UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2009
OR
[ ] 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 814-00717
UNITED ECOENERGY CORP.
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 84-1517723
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1365 N. Courtenay Parkway, Suite A
Merritt Island, FL 32953
(Address of Principal Executive Offices) (Zip Code)
(321)-452-9091
(Registrant?s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X ] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer
(as defined by Rule 12b-2 of the Act). Yes [ ] No [X ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ]
The number of shares of the Registrant?s Common Stock, $0.001 par
value, outstanding as of May 1, 2009, was 34,710,537 shares.
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 2009 and December 31, 2008 F-1
Schedule of Investments as of March 31, 2009 F-2
Statements of Operations for the Three-month periods
ended March 31, 2009 and 2008 F-3
Statements of Cash Flows for the Three-month periods ended
March 31, 2009 and 2008 F-4
Notes to Financial Statements F-5
Item 2. Management Discussion and Analysis of Financial Condition
and Results of Operations 2
Item 3. Quantitative and Qualitative Disclosures about Market Risk 7
Item 4. Controls and Procedures 7
PART II. OTHER INFORMATION 8
Item 1. Legal Proceedings 8
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
UNITED ECOENERGY CORP.
BALANCE SHEETS
March 31, 2009 December 31,
2008
(unaudited)
--------------- ----------------
-
Assets:
Cash and cash equivalents $ 20,722 $ 383
Due from affiliate 3,550 3,550
Accrued interest 15,690 8,190
------------ ------------
Total Current Assets 39,962 12,123
Other Assets:
Investments in Portfolio Companies 250,000 250,000
------------ ------------
Total Assets $ 289,962 262,123
============ ============
Liabilities and Stockholders?
Equity (Deficit)
Accounts payable $ 101,800 $ 25,698
Due to affiliate 175,781 175,781
Short term loans 68,865 43,865
Accrued interest 14,477 13,433
------------ ------------
Total Current Liabilities 360,923 258,777
Long Term Liabilities: - -
------------ -------------
Total Liabilities 360,923 258,777
------------ -------------
Commitments and Contingencies
Stockholders? Equity (Deficit):
Common stock, par value $0.001
authorized 150,000,000 shares,
issued 34,710,537 shares at
March 31, 2009 and December 31, 2008 34,710 34,710
Convertible preferred stock, par value
$0.001, authorized 5,000,000 shares,
issued no shares at March 31, 2009
and December 31, 2008 - -
Additional paid-in capital 690,839 690,839
Accumulated deficit (796,510) (722,203)
------------ ------------
Total Stockholders? Equity (Deficit): (70,961) 3,346
------------ ------------
Total Liabilities and
Stockholders? Equity (Deficit): $ 289,962 $ 262,123
============ ============
Net Asset value per common share $ (0.00020) $ (0.00010)
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
SCHEDULE OF INVESTMENTS (unaudited)
March 31, 2009
Portfolio Industry Amount Cost Fair % of
Investments or Number Value Net assets
------------------- --------- ----------- -------- --------- -----------
City 24/7 LLC Technology $250,000 $250,000 $250,000 -
Secured Note
Due May 31, 2009 -------- --------- -----------
Total $250,000 $250,000 -
======== ========= ===========
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
STATEMENTS OF OPERATIONS
For the three months ended
March 31, 2009 March 31, 2008
(unaudited) (unaudited)
---------- ----------
Investment income:
Interest income $ 7,500 $ -
Dividend income - -
Other income - -
---------- ----------
Total income 7,500 -
Operating expenses:
Investment advisory fees
Base fee - -
Incentive fee - -
Capital gains fee - -
---------- ----------
Total investment
advisory fees - -
General & administrative:
Administration expenses 78,750 21,250
Rent expense 1,950 1,450
Interest expense 1,044 2,060
Other expenses 63 4,545
---------- ----------
Total operating costs 81,807 29,305
---------- ----------
Net investment loss (74,307) (29,305)
---------- ----------
Net realized income from
disposal of investments - -
Net unrealized appreciation
in investments - -
---------- ----------
Net decrease in stockholders
equity resulting from
operations $ (74,307) $ (29,305)
=========== ==========
Basic and diluted net decrease
in stockholder equity per
common share resulting from
operations $ (0.0021) $ (0.0009)
=========== =========
Weighted number of common shares
outstanding-basic 34,710,537 32,781,639
=========== ==========
Weighted number of common shares
outstanding-diluted 34,710,537 32,781,639
=========== ==========
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
March 31, 2009 and 2008
(unaudited)
March 31, 2009 March 31, 2008
(Unaudited) (unaudited)
----------------- ----------------
Cash flows from operating activities:
Net decrease in stockholders? equity
from operations $ (74,307) $ (29,305)
Adjustments to reconcile net decrease
in stockholders? equity from
operations to net cash used
in operating activities:
(Increase) in accrued interest due (7,500) -
Increase (decrease)in accounts payable 76,102 (1,544)
Increase (decrease)in amounts due
to affiliate - 12,500
Increase (decrease) in amounts due
from affiliate - (600)
Decrease in amounts due to stockholder - -
Increase in accrued interest 1,044 2,060
------------ -----------
Net cash used in operating activities (4,661) (16,889)
Cash flows from financing activities:
Short term loan 25,000 25,000
------------ -----------
Net cash provided by financing activities 25,000 25,000
------------ -----------
Net increase (decrease) in cash 20,339 8,111
Cash, beginning of period 383 31
------------ -----------
Cash, end of period $ 20,722 $ 8,142
============ ===========
The accompanying notes are an integral part of these financial statements.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 1. Organization and Interim Financial Statements
United EcoEnergy Corp. (United EcoEnergy or the Company) a Nevada
corporation,
was organized in February, 1997 and is a closed-end investment company that
filed an election to be treated as a business development company (BDC) under
the Investment Company Act of 1940, (the 1940 Act) in February 2006.
