UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________________ to _____________________
Commission File Number 0-2660
1ST NRG CORP
(Exact name of small business issuer as specified in its charter)
Delaware | 22-3386947 |
(State or other jurisdiction of | (IRS Employer |
Incorporation or organization) | Identification No.) |
1941 Lake Whatcom Blvd #212 Bellingham, WA 98229 (address of principal executive offices) 360-384-4390 (issuer's telephone number)
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(former name)
(former address)
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(Former name, former address and former fiscal year, if changed since last report)
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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes |_| No |X|
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 59,560,560 shares of Common Stock, $.001 par value, were outstanding, as of November 10, 2007.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
Form 10-QSB
INDEX
Page | |
Number | |
PART I. FINANCIAL INFORMATION | 2 |
Item 1. Financial Statements | 2 |
Balance Sheet | 2 |
Statements of Operations | 3 |
Statements of Stockholders Equity | 4 |
Statements of Cash Flows | 5 |
Notes to Financial Statements | 6 |
Item 2. Plan of Operation | 9 |
Item 3. Controls and Procedures | 11 |
PART II OTHER INFORMATION | 11 |
Item 1. Legal Proceedings | 11 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 11 |
Item 3. Defaults upon Senior Securities | 11 |
Item 4. Submission of Matters to a Vote of Security Holders | 11 |
Item 5. Other Information | 11 |
Item 6. Exhibits and reports on Form 8-K | 11 |
SIGNATURES | 13 |
Exhibits 31 & 32 CERTIFICATIONS |
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
1st NRG CORP
(A Development Stage Company)
BALANCE SHEET
September 30, 2007
(Unaudited)
ASSETS | |||
Current Assets | |||
Cash | $ | 115 | |
Cash held in escrow accounts | 351,500 | ||
Prepaid expenses | 47,329 | ||
Total current assets | $ | 398,944 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||
Current Liabilities | |||
Accounts payable | $ | 5,263 | |
Accrued management compensation | 454,546 | ||
Loans payable | 34,378 | ||
Loans payable, related parties | 8,615 | ||
Total current liabilities | 502,802 | ||
Stockholders' Deficit | |||
Preferred stock - authorized 5,000,000 shares, | |||
par value $.001, none issued or outstanding | - | ||
Common stock - authorized 500,000,000 shares, | |||
par value $.001, 59,560,560 shares issued | |||
and outstanding | 59,561 | ||
Common stock issuable, 24,121,414 shares | 24,122 | ||
Additional paid-in capital | 5,735,909 | ||
Stock subscriptions | (720,000 | ) | |
Accumulated deficit | (2,632,475 | ) | |
Deficit accumulated during the development stage | (2,570,975 | ) | |
(103,858 | ) | ||
$ | 398,944 |
See Notes to Financial Statements
3
1st NRG CORP
(a Development Stage Company)
STATEMENT OF OPERATIONS
For the Three and Nine Months Ended September 30, 2007 and 2006, and for the Period from
October 1, 2003 (the effective date of the development stage) through
September 30, 2007
(Unaudited)
Three | Three | Cumulative | |||||||||||||
Months | Months | Nine Months | Nine Months | During the | |||||||||||
Ended Sep | Ended Sep | Ended Sep | Ended Sep | Development | |||||||||||
30, 2007 | 30, 2006 | 30, 2007 | 30, 2006 | Stage | |||||||||||
Revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
Expenses | |||||||||||||||
Management compensation | 125,001 | 29,250 | 253,546 | 87,750 | 2,577,046 | ||||||||||
General and administrative | 13,270 | 6,220 | 73,001 | 25,148 | 195,534 | ||||||||||
