10-Q/A
1
v192048_10qa.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
(Amendment
No. 1)
x
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended April 30, 2010
Or
¨
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
File Number: 333-131862
Clenergen
Corporation
(Exact
name of registrant as specified in its charter)
20-2781289
Nevada
(State
or other jurisdiction of
(I.R.S.
Employer
incorporation
or organization)
Identification
No.)
Bath
House
8
Chapel Place
London,
Great Britain
EC2A
3DQ
(Address
of principal executive offices)
(Zip
Code)
+44
(0) 207739 0028
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No ¨
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 ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer ¨
Accelerated
filer ¨
Non-accelerated
filer ¨ (Do not check if
a smaller reporting company)
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
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: As of June 15, 2010, a total of
96,120,741 shares of the common stock of the issuer were
outstanding.
Introductory
Comment - Use of Terminology
Throughout
this Quarterly Report on Form 10-Q, the terms the “Company,” “we,” “us” and
“our” refers to Clenergen Corporation and, unless the context indicates
otherwise, our subsidiaries, including Clenergen Corporation Limited (UK)
(“Limited”), Clenergen India Private Limited (“Clenergen India”) and Clenergen
Biopower Corporation (“CBC”), on a consolidated basis.
Unless
otherwise indicated, all monetary amounts are reflected in United States Dollars
and, when referenced to a specific date, converted at the currency exchange rate
as of the close of business on such date, as reported by the Wall Street
Journal.
Note
Regarding Forward-Looking Statements
This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and
Section 21E of the Securities Exchange Act of 1934 (the “Exchange
Act”). To the extent that any statements made in this Form 10-Q
contain information that is not historical, these statements are essentially
forward-looking. Forward-looking statements can be identified by the
use of words such as “expect,” “plan,” “will,” “may,” “anticipate,” “believe,”
“should,” “intend,” “estimate,” “could,” “potential,” “continue,” and variations
of such words. Forward-looking statements are subject to risks and
uncertainties that cannot be predicted or quantified and, consequently, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties include,
without limitation:
•
our
ability to raise capital to finance our growth and operations, when needed
and terms advantageous to us;
•
the
ability to manage growth, profitability and the marketability of our
products and services;
•
general
economic and business conditions;
•
the
effect on our business of recent credit-tightening throughout the
world;
•
the
impact of developments and competition within the fossil fuels and
alternative energy industries;
•
adverse
results of any legal proceedings;
•
the
impact of current, pending or future legislation and regulation on the
fossil fuels and alternative energy industries, including, but not limited
to, changes in zoning and environmental laws and
regulations;
•
our
ability to maintain and enter into relationships with suppliers, vendors
or contractors of acceptable quality of goods and services on terms
advantageous to us;
•
changes
in foreign currency exchange rates;
•
political
and government changes in the countries (including local and regional
governments) in which we operate;
•
the
volatility of our operating results and financial
condition;
•
our
ability to attract and retain qualified senior management personnel;
and
•
the
other risks and uncertainties detailed in this Form 10-Q and, from time to
time, in our other filings with the Securities and Exchange
Commission.
Readers
of this Quarterly Report on Form 10-Q should carefully consider such risks,
uncertainties and other information, disclosures and discussions which contain
cautionary statements identifying important factors that could cause our actual
results to differ materially from those provided in forward-looking
statements. Readers should not place undue reliance on
forward-looking statements contained in this Form 10-Q. We do not
undertake any obligation to publicly update or revise any forward-looking
statements we may make in this Form 10-Q or elsewhere, whether as a result of
new information, future events or otherwise.
2
PART
I – FINANCIAL INFORMATION
Item
1. Financial Statements.
CLENERGEN
CORPORATION
(a
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
April 30, 2010
October 31, 2009
(Unaudited)
ASSETS
Current Assets :
Cash
$
167,134
$
1,472
Subscriptions
receivable
699,643
-
Prepaid
expenses and other
1,886,729
15,039
Total
Current Assets
2,753,506
16,511
Fixed Assets :
Property
and equipment, net
20,216
12,901
Total
Fixed Assets
20,216
12,901
Other Assets :
Deposits
48,698
33,487
Total
Other Assets
48,698
33,487
TOTAL
ASSETS
$
2,822,420
$
62,899
LIABILITIES
AND STOCKHOLDERS' EQUITY/DEFICIENCY
Current Liabilities :
Accounts
payable and accrued expenses
$
1,374,805
$
214,211
Payroll
liabilities
84,313
6,745
Due
to affiliates and shareholders
1,270,307
330,302
Total
Current Liabilities
2,729,425
551,257
Total
Liabilities
2,729,425
551,257
Stockholders'
Equity/(Deficiency) :
Preferred
stock, $0.001 par value; Authorized: 10,000,000 shares; Issued:
None
-
-
Common
stock, $0.001 par value; Authorized: 500,000,000 shares; Issued:
95,640,741 and 86,941,013 shares, respectively
95,641
86,941
Additional
paid in capital
11,869,306
3,998,562
Accumulated
other comprehensive income/(loss)
33,939
389,956
Accumulated
deficit during development stage
(11,905,891
)
(4,963,818
)
Total
Stockholders' Equity/Deficiency
92,995
(488,358
)
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY/DEFICIENCY
$
2,822,420
$
62,899
The
accompanying notes are an integral part of these financial
statements.
