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

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-Q
 
(Mark One)
 
x
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
   
For the quarterly period ended March 31, 2012
   
o
Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
   
For the transition period from ___________ to ___________

Commission File Number: 0001073262

Terralene Fuels Corporation
 (Exact name of small business issuer as specified in it’s charter)
 
Delaware
(State or other jurisdiction of incorporation or organization)

52-2132622
(I.R.S. Employer Identification No.)

35 South Ocean Avenue
Patchogue, New York, 11772
 (Address of principal executive offices)

888-488-6882
 (Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes  o No
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   o Yes   o No
 
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
x
(Do not check if a smaller reporting company)    
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes  x No
 
APPLICABLE ONLY TO CORPORATE ISSUERS

On May 15, 2012 there were 79,198,691 shares outstanding of the issuer’s common stock.
 


 
 

 
 
INDEX
 
      PAGE  
Part I. FINANCIAL INFORMATION      
         
Item 1.  Financial Statements     F-1  
           
  Balance Sheet as of March 31, 2012 (Unaudited) and December 31, 2011     F-2  
           
  Statements of Operations (Unaudited) For the Three Months Ended March 31, 2012 and 2011, and the Period from September 13, 1993 (Inception) through March 31, 2012     F-3  
           
  Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2012 and 2011, and the Period from September 13, 1993 (Inception) through March 31, 2012     F-4  
           
  Statements of Other Comprehensive Loss (Unaudited) For the Three Months Ended March 31, 2012 and 2011 and the Period from September 13, 1993 (Inception) through March 31, 2012     F-5  
           
  Notes To Consolidated Financial Statements (Unaudited)     F-6  
           
Item 2. Management's Discussion and Analysis or Plan of Operation     3  
           
Item 3. Quantitative and Qualitative Disclosures About Market Risk     8  
           
Item 4T. Controls and Procedures     8  
           
Part II. OTHER INFORMATION        
           
Item 1. Legal Proceedings     9  
           
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds     9  
           
Item 3. Defaults Upon Senior Securities     9  
           
Item 4. Mine Safety Disclosures     11  
           
Item 5. Other Information     11  
           
Item 6. Exhibits     11  
           
SIGNATURES     12  
 
 
-2-

 
 
PART I -  FINANCIAL INFORMATION

Item 1. Financial Statements

TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)

(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)
 
 
 
CONSOLIDATED BALANCE SHEETS     F-2  
         
CONSOLIDATED STATEMENTS OF OPERATIONS
    F-3  
         
CONSOLIDATED STATEMENTS OF CASH FLOWS
    F-4  
         
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    F-6  
 
 
F-1

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
 (A development stage company)
CONSOLIDATED BALANCE SHEETS
 
   
March 31,
   
December 31,
 
    2012    
2011
 
    (unaudited)        
   
ASSETS
 
CURRENT ASSETS
           
     Cash
  $ 198     $ 61  
                 
TOTAL CURRENT ASSETS
    198       61  
                 
AVAILABLE FOR SALE SECURITIES – related parties
    8,609       5,161  
INTANGIBLE ASSETS
    181,662       131,212  
                 
 TOTAL ASSETS
  $ 190,469     $ 136,434  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
CURRENT LIABILITIES
               
     Accounts payable and accrued liabilities
  $ 38,430     $ 38,439  
     Due to related parties
    70,479       62,606  
                 
TOTAL CURRENT LIABILITIES
    108,909       101,045  
                 
COMMITMENTS AND CONTINGENCIES
 
   
STOCKHOLDERS’ (EQUITY)
               
     Common stock, $0.0001 par value, 500,000,000 shares authorized
               
     Issued and outstanding:
               
     79,198,691 (2011 – 72,198,691) common shares
    7,920       7,220  
     Additional paid-in capital
    18,529,450       18,467,650  
     Deferred compensation
    (26,250 )     (37,500 )
     Deficit accumulated during the development stage
    (18,434,907 )     (18,403,880 )
     Accumulated other comprehensive income
    5,347       1,899  
                 
 TOTAL STOCKHOLDERS’ (EQUITY)
    81,560       35,389  
                 
 TOTAL LIABILITIES AND STOCKHOLDERS’ (EQUITY)
  $ 190,469     $ 136,434  
 
The accompanying notes are an integral part of these financial statements
 
 
F-2

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
   
March 31,
2012
   
March 31,
2011
   
Sept. 13, 1993
(inception) to
March 31, 2012
 
REVENUES
       
 
       
Processing fees
  $ -     $ -     $ 98,425  
Gaming Revenue
    -       -       18,596  
Sale of oil and gas interest
    -       -       47,501  
Interest income
    -       -       2,927  
TOTAL REVENUES
    -       -       167,449  
COST OF SALES – Poker royalties and processing fees
    -       -       30,601  
GROSS PROFIT (LOSS)
    -       -       136,848  
GENERAL AND ADMINISTRATIVE EXPENSES
                       
Advertising and marketing
    -       -       93,895  
Consulting fees
    6,250       87,915       7,842,991  
Depreciation and amortization
    -       -       132,569  
Exploration costs
    -       -       241,754  
Investor relations
    5,000       6,666       762,463  
Litigation settlement
    -       -       52,169  
Loss on settlement of debt
    -       -       302,500  
Management fees
    -       -       378,447  
Office and general
    10,012       12,358       751,756  
Poker Sponsorships
    -       -       52,500  
Professional fees
    6,946       9,998       726,364  
Travel and accommodation
    1,804       1,968       290,901  
Wages and salaries
    1,015       2,743       269,308  
Write-off of website development costs
    -       -       425,682  
Write-down (recovery) of URL costs
    -       -       1,571,657  
Write-down of technology license
    -       -       2,055,938  
Write-down of film production and distribution costs
    -       -       90,763  
Write-off of other assets
    -       -       275,543  
 TOTAL GENERAL AND ADMINISTRATIVE EXPENSES
    31,027       121,648       16,317,200  
OTHER INCOME (EXPENSES)
                       