Interest | - | 16 | 433 | 3,395 | |||||||||||
138,271 | 35,470 | 326,563 | 113,331 | 2,775,975 | |||||||||||
Extinquishment of related party debt | - | (205,000 | ) | (205,000 | ) | ||||||||||
Net loss | ($ | 138,271 | ) | ($ | 35,470 | ) | ($ | 121,563 | ) | ($ | 113,331 | ) | ($ | 2,570,975 | ) |
Net loss per common share (basic and fully diluted) | ($ | 0.00 | ) | ($ | 0.00 | ) | ($ | 0.00 | ) | ($ | 0.00 | ) | |||
Weighted average number of common shares outstanding | 83,681,974 | 68,610,560 | 78,082,817 | 68,610,560 |
See Notes to Financial Statements
4
1st NRG CORP
(a Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIT
For
the Nine Months Ended September 30, 2007 and for the Period from
October 1, 2003 (the effective date of the development stage) through
September 30, 2007
(Unaudited)
|
|
| Preferred Stock |
| Common Stock |
| Common Stock Issuable |
|
|
|
|
|
|
|
Deficit |
|
| ||||||
|
|
| Number
of |
| Amount |
| Number
of |
| Amount |
| Number
of |
| Amount |
| Additional |
| Stock |
| Accumulated |
| During the |
| Total |
Balance, October 1, 2003 |
|
| - |
| $ - |
| 6,133,500 |
| $ 6,134 |
| - |
| $ - |
| $ 1,582,105 |
| $ - |
| $ (2,632,475) |
| $ - |
| $ (1,044,236) |
Common stock issuable for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
management compensation, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
October 2003 |
| - |
| - |
| - |
| - |
| 39,000,000 |
| 39,000 |
| 1,911,000 |
| - |
| - |
|
|
| 1,950,000 | |
Common stock issuable for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
debt and accrued expenses, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
October 23, 2003 |
|
|
|
|
|
|
|
|
| 20,477,060 |
| 20,477 |
| 1,003,376 |
|
|
|
|
|
|
| 1,023,853 | |
Net loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,986,287) |
| (1,986,287) |
Balance, December 31, 2003 | - |
| - |
| 6,133,500 |
| 6,134 |
| 59,477,060 |
| 59,477 |
| 4,496,481 |
| - |
| (2,632,475) |
| (1,986,287) |
| (56,670) | ||
Stock subscription issued for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
services to be provided, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
May 2004 |
|
|
|
|
| 3,000,000 |
| 3,000 |
|
|
|
|
| 717,000 |
| (720,000) |
|
|
|
|
| - | |
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
issuable |
|
|
|
|
| 49,927,060 |
| 49,927 |
| (49,927,060) |
| (49,927) |
|
|
|
|
|
|
|
|
| - | |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (121,966) |
| (121,966) |
Balance, December 31, 2004 |
| - |
| - |
| 59,060,560 |
| 59,061 |
| 9,550,000 |
| 9,550 |
| 5,213,481 |
| (720,000) |
| (2,632,475) |
| (2,108,253) |
| (178,636) | |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (164,683) |
| (164,683) |
Balance, December 31, 2005 |
| - |
| - |
| 59,060,560 |
| 59,061 |
| 9,550,000 |
| 9,550 |
| 5,213,481 |
| (720,000) |
| (2,632,475) |
| (2,272,936) |
| (343,319) | |
Common stock issuable for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
prepaid expenses on services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
to be provided in 2007, Nov 2006 |
|
|
|
|
|
|
|
|
| 285,714 |
| 286 |
| 9,714 |
|
|
|
|
|
|
| 10,000 | |
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
for services, Nov 2006 |
|
|
|
|
| 500,000 |
| 500 |
|
|
|
|
| 27,000 |
|
|
|
|
|
|
| 27,500 | |
Net loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (176,476) |
| (176,476) |
Balance December 31, 2006 |
| - |
| - |
| 59,560,560 |
| 59,561 |
| 9,835,714 |
| 9,836 |
| 5,250,195 |
| (720,000) |
| (2,632,475) |
| (2,449,412) |
| (482,295) | |
Common stock issuable for cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
including warrants for zero value |
|
|
|
|
|
|
|
|
