Item 1. Financial Statements
The interim financial statements included
herein are unaudited but reflect, in management's opinion, all adjustments, consisting only of normal recurring adjustments that
are necessary for a fair presentation of our financial position and the results of our operations for the interim periods presented.
Because of the nature of our business, the results of operations for the quarterly period ended June 30, 2013 are not necessarily
indicative of the results that may be expected for the full fiscal year.
SUNERGY, INC. (An Exploration Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
847
|
|
|
$
|
451
|
|
Prepaid expenses
|
|
|
–
|
|
|
|
22,248
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
847
|
|
|
|
22,699
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
|
|
|
|
|
|
Exploratory properties
|
|
|
1,753,497
|
|
|
|
1,753,497
|
|
Property and equipment, net
|
|
|
155,556
|
|
|
|
174,904
|
|
|
|
|
|
|
|
|
|
|
Total long-term assets
|
|
|
1,909,052
|
|
|
|
1,928,401
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,909,899
|
|
|
$
|
1,951,100
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
498,130
|
|
|
$
|
315,623
|
|
Notes payable, current portion
|
|
|
151,002
|
|
|
|
100,585
|
|
Accrued interest
|
|
|
426,300
|
|
|
|
317,700
|
|
Accounts payable to related parties
|
|
|
134,562
|
|
|
|
139,976
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,209,994
|
|
|
|
873,884
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,209,994
|
|
|
|
873,884
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Common stock, authorized 3,750,000,000 shares, par value
$0.001, issued and outstanding on June 30, 2013 and December 31, 2012 is 1,926,655,315 and 1,852,288,983
respectively
|
|
|
1,926,657
|
|
|
|
1,852,290
|
|
Additional paid-in capital
|
|
|
4,495,680
|
|
|
|
4,425,047
|
|
Accumulated deficit during exploration stage
|
|
|
(5,722,432
|
)
|
|
|
(5,200,121
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
699,905
|
|
|
|
1,077,216
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,909,899
|
|
|
$
|
1,951,100
|
|
The accompanying notes are an integral part
of these statements.
SUNERGY, INC. (An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Inception)
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
to June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
13,467
|
|
|
|
13,038
|
|
|
|
25,848
|
|
|
|
26,076
|
|
|
|
116,458
|
|
General and administrative
|
|
|
54,614
|
|
|
|
69,076
|
|
|
|
124,873
|
|
|
|
133,115
|
|
|
|
844,056
|
|
Management salary
|
|
|
10,500
|
|
|
|
46,000
|
|
|
|
21,000
|
|
|
|
67,000
|
|
|
|
772,696
|
|
Exploration and development
|
|
|
43,649
|
|
|
|
21,039
|
|
|
|
63,149
|
|
|
|
100,346
|
|
|
|
924,941
|
|
Professional fees
|
|
|
146,277
|
|
|
|
121,404
|
|
|
|
164,424
|
|
|
|
226,293
|
|
|
|
1,177,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
268,507
|
|
|
|
270,557
|
|
|
|
399,294
|
|
|
|
552,830
|
|
|
|
3,835,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) from operations
|
|
|
(268,507
|
)
|
|
|
(270,557
|
)
|
|
|
(399,294
|
)
|
|
|
(552,830
|
)
|
|
|
(3,835,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(59,600
|
)
|
|
|
(63,700
|
)
|
|
|
(119,017
|
)
|
|
|
(127,400
|
)
|
|
|
(1,719,031
|
)
|
Financing costs
|
|
|
–
|
|
|
|
–
|
|
|
|
(4,000
|
)
|
|
|
(160,281
|
)
|
|
|
(167,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) before income taxes
|
|
|
(328,107
|
)
|
|
|
(334,257
|
)
|
|
|
(522,311
|
)
|
|
|
(840,511
|
)
|
|
|
(5,722,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(328,107
|
)
|
|
$
|
(334,257
|
)
|
|
$
|
(522,311
|
)
|
|
$
|
(840,511
|
)
|
|
$
|
(5,722,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & Diluted
|
|
|
1,896,856,989
|
|
|
|
1,587,258,212
|
|
|
|
1,878,464,058
|
|
|
|
1,587,258,212
|
|
|
|
|
|
The accompanying notes are an integral part
of these statements.
