XOTC:SRBL Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

þ         REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: March 31, 2012
 
o          REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT       
                           
 For the transition period from _____________________ to ______________

Commission file number: 333-142516
 
 
 Great American Energy, Inc.
 
 
 (Exact name of registrant as specified in its charter)
 
 
Delaware
 
333-142516
 
20-8602410
(State or other jurisdiction of
 
(Commission
 
(IRS Employer
incorporation or organization)
 
File Number)
 
Identification No.)

999 18th Street, Suite 3000
Denver, Colorado 80202
 (Address of Principal Executive Offices)

(303) 952-0455
(Issuer Telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ    No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller Reporting Company
þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No þ
As of May 18, 2012, there were 88,000,000 shares issued and outstanding of the registrant’s common stock.



 
 

 
 
INDEX
 
PART I — FINANCIAL INFORMATION
     
         
Item 1.
Financial Statements 
   
F-1
 
           
Item 2. 
Management’s Discussion and Analysis or Plan of Operation.
      3  
           
Item 3.
Quantitative and Qualitative Disclosure about Market Risk 
      5  
           
Item 4.
Controls and Procedures. 
      6  
           
PART II — OTHER INFORMATION
       
           
Item 1.
Legal Proceedings. 
      7  
           
Item 1A.
Risk Factors 
      7  
           
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds. 
      7  
           
Item 3.
Defaults Upon Senior Securities. 
      7  
           
Item 4.
(Removed and Reserved). 
      7  
           
Item 5.
Other Information. 
      7  
           
Item 6.
Exhibits. 
      8  
 
 
2

 

PART I — FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
Great American Energy, Inc., formerly Southern Bella, Inc.
 
  Index
   
Unaudited Balance Sheets as of March 31, 2012 and December 31, 2011 F-2
   
Unaudited Statements of Operations for the three months ended March 31, 2012 and 2011 F-3
   
Unaudited Statements of Cash Flows for the three months ended March 31, 2012 and 2011 F-4
   
Notes to the Financial Statements F-5 – F-9
 
 
 
F-1

 
 
GREAT AMERICAN ENERGY, INC.
(formerly SOUTHERN BELLA, INC.)
BALANCE SHEETS
MARCH 31, 2012 AND DECEMBER 31, 2011
 
     
Unaudited
       
ASSETS
 
March 31,
   
December 31,
 
     
2012
   
2011
 
               
CURRENT ASSETS
           
   Cash
    $ 9,708     $ -  
 
Total current assets
    9,708       -  
                   
TOTAL ASSETS
  $ 9,708     $ -  
                   
                   
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
                   
CURRENT LIABILITIES
               
  Bank overdraft
  $ -     $ 572  
  Accounts payable
    -       5,630  
  Deferred revenue
    10,775       12,025  
  Accrued liabilities
    12,798       12,798  
 
Total current liabilities
    23,573       31,025  
                   
STOCKHOLDERS' EQUITY (DEFICIT)
               
   Preferred stock, $0.000001 par value, 20,000,000 authorized,
               
       none issued and outstanding
               
   Common stock, $0.000001 par value, 1,000,000,000 shares authorized, 88,000,000
               
       issued and outstanding at March 31, 2012 and December 31, 2011, respectively
    88       88  
   Additional paid in capital
    838,456       743,372  
   Accumulated earnings (deficit)
    (852,409 )     (774,485 )
 
Total stockholders' equity (deficit)
    (13,865 )     (31,025 )
 
 
               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 9,708     $ -  
 
 The accompanying notes are an integral part of these consolidated financial statements.

 
F-2

 
 
GREAT AMERICAN ENERGY, INC.
(formerly SOUTHERN BELLA, INC.)
 STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(UNAUDITED)
 
   
THREE MONTHS
 
   
ENDED
 
   
MARCH 31,
2012
   
MARCH 31,
2011
 
             
             
REVENUE
  $ 69,351     $ 84,585  
                 
COST OF REVENUES
    32,478       44,128  
                 
OPERATING EXPENSES
               
Payroll expenses
    3,365       13,609  
Officers compensation
    531       976  
General and administrative
    110,901       36,573  
Total operating expenses
    114,797       51,158  
                 
NET LOSS FROM OPERATIONS
  $ (77,924 )   $ (10,701 )
                 
NET LOSS
  $ (77,924 )   $ (10,701 )
                 
BASIC AND DILUTED EARNINGS PER SHARE
  $ (0.00 )   $ (0.00 )
                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    88,000,000       95,566,667  
 
 The accompanying notes are an integral part of these consolidated financial statements.

