form10qsb.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
__________________________
FORM
10-QSB
__________________________
Quarterly
Report Pursuant to Section 13 or 15 (D) of the Securities Act of
1934
for
the
quarterly period ended: September 30, 2007
Commission
File number: 000-49950
___________________________
High
Velocity Alternative Energy Corp.
(Exact
name of small business issuer as
specified in its charter)
Nevada
(State
or
other jurisdiction of Incorporation or organization)
98-0232018
(IRS
Employee Identification No.)
14
Garrison Inn Lane
Garrison,
NY 10524
(845)
424-4100
(Address
of principal executive offices)
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 and 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
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
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Common
Stock, $0.001 par value
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2,194,139
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(Class)
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(Outstanding
as of January 9, 2008)
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Triton
Petroleum Group, Inc.
Form
10-QSB
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Part
I – FINANCIAL INFORMATION
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Page
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5
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6
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7
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Condensed
Statements of Stockholder’s Equity
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8
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10
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23
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Part
II. OTHER INFORMATION
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24
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25
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25
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26
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26
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Certifications
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Triton
Petroleum Group, Inc.
Consolidated
Financial Statements
September
30, 2007
Triton
Petroleum Group, Inc.
Consolidated
Financial Statements
Index
to the Consolidated Financial Statements
September
30, 2007
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Page
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Financial
Statements
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Consolidated
Balance Sheet
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1
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Consolidated
Statements of Operations
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2
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Consolidated
Statements of Cash Flows
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3
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Notes
to the Consolidated Financial Statements
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4
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Triton
Petroleum Group, Inc.
Consolidated
Balance Sheet
September
30, 2007
(Unaudited)
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Assets
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Current
Assets:
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Cash
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$ |
7,571 |
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Trade
accounts receivable, net of allowance of $102,700 for doubtful
accounts
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451,308 |
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Prepaid
assets
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2,300 |
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Advances
to others
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217,897 |
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Inventory
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308,566 |
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Total
Current Assets
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987,642 |
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Equipment,
net of accumulated depreciation of $6,035
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9,733 |
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Other
assets
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2,700 |
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Total
Assets
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$ |
1,000,075 |
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Liabilities
and Stockholders’ Deficiency
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Current
Liabilities:
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Trade
accounts payable
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$ |
2,345,300 |
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Accrued
interest
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323,392 |
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Advances
from former president of subsidiary
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327,915 |
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Convertible
notes payable
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550,000 |
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Accrued
expenses
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411,586 |
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Loans
payable to officers/stockholders
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767,212 |
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Total
Current Liabilities
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4,725,405 |
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Stockholders’
Deficiency:
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Preferred
Stock, 5,000,000 shares authorized; 1,225,585 shares issued and
outstanding
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1,226 |
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Common
Stock, $.001, par value, 100,000,000 shares authorized; 98,330,066
shares
issued and outstanding
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98,330 |
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Additional
paid-in capital
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19,892,726 |
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Accumulated
deficit
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(23,717,612 |
) |
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Total
Stockholders’ Deficiency
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(3,725,330 |
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Total
Liabilities and Stockholders’ Deficiency
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$ |
1,000,075 |
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The
accompanying notes are an integral part of these consolidated financial
statements.
Triton
Petroleum Group, Inc.
Consolidated
Statements of Operations
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Three
Months Ended
September
30,
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Nine
Months Ended
September
30,
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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2007
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2006
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2007
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2006
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Net
sales
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$ |
413,255 |
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$ |
627,930 |
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$ |
1,303,022 |
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$ |
2,001,497 |
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Cost
of goods sold
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266,309 |
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380,245 |
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962,057 |
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1,472,489 |
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Gross
Profit
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146,946 |
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247,685 |
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340,965 |
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529,008 |
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Selling
General and Administrative Expenses
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373,693 |
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809,177 |
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1,156,226 |
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1,724,977 |
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Loss
Before Other Items
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(226,747 |
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(561,492 |
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(815,261 |
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(1,195,969 |
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Other
Income (Expense):
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Interest
expense
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(7,025 |
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(35,495 |
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(140,455 |
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(110,748 |
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Other
income (expense)
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- |
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(4,206 |
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- |
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58.966 |
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Bad
debts
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(25,000 |
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- |
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(80,000 |
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- |
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Total
Other Income (Expense)
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(32,025 |
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(39,701 |
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(220,455 |
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(51,782 |
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Net
Loss
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$ |
(258,772 |
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$ |
(601,193 |
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$ |
(1,035,716 |
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$ |
(1,247,751 |
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Loss
per share
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(.004 |
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(0.03 |
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(.02 |
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(0.07 |
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Weighted
average number of shares outstanding
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68,532,681 |
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17,803,500 |
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50,806,071 |
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17,803,500 |
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The
accompanying notes are an integral part of these consolidated financial
statements.
Triton
Petroleum Group, Inc.
Consolidated
Statements of Cash Flows
Nine
Months Ended September 30, 2007 and 2006
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(Unaudited)
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(Unaudited)
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September
30,
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September
30,
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2007
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2006
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Net
cash flows used in operating activities
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$ |
(645,570 |
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$ |
(52,307 |
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Cash
flows from investing activities:
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Purchases
of property and equipment
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(9,700 |
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- |
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Net
cash used in investing activities
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(9,700 |
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- |
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Cash
flows from financing activities:
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Repayment
of notes payable
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- |
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(73,078 |
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Proceeds
from loans payable
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631,822 |
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157,795 |
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Net
cash provided by financing activities
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631,822 |
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84,717 |
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Decrease
in cash and cash equivalents
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(23,448 |
) |
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32,410 |
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Cash
and cash equivalents - beginning of period
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31,019 |
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- |
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Cash
and cash equivalents – end of period
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$ |
7,571 |
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$ |
42,410 |
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The
accompanying notes are an integral part of these consolidated financial
statements.
Triton
Petroleum Group, Inc.
Notes
to the Consolidated Financial Statements
For
the Nine Month Period Ended September 30, 2007
(Unaudited)
BASIS
OF
PRESENTATION
The
accompanying condensed consolidated financial statements have been prepared
in
accordance with accounting principles generally accepted in the United
States of
America for interim financial information and with the instructions to
Item 310
of Regulation S-B. Accordingly, they do not include all of the information
and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results
for the
nine months ended September 30, 2007 are not necessarily indicative of
the
results that may be expected for the year ended December 31, 2007. The
unaudited
condensed consolidated financial statements should be read in conjunction
with
the consolidated financial statements and footnotes thereto included in
the
Company's annual report on Form 10-KSB for the year ended December 31,
2006.
