Item 1. Financial Statements
Item
1. Financial Statements.
CLENERGEN
CORPORATION
(a
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
July 31, 2010
October 31, 2009
(Unaudited)
ASSETS
Current Assets :
Cash
$
20,784
$
1,472
Subscriptions
receivable
120,505
-
Prepaid expenses and
other
823,005
15,039
Total Current
Assets
964,294
16,511
Fixed Assets :
Property and equipment,
net
20,120
12,901
Total Fixed
Assets
20,120
12,901
Other Assets :
Deferred financing
costs
121,949
-
Due from UBF
1,661,520
-
Deposits
160,655
33,487
Total Other
Assets
1,944,124
33,487
TOTAL
ASSETS
$
2,928,538
$
62,899
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities :
Accounts payable and accrued
expenses
$
1,499,437
$
214,211
Payroll
liabilities
22,622
6,745
Notes payable
3,046,835
330,302
Total Current
Liabilities
4,568,894
551,257
Total
Liabilities
4,568,894
551,257
Stockholders’ 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:
105,611,932 and 86,941,013 shares, respectively
105,612
86,941
Additional paid in
capital
17,371,217
3,998,562
Accumulated other comprehensive
income/(loss)
577,470
389,956
Accumulated deficit during
development stage
(19,694,655
)
(4,963,818
)
Total Stockholders’
Deficiency
(1,640,356
)
(488,358
)
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
$
2,928,538
$
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 Nine Months Ended July 31, 2010 and 2009
and
From October 27, 2005 (inception) to July 31, 2010
Three
Months Ended
Nine
Months Ended
From
Inception
July
31,
July
31,
To
2010
2009
2010
2009
July
31, 2010
Sales
$
-
$
-
$
-
$
-
$
-
Cost
of sales
-
-
-
-
-
Gross
profit or (loss)
-
-
-
-
-
General
and administrative expenses
6,245,971
10,688
14,169,635
69,256
16,858,409
Research
and development
29,408
-
73,910
-
2,348,953
Operating
loss
(6,275,379
)
(10,688
)
(14,243,544
)
(69,256
)
(19,207,362
)
Interest
expense
400,972
-
497,111
-
497,111
Other
income
9,267
-
9,818
-
9,818
Loss
before income taxes
(6,667,084
)
(10,688
)
(14,730,837
)
(69,256
)
(19,694,655
)
Provision
for income taxes
Federal
-
-
-
-
-
State
-
-
-
-
-
Net
loss
$
(6,667,084
)
$
(10,688
)
$
(14,730,837
)
$
(69,256
)
$
(19,694,655
)
Loss
per share, basic and diluted
$
(0.07
)
$
(0.00
)
$
(0.16
)
$
(0.00
)
$
(1.03
)
Weighted
average common shares outstanding
96,796,253
15,750,000
93,815,505
15,750,000
19,144,286
Comprehensive
loss:
Net loss
$
(6,667,084
)
$
(10,688
)
$
(14,730,837
)
$
(69,256
)
$
(19,694,655
)
Foreign
currency translation (loss)/income
543,531
-
187,514
-
577,470
Comprehensive
loss
$
(6,123,553
)
$
(10,688
)
$
(14,543,323
)
$
(69,256
)
$
(19,117,185
)
The
accompanying notes are an integral part of these financial
statements.