SUNERGY, INC. (An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
|
|
|
|
|
|
January 28, 2003
|
|
|
|
Six months ended June 30,
|
|
|
(Inception) to
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(522,311
|
)
|
|
$
|
(840,511
|
)
|
|
$
|
(5,722,432
|
)
|
Adjustments to reconcile net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
25,848
|
|
|
|
26,076
|
|
|
|
116,458
|
|
Stock-based compensation
|
|
|
73,750
|
|
|
|
50,250
|
|
|
|
624,640
|
|
Non-cash interest expense
|
|
|
14,416
|
|
|
|
|
|
|
|
1,130,743
|
|
Incentive shares
|
|
|
–
|
|
|
|
160,281
|
|
|
|
165,281
|
|
Change in assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/decrease in prepaid expenses
|
|
|
1,000
|
|
|
|
–
|
|
|
|
200,000
|
|
Increase/(decrease) in accrued interest payable
|
|
|
108,600
|
|
|
|
127,400
|
|
|
|
546,800
|
|
Increase/(decrease) in accounts payable and accrued liabilities
|
|
|
182,507
|
|
|
|
(24,067
|
)
|
|
|
708,831
|
|
Increase/(decrease) in accrued-related party
|
|
|
(5,415
|
)
|
|
|
277,628
|
|
|
|
524,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by operating activities
|
|
|
(121,605
|
)
|
|
|
(222,943
|
)
|
|
|
(1,705,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(6,500
|
)
|
|
|
–
|
|
|
|
(284,513
|
)
|
Cash acquired through acquistion of subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided/(used) by investment activities
|
|
|
(6,500
|
)
|
|
|
–
|
|
|
|
(284,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of loans from related parties
|
|
|
–
|
|
|
|
–
|
|
|
|
(31,915
|
)
|
Proceeds from issuance of debt
|
|
|
100,000
|
|
|
|
–
|
|
|
|
375,000
|
|
Proceeds from the sale of stock
|
|
|
28,500
|
|
|
|
152,989
|
|
|
|
1,634,471
|
|
Contributed capital
|
|
|
–
|
|
|
|
–
|
|
|
|
13,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
128,500
|
|
|
|
152,989
|
|
|
|
1,990,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase / (decrease) in cash
|
|
|
396
|
|
|
|
(69,954
|
)
|
|
|
847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
451
|
|
|
|
85,515
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
847
|
|
|
$
|
15,561
|
|
|
$
|
847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Income taxes paid
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for service as prepaid expenses
|
|
$
|
–
|
|
|
$
|
11,000
|
|
|
$
|
–
|
|
Debt issued to acquire assets
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
487,500
|
|
Stock issued to acquire assets
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
500,000
|
|
Assets acquired through acquisition of subsidiary
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
753,497
|
|
Liabilities assumed through acquisition of subsidiary
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
42,725
|
|
Shares issued to acquire subsidiary
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
290,000
|
|
Stock issued to settle debt
|
|
$
|
–
|
|
|
$
|
336,000
|
|
|
$
|
971,624
|
|
Warrants issued to acquire subsidiary
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
420,811
|
|
The accompanying notes are an integral part
of these statements.
SUNERGY, INC.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
June 30, 2013
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 precious and rare earth
element (“REE”) mineral properties located in the Republic of Ghana and Sierra Leone, Africa and has not yet determined
whether these properties contain reserves that are economically recoverable. The recoverability, if any, of amounts from these
properties will be dependent upon the discovery of economically recoverable reserves located within the property interests held
by the Company, 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.
Since inception, through the date of this
report, the Company has not generated any revenue and is considered an exploration stage entity as defined by accounting principles
generally accepted in the United States (“US GAAP”).
NOTE 2. CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have
been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2013, and for
all periods presented herein, have been made.
In accordance with Article 8-03 of Regulation
S-X certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December
31, 2012 audited financial statements. The results of operations for the period ended June 30, 2013 are not necessarily indicative
of the operating results for the full year.
The consolidated financial statements include
the accounts of Sunergy, Inc and its subsidiaries, Mikite Gold Resources Limited, a Ghanaian company, 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.
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.
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.
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.
Stock Based Compensation
The Company has on occasion issued equity
and equity linked instruments to non-employees in lieu of cash to various vendors for the receipt of goods and services and, in
certain circumstances the settlement of short-term loan arrangements. The applicable GAAP
establishes
that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably measurable.
