WINDGEN ENERGY, INC. - Annual Report: 2010 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-12968
WINDGEN ENERGY, INC.
(Exact name of registrant as specified in its charter)
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Utah
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87-0397815
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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14550 N. Frank Lloyd Wright Blvd., Suite 100
Scottsdale, Arizona 85260
(Address of principal executive offices)
(480) 991-9500
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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Securities Registered Pursuant to Section 12(b) of the Act:
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None
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Securities Registered Pursuant to Section 12(g) of the Act:
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Title of Each Class
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Name of Each Exchange on which Registered
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Common Stock, $.001 par value
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None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 Act). Yes o No þ
State the aggregate market value of the voting and non-voting common equity held by non-affiliates: $2,185,496 based on 21,854,960 non-affiliate shares outstanding at $0.10 per share, which is the bid price of the common shares as of March 25, 2011.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 42,083,428 shares of common stock, $.001 par value, as of March 29, 2011.
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ANNUAL REPORT ON FORM 10-K
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This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and should be read in conjunction with the Financial Statements of WindGen Energy, Inc. (the “Company” or “WindGen”). Such statements are not historical facts and reflect our current views regarding matters such as operations and financial performance. In general, forward-looking statements are identified by such words or phrases as “expects,” “anticipates,” “believes,” “could,” “approximates,” “estimates,” “may,” “intends,” “predicts,” “projects,” “plans,” or “will,” or the negative of those words or other terminology. These statements are not guarantees of future performance and involve certain known and unknown inherent risks, uncertainties and other factors that are difficult to predict; our actual results could differ materially from those expressed in these forward-looking statements, including those risks and other factors described elsewhere in this Annual Report. The cautionary factors, risks and other factors presented should not be construed as exhaustive. Other risks not presently known to us, or that we currently believe are immaterial, could also adversely affect our business, financial condition or results of operations.
Each forward-looking statement should be read in context with, and with an understanding of, the various disclosures concerning our business made elsewhere in this Annual Report, as well as other public reports filed by us with the United States Securities and Exchange Commission. Readers should not place undue reliance on any forward-looking statement as a prediction of actual results of developments. Except as required by applicable law or regulation, we undertake no obligation to update or revise any forward-looking statement contained in this Annual Report.
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BUSINESS
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Overview
InMedica Development Corporation (“InMedica” or the “Company”) was incorporated as a Utah corporation on June 16, 1983. On December 4, 2009, a majority of the Company’s shareholders executed a consent resolution to amend the Company’s Articles of Incorporation to change the Company’s name to WindGen Energy, Inc. (“WindGen” or the “Company”) and to increase the number of authorized common stock shares from 40,000,000 to 100,000,000. A Certificate of Amendment for such amendments was filed by the Company with the Secretary of State of Utah effective on December 16, 2009. The name change and the new trading symbol, “WGEI,” was approved by FINRA on March 16, 2010.
Change in Control
Effective January 30, 2009, Larry E. Clark, Ralph Henson and Richard Bruggeman resigned Directors of the Company. Further, Mr. Clark resigned as Chairman of the Company, Mr. Henson resigned as President and Chief Executive Officer of the Company, and Mr. Bruggeman resigned as Secretary/Treasurer and Chief Financial Officer of the Company, all effective January 30, 2009. There were no disagreements between Mr. Clark, Mr. Henson, Mr. Bruggeman and the Company.
Effective January 30, 2009, Ronald Conquest, Wayne R. Myers, and Christopher R. Miller were appointed as Directors of the Company. Additionally, Mr. Conquest was appointed as Chairman and Principal Executive Officer, Mr. Myers was appointed as President and Principal Operating Officer, and Mr. Miller was appointed as Secretary/Treasurer and Chief Financial Officer. There are no family relationships between Messrs. Conquest, Myers and Miller.
With the resignation of the Company’s three Directors and officers and the appointment of three new Directors and officers, control of the Company changed as of January 30, 2009.
Since January 30, 2009, the Company’s new management team has been investigating new areas of business and sources of funding for the Company. See, “Plan of Operation” below.
Changes in Officers and Directors
On June 2, 2009, Wayne R. Myers resigned as a Director and President of the Company, effective as of April 29, 2009. There were no disagreements between Mr. Myers and the Company.
