2014. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that no change occurred in the Company's internal control over financial reporting during the three months ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

No legal proceedings were initiated or served upon the Company in the quarterly period ended June 30, 2014. We are not currently involved in any material legal proceedings. We are not aware of any material legal proceedings pending against us.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

[TO COME – NOT NEEDED IF ALREADY REPORTED ON A FORM 8-K]

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5.

OTHER INFORMATION

None

 

ITEM 6.

EXHIBITS

 

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act *
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Label Linkbase Document*
101.PRE	XBRL Taxonomy Presentation Linkbase Document*

 

* Filed herewith

** Furnished herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

		CIRQUE ENERGY, INC.
February 2, 2015	By:	/s/ Joseph DuRant
		Joseph DuRant Chief Executive Officer (Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

February 2, 2015	By:	/ s/ Joseph DuRant
		Joseph DuRant Chief Executive Officer, President and Director (Principal Executive Officer)
February 2, 2015	By:	/s/ David Morgan
		David Morgan Chief Financial Officer (Principal Financial Officer)