On
August
21, 20 0 7 the Company changed its name to High Velocity Alternative Energy
Corp.
GOING
CONCERN
The
accompanying unaudited consolidated financial statements have been prepared
in
accordance with accounting principles generally accepted in the United
States of
America, which contemplates continuation of the Company as a going
concern. The Company has had recurring operating deficits in the past
few years and accumulated large deficits. This raises substantial
doubt about the Company's ability to continue as a going concern.
The
accompanying consolidated financial statements have been prepared on a
going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. As reflected
in
the condensed consolidated financial statements, the Company has incurred
recurring net losses from operations, an accumulated deficit, and recurring
negative cash flows from operations. Further, at September 30, 2007, current
liabilities exceed current assets by approximately $3,738,000 and total
liabilities exceed total assets by approximately $3,725,000. Its ability
to
continue as a going concern is dependent upon the ability of the Company
to
obtain the necessary financing to meet its obligations and pay its liabilities
arising from normal business operations when they come due. These factors
all
raise substantial doubt about the ability of the Company to continue as
a going
concern.
Management's
plan in regard to the going concern issues it to raise additional capital
through new debt and equity financing in conjunction with future acquisitions
SUBSIDIARY
On
May 1,
2007 a new corporation was formed known as Petroleum Products Corp which
will
operate in conjunction with APPC Oil Company.
(Unaudited)
CONVERTIBLE
NOTES PAYABLE
On
June
19, 2007 the agreement related to the convertible notes was amended to
extend
the maturity date of the obligation to December 31, 2008 and to entitle
the
holder of the note, at its option, to convert all of the outstanding balance
of
the obligation plus accrued interest and liquidated damages (aggregating
approximately $890,000 at June 19, 2007) into shares of the Company’s common
stock at a price per share equal to the lower of $.85 per share or 80%
of the
volume weighted average price, as defined, of the Company’s common stock for the
thirty trading days immediately preceding the conversion date.
PREFERRED
STOCK
The
Company, effective February 21, 2007, authorized the filing of a Certificate
of
Designation with the Secretary of State of the State of Nevada, establishing
a
“Series B Cumulative Convertible Preferred Stock” (Series B) of 1,500,000
shares. The Series B preferred stock ranks senior to any other series of
Preferred stock, on a parity with any other series of Preferred stock
established by the board stating such rank, and prior to any other equity
securities of the Company. Each share of Series B shall have voting rights
equal
to 45 shares of common stock. The Series B preferred stockholders are entitled
to receive, in the event of liquidation, dissolution or winding up of the
affairs of the corporation, whether voluntary or involuntary an amount
equal to
$1 for each share outstanding plus all accrued but unpaid dividends thereon
to
the date fixed for liquidation, dissolution or winding up. Each share of
Series
B preferred stock is convertible, in whole or in part at the option of
the
holders, into shares of common stock at a conversion rate of 45 shares
of common
stock for each share of Series B preferred stock (see note regarding
stock split).
On
February 21, 2007 the company converted $1,490,585 of debt due to stockholders
and officers of the company to 1,490,585 shares of the Series B Preferred
Stock.
STOCK
SPLIT
On
August
31, 2007, the Board of Directors unanimously approved amendments to the
Company's Articles of Incorporation to effect a reverse stock split whereby
all
outstanding shares of the Company's $.001 par value common stock (“Common
Stock”) will be reverse split on a 1-for-50 share basis. Currently, the Series
B
Cumulative Convertible Preferred Stock is convertible into 45 shares of
common
stock, and contains the right to vote equal to 45 times for each Series
B
Cumulative Convertible Preferred Stock as compared to the common
shares. After the effect of the Reverse Split these shares will be
subject to the same reduction in the total amount that can me converted,
thus
each share of Series B preferred stock will be convertible into shares
of common
stock at a rate of .9 shares of common stock for each share of Series B
preferred stock. The stock split was effective on November 1, 2007.
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Management’s
Discussion and Analysis and Plan of
Operations.
|
FORWARD
LOOKING STATEMENTS
Because
we want to provide investors with more meaningful and useful information, this
Annual Report on Form 10-KSB (“Form 10-KSB”) contains, and incorporates by
reference, certain forward-looking statements that reflect our current
expectations regarding its future results of operations, performance and
achievements. We have tried, wherever possible, to identify these
forward-looking statements by using words such as “anticipates,” “believes,”
“estimates,” “expects,” “designs,” “plans,” “intends,” “looks,” “may,” and
similar expressions. These statements reflect our current beliefs and are based
on information currently available to us. Accordingly, these statements are
subject to certain risks, uncertainties and contingencies, including the factors
set forth herein, which could cause our actual results, performance or
achievements for 2006 and beyond to differ materially from those expressed
in,
or implied by, any of these statements. You should not place undue
reliance on any forward-looking statements. Except as otherwise required by
federal securities laws, we undertake no obligation to release publicly the
results of any revisions to any such forward-looking statements that may be
made
to reflect events or circumstances after the date of this prospectus or to
reflect the occurrence of unanticipated events.
OVERVIEW
History
and Organization
High
Velocity Alternative Energy Corp. formerly Triton Petroleum Group, Inc.,
formerly American Petroleum Group, Inc., formerly American Capital Alliance,
Inc. until November 1, 2004 and formerly Prelude Ventures, Inc. (the “Company”)
was incorporated under the laws of the State of Nevada on May 24, 2000, under
the name of Prelude Ventures, Inc. Prior to its acquisition of
American Petroleum Products Company, formally Alliance Petroleum Products
Company, the company had limited business operations and was considered a
development stage enterprise. The activities during that period
principally had been limited to organizational matters, and examining business
and financing opportunities for the company.
Prior
Business Matters and Failed Business Acquisitions
On
March
9, 2001, we acquired a 20-year mining lease from Steve Sutherland, the owner
of
24 unpatented lode-mining claims, sometimes referred to as the Medicine Project,
located in Elko County, Nevada. The lease was terminated at some
point by prior management.