On June 2, 2009, the Board of Directors appointed David P. Martin as a Director and President of the Company, effective April 29, 2009. There are no family relationships between Mr. Martin and any other officer or Director of the Company.
On March 18, 2010, our Board of Directors accepted the resignation of Christopher R. Miller from the positions of Director, Secretary/Treasurer and Chief Financial Officer. There were no disagreements between Mr. Miller and the Company. On March 18, 2010, Ronald Conquest, our Chairman, was appointed as Secretary/Treasurer and Chief Financial Officer.
On April 21, 2010, Ronald Conquest resigned as Secretary, Treasurer and Chief Financial Officer of the Registrant, and Wendy Carriere was appointed to the positions of Director, Secretary, Treasurer and Chief Financial Officer. Ms. Carriere is not receiving any compensation for her services at this time, but the Board of Directors may approve compensation for her in the future.
MicroCor, Inc.
In 1985, the Company acquired MicroCor, Inc., a Utah corporation (“MicroCor”), engaged in the development of certain medical technology products. During 2008, MicroCor continued to engage in research and development on MicroCor’s hematocrit technology (a method for measuring hematocrit non-invasively without drawing blood) pursuant to the Joint Development Agreement (the “Wescor Agreement”) with Wescor, Inc., a Utah corporation (“Wescor”). The Agreement provided for Wescor to manage and provide funding for MicroCor’s development of its hematocrit technology. Wescor assumed day-to-day management of MicroCor as of September 7, 2004; however, Wescor breached the Wescor Agreement in 2008 by ceasing to fund additional research, and as of December 30, 2008, the day-to-day management was transferred to three of MicroCor’s Directors: Larry Clark, Ralph Henson and Richard Bruggeman.
On June 24, 2010, the Company, Chi Lin Technology Co., Ltd., a corporation organized and existing under the laws of the Republic of China (“Chi Lin”), MicroCor and Wescor executed an amendment (the “Amendment”) to the Wescor Agreement. The Company owned 57% of MicroCor as a result of the Wescor Agreement and Wescor and Chi Lin owned the interest in MicroCor. MicroCor owns three (3) patents covering various aspects of its hematocrit technology.
The Amendment provided for: (i) all debts between the parties to be extinguished and cancelled; (ii) the Company to transfer such stock ownership to Wescor so that Wescor would own 36.8% of MicroCor and the Company would only own 49.0% of MicroCor; and (iii) the Company to loan funds to MicroCor for the maintenance of its patents through 2011. The Amendment was effective as of March 31, 2010.
The Amendment also provides that in the event there are any net revenues from MicroCor’s hematocrit technology in the future, such net revenues will be distributed as follows: (i) the first $150,000 to Wescor; (ii) the Company will be repaid any sums loaned to MicroCor for the patent maintenance; (iii) the next $150,000 split pro-rata 80% to the Company and 20% to Chi Lin; and (iv) the remaining net revenues split pro-rata among MicroCor’s three shareholder’s: the Company (49.0%); Wescor (36.8%) and Chi Lin (14.2%).
As a result of the Company transferring shares in MicroCor to Wescor pursuant to the Amendment, the Company’s ownership in MicroCor became only 49.0%. Therefore, the financial statements of MicroCor are no longer consolidated into and reported with the financial statements of the Company.
Chi Lin Shares
On September 10, 2008, Chi Lin Technologies Co., Ltd. (“Chi Lin”), an entity of the Republic of China, granted a one-year option to Synergistic Equities Ltd., a Belize corporation (“Synergistic”), to purchase 6,043,704 issued and outstanding shares of common stock of the Company currently owned by Chi Lin and 425,000 shares of common stock currently owned by Chi Lin in MicroCor (collectively, the “Option Shares”) for the aggregate sum of $107,000 US (the “2008 Synergistic Option”). The agreement with Chi Lin is hereinafter referred to as (the “2008 Chi Lin Agreement”). The 2008 Synergistic Option was extended to January 8, 2010 and again to May 1, 2010, with the exercise price now $121,000. To date no options have been exercised by Synergistic and its option to acquire the Chi Lin shares has expired.