| 14,285,700 |
| 14,286 |
| 485,714 |
|
|
|
|
|
|
| 500,000 | |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (121,563) |
| (121,563) |
Balance, September 30, 2007 |
|
| $ - |
| $ - |
| $ 5,956,056,000 |
| $ 5,956,100 |
| $ 2,412,141,400 |
| $ 2,412,200 |
| $ 573,590,900 |
| $ (72,000,000) |
| $ (263,247,500) |
| $ (257,097,500) |
| $ (10,385,800) |
See Notes to Financial Statements
5
1st NRG CORP
(a Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2007 and 2006 and for the
Period from October 1, 2003 (the effective date of the development stage) through
September 30, 2007
(Unaudited)
Cumulative | |||||||||
Nine Months | Nine Months | During the | |||||||
Ended Sep 30, | Ended Sep 30, | Development | |||||||
2007 | 2006 | Stage | |||||||
Cash Flows From Operating Activities | |||||||||
Net (loss) for period | $ | (121,563 | ) | $ | (113,331 | ) | $ | (2,570,975 | ) |
Adjustments to reconcile net (loss) to net cash | |||||||||
used in operating activities | |||||||||
Common stock issuable for: | |||||||||
management compensation | 1,950,000 | ||||||||
future services | 10,000 | ||||||||
Common stock issued for: | |||||||||
services | 27,500 | ||||||||
Gain on extinguishment of related party debt | (205,000 | ) | (205,000 | ) | |||||
Changes in operating assets and liabilities | |||||||||
Prepaid expenses | (37,329 | ) | (47,329 | ) | |||||
Accounts payable and accrued expenses | (29,027 | ) | 1,695 | 36,218 | |||||
Accrued management compensation | 271,046 | 87,750 | 608,046 | ||||||
Net cash used in operating activities | (121,873 | ) | (23,886 | ) | (191,540 | ) | |||
Cash Flows From Investing Activity | |||||||||
Increase in deposits held in Escrow | (351,500 | ) | (351,500 | ) | |||||
Cash Flows From Financing Activities | |||||||||
Proceeds from loans payable, related parties | 23,947 | 117,234 | |||||||
Proceeds from loans payable | 21,878 | 21,878 | |||||||
Proceeds from contracts payable | 12,361 | ||||||||
Proceeds from common stock | 500,000 | 500,000 | |||||||
Payments on loans payable | (59,821 | ) | |||||||
Payments on loans payable, related parties | (48,500 | ) | (48,500 | ) | |||||
Net cash provided by financing activities | 473,378 | 23,947 | 543,152 | ||||||
Net change in cash | 5 | 61 | 112 | ||||||
Cash, beginning of period | 110 | 49 | 3 | ||||||
Cash, end of period | $ | 115 | $ | 110 | $ | 115 | |||
Supplementary Information - Non-cash Transactions: | |||||||||
Common stock issued and issuable for debt | |||||||||
and accrued expenses | $ | - | $ | - | $ | 1,041,353 | |||
Stock subscription issued for services to be | |||||||||
provided | $ | - | $ | - | $ | 720,000 |
See Notes to Financial Statements
6
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Significant Accounting Policies
Organization
1st NRG Corp (the "Company") (formerly Naptau Gold Corporation) was formed under the laws of the State of Delaware on January 8, 1988. The Company's principal business activity was the exploration and development of mineral properties until it reorganized. Effective as of October 1, 2003, the Company discontinued its operations related to mineral properties and re-entered the development stage to examine new opportunities. In 2006, the Company began to explore and consider opportunities in Specialty Fuel Distribution by entering partnerships with major refineries. The Company is currently working on a plan to acquire underutilized crude oil refining assets to begin implementation of their operational strategy.
Accordingly, this interim period financial statements have been prepared treating the Company as a development stage company, effective as of October 1, 2003.