 
F-3

 
 
GREAT AMERICAN ENERGY, INC.
(formerly SOUTHERN BELLA, INC.)
 STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(UNAUDITED)

 
   
THREE MONTHS
 
   
ENDED
 
   
MARCH 31, 2012
   
MARCH 31, 2011
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
             
Net loss
  $ (77,924 )   $ (10,701 )
Adjustment to reconcile net loss to net cash used in operating activities:
               
Donated rent
    2,700       1,800  
Donated consulting services
    20,000       -  
Changes in operating assets and liabilities:
               
Increase or (decrease) in bank overdraft
    (572 )     -  
Increase or (decrease) in accounts payable
    (5,630 )     (12,211 )
Increase or (decrease) in credit card payable
    -       1,468  
Increase or (decrease) in deferred revenue
    (1,250 )     (1,875 )
          Net cash used in operating activities
    (62,676 )     (21,519 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
                 
Capital contribution
    72,384       27,050  
          Net cash provided by financing activities
    72,384       27,050  
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    9,708       5,531  
 
               
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
    -       506  
 
               
CASH AND CASH EQUIVALENTS - END OF PERIOD
  $ 9,708     $ 6,037  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
               
          Interest paid
  $ -     $ -  
          Income taxes paid
  $ -     $ -  
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
 
Great American Energy, Inc., formerly Southern Bella, Inc.
 
Notes to the Financial Statements
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Southern Bella, Inc. (“Southern Bella”, the “Company” or the “Registrant”) was incorporated in Delaware on February 22, 2007.

Uptone Pictures, Inc. (“Uptone”) was incorporated in North Carolina on March 27, 2006.  Uptone is an entertainment company, which specializes in the creation, production and distribution of content.

On December 17, 2010 (the “Closing”), Southern Bella, Inc., closed a reverse take-over transaction by which it acquired Uptone. Pursuant to a Share Exchange Agreement (the “Exchange Agreement”) between the Registrant and Uptone, Viola J. Heitz, shareholder of Southern Bella, and Wendi Davis, sole shareholder of Uptone, the Registrant acquired 100% of Uptone’s issued and outstanding common stock.

On May 13, 2011, Southern Bella entered into a Subsidiary Put Option Agreement (the “Put Option Agreement”) with Wendi and Michael Davis (the “Purchasers”).  As of May 13, 2011, the Purchasers were members of Southern Bella’s Board of Directors (the “Board”).  On such date, the Purchasers were the beneficial holders of 8,166,667 shares of Southern Bella’s common stock, par value $0.000001 per share, or 94% of Southern Bella’s issued and outstanding common stock (the “Davis Shares”).  Subsequently, the Davis Shares were sold to Geoff Evett pursuant to the terms of a stock purchase agreement further described below.  Under the terms of the Put Option Agreement, Southern Bella acquired a put option (the “Put Option”) obligating the Purchasers to purchase Southern Bella’s holdings of 100 shares of common stock of Uptone, such shares constituting all of the issued and outstanding shares of Uptone (the “Uptone Shares”) for a total price of $100.  Under the terms of  the Put Option, Southern Bella is required to obtain Board and stockholder approval prior exercising the Put Option.  The Put Option will expire on May 13, 2014 (the “Option Termination Date”), unless it is terminated earlier under the terms of the Put Option Agreement.

Pursuant to the terms of the Put Option Agreement, the Purchasers will indemnify Southern Bella for any costs, expenses, liabilities or claims incurred by Uptone before, by and through and after the option period (the period from May 13, 2011 to the Option Termination Date or earlier termination as provided in the Put Option Agreement).

Southern Bella entered into the Put Option Agreement in connection with a stock purchase agreement that the Purchasers separately entered into with Geoff Evett on May 13, 2011 (the “Stock Purchase Agreement”), which closed on May 16, 2011 (the “SPA Closing”).  On the SPA Closing, the Purchasers sold 100% of the Davis Shares to Mr. Evett for an aggregate cash payment of $220,000. On the SPA Closing, the Purchasers, who were previously Southern Bella’s officers, resigned from such positions and Mr. Evett was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary.  On the Closing, the Purchasers submitted resignation letters from their positions as directors which were effective 10 days after the filing and mailing to Southern Bella’s stockholders of an Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14f-1 promulgated thereunder.  Mr. Evett became Southern Bella’s sole director on May 27, 2011.