3
CLENERGEN
CORPORATION
(a
Development Stage Company)
STATEMENTS
OF OPERATION
For
the Three and Six Months Ending April 30, 2010 and 2009
and
From October 27, 2005 (inception) to April 30, 2010
Three
Months Ended
April
30,
Six
Months Ended
April
30,
From
Inception
To
2010
2009
2010
2009
April
30, 2010
Revenue
$
-
$
-
$
-
$
-
$
-
Cost
of services
-
-
-
-
-
Gross
profit or (loss)
-
-
-
-
-
General
and administrative expenses
5,419,513
53,965
6,846,225
58,568
9,535,000
Research
and development
-
-
-
-
2,275,043
Operating
loss
(5,419,513
)
(53,965
)
(6,846,225
)
(58,568
)
(11,810,043
)
Interest
expense
96,412
-
96,412
-
96,412
Other
income
564
-
564
-
564
Loss
before income taxes
(5,515,361
)
(53,965
)
(6,942,073
)
(58,568
)
(11,905,891
)
Provision
for income taxes
Federal
-
-
-
-
-
State
-
-
-
-
-
Net
loss
$
(5,515,361
)
$
(53,965
)
$
(6,942,073
)
$
(58,568
)
$
(11,905,891
)
Loss
per share, basic and diluted
$
(0.06
)
$
(7.20
)
$
(0.08
)
$
(7.81
)
$
(0.81
)
Weighted
average common shares outstanding
91,257,718
7,500
90,860,152
7,500
14,637,979
Comprehensive
loss:
Net
loss
$
(5,515,361
)
$
(53,965
)
$
(6,942,073
)
$
(58,568
)
$
(11,905,891
)
Foreign
currency translation (loss)/income
(321,304
)
(46,300
)
(356,017
)
-
33,938
Comprehensive
loss
$
(5,836,665
)
$
(100,265
)
$
(7,298,090
)
$
(58,568
)
$
(11,871,953
)
The
accompanying notes are an integral part of these financial
statements.
4
CLENERGEN
CORPORATION
(a
Development Stage Company)
STATEMENTS
OF CASH FLOWS
For
the Six Months Ending April 30, 2010 and 2009
and
From October 27, 2005 (inception) to April 30, 2010
Six Months Ended
April 30,
From Inception
2010
2009
to April 30, 2010
CASH FLOWS FROM OPERATING
ACTIVITIES
Net
income (loss)
$
(6,942,073
)
$
(58,568
)
$
(11,905,891
)
Adjustments
to reconcile net income to net cash used in operating
activities:
Adjustments
for charges not requiring outlay of cash:
Depreciation
and amortization
2,695
-
3,835
Common
stock issued for compensation
5,116,651
-
5,116,651
Changes
in operating assets and liabilities:
(Increase)/decrease
prepaid expenses and other current assets
(1,871,690
)
-
(1,886,729
)
Deposits
(15,211
)
-
(48,698
)
Increase/(decrease)
in accounts payable and accrued expenses
1,160,594
-
1,374,805
Increase/(decrease)
in accrued payroll liabilities
77,568
-
84,313
Total
adjustments to net income
4,470,607
-
4,644,177
Net
cash used in operating activities
(2,471,466
)
(58,568
)
(7,261,714
)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase
of furniture and equipment
(10,010
)
-
(24,051
)
Net
cash used in investing activities
(10,010
)
-
(24,051
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash
received from affiliates/shareholders
2,550,406
-
6,935,386
Cash
received on notes payable
452,749
-
469,331
Net
cash provided by financing activities
3,003,155
-
7,404,717
CASH RECONCILIATION
Effect
of exchange rate changes on cash
(356,017
)
-
33,938
Net
increase (decrease) in cash and cash equivalents
165,662
(58,568
)
152,890
Cash
and cash equivalents - beginning balance
1,472
59,230
14,244
CASH
AND CASH EQUIVALENTS BALANCE END OF PERIOD
$
167,134
$
662
$
167,134
Supplemental
Disclosures of Cash Flow Information:
Common
stock issued for debt cancellation
$
-
$
-
$
4,069,085
Common
stock issued in recapitalization
$
-
$
-
$
2,175
The accompanying notes are an integral
part of these financial statements.
