UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
0-49632
Commission file number:
Solanex Management
Inc.
(Exact name of small business issuer as specified in its
charter)
| Nevada | #98-0361151 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
Suite 440 - 1555 E. Flamingo Road
Las Vegas,
Nevada 89119
(Address of principal executive offices)
(604) 601-2107_
(Issuer's telephone number)
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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [ X ] No (2) Yes [ X ] No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 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: As of April 24, 2008 the Issuer had 12,033,730 shares of common stock, par value $0.001, issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
The interim Financial Statements of the Company, prepared without audit and required to be filed with this 10-QSB Quarterly Report were prepared by management and commence on the following page, together with related Notes. In the opinion of management, the interim Financial Statements fairly present the financial condition of the Company. The Company's auditors have expressed a going concern qualification with respect to the Company's audited financial statements at December 31, 2007.
PART I - FINANCIAL INFORMATION
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PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
Solanex Management Inc.
(A
Development Stage Company)
Interim Balance Sheets
(expressed in U.S.
dollars)
| March 31, | December 31, | |||||
| 2008 | 2007 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current | ||||||
| Cash | $ | 8,744 | $ | 12,061 | ||
| Prepaid expense | - | 1,147 | ||||
| $ | 8,744 | $ | 13,208 | |||
| LIABILITIES | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | $ | 161,891 | $ | 139,124 | ||
| Payable to related parties | 19,500 | 18,790 | ||||
| Promissory notes payable | 188,852 | 173,500 | ||||
| 370,243 | 331,414 | |||||
| STOCKHOLDERS’ DEFICIENCY | ||||||
| Capital Stock | ||||||
| Authorized: | ||||||
| 100,000,000 common shares, par value of $0.001 per share | ||||||
| 20,000,000 preferred shares, par value of $0.001 per share | ||||||
| Issued and outstanding: | ||||||
| Nil preferred shares | - | - | ||||
| 12,033,730 common shares | 12,034 | 12,034 | ||||
| (December 31, 2007 – 12,033,730) | ||||||
| Additional paid-in capital | 395,005 | 395,005 | ||||
| Deficit accumulated during the development stage | (768,538 | ) | (725,245 | ) | ||
| (361,499 | ) | (318,206 | ) | |||
| $ | 8,744 | $ | 13,208 |
The accompanying notes are an integral part of the financial statements
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Solanex Management Inc.
(A
Development Stage Company)
Interim Statements of Operations
(expressed
in U.S. dollars)
(Unaudited)
| CUMULATIVE | |||||||||
| PERIOD FROM | |||||||||
| INCEPTION | |||||||||
| OCTOBER 12 | |||||||||
| THREE MONTHS ENDED | 2000 TO | ||||||||
| MARCH 31 | MARCH 31 | ||||||||
| 2008 | 2007 | 2008 | |||||||
| Revenue | $ | - | $ | - | $ | - | |||
| Expenses | |||||||||
| Administration | 6,375 | 6,000 | 148,569 | ||||||
| Consulting and management fees | 15,000 | 23,773 | 208,389 | ||||||
| Feasibility study | - | - | 9,250 | ||||||
| Office and rent | 3,836 | 6,520 | 153,824 | ||||||
| Organization expenses | - | - | 6,228 | ||||||
| Professional fees | 17,020 | 17,204 | 133,858 | ||||||
| Technology cost | - | - | 100,000 | ||||||
| 42,231 | 53,497 | 760,118 | |||||||
| Net Loss From Operations | (42,231 | ) | (53,497 | ) | (760,118 | ) | |||
| Other Income (Expense) | |||||||||
| Interest | (974 | ) | - | (4,870 | ) | ||||
| Foreign exchange (income) loss | (88 | ) | 1,328 | (3,550 | ) | ||||
| Net Loss For the Period | $ | (43,293 | ) | $ | (52,169 | ) | $ | (768,538 | ) |
| Basic And Diluted Loss Per Common Share | $ | (0.00 | ) | $ | (0.00 | ) | |||
| Weighted Average Number Of Common Shares | |||||||||
| Outstanding | 12,033,730 | 12,033,730 | |||||||
The accompanying notes are an integral part of the financial
statements
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Solanex Management Inc.
