UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2010
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number 000-52767
SUNERGY, INC.
(Exact name of registrant as specified in its charter)
Nevada 26-4828510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14362 N. Frank Lloyd Wright Blvd., Suite 1000, Scottsdale, AZ 85260
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: 480.477.5810
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
------------------- -----------------------------------------
N/A N/A
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No [X]
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 last 90 days. Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registration statement was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
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
definition 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]
The aggregate market value of Common Stock held by non-affiliates of the
Registrant on November 30, 2011 was 9,770,058 based on a $0.008 closing price
for the Common Stock on November 25, 2011. For purposes of this computation, all
executive officers and directors have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such executive
officers and directors are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date. 1,493,586,405 as of November 30,
2011
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
This annual report on Form 10-K is for the period ended December 31, 2010.
Except where expressly described, the information in this report reflects the
affairs of the Sunergy, Inc. as at December 31, 2010, and does not provide up to
date information regarding the business or operations of Sunergy, Inc.
subsequent to December 31, 2010.
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TABLE OF CONTENTS
PART I
Item 1. Business..................................................... 4
Item 1A. Risk Factors................................................. 6
Item 1B. Unresolved Staff Comments.................................... 20
Item 2. Properties................................................... 20
Item 3. Legal Proceedings............................................ 20
Item 4. (Removed and Reserved)....................................... 20
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities............ 20
Item 6. Selected Financial Data...................................... 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk... 26
Item 8. Financial Statements and Supplementary Data.................. 27
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure..................................... 51
Item 9A(T). Controls and Procedures...................................... 51
Item 9B. Other Information............................................ 53
PART III
Item 10. Directors, Executive Officers and Corporate Governance....... 54
Item 11. Executive Compensation....................................... 58
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters................... 59
Item 13. Certain Relationships and Related Transactions, and Director
Independence................................................. 61
Item 14. Principal Accounting Fees and Services....................... 62
PART IV
Item 15. Exhibits, Financial Statement Schedules...................... 63
SIGNATURES.................................................................. 64
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PART I
ITEM 1. BUSINESS
This annual report contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors," that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of 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. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common shares" refer
to the common shares in our capital stock.
As used in this current report and unless otherwise indicated, the terms "we",
"us", "our", "our company" and "Sunergy" mean Sunergy, Inc.
GENERAL OVERVIEW
We were incorporated in the State of Nevada, USA, on January 28, 2003. We are an
exploration stage company engaged in the acquisition and exploration of mineral
properties with a view to exploiting any mineral deposits we discover that
demonstrate economic feasibility.
On April 10, 2003, we acquired the Hummingbird Property located in British
Columbia, Canada, from Ashworth Explorations Ltd. The property consists of three
mineral claims located in British Columbia's Vancouver Mining Division that have
the potential to contain copper, silver and gold mineralization or deposits. In
order to acquire a 100% interest in these claims, we paid $3,450 to Ashworth
Explorations Ltd. In 2005, 2006, 2007 and 2008 we retained an agent, David
Heyman of Vancouver, British Columbia, to re-stake the Hummingbird property and
to hold it in trust for us. In 2006, we reduced the size of the property so that
it only covers areas upon which we have discovered mineralization in our initial
exploration program. As of June 30, 2009, we had abandoned the Hummingbird
Property.
On September 12, 2008, Lorne Lilley resigned as treasurer, secretary and a
director of our company and Christian Brule resigned as president of our
company. As a result of these resignations, George Polyhronopolous and Joseph B.
Guerrero were elected directors of our company. On the same date Mr.
Polyhronopolous was appointed secretary and treasurer of our company and Mr.
Guerrero was elected president.
On September 16, 2008, our board of directors approved a 1for 5 forward stock
split of our authorized and issued and outstanding shares of common stock. The
certificate of change was filed with the Nevada Secretary of State on September
23, 2008, effective October 7, 2008. Following the stock split our authorized
capital has increased from 75,000,000 shares of common stock with a par value of
$0.001 to 375,000,000 shares of common stock with a par value of $0.001. We
issued five (5) shares of common stock in exchange for every one 1 share of
common stock issued and outstanding.
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The company made a purchase of a Ghana, West Africa concession from General
Metals for an original contract price of $1,000,000. The payment was to be made
with $500,000 in cash and $500,000 in company stock. The $500,000 cash payable
to General Metals was made as follows; the company paid $12,500 on October 31,
2008. On December 30, 2008, a third party paid $250,000 to General Metals on
behalf of Sunergy and assumed a $250,000 note payable. General Metals
subsequently sold the remaining debt of $237,500 to various third party
investors. As of August 13, 2010, the company completely paid off the Ghana,
West Africia concession to all parties. The details of these transactions are
listed below:
On October 31, 2008, we entered into an agreement with General Metals
Corporation for the acquisition of its 100% owned Nyinahin Mining Concession
located in Ghana, West Africa. The consideration for the acquisition was to
consist of $500,000 in cash, which was payable as follows: (i) $50,000 within 5
days of the effective date of the agreement with General Metals, (ii) $200,000
by December 31, 2008, and (iii) the balance of $250,000 by April 30, 2009, in
addition to 2,000,000 restricted presplit shares (20,000,000 post split shares)
of common stock of our company, issued at a fair value of $0.25 per share or
$500,000.
On October 31, 2008, we provided a partial payment of $12,500 due on the
principal payment as noted under the agreement for the acquisition of the
Nyinahin Mining. This $12,500 payment was credited towards the payment due to
General Metals Corporation on April 30, 2009.
On December 5, 2008, we amended the agreement with General Metals Corporation to
allow for the initial $250,000 payment to be made on or before December 31, 2008
with the remaining $237,500 payment to be payable on or before April 30, 2009.
As of December 30, 2008, we issued 2,000,000 restricted presplit shares
(20,000,000 post split shares) of our common stock to General Metals Corporation
at a fair market value of $0.25 per share or $500,000. A shareholder of our
company, Global Capital Partners LLC, agreed to settle the initial payment of
$250,000 to General Metals Corporation.
On December 30, 2008, we issued a promissory note to Global Capital Partners
LLC, in the amount of $250,000 at 8% per annum with principal and interest due
and payable on December 31, 2009. Proceeds of the note were used to make payment
of an aggregate of $250,000 toward the acquisition of the Nyinahin Mining
Concession and on February 25, 2010, the board of directors authorized the
settlement of this outstanding debt by the issuance of stock to Global Capital
Partners LLC. This transaction was never completed subsequently a group of
private US accredited investors purchased this debt from Global Capital
Partners, LLC. On August 3, 2009 the company issued common stock to settle the
debt with the third party investors.
On March 11, 2009, we appointed Purnendu K. Medhi as director of our company.
On July 29, 2009, we entered into an agreement to settle the final balance due
to General Metals of $237,500 plus penalties and interest which was payable in
accordance with the previous agreement and due on April 30, 2009. General Metals
Corporation agreed to receive 2,000,000 restricted presplit shares (20,000,000
post split shares) of common stock valued at $0.125 per share or $250,000 in
settlement of the General Metal's $237,500 balance plus $12,500 payment interest
expense. These shares were never issued and subsequently a group of private US
accredited investors, including two foreign corporations, purchased this debt
from General Metals. On August 13, 2010 the company issued restricted common
stock shares to settle the debt with the third party investors.
On August 3, 2009, we entered into a debt settlement agreement with Global
Capital Partners LLC whom we owed $250,000 since December 30, 2008. The terms
were for a 1 year extension of the loan at 8% interest. Global Capital Partners
agreed to accept 2,100,000 restricted presplit shares (21,000,000 post split
shares) of common stock of our company in full settlement of the debt including
interest. The common stock was not issued in a timely fashion and subsequently
the holder assigned the debt to accredited third party investors. Subsequently,
on June 30, 2010 we issued shares of common stock for full settlement of the
third party debt, including accumulated interest.
On September 3, 2009, George Polyhronopolous resigned as our secretary,
treasurer and director.
On November 8, 2009, Christian Brule resigned as director of our company.
On December 21, 2009, Robert A. Levich was appointed as director of our company.
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On March 8, 2010, Joseph Guerrero resigned as president and as a Director of our
company and was succeeded by Karl A. Baum who was also appointed a director.
On June 30, 2010, we issued 7,500,000 restricted common presplit shares
(75,000,000 post split shares) with a market value of $432,500 on the date
authorized by the Board in full settlement of the $250,000 note issued to the
accredited third party investors, including, $12,500 accumulated interest and
$170,000 additional interest resulting from the fair value differential.
On August 13, 2010, we entered into debt settlement agreements and issued
15,000,000 common presplit shares (150,000,000 post split shares) with a market
value of $0.048 per share or $$724,000 to the above referenced private
accredited investor group to settle the $237,500 debt that had been previously
payable to General Metals Corporation including $17,500 in accrued interest and
$469,000 in interest expense. This transaction completed the retirement of all
debt associated with the Nyinahin Concession purchased from General Metals.
On August 17, 2010, a Certificate of Amendment was filed with the Nevada
Secretary of State effecting a forward stock split of our authorized capital and
issued and outstanding shares of common stock on a 1 old for 10 new basis, such
that our authorized capital increased from 375,000,000 shares of common stock
with a par value of $0.001 to 3,750,000,000 shares of common stock with a par
value of $0.001 and, correspondingly, our issued and outstanding shares of
common stock increased from 94,619,788 shares of common stock to 946,197,880
shares of common stock. The forward split became effective with the
Over-the-Counter Bulletin Board at the opening for trading on August 24, 2010.
Consequently, our stock symbol changed to "SNEYD" for 30 days and returned to
"SNEY" and our CUSIP number was changed to 86732G306.
On October 18, 2010, we entered into a membership purchase agreement with Allied
Mining and Supply, LLC for the purchase of 100% of the issued and outstanding
membership interest of Allied Mining, a Nevada limited liability company, and
its wholly owned Sierra Leone subsidiary, Allied Mining and Supply, Ltd, which
owns the rights to exploration license #EXPL 5/2009 on the 140 sq km Pampana
River concession in Sierra Leone, West Africa. In consideration for the purchase
of the membership interests, we agreed to pay $18,000 cash and issue 100,000,000
units at a deemed price of $0.0025 to Allied Mining. The units consist of
100,000,000 shares of restricted stock, 100,000,000 with each warrant to
purchase 1 share of restricted stock at an exercise price of $0.0025 for a
period of 12 months and 100,000,000 warrants with each warrant to purchase 1
share of restricted stock at an exercise price of $0.005 per share for a period
of 12 months. The value of the purchase was based on the market price of the
stock issued and the fair value of the warrants issued. The 100,000,000 units
were not issued until January 11, 2011. This transaction fully satified the
Allied Mining and Supply, LLC purchase agreement.
On November 2, 2010, Karl A. Baum resigned as our president and Director and was
succeeded by Bryan Miller, the co-founder and Chief Executive Officer of Allied
Mining and Supply, LLC. who was appointed President and Director.
During the fourth quarter of 2010, we settled $53,861 of accrued consulting
services payable through the execution of a subscription to issue 22,779,960
shares of stock at $.0025. The fair value was based on private subscriptions as
the settlement was finalized concurrent with the sale of stock to private
investors. The shares were not issued as of December 31, 2010 and consequently
have been recorded as stock payable.
On December 15, 2010, we settled $47,500 in accounts payable through the
execution of a subscription to issue 19,000,000 shares of stock at $.0025. The
fair value was based on private subscriptions as the settlement was finalized
concurrent with the sale of stock to private investors. The shares were not
issued as of December 31, 2010 and consequently have been recorded as stock
payable.
On April 21, 2011, we appointed Mark Shelley as our secretary, treasurer and
director.
As of April 21, 2011, our Board of Directors consists of Bryan Miller, Purnendu
K. Medhi, Robert A. Levich and Mark Shelley.
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For additional information, including information relating to the description of
the common stock of our company, refer to our Amended Registration Statement on
Form SB-2 filed with the SEC on November 20, 2006.
OUR CURRENT BUSINESS
We are an exploration stage mining company engaged in the exploration of
minerals on properties located in Ghana, and Sierra Leone West Africa.
Our plan of operation for the twelve months following the date of this annual
report is to continue Phase I of the exploration program on our Nyinahin mining
concession in Ghana, and to equip and commence the planned dredging operation on
our Pampana River Concession in Sierra Leone.
HUMMINGBIRD PROPERTY
On April 10, 2003, we executed a mineral property staking and sales agreement
and acquired a 100% undivided right, title and interest in and to the
Hummingbird Claims located in the province of British Columbia, Canada. We
incurred exploration costs on the Hummingbird Claims of $933 and $1,834 during
the years ended December 31, 2009 and 2008, and $13,872 in the aggregate from
our inception. As of June 30, 2009, we abandoned the Hummingbird Claims.
NYINAHIN MINING CONCESSION - GHANA, WEST AFRICA
Sunergy's Nyinahin concession is located in Ghana's Ashanti Region, ca. 50 km
southwest of Kumasi. The Kumasi-Bibiani road cuts NE-SW across the northwest
part of the concession. The concession is irregularly shaped and is
approximately bounded by 6o29' and 6o37' North Latitude and 2o01'and 2o12' West
Longitude. The concession consists of 150 km2 of gently rolling secondary forest
and slash-and-burn farming areas containing some cocoa farms and oil-palm
plantations. The Offin River valley follows a roughly 10 km meandering NE-SW
course through the southeastern part of the concession approximately 60 km
upstream from the Central Region town of Dunkwa-on-Offin (also known as Dunkwa).
Immediately adjacent on the east to the Nyinahin Concession is the Esaase-Jeni
(Gyeni) properties, held by Keegan Resources of Canada. Prior to Keegan's
acquisition of the Bonte (now called Esaase) and the Jeni (Gyeni) concessions,
they were mined for alluvial gold by Bonte Gold Mines, a subsidiary of
Akrokeri-Ashanti Gold Mines of Canada. The Nyinahin concession is located
between two geological gold belts, the Bibiani Belt to the west and the
Asankrangwa to the east. The license allows for the exploration and mining of
gold, silver, base metals and diamonds. About 80% of the Nyinahin Concession
lies to the west of the Offin River within the Ashanti Region of Ghana. There
are several historical pits and adits with a strong clustering of artisan pits
located along the Offin River. Three old gold prospects exist on the concession.
The property is accessed via the main Kumasi-Bibiani trunk road. It falls under
the jurisdiction of the Atwima Mponua District Assembly with headquarters at
Nyinahin.
The Nyinahin concession is comprised of the Nyinahin Mineral Licence LVB 8936/05
and Land Registry No. 1535/2005, and subsequently converted into a Full
Prospecting License (LVB 3857/08). The Concession is situated 20km northeast of
Bibiani and about 48km Southwest of Kumasi. The concession which covers an
approximate area of 172 sq. km. has been reduced to 150 sq. km to conform to
statutory requirements regarding the maximum size for Prospecting Licenses by
the Minerals Commission (Ghana).
There are numerous forms in which gold occurs in the Birimian system of Ghana.
Current field work coupled with other geological reports suggest that the
Nyinahin concession greatly point to mineralization related to shear system
within metase dimentary environment. Other forms of mineralization include types
associated with granites within intrabasinal environments. The structures on the
concession have resemblance to intrabasinal faults represented by the
Asankrangwa Fault in the Kumasi basin and the Yamfo trend in the Sunyani basin.
CURRENT EXPLORATION
STREAM SEDIMENTS
Stream sediment sampling was carried out to cover the whole concession.
Conventional stream sediment samples (fig. 4) were collected from mostly 1st and
2nd order streams. The main objective of the program was to identify
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gold-anomalous areas for further work. The sampling was done at a density of two
samples per square kilometer. A total of 116 stream sediment samples were
collected. Pan Concentrate sampling was carried out at a few places.
GEOLOGICAL MAPPING
Geological mapping was carried out alongside the stream sediment sampling. At
each sample location, geological observations were made and the co-ordinate
determined using the GPS. A total of 10 grab samples including quartz veins were
taken. The outcrops, together with other geological information based on
previous work enabled a geological map to be produced. Most of the outcrops
encountered are graphitic Phyllite.
GPS READINGS
GPS reading using a Garmin 12XL standardized with the Universal Transverse
Mercator Zone 30, Northern Hemisphere (WGS84), was used to obtain co-ordinates
for each sample point.
SUMMARY OF WORK DONE TO DATE:
MAPPING
Geological Mapping 172 sq. km
SAMPLING
Soil Samples
Stream Sediment samples 116
Trench/Pit Samples
Grab samples taken 10
Anthill -
Total 126
ASSAY
Assay Low Level (stream)
Routine Analysis (grab) 116
We spent approximately $107,900 on exploration costs in 2010.
FUTURE EXPLORATION
We have designed a four-phased exploration program as detailed below:
We are committed to spending approximately US$250,000 over a two year period
beginning in Fiscal 2011 depending on the type and size of any deposit to be
discovered. This estimate includes a 10% contingency cost. Phases II and III are
contingent upon a favorable result from earlier phases.
PHASES I AND II (DURATION 12 MONTHS -END OF FIRST YEAR)
PROPOSED EXPLORATION
Geological Mapping
Line Cutting
Geochemical Soil Sampling
Trenching
Pitting
Geophysical Investigation
The fieldwork will begin with preliminary geological mapping and documentation
to confirm the general structures and formations. A review of work done during
the reconnaissance license period will also be carried out.
Line cutting will be carried out on known mineralized zones identified within
the concession at initial grid spacing of 800m. This will be in-filled with
lines spaced at 400m and 200m over selected grounds. It is expected that about
100km of lines will be cut in all. Geochemical soil-sampling program will be
conducted at an initial interval of 400 and in-filled at 100m and 50m along the
grid lines.