As a BDC, the company is subject to the filing requirements of the Securities
Exchange Act of 1934 and has elected to be subject to Sections 55 to 65 of
the 1940 Act, which apply only to BDCs. The Company is not a registered
investment company under the 1940 Act, however, and is not required to file
the semi-annual and annual reports required to be filed by registered
investment companies under Section 30 of the 1940 Act. As a BDC, the
Company also is not eligible to file its periodic reports under the 1934 Act
as a small business issuer. As a BDC, the Company also is subject to the
financial reporting requirements of Regulation S-X issued by the SEC.
The original focus of the Company was primarily on investments in alternative
energy companies, including bio-fuel companies. Changes in the alternative
energy market and the inability to locate or close on suitable portfolio
investments in this market lead the Company to re-think its market focus,
a process which is on-going. At March 31, 2009, the Company had no net
assets invested in alternative energy companies and a total of $250,000
invested in other portfolio companies, as a short term interest bearing
secured loan.
The accompanying financial statements are un-audited and have been prepared
in
accordance with accounting principles generally accepted in the United States
of America for interim financial information and the instructions to Form
10-Q, including Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in audited financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been omitted pursuant to such rules and regulations. These
financial statements should be read in conjunction with the audited financial
statements that were included in the Form 10-K filed by the Company for the
year ended December 31, 2008. As a BDC, and therefore as a non-registered
investment company, the Company is subject to the normal financial reporting
rules of Regulation S-X, as adopted by the SEC, in accordance with Regulation
S-X 5.01. The accompanying financial reports have been prepared in
accordance
with the requirements of Regulation S-X, as explained and interpreted in the
Audit and Accounting Guide for Investment Companies of the American Institute
of Certified Public Accountants (May 1, 2008)(the Audit Guide).
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 1. Organization and Interim Financial Statements (continued)
Operating results for the interim periods presented are not necessarily
indicative of the results to be expected for a full year.
Note 2. Significant Accounting Policies
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reported period. Changes in the economic environment,
financial markets and any other parameters used in determining these
estimates could cause actual results to differ.
The following are significant accounting policies consistently applied by the
Company and are based on Chapter 7 of the Audit Guide, as modified by
Appendix
A:
Investments:
(a) Security transactions are recorded on a trade-date basis.
(b) Valuation:
(1) Investments for which market quotations are readily available are valued
at
such market quotations.
(2) Short-term investments which mature in 60 days or less, such as U.S.
Treasury bills, are valued at amortized cost, which approximates market
value.
The amortized cost method involves valuing a security at its cost on the date
of purchase and thereafter assuming a constant amortization to maturity of
the
difference between the principal amount due at maturity and cost. Short-term
securities which mature in more than 60 days are valued at current market
quotations by an independent pricing service or at the mean between the bid
and
ask prices obtained from at least two brokers or dealers (if available, or
otherwise by a principal market maker or a primary market dealer).
Investments
in money market mutual funds are valued at their net asset value as of the
close of business on the day of valuation.
(3) It is expected that most of the investments in the Company?s portfolio
will not have readily available market values. Debt and equity securities
whose market prices are not readily available are valued at fair value, with
the assistance of an independent valuation service where the board of
directors
considers that advisable, using a valuation policy and a consistently applied
valuation process which is under the direction of our board of directors.
The factors that may be taken into account in fairly valuing investments
include, as relevant, the portfolio company?s ability to make payments, its
estimated earnings and projected discounted cash flows, the nature and
realizable value of any collateral, the financial environment in which the
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 2. Significant Accounting Policies (continued)
portfolio company operates, comparisons to securities of similar publicly
traded companies and other relevant factors. Due to the inherent uncertainty
of determining the fair value of investments that do not have a readily
available market value, the fair value of these investments may differ
significantly from the values that would have been used had a ready market
existed for such investments, and any such differences could be material.
As part of the fair valuation process, the Audit Committee of the Company
will review the preliminary evaluations prepared by the Investment Advisor
engaged by the Board of Directors, as well as managements valuation
recommendations and the recommendations of the Investment Committee.
Management and the Investment Advisor will respond to the preliminary
evaluation to reflect comments provided by the Audit Committee. The Audit
Committee will review the final valuation report and management?s valuation
recommendations and make a recommendation to the Board of Directors based
on its analysis of the methodologies employed and the various valuation
factors as well as factors that the Investment Advisor and management may
not have included in their evaluation processes. The Board of Directors
then will evaluate the Audit Committee recommendations and undertake a
similar analysis to determine the fair value of each investment in
the portfolio in good faith.
(c) Realized gains or losses on the sale of investments are calculated using
the specific identification method.
(d) Interest income, adjusted for amortization of premium and accretion of
discount, is recorded on an accrual basis.
(e) Dividend income is recorded on the ex-dividend date.
(f) Loan origination, facility, commitment, consent and other advance fees
received by us on loan agreements or other investments are accreted into
income over the term of the loan.
Federal and State Income Taxes:
The Company has not elected to be treated as, and is not, a regulated
investment company and does not presently intend to comply with the
requirements of the Internal Revenue Code of 1986 (the Code), applicable
to regulated investment companies. A regulated investment company is
required to distribute at least 90% of its investment company taxable
income to shareholders, which the Company does not expect to do for the
foreseeable future. Therefore, the Company must make appropriate provision
for income taxes in accordance with SFAS 109, Accounting for Income Taxes,
using the liability method, which requires the recognition of deferred assets
and liabilities for the expected future tax consequences of temporary
differences between carry amounts and tax basis of assets and
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 2. Significant Accounting Policies (continued)
liabilities. At March 31, 2009, the Company has approximately $796,510
of net operating loss carry-forwards available to affect future taxable
income and has established a valuation allowance equal to the tax benefit of
the net operating loss carry-forwards as realization of the asset is not
assured. The net operating loss carry-forwards may be limited under the
change of control provisions of the Internal revenue Code, Section 382.
