Item 1. Financial Statements
Item 1. Financial Statements
CLENERGEN CORPORATION
(a Development Stage Company)
CONSOLIDATED BALANCE SHEETS
April 30, 2011
October 31, 2010
(Unaudited)
ASSETS
Current Assets :
Cash
$
159,769
$
392,502
Inventory
1,319,574
-
Accounts receivable
331,653
-
Prepaid expenses and other
3,243,195
1,853,952
Total Current Assets
5,054,191
2,246,454
Fixed Assets :
Property and equipment, net
29,107
21,450
Total Fixed Assets
29,107
21,450
Other Assets :
Deposits
252,676
143,020
Total Other Assets
252,676
143,020
TOTAL ASSETS
$
5,335,974
$
2,410,924
LIABILITIES AND STOCKHOLDERS' EQUITY/DEFICIENCY
Current Liabilities :
Accounts payable and accrued expenses
$
4,346,817
$
1,767,689
Payroll liabilities
94,174
28,432
Customer Advances
992,757
-
Due to Related Parties and Shareholders
3,841,905
3,491,032
Total Current Liabilities
9,275,653
5,287,153
Total Liabilities
9,275,653
5,287,153
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; 144,967,534 and 141,755,788 shares issued and outstanding,
144,668
141,756
Additional paid in capital
38,007,401
36,763,163
Stock subscriptions receivable
(320,969
)
(181,215
)
Accumulated other comprehensive income/(loss)
236,670
217,800
Accumulated deficit during development stage
(42,007,449
)
(39,817,733
)
Total Stockholders' Equity/Deficiency
(3,939,679
)
(2,876,229
)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/DEFICIENCY
$
5,335,974
$
2,410,924
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CLENERGEN CORPORATION
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended April 30, 2011 and 2010
and from October 27, 2005 (Inception) to April 30, 2011
(Unaudited)
Three Months Ended
April 30,
Six Months Ended
April 30,
From Inception
To
2011
2010
2011
2010
April 30, 2011
Revenue
$
2,543,350
$
-
$
4,441,192
$
-
$
4,658,190
Cost of services
2,158,988
-
3,757,069
-
4,089,376
Gross profit
384,362
-
684,123
-
568,814
General and administrative expenses
672,203
5,419,513
1,464,928
6,846,225
38,176,223
Research and development
15,175
-
20,200
-
2,381,045
Operating loss
(303,016
)
(5,419,513
)
(801,005
)
(6,846,225
)
(39,988,454
)
Interest expense
(541,926
)
(96,412
)
(1,388,711
)
(96,412
)
(2,020,500
)
Other income, net
-
564
-
564
1,505
Loss before income taxes
(844,942
)
(5,515,361
)
(2,189,716
)
(6,942,073
)
(42,007,449
)
Provision for income taxes
Federal
-
-
-
-
-
State
-
-
-
-
-
Net loss
(844,942
)
(5,515,361
)
(2,189,716
)
(6,942,073
)
(42,007,449
)
Loss per share, basic and diluted
$
(0.006
)
$
(0.060
)
$
(0.015
)
$
(0.080
)
$
(0.294
)
Weighted average common shares outstanding
142,974,709
91,257,718
142,974,709
90,860,152
142,974,709
Comprehensive loss:
Net loss
(844,942
)
(5,515,361
)
(2,189,716
)
(6,942,073
)
(42,007,449
)
Foreign currency translation (loss)/income
22,643
(321,304
)
18,869
(356,017
)
236,669
Comprehensive loss
$
(822,299
)
$
(5,836,665
)
$
(2,170,846
)
$
(7,298,090
)
$
(41,770,779
)
The accompanying notes are an integral part of these financial statements.