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Trenching, the most cost effective exploration method available in locating
significant in-situ mineralization will be employed. Preliminary trenching based
on results of the geochemical soil sampling will be carried out. An estimated
800m of trenches will be excavated.
Pitting will be carried out at some soil location points along the proposed
mineralized trend where trenching is not merited. Areas without significant gold
values along the mineralized trend will also be pitted to check the possibility
of transported materials.
Geophysical methods (VLF-EM/SP) will be used to identify mineralized
zones/anomalies within the concession area. Other work to be tackled are
clarification of the general forms of the mineral deposits (or anomalies), the
size of the main ore bodies, their quality, mineralogy and technical problems
which will generally assist in the evaluation of the deposit.
Finally, other geological works will be carried out if considered necessary. It
is hoped that any geophysical work already conducted in the area by the
Geological Survey will help in the interpretation of the structural problems. At
the end of this phase, an internal report will be prepared. The report will form
the basis of the Annual Report and on which the detailed prospecting phase will
be projected and carried out as the next phase of the project.
PHASE III (DURATION UP TO 6 MONTHS - BEGINNING OF SECOND YEAR)
DETAILED PROSPECTING
Geochemical Investigations
Trenching and Pitting
Structural Geological Mapping
Assay
Survey work
Geochemical samples will be taken along the geophysical traverses and analyzed
to cross check any prospects/anomalies picked up by the geophysics. All the
geochemical anomalies recorded will be "prioritized".
Detailed soil sampling at a closer grid system of 200 X 50m, and 100 X 25m will
be undertaken when it becomes necessary.
Trenching, pitting, sampling and structural geological mapping will be tightened
up. Any other geological work deemed necessary would also be carried out.
Assaying of all samples will be carried out locally in the first instance. Some
external cross checking of the assay values will also be made as and when
appropriate.
Survey work -all work from this stage will be performed on a surveyed grid
system. All trench locations from the previous phase and the subsequent ones
will be surveyed and put on plan and sections. This will enable a more effective
picture of the prospecting work to be viewed and interpreted.
Mineralogical and petrographical studies will be carried out.
A report will be prepared at the end of the period. This will involve project
appraisal and projections for the next phase of the prospecting program.
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PHASE IV (DURATION UP TO 6 MONTHS - END OF SECOND YEAR)
TARGET DELINEATION AND RESOURCE ESTIMATION
Trenching, Pitting and Sampling
RC Drilling (1000m)
Other Detailed Geological Work
Geological Report.
Work will be concentrated in areas, which have shown positive results during the
previous phases and carried out according to the importance of the results.
Area(s), which could be mined first, will be prospected in more detail. The aim
will be to accurately define the geological structure, forms, attitude of the
ore bodies or the ore deposit.
Trenching will continue at an aggressive rate and at closer grid spacing than
before. Sampling, survey work and structural geological mapping of all
exploration work will be carried out.
RC drilling of the gold deposit for resource estimation will be carried out. It
is estimated that about 800m of RC drilling will be carried out.
Assay of all samples will be done locally and externally as and when necessary.
Resource Estimation based on trench and RC drilling will be carried out.
Reserves estimation will be attempted at this stage to determine the extent of
the economic mineral potential of the concession area.
NYINAHIN CONCESSION COST ESTIMATES FOR FISCAL 2011 THROUGH 2012
We may not be able to fund the exploration of the Nyinahin concession and the
Pampana River concession all in the following year. If we were to raise
sufficient funds we would expect to expend $250,000 on this concession.
PAMPANA RIVER CONCESSION - SIERRA LEONE
The Pampana River Concession is an alluvial mining concession consisting of
Exploration License No. EXPL 5/2009 which was issued to Allied Mining and Supply
Ltd. (AMS) on 12th August 2009. The license is located in the Kholifa Rowalla,
Kafe Simiria and Tane Chiefdoms in the Tonkolili District of the Northern
Province of Sierra Leone covering an area of 141.3 km2. The concession is
situated on the western fringes of the southern Sula Mountains greenstone belt
and for most of the northern and central part it straddles the Pampana River. On
the west of the southern part, the concession runs along the Pampana River. The
property is South of the Sula Mountains in the Greenstone belt, around 120 miles
east of the capital, Freetown.
Rare earth elements (REEs) were initially discovered on the Pampana River
Concession as a result of exploration efforts carried by AMS in 2009 and 2010.
Subsequent due diligence on the Pampana River Concession suggests that
significant Rare Earth Elements (REEs) are contained in the 140.1 square
kilometers (approximately 87 square miles) concession. Assays of heavy black
sand concentrates containing REEs in 2009 and 2010, showed quantities of rare
earths and other valuable minerals in commercially exploitable grades. Recent
assays conducted by ALS Chemex in Sparks, Nevada, identified the presence of
several REE varieties contained in the heavy black sands including Lanthanum,
Scandium, Thallium, Cerium, Dysprosium, Hafnium, Lutetium, Niobium, Neodymium,
Praesodymium, Tantalum and Zircon The results of ALS Chemix's assays are
outlined below:
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PAMPANA RIVER CONCESSION BLACK SANDS ANALYSES
Substance ppm pct. (%) lbs/ton troy oz /ton
--------- --- -------- ------- ------------
Au - Gold 17.21 0.00172% 0.03443 0.441
Ce - Cerium >8748 >0.875% >17.50
Cr - Chrome 3932 0.393% 7.86
Dy - Dysprosium 149 0.0149% 0.295
Er - Erbium 83.4 0.0083% 0.167
Eu - Europium 42.5 0.0042% 0.085
Fe - Iron -- 16.05% 321
Gd - Gadolinium >491 >0.049% >0.983
Hf - Hafnium 1689 0.169% 3.38
Ho - Holmium 24.6 0.0025 0.049
La - Lanthanum 6022 0.602% 12.04
Lu - Lutetium 15.37 0.0015% 0.031
Mn - Manganese 10160 1.016% 20.32
Nb - Niobium 2661 0.266% 5.61
Nd - Neodynium 4523 0.45% 9.05
Pr - Praseodymium >864 >0.086% >1.73
Sm - Samarium >557 >0.056% >1.12
Ta - Tantalum 1231 0.123% 2.46
Tb - Terbium 42.8 0.0043% 0.086
Ti - Titanium -- 9.63% 193
Y - Yttrium 740 0.074% 1.48
Yb - Ytterbium 83.8 0.0084% 0.167
Zr - Zirconium >10000 >1.0% >20.0
|
Rare Earth Elements (REEs) are a unique group of chemical elements that exhibit
a range of special electronic, magnetic, optical and catalytic properties. REEs
are used in a wide range of alloys and compounds, and can greatly affect the
performance of complex engineered systems. They occur in a variety of chemical
forms and have a wide variety of applications, including the processing of
materials. REEs are used in components in engineered products, and their uses
include fluid cracking catalysts, automotive catalytic convertors, polishing
materials, permanent magnets, energy storage, phosphors, and glass additives. In
modern society, many of these uses are critical for high tech devices including
electronics, jet planes and rocks, and vital engineered components.
The Rare Earth Elements include the 15 elements of the Lanthanide Series,
(Atomic Numbers 57 through 71), and consist of Lanthanum, Cerium, Praseodymium,
Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium,
Holmium, Erbium, Thulium, Ytterbium, and Lutetium. In addition, several
11
non-Lanthanides, which have similar or related properties and uses, are
sometimes classified with the REEs, and these include Yttrium, Niobium, and
Tantalum.
In light of the results of the Black Sands Analyses on the Pampana River
Concession, we intend to focus our efforts and available resources on our
planned dredging operation on the Pampana River Concession. We are also
committed to purchasing three 8" dredges from Gold Dredge Wharehouse in Idaho to
be deployed on the concession. These custom dredges should process around 50-60
tons per hour each (150-180 Tons/hour) and are designed specifically to capture
even the finest gold, gemstones and smaller diamonds as well as the light and
heavy rare earths (REEs). Additional dredges are planned to be deployed in
Sierra Leone throughout the next year pending operations needs and available
funding.
PAMPANA RIVER CONCESSION COST ESTIMATES FOR FISCAL 2011 THROUGH 2012
Subject to the availability of sufficient financing, which is not guaranteed,
our planned exploration expenses on the Pampana River Concession for fiscal 2011
including travel is $454,460.
ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
The Pampana River Concession is a nearly triangular license for the exploration
for gold and other base metals located on the Pampana River from where it
emerges from the main schist belt in the Kolifa Rowalla, Kafe Simiria and Tane
Chiefdoms in the Tonkolili District. The concession has a series of meanders off
the Pampana River from the northern part of the concession to the south where
the river forms the western limit of the property. Access to the license area is
along the tarmacked Freetown- Kono Highway through Magburaka, which is the
largest township and District Headquarters, about 240km east of Freetown.
Several unpaved roads and foot tracks crisscross the property.
The climate is a wet tropical monsoon, with a single wet season each year. The
average annual rainfall is about 2,500 centimeters. The greater part of this
rain falls in the west season, from mid-May to mid-November. The wettest month
is usually August, but rivers attain maximum discharge at their lowest in March
and April, and begin to increase in May. Ground water levels do not rise
significantly until late July. Daytime shade temperatures range from 18(degree)
to 35(degree)C with 65% humidity in the dry season and up to 95% in the rainy
season. The coldest month on average is January when dry winds called `Hamattan'
blow from the north east towards the coast.
The original vegetation was tropical rain forest, but over most of the region,
the forest has been destroyed to make way for farms. Residual areas of primary
forest remain particularly along river banks. Elsewhere, the land has all been
farmed on the shifting cultivation system, and is normally covered with dense
secondary bush whose height varies with the number of years that have elapsed
since the ground was farmed. In the north, where rainfall is less, there are
large areas where the secondary bush has been replaced by elephant grass, with
shrubs and trees persisting only along the watercourses. The Pampana River has
its source from Lake Sonfon in the northern Sula Mountains which is well known
for its gold mineralization. In its course, the river action erodes the
mineralized primary gold deposit and carries the gold with other heavy minerals
in the eroded sediments to be deposited in suitable locations along its course.
One suitable location is the meanders of the river within the concession area.
The river flows south- and west-wards across the main body of the Sula mountains
greenstone belt. The Sula Mountains comprise an elongate chain some 120
kilometres long by 16 kilometres wide which forms an open, northerly trending
arc. The mountains comprise a relict zone of volcano sedimentary rocks, now
metamorphosed to green schist and amphibolite grade.
Having descended the steep valleys of the Sula Mountains and entering the
subdued granitic terrain surrounding the Sula Mountain, the Pampana River
becomes a series of meanders with several rock bars exposed across the river.
These rock boulders and series of meanders have become locations for the
deposition of heavy minerals and have become the locus for alluvial gold
mineralization and therefore alluvial mining.
12
HISTORY
Historically, the Pampana River and its tributaries supported some of the
richest alluvial gold workings in the Sula Mountains. The entire stretch of the
Pampana River along the southern boundary of the licence was dredged for gold in
the 1940s and `50s. The United Nations Development Programme (UNDP) conducted a
joint geochemical survey with the Sierra Leone Geological Survey in 1987. The
work located gold anomalies in streams along the Pampana River.
Gold placers have been mined from the entire greenstone belt with the exception
of the Maranda. The most productive has been the largest belt - the Sula
Mountains/ Kangari Hills. Virtually all production records have been from this
belt. Amongst the most productive areas have been from rivers in the Lake Sonfon
area, the Tebenko River (Makong, Makele) the Mokeke River and Maranda, the
Yirisen River and Pampana River. The largest production has come from the
dredging of the Pampana River but one of the dredge tails which was sampled was
estimated at 0.2gm per cubic yard. The most lucrative section of river has
revealed grades of 1gm per cubic yard with an average 0.5gm per cubic yard in
the river which is 60m wide with rock exposures. Dredging was successfully done
by the Pampana Mining Company for at least 20 miles along the river.
Between April 1984 and May 1987 the United Nations Revolving Fund (UNRF) for
Natural Resources Exploration undertook an extensive regional programme of gold
exploration in the Pampana district of the southern Sula Mountains. The
programme was designed to identify the source rocks of the alluvial gold being
mined extensively by artisanal miners. Stream sediment sampling (1,087 samples),
soil sampling (2,474 samples), topographic surveying, mapping, pitting and
trenching were undertaken. Following verification of stream sediment anomalies,
two areas, namely, Yirisen and Masamank (South Pampana EXPL) were targeted for
detailed soil sampling with a total of 1,477 sample sites.
At Yirisen soil sampling grids were extended 2.5km north-eastward from the
northern limit of known gold mineralization. Two anomalous gold zones were
defined by a 50 parts per billion (ppb) gold in soil contour. The most southerly
anomaly is comprised of three parallel mineralized trends, the most easterly of
which continues for 700m from the mapped extent of the Yirisen deposit. Some
1,200m north-east of the known mineralization, a second 1,500m long by 200m wide
gold anomaly extends along the contact between amphibolite and talc schist
lithologies. A second grid, 400m east of the main Yirisen grid at Kalmoro,
identified a 750m long by 500m wide northeast trending anomalous gold zone,
parallel to the trend of the Yirisen gold system.
The Yirisen project has many hallmarks of a potentially significant gold
deposit. Certain parallels in terms of the style and extent of shear zone hosted
mineralization can already be drawn with Mano River's KGL gold deposit (located
approximately 350km south east) in western Liberia, where an initial gold
resource of 610,000 ounces (indicated and inferred) at an average 4.8 grams per
tonne (g/t) has been defined.
The most recent holder of a license in the vicinity of the AMS Ltd concession,
Golden Leo Resources, identified several structural sites considered to have
potential for hosting gold mineralization within the prospect. Air photo
interpretation on a more detailed scale was utilized to define target zones more
precisely. Preliminary reconnaissance geological and structural traversing
located mineralized amphibolites and previously unreported artisanal gold
workings.
GEOLOGICAL SETTING
The prospect previously held by Golden Leo which adjoins the AMS concession to
the south lies in the southern part of the Sula Mountain Greenstone Belt, within
a complex sequence of folded and sheared metasediments and metavolcanics with
granitic intrusions both between folded greenstone units immediately north of
the Pampana River, and in an anticline exposed within the river.
About 0.5 to 1.5 kilometers northeast of the prospect, a series of
vertically-dipping ultramafic volcanic and metasediments contain pyritic bands
with low gold values. Quartz stringers with pyrite, chalcopyrite and gold occur,
13
and chalcopyrite-bearing quartz float with up to 20 g/t Au was found in the
area. Approximately one kilometer farther east, the Yirisen zone comprises an
anatomizing zone of aplitic sericitic quartz lodes in talc sericite schist with
associated fuchsite. Seven veins range from 0.5 to 5.28 metres in width and
carry arsenopyrite, chalcopyrite, galena, sphalerite, antimony minerals and
pyrite, together with gold values averaging 18 g/t Au. The zone was traced for
400 metres, and the Survey estimated a resource potential of 1,000 oz Au per 1
metre depth.
The Pampana River drains large areas of known gold occurrences hosted in Archean
greenstone belts. The Pampana North region is believed to contain significant
reserves of high value gold and other precious metals. The region also features
high quality alluvial gravels and hard rock quartz vein systems, situated near
Sierra Leone's largest known hard rock vein deposit.
The northeastern section of the property spans 1,200 feet and is situated nine
kilometers from the prolific Yirisen Gold deposit. Past sampling and ongoing
assaying results have indicated the presence of lode gold reserves.
DEPOSIT TYPE
Hard rock gold mineralization was first noted at Yirisen by the Geological
Survey of Sierra Leone in 1958 as part of a programme of mapping and sampling of
the country's major hard rock artisanal gold mines. The Survey identified seven
north easterly trending sub-vertical lodes of gold mineralised quartz veining,
averaging 150m in length. Sampling by the Survey returned numerous gold
intersections in trenches. Yirisen is one of the most advanced gold projects in
Sierra Leone, historic work returning a best trench intersect of 6.4m@23g/t Au.
The Yirisen gold system, as defined by a combination of mapped sites of in situ
mineralization, artisanal workings and soil geochemical anomalies, trends
north-northeast with a current inferred strike length of 3.75 km, open in both
directions. Independent consultants ACA Howe International Ltd reported from a
recent visit to Yirisen that several bands of high-grade gold mineralization
occur over a total width of up to 200m. Artisanal workings, extending to depths
of up to 5m, confirm that gold is not solely restricted to the high-grade veins
and that within both the oxide and sulphide zones, is partially free milling.
Reports indicate recoverable alluvial gold on the Pampana North section
(40.1sq/km) at over 500,000 oz., with average grades of 0.12 ounces per tonne
qualifying as superior grade deposits as defined by the US Bureau of Mines. AMS
Ltd was granted a boundary modification by the Sierra Leone Mines Ministry to
include an adjacent 100 square kilometres.
Much of the historic trench and channel sampling was selective in nature, with
disseminated mineralization between high grade zones of veining and sulphides
appearing to have not been adequately tested, despite reports by local miners
that gold is won from this material. An aggressive drilling programme must be
designed to thoroughly test the mineralization and permit the estimation of a
preliminary resource.
MINERALIZATION
The Pampana River drains large areas of known gold occurrences hosted in Archean
greenstone belts. The Pampana North region contains significant reserves of high
value gold and other precious metals. The region also features high quality
alluvial gravels and hard rock quartz vein systems. The northeastern section of
the property spans 1,200 feet and is nine kilometres from the Yirisen Gold
deposit. Past sampling and ongoing assaying results have indicated the presence
of lode gold reserves.
A compilation of field mapping, Landsat and air photo interpretation to assist
the prioritization of targets indicated by the initial regional geochemical
results was also conducted. It is concluded from this that the area has
potential for primary gold in veins and iron formation, volcanic-associated base
metal mineralization, nickel laterite, and granite-hosted molybdenum
mineralization. Gold targets exist within an extensive zone of imbricated
tectonic rock slices at the intersection of four crustal scale shear zones.