EQUITY LOSS FROM ORGANA GARDENS INTERNATIONAL
    -       -       (1,394,280 )
WRITE-DOWN OF INVESTMENT IN ORGANA GARDENS
    -       -       (313,301 )
GAIN/(LOSS) ON SALE OF SECURITIES-RELATED PARTIES
    -       -       216,509  
(LOSS) ON IMPAIRMENT OF SECURITIES-RELATED PARTIES
    -       -       (115,602 )
DILUTION GAIN – LEGACY WINE&SPIRITS INTERNATIONAL
    -       -       334,087  
PROPERTY OPTION LOSS
    -       -       (600,000 )
TOTAL OTHER INCOME (EXPENSES)
    -       -       (1,872,587 )
Loss before income taxes
    (31,027 )     (121,648 )     (18,052,939 )
Income Tax Provision
    -       -       -  
NET LOSS
    (31,027 )     (121,648 )   $ (18,052,939 )
NET LOSS ATTRIBUTED TO NONCONTROLLING INTEREST
    -       -       479,978  
NET LOSS TO TERRALENE FUELS CORPORATION
  $ (31,027 )   $ (121,648 )   $ (17,572,961 )
BASIC AND DILUTED LOSS PER COMMON SHARE
  $ (0.00 )   $ (0.00 )        
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     76,583,303       47,817,302          
 
The accompanying notes are an integral part of these financial statements
 
 
F-3

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
 (A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
                September 13,  
    Three Months     Three Months     1993 (inception) to  
    Ended     Ended     March 31  
   
March 31, 2012
   
March 31, 2011
   
2012
 
OPERATING ACTIVITIES
                 
Net loss
  $ (31,027 )   $ (121,648 )   $ (18,052,939 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
  Depreciation
    -       -       132,569  
  Fees and services paid for with shares
    11,250       95,331       5,517,918  
  Loss on settlement of debt
    -       -       302,500  
  Stock-based compensation
    -       -       2,208,169  
  Non-cash component of URL write-down
    -       -       1,214,193  
  Resource property acquisition and exploration costs
    -       -       763,000  
  Film production and development costs
    -       -       (90,763 )
  Write-down of technology license
    -       -       2,055,938  
  Write-off of website development costs
    -       -       206,876  
  Write-down of film production & development costs
    -       -       90,763  
  Write-off of other assets
    -       -       9,657  
  Equity loss from Organa
    -       -       1,394,280  
  Write-down of investment in Organa
    -       -       313,301  
  (Gain)/Loss on sale of marketable securities
    -       -       (216,509 )
  Loss on impairment of securities
    -       -       115,602  
  Dilution gain – Legacy
    -       -       (334,087 )
  Net changes in operating assets and liabilities
    9       849       322,816  
                         
CASH FLOWS USED IN OPERATING ACTIVITIES
    (19,768 )     (25,468 )     (4,046,716 )
INVESTING ACTIVITIES
                       
Deposit
    -       -       (75,000 )
Technology license
    -       -       (135,938 )
Acquisition of furniture and equipment
    -       -       (32,696 )
Website development costs
    -       -       (306,876 )
Other intangible assets
    (450 )     -       (21,508 )
Purchase of securities – related parties
    -       -       (75,603 )
Net proceeds from sale of securities – related parties
    -       -       380,238  
Net cash on disposition of Legacy Wine & Spirits International Ltd.
    -       -       209,955  
                         
CASH FLOWS (USED IN)  INVESTING ACTIVITIES
    (450 )     -       (57,428 )
FINANCING ACTIVITIES
                       
Net advances (to)/ from related parties
    20,355       24,951       978,919  
Net proceeds on sale of common stock
    -       -       3,125,423  
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
    20,355       24,951       4,104,342  
                         
NET (DECREASE) INCREASE IN CASH
    137       (517 )     198  
CASH, BEGINNING OF PERIOD
    61       824       -  
                         
CASH , END OF PERIOD
  $ 198     $ 307     $ 198  

The accompanying notes are an integral part of these financial statements
 
 
F-4

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A Development Stage Company)
STATEMENTS OF OTHER COMPREHENSIVE LOSS
(unaudited)
 
                September 13,  
    Three Months     Three Months     1993 (inception) to  
    Ended     Ended     March 31  
   
March 31, 2012
   
March 31, 2011
   
2012
 
                   
NET LOSS
  $ (31,027 )   $ (121,648 )   $ (18,052,939 )
                         
Unrealized gains on marketable securities – related parties
    3,448       187       5,347  
                         
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), net of tax
    3,448       187       5,347  
COMPREHENSIVE LOSS
  $ (27,579 )   $ (121,461 )   $ (18,047,592
 
 
F-5

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(unaudited) 

 
NOTE 1 – NATURE OF OPERATIONS

The Company was incorporated on September 13, 1993 in the State of Delaware as Power Direct, Inc.  On January 31, 2000 the Company changed its name to 2U Online.com Inc. to reflect management’s decision to shift the Company’s focus from oil and gas exploration and development to internet-based business development.  On October 8, 2003, the Company changed its name to Golden Spirit Minerals Ltd. to reflect management’s decision to shift the Company’s focus from internet-based business development to mineral exploration. On October 19, 2004, the Company changed its name to Golden Spirit Mining Ltd. On July 18, 2005, the Company changed its name to Golden Spirit Gaming Ltd. to reflect management’s decision to develop an online gaming business.  Effective June 30, 2006, the Company completed a 1 for 18 reverse stock split and changed its name to Golden Spirit Enterprises Ltd. to reflect the Company’s plan to expand its operations to include the marketing of other products and venues not related to gaming including the development, production, financing and packaging of innovative film and television programming. In addition, the Company has signed an agreement with Eneco Industries to participate in a series of Municipal Solid Waste (garbage) fueled Recycling and Resource Recovery Plants (refer to Note 5) and the Company signed an agreement with Global Terralene Inc. for the acquisition of all assets pertaining to Terralene Fuels.(refer to Note 4). On November 29, 2011, the Company changed its name to Terralene Fuels Corporation.
 