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CLENERGEN CORPORATION
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended April 30, 2011 and 2010
and From October 27, 2005 (Inception) to April 30, 2011
(Unaudited)
Six Months Ended
April 30,
From Inception to
2011
2010
April 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(2,189,716
)
$
(6,942,073
)
$
(42,007,449
)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments for charges not requiring outlay of cash:
Deferred financing costs
304,170
-
962,609
Common stock issued for compensation
-
5,116,651
29,027,623
Stock issued for interest
-
-
228,100
Depreciation and amortization
6,997
2,695
14,302
Changes in operating assets and liabilities:
(Increase)/decrease prepaid expenses and other current assets
(1,389,243
)
(1,871,690
)
(912,396
)
(Increase)/decrease in accounts receivable
(331,653
)
-
(331,653
)
(Increase)/decrease in inventory
(1,319,574
)
-
(1,319,574
)
(Increase)/decrease in deposits
(109,656
)
(15,211
)
(252,676
)
Increase/(decrease) in accounts payable and accrued expenses
2,274,958
1,160,594
3,300,570
Increase/(decrease) in accrued payroll liabilities and customer advances
1,058,499
77,568
94,174
Total adjustments to net loss
494,498
4,470,607
30,811,080
Net cash used in operating activities
(1,695,218
)
(2,471,466
)
(11,196,369
)
CASH FLOWS FROM INVESTING ACTIVITIES
UBF advances
-
-
(1,791,957
)
Purchase of furniture and equipment
(14,654
)
(10,010
)
(43,408
)
Net cash used in investing activities
(14,654
)
(10,010
)
(1,835,365
)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from affiliates/shareholders
785,397
2,550,406
3,299,545
Cash received from related parties and shareholders, net
672,873
-
8,321,151
Cash received on notes payable
-
452,749
1,334,139
Net cash provided by financing activities
1,458,270
3,003,155
12,954,834
CASH RECONCILIATION
Effect of exchange rate changes on cash
18,869
(356,017
)
236,669
Net increase (decrease) in cash and cash equivalents
(232,733
)
165,662
159,769
Cash and cash equivalents - beginning balance
392,502
1,472
-
CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD
159,769
167,134
159,769
Supplemental Disclosures of Cash Flow Information:
Common stock issued for deposit
$
-
$
-
$
90,000
Common stock issued for conversion of debt
$
322,000
$
322,000
Common stock issued for debt cancellation
$
-
$
-
$
4,356,725
Common stock issued in recapitalization
$
-
$
-
$
2,175
Cash paid for interest
$
-
$
-
$
254,435
The accompanying notes are an integral part of these financial statements .
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CLENERGEN CORPORATION
(A Development Stage Company)
For the Three and Six Months Ended April 30, 2011 and 2010
and from October 27, 2005 (Inception) to April 30, 2011
(Unaudited)
Notes to Condensed Consolidated Financial Statements
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Clenergen Corporation (the “Company”) was incorporated in the State of Nevada on May 2, 2005 under the name “American Bonanza Resources Limited.” On August 4, 2009, the Company acquired Clenergen Corporation Limited (UK), a United Kingdom corporation (“Limited”), and succeeded to the business of Limited. Limited acquired the assets of Rootchange Limited, a biofuel and biomass research and development company, in April 2009. The Company commenced operating two biomass power plants in India in October 2010.
The Company has entered into agreements to acquire such two plants from their current respective owners. The agreement to acquire one of such plants, for which the Company is reporting $2,543,350 in revenues for the three months ended April 30, 2011 and $4,441,192 for the six months ended April 30, 2011 in the accompanying unaudited Condensed Consolidated Statements of Operations, requires, as a condition to consummating the acquisition, that the bank-lender to the plant, IDBI Bank Ltd., approve such acquisition and the assumption of the debt owed to the bank-lender. The Company is in discussions with the bank-lender. However, the bank-lender has stated that it will not approve the acquisition until such time as the Company provides sufficient collateral in the form of cash deposits with the bank-lender as required under Indian banking laws. The Company currently does not have available the funds necessary to make such a deposit and is seeking additional capital to make the deposit. No assurance can be given that the Company will be successful in obtaining such additional capital, nor, if successful, the terms and costs of additional capital will be advantageous to the Company. The Company has an oral arrangement with the owners of the plant to the effect that the Company is operating the plant, retaining all revenues generated from such operations and paying all costs associated with operating the plant. This oral arrangement can be terminated at any time. As such, the revenues being generated may not be deemed revenues generated from continuing operations, which is a factor in determining whether or not the Company is to be treated, for accounting purposes, as a development stage company. Accordingly, the Company will continue to be considered a development stage company until such time as the Company consummates its acquisition of this plant, or either (x) enters into a long-term definitive agreement to operate the plant, (y) commences significant operations at other plants or (z) commences other operations which result in generating operations from continuing operations under applicable accounting rules.