5
CLENERGEN
CORPORATION
(a
Development Stage Company)
For
the Three and Six Months Ending April 30, 2010 and 2009
and
From October 27, 2005 (inception) to April 30, 2010
NOTES
TO FINANCIAL STATEMENTS
NOTE
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Clenergen
Corporation is a company that has, subsequent to the period covered by these
interim financial statements, migrated from the advanced development stage to an
operating company that offers strategic clean energy generation and sustainable
fuel supply projects to address the requirement for renewable and sustainable
source of power. The Company has developed a unique supply of biomass
for use with gasification, combustion steam, Pyrolysis oil and pelleting
technologies to generate electricity. The Company intends to use proprietary and
mixed biomass feedstock to implement sustainable supplies of clean
energy for regional, captive end users, mining companies and, through
government- or privately-owned power grid systems, other end users, including
private homes.
The
Company intends to address the needs of a cleaner, greener planet with an
environmentally sound and sustainable clean energy generation and integrated
fuel supply chain, which is in compliance with and in excess of international
standards for environmental protection, biodiversity, quality, safety and full
traceability; backed by a global management team providing a deep wealth of
experience in the science, technology, finance and business management, as well
as practical experiences of managing and investing in similar businesses in
emerging and developed markets.
NOTE
2. BASIS OF PRESENTATION
These
interim financial statements of Clenergen Corporation have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“US GAAP”) for interim financial information and pursuant to the
requirements for reporting on Form 10-Q and Regulation S-X. In the
opinion of management, all adjustments, consisting solely of normal recurring
accruals, considered necessary for the fair presentation of financial statements
for the interim periods have been included. The results of operations
for the three months and six months ended April 30, 2010 are not necessarily
indicative of results that ultimately may be achieved for any other interim
period or for the year ending October 31, 2010. These interim
unaudited financial statements and notes thereto should be read in conjunction
with the audited consolidated financial statements and notes thereto contained
in the Company’s amended Annual Report on Form 10-K/A for the year ended October
31, 2009.
The
Company has evaluated all subsequent events through date of issuance of this
Form 10-Q for appropriate accounting and financial disclosure.
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of
consolidation - The consolidated financial statements of the Company
include the accounts of Clenergen Corporation Limited and its 99.99% owned
subsidiary, Clenergen India Private Limited. All significant intercompany
balances and transactions have been eliminated.
Research and
development - Research and development costs are charged to operations as
incurred and include direct costs of research scientists and materials and an
allocation of other core scientific services.
Foreign currency
translation - The Company's assets and liabilities have been translated
using the exchange rate at the balance sheet date. The weighted average exchange
rate for the period has been used to translate expenses. Translation adjustments
are reported separately and accumulated in a separate component of equity
{comprehensive income (loss)}.
6
Comprehensive
income (loss) - Other comprehensive income refers to revenues, expenses,
gains and losses that under US GAAP are included in comprehensive income but are
excluded from net loss as these amounts are recorded directly as an adjustment
to stockholders' equity. The Company's other comprehensive income is comprised
of foreign currency translation adjustments. Comprehensive income is reported by
the Company in the consolidated statements of operations.
Basic earnings
per share - Basic net loss per share amounts are computed by dividing the
net loss by the weighted average number of common shares
outstanding. Diluted earnings per share amounts are the same as basic
earnings per share as the Company does not have any outstanding potentially
dilutive securities.
Cash
Equivalents - The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Use of Estimates
and Assumptions - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. All
adjustments are normal and recurring.
Income
Taxes - A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carry-forwards.
Deferred tax expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
NOTE
4. GOING CONCERN
The
accompanying financial statements are presented on a going concern basis. For
the period of October 27, 2005 (date of inception) through April 30, 2010, the
Company had a comprehensive loss of $11,871,953, inclusive of a net loss of
$11,905,891, and had total stockholders' equity of $92,995 at April 30,
2010. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. These interim financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
NOTE
5. STOCK TRANSACTIONS
All forms
of share-based payment awards, including shares issued under employee stock
purchase plans, stock options, restricted stock and stock appreciation rights,
as well as share grants and other awards issued to employees and
non-employees under free-standing arrangements, are recorded at fair
value on grant date, based on the estimated number of awards that are
expected to vest and will result in charges to operations.