On September 10, 2010, Chi Lin entered into a Stock Purchase and Escrow Agreement with The John Galt Society, LLC, a Washington limited liability company (“JGS”) and Brook Technologies, Inc., a Canadian corporation (“BT”), for JGS and BT to purchase the the 6,043,704 issued and outstanding shares of common stock of the Company owned by Chi Lin and the 425,000 shares of common stock owned by Chi Lin in MicroCor (collectively, the “Chi Lin Shares”) for the aggregate sum of $128,000 US. The transaction was completed on or about October 27, 2010, with JGS acquiring 3,000,000 shares of the common stock of the Company and BT acquiring 3,043,704 shares of the common stock of the Company, plus the 425,000 shares of MicroCor.
On September 15, 2010, Synergistic acquired the shares of MicroCor formerly held by Chi Lin, resulting in Synergistic owning 14.2% of MicroCor.
Law Investments CR, S.A.
On December 8, 2008, the Company entered into a stock purchase option agreement with Law Investments CR, S.A., a Costa Rica corporation (“LI”). The agreement with LI is hereinafter referred to as (the “LI Agreement”). Pursuant to the terms of the LI Agreement, the Company granted to LI a one-year option to purchase up to 15,000,000 restricted shares of the Company’s common stock at a purchase price of $0.0075 per share (the “LI Options”). The LI Options under the LI Agreement were transferable by LI. The LI Agreement provided that the first $75,000 received from the purchase of Company’s common stock pursuant to the LI Agreement would be distributed to Company’s wholly-owned subsidiary, ValuMobile, as a contribution to capital. The LI Agreement further provided that LI and any of its affiliates would not collectively acquire more than 88% of the outstanding common stock of the Company until such time as the Company or ValuMobile had been funded with at least $1,500,000. The LI Option expired on December 31, 2009, with all options there under exercised. See “Item 13. Certain Relationships and Related Transactions, and Director Independence” below. Ronald Conquest, the Chairman of the Board and Chief Executive Officer of the Company, is the President and a Director of LI.
Effective April 10, 2009, the Company and SNG agreed to rescind and cancel the transaction in which the SNG Option was granted, with no shares being issued under such option. The Company assigned its 100% interest in ValuMobile to SNG effective as of April 10, 2009. Pursuant to the terms of the cancellation of the SNG Option and the assignment of ValuMobile to SNG, funds received from the first $75,000 received from the purchase of Company’s common stock pursuant to the LI Agreement would be used for the Company’s general corporate purposes.
Agreement with MicroCor, Inc.
On January 30, 2009, the Company entered into an agreement with MicroCor, its subsidiary (the “MicroCor Agreement”). The MicroCor Agreement provided for the Company to create a Series B class of preferred stock, without dividend or voting rights (the “Series B Preferred”), which would receive 100% of any future benefit from the sale, spin-off, merger or liquidation of MicroCor or the commercialization of its hematocrit technology should such an event occur prior to the expiration of the MicroCor Agreement. The shares of the Series B Preferred would be distributed as a dividend, subject to compliance with federal and state securities laws and regulations, to the Company’s common stockholders, as of January 30, 2009. The creation of the Series B Preferred would prevent any holder of the Company’s common stock after January 30, 2009 from sharing in any future benefit of or to MicroCor through the expiration date of January 30, 2011. The Series B Preferred Stock will no longer be issued to the common shareholders of record at January 30, 2009, as no commercial benefit from MicroCor’s hematocrit technology occurred prior to the expiration date of January 30, 2011.
Plan of Operation
In January 2008, the Company’s plan of operation was to continue to work cooperatively with MicroCor and Wescor in the development of the Company’s portable Hematocrit device. In late 2008, Wescor ceased all research and development efforts on the Hematocrit technology. During 2008, the Company funded administrative operations with the proceeds of minimum royalty payments from MicroCor and from loans from the Company’s officers and Directors. These minimum payments to the Company from MicroCor have ceased. On June 24, 2010, the Company entered into an agreement with MicroCor, Chi Lin and Wescor, whereby the Company transferred 230,000 shares of MicroCor common stock owned by the Company to Wescor, reducing the Company’s holdings in MicroCor from 1,700,000 common shares to 1,470,000 common shares. The Company’s percentage of ownership of MicroCor was reduced from approximately 57% to 49%. Since the Company’s ownership percentage is below 50%, MicroCor’s financial statements are no longer consolidated with the Company’s financial statements. Development of the Hematocrit device remains dormant but has not been abandoned.
