NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Teerralene Fuels Corporation, (formetly Golden Spirit Enterprises Ltd.) (The “Company”) was incorporated on September 13, 1993 in the State of Delaware as Power Direct, Inc. On January 31, 2000 the Company changed its name to 2U Online.com Inc. to reflect management’s decision to shift the Company’s focus from oil and gas exploration and development to internet-based business development. On October 8, 2003, the Company changed its name to Golden Spirit Minerals Ltd. to reflect management’s decision to shift the Company’s focus from internet-based business development to mineral exploration. On October 19, 2004, the Company changed its name to Golden Spirit Mining Ltd. On July 18, 2005, the Company changed its name to Golden Spirit Gaming Ltd. to reflect management’s decision to develop an online gaming business. The launch of the updated goldenspiritpoker.com website featuring real cash games, in addition to play money games, occurred in January 2006. By agreement dated July 18, 2005 as amended September 20, 2005 (the “Amended Agreement”), the Company agreed to acquire 100% of the issued and outstanding common shares of 4 Of A Kind Enterprises (“4KE”) doing business as EverythingAboutPoker.com for consideration of 1,388,889 post-reverse split restricted shares of the Company’s common stock which were placed in trust pending finalization of the agreement. The parties have agreed to complete this acquisition, subject to satisfactory completion of due diligence (See Note 5), effective March 31, 2006.
Effective June 30, 2006, the Company completed a 1 for 18 reverse stock split (refer Note 7) and changed its name to Golden Spirit Enterprises Ltd. to reflect the Company’s plan to expand its operations to include the marketing of other products and venues not related to gaming including
an agreement with Eneco Industries to participate
in a series of Municipal Solid Waste (garbage) fueled Recycling and Resource Recovery Plants. In addition, the Company
signed an agreement with Global Terralene Inc. for the acquisition of all assets pertaining to Terralene Fuels.
(refer to Note 4).
On November 29, 2011, the Company changed its name to Terralene Fuels Corporation.
GOING CONCERN
The consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception of $18,147,836 and at December 31, 2012 had a working capital deficiency of $183,532. The Company and its subsidiaries are in the development stage and further significant losses are expected to be incurred in developing its business. The recoverability of the carrying value of assets and the ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations. There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. Given the Company’s limited operating history, lack of sales, and its operating losses, there can be no assurance that it will be able to achieve or maintain profitability. The Company intends to fund the marketing of its business with both equity financing and joint venture opportunities, although there are no assurances these opportunities will be successful. Accordingly, these factors raise substantial doubt regarding the ability of the Company to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The financial statements include the accounts of the Company and its subsidiaries, a 100% interest in PD Oil & Gas, Inc. (inactive), and a 100% interest in Cardstakes.com Enterprises Ltd. (inactive).
Concentration of Credit Risk
Cash in bank accounts is at risk to the extent that it exceeds U.S.Federal Deposit Insurance Corporation and Canadian Deposit Insurance Corporation insured amounts. To minimize risk, the Company places its cash with high credit quality institutions. All cash is deposited in one prominent Canadian financial institution.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates and Assumptions
Preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United Stares requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The significant areas requiring management’s estimates and
assumptions relate to determining the fair value of stock-based compensation, fair value of shares issued for services and the acquisitions and useful lives of long-lived assets.
Fair Value of Financial Instruments
The Company’s financial instruments include cash, receivables, available-for-sale securities, accounts payable and accrued liabilities, amounts due to and due to related parties. Management believes the fair values of these financial instruments approximate their carrying values due to their short-term nature.
The Company adopted ASC Topic 820-10 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements
.
ASC Topic 820-10 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, ASC Topic 820-10 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
|
*
|
Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
|
|
*
|
Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
*
|
Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques
|
In general, and where applicable, we use quoted prices in an active market for marketable securities that are traded on exchanges. These marketable securities are included in Level 1.
The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities are described below:
|
|
|
Fair Value Measurements
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair Value
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
207
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
207
|
|
|
Available securities
|
|
|
9,442
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,442
|
|
|
Intangible Assets
|
|
|
-
|
|
|
|
-
|
|
|
|
200,119
|
|
|
|
200,119
|
|
|
Total
|
|
$
|
9,649
|
|
|
$
|
-
|
|
|
$
|
200,119
|
|
|
$
|
209,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current and long-term debt
|
|
$
|
183,739
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
183,739
|
|
|
Total
|
|
$
|
183,739
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
183,739
|
|
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 52, “Foreign Currency Translation”, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates that prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Available For Sale Securities – Related Party
The Company holds marketable equity securities which are available-for-sale and as such, their carrying value is adjusted to market at the end of each reporting period. Unrealized gains and losses on these investments are recorded as a component of accumulated other comprehensive income (loss) and are recorded as a component of net income (loss) when realized. However, if there is a permanent decline in the market value of available-for-sale securities, this permanent market value adjustment is taken into income in the period.