In these transactions,
we issue unregistered and restricted equity instruments along with equity-linked instruments that are convertible into unregistered
and restricted shares of our common stock.
While we have 1,025,000,000
shares of freely-traded stock with a quoted market price (a Level 1 input within the GAAP hierarchy), the fair value of the unregistered
and restricted shares issued as valued by the quoted market price does not reflect the economic substance of the transactions;
correspondingly, the quoted market price is not the most reliably measurable fair value.
When unregistered
common shares and equity-linked instruments convertible into unregistered common shares are issued for the settlement of short-term
financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement
is determined by the value of the debt which is more clearly evident, and no
additional inducement expense is recognized.
In situations in which
we issue unregistered restricted common shares and equity-linked instruments in exchange for goods and services, and the value
of the goods and services are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity
instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions
(a Level 2 input within the GAAP hierarchy). We have determined this methodology reflects the risk adjusted fair value of our unregistered
restricted equity instruments using a commercially reasonable valuation technique.
Recent Accounting Guidance Not Yet Adopted
The Company has reviewed recently issued accounting pronouncements
and does not expect any to have a material impact on our financial position, results of operations, or cash flows.
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 not generated any revenue and continues to
incur operating losses and negative cash flows.. 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.
While we have been successful in raising
enough capital to pay for professional and administrative fees to file our delinquent financial statements, we have not had the
ability to raise any significant additional capital to materially advance our exploration and mining operations. We continue to
actively pursue additional sources of capital, however, there is no guarantee these efforts will be successful.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consisted
of the following at June 30, 2013 and December 31, 2012:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Exploration equipment
|
|
$
|
253,760
|
|
|
$
|
247,260
|
|
Rolling stock
|
|
|
13,500
|
|
|
|
13,500
|
|
Office furniture and equipment
|
|
|
4,753
|
|
|
|
4,753
|
|
Subtotal
|
|
$
|
272,013
|
|
|
$
|
265,513
|
|
Less accumulated depreciation
|
|
|
(116,457
|
)
|
|
|
(90,609
|
)
|
Property, and equipment - net
|
|
$
|
155,556
|
|
|
$
|
174,904
|
|
NOTE 5. NOTES PAYABLE
During the period ended June 30, 2013 we
accrued $108,600 of penalty expense, $10,417 of original issue discount interest expense and $4,000 of financing costs related
to shares issuance as an inducement to enter into a short-term commercial financing agreement on the outstanding principal balance
of $151,002 of our notes payable as of June 30, 2013, of which $48,085 are in default as of June 30, 2013. Balance of notes payable
at December 31, 2012 totaled $100,585. The individual notes in default carry daily interest penalties between $100 and $500.
On March 15, 2013, the Company entered
into a short-term commercial financing agreement of $25,000 due and payable in 180 days at an amount of $30,000. The Company issued
2,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant
exercisable at $0.004 per share as incentive to the lien holder to enter into the financing arrangement.
On May 15, 2013, the Company settled $60,000
of outstanding notes payable with payment of 30,000,000 common stock units consisting of one common share and one 12 month share
purchase warrant exercisable at $0.003.
On April 24, 2013, the Company entered
into a securities purchase agreement and convertible note agreement wherein the Company received $47,500 of principal which carries
an 8% per annum rate and is due and payable in 9 months. The note holder can convert the note into common stock of the Company
starting at 180 days after the date of the note. The conversion price has been set at the 56% of the average of the lowest three
trading days close prices in the 10 days prior to notice of conversions. Prepayment may be made but incur penalty of paying principal
plus accrued interest and an additional percentage based upon the number of days since the date of issuance of the note as follows:
1) 20% if paid within 30 days of the note date; 2) 25% if paid between 31 and 60 days of the note date; 3) 30% if paid between
61 and 90 days of the note date; 4) 35% if paid between 91 and 120 days of the note date; 5) 40% if paid between 121 and 150 days
of the note date; 6) 45% if paid between 151 and 180 days of the note date. After 180 days from the date of the note, the Company
has no right to prepay the note.
On June 17, 2013, the Company entered into
a convertible note agreement wherein the Company received $27,500 and carries an 8% per annum rate and is due and payable in 9
months. The convertible notes carries the same terms as the April 24, 2013 convertible note.