Interim Period Financial Statements
The interim period financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period financial statements should be read together with the audited financial statements and accompanying notes included in the Company's Form 10-KSB for the year ended December 31, 2006. In the opinion of the Company, the unaudited financial statements contained herein contain all adjustments (consisting of a normal recurring nature) necessary to present a fair statement of the results of the interim periods presented.
Going Concern
The Company has incurred significant losses from operations and has an accumulated deficit at September 30, 2007. The Company's ability to continue as a going concern is dependent upon obtaining additional financing and/or achieving a sustainable profitable level of operations. The interim period financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In November 2006, Management of the Company, as part of a plan of sustaining Company operations for the next twelve months and beyond signed a Private Placement Letter of Intent with a Placement Agent to undertake the Private Placement on a best efforts basis for the account of the Company for an aggregate of Five Hundred Million Dollars ($500,000,000) in
7 |
combined equity and debt to acquire the underutilized crude refining assets as referred to above in Organization. Pursuant to this plan, the Company has raised $500,000 as described in Note 2.
The Company has placed $351,500 of these proceeds in escrow accounts under the influence of escrow agents in connection with in-process transactions related to the acquisitions referred to above.
There can be no assurance that any of these efforts will be successful and that the Company will reach its stated goals.
Earnings per Share
Basic earnings or loss per share is computed by dividing the net income or loss available to common stockholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares. There were 10,500,000 potentially dilutive securities held as of September 30, 2007 and none as of September 30, 2006. For the three and nine months ended September 30, 2007 outstanding options and warrants were anti-dilutive because of the Companys net losses. As such, their effect has not been included in the calculation of diluted income per share. Common stock issuable is considered outstanding as of the original approval date for purposes of earnings per share computations.
Stock Based Compensation
The Company accounts for stock-based awards in accordance with SFAS No. 123(R) which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Companys valuation techniques previously utilized for options in footnote disclosures required under SFAS No. 123, Accounting for Stock Based Compensation, as amended by SFAS No. 148, Accounting for Stock Based Compensation Transition and Disclosure.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that the Company believes will have a significant impact on its financial statements or presentation.
8 |
Note 2. Equity Transactions
In April 2007, the Company reached agreement to issue 14,285,700 shares of common stock for aggregate proceeds of $500,000. The common stock issuable at September 30, 2007 will include 10,000,000 stock purchase warrants, which allow the holder to purchase 10,000,000 additional shares at $3.00 per share, expiring 30 months from April 2007. As of the date of this report, these shares and warrants have not yet been issued.
The proceeds from the equity securities were allocable to the common stock and the related warrants. Using the Black-Scholes valuation model, the warrants are considered to have no financial value, accordingly, no proceeds were allocated to the warrants. The Black-Scholes assumptions used were as follows: dividend yield $0, expected volatility of 162%, risk-free interest rate of 5.25%, and stated lives of 2.5 years.
A summary of warrants for the nine months ended September 30, 2007, is as follows:
Number of warrants | Weighted | Remaining | Aggregate | |||
Average | Contractual | Intrinsic Value | ||||
Exercise Price | Term | |||||
Balance at December 31, 2006 | 0 | $ | 0.00 | |||
Warrants granted | 10,000,000 | $ | 3.00 | 2.5 years | $ | 0.00 |
Warrants exercised | -0 | |||||
Warrants cancelled | -0 | |||||
Warrants expired | -0 | |||||
Balance at September 30, 2007 | 10,000,000 | $ | 3.00 | 2.0 years | $ | 0.00 |
In May 2007, the Company authorized 500,000 common stock options to the Companys CFO/Secretary as part of his employment contract. The options are exercisable at $1.00 per share and are exercisable for 3 years beginning in May 2007. The options were valued at $0.00 using the Black-Scholes option pricing model as estimated on the date of grant with the following assumptions: dividend yield $0, expected volatility of 162%, risk-free interest rate of 5.25%, and stated lives of 3 years. Accordingly no compensation expense has been recorded for this transaction.