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350 , “Intangibles-Goodwill and Other” requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of ASC 350. This standard also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. As of December 31, 2012, the Company has not completed the purchase of intangible assets. The Company's investment in intangible assets consist of the acquisition of patents and other proprietary information of Terralene Fuels, a patented fuel alternative formulation. Except for the website, the Company determined that the intangibles have indefinite useful lives and will be reviewed annually for impairment.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, 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 balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those 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 date of enactment or substantive enactment. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain.
Loss per Common Share
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury method. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
Stock-Based Compensation
The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on our financial statements.
The Company adopted certain amendments to Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements,” effective January 1, 2012. These amendments include a consistent definition of fair value, enhanced disclosure requirements for “Level 3” fair value adjustments and other changes to required disclosures. Their adoption did not have a material impact on the Company’s consolidated financial statements.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company adopted the amendments to ASC 220, “Comprehensive Income,” effective January 1, 2012. The amendments pertained to presentation and disclosure only.
The Company adopted the amendments to ASC 350, “Intangibles-Goodwill and Others,” effective January 1, 2012. The amended guidance allows us to do an initial qualitative assessment of relevant events and circumstances to determine if fair value of a reporting unit is more likely than not to be less than its carrying value, prior to performing the two-step quantitative goodwill impairment test. The adoption of these amendments did not have a material impact on the Company’s consolidated financial statements
NOTE 3 – AVAILABLE–FOR-SALE SECURITIES – RELATED PARTIES
Bravo Enterprises Ltd.
The Company owns common shares of Bravo Enterprises Ltd. (formerly Organa Gardens International Inc.) (“Bravo”), a public company with directors and significant shareholders in common that does not represent a position of control of or significant influence over Bravo.
During the year ended December 31, 2011, the Company sold Nil Bravo shares and recorded an additional unrealized loss of $ (3,097). As a result, the carrying value of the available for sale shares of Bravo is $1,407 as at December 31, 2011.
Effective December 31, 2011, the Company recorded a $1,689 write-down of its investment in Bravo due to an other-than-temporary decline in the value of the shares.
During the year ended December 31, 2012, the Company sold Nil Bravo shares and recorded an additional unrealized gain of $ 6,158. As a result, the carrying value of the available for sale shares of Bravo is $7,565 as at December 31, 2012.
Legacy Platinum Group Inc.
The Company owns common shares of Legacy Platinum Group Inc. (“Legacy”), a public company with directors and significant shareholders in common, that does not represent a position of control of or significant influence over Legacy
NOTE 3 – AVAILABLE–FOR-SALE SECURITIES – RELATED PARTIES (continued)
During the year ended December 31, 2011, the Company sold Nil Legacy shares and recorded an additional unrealized loss of $ (33,781). As a result, the carrying value of the available for sale shares of Legacy is $3,754 as at December 31, 2011.
Effective December 31, 2011, the Company recorded a $32,843 write-down of its investment in Legacy due to an other-than-temporary decline in the value of the shares.
During the year ended December 31, 2012, the Company sold Nil Legacy shares and recorded an additional unrealized loss of $ (1,877). As a result, the carrying value of the available for sale shares of Legacy is $1,877 as at December 31, 2012.
Available for sale securities – related parties include the following:
|
|
|
December 31 ,
|
|
|
December 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2,345,937 (2011-2,345,937) shares of Legacy Platinum Group Inc.
|
|
$
|
1,877
|
|
|
$
|
3,754
|
|
|
703,750 (2011- 703,750) shares of Bravo Enterprises Ltd.