NOTE 6. STOCKHOLDERS’ EQUITY
Common Stock
The following provides additional information for certain
stock transactions that occurred since January 1, 2013. For additional details for all stock transactions please see the
consolidated statement of changes in stockholders’ equity as reported in the Company’s 10-K for the period ended
December 31, 2012 and filed with the Securities Exchange Commission on April 16, 2013.
A summary of shares issued follows:
|
·
|
During the quarter ended March 31, 2013, the Company issued 2,500,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.005 per share for total cash of $5,000; , the Company issued 5,000,000 equity units at $0.0025 per unit for prepaid consulting services with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.005 per share.; the Company issued 2,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.004 per share for incentive to provide short-term commercial financing in the amount of $25,000.
|
|
·
|
During the quarter ended June 30, 2013, the Company issued 12,366,332 equity units at $0.0015 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $18,500; the Company issued 2,500,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share for total cash of $5,000; the Company issued 20,000,000 equity units at $0.002 per unit for consulting services with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share; the Company issued 30,000,000 equity units at $0.002 with each unit consisting of one common share of stock and one 12 month share purchase warrant exercisable at $0.003 per share to settle $60,000 in outstanding notes payable.
|
Outstanding Warrants
On January 23, 2012 the Company extended the expiration date of
all outstanding warrants as of December 31, 2011 for six months. In accordance with the modification, the Company recognized the
estimated excess value of the modified award over the fair value of the original award immediately before its terms were modified,
based on the pertinent factors on the modification date. The excess value totaling $160,281 was estimated by using a Black-Scholes
pricing model, and comparison of the unregistered and restricted shares underlying the warrants to those that are currently freely
trading. The Company used a historically derived volatility rate of 151%; the remaining contractual terms for each award between
one month and one year; a risk free rate of 0.52%; and an estimated forfeiture rate of 55% for its Black-Scholes model assumptions.
On June 30, 2013 the Company had warrants outstanding summarized
in the table below:
|
|
|
Warrants
|
|
|
Exercise
|
|
|
Expiration
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Date
|
|
|
|
|
|
14,642,855
|
|
|
|
0.005
|
|
|
31-Jul-13
|
|
|
|
|
|
10,000,000
|
|
|
|
0.006
|
|
|
27-Jul-13
|
|
|
|
|
|
5,000,000
|
|
|
|
0.005
|
|
|
31-Aug-13
|
|
|
|
|
|
24,000,000
|
|
|
|
0.005
|
|
|
31-Aug-13
|
|
|
|
|
|
2,000,000
|
|
|
|
0.005
|
|
|
30-Nov-13
|
|
|
|
|
|
5,000,000
|
|
|
|
0.005
|
|
|
15-Aug-13
|
|
|
|
|
|
5,000,000
|
|
|
|
0.005
|
|
|
6-Dec-13
|
|
|
|
|
|
2,500,000
|
|
|
|
0.005
|
|
|
6-Jan-14
|
|
|
|
|
|
2,000,000
|
|
|
|
0.004
|
|
|
15-Mar-14
|
|
|
|
|
|
1,333,333
|
|
|
|
0.003
|
|
|
24-Apr-14
|
|
|
|
|
|
15,000,000
|
|
|
|
0.004
|
|
|
22-Apr-14
|
|
|
|
|
|
1,666,666
|
|
|
|
0.003
|
|
|
30-Apr-14
|
|
|
|
|
|
30,000,000
|
|
|
|
0.003
|
|
|
21-May-14
|
|
|
|
|
|
2,500,000
|
|
|
|
0.003
|
|
|
19-May-14
|
|
|
|
|
|
1,333,333
|
|
|
|
0.003
|
|
|
25-May-14
|
|
|
|
|
|
1,333,000
|
|
|
|
0.003
|
|
|
27-May-14
|
|
|
|
|
|
6,700,000
|
|
|
|
0.003
|
|
|
23-May-14
|
|
|
|
|
|
5,000,000
|
|
|
|
0.003
|
|
|
31-May-14
|
|
Total
|
|
|
|
135,009,187
|
|
|
|
|
|
Information relating to warrant activity during the reporting period
follows:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Contingent
|
|
|
Exercise
|
|
|
|
Warrants
|
|
|
Warrants
|
|
|
Price
|
|
Total Warrants outstanding at December 31, 2012
|
|
|
347,092,849
|
|
|
|
–
|
|
|
|
0.0053
|
|
Plus: Warrants Issued
|
|
|
74,366,332
|
|
|
|
–
|
|
|
|
0.0034
|
|
Less: Warrants Exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Less: Warrants Expired
|
|
|
(286,449,994
|
)
|
|
|
–
|
|
|
|
0.0054
|
|
Total Warrants outstanding at June 30, 2013
|
|
|
135,009,187
|
|
|
|
|
|
|
|
0.0042
|
|
NOTE 7. RELATED PARTY TRANSACTIONS
Certain related parties assist in financing
operations by personally paying expenses which the company considers to be in the nature of accounts payable since the obligations
are incurred within the normal course of business and classified as related party accounts payable. Unpaid officer and director
fees are also classified as related party accounts payable. The balance due to related parties was $134,562, and $139,976 as of
June 30, 2013 and December 31, 2012, respectively.