Effective
March 15, 2010, the Company issued warrants to purchase 1 million shares, of
which 250,000 warrants are exercisable at $1.30, 250,000 warrants are
exercisable at $1.60, 250,000 warrants are exercisable at $2.00 and 250,000
warrants are exercisable at $2.50 per share. The Company valued such
warrants, for accounting purposes, at $ 43,513. Pursuant to FASC
260-10-45, options and warrants will have a dilutive effect
under the treasury stock method only when the average market price of the common
stock during the period exceeds the exercise price of the options or
warrants. The Company asserts that the purchase warrants are
anti-dilutive, and therefore not included in calculations of Basic or Diluted
Earnings per Share.
Effective
March 19, 2010, the Company purchased 62,500 shares of common stock from a
former shareholder. The Company accounted for such purchase by
debiting stockholder’s equity $25,966, the fair value of such shares on the
effective date of purchase.
7
Effective
March 26, 2010, the Company issued 1 million common shares to a
consultant. The Company valued such shares, for accounting purposes,
at $800,000, the fair value of such shares on the effective date of
issuance.
Effective
March 26, 2010, the Company issued 500,000 common shares to a
consultant. The Company valued such shares, for accounting purposes,
at $400,000, the fair value of such shares on the effective date of
issuance.
Effective
April 6, 2010, the Company issued 131,196 common shares to a third-party
investor for total gross consideration of $15,000.
Effective
April 9, 2010, the Company issued 250,000 common shares to a
consultant. The Company valued such shares, for accounting purposes,
at $220,000, the fair value of such shares on the effective date of
issuance.
Effective
April 11, 2010, the Company issued 400,000 common shares to a service
provider. The Company valued such shares, for accounting purposes, at
$352,000, the fair value of such shares on the effective date of
issuance.
Effective
April 26, 2010,
the Company issued 150,000 common shares to a consultant. The Company
valued such shares, for accounting purposes, at $178,500, the fair value of such
shares on the effective date of issuance.
Effective
April 28, 2010, the Company issued 60,000 common shares to a third-party
investor for total gross consideration of $25,000.
Effective
April 30, 2010, the Company issued 1.5 million common shares to a director of
the Company. The Company valued such shares, for accounting purposes,
at $1,695,000, the fair value of such shares on the effective date of
issuance.
During
April 2010 and through June 15, 2010, the Company sold an aggregate of 1,176,032
common shares to a total of 71 non-US Persons for aggregate gross proceeds of
$890,981 in offshore transactions pursuant to Regulation S promulgated under the
Securities Act of 1933. Pursuant to a subscription fee agreement, the
Company will pay as compensation for subscription services provided, a fee equal
to 40% of the gross subscription amounts received from
subscribers. As of April 30, 2010, the Company received $191,339 of
the expected 60% net proceeds of $534,589.
NOTE
6. SUBSEQUENT EVENTS
Subsequent
to April 30, 2010 and through June 15, 2010, the Company issued an aggregate of
500,000 common shares to a total of two consultants. The Company has
preliminarily valued such shares, for accounting purposes, at $460,000, the fair
values of such shares on the effective dates of such issuances.
Subsequent
to April 30, 2010, 1 million common shares that had been issued to a natural
person in connection with his agreement to become an executive officer of the
Company (a position which he never assumed), were surrendered for
cancellation. In connection with this surrender and cancellation, the
Company intends to credit shareholders' equity in an amount equal to the charge
incurred when such shares were originally issued.
Subsequent
to April 30, 2010 and through June 15, 2010, the Company agreed to purchase an
aggregate of 320,000 common shares from a total of three stockholders for the
aggregate consideration of $160,000. None of such agreed-upon
purchases have been consummated.
Effective
May 14, 2010, the Company issued a promissory note in the principal amount of
$250,000 and warrants to purchase 1 million common shares at $0.686 per
share. The Company valued such warrants, for accounting purposes, at
$390,000.
Effective
May 21, 2010, the Company issued 200,000 common shares as consideration for
the purchase of assets, which shares the Company has valued, for accounting
purposes, at $90,000, the fair value of such shares on the effective date of
such issuance.
8
On June
2, 2010, the Company acquired all of the outstanding capital stock of United Bio
Fuels Private Limited, an Indian corporation (“UBF”). UBF owns and
operates a 1.5 megawatt per hour (“MWe”) anaerobic digestive biomass power plant
located in Salem, Tamilnadu, India. Also included in the acquired
assets are ten acres of land and a power evacuation facilities
substation.