The Company applies the provisions of FASB, Interpretation No. 48, or FIN 48,
?Accounting for Uncertainty in Income Taxes ? an Interpretation of FASB
Statement 109.? FIN 48 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained
upon examination by taxing authorities. The amount recognized is measured as
the largest amount of benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement.
Fair Value
In September 2006, the Financial Accounting Standards Board (the ?FASB?)
issued Statement of Financial Accounting Standards (?SFAS?) No.
157, ?Fair Value Measurement? (?SFAS 157?). This statement defines fair
value, establishes a framework for measuring fair value in GAAP, and
expands disclosure about fair value measurements. This statement is
effective for financial statements for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Earlier
application is encouraged, provided that the reporting entity has not yet
issued financial statements for that fiscal year, including financial
statements for an interim period within that fiscal year. The Company
adopted SFAS 157 on January 1, 2008. Adoption of this statement did not
have a material impact on the financial statements of the Company.
Dividends and Distributions:
Dividends and distributions to common stockholders will be recorded on the
ex-dividend date. The amount, if any, to be paid as a dividend will be
approved by the board of directors each quarter and will be generally based
upon management? estimates of our earnings for the quarter and our investment
needs. Net realized capital gains, if any, will be reviewed at least
annually as part of any distribution determination.
Consolidation:
As an investment company, the Company will only consolidate subsidiaries
which
are also investment companies. At March 31, 2009, the Company did not have
any consolidated subsidiaries.
Managerial Assistance
As a business development company, we will offer, and provide upon request,
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 2. Significant Accounting Policies (continued)
managerial assistance to certain of our portfolio companies. This assistance
could involve, among other things, monitoring the operations of our portfolio
companies, participating in board and management meetings, consulting with
and advising officers of portfolio companies and providing other
organizational and financial guidance. The Company expects to receive fee
income for providing these services from each portfolio company.
Custodial Agreements
Rule 17f-1(c) issued under the Investment Company Act of 1940 provides that
if
a registered investment company shall place or maintain any of its investment
securities in the custody of a member of a national securities exchange, then
it may do so only pursuant to a written contract approved by its Board of
Directors and containing certain required provisions. The Company, as a BDC,
is not a registered investment company and in any event has no securities
placed or maintained with such a member. Therefore, the Company does not
have
and has not filed, such an agreement with the SEC. In the event it does
place
any of its investment securities in the custody of a member of a national
securities exchange, it will then prepare and enter into the required written
agreement.
Fidelity Bond
Rule 17g-1 issued under the Investment Company Act of 1940 provides that a
registered investment company must provide and maintain a fidelity bond
against
larceny or embezzlement by each officer or employee of the company who may
have
access to securities or funds of the company, directly or indirectly. The
Company, as a BDC, is not a registered investment company and in any event
has
had no securities and minimal cash through most of its tenure as a BDC, and
therefore has been unable to obtain a fidelity bond. Management will obtain
any
required fidelity bond as and when required by the rules applicable to the
Company as a BDC as it expands its business.
Note 3. Portfolio Investments
As required by the 1940 Act, we will classify our investments by level of
control. As defined in the 1940 Act, control investments are those where
there
is the ability or power to exercise a controlling influence over the
management
or policies of a company. Control is generally viewed to exist when a
company or individual owns 25% or more of the voting securities of an
investee
company. Affiliated investments and affiliated companies are defined by a
lesser degree of influence and are deemed to exist through ownership of an
amount greater than 5% but less than 25% of the voting securities of the
investee company. The Company currently has no controlled or affiliated
investments.
In September, 2008 and October, 2008, the Company entered into two short-term
secured promissory notes totaling $250,000 with City 24/7, LLC, with which it
had previously entered into a portfolio investment agreement. Due to changes
in the economic outlook generally and for the Internet industry in
particular,
the Company determined that the planned portfolio investment was no longer
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 3. Portfolio Investments (continued)
warranted, and terminated the investment. The two secured promissory notes
remained outstanding and matured on December 31, 2009, at which time the
Company began discussions with City 24/7, LLC for the repayment of the
secured
notes plus accrued interest, or the transfer of the assets securing the
notes
to the Company. Those discussions have continued, the maturity dates was
extended to March 31, 2009 and, as of May 7, 2009, have resulted in a meeting
with a potential new investor in City 24/7, LLC, which will result in the
payment of the notes in full, including accrued interest. In view of these
discussions, the Investment Committee of the Board of Directors of the
Company
has concluded, after a review of the situation, that an impairment loss for
these notes is not warranted at March 31, 2009. Accordingly, no impairment
loss has been recorded, and the interest on the note due through March 31,
2009 has been recorded, and the maturity dates of the two notes has been
extended to May 31, 2009.
Note 4. Related Party Agreements and Transactions
Investment Advisory Agreement
The Company has entered into an Investment Advisory Agreement with United
EcoEnergy Advisors, LLC (the Investment Advisor) under which the Investment
Advisor, subject to the overall supervision of the board of directors of the
Company, will provide investment advisory services to the Company. United
EcoEnergy Advisors, LLC is owned equally by Patrick Donelan and Adam Mayblum.
Mr. Mayblum and Mr. Donelan are also the equal owners of Enterprise Partners,
LLC, which holds 6,515,760 shares of our common stock, representing
approximately 18.9 percent of the common shares outstanding. Mr. Mayblum owns
7,721,270 shares, directly or indirectly as custodian and also serves as a
director of the Company. Mr. Donelan owns 7,721,270 shares directly or
indirectly as custodian.
For providing these services the Investment Advisor will receive a fee from
the
Company, consisting of two components--a base management fee and an incentive
fee. The base management fee will be calculated at an annual rate of 2.00
percent on the gross assets of the Company (including amounts borrowed). The
base management fee is payable quarterly in arrears based on the average
value
of the Company?s gross assets at the end of the two most recently completed
calendar quarters and appropriately adjusted for any share issuances or
repurchases during the current calendar quarter. Base management fees for any
partial month or quarter will be appropriately pro-rated.