|
|
|
7,565
|
|
|
|
1,407
|
|
|
|
|
$
|
9,442
|
|
|
$
|
5,161
|
|
NOTE 4 – INVESTMENTS IN INTANGIBLE ASSETS
On August 24, 2010, the Company signed an agreement with Global Terralene Inc. for the acquisition of all assets pertaining to Terralene Fuels. Under the terms of the agreement, the Company will issue 7,000,000 restricted common shares to Global Terralene Inc. in two phases. On November 30, 2010, the Company approved and issued 5,000,000 restricted common shares valued at $125,000 to Global Terralene Inc. The Company issued a further 2,000,000 restricted common shares valued at $50,000 in February 2012 once it received certain documents outlined in the agreement. are prepared. Terralene Fuel is a patented fuel alternative formulation that is the equivalent of 87 octane regular gasoline and utilizes renewable energy sources in 45% of its composition. Terralene’s unique fuel reduces greenhouse gas and other environmental damaging emissions and can be easily integrated into the existing fuel infrastructure. During the year ended December 31, 2012, the Company capitalized $18,907 (2011- $6,212) in patent work.
Total Investments in Terralene Fuels costs at December 31, 2012 and 2011 total $200,119 and $131,212 respectively and include the following assets:
Patents, trademarks, copyright
Formulas, reports, studies
Schematics, proprietary info
Website
Terralene brandname
|
The purchase was completed in 2012 and no preliminary allocation has been completed. Amortization for intangible assets with definitive useful life purchased from Terralene Fuels, specifically the website, will be recorded over the estimated useful life of the website using the straight-line method for financial statement purposes when the product or service has been delivered or performed and invoiced by the Company and it begins to recognize revenues.
NOTE 5 – DEFERRED COMPENSATION
The Company has recorded as deferred compensation prepaid amounts for consulting and management services contracts paid for by issuance of shares of common stock as follows:
|
a)
|
On May 15, 2010, the Company entered into an agreement with Domain Land Holdings Ltd. (“Domain”), a private company controlled by a significant shareholder, with a two-year term, whereby Domain provides investment-banking services to the Company (valued at $30,000) in exchange for 750,000 restricted shares of the Company’s common stock. During the year ended December 31, 2011, a total of $5,625 has been expensed (December 31, 2011 - $15,000).
|
|
b)
|
On May 15, 2010, the Company entered into an agreement with 103244 Alberta Ltd. (“1063244”), a private company controlled by a significant shareholder, with a two-year term, whereby 1063244 provides investor relations services to the Company (valued at $30,000) in exchange for 750,000 restricted shares of the Company’s common stock. During the year ended December 31, 2012, a total of $5,625 has been expensed (December 31, 2011 - $15,000).
|
|
c)
|
On October 1, 2011, the Company entered into an agreement with a consultant, for a two year term, whereby the consultant provides consulting services to the Company (valued at $10,000) in exchange for 5,000,000 restricted shares of the Company’s common stock. During the year ended December 31, 2012, $5,000 was expensed (December 31, 2011 - $1,250).
|
|
d)
|
On October 1, 2011, the Company entered into an agreement with Palisades Financial Ltd. (“Palisades”), a private company controlled by a significant shareholder, with a two-year term, whereby Palisades provides investment-banking services to the Company (valued at $10,000) in exchange for 5,000,000 restricted shares of the Company’s common stock. During the year ended December 31, 2012, $5,000 was expensed (December 31, 2011 - $1,250).
|
|
e)
|
On October 1, 2011 the Company entered into an agreement with Compte de Sierge Accomodative Corp. Limited (“Compte”), a private company controlled by a significant shareholder, with a two-year term, whereby Compte provides investor relations services to the Company (valued at $10,000) in exchange for 5,000,000 restricted shares of the Company’s common stock. During the year ended December 31, 2012, $5,000 was expensed (December 31, 2011 - $1,250).
|
|
f)
|
On August 30, 2012, the Company entered into an agreement with Domain Land Holdings Ltd. (“Domain”), a private company controlled by a significant shareholder, with a two-year term, whereby Domain provides consulting services to the Company (valued at $25,000) in exchange for 25,000,000 restricted shares of the Company’s common stock. During the year ended December 31, 2012, $4,167 was expensed (December 31, 2011 - $Nil).
|
NOTE 5 – DEFERRED COMPENSATION (continued)
|
g)
|
On August 30, 2012, the Company entered into an agreement with a consultant, with a two-year term, whereby the consultant provides consulting services to the Company (valued at $25,000) in exchange for 25,000,000 restricted shares of the Company’s common stock..During the year ended December 31, 2012, $4,167 was expensed (December 31, 2011 - $Nil).
|
As at December 31, 2012, the unamortized portion of the deferred compensation totaled $52,917 (December 31, 2011 - $37,500).