Going Concern
The consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has incurred losses since inception of $18,052,939 and at March 31, 2012 had a working capital deficiency of $108,711. The Company and its subsidiaries are in the development stage and further significant losses are expected to be incurred in developing its business.  The recoverability of the carrying value of assets and the ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations.  There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. Given the Company’s limited operating history, lack of sales, and its operating losses, there can be no assurance that it will be able to achieve or maintain profitability. The Company intends to fund the marketing of its business with both equity financing and joint venture opportunities, although there are no assurances these opportunities will be successful. Accordingly, these factors raise substantial doubt regarding the ability of the Company to continue as a going concern.

NOTE 2- BASIS OF PRESENTATION

The financial statements include the accounts of the Company and its subsidiaries, a 100% interest in PD Oil & Gas, Inc. (inactive), and a 100% interest in Cardstakes.com Enterprises Ltd. (inactive).

The foregoing unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X Article 8 “Financial Statements of Smaller Reporting Companies”, as promulgated by the Securities and Exchange Commission ("SEC").  Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements.  These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the period ended December 31, 2011 referenced in the 10-K.  In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period.  Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company's financial position and results of operations.

Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

 
F-6

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(unaudited) 

 
NOTE 2- BASIS OF PRESENTATION (continued)

Intangible Assets
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, “Intangibles-Goodwill and Other” requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of ASC 350. This standard also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. As of March 31, 2012, the Company believes there is no impairment of its intangible assets. The Company's intangible assets consist of the acquisition of patents and other proprietary information of Terralene Fuels, a patented fuel alternative formulation which began in 2010 and was completed in February 2012. The Company determined that the intangibles have indefinite useful lives and will be reviewed annually for impairment.

Stock-Based Compensation
The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.

Recent Accounting Pronouncements
In May 2011, 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.” The amendments in this update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments in this update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. For public entities, the new guideline is effective for interim and annual periods beginning after December 15, 2011 and should be applied prospectively. The Company does not expect that the guidance effective in future periods will have a material impact on its consolidated financial statements.
 
 In May 2011, the FASB issued ASC Update No. 2011-05, Comprehensive Income (Topic 820): Presentation of Comprehensive Income. Update No. 2011-05 requires that net income, items of other comprehensive income and total comprehensive income be presented in one continuous statement or two separate consecutive statements. The amendments in this Update also require that reclassifications from other comprehensive income to net income be presented on the face of the financial statements. We are required to adopt Update No. 2011-05 for our first quarter ending March 31, 2012, with the exception of the presentation of reclassifications on the face of the financial statements, which has been deferred by the FASB under ASC Update No. 2011-12, Comprehensive Income (Topic 820): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income. Our adoption of Update No. 2011-05 is not expected impact our future results of operations or financial position.
 
 In December 2011, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update No. 2011-10 (“ASU 2011-10”), Property, Plant and Equipment (Topic 360): Derecognition of in Substance Real Estate—a Scope Clarification (a consensus of the FASB Emerging Issues Task Force). ASU 2011-10 clarifies when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance for Real Estate Sale (Subtopic 360-20). The provisions of ASU 2011-10 are effective for public companies for fiscal years and interim periods within those years, beginning on or after June 15, 2012. When adopted, ASU 2011-10 is not expected to materially impact our consolidated financial statements.
 
 
F-7

 

TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(unaudited) 

 
NOTE 3 – AVAILABLE–FOR-SALE SECURITIES – RELATED PARTIES

Organa
The Company owns common shares of Organa Gardens International Inc. (formerly Shotgun Energy Corporation) (“Organa”), a public company with directors and significant shareholders in common that does not represent a position of control of or significant influence over Organa.  During 2007 the Company recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $3,775, which was recorded as other comprehensive income (loss).  During the year ended December 31, 2008, the Company recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $5,612 which was recorded as other comprehensive income (loss). During the year ended December 31, 2009, the Company sold 50,000 shares resulting in a realized loss of $(780) and recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $5,138, which was recorded as other comprehensive income.

During the year ended December 31, 2010, the Company received 700,300 restricted shares of Organa valued to $7,003 pursuant to a debt settlement and sold Nil Organa shares. The Company recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $2,541, which was recorded as other comprehensive income (loss). As a result, the carrying value of the available for sale shares of Organa is $4,504 as at December 31, 2010.

During the year ended December 31, 2011, the Company sold Nil Organa shares and recorded an additional unrealized loss of $ (3,097). As a result, the carrying value of the available for sale shares of Organa is $1,407 as at December 31, 2011. Effective December 31, 2011, the Company recorded a $1,689 write-down of its investment in Organa due to an other-than-temporary decline in the value of the shares.

During the three month period ended March 30, 2012, the Company sold Nil Organa shares and recorded an additional unrealized gain of $1,337 to March 31, 2012. As a result, the carrying value of the available for sale shares of Organa is $2,744 as at March 31, 2012.

Legacy
The Company owns common shares of Legacy Wine & Spirits International Ltd. (“Legacy”), a public company with directors and significant shareholders in common, that does not represent a position of control of or significant influence over Legacy.  During 2007 the Company recorded an unrealized gain in the carrying value of its available-for-sale securities totaling $590,993. During the year ended December 31, 2008, the Company acquired 23,200 shares valued at $19,532 sold 99,400 shares resulting in a realized gain of $28,645(net of commissions of $2,132) and recorded an unrealized gain in the carrying value of its available-for-sale securities totaling $275,121, which was recorded as other comprehensive income. During the year ended December 31, 2009, the Company sold 301,600 shares resulting in a realized gain of $180,398 and recorded an other-than-temporary loss in the carrying value of its available-for-sale securities totaling $34,001.