The Incentive Fee consists of two parts, as follows:
(i) One part will be calculated and payable quarterly in arrears
based on the pre-Incentive Fee net investment income for the immediately
preceding calendar quarter. For this purpose, pre-Incentive Fee net
investment income means interest income, dividend income and any other income
(including any other fees, such as commitment, origination, structuring,
diligence, consulting fees that the Corporation receives from portfolio
companies, but excluding fees for providing managerial assistance) accrued by
the Company during the calendar quarter, minus the operating expenses of the
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 4. Related Party Agreements and Transactions (Continued)
Company for the quarter (including the Base Management Fee, and any interest
expense and dividends paid on any issued and outstanding preferred stock,
but excluding the Incentive Fee). Pre-Incentive Fee net investment income
includes, in the case of investments with a deferred interest feature (such
as original issue discount, debt instruments with payment-in-kind interest
and zero coupon securities), accrued income that the Company has not yet
received in cash and includes the proportionate share of the portfolio
companies net income allocable to equity holdings that has not been
distributed as dividends. Pre-Incentive Fee net investment income does not
include any realized capital gains, realized capital losses or unrealized
capital appreciation or depreciation. Pre-Incentive Fee net investment
income, expressed as a rate of return on the value of the Corporations net
assets at the end of the immediately preceding calendar quarter, will
be compared to a hurdle rate of 1.75% per quarter (7% annualized). The
Company will pay the Adviser an Incentive Fee with respect to the pre-
Incentive Fee net investment income in each calendar quarter as follows:
(1) no Incentive Fee in any calendar quarter in which the pre-Incentive Fee
net investment income does not exceed the hurdle rate; (2) 100% of the pre-
Incentive Fee net investment income with respect to that portion of such pre-
Incentive Fee net investment income, if any, that exceeds the hurdle rate but
is less than 2.1875% in any calendar quarter (8.75% annualized); and (3) 20%
of the amount of the pre-Incentive Fee net investment income, if any, that
exceeds 2.1875% in any calendar quarter (8.75% annualized). These
calculations
will be appropriately pro-rated for any period of less than three months and
adjusted for any share issuances or repurchases during the current quarter.
(ii) The second part of the Incentive Fee (the Capital Gains Fee)
will be determined and payable in arrears as of the end of each fiscal year
(or upon termination of this Agreement as set forth below), commencing on
September 30, 2008, and will equal 20.0% of the realized capital gains of the
Company for the 2008 calendar year, if any, computed net of all realized
capital losses and unrealized capital depreciation at the end of such year;
provided that the Capital Gains Fee determined as of September 30, 2008 will
be calculated for a period of shorter than twelve calendar months to take
into
account any net realized capital gains, if any, computed net of all realized
capital losses and unrealized capital depreciation for the period ending
March 31, 2009. The amount of capital gains used to determine the Capital
Gains Fee shall be calculated at the end of each applicable year by
subtracting the sum of the Cumulative Aggregate Realized Capital Losses and
Aggregate Unrealized Capital Depreciation of the Company from the Cumulative
Aggregate Realized Capital Gains. If this number is positive at the end of
such year, then the Capital Gains Fee for such year is equal to 20.0% of such
amount, less the aggregate amount of any Capital Gains Fees paid in all prior
years. In the event that the Agreement terminates as of a date that is not a
calendar year end, the termination date is treated as though it were a
calendar year end for purposes of calculating and paying a Capital Gains Fee.
No investment advisory fees have been accrued for the quarter ended
March 31, 2009.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 4. Related Party Agreements and Transactions (Continued)
Administration Agreement
On September 1, 2008, the Company entered into an Administration Agreement
with
Enterprise Administration, LLC, under which the latter provides
administrative
services to the Company, either directly or through sub-administration
agreements. Enterprise Administration, LLC is owned by Mr. Mayblum and Mr.
Donelan. Under the terms of the Agreement, all management and
administration,
and related operating needs are provided by Enterprise Administration, LLC to
the Company, and the Company reimburses Enterprise Management, LLC for the
actual costs of the services on a monthly basis.
Enterprise Administration, LLC billed the Company for administrative services
In the amount of $26,250 for January, February and March, 2009, a total of
78,750,all of which is included in accounts payable at March 31, 2009. The
amounts charged by Enterprise Administration, LLC was made up of the
following administrative services:
Provider Service Amount
------------ ----------------------------- --------
-
FSR, Inc. Chairman and CEO services of
Kelly T. Hickel $
5,000
CF Consulting, LLC Consulting principal financial
officer and corporate counsel
services of Robert Hipple $
6,250
Tower 1 Consultants, LLC Services of Adam Mayblum, as
Director of Business Development,
Patrick Donelan as Director of
Corporate Finance and Chris Messalas,
through Roadrunner Capital Group, LLC
as Director of Mergers, Acquisitions
and Integration. $
15,000
------
--
Enterprise Administration, LLC does not generate any net revenues from the
Administration Agreement
Mr. Mayblum and Mr. Donelan, who own Enterprise Administration, LLC, also are
the equal owners of United EcoEnergy Advisors, LLC, our investment advisor,
and
of Enterprise Partners, LLC, which owns 6,515,760 shares of our common stock.
Mr. Mayblum and Mr. Donelan also each own or control 7,321,270 shares of our
common stock. Collectively, Mr. Mayblum, Mr. Donelan and Enterprise partners,
LLC own or control 21,158,300 shares of our common stock, representing 60.9
percent of our outstanding shares.
Roadrunner capital Group, LLC is a New Jersey limited liability company.