During
the nine months ended December 31, 2003, management of the Company terminated
the mining lease. As the Company terminated the lease, it is required
to pay all federal and state mining claim maintenance fees for the current
year. The Company is required to perform reclamation work on the
property as required by federal, state and local law for disturbances resulting
from the Company’s activities on the property. In the opinion of
management, there will be no continuing liability, due to the time period that
has elapsed since the lease was terminated. We have never received
any claim or communication with respect to this lease, and at this pointing
time, do not expect any communication from any party related
thereto. If there was any communication, it would be the position of
the Company that any claim would be time barred.
On
April
1, 2003, the Company entered into an agreement to acquire 100% of the issued
and
outstanding shares of Pascal Energy Inc., a Canadian corporation, by the
issuance of 273,750 post split common shares, restricted under Rule 144 of
the
Securities Act of 1933 and at a later date, issue 273,750 post split common
shares, restricted under Rule 144 subject to the Company paying not less than
$1,000,000 accumulated dividends to its shareholders of
record. Pascal Energy, Inc.’s business was to provide servicing for
the oil and gas industry.
The
Company determined that the transaction mentioned above could not be completed
due to the inability to complete a comprehensive due diligence
review. The shares of common stock previously transferred in
anticipation of the completion of the transaction were returned to the treasury
of the Company and canceled.
“TSG”
Acquisition
On
October 9, 2003, the Company acquired an option for $500,000 to purchase the
assets and certain liabilities of Tri-State Stores, Inc., an Illinois
Corporation (“Tri-State”), GMG Partners LLC, and Illinois Limited Liability
Company (“GMG”), and SASCO Springfield Auto Supply Company, a Delaware
Corporation (“SASCO”). Tri-State, GMG and SASCO are collectively
referred to herein as “TSG.” Upon exercise of the option, the Company
was to pay $3,000,000 and assume certain liabilities, not exceeding
$700,000. TSG is involved in the automotive after
market. During the first quarter of 2004, the Company elected not to
continue to pursue this acquisition. The contractual amount of the
option was never fully paid, however, amounts advanced for the option purchase
and associated expenses resulted in an $185,000 charge to operations for the
year ended December 31, 2003 and $10,000 for the year ended December 31,
2004. There have been no further dealings, discussions or
transactions related to this matter.
Motor
Parts Waterhouse, Inc.
The
Company on or about October 9, 2003, issued 500,000 post split shares of common
stock for an option to acquire all the outstanding stock of Motor Parts
Warehouse, Inc. (“MPW”), of St. Louis, Missouri. In order to exercise
the option, the Company was to issue an additional 500,000 post split shares
of
common stock to the shareholders of MPW and pay $2,200,000. This MPW
option can not be exercised until after the refinancing of the TSG debt of
approximately $3,000,000. MPW is also an auto parts
distributor. As a result of the financing not being completed, the
Company elected not to continue to pursue this acquisition and let the option
lapse. There have been no further dealings, discussions or
transactions occurred related to this matter.
Oilmatic
Systems, LLC Transaction
On
December 3, 2004, the Registrant entered into a Letter of Intent, dated December
1, 2004, with Oilmatic Systems LLC of East Orange, New Jersey, whereby the
Registrant would purchase Oilmatic Systems LLC and/or Oilmatic International,
Inc., for shares of common stock of the Registrant.
Oilmatic
is a food service distribution company that supplies a closed loop Bulk Cooking
Oil Supply and Management System. Its patented state of the art
handheld Dipstick® design dispenses and removes cooking oil with the simple push
of a button at the deep fryers. The system also consists of separate
fresh oil and waste oil tanks. A key switch allows management to
control unnecessary oil fills and disposals. This system completely
eliminates the practice of employees manually removing hot used oil which
significantly reduces slips, falls and burns, as well as the hard labor of
unloading and retrieving heavy boxes of oil. Additionally, the system
eliminates hazardous grease spills both inside and outside of the store that
cause grease fires and grease trap build-ups that pollute our
environment. As part of the transaction, Michael Allora, President of
Oilmatic was to assume, after the closing of the transaction the position of
President and Chief Operating Officer of Triton Petroleum as well as
Oilmatic. Effective May 20, 2005, Management of the Registrant no
longer felt that the mutual goals of both parties were attainable and therefore
the proposed transaction with Oilmatic was cancelled between the
parties. There have been no further dealings, discussions or
transactions occurred related to this matter.
Oilmatic
Systems, LLC was advanced, interest free, a total of $300,000 by the
Company. The Letter of Intent stated that in the event that the
proposed transaction did not close, the money advanced was to be considered
a
loan to Oilmatic, and repaid nine months after being advanced. We
have made repeated demands for the repayment of the loan. To date, we
have not been able to collect the money due. Management can not make
any reasonable determination that the advance will ultimately be collected.
And
accordingly it has been written off by the Company in the Fiscal year
2006.
American
Petroleum Products Company
On
October 9, 2003, the Company also entered into a Stock Purchase Agreement
(“Alliance Agreement”) with Alliance Petroleum Products Company, now known as
American Petroleum Products Company (“Alliance”), an Illinois Corporation, and a
Rider to the Alliance Agreement (“Rider”). Alliance is in the
business of blending and bottling motor oil and anti-freeze. Under
the Alliance Agreement, the Company issued 1,250,000 shares of common stock
for
100% of the issued and outstanding shares of the common stock for 100% of the
issued and outstanding shares of the common stock of American (757,864 common
shares). An additional 1,250,000 shares of common stock of the
Company was issued to Worldlink International Network, Inc. In
addition, under the terms of the Rider, the Company was required to provide
funding of at least $3,500,000 to pay Harris Bank, a secured creditor of
Alliance, as a condition of the transaction. This was a material
contingency to the transactions and as a result had to be resolved prior to
recognition of a business combination. On September 24, 2004
(effective date July 1, 2004), the Company (“Prelude”) now known as High
Velocity Alternative Energy Corp., (“AMPE”) and Alliance Petroleum Products
Company, entered into an Amendment to the original Alliance Agreement, dated
October 9, 2003, whereby all previous conditions and contingencies were deemed
to have been completed or waived. Therefore, the Company assumed the
operations of the subsidiary. However, after a change of management
took place in September 2004, the current management refused to recognize the
obligation to pay certain amounts arising from other non Company obligations
and
third party agreements.