The Company’s capitalization is 500,000,000 common shares with a par value of $0.0001 per share. No preferred shares have been authorized.
(1)
2012 Stock Transactions
During the year ended December 31, 2012, the Company issued a further 2,000,000 restricted common shares valued at $50,000 pursuant to its agreement with Global Terralene Inc. (See Note 4).
During the year ended December 31, 2012, the
Company issued a total of 5,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan at $0.0025 per share to satisfy debt to related parties in the amount of $12,500, 5,200,000 common shares at $0.002 per share to satisfy debt to related parties in the amount of $10,400 and 4,800,000 common shares at $0.001 per share to satisfy debt to related parties in the amount of $4,800.
During the year ended December 31, 2012,
the Company issued 50,000,000 restricted common shares valued at $50,000 pursuant to deferred compensation agreements. (See Note 6)
(2)
2011 Stock Transactions
On January 13, 2011, the Company issued 25,000 restricted common shares valued at $750 to a new director for his services and issued 250,000 restricted common shares valued at $7,500 to a consultant for his services in relation to the company’s Terralene Fuels project.
The Company issued a total of 12,000,000 common shares pursuant to the exercise of options under the Company’s 2011 Stock Incentive and Option Plan at prices between $0.03 - $0.035 per share to satisfy debt to related parties in the amount of $171,000 and for consulting services in the amount of $197,250.
During the year ended December 31, 2011, 15,000,000 restricted common shares were issued valued at $30,000 pursuant to deferred compensation contracts with related parties. See note 7.
NOTE 6 – CAPITAL STOCK (continued)
(3)
2012 Stock Options
On December 23, 2011, the Company filed a Registration Statement on Form S-8 to cover 15,000,000 shares of common stock to be granted pursuant to the Company’s 2012 Stock Incentive and Option Plan.
The Company’s stock option activity is as follows:
|
|
|
Number
of options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
3,002,517
|
|
|
$
|
0.20
|
|
|
2.67 years
|
|
|
Granted during 2010
|
|
|
14,516,667
|
|
|
|
-
|
|
|
|
|
|
|
Exercised during 2010
|
|
|
(14,516,667
|
)
|
|
|
-
|
|
|
|
|
|
|
Balance, December 31,2010
|
|
|
3,002,517
|
|
|
|
-
|
|
|
|
|
|
|
Granted during 2011
|
|
|
12,000,000
|
|
|
|
0.03
|
|
|
|
|
|
|
Exercised during 2011
|
|
|
(12,000,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
|
|
3,002,517
|
|
|
$
|
0.20
|
|
|
2.67 years
|
|
|
Granted during 2012
|
|
|
15,000,000
|
|
|
|
0.03
|
|
|
|
|
|
|
Exercised during 2012
|
|
|
(15,000,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
|
3,002,517
|
|
|
$
|
0.20
|
|
|
2.67 years
|
|
During the year ended December 31, 2012, the Company granted 15,000,000 options to certain related party creditors. The options were simultaneously converted by the option holders into 15,000,000 shares of the company’s $0.0001 par value common stock under the terms of the Company’s 2012 Stock Incentive and Option Plan as follows: a total of 5,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan at $0.0025 per share to satisfy debt to related parties in the amount of $12,500, 5,200,000 common shares at $0.002 per share to satisfy debt to related parties in the amount of $10,400 and 4,800,000 common shares at $0.001 per share to satisfy debt to related parties in the amount of $4,800. Accordingly, the value of the options on grant date approximated the fair value of the stock they were exercised into in order to satisfy the debt.
(4)
2011 Stock Options
On January 18, 2011, the Company filed a Registration Statement on Form S-8 to cover 12,000,000 shares of common stock to be granted pursuant to the Company’s 2011 Stock Incentive and Option Plan.
On December 23, 2011, the Company filed a Registration Statement on Form S-8 to cover 15,000,000 shares of common stock to be granted pursuant to the Company’s 2012 Stock Incentive and Option Plan.
During the year ended December 31, 2011,
the Company issued a total of 12,000,000 common shares pursuant to the exercise of options under the Company’s 2011 Stock Incentive and Option Plan at prices between $0.03 - $0.035 per share to satisfy debt to related parties in the amount of $171,000 and for consulting services in the amount of $197,250.