Historically the Pampana River and its tributaries supported some of the richest
alluvial gold workings in the Sula Mountains. Structural features known to host
gold and base metal mineralization are exposed within the Pampana EPLs including
that for AMS Ltd. Gold is considered to be derived from sericitic quartz vein
lodes and tourmaline bearing pegmatites, the host rock being predominantly
sheared ultramafic rocks, now serpentinized and talc-tremolite schists. In many
other schist belt gold deposits in West Africa, for instance at Mano's KGL and
Weaju projects in Liberia, the host rock is also a strongly sheared, mylonitised
and therefore silicified talc-tremolite schist.
14
ADJACENT PROPERTIES
In the Pampana Area, several licenses surround the Company's concession.
Immediately to the north is the Calone Mining Company concession which is
exploring for lode gold in its area. The area was held by Golden Leo Resources
previous to the current holder.
METALLURGICAL TESTING
During prospecting undertaken by AMS in 2009, samples collected from five sites
along the Pampana River were sent for analysis at the ALS Chemex Laboratory in
the USA. Assays of these heavy mineral concentrates including black sand proved
quantities of rare earth metals and other valuable minerals such as Tantalum,
Thallium, Zirconium, etc. in grades that could be considered commercially
exploitable. Documented information and history on the hard rock areas within
and immediately north of the AM&S Pampana prospect provide the opportunity for
the Company to pursue an aggressive exploration program parallel with the
planned gold and mineral sands production.
OTHER RELEVANT DATA AND INFORMATION
Development of the prospect area can occur in two phases: phase one will define
both alluvial and lode reserves for mining; phase 2 will be its reserve
development and commercial mining program. Testing and existing data indicate
gold concentrations ranging from 1 to 18 grams per tonne of material. Fire
assays conducted in Freetown by AMS show the gold purity at 89%. Assays of black
sand concentrates by AMS in 2009 proved quantities of rare earth metals and
other valuable minerals in commercially exploitable grades. Of particular
interest are the values of the ten of the lanthanide elements, as well as
thorium, tantalum, yttrium, zirconium and chromium. These sands are consistent
and verified in the river channel and along the banks and benches. AMS
geologists estimate 50kg/tonne rich black sands easily recoverable by dredging
and land-based mining, suggesting the likelihood of highly profitable and
immediate placer mining. Inspection of artisanal mining and prospecting sites
within the license area show black sands throughout the claim.
COMPETITION
We are a mineral resource exploration company. We compete with other mineral
resource exploration companies for financing and for the acquisition of new
mineral properties. Many of the mineral resource exploration companies with whom
we compete have greater financial and technical resources than those available
to us. Accordingly, these competitors may be able to spend greater amounts on
acquisitions of mineral properties of merit, on exploration of their mineral
properties and on development of their mineral properties. In addition, they may
be able to afford more geological expertise in the targeting and exploration of
mineral properties. This competition could result in competitors having mineral
properties of greater quality and interest to prospective investors who may
finance additional exploration. This competition could adversely impact on our
ability to finance further exploration and to achieve the financing necessary
for us to develop our mineral properties.
COMPLIANCE WITH GOVERNMENT REGULATION
We are committed to complying with and are, to our knowledge, in compliance
with, all governmental and environmental regulations applicable to our company
and our properties. Permits from a variety of regulatory authorities are
required for many aspects of mine operation and reclamation. We cannot predict
the extent to which these requirements will affect our company or our properties
if we identify the existence of minerals in commercially exploitable quantities.
In addition, future legislation and regulation could cause additional expense,
capital expenditure, restrictions and delays in the exploration of our
properties.
RESEARCH AND DEVELOPMENT EXPENDITURES
We have not incurred research and development expenditures over the last fiscal
year.
15
EMPLOYEES
Currently, we do not have any employees. Our directors and certain contracted
individuals play an important role in the running of our company. We do not
expect any material changes in the number of employees over the next 12 month
period. We do and will continue to outsource contract employment as needed.
We engage contractors from time to time to consult with us on specific corporate
affairs or to perform specific tasks in connection with our exploration
programs.
SUBSIDIARIES
As of December 31, 2010 we have two wholly owned subsidiaries, Allied Mining and
Supply LLC, a Nevada limited liability company, and Mikite Gold Resources
Limited, a Ghanaian company. The Mikite Gold Resources Ltd is a company which
was created to hold the Nyinahin concession in Ghana and has no other assets or
operations.
Our operations in relation to our Pampana River Concession in Sierra Leone are
conducted through Allied Mining and Supply LLC and its wholly owned subsidiary
Allied Mining and Supply Ltd., a Sierra Leone company.
The financial statement included in this report represent the consolidated
results of Sunergy, Inc., the Ghana concession, Allied Mining and Supply LLC and
Allied Mining and Supply Ltd. All material inter-company accounts and
transactions have been eliminated.
INTELLECTUAL PROPERTY
We do not own, either legally or beneficially, any patent or trademark.
ITEM 1A. RISK FACTORS
Our business operations are subject to a number of risks and uncertainties,
including, but not limited to those set forth below:
RISKS ASSOCIATED WITH MINING
OUR PROPERTIES ARE IN THE PRE-EXPLORATION STAGE. THERE IS NO ASSURANCE THAT WE
CAN ESTABLISH THE EXISTENCE OF ANY MINERAL RESOURCE ON OUR PROPERTIES IN
COMMERCIALLY EXPLOITABLE QUANTITIES. UNTIL WE CAN DO SO, WE CANNOT EARN ANY
REVENUES FROM OPERATIONS AND IF WE DO NOT DO SO WE WILL LOSE ALL OF THE FUNDS
THAT WE EXPEND ON EXPLORATION. IF WE DO NOT DISCOVER ANY MINERAL RESOURCE IN A
COMMERCIALLY EXPLOITABLE QUANTITY, OUR BUSINESS COULD FAIL.
Despite pre-exploration work on our mineral properties, we have not established
that they contain any mineral reserve, and there can be no assurance that we
will be able to do so. If we do not, our business could fail.
A mineral reserve is defined by the Securities and Exchange Commission in its
Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as that part
of a mineral deposit which could be economically and legally extracted or
produced at the time of the reserve determination. The probability of an
individual prospect ever having a "reserve" that meets the requirements of the
Securities and Exchange Commission's Industry Guide 7 is extremely remote; in
all probability our mineral resource property does not contain any 'reserve' and
any funds that we spend on exploration will probably be lost.
Even if we do eventually discover a mineral reserve on one of our properties,
there can be no assurance that we will be able to develop our properties into
producing mines and extract those resources. Both mineral exploration and
development involve a high degree of risk and few properties which are explored
are ultimately developed into producing mines.
The commercial viability of an established mineral deposit will depend on a
number of factors including, by way of example, the size, grade and other
attributes of the mineral deposit, the proximity of the resource to
infrastructure such as a smelter, roads and a point for shipping, government
regulation and market prices. Most of these factors will be beyond our control,
and any of them could increase costs and make extraction of any identified
mineral resource unprofitable.
16
MINERAL OPERATIONS ARE SUBJECT TO APPLICABLE LAW AND GOVERNMENT REGULATION. EVEN
IF WE DISCOVER A MINERAL RESOURCE IN A COMMERCIALLY EXPLOITABLE QUANTITY, THESE
LAWS AND REGULATIONS COULD RESTRICT OR PROHIBIT THE EXPLOITATION OF THAT MINERAL
RESOURCE. IF WE CANNOT EXPLOIT ANY MINERAL RESOURCE THAT WE MIGHT DISCOVER ON
OUR PROPERTIES, OUR BUSINESS MAY FAIL.
Both mineral exploration and extraction require permits from various foreign,
federal, state, provincial and local governmental authorities and are governed
by laws and regulations, including those with respect to prospecting, mine
development, mineral production, transport, export, taxation, labor standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. There can be no assurance that we
will be able to obtain or maintain any of the permits required for the continued
exploration of our mineral property or for the construction and operation of a
mine on our property at economically viable costs. If we cannot accomplish these
objectives, our business could fail.
We believe that we are in compliance with all material laws and regulations that
currently apply to our activities but there can be no assurance that we can
continue to remain in compliance. Current laws and regulations could be amended
and we might not be able to comply with them, as amended. Further, there can be
no assurance that we will be able to obtain or maintain all permits necessary
for our future operations, or that we will be able to obtain them on reasonable
terms. To the extent such approvals are required and are not obtained, we may be
delayed or prohibited from proceeding with planned exploration or development of
our mineral properties.
IF WE ESTABLISH THE EXISTENCE OF A MINERAL RESOURCE ON ONE OF OUR PROPERTIES IN
A COMMERCIALLY EXPLOITABLE QUANTITY, WE WILL REQUIRE ADDITIONAL CAPITAL IN ORDER
TO DEVELOP THE PROPERTY INTO A PRODUCING MINE. IF WE CANNOT RAISE THIS
ADDITIONAL CAPITAL, WE WILL NOT BE ABLE TO EXPLOIT THE RESOURCE, AND OUR
BUSINESS COULD FAIL.
If we do discover mineral resources in commercially exploitable quantities on
our property, we will be required to expend substantial sums of money to
establish the extent of the resource, develop processes to extract it and
develop extraction and processing facilities and infrastructure. Although we may
derive substantial benefits from the discovery of a major deposit, there can be
no assurance that such a resource will be large enough to justify commercial
operations, nor can there be any assurance that we will be able to raise the
funds required for development on a timely basis. If we cannot raise the
necessary capital or complete the necessary facilities and infrastructure, our
business may fail.
MINERAL EXPLORATION AND DEVELOPMENT IS SUBJECT TO EXTRAORDINARY OPERATING RISKS.
WE DO NOT CURRENTLY INSURE AGAINST THESE RISKS. IN THE EVENT OF A CAVE-IN OR
SIMILAR OCCURRENCE, OUR LIABILITY MAY EXCEED OUR RESOURCES, WHICH WOULD HAVE AN
ADVERSE IMPACT ON OUR COMPANY.
Mineral exploration, development and production involve many risks which even a
combination of experience, knowledge and careful evaluation may not be able to
overcome. Our operations will be subject to all the hazards and risks inherent
in the exploration for mineral resources and, if we discover a mineral resource
in commercially exploitable quantity, our operations could be subject to all of
the hazards and risks inherent in the development and production of resources,
including liability for pollution, cave-ins or similar hazards against which we
cannot insure or against which we may elect not to insure. Any such event could
result in work stoppages and damage to property, including damage to the
environment. We do not currently maintain any insurance coverage against these
operating hazards. The payment of any liabilities that arise from any such
occurrence would have a material adverse impact on our company.
MINERAL PRICES ARE SUBJECT TO DRAMATIC AND UNPREDICTABLE FLUCTUATIONS.
We expect to derive revenues, if any, either from the sale of our mineral
resource property or from the extraction and sale of precious and base metals.
The price of those commodities has fluctuated widely in recent years, and is
affected by numerous factors beyond our control, including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates, global or regional consumptive patterns,
speculative activities and increased production due to new extraction
developments and improved extraction and production methods. The effect of these
factors on the price of base and precious metals, and therefore the economic
viability of any of our exploration properties and projects, cannot accurately
be predicted.
17
THE MINING INDUSTRY IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE THAT WE WILL
CONTINUE TO BE SUCCESSFUL IN ACQUIRING MINERAL CLAIMS. IF WE CANNOT CONTINUE TO
ACQUIRE PROPERTIES TO EXPLORE FOR MINERAL RESOURCES, WE MAY BE REQUIRED TO
REDUCE OR CEASE OPERATIONS.
The mineral exploration, development, and production industry is largely
un-integrated. We compete with other exploration companies looking for mineral
resource properties. While we compete with other exploration companies in the
effort to locate and acquire mineral resource properties, we will not compete
with them for the removal or sales of mineral products from our properties if we
should eventually discover the presence of them in quantities sufficient to make
production economically feasible. Readily available markets exist worldwide for
the sale of mineral products. Therefore, we will likely be able to sell any
mineral products that we identify and produce.
In identifying and acquiring mineral resource properties, we compete with many
companies possessing greater financial resources and technical facilities. This
competition could adversely affect our ability to acquire suitable prospects for
exploration in the future. Accordingly, there can be no assurance that we will
acquire any interest in additional mineral resource properties that might yield
reserves or result in commercial mining operations.
RISKS RELATED TO OUR COMPANY
WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO BASE AN EVALUATION OF OUR
BUSINESS AND PROSPECTS.
We have been in the business of exploring mineral resource properties since 2003
and we have not yet located any mineral reserve. As a result, we have never had
any revenues from our operations. In addition, our operating history has been
restricted to the acquisition and exploration of our mineral properties and this
does not provide a meaningful basis for an evaluation of our prospects if we
ever determine that we have a mineral reserve and commence the construction and
operation of a mine. We have no way to evaluate the likelihood of whether our
mineral property contains any mineral reserve or, if it does that we will be
able to build or operate a mine successfully. We anticipate that we will
continue to incur operating costs without realizing any revenues during the
period when we are exploring our properties. We therefore expect to continue to
incur significant losses into the foreseeable future. We recognize that if we
are unable to generate significant revenues from mining operations and any
disposition of our property, we will not be able to earn profits or continue
operations. At this early stage of our operation, we also expect to face the
risks, uncertainties, expenses and difficulties frequently encountered by
companies at the start up stage of their business development. We cannot be sure
that we will be successful in addressing these risks and uncertainties and our
failure to do so could have a materially adverse effect on our financial
condition. There is no history upon which to base any assumption as to the
likelihood that we will prove successful and we can provide investors with no
assurance that we will generate any operating revenues or ever achieve
profitable operations.
THE FACT THAT WE HAVE NOT EARNED ANY OPERATING REVENUES SINCE OUR INCORPORATION
RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE TO EXPLORE OUR MINERAL
PROPERTIES AS A GOING CONCERN.
We have not generated any revenue from operations since our incorporation and we
anticipate that we will continue to incur operating expenses without revenues
unless and until we are able to identify a mineral resource in a commercially
exploitable quantity on our mineral property and build and operate a mine. We
had cash in the amount of $97,251 as of December 31, 2010. At December 31, 2010,
we had working capital of $55,659. We incurred a net loss of $1,734,968 for our
year ended December 31, 2010 and $2,358,270 since inception. We will have to
raise additional funds to meet our currently budgeted operating requirements for
the next 12 months. As we cannot assure a lender that we will be able to
successfully explore and develop our mineral property, we will probably find it
difficult to raise debt financing from traditional lending sources. We have
traditionally raised our operating capital from sales of equity and debt
securities, but there can be no assurance that we will continue to be able to do
so. If we cannot raise the money that we need to continue exploration of our
mineral property, we may be forced to delay, scale back, or eliminate our
exploration activities. If any of these were to occur, there is a substantial
risk that our business would fail.
These circumstances lead our independent registered public accounting firm, in
their report dated December 14, 2011 to comment about our company's ability to
continue as a going concern. Management has plans to seek additional capital
through a private placement of our capital stock. These conditions raise
18
substantial doubt about our company's ability to continue as a going concern.
Although there are no assurances that management's plans will be realized,
management believes that our company will be able to continue operations in the
future.
RISKS ASSOCIATED WITH OUR COMMON STOCK
TRADING ON THE OTC PINK SHEETS MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS
THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR STOCKHOLDERS
TO RESELL THEIR SHARES.
Our common stock is quoted on the OTC Pink Sheets service of the Financial
Industry Regulatory Authority. Trading in stock quoted on the OTC Pink Sheets is
often thin and characterized by wide fluctuations in trading prices, due to many
factors that may have little to do with our operations or business prospects.
This volatility could depress the market price of our common stock for reasons
unrelated to operating performance. Moreover, the OTC Pink Sheets is not a stock
exchange, and trading of securities on the OTC Pink Sheets is often more
sporadic than the trading of securities listed on a quotation system like NASDAQ
or a stock exchange like Amex. Accordingly, shareholders may have difficulty
reselling any of their shares.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT
A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, the Financial Industry Regulatory Authority has adopted
rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the Financial Industry Regulatory Authority believes that there
is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The Financial Industry Regulatory
Authority's requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.
19
OTHER RISKS
TRENDS, RISKS AND UNCERTAINTIES
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
EXECUTIVE OFFICES
Our executive office is located at 14362 N. Frank Lloyd Wright Blvd., Suite
1000, Scottsdale, Arizona, 85260. We rent approximately 500 square feet at a
cost of $500 per month.
MINERAL PROPERTIES
As of the date of this annual report on Form 10-K, we own two mineral
properties, the Nyinahin Mining Concession in Ghana, West Africa and The Pampana
River concession in Sierra Leone, West Africa. For detail descriptions of this
property, please see the section entitled "Business" above.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against us, nor
are we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our company.
ITEM 4. (REMOVED AND RESERVED)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common shares are quoted under the symbol "SNEY.PK" on the OTC Pink market
operated by OTC Markets Group Inc. The following quotations, obtained from
Market Watch, reflect the high and low bids for our common shares based
on inter-dealer prices, without retail mark-up, mark-down or commission and may
not represent actual transactions.
The high and low bid prices of our common stock for the periods indicated below
are as follows:
NATIONAL ASSOCIATION OF SECURITIES DEALERS OTC BULLETIN BOARD(1)(2)(3)
Quarter Ended High Low
------------- ---- ---
December 31, 2010 $ 0.0070 $ 0.0066
September 30, 2010 $ 0.0023 $ 0.0016
June 30, 2010 $ 0.0460 $ 0.0460
March 31, 2010 $ 0.0550 $ 0.0450
December 31, 2009 $ 0.0095 $ 0.0075
September 30, 2009 $ 0.01 $ 0.0075
June 30, 2009 $ 0.03 $ 0.02
March 31, 2009 $ 0.05 $ 0.03
December 31, 2008 $ 0.90 $ 0.50
|
20
(1) Over-the-counter market quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission, and may not represent actual
transactions.