The
Company
The
operations of Alliance Petroleum Products Corp., which was later amended to
be
American Petroleum Products Corp. (“APPC”) have been consolidated with the
results of High Velocity Alternative Energy Corp. since July 1,
2004. High Velocity Alternative Energy Corp. which was formerly known
as America Petroleum Group, Inc. (the “Company”) is a Chicago based holding
company with an agenda to acquire, merge, and manage various business
opportunities.
The
company, via its subsidiary (American Petroleum Products Company, or APPC),
is
in the manufacturing and distribution of petroleum and related products for
the
automotive industry. Specifically, APPC is in the business of
blending, bottling, and distributing private label motor oil, transmission
fluid, and related products for the automotive aftermarket. These
products are sold, both direct and through distributors, to retail outlets
that
include oil change shops, automotive aftermarket chains, gas stations,
department stores, and convenience stores. Although most products are
sold in 12-quart cases, some products are sold in bulk. APPC sells to
a wide variety of customers with a low dependence on any one customer (the
largest customer makes up less than 10% of sales year-to-date).
In
order
to make finished motor oil, blenders and bottlers like APPC purchase base oils
and blend them with V.I. Improver and/or Additive Packages to create motor
oil,
which is then sold either Bulk or Bottled. While there are several
major companies with huge markets, this is a highly fragmented market, with
many
smaller players, especially in the private label market. Other major
costs include bottles, caps, labels, corrugated, labor, and transportation
costs. The U.S. market for aftermarket motor oil is approximately
$11.3 billion annually, making APPC a microscopic regional
player. Most retail outlets for motor oil carry a major brand and a
lesser-known, lower-priced brand. APPC primarily competes with those
other, lesser-known brands, which consist of other regional/national motor
oil
blenders and bottlers.
Given
that the product is a commodity, APPC competes largely by managing a competitive
cost structure so that it can pass through competitive pricing and by carefully
managing customer relationships. By giving our customers fair prices
and providing excellent quality and service, APPC has maintained relatively
long
term relations with its customer base and has had success winning new
customers.
Motor
oil
for late model year automobiles normally utilize the latest formulae established
by the American Petroleum Institute and the society of Automotive
Engineers. The “standard” for current model year automobiles is
referred to as “SM,” which recently replaced “SL.” Only SM and SL
motor oil can currently receive the API “starburst” certification seal, and APPC
must annually renew its API license in order to use the “starburst” seal on its
labels. Motor oil can also be made without the API starburst and aold
as oil with technology prior to SM or SL.
This
API-certified oil must include what is referred to as “Group 2 Base Oils” as the
foundation for the oil, as well as an additive package that includes the most
recently approved chemical blend. APPC, like other motor oil
blenders, must purchase Group 2 base oils from select, API-approved suppliers
in
order to make API-certified premium motor oil. APPC primarily
purchases Group 2 base oils from Motiva (Port Arthur, Texas) and from Evergreen
Oil (Irvine, California). Shortages of Group 2 base oils have caused
price increases in recent months, but APPC has temporarily been able to pass
these increases on to the customer.
On
July
1, 2005, TPG acquired the operating assets of Triton Petroleum, LLC (“Triton”).
Triton is operated as a division of TPG. On the Payment Date, which
shall be the one year anniversary of the effectiveness of the Agreement, that
being July 1, 2006, the Registrant shall pay to the Sellers the Purchase Price
equal to three and one half (3.5) times the net earnings of the assets and
operations formerly owned by Triton. The Purchase Price is to be paid
as: (a) twenty-five percent (25%) in cash on the payment date, and (b) with
the
balance of seventy-five percent (75%), payable over the following two years,
in
cash and stock, as agreed to by the parties. In addition, current
loans to Triton, totaling approximately three hundred thousand dollars
($300,000), due and owing to the members of Triton, shall be paid over the
twelve months from the Closing date to the Payment Date. It is
anticipated that the total purchase price will be approximately $300,000, plus
the net book value of the assets acquired in the amount of $230,625 at the
time
of payment, July 1, 2006. The assets purchased include the right to
the name, Triton Petroleum, all operations and assets, including any leases,
or
sub-leases. Triton purchased used oil from various consolidators of
used petroleum such as gear oil, machine oils, etc. that have never been burnt
before. It then transported the un-combusted, but unrefined oils back
to its reclamation facility in Detroit, Michigan, for refining. After
a very detailed reclamation process, all impurities and contaminants are
extrapolated out of the oil, through Triton’s centrifuge operation, thus leaving
it with a renewable petroleum base oil. This base oil can be blended
with new crude and other chemical components and bottled in our Bedford Park,
Illinois facility. The operations have been discontinued
as unprofitable.
During
the second quarter of fiscal 2007, the Company commenced operations of a second
subsidiary Petroleum Products Company (“PPC”). In the third quarter
of fiscal 2007, the Company operated solely with the new PPC subsidiary and
did
no operations with the APPC subsidiary. All operation are
consolidated with the results of the parent company, High Velocity Alternative
Energy Corp.
Risks
to Consider Regarding our Company
Our
independent registered public accounting firms issued reports for the year
ended
December 31, 2006 and December 31, 2005 that contained a “going concern”
explanatory paragraph.
Our
independent registered public accounting firms issued reports on their audit
of
our financial statements as of and for the years ended December 31, 2006 and
2005. Our notes to the financial statements disclose that The
Registrant’s cash flows have been absorbed in operating activities and have
incurred significant net losses for fiscal 2006 and 2005, and have a working
capital deficiency. In the event that funding from internal sources
or from public or private financing is insufficient to fund the business at
current levels, the Company will have to substantially cut back our level of
spending which could substantially curtail our operations. The
independent registered public accounting firm’s report contains an explanatory
paragraph indicating that these factors raise substantial doubt about the
Company’s ability to continue as a going concern. Our going concern
uncertainty may affect our ability to raise additional capital, and may also
affect our relationships with suppliers and customers. Investors
should carefully read the independent registered public accounting firm’s report
and examine our financial statements before investing in the Registrant’s stock
or any other type of investment.