On June 29, 2011, Southern Bella approved the Certificate of Amendment to change its name to Great American Energy, Inc. (“Great American”).  The name change was effective as of August 26, 2011.
 
 
F-5

 

BASIS OF PRESENTATION
 
The Company follows accounting principles generally accepted in the United States of America.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
 
REVENUE RECOGNITION
 
Revenue is recognized when it is realized or realizable and earned. Great American considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, goods have been provided, and collectability is reasonably assured. With respect to revenues for the purchase of air time in advance, these criteria are assumed to have been met if a customer orders air time, payment for the time clears, and the entire air time purchased is available to the customer.  Other revenue that is billed in advance such as recurring weekly or monthly services are initially deferred and recognized as revenue over the period until the goods are provided.  There was deferred revenue of $10,775 and $12,025 for the three month period ending March 31, 2012 and the year ending December 31, 2011, respectively.

USE OF ESTIMATES
 
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 
CASH AND CASH EQUIVALENTS
 
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of March 31, 2012 and December 31, 2011, there were no cash equivalents.
 
FINANCIAL INSTRUMENTS
 
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
 
Level 1   Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
 
Level 2   Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
 
Level 3   Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
 
 
F-6

 
 
The Company’s financial instruments consist principally of cash, credit cards payable and deferred revenue. Pursuant to ASC 820 and 825, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
 
INCOME TAXES
 
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
 
BASIC AND DILUTED NET LOSS PER COMMON SHARE
 
Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the year. The per share amounts include the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share is the same due to the anti dilutive nature of potential common stock equivalents.  Great American had no common stock equivalents outstanding at March 31, 2012 and December 31, 2011.
 
RECENT ACCOUNTING PRONOUNCEMENTS

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on December 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on December 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements.
 
 
F-7

 

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. ASU 2011-02 has become effective for the Company on September 1, 2012. The Company does not believe that the guidance will have a material impact on its financial statements.

In December 2010, the FASB issued ASU 2010-29, “Business Combinations (Topic 805): Disclosure of supplementary pro forma information for business combinations.” This update changes the disclosure of pro forma information for business combinations. These changes clarify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. Also, the existing supplemental pro forma disclosures were expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

In December 2010, the FASB issued ASU 2010-28, “Intangible –Goodwill and Other (Topic 350): When to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts.” This update requires an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not (more than 50%) that a goodwill impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s goodwill is not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.
 
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations
 
NOTE 2 - GOING CONCERN
 
Great American’s financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations.  As of March 31, 2012, the Company has a working capital deficit of $13,865 and has an accumulated deficit of $852,409.  These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.  These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
 
F-8

 
 
NOTE 3 - DEFERRED REVENUE

At March 31, 2012, deferred revenue consists of $10,775 of a $25,000 contract for air time from June 1, 2009 through May 30, 2014.   At December 31, 2011, deferred revenue consists of $12,025 of that same contract.

NOTE 4 - STOCKHOLDERS’ EQUITY

On December 31, 2010, Wendi Davis owned 8,166,667 shares of common no-par stock.  During 2010, the Company received $151,517 of contributed capital from two related parties and $18,450 of capital from a non related party.

Under the Exchange Agreement in 2010, the Registrant completed the acquisition of all of the issued and outstanding shares of Uptone through the issuance of 8,166,667 restricted shares of Common Stock to Wendi Davis, sole shareholder of Uptone.  Immediately prior to the Exchange Agreement transaction, the Registrant had 8,666,667 shares of Common Stock issued and outstanding, of which 8,166,667 share of Common Stock are owned by Viola J. Heitz, which 8,166,667 shares were cancelled immediately prior to the Closing pursuant to the Exchange Agreement.  Immediately after the issuance of the shares to Wendi Davis, sole shareholder of Uptone, the Registrant had 8,666,667 shares of Common Stock issued and outstanding.

Geoff Evett owns 600,000 shares of common stock at .000001 par value.  During the year ended 2011, the Company received $50,537 of contributed capital from two related parties.

On June 29, 2011, the Company entered into a contribution agreement with the President, Geoff Evett, where Mr. Evett returned 7,566,667 shares of common stock to the Company as a contribution to the Company’s capital.