During the year ended December 31, 2010, the Company the Company received 1,451,360 restricted shares of Legacy valued to $72,568 pursuant to a debt settlement and sold Nil Legacy shares. The Company recorded an other-than-temporary loss in the carrying value of its available-for-sale securities totaling $47,069. As a result, the carrying value of the available for sale shares of Legacy is $37,535 as at December 31, 2010.

During the year ended December 31, 2011, the Company sold Nil Legacy shares and recorded an additional unrealized loss of $ (33,781). As a result, the carrying value of the available for sale shares of Legacy is $3,754 as at December 31, 2011.
Effective December 31, 2011, the Company recorded a $32,843 write-down of its investment in Legacy due to an other-than-temporary decline in the value of the shares.

During the three month period ended March 30, 2012, the Company sold Nil Legacy shares and recorded an additional unrealized gain of $2,111 to March 31, 2012. As a result, the carrying value of the available for sale shares of Legacy is $5,865 as at March 31, 2012.

Available for sale securities – related parties include the following:

   
March 31 ,
   
December 31,
 
   
2012
   
2011
 
2,345,937  (2011-2,345,937) shares of Legacy Wine & Spirits
  $ 5,865     $ 3,754  
703,750  (2011- 703,750) shares of  Organa Gardens International
    2,744       1,407  
    $ 8,609     $ 5,161  

 
F-8

 

TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(unaudited) 

 
NOTE 4 – INVESTMENTS IN INTANGIBLE ASSETS
 
On August 24, 2010, the Company signed an agreement with Global Terralene Inc. for the acquisition of all assets pertaining to Terralene Fuels. Under the terms of the agreement, the Company will issue 7,000,000 restricted common shares to Global Terralene Inc. in two phases. On November 30, 2010, the Company approved and issued 5,000,000 restricted common shares valued at $125,000 to Global Terralene Inc. The Company will issued a further 2,000,000 restricted common shares valued at $50,000 in February 2012. Terralene Fuel is a patented fuel alternative formulation that is the equivalent of 87 octane regular gasoline and utilizes renewable energy sources in 45% of its composition. Terralene’s unique fuel reduces greenhouse gas and other environmental damaging emissions and can be easily integrated into the existing fuel infrastructure.  During the year ended December 31, 2011, the Company capitalized $6,212 in patent work. During the three months ended March 31, 2012, the Company capitalized a further $450 in patent work.

Total Investments in Terralene Fuels costs at March 31, 2012 and December 31, 2011 total $181,662 and $131,212 respectively and include the following assets:
 
   
March 31,
2012
   
December 31,
2011
 
Patents, trademarks, copyright
  $ 111,662     $ 81,212  
Formulas, reports, studies     35,000        25,000  
Schematics, proprietary info       21,000        15,000  
Website      7,000        5,000  
Terralene brandname
    7,000       5,000  
    $ 181,662     $ 131,212  
                    
Amortization for intangible assets with definitive useful life purchased from Terralene Fuels, specifically the website, will be recorded over the estimated useful life of the website using the straight-line method for financial statement purposes when the product or service has been delivered or performed and invoiced by the Company and it begins to recognize revenues.

NOTE 5 – OTHER ASSETS

The Company signed an Agreement dated March 28, 2008 with EnEco Industries Ltd. ("EnEco"), a waste management company that has been in operation for fifteen years, to form an alliance for a renewable energy entity, where the Company will take majority interest in a series of Municipal Solid Waste (garbage) fueled Recycling and Resource Recovery Plants designed by EnEco. These plants will be in strategically located areas diverting tons of garbage from landfills and drastically reducing greenhouse gas outputs. As of March 31, 2012 and December 31, 2011, the Company has incurred $Nil on this project.

NOTE 6 – DEFERRED COMPENSATION

The Company has recorded as deferred compensation prepaid amounts for consulting and management services contracts paid for by issuance of shares of common stock as follows:

a)  
On May 15, 2010, the Company entered into an agreement with Domain Land Holdings Ltd. (“Domain”), a private company controlled by a significant shareholder, with a two-year term, whereby Domain provides investment-banking services to the Company (valued at $30,000) in exchange for 750,000 restricted shares of the Company’s common stock.  During the three month period ended March 31, 2012,  $3,750 was expensed (December 31, 2011 - $15,000).

b)  
On May 15, 2010, the Company entered into an agreement with 103244 Alberta Ltd. (“1063244”), a private company controlled by a significant shareholder, with a two-year term, whereby 1063244 provides investor relations services to the Company (valued at $30,000) in exchange for 750,000 restricted shares of the Company’s common stock.  During the three month period ended March 31, 2012,  $3,750 was expensed (December 31, 2011 - $15,000).

c)  
On October 1, 2011, the Company entered into an agreement with a consultant, for a two year term, whereby the consultant provides consulting services to the Company (valued at $10,000) in exchange for 5,000,000 restricted shares of the Company’s common stock.  During the three month ended March 31, 2012, $1,250 was expensed (December 31, 2011 - $1,250).
 
 
F-9

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(unaudited) 

 
NOTE 6 – DEFERRED COMPENSATION (con’t)
 
d)  
On October 1, 2011, the Company entered into an agreement with Palisades Financial Ltd. (“Palisades”), a private company controlled by a significant shareholder, with a two-year term, whereby Palisades provides investment-banking services to the Company (valued at $10,000) in exchange for 5,000,000 restricted shares of the Company’s common stock.  During the three month ended March 31, 2012,  $1,250 was expensed (December 31, 2011 - $1,250).

e)  
On October 1, 2011 the Company entered into an agreement with Compte de Sierge Accomodative Corp. Limited (“Compte”), a private company controlled by a significant shareholder, with a two-year term, whereby Compte provides investor relations services to the Company (valued at $10,000) in exchange for 5,000,000 restricted shares of the Company’s common stock.  During the three month ended March 31, 2012,  $1,250 was expensed (December 31, 2011 - $1,250).
 