New Company Focus: Wind Energy
With new management, we have refocused the Company on wind energy devices. On April 17, 2009, we entered into a license agreement (the “License”) with Wind Sail Receptor, Inc. of Boulder City, Nevada (“WSR”), pursuant to which we were granted the exclusive license to assemble and market WSR’s wind sail receptor energy generation devices using blades of 15 feet or less in length in the United States, Canada, the United Kingdom and Ireland, with nonexclusive rights in the rest of the world except Latin America and the Caribbean. Under the License, we must acquire 100 blades from WSR during the first year after WSR is able to manufacture the blades. WSR is currently in the final stages of selecting the electrical generator that it will connect to the WSR wind turbine blade.
During 2010, the Company issued 1,900,000 shares of the Company’s restricted common stock to WSR in consideration of amending its License. The proposed amendment to the License Agreement currently in existence between the Company and Wind Sail Receptor has not yet been executed. The reasons are various but include, but are not limited to, finalizing details regarding the need for the Company to be involved in assembly of the wind turbines in various license territory outside the US, final pricing that the units will be sold by Wind Sail Receptor to the Company, final terms of the product Warranty to be provided by Wind Sail Receptor, and possible additional exclusive territory added to the license. Under the terms of the existing License the Company intended to use its best efforts to obtain Federal, State, Local, or Private Grant Funds and to share these Grant Funds with Wind Sail Receptor up to a sum of one million dollars. To date the Company has not been successful in obtaining Grant Funds. The proposed amendment also could result in altering the various financial dealings between the two companies. No monetary disputes currently exist between the two companies. WSR is hopeful that it will begin production of complete wind turbine systems early in the second quarter of 2011.
We anticipate our first three wind turbine products will have blade diameters of 3, 6 and 12 feet with towers of up to 100 feet high. We are currently negotiating terms for the formation of the working capital required to bring our first products to market at some point during the second quarter of 2011. The progress of the Company in marketing its new wind energy products is dependent on obtaining additional capital. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
Wind Power
Wind energy offers many advantages, which explains why it’s the fastest-growing energy source in the world. Wind power now represents one of the largest new sources of electric capacity additions in the United States.
Wind power is the conversion of wind energy into more useful forms of energy, such as electricity, using wind turbines. Electricity generated by wind turbines is a clean fuel source that doesn’t pollute the air like power plants that rely on combustion of fossil fuels, such as coal or natural gas, and wind turbines don’t produce atmospheric emissions that cause acid rain or greenhouse gasses. Wind energy is a domestic source of energy, produced in the United States and relies on the renewable power of the wind, which can’t be used up.
Wind power was the most rapidly growing means of alternative electricity generation at the turn of the 21st century. Higher turbine and blade performance, recent increases in the availability of federal and state incentives, and the rising cost of traditional energy sources have significantly reduced the payback period for investments in small wind turbines for homeowners and small businesses. A well-designed wind energy system can provide many years of cost-effective, clean and reliable electricity. These factors are driving rapid growth in sales of small wind turbine systems.
Small wind turbines are electric generators that utilize wind energy to produce clean, emissions-free power for individual homes, farms, and small businesses. With this simple and increasingly popular technology, individuals can generate their own power and cut their energy bills while helping to protect the environment. The U.S. leads the world in the production of small wind turbines, which are defined as having rated capacities of 100 kilowatts (“kW”) and less.
A wind turbine, which is installed on top of a tall tower, collects kinetic (motion) energy from the wind and converts it to electricity that is compatible with electrical systems.
Small wind energy systems can be used in connection with an electricity transmission and distribution system (called grid-connected systems), or in stand-alone applications that are not connected to the utility grid.
Grid-Connected Systems
A grid-connected wind turbine can reduce the consumption of utility-supplied electricity for lighting, appliances, and electric heat. If the wind speeds are below cut-in speed (7-10 mph) – the minimum speed to spin the blades – there will be no output from the turbine and all of the needed power is purchased from the utility. As wind speeds increase, turbine output increases and the amount of power purchased from the utility is proportionately decreased. When the wind system produces more electricity than the household or business requires, many utilities institute a policy called “net metering” whereby the extra electricity is sold back to the utility. With the interconnections available today, switching takes place automatically. There are no batteries in a modern, grid-connected residential wind system.