The
aggregate purchase price for the land, power plant and other facilities
constituting the acquired assets was 82.44 million Indian Rupees (approximately
$1.76 million at the closing currency exchange rate on June 4, 2010, as reported
by CNNMoney.com). Included in such total purchase price was the
satisfaction of debt to the India Renewable Energy Development Agency Limited, a
government of India enterprise (the “IREDA”), totaling 72.74 million Indian
Rupees ($1.56 million), inclusive of interest. The remaining purchase price is
to be paid to Enkem Engineers Private Limited (“Enkem”), the former principal
stockholder of UBF and operator of the power plant, in the aggregate amount of
2.2 million Indian Rupees ($47,000). The other former shareholders of
UBF will receive in the aggregate, 7.5 million Indian Rupees ($160,000) upon the
power plant becoming fully operational.
The
Company funded the purchase price through prior sales of our securities, a loan
of $150,000 provided by our current chief executive officer, Tim J.E. Bowen, in
the amount of $150,000 (the “Bowen Loan”) and a loan provided by a
non-affiliated party in the amount of $200,000 (the “Non-Affiliate Loan”), as
well as the assumption of the debt due IREDA. The Bowen Loan is a demand loan
bearing interest at the imputed interest rate and the Non-Affiliate Loan is due
July 31, 2010 and bears interest at the rate of 12% per annum. The
Non-Affiliate Loan was used to make the initial good faith deposit the Company
tendered to UBF in November 2009. The principal of the Non-Affiliate
Loan was repaid in March 2010 and accrued interest, totaling $75,000, is
included in accounts payable and accrued expenses at April 30,
2010.
The
Company intends to rely upon FASC 805-10-25 and account for the acquisition by
applying the acquisition method.
9
Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially
from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this Quarterly Report on Form
10-Q. For further information, see “Note Regarding Forward-Looking
Statements.”
Results
of Operations
Three
months ended April 30, 2010 and 2009
Our
results of operations for the subject three-month periods are summarized as
follows:
Three Months Ended
April 30,
2010
2009
Revenue
$
Nil
$
Nil
Operating
expenses
5,419,513
53,965
Net
loss
(5,515,361
)
(53,965
)
Revenues
We did
not recognize any revenues for the three months ended April 30, 2010 (the "2010
Second Quarter") and 2009 (the "2009 Second Quarter").
Expenses
General
and administrative expenses for the three months ended April 30, 2010 increased
by $5,365,548 as compared to the 2009 Second Quarter, primarily as a result of
share-based compensation totaling $4,615,802, as compared to $0 incurred in the
2009 Second Quarter. The remaining general and administrative
expenses reflect increases in travel, legal, and professional fees, incurred, in
part, in connection with our efforts to migrate from the advanced development
stage to an operating company.
Six
months ended April 30, 2010 and 2009
Our
results of operations for the subject six-month periods are summarized as
follows:
Six Months Ended
April 30,
2010
2009
Revenue
$
Nil
$
Nil
Operating
expenses
6,846,225
58,568
Net
loss
(6,942,073
)
(58,568
)
Revenues
We did
not recognize any revenues for the six months ended April 30, 2010 (the "2010
Six Month Period") and 2009 (the "2009 Six Month Period"). Subsequent
to April 30, 2010, we migrated from a development stage company to an operating
company as a result of our acquisition of a biomass energy plant in Salem, India
on June 2, 2010. We expect to generate revenues as a result of plant
operations, commencing with our fiscal quarter ending October
2010. We also entered into an agreement in July 2010 to acquire a
turnkey 18 MW/e biomass power plant located near Chennai, India. We
expect to consummate the Chennai acquisition in our current fiscal
year.
10
Expenses
General
and administrative expenses for the six months ended April 30, 2010, increased
by $6,787,657 as compared to the six months ending April 30, 2009, primarily as
a result of the establishment of field offices in Chennai and the Philippines in
the 2010 Six Month Period totaling $1,129,786, development of project sites near
Salem and Chennai in the 2010 Six Month Period in anticipation of our acquiring
biomass power plants associated such sites totaling $391,332 and share-based
compensation totaling $5,116,651.
Other
significant expenses incurred during the six month period include travel, legal,
and professional fees, reflecting, in part, our efforts to migrate from the
advanced development stage to an operating company.