Chris Messalas is the sole managing member of Roadrunner and is deemed
to have the right to direct the voting and dispositive control over the
common stock that Roadrunner owns. Pursuant to an Option Agreement with Adam
Mayblum, Patrick Donelan and Enterprise Partners, LLC, Roadrunner has the
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 4. Related Party Agreements and Transactions (Continued)
right to purchase up to an additional 5,915,760 shares of common stock at an
exercise price of $.00079 per share, but Roadrunner is restricted from
exercising that portion of the Option, which when added to the sum
beneficially
owned, (as such term is defined under Section 13(d) and Rule
13d-3 of the Securities Exchange Act of 1934, as amended, (the 1934 Act)),
by Roadrunner and its affiliates, would exceed 9.5% of the number of shares
of
Common Stock outstanding on the date of exercise, as determined in accordance
with Rule 13d-1(j) of the 1934 Act. The options if not exercised, expire at
5:00 p.m. Eastern Time on June 1, 2010.
Leaddog Capital, L.P. is a Delaware limited partnership. Chris Messalas is
the
Chief Executive Officer, President and a Director of Leaddog Capital
Partners,
Inc. which is the general partner of Leaddog Capital, L.P., and therefore,
Mr.
Messalas is deemed to have the right to direct the voting
and dispositive control over the common stock in the Company that
Leaddog Capital, L.P. owns. Adam Mayblum, Patrick Donelan and Enterprise
Partners, LLC entered into an Option Agreement dated December 11, 2007, for
the sale of up to 2,000,000 shares of UEEC Common Stock to Leaddog Capital
L.P. at an exercise price of $.00079 per share. Leaddog Capital L.P.
exercised
its option to purchase all 2,000,000 shares of common stock.
Adam Mayblum, Patrick Donelan and Enterprise Partners, LLC also have
entered into an Option Agreement dated December 11, 2007, for the sale of up
to 2,500,000 shares of common stock held by them to Albert Wardi at an
exercise price of $.00079 per share. Mr. Wardi has exercised his option in
part and has received 1,500,000 shares of UEEC Common Stock. Mr. Wardi is a
registered representative and currently holds FINRA Series 7, 24 and 63
licenses that are registered with Carlton Capital, Inc. Chris Messalas is
the Chief Executive Officer, President and sole Director of The Carlton
Companies, Inc., which is the parent company of Carlton Capital, Inc.
Amounts due to and from Affiliates
Amounts due from affiliate totaling $3,550 at March 31, 2009 represent short-
term, non-interest bearing advances to an affiliated company. The amounts
due
to affiliate of $175,781 at March 31, 2009,represent funds advanced to and
expenses paid by Enterprise Partners, LLC to the Company in prior years.
Managerial Assistance
As a business development company, we will offer, and provide upon request,
managerial assistance to certain of our portfolio companies. This assistance
could involve monitoring the operations of our portfolio companies,
participating in board and management meetings, consulting with and advising
officers of portfolio companies and providing other organizational and
financial guidance. The Company expects to receive fee income for providing
these services.
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 5. Stockholders? Equity.
The Company issued no common or preferred shares in the quarter ended
March 31, 2009.
Note 6 FINANCIAL HIGHLIGHTS
Financial Highlights
The following is a schedule of financial highlights for the three months
ended
March 31, 2009 and for the twelve months ended December 31, 2008:
CHANGES IN NET ASSET VALUE
For the For the
Three months twelve months
ended ended
March 31, 2009 December 31, 2008
---------------- -----------------
Net asset value at
beginning of period (1) $ (0.00010) $ (0.01004)
Proceeds from common stock - 0.01811
Net investment income (0.00010) (0.00797)
------------- --------------
Net asset value, end of period (2) $ (0.00020) $ (0.00010)
(1) Financial highlights as of March 31, 2009 and December 31, 2008 are
based on 34,710,537 common shares outstanding.
(2) Total return based on net asset value is based upon the change in net
asset value per share between the opening and ending net asset values per
share in each period. The total return is not annualized.
Note 7. OTHER MATTERS
On February 1, 2007, the Company borrowed the sum of $50,000 from an existing
minority shareholder for a six month term with interest due at maturity at
the
rate of 9 percent per year. The Company also issued a warrant to purchase
8,000
shares of common stock at an exercise price of $0.40 per share for a period
of
two years. In September, 2008, a total of $30,000 was paid in principal on
this note, and an additional $5,000 was paid on November 12, 2008, leaving a
principal balance of $15,000 due at March 31, 2009. A total of $7,699 in
interest has accrued on the loan as of March 31, 2009. The warrant has
expired.
The maturity date on the note has been extended to June 30, 2009.
On March 27, 2007, the Company borrowed the sum of $30,000, $15,000 each from
two unrelated parties for a six month term with interest due at maturity at
the
rate of 9 percent per year. The Company also issued a warrant to purchase
3,000
shares of common stock to each of the parties at an exercise price of $0.40
per
share for a period of two years. In September, 2008, the Company paid a total
of
$8,368 in principal on each note, and an additional $4,700 was paid on each
note
on November 12, 2008, leaving a principal balance of $1,933 due on each note
at
UNITED ECOENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 2009
(unaudited)
Note 7. OTHER MATTERS (Continued)
March 31, 2009.
A total of $1,989 in interest has been accrued on each of the two loans as of
March 31, 2009. The warrants have expired. The maturity date on the notes has
been extended to June 30, 2009. The borrowed funds were used as general
working capital for the Company.
On February 22, 2008, the Company borrowed $25,000 from Leaddog Capital, LP
and issued its promissory note payable on the earlier of the date that an
additional $350,000 in capital is raised for the Company or October 22, 2008.
The note carries interest at 10 percent. Leaddog Capital also received
100,000
shares of common stock, issued on April 1, 2008, as a placement fee. The
maturity date on the note has been extended to August 31, 2009. A total of
$2,760 in interest has accrued on this note as of March 31, 2009.
On March 31, 2009, the Company borrowed $25,000 from Leaddog Capital, LP
In exchange for a short term note payable bearing interest at 12 percent.