The
Company Has Substantial Near-Term Capital Needs; The Company May Be Unable
To
Obtain Needed Additional Funding
The
Company will require funding over the next twelve months to develop the business
further. In fact, the Company has minimal capital for operations and
the Company has needs for immediate funding. Our capital requirements
will depend on many factors including, but not limited to, the timing of further
development of our business and the growth of the industry as a
whole. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our current shareholders will be
reduced. Moreover, those equity securities may have rights,
preferences, and privileges senior to those of the holders of our common
stock. There can be no assurance that additional capital will be
available on terms favorable to us or our shareholders.
Our
cash
requirements may vary substantially depending on our rate of development,
research results, competitive and technological advances and other
factors. If adequate funds are not available, the Company may be
required to curtail operations or to obtain funds by entering into collaboration
agreements on unattractive terms. Our inability to raise capital
would impair the current and future operations and may cause the Company to
cease business operations entirely.
The
Company Has Substantial Long-Term Capital Needs; The Company May Be
Unable To Obtain Needed Additional Funding
Substantial
expenditures will be required to further develop our business
model. The level of expenditures required for these activities will
depend in part on whether The Company develops and markets our services
independently or with other companies through collaborative
arrangements. Our future capital requirements will also depend on one
or more of the following factors:
| |
o
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Market
acceptance of our products and
services;
|
| |
o
|
The
extent and progress of our research and development
programs;
|
| |
o
|
Competing
technological and market developments;
and
|
| |
o
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The
costs of commercializing our products and
services.
|
There
can
be no assurance that funding will be available on favorable terms to permit
successful expansion of the business to allow the Company to exceed the break
even point, if at all.
In
addition, the Company has no credit facility or other committed sources of
capital. The Company may be unable to establish credit arrangements
on satisfactory terms, if at all. If capital resources are
insufficient to meet our future capital requirements, the Company may have
to
raise additional funds to continue development of our website. There
can be no assurance that such funds will be available on favorable terms, if
at
all.
To
the
extent that additional capital is raised through the sale of equity and/or
convertible debt securities, the issuance of such securities will likely result
in dilution to our shareholders. If adequate funds are not available,
the Company may be unable to develop our operations to a sufficient level to
generate revenues or become profitable.
We
expect
to issue additional stock in the future to finance our business plan and the
potential dilution caused by the issuance of stock in the future may cause
the
price of our common stock to drop.
The
Company is authorized to issue maximum stock of 100,000,000 common
shares. As of September 15, 2007, there were 17,803,500 issued and
outstanding shares of Common Stock. The Board of Directors has
authority to issue the balance of 82,196,500 shares of our authorized stock
without shareholder consent, on terms and conditions set in the discretion
of
the Board, which may dilute the value of your stock. If and when
additional shares are issued, it may cause dilution in the value of shares
purchased in this offering and may cause the price of our common stock to
drop. These factors could also make it more difficult to raise funds
through future offerings of common stock.
Most
of
our competitors may be able to use their financial strength to dominate the
market, which may affect our ability to generate revenues.
Most
of
our competitors are much larger companies than us and very well
capitalized. They could choose to use their greater resources to
finance their continued participation and penetration of this market, which
may
impede our ability to generate sufficient revenue to cover our
costs. Their better financial resources could allow them to
significantly outspend us on price to our customers, marketing and
production. We might not be able to maintain our ability to compete
in this circumstance.
The
Company Has Never Paid Dividends
The
Company has never paid dividends. The Company does not anticipate
declaring or paying dividends in the foreseeable future. Our retained
earnings, if any, will finance the development and expansion of our
business. Our dividends will be at our Board of Directors’ discretion
and contingent upon our financial condition, earnings, capital requirements
and
other factors. Future dividends may also be affected by covenants
contained in loan or other financing documents The Company may
execute. Therefore, there can be no assurance that cash dividends of
any kind will ever be paid.
Reporting
Requirements of a Public Company
As
a
public company, we are required to comply with the reporting obligations of
the
Exchange Act and may be required to comply with Section 404 of the
Sarbanes-Oxley Act for our fiscal year ending December 31, 2007. If
we fail to comply with the reporting obligations of the Exchange Act and Section
404 of the Sarbanes-Oxley Act, or if we fail to achieve and maintain adequate
internal controls over financial reporting, our business, results of operations
and financial condition, and investors’ confidence in use, could be materially
adversely affected. As a public company, we are required to comply
with the periodic reporting obligations of the Exchange Act, including preparing
annual reports, quarterly reports and current reports. Our failure to
prepare and disclose this information in a timely manner could subject us to
penalties under federal securities laws, expose us to lawsuits and restrict
our
ability to access financing. In addition, we are required under
applicable law and regulations to integrate our systems of internal controls
over financial reporting. We plan to evaluate our existing internal
controls with respect to the standards adopted by the Public Company Accounting
oversight Board. During the course of our evaluation, we may identify
areas requiring improvement and may be required to design enhanced processes
and
controls to address issues identified through this review. This could
result in significant delays and cost to us and require us to divert substantial
resources, including management time, from other activities.
It
is
more difficult for our shareholders to sell their shares because we are not,
and
may never be, eligible for NASDAQ or any National Stock Exchange.
We
are
not presently, nor is it likely that for the foreseeable future we will be,
eligible for inclusion in NASDAQ or for listing on any United States national
stock exchange. To be eligible to be included in NASDAQ, a company is
required to have not less than $4,000,000 in net tangible assets, a public
float
with a market value of not less than $5,000,000, and a minimum bid price of
$4.00 per share. At the present time, we are unable to state when, if
ever, we will meet the NASDAQ application standards. Unless we are
able to increase our net worth and market valuation substantially, either
through the accumulation of surplus out of earned income or successful capital
raising financing activities, we will never be able to meet the eligibility
requirements of NASDAQ. As a result, it will be more difficult for
holders of our common stock to resell their shares to third parties or
otherwise, which could have a material adverse effect on the liquidity and
market price of our common stock.
We
must
also obtain additional financing to either purchase our operating assets or
obtain working capital for leasing arrangements.
To
meet
our need for cash, we are attempting to raise debt and equity financings to
complete the acquisitions either described in this document or contemplated
in
the future and fund the Company’s ongoing operations. There is no
assurance that we will be able to raise these funds and stay in
business. If we do not raise the funds required to complete any of
the acquisitions, we will have to find alternate sources of capital such as
a
secondary public offering, private placement of securities, or loans from
officers or others. If we need additional cash and cannot raise it,
we will either have to suspend operations until we do raise the cash or case
operations entirely.