4
CLENERGEN
CORPORATION
(a
Development Stage Company)
STATEMENTS
OF CASH FLOWS
For
the Nine Months Ended July 31, 2010 and 2009
and
From October 27, 2005 (inception) to July 31, 2010
Nine
Months Ended
July
31,
From
Inception
2010
2009
to
July 31, 2010
CASH FLOWS FROM OPERATING
ACTIVITIES
Net
income (loss)
$
(14,730,837
)
$
(69,256
)
$
(19,694,655
)
Adjustments
to reconcile net income to net cash used in operating
activities:
Adjustments
for charges not requiring outlay of cash:
Depreciation and
amortization
4,338
-
5,478
Deferred financing
costs
536,490
-
536,490
Common stock issued for
compensation
10,214,632
-
10,214,632
Changes in operating assets and
liabilities:
(Increase)/decrease
prepaid expenses and other current assets
(1,050,420
)
-
(1,065,459
)
Deposits
(127,168
)
-
(160,655
)
Increase/(decrease)
in accounts payable and accrued expenses
1,285,226
10,389
1,499,437
Increase/(decrease)
in accrued payroll liabilities
15,877
-
22,622
Total adjustments to net
income
10,878,975
10,389
11,052,545
Net
cash used in operating activities
(3,851,862
)
(58,867
)
(8,642,110
)
CASH FLOWS FROM INVESTING
ACTIVITIES
UBF
advances
(1,661,520
)
(1,661,520
)
Purchase
of furniture and equipment
(11,558
)
-
(25,599
)
Net
cash used in investing activities
(1,673,078
)
-
(1,687,119
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash
received from sale of stock
1,194,484
1,244,484
Additional
paid-in capital
(12,750
)
4,332,968
Cash
received from affiliates/shareholders
2,383,057
12,750
2,385,068
Cash
received on notes payable
1,779,197
-
1,795,779
Net
cash provided by financing activities
5,356,738
-
9,758,299
CASH RECONCILIATION
Effect
of exchange rate changes on cash
187,514
-
577,470
Net
increase (decrease) in cash and cash equivalents
19,312
(58,867
)
6,540
Cash
and cash equivalents - beginning balance
1,472
59,230
14,244
CASH
AND CASH EQUIVALENTS BALANCE END OF PERIOD
$
20,784
$
363
$
20,784
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 Nine Months Ending July 31, 2010 and 2009
and
From October 27, 2005 (inception) to July 31, 2010
NOTES
TO FINANCIAL STATEMENTS
NOTE
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Clenergen
Corporation is a company that is in the process of migrating from the advanced
development stage to an operating company that offers strategic clean energy
generation and sustainable fuel supply alternatives to address the world-wide
requirements for renewable and sustainable sources 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 provide
sustainable supplies of clean energy to 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 for 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. The Company is backed by a global management team with 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 nine months ended July 31, 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.
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. As of July 31, 2010, the Company has issued one potentially
dilutive purchase warrant for 1,000,000 shares, exercisable at $0.686 per
share.
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 July 31, 2010,
the Company incurred an aggregate comprehensive loss of $19,117,185, inclusive
of an aggregate net loss of $19,694,655, and had a total stockholders’ deficit
of $1,640,356 at July 31, 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
May 18, 2010, the Company issued 500,000 shares to two consultants for $460,000,
the fair value of such shares on the effective date of issuance.
On May
21, 2010, the Company issued 200,000 shares of its common stock, valued at
$90,000, which represents the fair value of such shares on the date of issuance,
as a deposit on an asset purchase.
The
Company issued 120,761 shares of its common stock to a third-party investor for
total gross consideration of $53,364.50, effective July 12, 2010.
7
During
the fiscal quarter ended July 31, 2010, the Company sold an aggregate of
2,146,274 shares of its common stock to a total of 19 third party investors for
aggregate net proceeds of $560,270 pursuant to a private placement of the
Company’s common stock conducted through a selling agent located in
Germany. The Company incurred fees and expenses relating to such private
placement equal to approximately 40% of the gross proceeds of the
placement. As of July 31, 2010, the Company received $439,765 of the
private placement’s expected net proceeds from sales made during the fiscal
quarter ended July 30, 2010, inclusive of fees charged by the selling and escrow
agents. The Company sold 1,180,188 shares through the selling agent and
received net proceeds of approximately $530,000.00 during periods prior to the
Company’s fiscal quarter ended July 31, 2010.
Effective
July 30, 2010, the Company issued to Stew Investment Management Limited
(“SIML”), as designee of Tim J.E. Bowen, chief executive officer of the Company,
a total of 7 million shares of the Company’s common stock as consideration for
Mr. Bowen having agreed to provide the Company with international strategic and
operational management consulting services and for his being retained as an
executive officer (as chief operating officer in April 2010 and as chief
executive officer in June 2010). The Company valued such shares at
$3,850,000, the fair value of the shares on the effective date of their
issuance.
SIML also
is entitled to purchase, for aggregate consideration of ₤175,000, an additional
3 million shares of common stock if certain milestones related to the services
Mr. Bowen provides to the Company are met, such milestones to be mutually agreed
upon by Mr. Bowen and the Company. SIML has irrevocably paid the Company
the sum of ₤175,000 (approximately $258,000) and such amount is to be retained
by the Company regardless of whether the milestones are met and/or such 3
million shares are issued to Mr. Bowen.