As at March 31, 2012, the unamortized portion of the deferred compensation totaled $26,250 (December 31, 2011 - $37,500).
 
NOTE 7 – CAPITAL STOCK
 
The Company’s capitalization is 500,000,000 common shares with a par value of $0.0001 per share.  No preferred shares have been authorized.

(1)  
2012 Stock Transactions

During the three months ended March 31, 2012, the Company issued a further 2,000,000 restricted common shares valued at $50,000 pursuant to  its agreement with Global Terralene Inc.(See Note 4).

During the three months ended March 31, 2012, the Company issued a total of 5,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan at $0.0025 per share to satisfy debt to related parties in the amount of $12,500.
 
(2)  
2012 Stock Options
 
On December 23, 2011, the Company filed a Registration Statement on Form S-8 to cover 15,000,000 shares of      common stock to be granted pursuant to the Company’s 2012 Stock Incentive and Option Plan.

The Company’s stock option activity is as follows:
 
   
Number
of options
   
Weighted
Average
Exercise
Price
 
Weighted Average Remaining Contractual Life
               
Balance, December 31, 2009
    3,002,517     $ 0.20  
2.67 years
Granted during 2010
    14,516,667       -    
Exercised during 2010
    (14,516,667     -    
Balance, December 31,2010
    3,002,517       -    
Granted during 2011
    12,000,000       0.03    
Exercised during 2011
    (12,000,000 )          
Balance, December 31, 2011
    3,002,517     $ 0.20  
2.67 years
Granted during 2012
    5,000,000       0.03    
Exercised during 2012
    (5,000,000 )          
Balance, March 31, 2012
    3,002,517     $ 0.20  
2.67 years
 
 
F-10

 
 
TERRALENE FUELS CORPORATION
(formerly Golden Spirit Enterprises Ltd.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(unaudited) 

 
NOTE 7 – CAPITAL STOCK (con’t)

(3)           2011 Stock Transactions:

On January 13, 2011, the Company issued 25,000 restricted common shares valued at $750 to a new director for his services and issued 250,000 restricted common shares valued at $7,500 to a consultant for his services in relation to the company’s Terralene Fuels project.

The Company issued a total of 5,850,000 common shares pursuant to the exercise of options under the Company’s 2011 Stock Incentive and Option Plan at $0.03 per share to satisfy debt to related parties in the amount of $103,500 and for consulting services in the amount of $72,000.

(4)          2011 Stock Options
 
On January 18, 2011, the Company filed a Registration Statement on Form S-8 to cover 12,000,000 shares of common stock to be granted pursuant to the Company’s 2011 Stock Incentive and Option Plan.

During the three months ended March 31, 2011, 3,450,000 incentive stock options were granted and immediately  exercised at $0.03 per share to satisfy debts  related parties in the amount of $103,500 and 2,400,000 incentive stock options were granted and immediately exercised at $0.03 per share to for consulting services in the amount of $72,000.

The Company’s stock option activity is as follows:
 
   
 
Number of options
   
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Life
               
Balance, December 31, 2009
    3,002,517     $ 0.20  
2.67 years 
Granted during 2010
    14,516,667       -    
Exercised during 2010
    (14,516,667     -    
Balance, December 31,2010
    3,002,517       -    
Granted during 2011
    5,850,000       0.03    
Balance, March 31, 2011
    3,002,517     $ 0.20  
2.67 years 
 
NOTE 8 – RELATED PARTY TRANSACTIONS
 
During the three months ended March 31, 2012, companies controlled by significant shareholders earned $11,250 (2011 - $15,081) pursuant to the expired portion of deferred compensation services contracts (refer to Note 7).

During the three months ended March 31, 2012, the Company paid $1,015 (2011 -$2,743) to directors for management fees.

During the three months ended March 31, 2012, the Company incurred expenses for office rent of $7,517 (2011 - $7,645) to a private company controlled by a significant shareholder.

The following amounts are due to related parties at:
 
   
March 31, 2012
   
December 31, 2011
 
             
Significant shareholders
  $ 70,479     $ 62,606  
 
All related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
 
 
F-11

 
 
NOTE 9 – COMMITMENTS AND CONTINGENCIES

As of August 1, 2010, the Company has leased 1250 sq. ft of office space from Holm Investments Ltd. at $2,500 per month for a period of 3 years.

NOTE 10 – INCOME TAXES

As of March 31, 2012, the Company had net operating loss carryforwards of approximately $18,500,000 that may be available to reduce future years' taxable income and will expire between the years 2013 - 2032.  Availability of tax losses is subject to change of ownership limitations under Internal Revenue Code 382.  Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carryforwards.

NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES

Supplemental disclosure of non-cash investing and financing activities:
 
Cash paid during the three months ended March 31, 2012 and 2011 for:
 
2012
   
2011
 
             
Interest
  $ -     $ -  
                 
Income taxes
  $ -     $ -  
                 
Shares issued for debt settlement   $ 12,500     $ 103,500  
                 
Shares issued for deferred compensation
  $ -     $ 30,000  
 
During the three months ended March 31, 2012, the Company issued a total of 5,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan at $0.0025 per share to satisfy debt to related parties in the amount of $12,500.

The Company paid no cash for interest and income taxes for the three months ended March 31, 2012 and 2011.
 
 
F-12

 
 
Item 2. Management’s Discussion and Analysis or Plan of Operation.
 
The following should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The 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.