On August 29, 2011, the Company declared a 79 for 1 stock dividend payable on August 30, 2011 to shareholders of record on August 29, 2011.  This dividend is shown retroactively.

During 2011 Metlera Capital which is owned equally by Geoff Evett and his wife contributed $87,106 in capital, $10,800 in rent and $4,000 in consulting to the Company.

During the first quarter of 2012, Metlera Capital contributed $46,534 in capital, $2,700 in rent and $20,000 in consulting to the Company.  Also during the first quarter of 2012 7Worldwide, owned by the former President, Mike Davis and Medplus, owned by the former Secretary’s father contributed $20,100 and $28,450, respectively.

NOTE 5 - RELATED PARTY TRANSACTIONS

During the first quarter of 2012, the Company received $95,084 of contributed capital from three related parties:  $20,100 from 7Worldwide, owned by the former President, Mike Davis, $28,450 from MedPlus, owned by the former Secretary’s father, $46,534 of contributed capital from Metlera Capital SL, owned equally by Geoff Evett and his wife.  The $46,534 consists of $23,834 of cash, $2,700 in rent and $20,000 in consulting.

The Company conducts its operations from facilities located in Wake Forest, North Carolina.  This office is provided to the Company by its former President, Mike Davis, for which the company recognizes expenses of $900 per month through July 1, 2012.  Rent expense for the three months ending March 31, 2012 and the year ending December 31, 2011 was $2,700 and $10,800, respectively. 

NOTE 6 - SUBSEQUENT EVENTS
 
Subsequent events have been evaluated through the date the financial statements were issued.

On April 19, 2012, Mr. Geoff Evett, our Chief Executive Officer, tendered his resignation from his position as CEO of the Company.

On April 19, 2012, Mr. Felipe Pimienta Barrios was appointed Chief Executive Officer by the Company’s Board of Directors.  On the same date Mr. Pimienta was appointed by the Company’s Board of Directors to fill a vacancy on the Board.
 
 
F-9

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report.

Overview

Great American Energy, Inc. (“Great American Energy” or the “Registrant”) was incorporated in Delaware on February 22, 2007 (originally under the name Southern Bella, Inc.). The Registrant was organized to acquire catering companies throughout the United States. The first catering company acquired by the Registrant was Dupree Catering, Inc. (“Dupree”). Dupree is a Kentucky corporation, formed on October 28, 1991. On March 1, 2007, the Registrant acquired all of the shares of stock of Dupree for $110,000 and Dupree became the wholly-owned subsidiary of the Registrant. The Registrant sold all of the assets of Dupree on July 1, 2008.
 
On December 17, 2010 the Registrant, closed a reverse take-over transaction by which it acquired 100% of the issued and outstanding common stock of Uptone Pictures, Inc., a North Carolina corporation (“Uptone”) which specializes in the creation, production and distribution of content.  

Prior to the reverse take-over of Uptone,  the Registrant was a public reporting “shell company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a result of the reverse take-over transaction, Uptone became the Registrant’s wholly-owned subsidiary, and the Registrant acquired the business and operations of Uptone. Except as otherwise indicated by the context, references to “we,” “us,” and “our” hereinafter in this Form 10-Q are to the consolidated business of Uptone, except that references to “our common stock”, “our shares of common stock” or “our capital stock” or similar terms shall refer to the common stock of the Registrant.
 
We specialize in the creation, production and distribution of media content and have developed a number of entertainment products which include:
 
·
National Television shows

·
Docu-dramas

·
Music Videos

·
Feature Films

·
Specialty content for various other electronic platforms
 
On April 20th 2010, we entered into a Production Agreement with Moving Box Entertainment LLC, a North Carolina limited liability company for the production of A Box For Rob (the “Movie”).

Under the Production Agreement, Moving Box provided cash financing in the amount of $264,200 and Uptone provided in-kind services valued at approximately $32,800. The Movie was completed on April 20, 2011 and since that time, we have focused on securing distribution for the Movie. We have engaged in discussions with several distribution companies, however, we have not secured any contracts, agreements, or commitments for any distribution of the Movie.