Note 8. Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company?s financial position
and operating results raise substantial doubt about the Company?s ability
to continue as a going concern, as reflected by the accumulated deficit of
$796,510 and recurring net losses. The ability of the Company to continue as
a going concern is dependent upon acquiring suitable portfolio investments
and
obtaining additional capital and financing. Management?s plan in this regard
is to acquire portfolio investment operating entities and secure financing
and operating capital. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations.
This quarterly report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if they never
materialize or prove incorrect, could cause the results of the Company to
differ materially from those expressed or implied by such forward-looking
statements. All statements other than statements of historical fact are
statements that could be deemed forward-looking statements, including any
projections of revenue, expenses, earnings or losses from operations or
investments, or other financial items; any statements of the plans,
strategies
and objectives of management for future operations; any statements of
expectation or belief; and any statements of assumptions underlying any of
the foregoing. The risks, uncertainties and assumptions referred to above
include risks that are described from time to time in our Securities and
Exchange Commission, or the SEC, reports filed before this report.
The forward-looking statements included in this quarterly report
represent our estimates as of the date of this quarterly report. We
specifically disclaim any obligation to update these forward-looking
statements in the future. Some of the statements in this quarterly report
constitute forward-looking statements, which relate to future events or our
future performance or financial condition. Such forward-looking statements
contained in this quarterly report involve risks and uncertainties.
We use words such as anticipates, believes, expects, future, intends and
similar expressions to identify forward-looking statements. Our actual
results
could differ materially from those projected in the forward-looking
statements
for any reason. We caution you that forward-looking statements of this type
are subject to uncertainties and risks, many of which cannot be predicted or
quantified.
The following analysis of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes thereto contained elsewhere in this Form 10-Q, as well as the risk
factors included in our Form 10-K filed for the year ended December 31, 2007.
Overview
We were incorporated under the Nevada General Corporation Law in February
1997
as MNS Eagle Equity Group III, Inc., and were a development stage company
through the end of 2005, and until we changed our business model with the
election to be treated as a business development company on February 28,
2006.
On February 21, 2006, we changed our corporate name to United EcoEnergy
Corp.,
to reflect our new business model and plan by the filing of an amendment to
its
Articles of Incorporation with the State of Nevada on February 21, 2006.
In January, 2007, our common shares were admitted for quotation on the OTC
Bulletin Board under the symbol UEEC.
We have elected to be treated as a business development company under the
1940
Act. Accordingly, we are required to comply with certain regulatory
requirements. For instance, we generally have to invest at least 70% of our
total assets in qualifying assets, including securities of private or thinly
traded public U.S. companies, cash, cash equivalents, U.S. government
securities and high-quality debt investments that mature in one year or less.
We will typically invest under normal circumstances, at least 80% of net
assets in alternative energy companies.
As of March 31, 2009, we had not yet made any portfolio or other investments
except for a short term secured loan to City 24/7, LLC. During 2007 and 2008,
we entered into investment agreements to acquire a controlling interest in
several companies, on the recommendation of our investment adviser and with
the
approval of our Investment Committee. In both cases, the results of due
diligence investigation of the companies resulted in the abandonment of both
investments in 2008, despite the considerable time and effort devoted to the
acquisitions.
In September, 2008 and October, 2008, we entered into two short-term
secured promissory notes totaling $250,000 with City 24/7, LLC, with which we
had previously entered into a portfolio investment agreement. Due to changes
in
the economic outlook generally and for the Internet industry in particular,
we
determined that the planned portfolio investment was no longer warranted, and
terminated the investment. The two secured promissory notes remained
outstanding and matured on December 31, 2009, at which time the Company began
discussions with City 24/7, LLC for the repayment of the secured notes plus
accrued interest, or the transfer of the assets securing the notes to the
Company. Those discussions have continued, the maturity dates was extended
to
March 31, 2009 and, as of May 7, 2009, have resulted in a meeting with a
potential new investor in City 24/7, LLC, which will result in the payment of
the notes in full, including accrued interest. In view of these discussions,
the Investment Committee of our Board of Directors has concluded, after a
review of the situation, that an impairment loss for these notes is not
warranted at March31, 2009. Accordingly, no impairment loss has been
recorded, the interest on the note due through March 31, 2009 has been
recorded, and the maturity dates of the two notes has been extended to
May 31, 2009.
In September, 2008, we entered into an investment term sheet with SSC, Inc.,
of Richland, Washington, the manufacturer and developer of the Shelby super
car known as the Ultimate Aero. The Ultimate Aero is an 1183 horsepower
extreme performance car which holds the land speed record as the world?s
fastest production car. SSC, Inc. also has developed the Ultimate Aero EV,
a 100 percent green supercar, which is expected to capture the world record
as the fastest electric car. In May, 2009, we expect to sign a final
agreement and close on the initial portfolio investment in SSC, Inc.
Operating Activities
As of March 31, 2009, our operating activities have involved identifying
suitable portfolio investments, negotiating investment terms, entering into
investment agreements and undertaking due diligence. We also completed
additional fund raising activities to support our portfolio investment
activities through a Regulation E offering.
As a result of these activities, our investment advisor, United EcoEnergy
Advisors, LLC, recommended to our Investment Committee that the Company
undertake portfolio investments in City 24/7, LLC and SSC, Inc.
The Investment Committee of the Board of Directors met to consider each of
these separate investment recommendations, and after considering the
companies, their operations, business model and other relevant factors,
approved the recommendation of the investment advisor for approval by the
entire Board of Directors. At subsequent meetings of the Board of Directors,
both of these investment recommendations were approved.
We entered into an investment agreement to acquire a 22.5 percent
ownership interest in City24/7 LLC for $750,000. City 24/7 has partnered
with a Fortune 100 telecommunications company to launch a new information
system built to reinvigorate the existing pay phone structure. The completely
interactive "Super Booth" will broadcast locally relevant information and
advertising in targeted locations across the country, starting in New York
City. While the due diligence process continued, we advanced a loan of
$100,000
to City 24/2, LLC in September 2008 and another $150,000 in October, 2008.