(2) Our common stock was quoted on the Over-the-Counter Bulletin Board on
October 22, 2007.
(3) The first trade in our common stock occurred on October 29, 2008.
Our common shares are issued in registered form. Clear Trust, LLC 16540 Pointe
Village Drive, Suite 201, Lutz, Florida 33558, Tel (813) 235-4490, Fax (813)
388-4549 is the registrar and transfer agent for our common shares.
On December 31, 2010, our shareholders' list showed 28 registered shareholders
and 946,197,880 common shares outstanding.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock and have no present
intention of paying any dividends on the shares of our common stock. Our current
policy is to retain earnings, if any, for use in our operations and in the
development of our business. Our future dividend policy will be determined from
time to time by our board of directors.
EQUITY COMPENSATION PLAN INFORMATION
We currently do not have any stock option or equity compensation plans or
arrangements.
RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES
Other than as set out below, we did not sell any equity securities which were
not registered under the Securities Act during the year ended December 31, 2010
that were not otherwise disclosed on our quarterly reports on Form 10-Q or our
current reports on Form 8-K filed during the year ended December 31, 2010.
On June 3, 2010 we issued 5,000,000 resticted common shares (20,000,000 in the
aggregate) valued at $0.0065 per share to George Polyhronopoulos, our then
former treasurer, secretary and director, Karl Baum, our then treasurer,
president, and director, and our directors P.K Medhi and Robert Levich. The
shares were issued in consideration of executive services with an aggregate
market value of $130,000.
On June 3, 2010 we issued 40,992,880 restricted common shares at $0.0035 per
share in respect of $143,400 in prepaid subscriptions.
On June 30, 2010 we issued 75,000,000 restricted common shares valued $0.0058
per share or $432,500 in full settlement of a $250,000 promissory note to Global
Capital, a Canadian Corporation and $12,500 accumulated interest, and $170,000
additional interest resulting from the fair value differential.
On July 30, 2010, we issued 25,000,000 restricted common shares at $0.0067 per
share to our officers for executive services. A total value of $167,500 was
recorded as compensation expense.
Between July 15 and July 22, 2010, we issued 39,980,000 restricted common shares
to settle $67,980 in debts. The fair value of the shares on the date of issuance
was $0.004 per share for a total value of $175,790 which was allocated as
$67,980 to the debt and $107,810 to interest expense.
On July 15, 2010, we issued 14,700,000 restricted common shares to settle
$24,990 in debt. The fair value of the shares on the date of issuance was $0.004
per share total value of $58,800 which was allocated as $24,990 to the debt and
$33,810 to interest expense.
On July 10, 2010, we issued 17,650,000 restricted common shares to settle
$30,000 debt. The fair value of the shares on the date of issuance was $0.004
per share total value of $70,600 which was allocated as $30,000 to the debt and
$40,600 to interest expense.
21
On August 13, 2010, we issued 150,000,000 restricted common shares to settle
$255,000 debt. The fair value of the shares issued on the date of each
individual settlement was $724,000 resulting in the company allocating $237,500
to the note, $17,500 to accrued interest and $469,000 to interest expense.
On August 19, 2010, we issued 10,800,000 restricted common shares at $0.004 per
share for $18,361 executive services with a fair value of $43,200. We also
issued 14,100,000 common shares to settle $23,932 in debt. The fair value of the
shares on the dates of issuance was $0.015 per share with a total value of
$211,500 which was allocated as $23,932 to the debt and $187,568 to interest
expense.
On October 18, 2010, we agreed to issue 100,000,000 units which consist of one
share of restricted common stock, one 12 month warrant exercisable at $0.0025
and one 12 month warrant exercisable at $0.005 per share. The fair value of the
shares issued on the date of the agreement plus the value of the warrants was
$710,811. The 100,000,000 shares were valued as of the closing price on October
18, 2010 of $.0029 resulting in a value of $290,000. The shares were not issued
until January 2011 and thus have been recorded as stock payable at December 31,
2010. The warrants were valued using the Black-Scholes pricing model using a one
year term, 231% volatility and a .23% risk free rate. The total value of the
warrants is $420,811 and recorded in additional paid in capital.
On December 15, 2010, we settled $47,500 in accounts payable through the
execution of a subscription to issue 19,000,000 shares of stock at $.0025. The
fair value was based on private subscriptions as the settlement was finalized
concurrent with the sale of stock to private investors. The shares were not
issued as of December 31, 2010 and consequently have been recorded as stock
payable.
During the fourth quarter of 2010, the Company received cash in the amount of
$313,500 for prepaid stock subscriptions at $0.0025. On January 11, 2011, the
Company issued 125,400,000 units consisting of one restricted common share and
one 12 month warrant exercisable at $0.005 per share to satisfy the
subscriptions.
During the fourth quarter of 2010, the Company settled $53,861 of accrued
consulting services payable through the execution of a subscription to issue
22,779,960 shares of stock at $.0025. The fair value was based on private
subscriptions as the settlement was finalized concurrent with the sale of stock
to private investors. The shares were not issued as of December 31, 2010 and
consequently have been recorded as stock payable.
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
We did not purchase any of our shares of common stock or other securities during
our fourth quarter of our fiscal year ended December 31, 2010.
ITEM 6. SELECTED FINANCIAL DATA
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our audited
financial statements and the related notes that appear elsewhere in this annual
report. 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 annual report, particularly in the
section entitled "Risk Factors" beginning on page 16 of this annual report.
22
Our audited financial statements are stated in United States Dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
RESULTS OF OPERATIONS FOR OUR YEARS ENDED DECEMBER 31, 2010 AND 2009
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2010 AND 2009
Year Ended December 31,
2010 2009
---------- ----------
Revenue $ Nil $ Nil
Operating Expenses 691,341 $ 312,740
Net Loss $(1,734,968) $ (332,740)
|
EXPENSES
Our operating expenses for the years ended December 31, 2010 and December 31,
2009 are outlined in the table below:
Year Ended December 31,
2010 2009
---------- ----------
General and Administrative $ 143,043 $ 17,746
Management Compensation 71,000 71,500
Management stock based compensation 297,500 --
Rent - Related Party -- 2,000
Professional Fees 71,809 195,813
Exploration Costs 107,989 25,681
|
Operating expenses for the year ended December 31, 2010, increased by
approximately 121% as compared to the comparative period in 2009 primarily as a
result of an increase in exploration costs, consulting fees and an increase in
interest expenses due to stock fair value.
REVENUE
We did not earn any revenues during the years ended December 31, 2010 and 2009.
We do not anticipate earning revenues until such time as we have entered into
commercial production on the Nyinahin property. We have not commenced the
exploration stage of our business and can provide no assurance that we will
discover economic mineralization on the property, or if such minerals are
discovered, that we will enter into commercial production.
EQUITY COMPENSATION
We currently do not have any formal stock option or equity compensation plans or
arrangements. However, the company issued stock based compensation of 297,500 in
2010. See Item 11 Executive Compensation.
23
LIQUIDITY AND FINANCIAL CONDITION
WORKING CAPITAL
At At
December 31, December 31, Increase/
2010 2009 (Decrease)
---------- ---------- ----------
Current Assets $ 147,251 $ 33,387 113,864
Current Liabilities $ 91,592 $ 635,531 (543,939)
Working Capital (deficit) $ 55,659 $(602,144) 657,803
CASH FLOWS
Year Ended Year Ended
December 31, December 31,
2010 2009
---------- ----------
Net Cash (Used) in Operating Activities $(234,089) $(152,774)
Net Cash (Used) by Investing Activities $ (52,215) $ --
Net Cash Provided by Financing Activities $ 383,502 $ 152,180
Net Increase (Decrease) in Cash During the Period $ 97,198 $ (594)
|
CONTRACTUAL OBLIGATIONS
As a "smaller reporting company", we are not required to provide tabular
disclosure obligations.
GOING CONCERN
We anticipate that additional funding will be required in the form of equity
financing from the sale of our common stock. At this time, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock or through a loan from our directors to meet
our obligations over the next twelve months. We do not have any arrangements in
place for any future debt or equity financing.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with the accounting principles generally accepted in the United States of
America. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses. These estimates and assumptions are affected by
management's application of accounting policies. We believe that understanding
the basis and nature of the estimates and assumptions involved with the
following aspects of our financial statements is critical to an understanding of
our financial statements.
EXPLORATION STAGE COMPANY
Our company complies with Accounting Standards Codification (ASC) Topic 915 and
for its characterization of our company as exploration stage. All losses
accumulated since inception has been considered as part of our company's
exploration stage activities.
Our company is subject to several categories of risk associated with its
exploration stage activities. Mineral exploration and production is a
speculative business, and involves a high degree of risk. Among the factors that
24
have a direct bearing on our company's prospects are uncertainties inherent in
estimating mineral deposits, future mining production, and cash flows,
particularly with respect to properties that have not been fully proven with
economic mineral reserves; access to additional capital; changes in the price of
the underlying commodity; availability and cost of services and equipment; and
the presence of competitors with greater financial resources and capacity.
MINERAL PROPERTY COSTS
Mineral property exploration costs are expensed as incurred. Mineral property
acquisition costs are initially capitalized when incurred. Our company assesses
the carrying costs for impairment at each fiscal quarter end. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs then incurred to develop
such property, are capitalized. Such costs will be amortized using the units of
production method over the estimated life of the probable reserve. If mineral
properties are subsequently abandoned or impaired, any capitalized costs will be
charged to operations.
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be reasonably
estimated. Generally, the timing of these accruals coincides with the earlier of
completion of a feasibility study or our company's commitments to plan of action
based on the then known facts.
ASSET RETIREMENT OBLIGATION
Our company records asset retirement obligations as a liability in the period in
which a legal obligation associated with the retirement of tangible long-lived
assets result from the acquisition, construction, development and/or normal use
of the assets. At December 31, 2010, our company had not undertaken any drilling
activity on its properties and had not incurred significant reclamation
obligations. Consequently no asset retirement obligation was accrued in the
December 31, 2010 and 2009 financial statements.
IMPAIRMENT OF LONG-LIVED ASSETS
Our Company reviews the recoverability of its long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The estimated future cash flows are based upon, among other
things, assumptions about future operating performance, and may differ from
actual cash flows. Long-lived assets evaluated for impairment are grouped with
other assets to the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. If the
sum of the projected undiscounted cash flows (excluding interest) is less than
the carrying value of the assets, the assets will be written down to the
estimated fair value in the period in which the determination is made. During
the years ended December 31, 2010 and 2009 our Company impaired $0 and $3,450,
respectively.
STOCK BASED COMPENSATION
The Company has on occasion issued stock in lieu of cash to various vendors for
services rendered. The Company has adopted FASB ASC 718-10, "Compensation-Stock
Compensation", which requires the compensation cost related to share-based
payments, such as stock options and employee stock purchase plans, be recognized
in the financial statements based on the grant-date fair value of the award. 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.
25
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 of the financial statements
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company", we are not required to provide the information
required by this Item.
26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Sunergy, Inc.
(An Exploration Stage Company)
We have audited the accompanying consolidated balance sheet of Sunergy, Inc.
(the "Company") (an exploration stage company) as of December 31, 2009, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year then ended and as included in the January 28, 2003
(inception) through December 31, 2010 columns in the statements of operations
and cash flows. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of Sunergy,
Inc. from January 28, 2003 (inception) through December 31, 2008, were audited
by other auditors whose report dated April 13, 2009 expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As discussed in Note 5 to the consolidated financial statements, the
accompanying balance sheet as of December 31, 2009 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended have been restated.
In our opinion the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Sunergy, Inc. as of
December 31, 2009, and the results of its consolidated operations and its
consolidated cash flows for the year then ended and as included in the January
28, 2003 (inception) through December 31, 2010 columns in the consolidated
statement of operations and cash flows , in conformity with U.S. generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company is in the exploration stage and had losses
from operations of $332,740 for the year ended December 31, 2009 and an
accumulated deficit of $623,802 as of December 31, 2009 which raises substantial
doubt about its ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Gruber & Company, LLC
------------------------------------
Gruber & Company, LLC
|
Lake Saint Louis, Missouri
April 11, 2011, (except for note 5 to the consolidated financial statements for
which the date is December 27, 2011)
27
[LETTERHEAD OF DE JOYA GRIFFITH & COMPANY, LLC]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Sunergy, Inc.
We have audited the accompanying consolidated balance sheet of Sunergy, Inc.
(the "Company") (A Exploration Stage Company) as of December 31, 2010 and the
related consolidated statements of operations, stockholders' deficit and cash
flows for the period then ended and from inception (January 28, 2003) through
December 31, 2010. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statements of Sunergy, Inc. for the year ended December 31, 2009 and from
inception (January 28, 2003) to December 31, 2009. Those statements were audited
by other auditors whose report has been furnished to us and our opinion, in so
far as it relates to the amounts included in the year ended December 31, 2009
and from inception (January 28, 2003) to December 31, 2009, is based solely on
the report of other auditors.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sunergy, Inc. (A Exploration
Stage Company) as of December 31, 2010 and the results of its operations and
cash flows for the year then ended and from inception (January 28, 2003) through
December 31, 2010 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has suffered losses from operations, which raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ De Joya Griffith & Company, LLC
-------------------------------------------
Henderson, Nevada
December 15, 2011
|
28
SUNERGY, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 2010
December 31, December 31,
2010 2009
------------ ------------
(Restated)
ASSETS
Current Assets
Cash and cash equivalents $ 97,251 $ 54
Prepaid expense -- 33,333
Deposits 50,000 --
----------- -----------
Total current assets 147,251 33,387
Long Term Assets
Exploratory properties 1,753,497 1,000,000
Property, plant and equipment 2,254 --
----------- -----------
Total assets $ 1,903,002 $ 1,033,387
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 7,601 $ 31,222
Accruals - related party -- 93,859
Operational advances-related party 83,991 22,950
Notes payable -- 487,500
----------- -----------
Total current liabilities 91,592 635,531
Stockholders' Equity
Common Stock, authorized 3,750,000,000 shares,
par value $0.001, issued and outstanding on
December 31, 2010 and 2009 is 1,046,197,880
and 537,975,000, respectively 1,046,198 537,975
Additional paid in capital 2,709,121 340,283
Subscriptions payable 414,861 143,400
Accumulated deficit during exploration stage (2,358,770) (623,802)
----------- -----------
Total stockholders' equity 1,811,410 397,856
----------- -----------
Total liabilities and stockholders' equity $ 1,903,002 $ 1,033,387
=========== ===========
|
The accompanying notes are an integral part of these statements.
29
SUNERGY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATION
From Inception
Year Ended December 31, January 28, 2003 to
----------------------------------- December 31,
2010 2009 2010
------------ ------------ ------------
(Restated)
Income $ -- $ -- $ --
------------ ------------ ------------
Operating Expenses
General and administrative 143,043 17,746 196,538
Management compensation 71,000 71,500 224,000
Management stock based compensation 297,500 -- 297,500
Rent-related party -- 2,000 37,500
Professional fees 71,809 195,813 384,918
Exploration costs 107,989 25,681 146,609
------------ ------------ ------------
Total expenses 691,341 312,740 1,287,065
------------ ------------ ------------
Net loss from operations (691,341) (312,740) (1,287,065)
Other expenses
Interest expense (1,043,627) (20,000) (1,071,705)
------------ ------------ ------------
Total other expenses (1,043,627) (20,000) (1,071,705)
------------ ------------ ------------
Net loss $ (1,734,968) $ (332,740) $ (2,358,770)
============ ============ ============
Loss per share-basic $ (0.00) $ (0.00)
------------ ------------
Weighted average number of shares-basic 723,220,692 536,851,712
------------ ------------
|
The accompanying notes are an integral part of these statements.