 
3

 

Recent Developments

On May 13, 2011, the Registrant entered into a Subsidiary Put Option Agreement (the “Put Option Agreement”) with Wendi and Michael Davis (the “Purchasers”).  As of May 13, 2011, the Purchasers were members of the Registrant’s Board of Directors (the “Board”).  On such date, the Purchasers were the beneficial holders of 8,166,667 shares of the Registrant’s common stock, par value $0.000001 per share, or 94% of the Registrant’s issued and outstanding common stock (the “Davis Shares”).  Subsequently, the Davis Shares were sold to Geoff Evett pursuant to the terms of a stock purchase agreement further described below.  Under the terms of the Put Option Agreement, the Registrant acquired a put option (the “Put Option”) obligating the Purchasers to purchase the Registrant’s holdings of 100 shares of common stock of Uptone, such shares constituting all of the issued and outstanding shares of Uptone (the “Uptone Shares”) for a total price of $100.  Under the terms of  the Put Option, the Registrant is required to obtain Board and stockholder approval prior exercising the Put Option.  The Put Option will expire on May 13, 2014 (the “Option Termination Date”), unless it is terminated earlier under the terms of the Put Option Agreement.

Pursuant to the terms of the Put Option Agreement, the Purchasers will indemnify the Registrant for any costs, expenses, liabilities or claims incurred by Uptone before, by and through and after the option period (the period from May 13, 2011 to the Option Termination Date or earlier termination as provided in the Put Option Agreement).

We entered into the Put Option Agreement in connection with a stock purchase agreement that the Purchasers separately entered into with Geoff Evett on May 13, 2011 (the “Stock Purchase Agreement”), which closed on May 16, 2011 (the “SPA Closing”).  On the SPA Closing, the Purchasers sold 100% of the Davis Shares to Mr. Evett for an aggregate cash payment of $220,000. On the SPA Closing, the Purchasers, who were previously our officers, resigned from such positions and Mr. Evett was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary.  On the Closing, the Purchasers submitted resignation letters from their positions as directors which were effective 10 days after the filing and mailing to our stockholders of an Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14f-1 promulgated thereunder.  Mr. Evett became our sole director on May 27, 2011.

On June 29, 2011, we entered into a contribution agreement (the “Contribution Agreement”) with Geoff Evett, our sole director, president, and largest shareholder. Pursuant to the Contribution Agreement, Mr. Evett returned 7,566,667 shares of our common stock to us as a contribution to our  capital. Prior to the execution of the Contribution Agreement, Mr. Evett held 8,166,667 shares of our common stock representing approximately 94.23% of our issued and outstanding shares. Following the execution of the Contribution Agreement, Mr. Evett holds 600,000 shares of our common stock representing approximately 54.54% of our issued and outstanding shares.

On June 29, we approved the Certificate of Amendment to change our name to Great American Energy, Inc.  The name change was effective as of August 26, 2011.

On August 30, 2011, we effected a 79-for-1 stock-on-stock dividend for all of the issued and outstanding shares of our common stock on the record date of August 29, 2011 (the “Dividend”). Following the Dividend, we have 88,000,000 shares of common stock outstanding.

On April 19, 2012, our then Chief Executive Officer, Mr. Evett, tendered his resignation and our Board appointed Mr. Felipe Pimienta Barrios as our Chief Executive Officer and member of our Board.  Mr. Evett remains on our Board.
 
We are considering the possibility of acquiring an existing company. Although no specific companies have been identified for such an acquisition, we are focusing on the mineral exploration and development industry. Should we proceed with an acquisition in the mineral exploration and development industry, we may exercise the Put Option in order to focus on the line of business of such a newly acquired subsidiary.
 
 
4

 
 
Results of Operations

Revenue for the three months ended March 31, 2012 was $69,351 as compared with $84,585 for the same period in 2011. The 18.01% decrease was due reduced sales. Cost of revenues for the three months ended March 31, 2012 was $32,478 as compared with $44,128 for the three months ended March 31, 2011. The 26.40% decrease was due to reduced sales and sales efforts. Payroll expenses for the three months ended March 31, 2012 were $3,365 as compared to $13,609 for the three months ended March 31, 2011. The 75.27% decrease was due to the layoffs of part time workers . Officers compensation for the three months ended March 31, 2012 was $531 as compared to $976 for the three months ended March 31, 2011. This decrease was due to reductions in the number of officers and reduced compensation for remaining officers. General and administrative expenses increased from $36,573 to $110,901. This 203.23% increase was due to increased general and administrative expenses relating to recent corporate transactions.  Net loss from operations for the three months ended March 31, 2012 were $77,924 as compared to $10,701 for the three months ended March 31, 2011. The increase of $67,233 was due to reduced sales and increased general and administrative expenses.