We changed our name from Power Direct, Inc., to 2UOnline.com, Inc. by filing a Certificate of Amendment to our Certificate of Incorporation on January 31, 2000. We also changed our trading symbol from "PWDR" to "TWOU" in order to reflect our decision to shift our focus from oil and gas production to Internet- related activities. Our symbol was then changed to "TWOUE".  On or about April 18, 2000, we were removed from the Over-the-Counter Bulletin Board ("OTCBB") for failure to comply with NASD Rule 6530, which requires any company listed on the OTCBB to be current in its public reporting obligations pursuant to the Securities and Exchange Act of 1934. The Company was re-instated on the OTCBB on October 7, 2002 under the symbol "TWOU". The Company filed a certificate of amendment to its Articles of Incorporation with the State of Delaware on October 1, 2003 to change its name to Golden Spirit Minerals Ltd. The name change reflects management's decision to shift the Company's focus from internet-based business development to mineral exploration. On October 8, 2003, the trading symbol for the Company became "GSPM". On October 19, 2004, the Company changed its name to Golden Spirit Mining Ltd. and the trading symbol was "GSML". On July 18, 2005 the Company changed its name to Golden Spirit Gaming Ltd. and the trading symbol was “GSGL”. On June 30, 2006, the Company changed its name to Golden Spirit Enterprises Ltd. and the trading symbol is “GSPT”.
 
On November 29, 2011, the Company changed its name to Terralene Fuels Corporation and the trading symbol remains as “GSPT
 
The Company has signed an agreement with Eneco Industries to participate in a series of Municipal Solid Waste (garbage) fueled Recycling and Resource Recovery Plants. The Agreement calls for a joint venture utilizing EnEco's expertise and technology to develop a municipal solid waste (garbage) recycling and biomass derived renewable energy facility. Golden Spirit and EnEco will build and operate a series of solid waste recycling and biomass derived renewable energy facility with greenhouse and algae subsystems that will utilize our Thermal Oxidation Process System (TOPS) technology to generate electricity for sale to the local power grid. Further details on the new Terralene Fuels - Eneco project can be viewed on our website www.goldenspirit.ws.
 
In 2010, the Company signed an agreement with Global Terralene Inc .for the acquisition of all assets pertaining to Terralene Fuels. Terralene Fuel is a patented fuel alternative formulation that is the equivalent of 87 octane regular gasoline and utilizes renewable energy sources in 45% of its composition. Terralene’s unique fuel reduces greenhouse gas and other environmental damaging emissions and can be easily integrated into the existing fuel infrastructure. Further details on the new Terralene Fuels project can be viewed on our website www.terralenefuels.net.
 
 
-3-

 
 
Our Investment in Available for sale securities – related parties
 
Organa
The Company owns common shares of Organa Gardens International Inc. (“Organa”), a public company with directors and significant shareholders in common that does not represent a position of control of or significant influence over Organa.  During 2007 the Company recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $3,775, which was recorded as other comprehensive income (loss).  During the year ended December 31, 2008, the Company recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $5,612 which was recorded as other comprehensive income (loss). During the year ended December 31,
2009, the Company sold 50,000 shares resulting in a realized loss of $(780) and recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $5,138, which was recorded as other comprehensive income.

During the year ended December 31, 2010, the Company received 700,300 restricted shares of Organa valued to $7,003 pursuant to a debt settlement and sold Nil Organa shares. The Company recorded an unrealized loss in the carrying value of its available-for-sale securities totaling $2,541, which was recorded as other comprehensive income (loss). As a result, the carrying value of the available for sale shares of Organa is $4,504 as at December 31, 2010.

During the year ended December 31, 2011, the Company sold Nil Organa shares and recorded an additional unrealized loss of $ (3,097). As a result, the carrying value of the available for sale shares of Organa is $1,407 as at December 31, 2011. Effective December 31, 2011, the Company recorded a $1,689 write-down of its investment in Organa due to an other-than-temporary decline in the value of the shares.

During the three month period ended March 30, 2012, the Company sold Nil Organa shares and recorded an additional unrealized gain of $1,337 to March 31, 2012. As a result, the carrying value of the available for sale shares of Organa is $2,744 as at March 31, 2012.

Legacy
The Company owns common shares of Legacy Wine & Spirits International Ltd. (“Legacy”), a public company with directors and significant shareholders in common, that does not represent a position of control of or significant influence over Legacy.  During 2007 the Company recorded an unrealized gain in the carrying value of its available-for-sale securities totaling $590,993. During the year ended December 31, 2008, the Company acquired 23,200 shares valued at $19,532 sold 99,400 shares resulting in a realized gain of $28,645(net of commissions of $2,132) and recorded an unrealized gain in the carrying value of its available-for-sale securities totaling $275,121, which was recorded as other comprehensive income. During the year ended December 31, 2009, the Company sold 301,600 shares resulting in a realized gain of $180,398 and recorded an other-than-temporary loss in the carrying value of its available-for-sale securities totaling $34,001.

During the year ended December 31, 2010, the Company the Company received 1,451,360 restricted shares of Legacy valued to $72,568 pursuant to a debt settlement and sold Nil Legacy shares. The Company recorded an other-than-temporary loss in the carrying value of its available-for-sale securities totaling $47,069. As a result, the carrying value of the available for sale shares of Legacy is $37,535 as at December 31, 2010.

 
-4-

 
 
During the year ended December 31, 2011, the Company sold Nil Legacy shares and recorded an additional unrealized loss of $ (33,781). As a result, the carrying value of the available for sale shares of Legacy is $3,754 as at December 31, 2011.

Effective December 31, 2011, the Company recorded a $32,843 write-down of its investment in Legacy due to an other-than-temporary decline in the value of the shares.

During the three month period ended March 30, 2012, the Company sold Nil Legacy shares and recorded an additional unrealized gain of $2,111 to March 31, 2012. As a result, the carrying value of the available for sale shares of Legacy is $5,865 as at March 31, 2012.