We expect
operating expenses to increase as we place on-line and expand the capacity of
power plants we acquire, as well as operating expenses relating to our
plantations as more acreage is devoted to growing biomass feedstock for our
power plants and for sale to third parties. We do not anticipate compensating
our officers, directors, employees and consultants with shares of our common
stock during the next six months at the same or similar rate as incurred in the
2010 Six Month Period, although we do intend to grant warrants at exercise
prices equal to or greater than the market price of our common stock on the
dates of such warrant grants, as well as implementing a stock option program, so
as to provide incentives to our officers, directors, employees and consultants.
We expect to commence generating revenue in the second half of our current
fiscal year, with growth in revenue as operations expand. We also
expect that expenditures will increase due to our further acquisition of and
expansion of generating capacity at our power plants; but anticipate that that
such costs will be offset by the revenue generated from such power
plants.
Liquidity
and Financial Condition
Working
Capital
As of
April 30 2010, we had working capital of $24,081, calculated as
follows.
At April 30,
2010
At October 31,
2009
Percentage
Increase/Decrease
Current
assets
$
2,753,506
$
16,511
16,676.80
%
Current
liabilities
2,729,425
551,257
495.13
%
Working
capital
$
24,081
$
(534,746
)
Our
working capital has increased over the six month period ending April 30, 2010 by
$558,827. Our current assets have increased by $2,736,995 since
October 31, 2009 while our current liabilities have increased by $2,178,168 for
the same period.
During
the six months, we increased our current assets by virtue of prepaid expenses,
capital from stock subscriptions, and proceeds from short-term notes
payable.
Prepaid
Expenses
We
retained Vastani Company SA (“Vastani”) as an advisor pursuant to a Letter of
Agreement, dated March 15, 2010. As of April 30, 2010, we are
reporting a balance of $699,643 in subscriptions receivable. This
represents the balance of monies held in escrow for completed
subscriptions. This balance was received from our escrow agent during
May 2010.
Subscriptions
Receivable
We have
entered into various consulting agreements whereby consultants have been issued
shares as compensation for services. We are amortizing the value of
the compensation over the terms of the individual agreements and is carrying the
unearned portion as prepaid expense. As of April 30, 2010, the value
of prepaid consulting is $1,544,105.
11
Current
liabilities have increased primarily as a result of expenses payable including,
but not limited to, travel and legal and professional fees. We
received approximately $220,000 from short term shareholder notes.
Over the
past six months, we have been transitioning from an advanced development stage
entity to an operating company. During the six month period, we have
primarily been financed through use of our common stock; through sales to third
parties and others and by the issuance of stock as share-based
compensation. We currently have 50 highly qualified individuals,
located in six different geographic areas, providing services to our company. In
part by preserving cash flow through compensating, in whole or part, our
services providers, consisting of employees and consultants, through issuances
of stock rather than cash payments, we believe that we have acquired assets,
including what we hope to be valuable intellectual property rights, and have
begun to create the infrastructure required to generate revenues in the near
future. While such stock issuances have resulted in dilution to our
current shareholders, we note that there are no current liens on any of our
assets that could, in the long term, restrict our ability to manage operations
and the further implementation of our business model.
The
following summarizes our cash flows for the six months ending April 30,
2010:
Six Months Ended
April 30,
2010
2009
Net
cash used in operating activities
$
(2,471,466
)
$
(58,568
)
Net
cash used in investing activities
(10,010
)
Nil
Net
cash provided by financing activities
3,003,115
Nil
Effect
of exchange rate changes on cash
(356,017
)
Nil
Net
Increase (Decrease) in Cash During the Period
$
165,662
$
(58,568
)
Future
Financings
We
estimate our operating expenses and working capital requirements for the next
twelve month period to be as follows:
Agronomy
field trials
$
800,000
Feasibility
studies
600,000
Biomass
power plant new build (2.25MW/h)
2,250,000
Biomass
power plant acquisitions and upgrade (18MW/h)
1,750,000
Biomass
power plant acquisitions and upgrade(1.5MW/h)
5,000,000
Operating
expenses
840,000
Management
and consulting
612,000
General
and administrative
1,234,000
Total
$
13,086,000
We will
require additional capital to fund our business and development plan, including
our planned acquisition, development, expansion and/or construction of biomass
power plants and biomass feedstock plantations. In addition, once the
power plants have been constructed, we will need to fund the start-up costs
operations of these plants until, if ever, the plants generate sufficient cash
flow from their operations to fund the plants' ongoing costs and
expenses. We also may encounter unforeseen costs that could also
require us to seek additional capital. As a result, our business plan
and growth strategy requires that we obtain significant additional financial
resources, including resources obtained through debt and/or equity
financing. We may not be able to obtain the funding necessary to
implement our growth strategy on acceptable terms or at all. An
inability to obtain such funding would prevent us from acquiring, developing,
expanding and/or constructing any plants or plantations. Furthermore,
our business development strategy may not result in significant revenues even if
successfully funded.