30
SUNERGY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From Inception (January 28, 2003) to December 31, 2010
Deficit
Accumulated
Common Stock During the
--------------------- Paid in Subscriptions Exploration Total
Shares Amount Capital Payable Stage Equity
------ ------ ------- ------- ----- ------
BALANCE AT INCEPTION,
JANUARY 28, 2003 -- $ -- $ -- $ -- $ -- $ --
Common shares issued for cash 500,000,000 500,000 (490,000) -- -- 10,000
Common shares issued for cash 6,975,000 6,975 6,975 -- -- 13,950
Net loss (30,313) (30,313)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2003 506,975,000 506,975 (483,025) -- (30,313) (6,363)
Contributed Capital -- -- 401 -- -- 401
Net loss (41,362) (41,362)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2004 506,975,000 506,975 (482,624) -- (71,675) (47,324)
Contributed Capital -- -- 938 -- -- 938
Net loss (26,093) (26,093)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2005 506,975,000 506,975 (481,686) -- (97,768) (72,479)
Contributed Capital -- -- 1,959 -- -- 1,959
Net loss (39,746) (39,746)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2006 506,975,000 506,975 (479,727) -- (137,514) (110,266)
Net loss (55,103) (55,103)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2007 506,975,000 506,975 (479,727) -- (192,617) (165,369)
Common shares issued for cash 6,000,000 6,000 144,000 -- -- 150,000
Common shares issued to acquire
mineral property 20,000,000 20,000 480,000 -- -- 500,000
Common shares subscribed -- -- -- 5,000 -- 5,000
Net loss (98,445) (98,445)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2008 532,975,000 532,975 144,273 5,000 (291,062) 391,186
Common shares subscribed -- -- -- 138,400 -- 138,400
Common shares issued for services 5,000,000 5,000 195,000 -- -- 200,000
Contributed Capital -- -- 1,010 -- -- 1,010
Net loss (332,740) (332,740)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2009(RESTATED) 537,975,000 537,975 340,283 143,400 (623,802) 397,856
Contributed Capital -- -- 8,960 -- -- 8,960
Common shares issued for services 20,000,000 20,000 110,000 -- -- 130,000
Common shares issued to
settle debt 75,000,000 75,000 357,500 -- -- 432,500
Common shares issued for
subscriptions 40,992,880 40,993 102,407 (143,400) -- --
Common shares issued for services 25,000,000 25,000 142,500 -- -- 167,500
Common shares issued to
settle debt 39,980,000 39,980 135,810 -- -- 175,790
Common shares issued to
settle debt 14,700,000 14,700 44,100 -- -- 58,800
Common shares issued to
settle debt 17,650,000 17,650 52,950 -- -- 70,600
Common shares issued to
settle debt 150,000,000 150,000 574,000 -- -- 724,000
Common shares issued for
settle debt 10,800,000 10,800 32,400 -- -- 43,200
Common shares issued to
settle debt 14,100,000 14,100 197,400 -- -- 211,500
Common shares and warrants issued
to acquire exploration property
and assets 100,000,000 100,000 610,811 -- -- 710,811
Common shares subscribed -- -- -- 313,500 -- 313,500
Common shares to be issued
to settle debt -- -- -- 47,500 -- 47,500
Common shares to be issued
to settle debt -- -- -- 53,861 -- 53,861
Net loss (1,734,968) (1,734,968)
------------- ---------- ---------- --------- ----------- -----------
BALANCE, DECEMBER 31, 2010 1,046,197,880 $1,046,198 $2,709,121 $ 414,861 $(2,358,770) $ 1,811,410
============= ========== ========== ========= =========== ===========
|
On September 16, 2008 the Company authorized a 5:1 forward stock split for
shares issued and outstanding as of that date which has been retroactively
applied to this statement.
On August 17, 2010 the Company authorized a 10:1 forward stock split for shares
issued and outstanding as of that date which has been retroactively applied to
this statement.
The accompanying notes are an integral part of these statements
31
SUNERGY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 2010
From Inception
Year Ended December 31, January 28, 2003 to
----------------------------------- December 31,
2010 2009 2010
------------ ------------ ------------
(Restated)
Operating Activities
Net loss (1,734,968) $ (332,740) $(2,358,770)
Adjustments to reconcile net loss to cash:
Amortized prepaid expense 33,333 166,667 200,000
Stock based compensation 297,500 -- 340,700
Non cash interest expense 1,033,627 -- 1,033,627
Changes in assets and liabilities
Increase in accounts payable and accruals 136,419 13,299 218,300
----------- ----------- -----------
Net Cash Used by Operating Activities (234,089) (152,774) (566,143)
----------- ----------- -----------
Investment Activities
Acquisition of plant, property and equipment (2,254) -- (14,754)
Cash acquired through acquisition of subsidiary 39 -- 39
Deposit for purchase of dredge (50,000) -- (50,000)
----------- ----------- -----------
Net Cash Used by Investment Activities (52,215) -- (64,715)
----------- ----------- -----------
Financing Activities
Proceeds from sale of common stock 313,500 138,400 630,850
Contributed capital 8,960 1,010 13,268
Operational advances 61,041 12,770 83,991
----------- ----------- -----------
Net Cash Provided by Financing Activities 383,501 152,180 728,109
----------- ----------- -----------
Net increase/(decrease) in cash 97,197 (594) 97,251
Cash and cash equivalents, beginning of period 54 648 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 97,251 $ 54 $ 97,251
=========== =========== ===========
Supplemental disclosure cash flows for:
Interest $ -- $ -- $ --
----------- ----------- -----------
Income taxes $ -- $ -- $ --
----------- ----------- -----------
Supplemental disclosure of non-cash financing and investing:
Shares issued to settle debt $ (682,763) $ -- $ (682,763)
----------- ----------- -----------
Shares to be issued to settle debt $ (101,361) $ -- $ (101,361)
----------- ----------- -----------
Debt issued to acquire assets $ -- $ 237,500 $ 487,500
----------- ----------- -----------
Stock issued to acquire assets $ -- $ -- $ (500,000)
----------- ----------- -----------
Assets acquired through acquisition of subsidiary $ (753,497) $ -- $ (753,497)
----------- ----------- -----------
Liabilities assumed through acquisition of subsidiary $ 42,725 $ -- $ 42,725
----------- ----------- -----------
Shares issued to acquire subsidiary $ 290,000 $ -- $ 290,000
----------- ----------- -----------
Warrants issued to acquire subsidiary $ 420,811 $ -- $ 420,811
----------- ----------- -----------
|
The accompanying notes are an integral part of these statements
32
SUNERGY, INC.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2010
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
SUNERGY, Inc. (The Company) was organized in the state of Nevada on January 28,
2003 and is an exploration phase mineral and mining company.
The Company has mineral properties located in the Republic of Ghana and has not
yet determined whether these properties contain reserves that are economically
recoverable. The recoverability of amounts from these properties will be
dependent upon the discovery of economically recoverable reserves, confirmation
of the Company's interest in the underlying properties, the ability of the
Company to obtain necessary financing to satisfy the expenditure requirements
under the property agreements to complete the development of the properties and
upon future profitable production or proceeds for the sale thereof.
The Company entered into a purchase agreement to acquire Allied Mining and
Supply LLC., a Nevada limited liability company. Allied Mining and Supply LLC
also has one subsidiary, a Sierra Leone company, Allied Mining and Supply Ltd.
The acquisition closed as of October 18, 2010 and thus has been consolidated as
of December 31, 2010. As part of the acquisition the Company now has a
concession in Sierra Leone. The Company has been in the exploration phase of
this concession since the purchase. No revenues have been generated as of yet.
This concession, if determined to be economically feasible, may produce gold and
rare metals.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The relevant accounting policies and procedures are listed below.
Principles of Consolidation
The consolidated financial statements include the accounts of Sunergy, Inc and
its subsidiaries Mikite Gold Resources Limited, a Ghanaian company (100%) and
Allied Mining and Supply LLC, a Nevada limited liability company (100%). Allied
Mining and Supply LLC also has one 100% owned subsidiary, a Sierra Leone
company, Allied Mining and Supply Ltd which are 100% consolidated in the
financial statements. All material inter-company accounts and transactions have
been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and financial instruments which
mature within three months of the date of purchase.
The Company maintains its cash in institutions insured by the Federal Deposit
Insurance Corporation (FDIC). On July 21, 2010 FDIC-insured institutions are
permanently insured up to at least $250,000 per depositor. On January 1, 2010,
FDIC deposit insurance for all deposit accounts, except for certain retirement
accounts, will return to at least $100,000 per depositor. Insurance coverage for
certain retirement accounts, which include all IRA deposit accounts, will remain
at $250,000 per depositor.
Reclassification
Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation. These reclassifications
had no effect on previously reported results of operations or retained earnings.
The Company reclassified prepaid expenses-stock related from the equity section
of the balance sheet to the current assets section.
33
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Cont.)
Accounting Basis
The statements were prepared following generally accepted accounting principles
of the United States of America. The Company operates on a December 31 fiscal
year end.
Revenue Recognition
Revenues from services are recognized when there is persuasive evidence of an
arrangement, the fee is fixed or determinable, services have been rendered,
payment has been contractually earned and it is reasonably assured that the
related receivable or unbilled revenue is collectable.
Earnings per Share
Basic earnings per share excludes dilution and is computed by dividing net
income (loss) by the weighted-average common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. The Company has potentially dilutive common
shares consisting of warrants, which are excluded from the diluted earnings per
share computation in periods where the Company has incurred net loss.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carryforwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on their characteristics. 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.
Stock Based Compensation
The Company has on occasion issued stock in lieu of cash to various vendors for
services rendered. The Company has adopted FASB ASC 718-10, "Compensation-Stock
Compensation", which requires the compensation cost related to share-based
payments, such as stock options and employee stock purchase plans, be recognized
in the financial statements based on the grant-date fair value of the award. 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.
34
A summary of stock based compensation for the reporting periods follows:
2010 2009
-------- --------
Management stock bonus compensation 297,500 --
|
Exploration Stage Company
The Company complies with Accounting Standards Codification (ASC) Topic 915 for
its characterization of the Company as exploration stage. All losses accumulated
since inception has been considered as part of the Company's exploration stage
activities.
The Company is subject to several categories of risk associated with its
exploration stage activities. Mineral exploration and production is a
speculative business, and involves a high degree of risk. Among the factors that
have a direct bearing on the Company's prospects are uncertainties inherent in
estimating mineral deposits, future mining production, and cash flows,
particularly with respect to properties that have not been fully proven with
economic mineral reserves; access to additional capital; changes in the price of
the underlying commodity; availability and cost of services and equipment; and
the presence of competitors with greater financial resources and capacity.
Mineral Property Costs
Mineral property exploration costs are expensed as incurred. Mineral property
acquisition costs are initially capitalized when incurred. The Company assesses
the carrying costs for impairment at each fiscal quarter end. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs then incurred to develop
such property, are capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable reserve. If
mineral properties are subsequently abandoned or impaired, any capitalized costs
will be charged to operations.
Environmental Costs
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be reasonably
estimated. Generally, the timing of these accruals coincides with the earlier of
completion of a feasibility study or the Company's commitments to plan of action
based on the then known facts.
35
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Cont.)
Asset Retirement Obligation
The Company records asset retirement obligations as a liability in the period in
which a legal obligation associated with the retirement of tangible long-lived
assets result from the acquisition, construction, development and/or normal use
of the assets. At December 31, 2010, the Company had not undertaken any drilling
activity on its properties and had not incurred significant reclamation
obligations. Consequently no asset retirement obligation was accrued in the
financial statements for the years ended December 31, 2010 and December 31,
2009.
Property, Plant and Equipment
Property and equipment are recorded at historical cost. Minor additions and
renewals are expensed in the year incurred. Major additions and renewals are
capitalized and depreciated over their estimated useful lives. When property and
equipment are retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
included in the results of operations for the respective period. Depreciation is
provided over the estimated useful lives of the related assets using the
straight-line method for financial statement purposes. The Company uses other
depreciation methods (generally accelerated) for tax purposes where appropriate.
The estimated useful lives for significant property and equipment categories are
as follows:
Furniture and Fixtures 5 - 7 Years
Equipment 3 - 5 Years
Impairment of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The estimated future cash flows are based upon, among other
things, assumptions about future operating performance, and may differ from
actual cash flows. Long-lived assets evaluated for impairment are grouped with
other assets to the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. If the
sum of the projected undiscounted cash flows (excluding interest) is less than
the carrying value of the assets, the assets will be written down to the
estimated fair value in the period in which the determination is made. During
the years ended December 31, 2010 and 2009 the Company impaired $0 and $3,450,
respectively.
Recent Accounting Guidance Not Yet Adopted
In January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the transfers. Additionally,
the guidance requires a roll forward of activities on purchases, sales,
issuance, and settlements of the assets and liabilities measured using
significant unobservable inputs (Level 3 fair value measurements). The guidance
will become effective for us with the reporting period beginning January 1,
2010, except for the disclosure on the roll forward activities for Level 3 fair
value measurements, which will become effective for us with the reporting period
beginning January 1, 2011. Other than requiring additional disclosures, adoption
of this new guidance will not have a material impact on our financial
statements.
The Company has reviewed other recently issued accounting pronouncements thru
ASU 2011-09 and believes none will have any material impact on our financial
statements.
36
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the liquidation of liabilities in the normal course of business.
However, the Company has accumulated a loss of $2,358,770 during its exploration
stage. This raises substantial doubt about the Company's ability to continue as
a going concern. These financials do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might result from this uncertainty.
It should be noted that all mining, mineral and oil and gas companies show a
loss in their exploration stage of each project. By its very nature the
exploration phase has only expenditures with no income. To expect otherwise is
not reality. In the exploration stage almost all of the expenditures are
expensed and not capitalized. After the exploration stage of a project then the
production phase begins. In this phase revenues are beginning to be made and a
match of revenue and expenses can take place. In the production phase many of
the expenses are capitalized and spread over the expected life of the mining
project. During the years 2010 and 2009 the company continued in the exploration
phase.
Sunergy will continue to seek additional funds from its investors to complete
its exploration stages, that is to say the stage of determining if a particular
project is economically feasible. Once this is determined then production will
begin.
NOTE 4. PURCHASE OF ALLIED MINING AND SUPPLY LLC.
On October 18, 2010, the Company entered into a membership purchase agreement
with Allied Mining and Supply, LLC for the purchase of 100% of the issued and
outstanding membership interest of Allied Mining, a Nevada Limited Liability
company, which owns the rights to Exploration License #EXPL 5/2009 on the 140 sq
km Pampana River concession in Sierra Leone, West Africa along with various
exploration equipment.
In consideration for the purchase of the membership interests, the Company
agreed to issue 100,000,000 units at a market price of $0.0029 to Allied Mining.
Each unit consists of one share of restricted stock, one 12 month share purchase
warrant exercisable at $0.0025 per share and one 12 month share purchase warrant
exercisable at $0.005 per share. The value of the purchase is based on the
market price of the stock issued and the fair value of the warrants as
calculated using the Black-Sholes option pricing model.
Because the shares were not issued until January 2011 the Company recorded the
purchase allocating market value of the stock to Stock Payable and the value of
the warrants to Additional Paid in Capital as follows:
Cash $ 39
Pampana River Concession 753,497
--------
TOTAL ASSETS $753,536
========
Accounts payable 42,725
--------
TOTAL LIABILITIES $ 42,725
========
Net assets in excess of liabilities $710,811
========
Stock payable $290,000
Additional paid in capital 420,811
--------
TOTAL COST OF ACQUSITION $710,811
========
|
37
NOTE 4. PURCHASE OF ALLIED MINING AND SUPPLY LLC. (Cont)
The condensed pro forma balance sheets and statements of operations as if the
acquisition of Allied Mining and Supply, LLC had taken place on January 1, 2009
and includes the years ended December 31, 2009 and 2010 as follows:
BALANCE SHEET
Year Ended December 31, 2009
--------------------------------------------------------------
Allied
Mining &
Sunergy, Inc. Supply LLC Purchase Pro
Actual Actual Adjustments Forma
---------- ---------- ----------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 54 $ 3,348 $ -- $ 3,402
Prepaid expense 33,333 -- -- 33,333
Long Term Assets
Exploratory properties 1,000,000 -- -- 1,000,000
Property, plant and equipment -- 5,000 -- 5,000
---------- ---------- ---------- ----------
Total Assets $1,033,387 $ 8,348 $ -- $1,041,735
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ 31,222 $ -- $ -- $ 31,222
Accruals - related party 93,859 -- -- 93,859
Operational advances - related party 22,950 -- -- 22,950
Notes payable 237,500 -- -- 237,500
Notes payable - related party 250,000 -- -- 250,000
---------- ---------- ---------- ----------
Total current liabilities 635,531 -- -- 635,531
---------- ---------- ---------- ----------
Stockholders' Equity
Common Stock 537,975 -- 537,975
Additional paid in capital 340,283 10,500 -- 350,783
Subscriptions payable 143,400 -- -- 143,400
Accumulated deficit during development stage (623,802) (2,152) -- (625,954)
---------- ---------- ---------- ----------
Total stockholders' deficit 397,856 8,348 -- 406,204
---------- ---------- ---------- ----------
Total Liabilities and stockholders' deficit $1,033,387 $ 8,348 $ -- $1,041,735
========== ========== ========== ==========
|
38
NOTE 4. PURCHASE OF ALLIED MINING AND SUPPLY LLC. (Cont)
BALANCE SHEET
Year Ended December 31, 2010
--------------------------------------------------------------
Allied
Mining &
Sunergy, Inc. Supply LLC Purchase Pro
Actual Actual Adjustments Forma
---------- ---------- ----------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 47,402 $ 49,849 $ -- $ 97,251
Deposits -- 50,000 -- 50,000
Long Term Assets
Exploratory properties 1,000,000 -- 753,497 1,753,497
Property, plant and equipment -- 2,254 -- 2,254
----------- ----------- ----------- -----------
Total Assets $ 1,047,402 $ 102,103 $ 753,497 $ 1,903,002
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ (35,124) $ 42,725 $ -- $ 7,601
Accruals - Related Party -- -- -- --
Operational Advances - Related Party 83,991 -- -- 83,991
----------- ----------- ----------- -----------
Total Current Liabilities 48,867 42,725 -- 91,592
----------- ----------- ----------- -----------
Stockholders' Equity
Common Stock 946,198 -- 100,000 1,049,198
Additional paid in capital 1,781,661 316,650 610,810 2,709,121
Prepaid expense-stock related -- -- -- --
Subscriptions payable 414,861 -- -- 414,861
Accumulated deficit during development stage (2,144,185) (257,272) 42,687 (2,358,770)
----------- ----------- ----------- -----------
Total stockholders' deficit 998,535 59,378 753,497 1,811,410
----------- ----------- ----------- -----------
Total Liabilities and stockholders' deficit $ 1,047,402 $ 102,103 $ 753,497 $ 1,903,002
=========== =========== =========== ===========
|
39
NOTE 4. PURCHASE OF ALLIED MINING AND SUPPLY LLC. (Cont)
STATEMENT OF OPERATIONS
Year Ended December 31, 2009
-----------------------------------------------------
Allied
Mining &
Sunergy, Inc. Supply LLC
Actual Actual Pro Forma
---------- ---------- ----------
Income $ -- $ -- $ --
--------- --------- ---------
Operating Expenses
General and administrative 17,746 2,152 19,898
Management compensation 71,500 -- 71,500
Rent-related party 2,000 -- 2,000
Accounting and audit fees 26,436 -- 26,436
Legal fees 15,665 -- 15,665
Consulting fees 153,712 -- 153,712
Exploration costs 25,681 -- 25,681
--------- --------- ---------
Total expenses 312,740 2,152 314,892
--------- --------- ---------
Net loss from operations (312,740) (2,152) (314,892)
Other expenses
Interest expense-related party (20,000) -- (20,000)
--------- --------- ---------
Net loss $(332,740) $ (2,152) $(334,892)
========= ========= =========
|
40
NOTE 4. PURCHASE OF ALLIED MINING AND SUPPLY LLC. (Cont)
STATEMENT OF OPERATIONS
Year Ended December 31, 2010
-----------------------------------------------------------------
Allied
Mining &
Sunergy, Inc. Supply LLC Purchase Pro
Actual Actual Adjustments Forma
------------ ------------ ----------- ------------
Income $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Operating Expenses
General and administrative 143,043 -- -- 143,043
Management salary 71,000 -- -- 71,000
Fair value differential for stock
issued to settle management
compensation 297,500 297,500
Professional fees 71,809 -- -- 71,809
Exploration costs 27,556 255,119 (174,686) 107,989
----------- ----------- ----------- -----------
Total expenses 610,908 255,119 (174,686) 691,341
----------- ----------- ----------- -----------
Net loss from operations (610,908) 174,686 (691,341)
(255,119)
Other expenses
Interest expense-related party -- -- --
Interest expense (1,043,628) -- -- (1,043,628)
----------- ----------- ----------- -----------
Total other expenses (1,043,628) -- -- (1,043,628)
----------- ----------- ----------- -----------
Net loss $(1,654,536) $ (255,119) $ 174,686 $(1,734,969)
=========== =========== =========== ===========
|
The $174,686 purchase adjustment is the accumulated deficit thru the date of
purchase of October 18, 2010.