(A
Development Stage Company)
Interim Statements of Cash Flows
(expressed
in U.S. dollars)
(Unaudited)
| CUMULATIVE | |||||||||
| PERIOD FROM | |||||||||
| INCEPTION | |||||||||
| OCTOBER 12 | |||||||||
| THREE MONTHS ENDED | 2000 TO | ||||||||
| MARCH 31 | MARCH 31 | ||||||||
| 2008 | 2007 | 2008 | |||||||
| Cash Flows Used In Operating Activities | |||||||||
| Net loss for the period | $ | (43,293 | ) | $ | (52,169 | ) | $ | (768,538 | ) |
| Adjustment for items not affecting operating working capital: | |||||||||
| Expenses not paid with cash | - | - | 7,387 | ||||||
| Adjustment for items affecting operating working capital: | |||||||||
| Increase in account receivable | - | (710 | ) | - | |||||
| Decrease in prepaid expense | 1,147 | - | - | ||||||
| Increase in accounts payable and accrued liabilities | 23,477 | 21,851 | 276,660 | ||||||
| (18,669 | ) | (29,700 | ) | (484,491 | ) | ||||
| Cash Flows Provided By Financing Activities | |||||||||
| Issuance of common shares | - | - | 264,998 | ||||||
| Loans payable | 15,352 | - | 230,624 | ||||||
| 15,352 | - | 495,622 | |||||||
| Foreign Exchange Effect On Cash | - | - | (2,387 | ) | |||||
| (Decrease) Increase In Cash | (3,317 | ) | (31,028 | ) | 8,744 | ||||
| Cash, Beginning Of Period | 12,061 | 93,797 | - | ||||||
| Cash, End Of Period | $ | 8,744 | $ | 62,769 | $ | 8,744 | |||
| Supplemental Disclosure of Cash-Flow Information | |||||||||
| Interest paid | $ | - | $ | - | $ | - | |||
| Income taxes paid | - | - | - | ||||||
| Supplemental Disclosure Of Non-Cash Financing Activities | |||||||||
| Common shares issued for the acquisition of technology | $ | - | $ | - | $ | 3,500 | |||
| Common shares on conversion of promissory notes | - | - | 26,772 | ||||||
| Common shares issued for organization of the Company | - | - | 1,500 | ||||||
| Common shares issued to settle payables | - | - | 95,269 | ||||||
| Common shares issued for share subscriptions received | - | - | 15,000 | ||||||
The accompanying notes are an integral part of the financial
statements.
5
Solanex Management Inc.
(a
Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
Three
Months Ended March 31, 2008
1. ORGANIZATION AND BASIS OF PRESENTATION
Solanex Management Inc., herein (the "Company"), was incorporated in the State of Nevada on October 12, 2000 under the name EcoSoil Management Inc. and is in its developmental stage. The Company changed its name to Solanex Management Inc. on December 6, 2001. To date the Company's activities have been organizational, directed at acquiring a principal asset, raising initial capital, and developing its technology and business plan.
The interim financial statements of the Company are consolidated with the financial statements of its two wholly owned subsidiary companies: Solanex Placer Inc. and Solanex Recovery Inc. All inter company accounts and transactions have been eliminated on consolidation. At March 31, 2008 both subsidiary companies were inactive.
On October 12, 2000 Solanex acquired a license to certain technology and intellectual property from Colin V. Hall, the developer of the technology, and a group of investors. The license granted a non-exclusive right to manufacture, market and sell a thermal destructor for site remediation to industrial, petrochemical and site remediation organizations. The intellectual property assets acquired include all licensing, modification, marketing, distribution and sales rights worldwide in perpetuity. Under the terms of the Agreement and Assignment of Intellectual Property Rights Mr. Hall was compensated $2,000 dollars and 1,500,000 shares of Solanex common stock, and the group of investors were compensated an aggregate of 2,000,000 shares of Solanex common stock. The original agreement contemplated that the license may be revoked if the Company did not manufacture at least one Thermal Destructor within 3 years of the Licensing date. This Agreement and License of Intellectual Property Rights has been renewed on a month to month basis and has been supplemented with a joint venture agreement between Solanex Management Inc. and EcoTech Waste Management Systems, Inc., the terms of which continue to be negotiated. Mr. Hall is a director of the Company and a principal of EcoTech Waste Management Systems, Inc. (EcoTech).