12
We have
not yet identified all of the sources for the additional financing we require,
although we do have offers of debt financing from two banks and have, in the
past, been able to raise equity capital through the sale of equity interest in
our company. Furthermore, we plan to make presentations to major
institutions and renewable energy investment funds in June and July 2010 with
the view of raising interest for our financing projects. Our ability
to obtain additional capital will depend on market conditions, national and
global economies, demand for electricity in countries in which we intend to
operate power plants, environmental and legal issues affecting power plant
operations, weather and other conditions affecting our biomass plantations and
other factors beyond our control. The terms of any future debt or
equity funding that we may obtain may be unfavorable to us and to our
stockholders.
Critical Accounting
Policies
Our
significant accounting policies are described in Note 2 of the Notes to
Consolidated Financial Statements included in our amended Annual Report on Form
10-K/A for the year ended October 31, 2009, filed with the Securities and
Exchange Commission on March 19, 2010. A discussion of our critical
accounting policies and estimates is included in the Management’s Discussion and
Analysis of Financial Condition and Results of Operations section of such Form
10-K/A. There have no material changes to such critical accounting
policies or estimates as reported in such amended Annual Report
section.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk.
This item
is not applicable to smaller reporting companies.
Item
4T. Controls and Procedures.
Evaluation of Disclosure
Controls and Procedures
Our
management conducted an evaluation, with the participation of our then-chief
executive officer and then-chief financial officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of
the period covered by this Quarterly Report on Form 10-Q. Based upon
that evaluation, our chief executive officer and then-chief financial officer
have concluded that our disclosure controls and procedures were not effective in
reporting, on a timely basis, information required to be disclosed by us in the
reports we file or submit under the Exchange Act.
We failed
to file our 10-Q for the quarter ending January 31, 2010 on a timely
basis. We are attempting to resolve such ineffective disclosure
controls and procedures and, to such end, we have retained outside accountants
to assist us in revising our systems and provide financial reporting
support.
Changes in Internal Control
over Financial Reporting
We are in
the process of adopting new internal controls over the financial reporting as we
migrate from a development stage company to an operating
company. Since January 1, 2010, we have retained Tim Bowen as our
Chief Executive Officer and Mike Starkie as our President and Acting Chief
Financial Officer. These two executive officers have substantial
management and financial experience, including acting as executive officers of a
number of publicly-held companies.
13
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings.
Not
applicable.
Item
1A. Risk Factors.
Not
applicable.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
The
following sets forth certain information concerning securities which were sold
or issued by us within the past three years without the registration of the
securities under the Securities Act of 1933, as amended (the “Securities Act”)
in reliance on exemptions from such registration requirements and were not
previously disclosed by us in our prior Annual Reports on Forms 10-K or 10-K/A,
Quarterly Reports on Forms 10-Q or 10-Q/A or Current Reports on Form
8-K.
(a)
Effective
March 26, 2010, the Company issued 1 million common shares to a
consultant. The Company valued such shares, for accounting
purposes, at $800,000, the fair value of such shares on the effective date
of issuance . The consultant is a person not
meeting the definition of a “U.S. person” (a “non-US Person”) contained in
Regulation S (“Regulation S”) promulgated under the Securities Act and
such shares were issued in an offshore transaction (an “offshore
transaction”), as such term is defined in Regulation S. We
believe that such shares were issued in a transaction not requiring
registration under the Securities Act due to the exemptions available
under Regulation S and Section 4(2) of the Securities
Act.
(b)
Effective
March 26, 2010, we issued 500,000 common shares to a
consultant. We valued such shares, for accounting purposes, at
$400,000, the fair value of such shares on the effective date of
issuance . The consultant is a person not
meeting the definition of a “ U.S. person” (a “ non-US Person” ) contained in Regulation S
(“ Regulation
S” ) promulgated under
the Securities Act and such shares were issued in an offshore transaction
(an “ offshore
t ransaction” ), as such term is defined in
Regulation S. We believe that such shares were issued in a
transaction not
requiring registration under the Securities Act due to
the exemptions available under Regulation S and Section 4(2) of the
Securities Act.