Stand-Alone Systems
Stand-alone wind energy systems (small wind systems for remote off-grid applications) operate somewhat differently and often charge batteries so electricity is available when the wind isn’t blowing. These systems can be appropriate for homes, farms, or even entire communities (a co-housing project, for example) that are far from the nearest utility lines.
Electricity generated from wind power can be highly variable at several different time scales: from hour to hour, daily, and seasonally. Annual variation also exists, but is not as significant. The intermittency of wind seldom creates problems when using wind power at low to moderate penetration levels.
According to Betz’s law, a theory about the maximum possible energy to be derived from a wind turbine, no turbine can capture more than 59.3% of the kinetic energy in the wind. The Betz limit applies regardless of the design of the turbine.
Wind Power Industry
Much of the wind power industry to date is made up of large, utility-scale turbines. However, small wind turbines are now benefitting from many of the same high-growth factors driving large turbines, which include:
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Persistent, high energy costs,
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Improved technology leading to significantly more efficient turbines,
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Federal and state incentive programs,
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Heightened consumer education and public awareness of the technology and its attributes, and
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Increased public concern for environmental issues.
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As set forth in the American Wind Energy Association (“AWEA”) Small Wind Turbine Industry Roadmap (the “AWEA Roadmap”), a 20-year industry plan for small wind turbine technology, small wind turbine technology can be a meaningful contributor to our energy security, strategic technology, and long-term economic growth. Small wind turbines are a “distributed” generation source with a very attractive near-term potential for low-cost, rapid growth. Small wind turbines can mitigate our dependence on foreign energy supplies while providing distinct benefits to our domestic economy.
In 2001, annual sales of the U.S. small wind turbine industry amounted to about 13,400 turbines. The AWEA Roadmap estimates that turbine sales will increase, and by 2020, small wind turbines could contribute 3%, or 50,000 megawatts (“MW”), to America’s electric supply. Increasing the energy contribution from this home-grown industry could increase our energy security and our gross national product as well as our energy supply. In the process, this technology will also give the public more energy choices and make electricity markets more competitive.
Our potential customer has one or more acres of property and a Department of Energy (“DOE”) Class 2 wind resource or better. A Class 2 wind resource is defined as a location with an average wind speed in the range of 9.8 to 11.5 mph. Wind power ratings are broken down into 7 classes (1 through 7 – with 1 being the lowest and 7 being the highest). A Class 2 wind resource is regarded as sufficient for a small turbine system.
Wind energy systems provide a cushion against electricity price increases. Wind energy systems reduce U.S. dependence on fossil fuels. For homes and other structures requiring electricity built in remote locations, a small wind energy system can help avoid the high costs of extending utility power lines to the site.
The long-term industry vision is of a major new category of home energy appliance. According to the AWEA Roadmap, this is possible due to the sheer number of homes (15 million) and small businesses (1 million) that could effectively use small wind systems if the economics were favorable, making small wind power a potential multi-billion dollar industry in the United States.
Worldwide Investment
In spite of the global economic crisis, investment in new wind turbines exceeded by far all previous years. Pursuant to the World Wind Energy Report 2009, issued by the World Wind Energy Association (“WWEA”), worldwide capacity reached 159.213 MW, out of which 38.312 MW were added in 2009. Wind power showed the highest growth rate since 2001. The growth rate is the relation between the new installed wind power capacity and the installed capacity of the previous year. The annual growth rate continued to increase since the year 2004, reaching 31.7% in 2009, after 29.0% in 2008, 26.6% in 2007, 25.6% in 2006 and 23.8% in 2005. According to the report, wind turbines installed by the end of 2009 worldwide are generating 2% of global electricity consumption and installed wind capacity is more than doubling every third year.
As of June 2010, the United States maintained its number one position in terms of total installed capacity and China remained number two in total capacity, only slightly ahead of Germany. In 2010, China continued its role as the biggest market for new turbines, adding 7.800 MW as of June 2010.
The European Union (“EU”) is also a strong market, reflecting a greater environmental consciousness and higher energy costs. All EU countries have signed the Kyoto Accords and have begun to implement policies to meet environmental commitments under the agreements.
Apart from regulatory issues and externalities, decisions to invest in wind energy generally depend on the cost of alternative sources of energy. Natural gas, oil and coal prices, and the main production technologies with significant fuel costs are often determinants in the choice of the level of wind energy.