2. DEVELOPMENT STAGE COMPANY AND GOING CONCERN
In a development stage company, management devotes most of its activities to preparing the business for operations. The ability of the Company to emerge from the development stage with respect to any planned principal business activity is dependent upon its successful efforts to obtain additional equity financing and/or attain profitable operations. There is no guarantee that the Company will be able to obtain any equity financing or sell any of its products at a profit. There is, therefore, doubt regarding the Company’s ability to continue as a going concern.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| a) | Technology Development Costs | |
| The costs to acquire and develop new technology and enhancements to existing technology are expensed as incurred until such time as technological feasibility is demonstrated. | ||
| b) | Use of Estimates | |
| The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the periods. Actual results could differ from these estimates. |
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| c) | Foreign Currency Translation | ||
| The Company’s functional currency is the U.S. dollar. Transactions in foreign currency are translated into U.S. dollars as follows: | |||
| i) | monetary items at the rate prevailing at the balance sheet date; | ||
| ii) | non-monetary items at the historical exchange rate; | ||
| iii) | revenue and expense items at the average rate in effect during the applicable accounting period. | ||
| d) | Financial Instruments | ||
| The Company’s financial instruments consist of cash, accounts payable and accrued liabilities, and loans payable. | |||
| Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values, unless otherwise noted. | |||
3. BASIS OF ACCOUNTING PRESENTATION
These unaudited interim financial statements have been prepared by management on a going concern basis in accordance with accounting principles generally accepted in the United States of America for interim financial information, are condensed and do not include all disclosures required for annual financial statements. This disclosure presumes funds will be available to finance on-going development, operations and capital expenditures and the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.
The organization and business of the Company, significant accounting policies followed by the Company and other information are contained in the notes to the Company’s audited financial statements filed as part of the Company’s Form 10-KSB for the year ended December 31, 2007.
In the opinion of the Company’s management these financial statements reflect all adjustments necessary to present fairly the Company’s financial position at March 31, 2008 and the results of its operations for the three months then ended. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results to be expected for the entire fiscal year.
The Company has minimal capital resources presently available to meet obligations normally expected by similar companies and has an accumulated deficit of $768,538 to March 31, 2008.
These factors raise substantial doubt about the Company’s ability to continue as a going concern and the Company is dependent on its ability to obtain and maintain an appropriate level of financing on a timely basis and to achieve sufficient cash flows to cover obligations and expenses. The outcome of these matters cannot be predicted. These financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.
4. LICENSE AND TECHNOLOGY RIGHTS
On October 12, 2000, the Company acquired a license to certain technology and intellectual property from Colin V. Hall, the developer of the technology, and a group of investors. The license granted a non-exclusive right to manufacture, market and sell a thermal destructor (“soil Remediator”) for on site remediation to industrial, petrochemical and site remediation organizations. The technology and intellectual property acquired included all licensing, modification, marketing, distribution and sales rights worldwide in perpetuity. Under the terms of the Agreement and License, a cash payment of $2,000 was made on behalf of the Company and the Company issued 3,500,000 shares of common stock.
On October 1, 2002, the Company entered into a joint venture agreement (the “Agreement”) with EcoTech Waste Management Systems (1991) Inc. (“EcoTech”) to design the systems for the soil
7
Remediator and provide marketing and business concept expertise. Under the terms of the Agreement, EcoTech will evaluate, improve and complete the assets of the Company, and market and/or find customers for the assets of the Company. Furthermore, EcoTech will search for, recommend and advise the Company on the acquisition of further technology, complementary to the current business direction and assets of the Company. In consideration for the services provided by EcoTech, the Company is required to pay $100,000 to EcoTech over the life of the contract (3 years), in cash or common stock.
As of December 31, 2006, the Company had paid $85,500 to EcoTech, and the remaining $14,500 is included in accounts payable and accrued liabilities. This agreement is being renegotiated by both parties.