A summary of options for the nine months ended September 30, 2007 is as follows:
Number of | Weighted | Remaining | Aggregate | |||
options | Average | Contractual | Intrinsic Value | |||
Exercise Price | Term | |||||
Balance at December 31, 2006 | 0 | $ | 0.00 | |||
Options granted | 500,000 | $ | 1.00 | 3.0 years | $ | 0.00 |
Options exercised | -0 | |||||
Options cancelled | -0 | |||||
Options expired | -0 | |||||
Balance at September 30, 2007 | 500,000 | $ | 1.00 | 2.5 years | $ | 0.00 |
The Company has no unvested warrants or stock options.
Note 3. Related Party Transactions
In May 2007, as part of a renegotiated contract with the Companys CFO/Chairman to take on the added responsibilities of the position of Chief Strategic Officer, the Executive agreed to relinquish any right to past accrued salary debt owing to him in the amount of $205,000. Because the renegotiated contract did not include any consideration paid or to be paid to the Executive for prior service, the Company considers the liability to have been extinguished and has recorded a gain for that amount.
The Company's offices are currently provided on a rent-free basis by a Director of the Company. Due to limited Company operations, any facilities expenses are not material and have not been recognized in these interim period financial statements.
Item 2. Plan of Operation
THE FOLLOWING INFORMATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT. FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY," "SHALL," "WILL," "COULD," "EXPECT," "ESTIMATE," "ANTICIPATE," PLAN, "PREDICT," "PROBABLE," "POSSIBLE," "SHOULD," "CONTINUE," OR SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
This discussion and analysis should be read in conjunction with the accompanying Financial Statements and related notes. Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. Our estimates were based on our historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Our critical accounting policies, the policies we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments are outlined below and have not changed significantly.
With the completion of the re-organization in 1994 the Company expanded its areas of interest in addition to the historical mineral exploration activities carried on in the past. The Company is presently developing a business plan and model based on an identified niche related to Specialty Fuel Production. It will attack this market by developing partnerships with major players, identifying acquisition targets, and utilize its established financial associations to fund the model. As the model develops the Companys Chief Strategic Officer has identified quality, qualified personnel, with whom he is in current negotiation, to help bring the model to life and guide it through the various stages of development and growth.
Limited Operations: The Company has not generated any significant revenues and will not generate significant revenues until it is able to develop new projects and sources of financing. Expenditures as shown in the Statements of Operations during the current nine month period reflect a material increase of approximately $213,000 over 2006 caused by the revised employment agreements (see Item 6(a) Exhibits 10.14.1 Employment agreement of Edward D. Renyk and 10.21.1.1 Employment Agreement of Dr. J. Greig (even though the total expenditure was less than 2006 reflecting the recovery of accrued salary in the amount of the one time extinguishment of $205,000 on revision of the Chief Strategic Officers Employment Contract) (see 10.21.1.1 Employment Agreement of Dr. J. Greig). General and administrative expenses for the nine months in 2007 reflect an increase over 2006 of approximately $48,000 for professional fees related to the presentation package to elicit the major financing Letter of Intent (see Item 6 (a) Exhibits 10.23, Chadbourn Securities Private Placement Letter of Intent.
At September 30, 2007 the Company had a stockholders' deficit of $103,858.
Liquidity: The financial statements of the Company contained herein have been prepared on a going concern basis. If the Company were unable to raise funds necessary to continue operations or were unable to generate positive cash flow from new operations, it might be forced to liquidate. In such event, it is unlikely that the Company would realize amounts sufficient to liquidate its liabilities recorded on the balance sheet.