NOTE 8. SUBSEQUENT EVENTS
Since June 30, 2013, our CEO and President,
Garrett Hale, has provided short-term operating loans to the Company in the amount of $10,000. Additionally, we have raised $5,000
in funding from private placements with investors.
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly and unaudited 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 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 unaudited financial statements are
stated in United States dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. The
following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in
this quarterly 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 quarterly report.
In this quarterly and unaudited report,
unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common stock"
refer to the common shares in our capital stock.
As used in this quarterly and unaudited
report, the terms "we", "us", "our", "our company" and "Sunergy" mean Sunergy,
Inc. and our wholly owned subsidiaries, Mikite Gold Resources Limited, a Ghanaian company, Allied Mining and Supply LLC, a Nevada
limited liability, which wholly owns Allied Mining and Supply Limited, a Sierra Leone Company, unless otherwise stated.
Overview and Current Business
We were incorporated in the State of Nevada,
USA, on January 28, 2003. We are an exploration stage company engaged in the acquisition, exploration and development of mineral
properties with a view to exploiting any mineral deposits we discover that demonstrate economic feasibility. Our current exploration
efforts are focused on our two properties; one of which is located in Sierra Leone, Africa and the other is located in Ghana, Africa.
Overview and Current Business
We were incorporated in the State of Nevada,
USA, on January 28, 2003. We are an exploration stage company engaged in the acquisition, exploration and development of mineral
properties with a view to exploiting any mineral deposits we discover that demonstrate economic feasibility. Our current exploration
efforts are focused on our two properties; one of which is located in Sierra Leone, Africa and the other is located in Ghana, Africa.
Nyinahin Concession, Ghana:
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 Offin River area
offers strong alluvial operations potential as well as the underlying bedrock is a continuation of the Keegan Esaase-Jeni Project.
The large area west of the Offin River area contain some significant geological anomalies that warrant additional exploration activities.
In the overall, this concession represents a significant future development opportunity for our Company.
We have commenced the exploration stage
of our operations on Nyinahin but 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. This year’s exploration is designed to confirm
initial discoveries of gold on our concession contained in a report that accompanied the purchase of the property.. The results
indicate further exploration involving geochemical and geophysical work which, if successful, should set the stage for drilling
in the bedrock that is a direct extension of the Keegan Esaase-Jeni Project. Due to our current lack of funding, our activities
during the current fiscal year have been limited to maintaining “good-standing” status of our 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
August 12, 2009. This is a renewable license and all renewal applications, permits and associated fees have been paid and filed
with the Minerals Commission in Sierra Leone. Once the renewal is finalized, a 4 year EXPL license will be granted.The license
area 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 square kilometers. 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.
In 2011 we dredged
the Masanga Area that is believed to have limited overburden and good river accessibility. Shortly after deployment the two Allied
dredges were producing daily quantities of heavy mineral sands (HMS). This effort validated our early extraction estimate of 400
to 500 pounds of HMS per dredge per 10 hour day. The process involved regular performance evaluation resulting in modifications
and adjustments of the dredges and support equipment in order to maximize the efficiency of the advanced exploration .