On May 23, 2006, the Company entered into a joint venture with EcoTech (“the Strategic Alliance Agreement”) to develop a portable soil remediation system to clean soils contaminated by industrial use. The Company agreed to pay $40,000 in marketing costs for the initial customer (increasing to $50,000 for each subsequent customer).
Further, EcoTech agreed to build portable high temperature burner units for a cost not to exceed $2 million per unit. The Company would then be the exclusive distributor under revenue sharing arrangements to be negotiated.
On October 12, 2006, the Company and EcoTech signed an addendum to the Strategic Alliance Agreement, whereby, in consideration for $2,000 to be paid to EcoTech, the parties agreed to expand their business relationship to include portable high temperature steam generation technology and to market portable high temperature burner gasifier systems.
The Company’s president, Colin Hall, is also a principal of EcoTech.
5. PROMISSORY NOTES AND LOANS PAYABLE
The promissory notes may be converted in whole or in part into common shares of the Company at the option of the lender(s) at a mutually agreed price per share. The promissory notes are unsecured and bear no interest and are due on demand. Management has imputed interest ranging from 2% to 8% and accrued the interest in the event of conversion.
6. COMMON STOCK
Stock issued to settle debt has been issued at fair market values as estimated by the Company.
On October 12, 2000 the Company issued 3,500,000 shares of common stock at $0.001 per share in compensation for the acquisition of a license agreement to certain technology and intellectual property, and issued 1,500,000 shares of common stock at $0.001 per share in compensation for organizational expenses.
In 2003 the Company issued 310,000 restricted shares of common stock at $0.01 per share pursuant to a private placement in the amount of $3,100, and issued 281,725 free trading and 2,267,000 restricted shares of common stock for settlement of a $96,939 payable.
On December 1, 2003 the Company acquired and cancelled 750,000 restricted shares of common stock for the consideration of $1.00.
On April 12, 2004 the Company issued 419,300 shares of common stock at $0.04 per share in settlement of $16,772 in promissory notes payable.
On September 30, 2005 the Company recorded the issuance of 2,130,705 common shares at $0.04 per share in settlement of share subscriptions received by the Company on October 1, 2004.
8
On February 9, 2006 the Company issued 1,000,000 shares of common stock at $0.10 per share pursuant to a private placement in the amount of $100,000 and issued 375,000 shares for cash at $0.04 in the amount of $15,000.
On June 9, 2006 the Company issued 250,000 shares of common stock at $0.04 per share in settlement of a $10,000 promissory note payable.
On September 28, 2006 the Company issued 750,000 restricted shares of common stock at $0.10 per share pursuant to a private placement in the amount of $75,000.
7. RELATED PARTY TRANSACTIONS AND AMOUNTS OWING
Colin V. Hall, the Company’s President and the developer of the Company’s technology, together with EcoTech Waste Management Inc., a company of which he is a principal, owned 29.1% (2007: 29.1%) of the issued and outstanding shares of the Company as of March 31, 2008. As of March 31, 2008, $14,500 (2007: $14,500) was owing to EcoTech for services performed during prior periods. This amount is included in payable to related parties.
8. CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Company has no significant contractual obligations or commitments with any parties respecting executive compensation, consulting arrangements, rental premises or other matters, except as disclosed elsewhere in these notes. Management services provided and rental of premises are on a month to month basis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN
Forward-Looking Statements
Certain statements, other
than purely historical information, including estimates, projections, statements
relating to our business plans, objectives, and expected operating results, and
the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements generally are
identified by the words “believes,” “project,” “expects,” “anticipates,”
“estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,”
“will continue,” “will likely result,” and similar expressions. We intend such
forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and are including this statement for purposes of complying with
those safe-harbor provisions. Forward-looking statements are based on current
expectations and assumptions that are subject to risks and uncertainties which
may cause actual results to differ materially from the forward-looking
statements. Our ability to predict results or the actual effect of future plans
or strategies is inherently uncertain. Factors which could have a material
adverse affect on our operations and future prospects on a consolidated basis
include, but are not limited to: changes in economic conditions,
legislative/regulatory changes, availability of capital, interest rates,
competition, and generally accepted accounting principles. These risks and
uncertainties should also be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. We undertake no
obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise. Further information
concerning our business, including additional factors that could materially
affect our financial results, is included herein and in our other filings with
the SEC.