Historically, management has provided the cash funding required to meet current operating costs. Additionally the Company has undertaken further steps as part of the plans outlined above under Plan of Operation with the goal
of sustaining Company operations for the next twelve months and beyond. These steps include: (a) in November the signing of a Private Placement Letter of Intent with a Placement Agent to undertake the Private Placement on a best efforts basis for the account of the Company an aggregate of Five Hundred Million Dollars ($500,000,000) in combined equity and debt (see Item 6 (a) Exhibits 10.23, Chadbourn Securities Private Placement Letter of Intent) , (b) with the raising of $500,000 private placement funding, (see Item 6(a) Exhibits 10.22, Common Stock Unit Purchase Agreement), and (c) in April and May, 2007 updating and concluding management contracts with its CSO and Secretary (see Item 6(a) Exhibits 10.14.1 Employment Agreement of Edward D. Renyk). There can be no assurance that any of these efforts will be successful.
Substantial Indebtedness to Related Parties: The Company owed an aggregate of $463,161, including accrued management compensation and loans payable, primarily to Officers, Directors and related parties. There can be no assurance that the Company will be able to satisfy its obligations to the Related Parties.
Item 3. Controls and Procedures
(a) | Evaluation of Disclosure Controls and Procedures. |
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Companys Chief Executive and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to section 240.13a-15(b) of the Exchange Act of 1934, which are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq) is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, as appropriate to allow timely discussions regarding required disclosure, particularly during the period in which this report was prepared. Based upon that evaluation, the Companys Chief Executive and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic filings with the U.S. Securities and Exchange Commission. | |
However, due to the limited funding available to staff administrative and clerical positions, the Company continues to rely on its principal financial officer and secretary to perform substantially all of the basic accounting functions. It is not possible to adequately segregate the accounting responsibilities so that the person receiving and recording accounting entries is not the same person that is reconciling and reviewing the accounts and therefore extra diligence must be exercised during the period these tasks are combined and this weakness exists. Because the volume of accounting transactions at this time is very low, the extra burden on the other members of the Company to carry out this extra diligence is minimal and manageable. | |
It is also recognized, for similar reason, the Company has not designated an audit committee and should address this concern at the earliest possible opportunity. | |
The Company is committed in its efforts to stabilize its financing to allow for adequate staffing of the accounting department and the addition of an audit committee once operations commence. | |
(b) | Changes in Internal Controls. |
There were no significant changes in our internal controls or in other factors that could significantly affect these internal controls subsequent to the date of our most recent evaluation. | |
PART II OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In April of 2007 the Company placed 50 units under its Common Stock Unit Purchase Agreement (see Item 6(a) Exhibits 10.22, Common Stock Unit Purchase Agreement) realizing $500,000, or $0.035 per share. The Companys management considers the offering to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.
A summary of vested options and warrants for the nine months ended September 30, 2007 is as follows:
Options | Warrants | Weighted | Remaining | Aggregate | |||||
Number | Number of | Average | Contractual | Intrinsic | |||||
of shares | shares | Exercise | Term | Value | |||||
Price | |||||||||
Balance at December 31, 2006 | 0 | 0 | |||||||
Options granted pursuant to an | |||||||||
employment contract | 500,000 | $ | 1.00 | 2.0 years | $ | 0.00 | |||
Warrants issued pursuant to a | |||||||||
Private Placement Agreement | 10,000,000 | 3.00 | 2.5 years | $ | 0.00 | ||||
Options/Warrants exercised | (0 | ) | (0 | ) | |||||
Options/Warrants canceled | (0 | ) | (0 | ) | |||||
Options/Warrants expired | (0 | ) | (0 | ) | |||||
Options/Warrants outstanding | |||||||||
and exercisable at September 30, | |||||||||
2007 | 500,000 | 10,000,000 |
The aggregate intrinsic value in the table above represents the total pretax intrinsic value for all in-the-money options (i.e. the difference between the Companys closing price on the last trading day of the period and the exercise price, multiplied by the number of shares) that would have been received by the option/warrant holders had all option/warrant holders exercised their options/warrants on September 30, 2007. This value changes based on the fair market value of the Companys stock.
The Company has no unvested stock options or warrants.
Item 3. Defaults upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None during this reporting period.