Both
loans were due in December, 2008, bear interest at 12 percent per annum, and
are
secured by the assets of City 24/7, LLC. After the completion of due
diligence,
we determined not to proceed with the investment in City 24/7 LLC, and is now
in
discussions with the company to secure the repayment of the $250,000 in
secured
loans, plus accrued interest.
We also have entered into an agreement to acquire an up to 35 percent stake
in
SSC, Inc (SSC). SSC, an all-American auto manufacturer based in West
Richland,
Washington, has solidified its place in history with the production of the
Ultimate Aero Supercar currently holding the Guinness World Record title of
the ?Fastest Production Car in the World,? Additionally, SSC is working on
the
Ultimate Aero EV ? a 100% Green Supercar which it hopes will set the
benchmark
for the ?world?s fastest electric car.? UEEC will be investing $1 million of
its
stock in SSC in exchange for 5% of SSC?s shares at the closing of the
investment
agreement in May 2009, 25% of SSC?s shares in exchange for investing
$5,000,000
and another, up to 5% of SSC?s shares when the $5 million investment is
completed.
Critical Accounting Policies
In determining the fair value of our investments, the Audit Committee may
consider valuations from an independent valuation firm, from our Investment
Committee and from management, as well as other appropriate indicators of
the value of our portfolio, in its discretion.
Results of Operations
For the quarter ended March 31, 2009, we incurred administrative expenses of
$76,750, rent expense of $1,950, interest of $1,044 and other expenses
totaling
63, compared to consulting expenses of $21,250, rent expenses of $1,450,
interest of $2,060 and other expenses of $4,545 for the quarter ended March
31,
2008. Our total expenses were $74,307 and $29,305, respectively for the
quarters
ended March 31, 2009 and 2008. We had $7,500 of investment income (interest)
for
the quarter ended March 31, 2009 and no income reported for the earlier
quarter.
Financial Highlights
Financial highlights of the Company for the period ending March 31, 2009
are included in Footnote 6 to our Financial Statements.
Investment Activity
There were no additional portfolio investments made during the three months
ended March 31, 2009.
Investment Income
We expect to generate revenue in the form of interest income on the debt
securities that we own, dividend income on any common or preferred stock that
we own, and capital gains or losses on any debt or equity securities that we
acquire in portfolio companies and subsequently sell. Our investments, if in
the form of debt securities, will typically have a term of one to ten years
and bear interest at a fixed or floating rate. To the extent achievable, we
will seek to collateralize our investments by obtaining security interests in
our portfolio companies assets. We also may acquire minority or majority
equity
interests in our portfolio companies, which may pay cash or in-kind dividends
on a recurring or otherwise negotiated basis. In addition, we may generate
revenue in other forms including commitment, origination, structuring or due
diligence fees, and possibly consultation fees. Any such fees generated in
connection with our investments will be recognized as earned. We accrued
$7,500
in investment income during the quarter ended March 31, 2009.
Operating Expenses
Operating expenses for the quarter ended March 31, 2009 are broken
down as follows:
Administration expenses $ 78,750
Rent 1,950
Interest 1,044
Bank fees 63
--------
Total operating expense $ 81,807
On September 1, 2008, we entered into an Administration Agreement with
Enterprise Administration, LLC, under which the latter provides
administrative
services to us, either directly or through sub-administration agreements.
Enterprise Administration, LLC is owned by Mr. Mayblum and Mr. Donelan.
Under
the terms of the Agreement, all management and administration, and related
operating needs are provided by Enterprise Administration, LLC to the
Company,
and we reimburses Enterprise Management, LLC for the actual costs of the
services on a monthly basis.
Enterprise Administration, LLC billed us for administrative services in the
amount of $26,250 for January, February and March, 2009, a total of $78,750,
all
of which is included in accounts payable at March 31, 2009. The amounts
charged by Enterprise Administration, LLC was made up of the following
administrative services:
Provider Service Amount
------------ ----------------------------- --------
---
FSR, Inc. Chairman and CEO services of
Kelly T. Hickel $
5,000
CF Consulting, LLC Consulting principal financial
officer and corporate counsel
services of Robert Hipple $
6,250
Tower 1 Consultants, LLC Services of Adam Mayblum, as
Director of Business Development,
Patrick Donelan as Director of
Corporate Finance and Chris Messalas,
through Roadrunner Capital Group, LLC
as Director of Mergers, Acquisitions
and Integration. $
15,000
------
---
Enterprise Administration, LLC does not generate any net revenues from the
Administration Agreement
Net Investment Income, Net Unrealized Appreciation and Net Increase in
Stockholders? Equity Resulting from Operations
Our net investment loss totaled $74,307 for the quarter ended March 31,
2009 compared to $29,305 for the quarter ended March 31, 20087 and $276,689
for the year ended December 31, 2008. Net unrealized appreciation totaled $0
for
the quarter ended March 31, 2009 compared to $0 for the quarter ended
March 31, 2007 and $0 for the year ended December 31, 2008.
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources were generated initially from an advance
of $60,000 by our then major shareholder, Enterprise Partners, LLC, which was
later paid by the issuance of 1 million shares of Series A Convertible
Preferred Stock. We also undertook an exempt offering of our common shares
pursuant to a Form 1-E Application and Notice filed with the SEC on September
19, 2006, and accepted subscriptions for a total of 312,739 common shares,
representing $92,366 in additional working capital.
On February 1, 2007, we borrowed the sum of $50,000 from an existing minority
shareholder for a nine month term with interest due at maturity at the rate
of
9 percent per year, later extended to February 1, 2009. We also issued a
warrant
to purchase 8,000 shares of common stock at an exercise price of $.40 per
share
for a period of two years. A total of $6,920 in interest has been accrued on
this loan at March 31, 2009. On March 27, 2007, we borrowed the sum of
$30,000,
$15,000 each from two unrelated parties for a nine month term with interest
due
at maturity at the rate of 9 percent per year, later extended to March 27,
2009.