Overview of Our Business
We were incorporated as
EcoSoil Management Inc. under the laws of the State of Nevada on October 12,
2000. We changed our name to Solanex Management Inc. (“Solanex” or “the
Company”) on December 6, 2001. To date, our activities have been organizational
in nature, directed at acquiring our principal assets, raising capital, and
implementing measures under our business plan in hopes of achieving revenues.
9
Our business is divided into three areas: the development, manufacture, and sale of the Thermal Destructor; the development, manufacture, and sale of the portable Steam Injection System; and, investing in mineral resource properties.
Thermal Destructors
A Thermal Destructor is a self
contained, mobile, soil residue combustion system to be used for cleaning
contaminated sites by sterilizing soil. The Thermal Destructor consists of a
high efficiency, waste or gas-fired combustion chamber and an exhaust gas,
low-pressure drop liquid scrubber effective in trapping pollutants in air
emissions. A common use of the Thermal Destructor is what oilfield engineers
refer to as “post-op dirt burning”, the practice of cleaning up hydrocarbon
spills at the end of the life of a production well by passing the soil and
substrate through a rotary kiln, such as in our device, whereby the hydrocarbons
are burned, delivering sterile and cleaned soil and clay residues.
Steam Injection System
The Steam Injection System is
an offshoot from our original high temperature Thermal Destructor also being
developed for use by the oil industry. We have utilized the body, drive
mechanism, and heating components from the Thermal Desructor to create a
portable high temperature, high pressure steam generation unit.
The Steam Injection System is designed specifically for use in oil fields where high-pressure steam can be injected into the oil formation to soften the material in which the oil is trapped and to help dilute and separate heavy oil from the earth. The injection of steam under high pressure also creates channels and cracks through which the oil can flow to the well. This is a tertiary retrieval method used to capture oil from wells already exhausted via primary and secondary means of oil retrieval.
The most immediate market for a quick-deployment, mobile or short term steam generation and delivery system such as our Steam Injection System is companies who are in the bitumen/heavy oil exploitation business. Bitumen is a semisolid, degraded, tar-like form of oil that does not flow at normal temperatures and pressures. Bitumen cannot be produced from a well unless it is heated or diluted. Most of today's major commercial on-site bitumen projects use steam to heat and dilute the bitumen.
Expansion of Business into Resource Sector
By using
our contacts in the resources sector we have considered implementing steps
including taking our Company into a new channel of business by way of actively
seeking mineral resource property opportunities. We turned down an opportunity
to acquire an option interest in a sand and gravel deposit for payment of up to
$75,000 over four years and the issuance of up to 2,000,000 shares of common
stock. Management believed that acquiring the option at this stage was premature
in our development and would divert needed capital away from our core business
pursuits. However, we have continued our search in the resource sector and
intend to seize the right opportunity when our capital resources permit and when
the timing is right. We are currently in a preliminary stage of review of a
placer gold recovery operation located on property in Chile.
Plan of Operation
Our plans for the next 12 months
related to our Thermal Destructor and our Steam Injection System are currently
secondary to pursuing financing.
Our Steam Injector System is designed to aid in heavy oil and bitumen retrieval using technology derived from the Thermal Destructor. In order to focus our resources in marketing the Steam Injection System for its intended purpose and to cross-market our Thermal Destructor for potential clients in the same industry (oil production) that are in need of soil contamination cleanup on their old oil fields, we must obtain sufficient funding to cover our projected working capital requirements. The Company continues to seek out other opportunities in the resource sector which may become available to the Company and which may be funded at levels of funding attainable by the Company.
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Product Development
We intend to finalize the technical designs for our Steam Injection System within the next twelve months, at which time we will begin the sale and manufacture of Steam Injection Systems to oil companies who do or could utilize steam injection as a method to recover oil held in Bitumen or oil sands. Our marketing program will begin in earnest prior to the completion of the finalization of our technical designs.
During the coming year, we will also seek out other applications for our technology, and may modify our product development plans based on new applications and opportunities that arise.