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
a)Exhibits: The following Exhibits are furnished as part of this report.
10.14.1 Employment Agreement of Edward D. Renyk (10)
10.21.1.1 Employment Agreement of Dr. J. Greig (9)
10.22 Common Stock Unit Purchase Agreement (8)
10-23 Private Placement Letter of Intent Chadbourn Securities (8)
(b) Reports on Form 8-K
On April 23, 2007 the Company filed a Form 8k to disclose that under:
1)Section 3 Securities and Trading Markets Item 3.01 the Company had given notice of Failure to
Satisfy a Continued Listing Rule or Standard in that it was unable to complete its Annual Report on
form 10-KSB for the year ended December 31, 2006 within the prescribed time due. This
deficiency was subsequently resolved.
2)Section 5 Corporate Governance of Registrant the Company Item 5.02 (a)(2) announced that a
Director, Ludwig Stromeyer was removed from the Board by mutual agreement.
3)Section 5 Corporate Governance of Registrant the Company Item 5.02(e) the Company signed
and filed a modified Employment Contract with Dr. J. Greig effective April 20, 2007 and running
until April 20, 2012.
4)Item 5.03 Amendments to Articles of Incorporation the Company had filed, effective January
22, 2007, an amendment to its certificate of incorporation in the state of Delaware to effect the
change in name from Naptau Gold Corporation to 1st NRG Corp.
31 & 32 Certification
(8)Incorporated by reference to Companys 10K-SB filed May 18, 2007 Accession Number 0001137171-07-000745
(9)Incorporated by reference to Companys Form 8-K filed April 30, 2007 Accession Number
0001137171-07-000608
(10)Incorporated by reference to Companys Form 10K-SB filed August 20, 2007 Accession Number
0001137171-07-001138
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
1ST NRG CORP | |
/s/ J. Greig | |
--------------------------------- | |
Dated: November 8, 2007 | By: Dr. J. Greig, Ph.D. |
CSO and | |
Principal Executive Officer | |
/s/ Edward D. Renyk | |
--------------------------------- | |
Dated: November 8, 2007 | By: Edward D. Renyk, CA |
Secretary and | |
Principal Accounting Officer |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,
RULES 13a-14 AND 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of 1st NRG CORP (the Company) on Form 10-QSB for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Dr. J. Greig, Chief Executive Officer of the Company, certify, pursuant to Rules 13a-14 and 15-d14 of the Securities Exchange Act of 1934 (the Exchange Act), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002, that:
1.I have reviewed this Report;
2.Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3.Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of, and for, the periods presented in this Report;
4.I and the other certifying officers of the Company are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including any consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(c) Disclosed in this Report any change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter (the Companys fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and
5.I and the other certifying officers have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and to the audit committee of the Companys board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.
/s/ J. Greig
Dr. J. Greig, Chief Executive Officer
November 8, 2007
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, RULES 13a-14 AND 15d-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of 1st NRG CORP. (the Company) on Form 10-QSB for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Edward Renyk, Chief Financial Officer of the Company, certify, pursuant to Rules 13a-14 and 15-d14 of the Securities Exchange Act of 1934 (the Exchange Act), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002, that:
1.I have reviewed this Report;
2.Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3.Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of, and for, the periods presented in this Report;
4.I and the other certifying officers of the Company are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including any consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(c) Disclosed in this Report any change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter (the Companys fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and
5.I and the other certifying officers have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and to the audit committee of the Companys board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.
/s/ E. D. Renyk
Edward Renyk, Chief Financial Officer
November 8, 2007
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of 1st NRG CORP (the Company) on Form 10-QSB for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, Dr. J. Greig, Chief Executive Officer of the Company, and Edward Renyk, Chief Financial Officer of the Company, respectively certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ J. Greig | /s/ E. D. Renyk |
Dr. J. Greig, Chief Executive Officer | Edward Renyk, Chief Financial Officer |
November 8, 2007 | November 8, 2007 |