Multiple areas along the river were sampled
involving considerable de-staging, repositioning and deployment in order to generate target appraisals and gauge future recovery
potential. Due to our limited exploration budget, our 2013 exploration activities consist of investigation of additional areas
of our Pampana River concession and other potential areas where we have been looking for gold, diamonds, REE’s and coltan
minerals. Our activities have been designed to make ready for renewed aggressive exploration activity now that we may have greater
ability to attract exploration and development capital.
Due to the complex nature and broad range
of apparent minerals of the Pampana sands, additional mineralogy is required in order to prove their full mineralogical and elemental
content, and to accurately describe the economic value and overall potential.. We have already learned that in addition to the
free gold contained in the sands, there is an additional amount of precious metals including gold contained in the sands themselves
that will require special separation equipment to recover. Once these additional mineralogical studies are completed by Hazen Research
Labs of Denver, Colo. and the separation equipment and process is defined, we are committed to establishing our processing facility
and conducting operations designed to both produce cash flow and to develop resources and reserves immediately A report dated August
22, 2012 from Hazen Research in Colorado in part states as follows: (The complete report is available for review on our website
www.sunergygold.com
)
MINERALOGICAL EXAMINATION
An initial microscopic examination of the
Stockpile sample showed major ilmenite, zircon, and subordinate monazite and quartz.
To provide evidence of the occurrence of
randomly distributed free placer gold, a 100 g grab sample of the blended Stockpile sample was separated using a high-intensity
rare earth hand magnet to separate the paramagnetic ilmenite from the nonmagnetic constituents, including the gold. Both magnetic
products were assayed for gold and PGMs. The results show that about 99% of the gold is in the nonmagnetic product which assayed
14.4 g/t Au and represents about 28% of the total weight of the sample.
CONCLUSIONS AND RECOMMENDATIONS
Based on the results of this preliminary
investigation, the Stockpile sand contains appreciable gold which is easily recoverable by magnetic and gravity separation.
If desirable or necessary, a high-grade
ilmenite product could also be recovered. Production of monazite and zircon concentrates would also be feasible, however, a monazite
concentrate would be high in thorium, probably in the several-percent range and would certainly represent radioactive source material.
The recovery of the niobium and tantalum
values would require more development work, but considering the information at hand, it is expected that niobium occurring as niobian
rutile can be recovered by electrostatic and high-intensity magnetic separation. The niobium and tantalum occurring as the columbite–tantalite
series (Coltan) would concentrate along with the ilmenite and might be difficult to recover as a separate concentrate.
For the next phase of this project we would
recommend sample variability testing for assessment of the gold potential. As part of this evaluation, further upgrading of the
conventional table concentrate(s) with a Gemini table might be included to produce extra high-grade concentrates. If recovery of
the other components is of interest, the material, preferably a composite, would be processed by the procedure.”
We are currently engaged in further mineralogical
studies to determine the final design of a pilot plant facility, which once finalized will be deployed in our operation in Sierra
Leone.
We are in the process of securing funding
to advance Pampana dredging operations and to finance the acquisition and commissioning of the pilot plant facility. Operations
on Pampana have been voluntarially stopped by our personnel until such time as the renewed EXPL is finalized Dredging and sampling
operations are scheduled to commence in a high terrace area that can only be operated in the rainy season as soon as final approval
is granted. This area has already been tested and shows significant gold as well as black sands.
Management
intends to work closely with local artisanal operators so that cash flow becomes the focus of 2013 operations. Expansion of operations
focused on cash flow is being pursued in a highly prospective diamond, gold and black sands project that is in addition to the
Pampana project
.
Liquidity and Capital Requirements
As we do not have the funds necessary to
cover our projected operating expenses for the next twelve month period, we will be required to raise additional funds through
the issuance of equity securities, through loans or through debt financing. There can be no assurance that we will be successful
in raising the required capital or that actual cash requirements will not exceed our estimates. We intend to fulfill any additional
cash requirement through the sale of our equity securities.
If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation of our
business.
The continuation of our business is dependent
upon obtaining further financing, a successful program of exploration and/or development, and, finally, achieving a profitable
level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests
of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities
and future cash commitments.
There are no assurances that we will be
able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives
to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available
to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the
additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet
our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
We continue to explore opportunities for
the receipt of funding in either equity or financing transactions. As we receive these funds, the Board of Directors and Management
evaluate the best use of the funding received so as to continue on the path of fast ramp up to production.