We expect ecoTECH to:
Manufacturing
During the next year, we plan to contract with third parties to manufacture and assemble our Steam Injection System according our technical specifications. There are a number of manufacturing facilities capable of producing technical products of this type and size. We have made initial arrangements with TS2000-Star Vehicle Technologies Inc. (www.ts2000-star.com), a company that has production facilities under construction in Malakwa, British Columbia in a joint venture with Heromin, the North American arm of Yituo China Manufacturing Group (“YTO”). YTO is a large company in China with approximately 52,000 employees (www.yto.com.cn). We are currently pursuing bids from other manufacturing companies, and intend to sign a contract with at least one company in the coming year.
The TS2000/Heromin Joint Venture has indicated that it may open a U.S. facility in the Free Trade Zone at the Port of Bellingham, once the Canadian operation is running smoothly in about 18 months. With assembly in Bellingham of components manufactured in China (heavy steel components) and others in the United States (controls, computer systems and electronics), an alliance with this manufacturer should prove be very advantageous in our U.S. operations and our Master USA license guarantees exclusivity to U.S. clients.
Because our Steam Injection System requires a significant amount of capital to manufacture, we will not maintain a standing inventory of products. As is customary with companies that develop and manufacture large construction and/or mining equipment, each unit will be made to order, manufactured to the customer’s specifications in order to meet their unique needs. This not only provides the most appropriate product to our customer, but allays our need to tie up large amounts of capital in inventory.
When a customer purchases one of our Steam Injection Systems, we plan to send a field operations specialist to their operations site. Our specialist will interview the customer’s engineers, survey the operations site, and collect other relevant data. He will then provide our technicians and our contract manufacturer with 3D terrain and site modeling and design specifications based upon the customer’s needs. As our liaison with the customer’s site engineers, he will provide information such as required
11
delivery temperatures and pressures, and pumping distances. He will also help determine the number of systems we will need to supply to meet the customer’s needs for a particular operations site.
Marketing
To date, interest in our technology has been generated through the direct efforts of our executive officer, Mr. Hall, with engineers and engineering firms servicing the oil production industry in North America. Through this contact, Mr. Hall has been able to generate some positive interest in our technology. Additionally, Mr. Hall is commencing a program to identify marginal oil shale opportunities, from which oil could not previously be profitably recovered because of the high fixed costs associate with building large, permanent steam-generation units. By offering access to our technology, which will make oil recovery from such properties a profitable operation, Mr. Hall is seeking joint ventures with oil firms to bring those oil shale deposits into production.
In the next twelve months, we intend to continue to use the services of Mr. Hall to sell our technology, seeking joint ventures as well as direct sales. If future sales justify the expense, however, we may employ sales personnel to market our products to potential customers. These representatives will be responsible for soliciting, selecting and securing opportunities within a particular regional territory. We expect to pay such representatives on a commission basis, with commissions depending on the size of the sale. We expect to provide service and support to our representatives, including advertising, technical data sheets, design services (usually bespoke and on a fee basis), and sales materials. We do not intend to incur the costs of representation personnel in the next twelve months unless our revenues are enough to absorb the cost of these personnel, especially as it will be some months before we have field-ready systems to offer.
Access International Matting (“AIM”) and Heromin Machinery (Canada) will assist Mr. Hall in the development of an overall project marketing plan and a project financial plan. The intention is to have the first customer finance their initial plant, which it is anticipated will take nine months to build. AIM has recently employed three people to develop the Heromin market and we are to be represented by AIM on an ad-hoc, commission only basis, starting in September 2008. A web site describing Solonex Management's services is under construction and will be linked from the TS2000, ecoTECH, Heromin and AIM sites.
We are also currently working with engineering firms that are connected with steam stimulation or steam-assisted gravity drainage projects in Alberta, Canada. We hope to secure an agreement in the next 12 months with one or more of these firms on a project in Alberta. We anticipate that an engineering firm will help us provide consulting on engineering and product application needs, audit the finished system’s performance, and with proven performance, thereafter recommend the system to the firm’s clients, with an option to invest in, or take over the program.