NOTE 5. RESTATEMENT
As a result of the review of the Company's valuation methods for shares issued
for services during 2009 the Company discovered that shares granted for services
were improperly valued. On March 1, 2009 the Company granted the issuance of
5,000,000 common shares originally valued at $0.06 per share or $300,000 for one
year consulting services and recorded as prepaid expense. The market price of
the stock on March 1, 2009 was $.04 per share resulting in the Company
overstating the value of the shares by $100,000. The effect of the restatement
was to decrease additional paid in capital by $100,000, prepaid expenses by
$16,677 and decrease net loss by $83,333. Accumulated deficit at the beginning
of 2010 was decreased by $83,333 for the effect of the restatement of 2009.
41
The effect of the restatement on results of operations and financial position as
of and for the years ended December 31, 2009 is as follows:
As Previously
Reported Restated
December 31, December 31,
2009 2009
------------ ------------
Total assets $ 1,000,054 $ 1,033,387
============ ============
Total liabilities 635,531 635,531
Stockholders' Equity
Common Stock 537,975 537,975
Additional paid in capital 440,283 340,283
Subscriptions payable 143,400 143,400
Prepaid expense - stock related (50,000) --
Accumulated deficit during exploration stage (707,135) (623,802)
------------ ------------
Total stockholders' equity 364,523 397,856
------------ ------------
Total Liabilities and stockholders' equity $ 1,000,054 $ 1,033,387
============ ============
Income $ -- $ --
------------ ------------
Total operating expenses 396,073 312,740
------------ ------------
Net loss from operations (396,073) (312,740)
Total other expenses (20,000) (20,000)
------------ ------------
Net loss $ (416,073) $ (332,740)
============ ============
Loss per share-basic $ (0.00) $ (0.00)
------------ ------------
Weighted average number of shares-basic 536,851,712 536,851,712
------------ ------------
|
42
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
As of December 31, 2010, Sunergy, Inc. was an exploration company. The main
thrust of our testing has been in the Sierra Leone concession with our wholly
owned subsidiary, Allied Mining & Supply LLC. We purchased some computers in
December 2010 and because they were not put into service until January 2011 we
have not recorded any depreciation.
As of December 31, 2010, the Company had made a deposit of $50,000 on the
purchase of custom dredging equipment for which the purchase was finalized
during the 1st quarter of 2011.
Property, Plant and Equipment consisted of the following at December 31, 2010
and 2009:
2010 2009
-------- --------
Office furniture and equipment $ 2,254 $ --
Accumulated depreciation -- --
-------- --------
Property, plant and equipment - net $ 2,254 $ --
======== ========
|
NOTE 7. MINERAL PROPERTIES
Hummingbird Claim
On April 10, 2003, the Company executed a mineral property staking and sales
agreement and acquired a 100% undivided right, title and interest in and to the
Hummingbird Claims located in the province of British Columbia, Canada. The
Company incurred exploration costs of $933 and $1,834 for the years ended
December 31, 2009 and 2008, respectively. From inception to date the Company
incurred exploration costs of $13,872 on the Hummingbird Claims. As of June 30,
2009, the Company decided to abandon the Hummingbird Claims and the asset
acquired for $3,450 was fully impaired.
Nyinahin Mining Concession
On October 31, 2008 and amended by agreement on December 5, 2008, the Company
executed a mining acquisition agreement and acquired an 100% interest in a
mineral concession located in the Ashanti region of Ghana, known as the Nyinahin
concession. Agreed to consideration consisted of the following:
1. $500,000 to be paid within 5 days of the effective date of the
agreement.
* $12,500 by November 5, 2008; (paid by issuance of a promissory
note)
* $37,500 by December 31, 2008; (paid by issuance of a promissory
note)
* $200,000 by December 31, 2008; (paid by issuance of a promissory
note)
* $250,000 by April 30, 2009; (paid $12,500)
2. 20,000,000 restricted shares of common stock of the Company valued at
$0.025 per share (based upon the price per share received on a private
placement around the time of this agreement) for a total of $500,000.
43
NOTE 7. MINERAL PROPERTIES (Cont.)
On December 30, 2008, the Company entered into a promissory note in the amount
of $250,000 with a shareholder of the Company (see Note 9) who satisfied the
Company's aggregate consideration of $250,000 that were due by December 31,
2008.
During the year ended December 31, 2008, the Company paid $12,500 to the holder
of the Nyinahin Mining Concession which was credited toward the $250,000
obligation due on April 30, 2009.
On July 30, 2009, the Company entered into an agreement to settle the final
payment balance of $237,500. The holder agreed to receive 20,000,000 restricted
shares of common stock valued at $0.0125 per share or $250,000 in settlement and
the previous $12,500 payment recorded as interest expense for late payment. The
common stock was not issued in a timely fashion and subsequently the holder
assigned the debt. The Company has since settled with the assignees.
The vendor shall retain a 5% Net Smelter Return on the Property.
Pampana River Concession
On October 18, 2010, the Company entered into a membership purchase agreement
with Allied Mining and Supply, LLC for the purchase of 100% of the issued and
outstanding membership interest of Allied Mining, a Nevada Limited Liability
company, which owns the rights to Exploration License #EXPL 5/2009 on the 140 sq
km Pampana River concession in Sierra Leone, West Africa.
In consideration for the purchase of the membership interests, the Company
agreed to issue 100,000,000 units at a deemed price of $0.0025 to Allied Mining.
Each unit consists of one share of restricted stock valued at $0.0029 per share
or $290,000, one 12 month share purchase warrant exercisable at $0.0025 per
share valued at $223,501 and one 12 month share purchase warrant exercisable at
$0.005 per share valued at $197,312. The value of the purchase is based on the
market price of the stock issued and the fair value of the warrants issued.
NOTE 8. STOCKHOLDERS' EQUITY
Common Stock
The Company originally had 75,000,000 shares of common stock authorized at a
$0.001 par value and on September 16, 2006 executed a 5:1 forward stock split
bringing the authorized common shares to 375,000,000 with a par value of $0.001
per share and the issued and outstanding shares as of September 16, 2006 from
10,139,500 to 50,697,500 shares. On August 17, 2010 the Company executed a 10:1
forward stock split increasing the authorized common shares to 3,750,000,000 and
the issued and outstanding shares from 94,619,788 to 946,197,880 shares. The
stock splits are retroactively applied to these financial statements resulting
in an increase in the number of shares outstanding and a decrease in issued
price per share.
All shares issued for services are valued at fair value which is the current
market price on the day shares are authorized to be issued.
A summary of shares issued follows:
* On January 31, 2003 the Company issued 500,000,000 common shares to
the founders for $10,000 cash.
* On September 22, 2003, the Company issued 6,975,000 common shares for
$13,950 cash.
* On October 10, 2008, the Company issued 6,000,000 common shares plus
an equal number of two-year detachable warrants exercisable at $0.025
per share in a private placement for $150,000 or $0.025 per share.
44
NOTE 8. STOCKHOLDERS' EQUITY (Cont.)
* On December 10, 2008, the Company issued 20,000,000 common shares
valued at $0.025 per share or $500,000 as partial payment for the
acquisition of the Nyinahin Mining Concession.
* On March 1, 2009, the Company issued 5,000,000 common shares valued at
$0.04 per share or $200,000 for one year consulting services and
recorded as prepaid expense.o
* On June 3, 2010 the Company issued 20,000,000 common shares valued at
$0.0065 per share to its officers for executive services with an
aggregate market value of $130,000.
* On June 30, 2010 the Company issued 75,000,000 common shares valued
$0.0058 per share or $432,500 in full settlement of a $250,000 note
and $12,500 accumulated interest and $170,000 additional interest
resulting from the fair value differential.
* On June 3, 2010 the Company issued 40,992,880 common shares at $0.0035
per share for the $143,400 stock payable.
* On July 30, 2010, the Company issued 25,000,000 common shares at
$0.0067 per share to its officers for executive services. A total
value of $167,500 was recorded as compensation expense.
* Between July 15 and July 22, 2010, the Company issued 39,980,000
common shares to settle $67,980 worth of debts. The fair value of the
shares on the date of issuance was $0.004 per share for a total value
of $175,790 which was allocated as $67,980 to the debt and $107,810 to
interest expense.
* On July 15, 2010, the Company issued 14,700,000 common shares to
settle $24,990 debt. The fair value of the shares on the date of
issuance was $0.004 per share total value of $58,800 which was
allocated as $24,990 to the debt and $33,810 to interest expense.
* On July 10, 2010, the Company issued 17,650,000 common shares to
settle $30,000 debt. The fair value of the shares on the date of
issuance was $0.004 per share total value of $70,600 which was
allocated as $30,000 to the debt and $40,600 to interest expense.
* On August 13, 2010, the Company issued 150,000,000 common shares to
settle $255,000 debt. The fair value of the shares issued on the date
of each individual settlement was $724,000 resulting in the company
allocating $237,500 to the note, $17,500 to accrued interest and
$469,000 to interest expense.
* On August 19, 2010, the Company issued 10,800,000 common shares at
$0.004 per share for $18,361 executive services with a fair value of
$43,200. Also, the Company issued 14,100,000 common shares to settle
$23,932 in debt. The fair value of the shares on the dates of issuance
was $0.015 per share with a total value of $211,500 which was
allocated as $23,932 to the debt and $187,568 to interest expense.
* On October 18, 2010, the Company issued 100,000,000 units which
consist of one share of common stock, one 12 month warrant exercisable
at $0.0025 and one 12 month warrant exercisable at $0.005 per share.
The fair value of the shares issued on the date of the agreement plus
the value of the warrants was $710,811. The 100,000,000 shares were
valued as of the closing price on October 18, 2010 of $.0029 resulting
in a value of $290,000. The warrants were valued using the
Black-Scholes pricing model using a one year term, 231% volatility and
a .23% risk free rate. The total value of the warrants is $420,811 and
recorded in additional paid in capital. See Note 4 for further
information regarding the purchase price allocation.
* During the last quarter of 2010, the Company received cash in the
amount of $313,500 for prepaid stock subscriptions at $0.0025. On
January 11, 2011, the Company issued 125,400,000 units consisting of
one common share and one 12 month warrant exercisable at $0.005 per
share to satisfy the subscriptions.
45
NOTE 8. STOCKHOLDERS' EQUITY (CONT.)
* On December 15, 2010, the Company settled $47,500 in accounts payable
through the execution of a subscription to issue 19,000,000 shares of
stock at $.0025. The fair value was based on private subscriptions as
the settlement was finalized concurrent with the sale of stock to
private investors. The shares were not issued as of December 31, 2010
and consequently have been recorded as stock payable.
Contributed Capital
* During the year ended 2004, an officer donated services valued at $401
which was treated as contributed capital.
* During the year ended 2005, an officer donated services valued at $938
which was treated as contributed capital.
* During the year ended 2006, an officer donated services valued at
$1,959 which was treated as contributed capital.
* During the year ended 2009, an officer donated services valued at
$1,010 which was treated as contributed capital.
* During the quarter ended March 31, 2010, an officer paid expenses on
behalf of the Company valued at $4,000 which was treated as
contributed capital.
* During the quarter ended June 30, 2010, an officer paid expenses on
behalf of the Company valued at $4,960 which was treated as
contributed capital.
Stock Payable
As of March 30, 2009, the Company received the benefit of either cash or payment
of outstanding liabilities with the aggregate total of $143,400 from non-related
individuals as prepaid subscriptions for common stock. On June 3, 2010,
40,992,880 common shares were issued to satisfy the subscriptions.
During the last quarter of 2010, the Company received cash in the amount of
$313,500 for prepaid stock subscriptions at $0.0025. The shares were not issued
as of December 31, 2010 and consequently have been recorded as stock payable.
During the fourth quarter of 2010, the Company settled $53,861 of accrued
consulting services payable through the execution of a subscription to issue
22,779,960 shares of stock at $.0025. The fair value was based on private
subscriptions as the settlement was finalized concurrent with the sale of stock
to private investors. The shares were not issued as of December 31, 2010 and
consequently have been recorded as stock payable.
On December 15, 2010, the Company settled $47,500 in accounts payable through
the execution of a subscription to issue 19,000,000 shares of stock at $.0025.
The fair value was based on private subscriptions as the settlement was
finalized concurrent with the sale of stock to private investors. The shares
were not issued as of December 31, 2010 and consequently have been recorded as
stock payable.
46
NOTE 8. STOCKHOLDERS' EQUITY (CONT.)
Outstanding Warrants
On October 20, 2008, the Company issued 6,000,000 two-year detachable warrants
exercisable at $0.025 per share and considered the value of the warrants as a
stock issue cost netted against paid in capital. The warrants have now expired.
On October 18, 2010, the Company authorized the issuance of 100,000,000 one year
warrants exercisable at $0.0025 and 100,000,000 one year warrants exercisable at
$0.005 per share. The warrants were issued as consideration for the acquisition
of Allied Mining and subsidiary. See Note 4 for further discussion. The warrants
were valued using the Black-Scholes pricing model using a one year term, 231%
volatility and a .23% risk free rate. The total value of the warrants is
$420,811.
During the last quarter of 2010, the Company received cash in the amount of
$313,500 for prepaid stock subscriptions at $0.0025. The units consisted of one
share of the Company's common stock and one 12 month purchase warrant
exercisable at $0.005 per share.
Information relating to warrant activity during the reporting period follows:
Weighted
Average
Number of Exercise
Warrants Price
-------- -----
Total Warrants outstanding at December 31, 2009 6,000,000 0.0025
Plus: Warrants Issued 100,000,000 0.0025
100,000,000 0.005
125,400,000 0.005
Less: Warrants Exercised -- --
Less: Warrants Expired (6,000,000) 0.25
-----------
Total Warrants outstanding at December 31, 2010 325,400,000
===========
|
On December 31, 2010 the Company had warrants outstanding for the purchase of an
aggregate of 325,400,000 shares of its common stock, which are summarized in the
table below:
Warrants Exercise Expiration
Outstanding Price Date
----------- ----- ----
100,000,000 0.0025 11-Jan-2012
100,000,000 0.005 11-Jan-2012
125,400,000 0.005 11-Jan-2012
|
47
NOTE 9. SHORT AND LONG TERM LIABILITIES
Accounts Payable and Accrued Liabilities
A summary of accounts payable and accrued liabilities for the reporting period
follows:
31-Dec-10 31-Dec-09
--------- ---------
Accounts Payable $ 7,601 $ 31,222
Accrued Interest -- 20,000
-------- --------
Total Accounts Payable and Accruals $ 7,601 $ 51,222
======== ========
|
NOTE 10. RELATED PARTY TRANSACTIONS
Accruals - Related Party
Related Party transactions include accruals of unpaid management and director
fees, rent for a facility owned by a corporate officer, and interest accrued on
the note held by a shareholder. During the 4th quarter of 2010 the management
and directors agreed to settle $53,861 in accrued fees via the issuance of
22,779,960 shares of common stock. The shares were not issued as of December 31,
2010 and thus the amounts were recorded as stock payable as of December 31,
2010. Summary of balance follows:
31-Dec-10 31-Dec-09
--------- ---------
Management & Director Fees $ -- $ 73,859
======== ========
|
Operational Advances
Operational advances are short term, unsecured, non-interest bearing operational
loans made by various related parties to maintain day to day operations. Summary
of balance follows:
31-Dec-10 31-Dec-09
--------- ---------
Operational Advances $ 83,991 $ 22,950
|
Notes Payable
On June 30, 2010, we issued 7,500,000 common presplit shares (75,000,000 post
split shares) with a market value of $0.058 per share or $432,500 on the date
authorized by the Board in full settlement of the $250,000 note issued to the
accredited third party investors, including, $12,500 accumulated interest and
$170,000 additional interest resulting from the fair value differential.