During
November and December 2009, the Company sold an aggregate of 320,000 shares of
the Company’s common stock to a total of three investors for total consideration
of $160,000. The per share market price of the Company’s common stock on
the dates of the funding of such purchases ranged from $0.59 to $0.91.
Additionally, between November 2009 and January 2010, these three investors also
made loans to the Company totaling $150,000. At the time of the stock
sales and funding of the loans, the Company and the investors assumed that the
loans would be repaid in six months and the investors assumed that their
investment in the 320,000 shares would generate a significant return on
investment due to the shares having been sold to them at a discount to
market. The proceeds of the stock sales and loans, which loans were
not evidenced by written agreements, were used in connection with the Company’s
pending acquisition of a biomass power plant in Salem, Tamilnadu, India in June
2010. The Company’s loan obligations were not satisfied six months
following the funding, although the aggregate principal amount of the loans was
reduced to $30,000 at July 31, 2010. Between February and April 2010, the
Company offered to repurchase the 320,000 shares for their original purchase
price of $160,000. Effective July 31, 2010, the Company came to an oral
agreement with the investors whereby the investors agreed to retain the 320,000
shares, with the understanding that the Company would endeavor to repay the
remaining loan principal amount by October 31, 2010. The Company and the
investors have not come to an agreement as to the rate of interest, if any, on
the loans.
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, exercisable at $0.686
per share. The Company valued such warrants, for accounting purposes, at
$614,926. 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 has purchase warrants that were not
included in calculations of Basic or Diluted Earnings per Share due to the
current loss incurred by of the Company.
NOTE
6. NOTES PAYABLE
On March
25, 2010, the Company received $100,000 on a note payable bearing a 50% interest
rate and maturing on March 25, 2011. Through July 31, 2010, the Company
has accrued $17,534 in interest on this note.
On May
14, 2010, the Company received $250,000 in connection with a note payable.
The note bears an interest rate of 24% and is payable in full at August 14,
2010. In the event the Company fails to satisfy the note, the Company is
obligated to issue to the lender warrants to purchase 100,000 shares of common
stock for each month following the maturity date that the note is not fully
paid. The note was not fully satisfied as of August 14, 2010 and the
Company is in the process of preparing and physically delivering a warrant
certificate evidencing the 100,000 warrants issuable with respect to the
Company’s failure to satisfy the note in full on or prior to such
date.
During
the nine months ended July 2010, the Company borrowed an additional
approximately $2,700,000 from related parties and shareholders. These
borrowings were in the forms of informal loans with no formal written agreements
stipulating their terms.
8
NOTE
9. DUE FROM UBF
The
Company has a receivable from UBF in the amount of $1,661,520 representing
advances the Company has made to a unit of the Government of India (IREDA) in
relation to the acquisition of a biomass power generation plant in Salem,
Tamilnadu, India.
NOTE
8. SUBSEQUENT EVENTS
The
Company issued 300,000 shares of its common stock to a third-party investor for
total gross consideration of $105,000, effective August 19, 2010.
The
Company issued an aggregate of 600,000 shares of its common stock to a total of
three consultants for services rendered or to be rendered by such consultants,
effective August 23, 2010. The Company valued such shares for accounting
purposes at an aggregate of $258,000, the fair value of the shares on the
effective date of their issuance.
Effective
August 5, 2010, we obtained a loan in the amount of $607,461 from Rootchange
Limited (“Rootchange”). Rootchange is a corporation organized under the
laws of Great Britain. Rootchange is owned by two of our directors and
officers, Mark L.M. Quinn, the executive chairman of our board of directors, and
Jessica Hatfield, our executive vice president. The loan is evidenced by
two promissory notes, each in the principal amount equal to one-half of the loan
amount, $303,730.50. The maturity date of each of the promissory notes is
November 1, 2011, with acceleration of such maturity date limited to non-payment
and bankruptcy events. The promissory notes each provide for interest at
the below-market rate of 1.00% per annum (20.00% following an acceleration
event), payable semi-annually, commencing on February 1, 2011. The
principal amount (but not accrued and unpaid interest) is convertible into our
common stock at the rate of one share for each $0.50 of principal
converted. The closing market price of our common stock on the date we
received the loan proceeds was $0.50 per share.
9
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.