Results of Operations – Three
months Ended June 30, 2013 and 2012
The following discussion should be read
in conjunction with our unaudited financial statements and the related notes contained in this report for the period ended June
30, 2013. 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 in this interim report.
Our operating expenses for the three
months ended June 30, 2013 and 2012 are outlined in the table below:
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
Depreciation and amortization
|
|
$
|
13,467
|
|
|
$
|
13,038
|
|
|
$
|
429
|
|
General and administrative
|
|
$
|
54,614
|
|
|
$
|
69,076
|
|
|
$
|
(14,462
|
)
|
Management salary
|
|
$
|
10,500
|
|
|
$
|
21,000
|
|
|
$
|
(10,500
|
)
|
Exploration and development
|
|
$
|
43,649
|
|
|
$
|
21,039
|
|
|
$
|
22,610
|
|
Professional fees
|
|
$
|
146,277
|
|
|
$
|
121,404
|
|
|
$
|
24,873
|
|
Revenue
We are an exploration stage entity and
have not commenced any revenue producing activities since our inception. We do not anticipate earning revenues until such time
as we have entered into commercial production on the Nyinahin or Pampana River concessions.
Expenses
The decrease in
operating expenses for the three months ended June 30, 2013, compared to the same period in fiscal 2012, was mainly due to a decrease
in Management salary due to a change in our officers in the third quarter of 2012 at reduced compensation rates. During the period,
our CEO and President and other members of the Company’s exploration team were able to visit operations in Sierra Leone and
Ghana and expended funds to further exploration operations. Professional fees increased $24,873 primarily related to the completion
of the 2012 audit during the second quarter of 2013 as compared to the completion of such procedures in the third quarter of 2012.
Other Expenses
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
Interest expense
|
|
$
|
59,600
|
|
|
$
|
63,700
|
|
|
$
|
(4,100
|
)
|
Interest and financing expenses decreased
by $4,100 primarily is the result of a decrease in the amount of notes payable outstanding during the period with the related interest
or penalty expenses on such notes.
Results of Operations – Three
months Ended June 30, 2013 and 2012
Our operating expenses for the six
months ended June 30, 2013 and 2012 are outlined in the table below:
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
Depreciation and amortization
|
|
$
|
25,848
|
|
|
$
|
26,076
|
|
|
$
|
(228
|
)
|
General and administrative
|
|
$
|
124,873
|
|
|
$
|
133,115
|
|
|
$
|
(8,242
|
)
|
Management salary
|
|
$
|
21,000
|
|
|
$
|
67,000
|
|
|
$
|
(46,000
|
)
|
Exploration and development
|
|
$
|
63,149
|
|
|
$
|
100,346
|
|
|
$
|
(37,197
|
)
|
Professional fees
|
|
$
|
164,424
|
|
|
$
|
226,293
|
|
|
$
|
(24,873
|
)
|
Expenses
The decrease in operating expenses for
the six months ended June 30, 2013, compared to the same period in fiscal 2012, was mainly due to a decrease in exploration which
related to decreased funding available to further exploration work at the concessions. Management salary decreased $46,000 due
to the change in management during the first quarter of 2013 at reduced compensation rates and having only a single officer. Professional
fees decreased $24,873 primarily related to the finalization of auditing and accounting expenses that occurred in the prior year
in getting company filings up-to-date.
Other Expenses
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
Interest expense
|
|
$
|
119,017
|
|
|
$
|
127,400
|
|
|
$
|
(8,383
|
)
|
Financingcosts
|
|
$
|
4,000
|
|
|
$
|
160,281
|
|
|
$
|
(156,281
|
)
|
Interest and financing expenses decreased
by $8,383 primarily is the result of a decrease in the amount of notes payable outstanding during the period with the related interest
or penalty expenses on such notes. Financing costs decreased $156,281 primarily related to the non-recurring incremental cost associated
with the modification of the warrant expiration date that occurred in the first quarter of 2012.
Equity Compensation
We currently do not have any formalized
stock option or equity compensation plans or arrangements however, from time to time we settle obligations via the issuance of
equity and equity-linked instruments.