On August 13, 2010, we entered into debt settlement agreements and issued
15,000,000 common presplit shares (150,000,000 post split shares) with a market
value of $0.048 per share or $$724,000 to the above referenced private
accredited investor group to settle the $237,500 debt that had been previously
payable to General Metals Corporation including $17,500 in accrued interest and
$469,000 in interest expense. This transaction completed the retirement of all
debt associated with the Nyinahin Concession purchased from General Metals.
48
A summary of the outstanding balance for the year ended December 31, 2010 and
2009 follows:
31-Dec-10 31-Dec-09
--------- ---------
Notes Payable $ -- $ 250,000
Notes Payable -- 237,500
--------- ---------
Total Notes Payable $ -- $ 487,500
========= =========
|
NOTE 11. PROVISION FOR INCOME TAXES
The Company provides for income taxes under ASC 740 "Income Taxes" which
requires the use of an asset and liability approach in accounting for income
taxes. Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently.
The standard requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $274,555 which is calculated by multiplying a 35%
estimated tax rate by the cumulative NOL of $784,443. The total valuation
allowance is $274,555. Details for the years ended December 31, 2010 and 2009
follow:
Year Year
Ended Ended
31-Dec-10 31-Dec-09
--------- ---------
Deferred Tax Asset $ 274,555 $ 144,877
Valuation Allowance (274,555) (144,877)
--------- ---------
Income Tax Expense $ -- $ --
========= =========
|
Below is a chart showing the estimated federal net operating losses and the
years in which they will expire.
Net
Operating
Period Loss Expiration
------ ---- ----------
2003 $ 30,313 2023
2004 41,362 2024
2005 26,093 2025
2006 39,746 2026
2007 55,103 2027
2008 98,445 2028
2009 122,873 2029
2010 370,508 2030
----------
Total NOL $ 774,443
==========
|
49
NOTE 12. SUBSEQUENT EVENTS
On January 11, 2011, the Company issued 125,400,000 units in a private
placement, raising gross proceeds of $313,500 at $0.0025 per unit. Each unit
consists of one share of restricted common stock and one 12 month share purchase
warrant exercisable at $0.005 per share.
On January 11, 2011, the Company issued 77,659,960 units were issued at market
value to settle $101,361 stocks payable, and pay for $50,100 consulting
services. Each unit consists of one share of restricted common stock and one 12
month share purchase warrant exercisable at $0.005 per share. Of the issued
shares 17,940,000 were issued by mistake and will be returned and cancelled. As
of December 21, 2011 these share have still not been cancelled.
On January 11, 2011, the Company issued 12,000,000 restricted common shares in
error which will be returned and cancelled. As of December 21, 2011 these share
have still not been cancelled.
On February 4, 2011 the Company issued 10,000,000 restricted shares with a
market value of $0.007 per share to its Board of Directors for services.
On May 3, 2011 the Company issued 1,000,000 restricted common shares for $5,000
cash for the exercise of 1,000,000 warrants.
On June 22, 2011 the Company issued 13,000,000 units consisting of one
restricted common share and one 12 month warrant exercisable at $0.005 and
1,200,000 units consisting of one common share and one 12 month warrant
exercisable at $0.0075 as incentive to make equipment loans to the Company. Each
unit was issued at the market value of shares.
On June 22, 2011 the Company issued 1,200,000 units for cash at $0.025 per unit
with each unit consisting of one restricted common share and one 12 month
warrant exercisable at $0.005 and 35,642,852 units for cash at $0.0035 per unit
with each unit consisting of one common share and one 12 month warrant
exercisable at $0.006.
On June 22, 2011 the Company issued 100,000,000 units consisting of one
restriceted common share and one 12 month warrant exercisable at $0.007 for cash
at $0.0035 per unit. Upon exercise each original warrant will be issued an
incentive warrant if exercised within seven months. The number of incentive
warrants issued for each original warrant exercised will decrease to 80%, 70%,
60%, 50%, and 40% if exercised on the 8th, 9th, 10th, 11th or 12th month
respectively. Incentive warrants will be exercisable at a 30% discount of the
preceding five day average price per share.
During the third quarter 2011 the Company issued 10,000,000 restricted common
shares for the exercise of warrants at $0.0025 per share, 8,000,000 common
shares for the exercise of warrants at$0.005 per share, 3,000,000 common shares
for various services at market price and 10,357,142 units for cash at $0.0035
per unit with each unit consisting of one common share and one 12 month warrant
exercisable at $0.007 per share.
During the period ended November 30, 2011 the Company issued 22,000,000
restricted common shares to settle $52,500 debt, 1,428,571 units at $0.0035 per
unit with each unit consisting of one common share and one 12 month warrant
exercisable at $0.007 per share, 4,500,000 shares for consulting service at
$0.0055 per share, 6,000,000 units at $0.0055 per unit for consulting services
with each unit consisting of one common share and one 12 month warrant
exercisable at $0.005 per share and 5,000,000 common share for cash in the
exercise of warrants at $0.0025 per share.
50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 27, 2010, we dismissed BDO Canada LLP, and authorized the engagement
of Gruber & Company LLC as our auditor.
On May 11, 2011, we dismissed Gruber & Company LLC. On May 23, 2011 we engaged
the audit firm of De Joya Griffith & Company LLC.
There were no disagreements related to accounting principles or practices,
financial statement disclosure, internal controls or auditing scope or procedure
during the two fiscal years and interim periods, including the interim period up
through the date these relationships ended.
ITEM 9A(T). CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the SECURITIES
EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president (who is acting as our
principal executive officer, principal financial officer and principle
accounting officer) to allow for timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. As of December 31,
2010, the end of our fiscal year covered by this report, we carried out an
evaluation, under the supervision and with the participation of our president
(who is acting as our principal executive officer, principal financial officer
and principle accounting officer), of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on the foregoing, our
president (who is acting as our principal executive officer, principal financial
officer and principle accounting officer) concluded that our disclosure controls
and procedures were not effective as of the end of the period covered by this
annual report in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance's with US generally accepted accounting principles due to
the existence of significant deficiencies constituting material weaknesses, as
described in greater detail below. A material weakness is a control deficiency,
or combination of control deficiencies, such that there is a reasonable
possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over our financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f). Our management evaluated, under the supervision and with the
participation of our principal executive and principal financial officer, the
effectiveness of our internal control over financial reporting as of December
31, 2010.
Based on its evaluation under the framework in Internal Control--Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission, our management, with the participation of our principal executive
and principal financial officer concluded that our internal control over
financial reporting was not effective as of December 31, 2010, due to the
existence of significant deficiencies constituting material weaknesses, as
described in greater detail below. A material weakness is a control deficiency,
51
or combination of control deficiencies, such that there is a reasonable
possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis.
This annual report does not include an attestation report of our company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by our
company's independent registered public accounting firm pursuant to temporary
rules of the SEC that permit our company to provide only management's report in
this annual report.
Material Weaknesses Identified
Based on our management's evaluation required by paragraph (d) of Rule 13a-15
and of Rule 15d-15 of the Exchange Act, certain significant deficiencies in
internal control became evident to management that our management believes
represent material weaknesses, including:
(i) Insufficient segregation of duties in our finance and accounting
functions due to limited personnel. During the year ended December 31,
2010, we had limited staff that performed nearly all aspects of our
financial reporting process, including, but not limited to, access to
the underlying accounting records and systems, the ability to post and
record journal entries and responsibility for the preparation of the
financial statements. This creates certain incompatible duties and a
lack of review over the financial reporting process that would likely
result in a failure to detect errors in spreadsheets, calculations, or
assumptions used to compile the financial statements and related
disclosures as filed with the SEC. These control deficiencies could
result in a material misstatement to our interim or annual
consolidated financial statements that would not be prevented or
detected;
(ii) There is a lack of sufficient supervision and review by our
management;
(iii) Insufficient corporate governance policies. Although we have a code
of ethics which provides broad guidelines for corporate governance,
our corporate governance activities and processes are not always
formally documented. Specifically, decisions made by the board to be
carried out by management should be documented and communicated on a
timely basis to reduce the likelihood of any misunderstandings
regarding key decisions affecting our operations and management; and
(iv) Our company's accounting staff does not have sufficient technical
accounting knowledge relating to accounting for income taxes and
complex US GAAP matters, including stock based compensation which
resulted in a restatement of our 2009 financial statements. Management
corrected any errors prior to the release of our company's December
31, 2010 financial statements.
PLAN FOR REMEDIATION OF MATERIAL WEAKNESSES
We intend to take appropriate and reasonable steps to make the necessary
improvements to remediate these deficiencies. We intend to consider the results
of our remediation efforts and related testing as part of our 2011year-end
assessment of the effectiveness of our internal control over financial
reporting.
We have implemented certain remediation measures and are in the process of
designing and implementing additional remediation measures for the material
weaknesses described in this annual report. Such remediation activities include
the following:
(1) We intend to hire outside consultants with sufficient expertise in
accounting for complex US GAAP issues for our 2011 fiscal year;
(2) We intend to update the documentation of our internal control
processes, including formal risk assessment of our financial reporting
processes.
52
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Our principal executive and principal financial officer does not expect that our
disclosure controls or our internal control over financial reporting will
prevent 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 system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within our company have been detected. 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. Additional controls
can 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 also is based in part upon 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;
over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during
the fiscal year ended December 31, 2010 that have materially affected, or are
reasonably likely to materially affect our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
SHARE ISSUANCES
On June 3, 2010 the Company issued 20,000,000 common shares valued at $0.0065
per share to its officers for executive services with an aggregate market value
of $130,000.
On June 30, 2010 the Company issued 75,000,000 common shares valued $0.0058 per
share or $432,500 in full settlement of a $250,000 note and $12,500 accumulated
interest and $170,000 additional interest resulting from the fair value
differential.
On June 3, 2010 the Company issued 40,992,880 common shares at $0.0035 per share
for the $143,400 stock payable.
On July 30, 2010, the Company issued 25,000,000 common shares at $0.0067 per
share to its officers for executive services. A total value of $167,500 was
recorded as compensation expense.
Between July 15 and July 22, 2010, the Company issued 39,980,000 common shares
to settle $67,980 worth of debts. The fair value of the shares on the date of
issuance was $0.004 per share for a total value of $175,790 which was allocated
as $67,980 to the debt and $107,810 to interest expense.
On July 15, 2010, the Company issued 14,700,000 common shares to settle $24,990
debt. The fair value of the shares on the date of issuance was $0.004 per share
total value of $58,800 which was allocated as $24,990 to the debt and $33,810 to
interest expense.
On July 10, 2010, the Company issued 17,650,000 common shares to settle $30,000
debt. The fair value of the shares on the date of issuance was $0.004 per share
total value of $70,600 which was allocated as $30,000 to the debt and $40,600 to
interest expense.
On August 13, 2010, the Company issued 150,000,000 common shares to settle
$255,000 debt. The fair value of the shares issued on the date of each
individual settlement was $724,000 resulting in the company allocating $237,500
to the note, $17,500 to accrued interest and $469,000 to interest expense.
On August 19, 2010, the Company issued 10,800,000 common shares at $0.004 per
share for $18,361 executive services with a fair value of $43,200. Also, the
Company issued 14,100,000 common shares to settle $23,932 in debt. The fair
53
value of the shares on the dates of issuance was $0.015 per share with a total
value of $211,500 which was allocated as $23,932 to the debt and $187,568 to
interest expense.
On August 17, 2010 we executed a 10:1 forward stock split increasing its
authorized common stock from 375,000,000 to 3,750,000,000 shares which increase
our issued and outstanding share balance from 94,619,788 to 946,197,880 common
shares.
On October 18, 2010, the Company issued 100,000,000 units which consist of one
share of common stock, one 12 month warrant exercisable at $0.0025 and one 12
month warrant exercisable at $0.005 per share. The fair value of the shares
issued on the date of the agreement plus the value of the warrants was $710,811.
The 100,000,000 shares were valued as of the closing price on October 18, 2010
of $.0029 resulting in a value of $290,000. The shares were not issued until
January 2011 and thus have been recorded as stock payable at December 31, 2010.
The warrants were valued using the Black-Scholes pricing model using a one year
term, 231% volatility and a .23% risk free rate. The total value of the warrants
is $420,811 and recorded in additional paid in capital. See Note 6 for further
information regarding the purchase price allocation.
During the last quarter of 2010, the Company received cash in the amount of
$313,500 for prepaid stock subscriptions at $0.0025. On January 11, 2011, the
Company issued 125,400,000 units consisting of one common share and one 12 month
warrant exercisable at $0.005 per share to satisfy the subscriptions.
On December 15, 2010, the Company settled $47,500 in accounts payable through
the execution of a subscription to issue 19,000,000 shares of stock at $.0025.
The fair value was based on private subscriptions as the settlement was
finalized concurrent with the sale of stock to private investors. The shares
were not issued as of December 31, 2010 and consequently have been recorded as
stock payable.
On January 16, 2011, we issued 128,675,200 units in a private placement, raising
gross proceeds of $321,688 at $0.0025 per unit. Each unit consists of one share
of common stock and one 12 month share purchase warrant exercisable at $0.005
per share
On January 16, 2011, we issued 50,384,260 units in consideration for debt
outstanding and for compensation to directors and advisory board members at a
deemed price of $0.0025 per unit. Each unit consists of one share of common
stock and one 12 month share purchase warrant exercisable at $0.005 per share
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
All directors of our company hold office until the next annual meeting of the
security holders or until their successors have been elected and qualified. The
officers of our company are appointed by our board of directors and hold office
until their death, resignation or removal from office. Our directors and
executive officers, their ages, positions held, and duration as such, are as
follows:
Position Held Date First Elected
Name with our Company Age or Appointed
---- ---------------- --- ------------
Purnendu K. Medhi Director 73 March 11, 2009
Robert A. Levich Director 68 December 21, 2009
Bryan Miller President and Director 53 November 2, 2010
Mark Shelley Secretary, Treasurer, Director 59 April 21, 2011
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BUSINESS EXPERIENCE
The following is a brief account of the education and business experience during
at least the past five years of each director, executive officer and key
employee of our company, indicating the person's principal occupation during
54
that period, and the name and principal business of the organization in which
such occupation and employment were carried out.
BRYAN MILLER--PRESIDENT AND DIRECTOR
Prior to joining Sunergy, Inc. in 2010, Mr. Miller co-founder of Allied Mining &
Supply Ltd. (AMS), and Allied Renewable Energy. AMS was formed in 2008 as a
precious metal prospect generator and contract mining operator in Sierra Leone,
West Africa. Mr. Miller continues to serve as Chief Executive Officer of AMS.
Mr. Miller held executive level positions in the cable television industry from
1998 to 2007, including serving as Executive Director of cable access operations
for the cities of Napa, Santa Maria and Lompoc, California.
PURNENDU K. MEDHI - DIRECTOR
Purnendu K. Medhi, is a principal of Minerals Management International, a
cooperative of mining professionals that provides comprehensive mining
management services and technical support internationally to mineral industry
and financial institutions. He also serves as Chairman of the Board of Governors
of the Arizona Department of Mines and Mineral Resources and Trustee of the
Boards of the Mining Foundation of the Southwest and AIPG Foundation. Mr. Medhi
retired from Cyprus Amax Minerals Company in 1994 after 28 years of service in
order to start his own consulting practice. At Cyprus he held various senior
technical and management positions including general manager of several of its
operating divisions where he participated in many of the industrial mineral,
base metal and gold discoveries and mine development projects and played a key
role in developing roasting, leaching and SX-EW technology. Mr. Medhi holds a
Masters of Science degree from the University of Arizona and is a Registered
Mining and Engineering Geologist in the states of Arizona and Oregon and a
Certified Professional Geologist with the American Institute of Professional
Geologists. He is also an adjunct professor of mining technology and geology
with community colleges of Arizona
ROBERT A. LEVICH - DIRECTOR
Mr. Levich retired from the U.S. Department of Energy (DOE) at the end of 2004,
after more than 30 years of Federal Service, starting in 1963 as a Peace Corps
Geologist assigned to Ghana's Geological Survey Department in West Africa. He
studied uranium resources for more than eight years with DOE's Grand Junction
Office in Texas and Oklahoma, the Appalachian Basin from New York to Alabama,
and the four Northwestern States. He also spent more than 20 years studying the
deep geologic disposal of high-level nuclear waste for DOE at the Chicago
Operations Office in Illinois, and in Las Vegas, Nevada. At the Yucca Mountain
Project in Nevada, Mr. Levich served as Chief of the Technical Analysis Branch,
International Programs Manager (where he served as DOE Representative to working
groups of the OECD's Nuclear Energy Agency in Paris, and developed technical
cooperative programs with several foreign nations), and was responsible for
developing the Yucca Mountain Site Description. He has also been Northwest
Region Manager in Spokane, Washington for Apache Energy & Minerals Company;
Geologist for the Ghana Geological Survey at Sunyani, Brong-Ahafo, Ghana; and
Consultant Expert for the International Atomic Energy Agency (IAEA) for uranium
resource evaluations in Uganda and Somalia, East Africa; and deep geologic
disposal of high-level nuclear waste in the granites of the Gobi Desert in
Northwest China.
Mr. Levich holds a Bachelor's Degree in Geology from Brooklyn College of the
City University of New York, and a Master's Degree in Geological Sciences from
the University of Texas at Austin. He is a Certified Professional Geologist by
the American Institute of Professional Geologists, and licensed as a European
Geologist by the European Federation of Geologists. Mr. Levich is a Fellow of
both the Geological Society of America and the Society of Economic Geologists,
as well as a Member of the Association of Geoscientists for International
Development. Mr. Levich has been Listed in Who's Who in America, and Who's Who
in Science and Engineering, and has received more than 20 Awards from the U.S.