We also issued a warrant to purchase 3,000 shares of common stock to each of
the
parties at an exercise price of $0.40 per share for a period of two years. A
total of $1,884 in interest has been accrued on each of these notes as of
March
31, 2009. On February 22, 2008, we borrowed $25,000 from an unrelated party
payable at 9 percent interest for 8 months, due October 22, 2008 or the
earlier date when we have raised at least $350,000 in new capital, plus
100,000
shares of common stock. A total of $1,510 in interest has been accrued on
this
note as of March 31, 2009, and the note term has been extended. The borrowed
funds were used as general working capital for the Company.
We filed a Form 1-E notice and offering circular with the SEC in December
2007,
which became effective in January 2008 and sold a total of 1,603,475 common
shares for net proceeds to the Company of $473,025 through October 15, 2008.
The Company filed a new Regulation E notice on November 24, 2008 which became
effective ten calendar days later, to raise additional capital for our
portfolio
investment activities. Under Regulation E, a business development company
can
offer and sell up to $5,000,000 in value of its stock in any consecutive,
rolling 12 month period so long as the provisions of Regulation E are met. No
additional funds were raised under the current 1-E filing through March 31,
2009.
By letter dated April 10, 2009, the SEC advised us that it had reviewed the
1-E
filing and related documents filed in November, 2008, and raised a number of
comments and requested changes to the offering and offering documents, as
well
as previously filed periodic reports filed by us on Forms 10-Q and 10-K. We
are
reviewing the comments and expect to address the comments and requested
changes
within the next few weeks.
We generated no cash flows from operations during 2008 and the current year
to
date through March 31, 2009. In the future, we may fund a portion of our
investments through borrowings from banks, issuances of senior securities or
secondary offerings of equity, including further exempt offerings. We may
also
securitize a portion of our investments in mezzanine or senior secured loans
or other assets. Our primary use of funds will be investments in portfolio
companies.
Risk Factors
In addition to the other information set forth in this report, you should
carefully consider the factors discussed in Part I, Item 1A. Risk Factors in
our Annual Report on Form 10-K for the year ended December 31, 2008, which
could materially affect our business, financial condition or future results.
The risks described in our Annual Report on Form 10-K are not the only
risks facing our Company. Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating results.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are subject to financial market risks, including changes in interest
rates,
equity price risk and some of the loans in our portfolio may have floating
rates in the future. We may hedge against interest rate fluctuations by using
standard hedging instruments such as futures, options and forward contracts
subject to the requirements of the 1940 Act. While hedging activities may
insulate us against adverse changes in interest rates, they may also limit
our
ability to participate in the benefits of higher interest rates with respect
to our portfolio of investments. During the three months ended March 31, 2009
and the twelve months ended December 31, 2008, we did not engage in any
hedging
activities.
Item 4. Controls and Procedures.
As of the end of the period covered by this report, the Company carried out
an
evaluation, under the supervision and with the participation of our
management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15 of the Securities Exchange Act of
1934).
Based on that evaluation, as of March 31, 2009, the Chief Executive Officer
and the Chief Financial Officer have concluded that our current disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company that is required to be disclosed by the
Company in the reports it files or submits under the Securities Exchange Act
of
1934.
Internal Control Over Financial Reporting
Our management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, is responsible for
establishing
and maintaining adequate internal control over financial reporting, as such
responsibility is defined in Rule 13a-15(f) of the Securities Exchange Act of
1934, and for performing an assessment of the effectiveness of internal
control
of financial reporting. Internal control over financial reporting is a
process
designed to provide reasonable assurance regarding the reliability of
financial
reporting and the preparation of financial statements for external purposes
in
accordance with generally accepted accounting principles. Our internal
control
over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures
of
the company are being made only in accordance with authorizations of
management
and directors of the company; and (iii) provide reasonable assurance
regarding
prevention or timely detection of unauthorized acquisition, use, or
disposition
of assets that could have a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance
of
achieving financial reporting objectives because of its inherent limitations.
Internal control over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of
such limitations, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known features of the
financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
There have been no changes in our internal controls over financial reporting
that occurred during the three months ended June 30, 2009 that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a defendant in any legal action arising out of our activities. We
are
not aware of any other material pending legal proceeding, and no such
material
proceedings are known to be contemplated, to which we are a party or of which
any of our property is subject.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We sold no common shares during the quarter ended March 31, 2009.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
By letter dated April 10, 2009, the SEC advised us that it had reviewed the
1-E
filing and related documents filed in November, 2008, and raised a number of
comments and requested changes to the offering and offering documents, as
well
as previously filed periodic reports filed by us on Forms 10-Q and 10-K. We
are
reviewing the comments and expects to address the comments and requested
changes
within the next few weeks, as well as any required amendments to its previous
periodic filings.
Item 6. Exhibits
Exhibit Description of Exhibit
10.0 Administration Agreement dated September 1, 2008 with Enterprise
Administration, LLC.
10.1 Sub-Administration Agreement between Enterprise Administration,
LLC
and FSR, Inc. dated September 1, 2008.
10.2 Sub-Administration Agreement between Enterprise Administration,
LLC
and CF Consulting, LLC. dated September 1, 2008.
10.3 Sub-Administration Agreement between Enterprise Administration,
LLC
and Tower I Consultants, LLC. dated September 1, 2008.
10.4 Promissory note dated March 31, 2009 for $25,000 payable to
Leaddog
Capital Partners, LP
31.1 Certification of Chief Executive Officer Pursuant to
Rule 13a-14(a)/15d-14(a)
31.2 Certification of Chief Financial Officer Pursuant to
Rule 13a-14(a)/l5d-14(a)
32.1 Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. 1350
32.2 Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. 1350
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.
_/s/__Kelly T. Hickel May 14, 2009
Kelly T. Hickel
Chief Executive Officer