The Company is reporting zero revenues from the second power plant for both the three months and six months ended April 30, 2011.
The Company is in the process of developing strategic clean energy and sustainable fuel supply alternatives to address the demand 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 and other end users, including private homes.
The Company intends to address the needs for a cleaner, greener planet with environmentally sound and sustainable clean energy generation and an integrated fuel supply chain, which is intended to be in compliance with and in excess of international standards for environmental protection, biodiversity, quality, safety and full traceability.
NOTE 2. BASIS OF PRESENTATION
These interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and 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, 2011 are not necessarily indicative of results that ultimately may be achieved for any future interim period or for the year ending October 31, 2011. 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 Annual Report on Form 10-K for the year ended October 31, 2010.
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The Company has evaluated all subsequent events through the date of the filing of the Company’s Form 10-Q in which these interim financial statements and notes thereto are included for appropriate accounting and disclosure.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The consolidated financial statements of the Company include the historical accounts of the Company’s wholly-owned subsidiaries, including Clenergen Corporation Limited (UK), Clenergen India Private Limited and Clenergen Corporation Administrative Services Limited, on a consolidated basis. 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.
Revenue Recognition - Revenue from power generation is recognized on an accrual basis, based on the terms of the Company’s power purchase agreements with its governmental, quasi-governmental and private customers. The governmental and quasi-governmental power purchase agreements typically provide for charges based on readings of outward-bound electricity from the generating plant, which readings are conducted jointly by the Company and representatives of the applicable state electricity board. Each Indian state electricity board is responsible for the electrical grid of such state, including maintenance of the grid’s infrastructure and acts as a purchaser of excess electricity injected into the grid by power generating companies, such as the Company, which is not delivered to customers of the power generating companies. Actual revenues recognized for power supplied to the governmental, quasi-governmental and private customers may not be contemporaneous with the reading dates. Billings to private customers are based on a monthly injection statement prepared by the Company giving details of power supplied to all customers and duly certified by the applicable state electricity board.
Accounts Receivable - Accounts receivable represent all outstanding amounts due from governmental, quasi-governmental and private customers for electricity supplied by the Company to the customers for which revenue recognition has occurred, including unbilled amounts. The Company establishes an allowance for doubtful accounts based on estimates as to the collectability of accounts receivable. Since the Company has a limited operating history, management considers trends in estimating the allowance for doubtful accounts including reviewing past-due accounts receivable balances, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Amounts determined to be uncollectible will be written-off when it is determined that the balance will not be collected. Based on the factors listed above, management concluded no allowance for doubtful accounts was required as of April 30, 2011.
Inventory - The inventory of the Company, comprising exclusively of the raw material feedstock fuel for the biomass power plant operated by the Company, have been valued at weighted average cost.
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 income and expenses. Translation adjustments are reported separately and accumulated in a separate component of equity, “Accumulated other comprehensive income/loss.”
Comprehensive income (loss) - Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under US GAAP are included in comprehensive income (loss) but are excluded from net loss as these amounts are recorded directly as an adjustment to stockholders’ equity/ (deficiency). The Company’s other comprehensive income (loss) is comprised of foreign currency translation adjustments. Comprehensive income (loss) is reported by the Company in the consolidated statements of operations.
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Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with accounting principles relating to share-based payment which requires fair value method of accounting. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. Expected forfeitures are included in determining share-based employee compensation cost. Share-based awards that do not require future services are expensed immediately.
Basic earnings (loss) per share - Basic net loss per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding. As of April 30, 2011, the Company has issued potentially dilutive purchase warrants to purchase an aggregate of 2,500,000 shares of the Company common stock. These shares have no effect on earnings per share as a result of the operating loss of the Company.
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 US GAAP 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.
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, 2011, the Company incurred an aggregate net loss of $42,007,449.
As of April 30, 2011, the Company has not emerged from the development stage and its ability to continue as a going concern is dependent upon the Company's ability to generate net income and obtain additional financing. Since inception, the Company has financed its activities principally from the use of advances from stockholders and others to pay for its operations. The Company intends on financing its future development activities and its working capital needs largely from the issuance of stock, until such time that funds provided by operations are sufficient to fund working capital requirements. There can be no assurance that the Company will be successful at achieving its financing goals on reasonably commercial terms, if at all.