Financing Plans
The completion of our business plan for the next twelve months is contingent upon us obtaining additional financing. As of March 31, 2008 we had cash in the amount of $8,744. We have forecasted expenditures of $150,000 for the next twelve months. Therefore, we will require financing to pursue our business plan for the next twelve months. We plan to offer equity securities in an exempt offering as a means of meeting our financial requirements over the next twelve months. Although neither Colin Hall, ecoTECH Waste Management Systems (1991), Inc. nor any other shareholders or third parties have any legal obligations to infuse additional capital, it is anticipated that each party will continue to do so as reasonably necessary by providing short-term demand loans carrying a market interest rate. If we are unable to obtain additional financing, our business plan will be significantly delayed or will fail. Should this failure to finance occur the Company would abandon its current business plan.
12
We have not contacted any broker-dealers or other parties regarding our financing plans but may do so during 2008. We have not identified any broker-dealers to assist in our financing efforts. Currently, we believe we have the required funds to cover our expenses through the end of May 2008.
Results of Operations for the three months ended March 31,
2008 and 2007
No revenue was recorded for the three months period ended
March 31, 2008 and no revenue has been generated since inception.
Net loss for the three months period ended March 31, 2008 was $43,293 compared to a loss of $52,169 for the three months ended March 31, 2007. The expenditures comprising the loss for the three months ended March 31, 2008 consisted primarily of administrative expenses in the amount of $6,375, consulting and management in the amount of $15,000 and office/rent in the amount of $3,836 as compared to $6,000 in administrative fees, $23,773 in consulting and professional fees, and $6,520 for office and rent expense during the same period in 2007. During the three months ended March 31, 2008 we expended $15,000 on outside consultants in our review of our Company’s business plan, review of other opportunities available to us in the resource sector and day to day management of the Company ($23,773 for the comparable period in 2007). The Company has kept its office and business operations at a minimum and has relied mainly on its directors as the Company assesses its business plan and direction.
Liquidity and Capital Resources
The Company has not
earned any revenue since inception and has been able to pay its expenses and
costs through the issuance of common shares as well as loans from directors and
other shareholders. We do not anticipate any revenues until we are successful in
producing and marketing our technologies. The Company did not issue any shares
of common stock during the three months ended March 31, 2008 (nil shares were
issued during the comparative period of 2007).
As of March 31, 2008 the Company has a working capital deficiency of $361,499 (at December 31, 2007 there was a working capital deficiency of $318,206). The working capital deficit includes $122,060 payable to an outside management company (creditor) for monthly management fees, services, rent and office and administration charges. The creditor has informally agreed to defer collection of this Company debt and is negotiating settlement of the debt for shares of common stock of the Company. The working capital deficit also includes $14,500 owing to EcoTech. The president of the Company is a principal of EcoTech and has agreed to the deferment of payment of this debt.
We have not earned any revenue since inception. We relied primarily on equity capital and loan proceeds to fund our business activities. We need to raise additional funds through the sale of stock or borrowing just to maintain our corporate existence. Our cash requirements to operate for fiscal year 2008 are estimated at $150,000. As such, we will need additional funds to carry us through the end of the year and beyond. We are currently seeking out options for financing from shareholders or private placements but may not be successful in our further efforts to obtain equity financing and/or attain profitable operations. There is doubt regarding the Company’s ability to continue as a going concern.
Off Balance Sheet Arrangements
As of March 31, 2008
there were no off balance sheet arrangements.
Going Concern
We have minimal capital resources
presently available to meet obligations normally expected by similar companies
and have an accumulated deficit of $768,538 through March 31, 2008.
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These factors raise substantial doubt about our ability to continue as a going concern and we are dependent on our ability to obtain and maintain an appropriate level of financing on a timely basis and to achieve sufficient cash flows to cover obligations and expenses. The outcome of these matters cannot be predicted. The financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
ITEM 3. CONTROLS AND PROCEDURES
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2008. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. Colin Hall. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2008, our disclosure controls and procedures are effective. There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2008.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The information set forth below relates to our issuances of securities without registration under the Securities Act during the reporting period and which were not previously included in a Current Report on Form 8-K.
No securities were issued during the quarterly period ended March 31, 2008.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended March 31, 2008.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Solanex Management Inc. | ||
| Date: April 30, 2008 | ||
| By: | /s/ Colin Hall | |
| Colin Hall | ||
| Title: | President, Chief Executive Officer and Director | |
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