Liquidity and Financial Condition
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
Change
|
|
Current assets
|
|
$
|
847
|
|
|
$
|
22,699
|
|
|
$
|
(21,852
|
)
|
Current liabilities
|
|
$
|
1,209,994
|
|
|
$
|
873,884
|
|
|
$
|
336,110
|
|
Working Capital
|
|
$
|
(1,209,147
|
)
|
|
$
|
(851,185
|
)
|
|
$
|
(357,962
|
)
|
Cashflow
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
Net cash used in operating activities
|
|
$
|
(121,605
|
)
|
|
$
|
(222,943
|
)
|
|
$
|
101,338
|
|
Net cash provided/(used) in investing activities
|
|
$
|
(6,500
|
)
|
|
$
|
–
|
|
|
$
|
(6,500
|
)
|
Net cash provided/(used) by financing activities
|
|
$
|
128,500
|
|
|
$
|
152,989
|
|
|
$
|
(24,489
|
)
|
Net increase/(decrease) in cash during period
|
|
$
|
396
|
|
|
$
|
(69,954
|
)
|
|
$
|
69,558
|
|
Our total assets at June 30, 2013 were
$1,909,899. Our financial statements report a net loss of $522,311 for the six months ended June 30, 2013 and a net loss of $5,722,432
for the period from January 28, 2003 (date of inception) to June 30, 2013. We had a cash balance of $847 as of June 30, 2013.
We have suffered recurring losses from
operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising
additional capital as needed. In this regard we have raised additional capital through equity offerings and loan transactions. We
have been successful in structuring deals in which expenses are paid for through the issuances of common shares. In
addition, we have raised additional funds and expect to continue to raise additional funds through private placement equity offerings
sufficient to fund our current plan of operations.
We continue to
explore and seek funding opportunities through either equity or loan transactions. As we receive funding, the use of available
funding is evaluated by Management and the Board of Directors for its priority of use.
Our principal sources of funds have
been from sales of our common stock and we expect this to be consistent for at least the next twelve months.
During the first three months, the Company
has focused its efforts on maintaining compliance with all applicable filing requirements and further explore funding opportunities
to progress completion of the work and start of operations at our properties in Ghana and Sierra Leone. The company has been successful
in covering our on-going operational expenses, through the issuance of equity instruments which will allow a larger percentage
of incoming capital to be used to expand our exploration activity.
Contractual Obligations
As
a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
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 Company has on occasion issued equity
and equity linked instruments to non-employees in lieu of cash to various vendors for the receipt of goods and services and, in
certain circumstances the settlement of short-term loan arrangements. The applicable GAAP
establishes
that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably measurable.
In these transactions,
we issue unregistered and restricted equity instruments along with equity-linked instruments (warrants) that are convertible into
unregistered and restricted shares of our common stock.
When unregistered
common shares and equity-linked instruments convertible into unregistered common shares are issued for the settlement of short-term
financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement
is determined by the value of the debt which is more clearly evident, and no
additional inducement expense is recognized.
In situations in which
we issue unregistered restricted common shares and equity-linked instruments in exchange for goods and services, and the value
of the goods and services are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity
instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions
(a Level 2 input within the GAAP hierarchy). We have determined this methodology reflects the risk adjusted fair value of our unregistered
restricted equity instruments using a commercially reasonable valuation technique.
Of major significance
during the nine months period ended September 30, 2012 is the extension of all of the warrants for six months. The assumption was
made when these warrants were purchased that the
Caveat Emptor
would be removed shortly. The
filings took longer to complete than was expected. The board of directors felt that since the company had not been able to at that
point catch up with its government filings, it would be fair and prudent to extend the warrant date. Now that we are current in
our filings we have experienced an increase in the exercising of outstanding warrants.
In accordance with ASC 718, a modification
of the terms of an equity instrument for financial reporting purposes is treated as an exchange of the original award for a new
award. We recognized, as financing costs, the excess value of the modified award over the fair value of the original award immediately
before its terms were modified, based on the pertinent factors on the modification date, We estimated the excess value by using
a Black-Scholes pricing model, and comparison of the unregistered and restricted shares underlying the warrants to those that are
currently freely trading.
In addition to assuming a volatility rate
of approximately 151% (historically derived), we estimated a forfeiture rate of approximately 55% based on prior exercise history
and our prior experience with several of the warrant holders. Increases in the volatility rate assumption along with decreases
in the forfeiture would result in the recognition of additional excess value.