Liquidity and Capital Resources

We generated net losses for the period ending March 31, 2012 and the year ending December 31, 2011, and had a deficit accumulated through March 31, 2012 of $852,409. We had a working capital deficit of $13,865 for the period ending March 31, 2012 and $31,025 at December 31, 2011. We have no long term obligations.

We had a cash balance of $9,708 at March 31, 2012 and $0 at December 31, 2011. For the three month period ended March 31, 2012 we had net cash inflows of $9,708. Cash flows used in operations for the three month period ended March 31, 2012 were ($38,842) compared with ($21,519) for the same period in 2011, a decrease which was primarily due to reduced operations. Cash flows used in operations for the three month period ending March 31, 2012 consisted primarily of a net loss from operations of ($77,924), contributed capital of $48,834, decreases in accounts payable ($5,630), and deferred revenue ($1,250). We had net cash provided by financing activities of $48,550 for the three month period ended March 31, 2012.
 
During the remaining fiscal year 2012, we expect that our operations will be funded by advances from management and financing activities. However, there is no assurance that we will be able to obtain sufficient funds to support our operations as planned. We are dependent on the continued support of our creditors and our ability to raise further capital to fund ongoing expenditures. In current market conditions there is uncertainty that the necessary funding can be obtained as needed, raising substantial doubt as to our to continue operating as a going concern. In the event we are unable to raise additional capital, we will not be able to meet our obligations and will be required to further curtail or terminate some of our projects and/or activities.

All of our costs associated with complying with the securities laws, rules, and regulations applicable to public companies, estimated to be less than $25,000 annually, will be funded by a loan from management, to the extent that funds are available to do so. However, management is not obligated to provide these or any other funds. If we fail to secure such funding, we may fail to meet our reporting obligations as a public company and could lose our eligibility for the quotation of our stock on the over the counter bulletin board. Should this occur, investors may have increased difficulty selling their stock.

Our independent auditors have indicated in their audit report for the years ended December 31, 2011 that there is substantial doubt about our ability to continue as a going concern over the next twelve months.
 
Off-Balance Sheet Arrangements
 
There are no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
Not applicable
 
 
5

 
 
ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures
 
We have established disclosure controls and procedures to ensure that information required to be disclosed in this quarterly report on Form 10-Q was properly recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Our controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officers to allow timely decisions regarding required disclosure.

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) at March 31, 2012 based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer/Chief Financial Officer concluded that, at and as of March 31, 2012, our disclosure controls and procedures are not effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
6

 

PART II — OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS.
 
None.
 
ITEM 1A. RISK FACTORS
 
Not applicable.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
 
(a)  Unregistered Sales of Equity Securities.

None.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
 
None.
 
ITEM 4. (REMOVED AND RESERVED).
 
ITEM 5. OTHER INFORMATION.
 
Not applicable.
 
 
7

 
 
ITEM 6. EXHIBITS.
 
Exhibit
 
Item
3.1
 
Articles of Incorporation(1)
3.2
 
Bylaws(2)
10.1
 
Subsidiary Put Option Agreement dated May 13, 2011(3)
10.2
 
Contribution Agreement dated June 29, 2011(4)
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002*

*             Filed herewith.
(1)           Incorporated by reference to the exhibit to the registrant’s annual report on Form 10-K filed with the SEC on April 13, 2012.
(2)           Incorporated by reference to the exhibit to the registrant’s registration statement on Form SB-2 filed with the SEC on November 14, 2007.
(3)           Incorporated by reference to the exhibit to the registrant’s current report on Form 8-K filed with the SEC on May 18, 2011.
(4)           Incorporated by reference to the exhibit to the registrant’s current report on Form 8-K filed with the SEC on July 6, 2011.
 
 
8

 
 
SIGNATURES

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.
 
 
 
GREAT AMERICAN ENERGY, INC.
 
 
 
 
 
Date: May 15, 2012
By:
 /s/ Felipe Pimienta Barrios   
 
 
(Authorized Officer/Principal Executive Officer,
Principal Financial Officer/Principal Financial Officer)
 


 
9

 

XOTC:SRBL Quarterly Report 10-Q Filling

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XOTC:SRBL Quarterly Report 10-Q Filing - 3/31/2012
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