These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
NOTE 5. PREPAID EXPENSES AND OTHER
The Company has a receivable from United Biofuels Ltd. in the amount of approximately $2.04 million representing advances the Company has made to a unit of the Government of India (IREDA) in connection with the Company’s planned acquisition of a 1.5 MW/h anaerobic digestion biomass power generation plant in Namakkal, Tamilnadu, India. The Company has paid an advance of around $226,000 as an initial sum towards acquiring an 8.5 MW/h power plant in Tamil Nadu, India. The Company also has made initial investments in and advances to several entities incorporated in Ghana, India and the Philippines, which were formed to develop and expand the Company’s business in such jurisdictions. Further, the Company has paid approximately $551,000 towards the long term bank loan liability of the 18.0 MW/h power plant it currently operates in Tamil Nadu, India. This payment has been classified as recoverable, pending the formal closure of the acquisition of the 18.0 MW/h power plant.
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NOTE 6. 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 a charge to operations.
Between November 1, 2010 and January 31, 2011, the Company sold an aggregate of 673,046 shares of Company common stock to a total of nine purchasers in private transactions the Company conducted in Germany. Gross proceeds from such sales totaled approximately $444,000 and selling commissions and other sale expenses totaled approximately $202,000, resulting in net proceeds of $242,000.
Between February 1, 2011 and April 30, 2011, the Company sold an aggregate of 1,107,600 shares of Company common stock to a total of twenty four purchasers in private transactions the Company conducted in Germany. Gross proceeds from such sales totaled approximately $554,000 and selling commissions and other sale expenses totaled approximately $222,000, resulting in net proceeds from such sales of $332,000, of which $109,000 remains outstanding as at April 30, 2011.
On February 16, 2011, the Company sold and issued to a single investor 40,000 shares for a total consideration of $20,000. Also, February 16, 2011, the Company sold and issued to a single investor 600,000 shares for a total consideration of $322,000. In a third separate transaction occurring on February 16, 2011, the Company sold and issued to three investors 491,100 shares of its common stock for a total consideration of $270,000, which remains outstanding as at April 30, 2011. The Company did not incur any commission or other fees in connection with such sales.
The Company's stock subscription receivable has increased by approximately $140,000 for the six months period between November 1, 2010 and April 30, 2011. The Company has recovered during the six months period $257,000, being receivable from earlier periods, which has reduced the subscriptions receivable. However during the six months period, the Company issued shares for which a gross subscription amount of $394,000 was outstanding as at the end of the quarter. The effect of change in currency rates between November 1, 2010 and April 30, 2011 was approximately $2,000.
NOTE 7. NOTE PAYABLE
During the six months ended April 30, 2011, the Company received an advance of $500,000 pursuant to an informal arrangement with an investor in conjunction with the company’s efforts to raise additional capital. On February 16, 2011, the Company formalized the arrangement with this investor and agreed to issue 600,000 shares of Company common stock at a purchase price of approximately $322,000, which purchase price was applied against the $500,000 advance. A promissory note in the principal amount equal to the remaining balance of the advance, $177,884, was issued to the investor. The promissory note had a stated interest rate of 12% per annum and matured on April 16, 2011. On April 16, 2011, the investor agreed to extend the maturity date until June 30, 2011.
NOTE 8. SUBSEQUENT EVENTS
On May 23, 2011, the Company obtained a loan of $300,000 from TCA Global Credit Fund, LP (“TCA”). The loan is evidenced by a promissory note and provides for an interest rate of 10% per annum, payable on the maturity date. The maturity date of the note is November 21, 2011. The Company received net proceeds of $277,950 on May 26, 2011 after deduction of incidental legal expenses and loan commitment charges imposed by TCA. As security for the repayment of the note, the Company entered into a Pledge and Escrow Agreement, dated May 21, 2011. Pursuant to such agreement, the Company pledged 5,000,000 shares of common stock to secure the satisfaction of the Company’s obligations under this note. The pledged shares are being held in escrow by TCA’s legal counsel. The Company intends to use the net proceeds of the loan to fund a deposit on acquisition of an 8.5 MW/h biomass plant in India and for general working capital purposes.
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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.