Available for sale securities – related parties include the following:

   
March 31 ,
   
December 31,
 
   
2012
   
2011
 
  2,345,937  (2011-2,345,937) shares of Legacy Wine & Spirits
  $ 5,865     $ 3,754  
     703,750  (2011- 703,750) shares of  Organa Gardens International
    2,744       1,407  
    $ 8,609     $ 5,161  

WASTE ENERGY SECTOR
 
The Thermal Oxidation Process System (TOPS) Greencycle Gasification plants decompose organic matter (with heat and air) and recover non-organics by utilizing specialized equipment and is a proven alternative to landfills. Greencycle uses low heat (500-600 Celsius) to convert all the carbon locked up in unsorted garbage into a form where it produces high quality heat through a second stage gas oxidizer running at around 1,100 Celsius. This process creates energy, enough to make electrical energy and support district heating / greenhouses. The Greencycle system provides controlled conditions to utilize Carbon Dioxide (CO2) for accelerated plant growth in greenhouses and algae farms.  The other non-carbon materials in garbage, such as aluminum, tin, copper and stainless steel, and can be easily separated after all the carbon has been removed without melting or slagging. Micron sized metals, silica, calcium etc, are also sorted out for re-use by using the Ash Recycling and Recovery Equipment (ARRE) sub-system.
 
As of March 31, 2012, the Company has not secured any facilities to construct the Gasification Plant, nor has it incurred any other expenditures for the three month period ended March 31, 2012 (2011- $Nil)

 
-5-

 
 
ALTERNATIVE FUELS SECTOR

On August 24, 2010, the Company signed an agreement with Global Terralene Inc. for the acquisition of all assets pertaining to Terralene Fuels. Under the terms of the agreement, the Company will issue 7,000,000 restricted common shares to Global Terralene Inc. in two phases. On November 30, 2010, the Company approved and issued 5,000,000 restricted common shares valued at $125,000 to Global Terralene Inc. The Company  issued a further 2,000,000 restricted common shares valued at $50,000 in February 2012. Terralene Fuel is a patented fuel alternative formulation that is the equivalent of 87 octane regular gasoline and utilizes renewable energy sources in 45% of its composition. Terralene’s unique fuel reduces greenhouse gas and other environmental damaging emissions and can be easily integrated into the existing fuel infrastructure.  During the year ended December 31, 2011, the Company capitalized $6,212 in patent work. During the three months ended March 31, 2012, the Company capitalized a further $450 in patent work.
 
Total Investments in Terralene Fuels costs at March 31, 2012 total $181,662 (2011 - $125,000) and include the following assets:
 
   
March 31,
2012
   
December 31,
2011
 
Patents, trademarks, copyright
  $ 111,662     $ 81,212  
Formulas, reports, studies
    35,000       25,000  
Schematics, proprietary info     21,000       15,000  
Website     7,000       5,000  
Terralene brandname     7,000       5,000  
    $ 181,662     $ 131,212  
 
Amortization for intangible assets with definitive useful life purchased from Terralene Fuels, specifically the website, will be recorded over the estimated useful life of the website using the straight-line method for financial statement purposes when the product or service has been delivered or performed and invoiced by the Company and it begins to recognize revenues.

Liquidity and Capital Resources.

At March 31, 2012, we had total assets of $190,469, including current assets in cash of $198. We have  available for sale securities of $8,609, and intangible assets of $181,662. As of December 31, 2011, we had total assets of $136,434. The increase in assets is due to an increase in our investment in intangible assets – the Terralene Project.

At March 31, 2012, we had current liabilities of $108,909, which was represented by accounts payable and accrued liabilities of $38,430 and due to related parties in the amount of $70,479. As of December 31, 2011 we had total current liabilities of $101,045. The increase in liabilities was due to an increase in the amounts due to related parties. At March 31, 2012, we had a working capital deficiency of $108,711. (December 31, 2011 - $100,984).

We do not believe that our current cash resources will be able to maintain our current operations for an extended period of time.  We will be required to raise additional funds or arrange for additional financing over the next 12 months to adhere to our development schedule, mainly with respect to advancing the Terralene project closer to the goal of marketing the product.  No assurance can be given, however, that we will have access to additional cash in the future, or that funds will be available on acceptable terms to satisfy our working capital requirements. If we are not able to arrange for additional funding or if our officers, directors and shareholders stop advancing funds to us, we may be forced to make other arrangements for financing such as loans or entering into strategic alliances. We have not identified any alternative sources of financing.

 
-6-

 
 
Results of Operations

We have realized minimal revenues from operations to date. Loss from operations for the three month period ended March 31, 2012 was $31,027 (2011 - $121,648). This decrease in loss was largely due to a decrease in consulting fees.

From inception to March 31, 2012, we have incurred cumulative net losses of $18,052,939 resulting primarily from a write-down and equity loss in Organa Gardens International Inc. (a related party) of $1,394,280, a $600,000 property option loss as a recorded value of certain restricted shares issued to Legacy Wine & Spirits International Ltd. (a related party – see our Investment in Available for sale securities - Legacy Wine & Spirits International Ltd. above) and general and administrative expenses of $16,317,200, the majority of which is made up of consulting fees and stock based compensation expense totaling $7,842,991, write-down of URL costs of $1,571,657 and write-down of technology license of $2,055,938.
 
The cash and equivalents constitute our present internal sources of liquidity. Because we are not generating any significant revenues, our only external source of liquidity is the sale of our capital stock and any advances from officers, directors or shareholders.

To address the going concern problem discussed in our financial statements, we will require additional working capital.  We will also require additional funds to implement our business strategies, including funds for payment of undetermined expenses relating to the Eneco and Terralene ventures (see above)

No assurance can be given; however, that we will have access to the capital markets in the future, or that financing will be available on acceptable terms to satisfy our cash requirements needed to implement our business strategies. Our inability to access the capital markets or obtain acceptable financing could have a material adverse effect on our results of operations and financial condition and could severely threaten our ability to operate as a going concern.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary as a result of a number of factors.

Our Plan of Operation for the Next 12 Months.  We anticipate that we will need to raise additional capital within the next 12 months in order to continue as a going concern. Therefore, additional capital may be raised through additional public or private financings, as well as borrowings and other resources.  To the extent that additional capital is raised through the sale of equity or equity-related securities, the issuance of such securities could result in dilution of our stockholders.  There can be no assurance that additional funding will be available on favorable terms, if at all.  If adequate funds are not available within the next 12 months, we may be required to curtail our operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our assets that we would not otherwise relinquish.