Limited
Operating History
We
cannot
guarantee we will be successful in our business operations. Our
business is subject to the risks inherent in the establishment of a new business
enterprise, including limited capital resources and the ability to find and
finance suitable acquisition candidates. We are seeking equity and
debt financing to provide the capital required to fund additional proposed
acquisitions and our ongoing operations.
We
have
no assurance that future financing will be available to the Company on
acceptable terms. If financing is not available on satisfactory
terms, we may be unable to continue, develop or expand our operations and
possibly cease operations totally. Equity financing could result in
additional dilution to shareholders.
Inflation
The
amounts presented in the financial statements do not provide for the effect
of
inflation on the Company’s operations or its financial
position. Amounts shown for machinery, equipment and leasehold
improvements and for costs and expenses reflect historical cost and do not
necessarily represent replacement cost. The net operating losses
shown would be greater than reported if the effects of inflation were reflected
either by charging operations with amounts that represent replacement costs
or
by using other inflation adjustments.
Provision
for Income Taxes
The
Company has determined that it will more likely than not use any tax net
operating loss carry forward in the current tax year and has taken and therefore
has a valuation amount equal to 100% of any asset.
Employees
As
of
December 31, 2006, we employed approximately 12 persons. None of our
employees are covered by collective bargaining agreements. We believe
that our relations with our employees are good.
PLAN
OF OPERATIONS
------------------
We
were a
startup, development stage Company prior to the acquisition of American
Petroleum Products Company (“APPC”) beginning with operations as of July 1,
2004, and did not realize any revenues from our business operations until that
time. However at time of acquiring APPC its sales volume was at a
point below its break even point and therefore was losing
money. Management of the Company feels that APPC is operating at a
small percentage of its capacity with its major constraint on increasing volume
being that of financing raw materials for manufacturing and some other limited
variable manufacturing costs. In addition, it is currently not
generating profits of sufficient amount to support the other operations of
the
parent Company. Accordingly, we must raise money from sources other
than the operations of this business. Our only other source of cash
at this time is investments by others (primarily from existing shareholders
and
others) in our Company. We must raise additional cash to complete any
future acquisitions and maintain current operations, otherwise the business
will
fail.
In
order
to raise capital for operations of the parent Company and to attempt to complete
the proposed Oilmatic transaction, the Company entered into a
transaction with Cornell Capital Partners LP and Highgate House Funds, Ltd.,
dated March 8, 2005, whereby the Company entered into a Convertible debenture
for a total amount of $500,000 at 7% interest. The Note is
convertible into shares of common stock at a conversion price of $0.85 per
share, at the option of the Lender. At the same time the Company
entered into with Cornell Capital Partners LP a total Standby Equity
Distribution Agreement for up to $10,000,000 equity line (See Item 3, Legal
Proceedings).
Liquidity,
Capital Resources and Operations
Since
the
Company’s inception, the Company raised funds from officer/stockholder advances,
from private sales of its common shares, including approximately $500,000 from
the sale of borrowed stock contributed by the Company’s promoters. We
have repaid this stock borrowing with the issuance of 50,000 shares of common
stock (taking in to account a reverse of the common shares of the Company in
November 2004). This money was utilized for certain start-up costs
and operating capital.
In
this
regard, the Company’s plan of operations for the next 12 months is to pursue
profitable business acquisitions, and obtain financing to increase the sales
volume of APPC. Product research and development is expected to be
minimal during the period. Additionally, the Company does not expect
any change in number of employees other than through acquisitions.
Financings
In
order
to raise capital for operations of the parent Company and to complete the
Oilmatic transaction at the time, the Company entered into a transaction with
Cornell Capital Partners LP and Highgate House Funds, Ltd., dated March 8,
2005,
whereby the Company entered into a Convertible debenture for a total amount
of
$500,000 at 7% interest. The Note is convertible into 588,325 shares
of common stock at a conversion price of $0.85 per share, at the option of
the
Lender. At the same time the Company entered into with Cornell
Capital Partners LP a total Standby Equity Distribution Agreement for up to
$10,000,000 equity line. Pursuant to the Standby Equity Distribution
Agreement we are to file a registration statement 180 days after
execution.
On
June
19, 2007 the terms of the secured convertible notes were amended to extend
the
maturity date to December 31, 2008 and to entitle the holder of the
note to convert all of the outstanding balance of the obligation plus accrued
interest and liquidated damages (aggregating approximately $890,000 at June
19,
2007) into shares of the Company’s common stock at a price per share equal to
the lower of $.85 per share or 80% of the volume weighted average price, as
defined, of the Company’s common stock for the thirty trading days immediately
preceding the conversion date.
The
Company must still obtain additional financing to either purchase our operating
assets or obtain working capital for leasing arrangements, and to operate our
business.
To
meet
our need for cash, we are attempting to raise debt and equity financing to
complete the acquisitions described in this document and fund the Company’s
on-going operations. There is no assurance that we will be able to
raise these funds and stay in business. If we do not raise the funds
required to complete any of the acquisitions mentioned in this document or
any
contemplated acquisition, we will have to find alternate sources such as a
secondary public offering, private placement of securities, or loans from
officers or others. If we need additional cash and can not raise it,
the Company will either have to suspend operations until we do raise the cash
or
cease operations entirely.
On
July
25, 2005, we conducted a Rule 504, Regulating D offering of $1,000,000 worth
of
Convertible Debentures of our subsidiary American Petroleum Products Company
(“APPC”), to accredited investors in the State of Texas. The Offering
was amended in October 10, 2005 to include the State of
Pennsylvania. Pursuant to the Offering, APPC issued the convertible
debentures, which were convertible into shares of common stock. As
part of the Offering, APPC was to be merged into the Registrant. This
event did not occur. Upon conversion into shares and merger of APPC
into the Registrant, the offering shares are issuable as shares of Triton
Petroleum Group, Inc. Pursuant to the amendment to the original
offering, the amount of shares to be offered for sale was raised to a total
of
3,108,000 shares of common stock.
We
are
also currently in discussions with several investors to raise the capital via
an
equity offering, involving the issuance of convertible debentures to be
converted upon the effectiveness of a Registration Statement. The
funds raised are necessary to complete the transactions with Harris Bank to
obtain clear title to the equipment used by the Company, in its APPC operations
and to purchase the real property that our plant is situated on from its owner,
as well as general business purposes. We anticipate that this
financing would close sometime in the second fiscal quarter 2006.