NOTE 6 – CAPITAL STOCK (continued)
The Company’s stock option activity is as follows:
|
|
|
Number
of options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
3,002,517
|
|
|
$
|
0.20
|
|
|
2.67 years
|
|
|
Granted during 2010
|
|
|
14,516,667
|
|
|
|
-
|
|
|
|
|
|
|
Exercised during 2010
|
|
|
(14,516,667
|
)
|
|
|
-
|
|
|
|
|
|
|
Balance, December 31,2010
|
|
|
3,002,517
|
|
|
|
-
|
|
|
|
|
|
|
Granted during 2011
|
|
|
12,000,000
|
|
|
|
0.03
|
|
|
|
|
|
|
Exercised during 2011
|
|
|
(12,000,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
|
|
3,002,517
|
|
|
$
|
0.20
|
|
|
2.67 years
|
|
NOTE 7 – RELATED PARTY TRANSACTIONS
During the year ended December 31, 2012, companies controlled by significant shareholders earned $34,584 (2011 - $48,635) pursuant to deferred compensation services contracts (refer to Note 5).
During the year ended December 31, 2012, the Company paid $4,015 (2011 -$7,243) to directors for management fees.
During the year ended December 31, 2012, the Company incurred expenses for office rent of $31,081 (2011 - $30,868) to a private company controlled by a significant shareholder.
The following amounts are due to related parties at:
|
|
|
December 31,
2012
|
|
|
December 31,
2011
|
|
|
|
|
|
|
|
|
|
|
Significant shareholders
|
|
$
|
121,400
|
|
|
$
|
62,606
|
|
All related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
As of August 1, 2012, the Company has leased 1250 sq. ft of office space from Holm Investments Ltd. at $2,500 per month for a period of 3 years.
|
Payments
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
TOTAL
|
|
|
Office Rent
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
$
|
90,000
|
|
NOTE 9 – INCOME TAXES
As of December 31, 2012, the Company had net operating loss carryforwards of approximately $18,100,000 that may be available to reduce future years' taxable income and will expire between the years 2013 - 2032. Availability of tax losses is subject to change of ownership limitations under Internal Revenue Code 382. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carryforwards.
NOTE 9 – INCOME TAXES (continued)
The actual income tax provisions differ from the expected amounts calculated by applying the federal income tax statutory rate to the Company’s loss before income taxes. The components of these differences are as follows:
|
|
|
Year ended
December 31, 2012
|
|
|
Year ended
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(125,924
|
)
|
|
$
|
(393,813
|
)
|
|
Combined federal and state corporate tax rate
|
|
|
42.7
|
%
|
|
|
42.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Expected tax expense (recovery)
|
|
|
(53,770
|
)
|
|
|
(168,158
|
)
|
|
Non-deductible stock based compensation
|
|
|
97,000
|
|
|
|
97,000
|
|
|
Change in valuation allowance
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company’s tax-effected deferred income tax assets and liabilities are estimated as follows:
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Non-capital loss carry forwards
|
|
$
|
7,273,000
|
|
|
$
|
7,273,000
|
|
|
Valuation allowance
|
|
|
(7,273,000
|
)
|
|
|
(7,273,000
|
)
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 10 – SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES
Cash paid during the years ended December 31, 2012 and 2011 for:
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
During the year ended December 31, 2012:
During the year ended December 31, 2012, the Company issued a further 2,000,000 restricted common shares valued at $50,000 pursuant to its agreement with Global Terralene Inc. (See Note 4).
During the year ended December 31, 2012, the
Company issued a total of 5,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan at $0.0025 per share to satisfy debt to related parties in the amount of $12,500, 5,200,000 common shares at $0.002 per share to satisfy debt to related parties in the amount of $10,400 and 4,800,000 common shares at $0.001 per share to satisfy debt to related parties in the amount of $4,800.
During the year ended December 31, 2012,
the Company issued 50,000,000 restricted common shares valued at $50,000 pursuant to deferred compensation agreements. (See Note 6)
During the year ended December 31, 2011:
The Company issued 25,000 restricted common shares valued at $750 to a new director for his services and issued 250,000 restricted common shares valued at $7,500 to a consultant for his services in relation to the Terralene Fuels project.
The Company issued a total of 12,000,000 common shares pursuant to the exercise of options under the Company’s 2011 Stock Incentive and Option Plan at prices between $0.03 - $0.035 per share to satisfy debt to related parties in the amount of $171,000 and for consulting services in the amount of $197,250.
The Company issued 15,000,000 restricted common shares were issued valued at $30,000 pursuant to deferred compensation contracts with related parties. (See note 7).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.