(c)
Effective
April 6, 2010, we issued 131,196 common shares to a third party investor
for total gross consideration of $15,000. The investor is a non-US Person
and such shares were issued in an offshore transaction. We
believe that such shares were is sued in a transaction not
requiring registration under the Securities Act due to the exemptions
available under Regulation S and Section 4(2) of the Securities
Act.
(d)
Effective
April 9, 2010, we issued 250,000 common shares to a
consultant. We valued such shares, for accounting purposes, at
$220,000, the fair value of such shares on the effective date of
issuance . We believe that such
shares were issued in a transaction not requiring registration under the
Securities Act due to the exemptions available under Section 4(2) of the
Securities Act.
(e)
Effective
April 11, 2010, we issued 400,000 common shares to a service
provider. We valued such shares, for accounting purposes, at
$352,000, the fair value of such shares on the effective date of
issuance . We believe that such
shares were issued in a transaction not requiring registration under the
Securities Act due to the exemptions available under Section 4(2) of the
Securities Act.
(f)
Effective
April 26, 2010,
we issued 150,000 common shares to a consultant. We valued such
shares, for accounting purposes, at $178,500, the fair value of such
shares on the effective date of issuance . The consultant is a
non-US Person and such shares were issued in an offshore
transaction. We believe that such shares were issued in a transaction not
requiring registration under the Securities Act due to the exemptions
available under Regulation S and Section 4(2) of the Securities
Act.
14
(g)
Effective
April 28, 2010, we issued 60,000 common shares to a third-party investor
for total gross consideration of $25,000. The investor is a non-US Person
and such shares were issued in an offshore transaction. We
believe that such shares were issued in a transaction not requiring
registration under the Securities Act due to th e exemptions available under
Regulation S and Section 4(2) of the Securities
Act.
(h)
Effective
April 30, 2010, we issued 1.5 million common shares to a
director. We valued such shares, for accounting purposes, at
$1,695,000, the fair value of such shares on the effective date of
issuance. The
director is a non-US Person and such shares were issued in an offshore
transaction. We believe that such shares were issued in a
transaction not requiring registration under the Securities Act due to the
exempti ons available
under Regulation S and Section 4(2) of the Securities
Act.
(i )
During
April 2010 and through June 15, 2010, we sold an aggregate of 1,176,032
common shares to a total of 71 non-US Persons in offshore transactions
pursuant to Regulation S for aggregate gross proceeds of
$890,981. Pursuant to a subscription fee agreement, the Company
will pay as compensation for subscription services provided, a fee equal
to 40% of the gross subscription amounts received from
subscribers. We believe that such shares were issued in
transactions not requiring registration under the Securities Act due to
the exemptions available under Regulation S and Section 4(2) of the
Securities Act.
(j)
Effective May 21, 2010,
we issued 200,000 common shares as
considera tion for the
purchase of assets,
which shares we
have preliminarily
valued, for a ccounting purposes, at
$90,000 , the fair
value of such shares on the effective date of such issuance . The seller of such assets is a
non-US Person and such shares were issued in an offshore
transaction. We believe that such shares were issued in a
transaction not requiring registration under the Securities Act due to the
exemptions available under Regulation S and Section 4(2) of the Securities
Act.
( k )
Subsequent
to April 30, 2010 and through June 15, 2010, we issued an aggregate of
500,000 common shares to a total of two consultants. We valued
such shares, for accounting purposes at $460,000, the fair value of such
shares on the effective date of such issuance. Each of the
consultants is a non-US
Person and such shares were issued in offshore transaction s . We believe that such
shares were issued in transaction s not requiring registration under
the Securities Act due to the exemptions available under Regulation S and
Section 4(2) of the Securities
Act.
Item
3. Defaults upon Senior Securities.
Not
applicable.
Item
4. Submission of Matters to a Vote of Security Holders.
Not
applicable.
Item
5. Other Information.
Not
applicable.
Item
6. Exhibits.
The
following exhibits are being filed as part of this Quarterly Report on Form
10-Q.
Exhibit
Number
Exhibit Description
31.1
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive
Officer.
31.2
Rule
13a-14(a)/15d-14(a) Certification of Principal Financial
Officer.
32.1
Section
1350 Certification of Principal Executive Officer.
32.2
Section
1350 Certification of Principal Financial
Officer.
15
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: July
30, 2010
Clenergen
Corporation
By:
/s/ Mark L.M.
Quinn
Mark
L.M. Quinn
Executive
Chairman of the Board of Directors
(Duly
Authorized Officer
and
Principal Executive Officer)
By:
/s/ Mike
Starkie
Mike
Starkie
Acting
Chief Financial Officer
(Principal
Financial and Accounting
Officer)
16
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.