RESULTS
OF OPERATIONS
For
the Nine Months Ended September 30, 2007 vs. September 30, 2006
-----------------------------------------------------------
Net
Sales
Net
sales
for the nine months ended September 30, 2007 were $1,303,022 as compared
to
$2,001,497 for the nine months ended September 30, 2006, which represents
a
decrease of $698,475. The decrease is primarily due to a reduction of
orders due to increased prices, which were not accepted by
customers.
Cost
of Goods Sold and Gross Profit
Cost
of
goods sold for the nine months ended September 30, 2007 was $962,057 as compared
to $1,472,489 for the nine months ended September 30, 2006, a decrease of
$510,432 or 35%. This decrease is due to the decrease in sales. Gross
profit for the nine months ended September 30, 2007 was $340,965 or 25% as
compared to $529,008 or 26% for the nine months ended September 30,
2006. This is primarily due to lower sales volume.
Selling,
General and Administrative Expenses
These
expenses for the nine months ended September 30, 2007 were $1,156,226 as
compared to $1,724,977 for the nine months ended September 30, 2006, a decrease
of $568,751 or 33%. The decrease was primarily attributable to the
reduction in personnel and payroll costs.
Other
Income (Expense)
Other
expenses increased to $220,455 for the nine months ended September 30, 2007
compared to $51,782 for the nine months ended September 30,
2006. This was due an increase in interest costs due to higher debt
levels and a provision for bad debts.
Net
Loss
The
net
loss was $1,035,716 for the nine months ended September 30, 2007 compared
to a
loss of $1,247,751 for the nine months ended September 30, 2006. The
$212,035 decrease in loss was a result of three factors; namely, the decreased
gross profit less the reduction on selling, general and administrative expenses,
and the increase in other expense.
RESULTS
OF OPERATIONS
For
the Three Months Ended September 30, 2007 vs. September 30, 2006
-----------------------------------------------------------
Net
Sales
Net
sales
for the three months ended September 30, 2007 were $413,255 as compared to
$627,930 for the three months ended September 30, 2006, which represents
a
decrease of $214,675. The decrease is primarily due to a reduction of
orders due to increased prices, which were not accepted by
customers.
Cost
of Goods Sold and Gross Profit
Cost
of
goods sold for the three months ended September 30, 2007 was $266,309 as
compared to $380,245 for the three months ended September 30, 2006, a decrease
of $113,936 or 30%. This decrease is due to the decrease in sales.
Gross profit for the three months ended September 30, 2007 was $146,946 or
36%
as compared to $247,685 or 39% for the three months ended September 30,
2006. This is primarily due to lower sales volume.
Selling,
General and Administrative Expenses
These
expenses for the three months ended September 30, 2007 were $373,693 as compared
to $809,177 for the three months ended September 30, 2006, a decrease of
$435,484 or 54%. The decrease was primarily attributable to the
reduction in personnel and payroll costs.
Other
Income (Expense)
Other
expenses were $32,025 for the three months ended September 30, 2007 compared
to
$39,701 for the three months ended September 30, 2006. This was due
an decrease in interest costs net of a provision for bad debts.
Net
Loss
The
net
loss was $258,772 for the three months ended September 30, 2007 compared
to a
loss of $601,193 for the three months ended September 30, 2006. The
$342,421 reduction in loss was a result of three factors; namely, the decreased
gross profit less the reduction on selling, general and administrative expenses,
and the reduction in interest expense.
Liquidity
and Financial Resources
---------------------------------
During
the quarters ended September 30, 2007, and 2006, net cash used by operating
activities was ($480,801) and
($52,307) respectively. The Company incurred net losses in
the Quarter of ($258,772) and ($601,193) for the quarters ended September
30, 2007 and 2006, respectively. The Company still would have
incurred net operating losses in 2007 and 2006 even if the non-cash stock
compensation and financing expense, detailed above did not
occur. Additionally, at September 30, 2007, current liabilities
exceeded current assets by $3653,847.
These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. The Company anticipates that in order to fulfill its
plan of operation including payment of certain past liabilities of the Company,
it will need to seek financing from outside sources. The Company is
currently pursuing private debt and equity sources. It is the
intention of the Company’s management to also improve profitability by
significantly reducing operating expenses and to increase revenues
significantly, through growth and acquisitions.
The
Company is actively in discussion with one or more potential acquisition or
merger candidates. There is no assurance that the Company will be
successful in raising the necessary funds nor there a guarantee that the Company
can successfully execute any acquisition or merger transaction with any company
or individual or if such transaction is effected, that the Company will be
able
to operate such company profitably or successfully.
The
increases in recurring administrative expenses detailed above in The Results
of
Operations section are due to the start up of the operations, increases in
personnel and professional fees, and a generally higher level of fixed
administrative expenses. It is anticipated by the Registrant that
General and Administrative costs will remain relatively the same, while Revenues
and Gross Profit will increase as a result of the business derived from APPC
and
Triton. This can be achieved only if the Company
can obtain financing from outside sources since additional capital is needed
to
operate and expand operations from current levels.
Off-Balance
Sheet
Arrangements
We
do not
have any off-balance sheet arrangements that have or are reasonably likely
to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
The
registrant’s Principal executive financial officer, based on his evaluation of
the registrant's disclosure controls and procedures (as defined in Rules 13a-14
(c) of the Securities Exchange Act of 1934) as of September 30, 2007 has
concluded that the registrants’ disclosure controls and procedures are adequate
and effective to ensure that material information relating to the registrants
and their consolidated subsidiaries is recorded, processed, summarized and
reported within the time periods specified by the SEC's rules and forms,
particularly during the period in which this quarterly report has been
prepared.
The
registrant's principal executive/financial officer has concluded that there
were
no significant changes in the registrant’s internal controls or in other factors
that could significantly affect these controls subsequent to December 31, 2006
the date of their most recent evaluation of such controls, and that there was
no
significant deficiencies or material weaknesses in the registrant's internal
controls.