We do anticipate certain expenditures within the next 12 months for our corporate projects.  We do not anticipate any significant research and development within the next 12 months, nor do we anticipate that we will lease or purchase any significant equipment within the next 12 months. We do not anticipate a significant change in the number of our employees within the next 12 months. We are not aware of any material commitment or condition that may affect our liquidity within the next 12 months.

 
-7-

 
 
Off-Balance Sheet Arrangements

Our company has not entered into any off balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of March 31, 2012, we had cash in the amount of $198. We have not generated any significant revenues since inception and have incurred a net loss of $18,052,939 from our inception on September 13, 1999 to March 31, 2011. Our current operating funds are insufficient to cover any additional costs for our film production & distribution sector or our waste energy sector. Terralene Fuels Corporation does not expect significant start up costs to complete the installation of Gasification Plants for its waste energy project. The newly acquired Terralene project has had all the research and development already completed and the Company will incur costs to get the product to market, which are not yet determinable. It will have to obtain funds through entering into arrangements with collaborative partners or others to accomplish these expenditures. However, we do not have any specific plans for raising the required funds. There is no assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our projects.
 
Item 4T Controls and Procedures.
 
Our management carried out an evaluation with the participation of our Chief Executive Officer who serves as our principal executive officer and principal financial and accounting officer, required by Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act.
 
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
This quarterly report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
 
 
-8-

 
 
PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

None

ITEM 1A. Risk Factors

Not applicable

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s capitalization is 500,000,000 common shares with a par value of $0.0001 per share.  No preferred shares have been authorized.

(1)  
2012 Stock Transactions
 
During the three months ended March 31, 2012, the Company issued a further 2,000,000 restricted common shares valued at $50,000 pursuant to its agreement with Global Terralene Inc.
 
During the three months ended March 31, 2012, the Company issued a total of 5,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan at $0.0025 per share to satisfy debt to related parties in the amount of $12,500.


(2)  
2012 Stock Options
 
On December 23, 2011, the Company filed a Registration Statement on Form S-8 to cover 15,000,000 shares of  common stock to be granted pursuant to the Company’s 2012 Stock Incentive and Option Plan.

 
-9-

 
 
The Company’s stock option activity is as follows:
 
   
 
Number
of options
   
Weighted Average Exercise Price
   
Weighted Average Remaining Contractual Life
 
                   
Balance, December 31, 2009
    3,002,517     $ 0.20    
2.67 years 
 
Granted during 2010
    14,516,667       -        
Exercised during 2010
    (14,516,667     -        
Balance, December 31,2010
    3,002,517       -        
Granted during 2011
    12,000,000       0.03        
Exercised during 2011
    (12,000,000 )              
Balance, December 31, 2011
    3,002,517     $ 0.20    
2.67 years 
 
Granted during 2012
    5,000,000       0.03        
Exercised during 2012
    (5,000,000 )              
Balance, March 31, 2012
    3,002,517     $ 0.20    
2.67 years 
 

(3)           2011 Stock Transactions:

On January 13, 2011, the Company issued 25,000 restricted common shares valued at $750 to a new director for his services and issued 250,000 restricted common shares valued at $7,500 to a consultant for his services in relation to the company’s Terralene Fuels project.

The Company issued a total of 5,850,000 common shares pursuant to the exercise of options under the Company’s 2011 Stock Incentive and Option Plan at $0.03 per share to satisfy debt to related parties in the amount of $103,500 and for consulting services in the amount of $72,000.

(4)           2011 Stock Options

On January 18, 2011, the Company filed a Registration Statement on Form S-8 to cover 12,000,000 shares of common stock to be granted pursuant to the Company’s 2011 Stock Incentive and Option Plan.

During the three months ended March 31, 2011, 3,450,000 incentive stock options were granted and immediately  exercised at $0.03 per share to satisfy debts  related parties in the amount of $103,500 and 2,400,000 incentive stock options were granted and immediately exercised at $0.03 per share to for consulting services in the amount of $72,000.

The Company’s stock option activity is as follows:
 
   
 
Number
of options
   
Weighted Average Exercise Price
   
Weighted Average Remaining Contractual Life
 
                   
Balance, December 31, 2009
    3,002,517     $ 0.20    
2.67 years 
 
Granted during 2010
    14,516,667       -        
Exercised during 2010
    (14,516,667     -        
Balance, December 31,2010
    3,002,517       -        
Granted during 2011
    5,850,000       0.03        
Balance, March 31, 2011
    3,002,517     $ 0.20    
2.67 years 
 
 
 
-10-

 
 
ITEM 3.  Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not Applicable

ITEM 5.  Other Information

None.

ITEM 6. EXHIBITS

Exhibit 31.1 - Section 906 Certification of Periodic Report of the Chief Executive Officer.

Exhibit 31.2 - Section 906 Certification of Periodic Report of the Chief Financial Officer.

Exhibit 32.1 - Section 302 Certification of Periodic Report of the Chief Executive Officer.

Exhibit 32.2 - Section 302 Certification of Periodic Report of the Chief Financial Officer.
 
101.INS **
 
XBRL Instance Document
     
101.SCH **
 
XBRL Taxonomy Extension Schema Document
     
101.CAL **
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
 
XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
-11-

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
  TERRALENE FUELS CORPORATION  
       
       
Date: May 21, 2012
By:
/s/ J. Cruz
 
   
Jaclyn Cruz
 
   
President and a Director.
 
       
Date: May 21, 2012
By: 
/s/ M. Kelly
 
   
Matt Kelly
 
   
Director, Secretary & Treasurer
 
 
 
 
 
-12-

 

XOTC:GSPT Quarterly Report 10-Q Filling

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