Department of Energy, plus several awards from the American Institute of
Professional Geologists. He has authored or edited over 40 Publications on
economic geology, uranium resources, and nuclear waste management.
55
MARK SHELLEY--SECRETARY, TREASURER, DIRECTOR
Since 1990 Mark Shelley has been the principal of Shelley International CPA, a
PCAOB registered audit firm, and Mark Shelley CPA, a tax and accounting CPA
firm, based in Mesa, Arizona. In this capacity he has provided a wide range of
audit, tax, finance, accounting and consulting services to public and private
corporations in various industries. Mr. Shelley received his CPA designation
from the state of Arizona in 1981, and holds a Bachelor of Science in accounting
from Brigham Young University. He is a member of the Arizona Society of CPAs and
the American Institute of CPAs.
Family Relationships
There are no family relationships between any of our directors, executive
officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control persons has been
involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending
criminal proceeding, excluding traffic violations and other minor
offences;
3. being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
4. being found by a court of competent jurisdiction in a civil action,
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or
vacated.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors and persons who own more than 10% of our common stock to
file with the Securities and Exchange Commission initial statements of
beneficial ownership, reports of changes in ownership and annual reports
concerning their ownership of our common stock and other equity securities, on
Forms 3, 4 and 5 respectively. Executive officers, directors and greater than
10% shareholders are required by the SEC regulations to furnish us with copies
of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or
written representations from certain reporting persons, we believe that during
fiscal year ended December 31, 2010, all filing requirements applicable to our
officers, directors and greater than 10% percent beneficial owners were complied
with, with the exception of the following:
Number of Failure
Transactions to File
Number of Late Not Reported on Required
Name Reports a Timely Basis Forms
---- ------- -------------- -----
Joseph B. Guerrero (2) 1 (1) 1 (1) 1 (1)
George Polyhronopolous (3) 1 (1) 1 (1) 1 (1)
Christian Brule (4) 1 (1) 1 (1) 1 (1)
Purnendu K. Medhi 1 (1) 1 (1) 1 (1)
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56
(1) The executive officer, director or holder of 10% or more of our common
stock filed a late Form 3 -Initial Statement of Beneficial Ownership of
Securities.
(2) Joseph B. Guerrero resigned as president and director of our company on
March 8, 2010. (3) George Polyhronopolous resigned as treasurer, secretary
and director of our company on September 3, 2009. (4) Christian Brule
resigned as director of our company on November 8, 2009.
CODE OF ETHICS
Effective April 14, 2009, our company's board of directors adopted a Code of
Business Conduct and Ethics that applies to, among other persons, our company's
president (being our principal executive officer, principal financial officer
and principal accounting officer), as well as persons performing similar
functions. As adopted, our Code of Business Conduct and Ethics sets forth
written standards that are designed to deter wrongdoing and to promote:
1. honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
2. full, fair, accurate, timely, and understandable disclosure in reports
and documents that we file with, or submit to, the Securities and
Exchange Commission and in other public communications made by us;
3. compliance with applicable governmental laws, rules and regulations;
4. the prompt internal reporting of violations of the Code of Business
Conduct and Ethics to an appropriate person or persons identified in
the Code of Business Conduct and Ethics; and
5. accountability for adherence to the Code of Business Conduct and
Ethics.
Our Code of Business Conduct and Ethics requires, among other things, that all
of our company's personnel shall be accorded full access to our president and
secretary with respect to any matter which may arise relating to the Code of
Business Conduct and Ethics.
Further, all of our company's personnel are to be accorded full access to our
company's board of directors if any such matter involves an alleged breach of
the Code of Business Conduct and Ethics by our Company officers. In addition,
our Code of Business Conduct and Ethics emphasizes that all employees, and
particularly managers and/or supervisors, have a responsibility for maintaining
financial integrity within our company, consistent with generally accepted
accounting principles and federal and state securities laws. Any employee who
becomes aware of any incidents involving financial or accounting manipulation or
other irregularities, whether by witnessing the incident or being told of it,
must report it to his or her immediate supervisor or to our company's president
or secretary. If the incident involves an alleged breach of the Code of Business
Conduct and Ethics by the president or secretary, the incident must be reported
to any member of our board of directors. Any failure to report such
inappropriate or irregular conduct of others is to be treated as a severe
disciplinary matter. It is against our company policy to retaliate against any
individual who reports in good faith the violation or potential violation of our
company's Code of Business Conduct and Ethics by another. We will provide a copy
of the Code of Business Conduct and Ethics to any person without charge, upon
request. Requests may be sent in writing to Sunergy Inc., 14362 N. Frank Lloyd
Wright Blvd., Suite 1000, Scottsdale, AZ. 58260.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
As of December 31, 2009 and 2010, our board of directors determined that it did
not have a member of its audit committee that qualified as an "audit committee
financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K.
We believe that the members of our board of directors are collectively capable
of analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting. We believe that retaining an
independent director who would qualify as an "audit committee financial expert"
would be overly costly and burdensome and is not warranted in our circumstances
given the early stages of our development and the fact that we have not
generated any material revenues to date. In addition, we currently do not have
nominating, compensation or audit committees or committees performing similar
functions nor do we have a written nominating, compensation or audit committee
charter. Our board of directors does not believe that it is necessary to have
57
such committees because it believes the functions of such committees can be
adequately performed by our board of directors.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of the compensation paid to the following persons:
(a) our principal executive officer;
(b) each of our two most highly compensated executive officers who were
serving as executive officers at the end of the years ended December
31, 2010 and 2009; and
(c) up to two additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as our executive officer at the end of the years ended
December 31, 2010 and 2009, who we will collectively refer to as the
named executive officers of our company, are set out in the following
summary compensation table, except that no disclosure is provided for
any named executive officer, other than our principal executive
officers, whose total compensation did not exceed $100,000 for the
respective fiscal year:
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Name Stock Option Plan Compensation All Other
and Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
------------- ---- ------ ----- ------ ------ ------------ -------- ------------ -----
Karl A. Baum(1) 2010 13,000 Nil 74,375 Nil Nil Nil Nil 87,375
2009 19,000 Nil Nil Nil Nil Nil Nil 19,000
Joseph B. Guerrero(2) 2010 14,000 Nil Nil Nil Nil Nil Nil 14,000
Former President 2009 13,500 Nil Nil Nil Nil Nil Nil 13,500
and Director
Purnendu K. Medhi(3) 2010 19,500 Nil 74,375 Nil Nil Nil Nil 93,875
Director 2009 9,000 Nil Nil Nil Nil Nil Nil 9,000
Robert A. Levich(4) 2010 5,000 Nil 74,375 Nil Nil Nil Nil 79,375
Director 2009 Nil Nil Nil Nil Nil Nil Nil Nil
Christian Brule(5) 2010 Nil Nil Nil Nil Nil Nil Nil Nil
Former President 2009 13,500 Nil Nil Nil Nil Nil Nil 13,500
and Director
George Polyhronopolous(6) 2010 19,500 Nil 74,375 Nil Nil Nil Nil 93,875
Former Treasurer, 2009 12,000 Nil Nil Nil Nil Nil Nil Nil
Secretary and
Director
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(1) Mr. Baum was appointed as our president and director on March 8, 2010 and
resigned on November 2, 2010.
(2) Mr. Guerrero was appointed as our president and a director of our company
on September 12, 2008 and resigned on March 8, 2010.
(3) Mr Medhi was appointed as director of our company on March 11, 2009.
(4) Mr. Levich was appointed as director of our company on December 21, 2009.
(5) Mr. Brule resigned as our president on September 12, 2008 and as director
on November 8, 2009.
(6) Mr. Polyhronopoulos resigned as our treasurer, secretary and director on
September 3, 2009.
58
Effective October 1, 2008, we agreed to pay Joseph B. Guerrero, our then
president and director, remuneration for his services at a rate of one thousand
five hundred dollars ($1,500) per month. The agreement was for a term of one
year and continued thereafter on a month to month basis until terminated on
March 8, 2010.
Other than the above described agreement, we have not entered into any formal
agreements with any of our directors or officers.
STOCK OPTION GRANTS TO OUR NAMED EXECUTIVE OFFICERS
Our company did not grant any stock options to any named executive officers
during the year ended December 31, 2010.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
There were no outstanding equity awards granted to any named executive officer
as of December 31, 2010.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
There were no options outstanding, and hence no options exercised, by any named
executive officers during the year ended December 31, 2010.
COMPENSATION OF DIRECTORS
We do not have any agreements for compensating our directors for their services
in their capacity as directors, although such directors are expected in the
future to receive stock options to purchase shares of our common stock as
awarded by our board of directors.
PENSION, RETIREMENT OR SIMILAR BENEFIT PLANS
There are no arrangements or plans in which we provide pension, retirement or
similar benefits for directors or executive officers. We have no material bonus
or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officers, except that stock options
may be granted at the discretion of the board of directors or a committee
thereof.
INDEBTEDNESS OF DIRECTORS, SENIOR OFFICERS, EXECUTIVE OFFICERS AND OTHER
MANAGEMENT
None of our directors or executive officers or any associate or affiliate of our
company during the last two fiscal years is or has been indebted to our company
by way of guarantee, support agreement, letter of credit or other similar
agreement or obligation currently outstanding.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth, as of December 31, 2010, certain information
with respect to the beneficial ownership of our common shares by each
shareholder known by us to be the beneficial owner of more than 5% of our common
shares, as well as by each of our current directors and executive officers as a
group. Each person has sole voting and investment power with respect to the
shares of common stock, except as otherwise indicated. Beneficial ownership
consists of a direct interest in the shares of common stock, except as otherwise
indicated.
59
Amount and Nature
Name and Address of Beneficial Ownership Percentage and
of Beneficial Owner (Common Shares) Class (1)
------------------- --------------- ---------
Bryan Miller (2) 14,535,500 .97%
Karl Baum (3) 22,638,022 1.52%
Joseph B. Guerrero (4) 14,700,000 .98%
8711 E Paraiso Drive
Scottsdale AZ 85255
Purnendu K. Medhi (5) 24,980,000 1.67%
1002 East Shadow Ridge Road
Casa Grande, AZ 85222
Robert A. Levich (6) 27,779,960 1.87%
405 Norwood Lane
Las Vegas NV 89107
Directors and Executive Officers
as a Group(1) 104,633,482 7.01%
Holder of 10% of more Nil Nil
----------
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(1) Under Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power
to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually outstanding on
December 31, 2010. As of November 30, 2011, there were 1,493,586,405 shares
of our company's common stock issued and outstanding.
(2) Mr. Miller was appointed as our President and Director on November 2, 2010
(3) Mr. Baum was appointed our President and Director on March 8, 2010 and
resigned on November 2, 2010.
(4) Mr. Guerrero was appointed as our president and a director of our company
on September 12, 2008 and resigned on March 8, 2010.
(5) Mr Medhi was appointed as director of our company on March 11, 2009.
(6) Mr. Levich was appointed as director of our company on December 21, 2009.
CHANGES IN CONTROL
We are unaware of any contract or other arrangement the operation of which may
at a subsequent date result in a change in control of our company.
60
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Except as disclosed herein, no director, executive officer, shareholder holding
at least 5% of shares of our common stock, or any family member thereof, had any
material interest, direct or indirect, in any transaction, or proposed
transaction since the year ended December 31, 2009, in which the amount involved
in the transaction exceeded or exceeds the lesser of $120,000 or one percent of
the average of our total assets at the year end for the last three completed
fiscal years.
ACCRUALS - RELATED PARTY
Related Party transactions include accruals of unpaid management and director
fees, rent for a facility owned by a corporate officer, and interest accrued on
the note held by a shareholder. During the 4th quarter of 2010 the management
and directors agreed to settle $53,861 in accrued fees via the issuance of
22,779,960 shares of common stock to the following related parties:
Amount Shares
--------- ----------
Karl Baum (former officer and director) 15,500.00 7,400,000
Robert Levich (Director) 18,391.11 6,979,960
P.K Medhi. (Director) 11,000.00 4,400,000
George Polous (former officer and director) 9,000.00 4,000,000
--------- ----------
Totals 53,891.11 22,779,960
========= ==========
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OPERATIONAL ADVANCES
Operational advances are short term, unsecured, non-interest bearing operational
loans made by various related parties to maintain day to day operations. Summary
of balance follows:
31-Dec-10 31-Dec-09
--------- ---------
Operational Advances 83,991 22,950
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NOTES PAYABLE
On June 30, 2010, we issued 7,500,000 common presplit shares (75,000,000 post
split shares) with a market value of $0.058 per share or $432,500 on the date
authorized by the Board in full settlement of the $250,000 note issued to the
accredited third party investors, including, $12,500 accumulated interest and
$170,000 additional interest resulting from the fair value differential.
On August 13, 2010, we entered into debt settlement agreements and issued
15,000,000 common presplit shares (150,000,000 post split shares) with a market
value of $0.048 per share or $$724,000 to the above referenced private
accredited investor group to settle the $237,500 debt that had been previously
payable to General Metals Corporation including $17,500 in accrued interest and
$469,000 in interest expense. This transaction completed the retirement of all
debt associated with the Nyinahin Concession purchased from General Metals.
61
A summary of the outstanding balance for the year ended December 31, 2010 and
2009 follows:
31-Dec-10 31-Dec-09
--------- ---------
Notes Payable $ -- $ 250,000
Notes Payable -- 237,500
--------- ---------
Total Notes Payable $ -- $ 487,500
========= =========
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DIRECTOR INDEPENDENCE
We currently act with four (4) directors, consisting of Bryan Miller, Purnendu
K. Medhi, Robert A. Levich, and Mark Shelley. We have determined that Mr. Medhi
is an "independent directors" as defined in NASDAQ Marketplace Rule 4200(a)(15).
Currently our audit committee consists of our entire board of directors. We
currently do not have nominating, compensation committees or committees
performing similar functions. There has not been any defined policy or procedure
requirements for shareholders to submit recommendations or nomination for
directors.
Our board of directors has determined that it does not have a member of its
audit committee who qualifies as an "audit committee financial expert" as
defined in as defined in Item 407(d)(5)(ii) of Regulation S-K.
From inception to present date, we believe that the members of our audit
committee and the board of directors have been and are collectively capable of
analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed for the most recently completed fiscal year ended
December 31, 2010 and for fiscal year ended December 31, 2009 for professional
services rendered by the principal accountant for the audit of our annual
financial statements and review of the financial statements included in our
quarterly reports on Form 10-Q and services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for these fiscal periods were as follows:
Year Ended
December 31, 2010 December 31, 2009
----------------- -----------------
Audit Fees $25,000 $7,500
STSTAudit Related Fees Nil Nil
Tax Fees Nil Nil
All Other Fees Nil Nil
Total Nil $7,500
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Effective May 6, 2003, the Securities and Exchange Commission adopted rules that
require that before our independent auditors are engaged by us to render any
auditing or permitted non-audit related service, the engagement be approved by
our audit committee (which consists of our entire board of directors); or
entered into pursuant to pre-approval policies and procedures established by the
board of directors, provided the policies and procedures are detailed as to the
particular service, the board of directors is informed of each service, and such
policies and procedures do not include delegation of the board of directors'
responsibilities to management.
Our board of directors pre-approves all services provided by our independent
auditors. All of the above services and fees were reviewed and approved by the
board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by
our independent auditors and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining our independent
auditors' independence.
62
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
(1) Financial statements for our company are listed in the index under
Item 8 of this document
(2) All financial statement schedules are omitted because they are not
applicable, not material or the required information is shown in the
financial statements or notes thereto.
(b) Exhibits
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation (incorporated by reference from our
Registration Statement on Form SB-2 filed on February 23, 2004)
3.2 Bylaws (incorporated by reference from our Registration Statement on
Form SB-2 filed on February 23, 2004)
(10) MATERIAL CONTRACTS
10.1 Mineral Property Staking and Purchase Agreement dated April 10, 2003
(incorporated by reference from our Registration Statement on Form
SB-2/A filed on June 30, 2004)
10.2 Mining Acquisition Agreement dated October 31, 2008 between our company
and General Metals Corporation (incorporated by reference from our
Current Report on Form 8-K filed on December 10, 2008)
10.3 Amending Agreement to the Mining Acquisition Agreement dated December
5, 2008 between our company and General Metals Corporation.
(incorporated by reference from our Current Report on Form 8-K filed on
December 10, 2008)
10.4 Membership Purchase Agreement dated October 18, 2010 between our
company and Allied Mining and Supply, LLC. (incorporated by reference
as exhibit 10.1 of the form 8-K filed on February 4, 2011)
(14) CODE OF ETHICS
14.2 Code of Ethics and Business Conduct
(31) RULE 13A-14(D)/15D-14(D) CERTIFICATIONS
31.1* Section 302 Certification of Principal Executive Officer, Principal
Accounting Officer and Principal Financial Officer
(32) SECTION 1350 CERTIFICATIONS
32.1* Section 906 Certification of Principal Executive Officer, Principal
Accounting Officer and Principal Financial Officer
----------
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* Filed herewith.
63
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SUNERGY, INC.
By: /s/ Bryan Miller
-------------------------------------------------
Bryan Miller, President and Director
(Principal Executive Officer, Principal Accounting
Officer, Principal Financial Officer)
Date: December 27, 2011
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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.
By: /s/ Bryan Miller By: /s/ Purnendu K. Mehdi
------------------------------ ------------------------------
Bryan Miller, President Purnendu K. Medhi
and Director Director
(Principal Executive Officer) Date: December 27, 2011
Date: December 27, 2011
By: /s/ Robert A. Levich By: /s/ Mark Shelley
------------------------------ ------------------------------
Robert A. Levich Mark Shelley
Director Director, Secretary, Treasurer
Date: December 27, 2011 Date: December 27, 2011
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