Part
II. Other Information
Other
than described below, there are no past, pending or, to our knowledge,
threatened litigation or administrative action which has or is expected by
our
management to have a material effect upon our business, financial condition
or
operations, including any litigation or action involving our officer, director
or other key personnel. There have been no changes in the company’s
accountants or disagreements with its accountants since its
inception.
There
is
a threatened action by the Harris Bank of Chicago, Illinois with respect to
a
defaulted loan agreement. Harris Bank claims to have a lien on the
equipment used by the Registrant in its operations. The Registrant
has had contact with Harris Bank and is attempting to resolve the
matter. We believe that we have reached a resolution with Harris
Bank. The resolution is anticipated to be closed within the second
fiscal quarter of 2006. The exact terms have not yet been
finalized. It is hoped that discussions the Company is involved in
with various funding sources will reach an agreement and conclusion begun within
the fourth fiscal quarter so the company may proceed with the
transactions.
The
Company has paid no rent or compensation of any type to the entities that claim
to have legal title to the operating assets of APPC, up until six months
ago. Although no lease exists, these entities are claiming that the
Company owes a monthly rental amount of approximately $15,000. Based
upon settlement discussions with the owner of the real estate the Company has
accrued approximately $185,000 for past due rental
expense. Since March, we have been paying $10,000 per month at
the rate of $2,500 per week. This covers only current
rent. Management has taken the position that since there was no
contract or agreement to purchase the assets or for the payment of rentals
for
these assets, therefore nothing is owed. The consolidated operations
for the period since APPC was acquired do not contain $185,000 of accrued rent
for compensation for use of the facilities. The owner (and former
President of the Company and shareholder) of the entity that owns the real
estate is claiming a monthly rental amount of $15,000. The Company
has been in discussion with the owner of the real estate and has a tentative
agreement that is not yet fully agreed upon. The terms under
discussion include the purchase of the real estate for approximately $1,900,000
and $185,000 for additional back-rent and other capital debt claimed by the
owner.
The
Company received a letter, dated February 28, 2005, from the Attorney for
Concentric Consumer Marketing, Inc., in connection with certain sums owed by
American Petroleum Products Corporation (“APPC”), a wholly owned subsidiary of
the Company, in the amount of $13,000 per month for the past four (4) months,
for services. There is no way to determine at this time the validity
of the claim, or any possible outcome or if the claim is material to the
Company, or even if litigation will be commenced against the Company and/or
APPC. The Company has reached a settlement with Concentric Consumer
Marketing, Inc., which has been paid.
Clement
Finance & Leasing, Inc. has apparently obtained a judgment against the
Company in the State of Wisconsin, Circuit Court, Waukesha County, case No.
07CV-630, on or about March 5, 2007, for breach of contract involving the lease
of certain Trailers to our subsidiary American Petroleum Group. On
April 25, 2007, a Judgment was granted to Clement Finance & Leasing, Inc. in
the amount of $14,329.00, plus interest at the rate of
9%. Thereafter, the judgment-creditor commenced an action in New York
State Supreme Court, County of Putnam, under the Uniform Enforcement of Foreign
Judgment Act. To date, it is unknown if such judgment has been
granted and entered in New York State.
On
or
about October 20, 2007, to all holders of record on September 1, 2007 of the
$0.001 par value common stock (the “Common Stock”) of High Velocity Alternative
Energy Corp., a Nevada corporation (the “Company”), in connection with the vote
by the Board of Directors of the Company and the approval by written consent
of
the holder(s) of a majority of the Common Stock to effect a reverse stock split
whereby all outstanding shares of the Company's $.001 par value common stock
was
reversed split on a 1-for-50 share basis. This was effective on
November 1, 2007.
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Defaults
Upon Senior Securities
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The
Company is currently in default of its obligations with respect to Cornell
Capital Partners LP and Highgate House Funds, Ltd., dated March 8,
2005. Previously, on or about September 26, 2007, The Registrant had
entered into Amendment No. 1 to Secured Convertible Debenture, dated September
26, 2007 (the “Amendment”), between the Registrant and Highgate House Funds,
Ltd., to a Secured Convertible Debenture dated March 8, 2005 (the “Master
Agreement”).
Under
the
terms of the Amendment, the Conversion Price in Section 1.02 of the Master
Agreement is amended as follows:
“The
Holder is entitled, at its option,
to convert, and sell on the same day, at any time and from time to time, until
payment in full of this Debenture, all or any part of the principal amount
of
the Debenture, plus accrued interest and liquidated damages, into shares (the
“Conversion
Shares”) of the Company’s
common stock, par value $0.001 per share (“Common
Stock”), at the price per
share (the “Conversion
Price”) equal to the lower
of (a) $0.85, or (b) eighty percent (80%)
of the lowest daily Volume
Weighted Average Price (“VWAP”)
of the Common Stock on the Principal
Market during the thirty (30) trading days immediately preceding the Conversion
Date as quoted by Bloomberg, LP (collectively, the “Conversion
Price”).
Subsequent
to that, on December 14, 2007, the Registrant notified its Transfer Agent that
it believed that Highgate House Funds, Ltd. was in breach of its obligations
and
would no longer honor conversion requests. It is expected that
litigation will be commenced by the Company by January 15, 2008. Such
litigation might be significant and materially affect the Company.
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Submission
of Matters To A Vote Of Security
Holders
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On
or
about April 20, 2007, the Company received written consents in lieu of a meeting
of stockholders from holders of a majority of the shares of Common Stock
representing in excess of 50.1 % of the total issued and outstanding shares
of
voting stock of the Company (the “Majority Stockholders”) approving the
Certificate of Amendment to the Certificate of Incorporation of the Company,
pursuant to which the Company's name will change to “High Velocity Alternative
Energy
Corp.” This was effective on September 3, 2007.
See
Item
2 with respect to a reverse split of the common stock.
None
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3.1
|
Articles
of Incorporation of the Registrant, as
amended*
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| |
3.2
|
By-laws
of the Registrant, as amended*
|
| |
|
Section
302 Certification of Chief Executive Officer
(1)
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| |
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Section
906 Certification of Chief Executive Officer
(1)
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------------
*
Previously filed as an exhibit to the Company’s Form 10-SB filed on September
26, 2001
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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Date: January
22, 2008
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High
velocity Alternative Energy Corp.
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/s/
Michael Margolies
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Michael
Margolies, President and Chief Executive Officer and Chief Financial
Officer
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