Developing Countries
Energy demand in developing countries is growing rapidly as well. There are 1.6 billion people in developing countries that do not have electricity, and hundreds of millions have either poor quality or intermittent power. The demand for village electrification programs in developing countries is expected to be strong. A new source of funding for this market comes from the availability of CO2 abatement credits to companies for installation of RE equipment in developing countries - part of the Kyoto Accords treaty.
Pursuant to the AWEA Roadmap, developing countries have a high potential demand for small wind systems because they normally do not have major electrical power plants serving rural areas. However, the people are usually too poor to buy small wind systems and need financial assistance from their government in order to afford them.
Electricity is a major contributor in meeting global goals for economic development, poverty alleviation, social development, health, and environmental quality. “Access to Electricity” initiatives support collaborative efforts between private and public sector groups for electrical development. Policy makers in developing countries have strong motivation to provide power to rural areas, to upgrade their people’s lives and to facilitate the creation of small businesses that encourage people to stay in their villages instead of migrating to large cities.
Interesting prospects for financing wind and other renewable technologies came up in the context of the UN climate change discussions: The International Renewable Energy Alliance proposed at the COP15 in Copenhagen a Global Fund for Renewable Energy Investment, including a Global Feed-in Tariff program. This proposal would enable mainly developing countries to invest on a large scale in renewable energy and has already attracted major interest among governments and international organizations. Adopted in the frame of the United Nations Framework Convention on Climate Change, it would pave the way for an accelerated huge and worldwide boom of renewable energy deployment.
United States
Wind Power Additions in 2009 Shattered Old Records, with roughly 10 Gigawatts (GW) of New Capacity Added in the United States and $21 Billion Invested. The pace of utility-scale wind power capacity additions in 2009 was 20% higher than the previous U.S. record set in 2008, while cumulative wind power capacity grew by 40%. This was achieved despite the financial crisis that roiled the wind power industry in 2009, and the significant reductions in wholesale electricity prices that began in mid- to late-2008 and have continued to the present. A variety of market drivers allowed year-on-year installation growth to persist in 2009, including: carryover of projects initially planned for completion in 2008; elements of the American Recovery and Reinvestment Act of 2009 (Recovery Act), including the Section 1603 Treasury Grant Program; the expiration of bonus depreciation rules at the end of 2009; and state renewables portfolio standards.
Wind Power Contributed 39% of All New U.S. Electric Generating Capacity in 2009. This is down from 44% in 2008, but exceeds wind power’s contribution of 35% in 2007, 18% in 2006, 12% in 2005, and less than 4% from 2000 through 2004. For the fifth consecutive year, wind power was the second-largest new resource added to the U.S. electrical grid in terms of nameplate capacity, behind natural gas plants, but ahead of new coal power.
The United States Continued to Lead the World in Cumulative Wind Power Capacity, but Was Overtaken by China in Annual Additions. After four years of leading the world in annual wind power capacity additions, the United States dropped to second place in 2009, capturing roughly 26% of the worldwide market (behind China’s 36% market share). At the end of 2009, cumulative wind power capacity in the United States stood at more than 35,000 megawatts (MW), ahead of China’s 25,853 MW and Germany’s 25,813 MW. Several countries are beginning to achieve relatively high levels of wind energy penetration in their electricity grids: end-of-2009 wind power capacity is projected to supply the equivalent of roughly 20% of Denmark’s electricity demand, 14% of Spain’s and Portugal’s, 11% of Ireland’s, and 8% of Germany’s. In the United States, the cumulative wind power capacity installed at the end of 2009 would, in an average year, be able to supply roughly 2.5% of the nation’s electricity consumption.
Offshore Wind Power Project and Policy Developments Accelerated in 2009. To date, all wind power installations in the United States have been located on land, but there is also interest in offshore wind power development and 2,476 MW of offshore projects have advanced significantly in the permitting and development process. Of those projects, three have signed or proposed power purchase agreements with terms and details have been made public. Notably, after nine years in the permitting process, the Cape Wind project was granted approval by the Department of Interior in April 2010, and a variety of other recent project and policy announcements demonstrate accelerated activity in the offshore wind energy sector.
A Growing Percentage of the Equipment Used in U.S. Wind Power Projects Has Been Sourced Domestically in Recent Years. U.S. trade data show that the United States remained a large importer of wind power equipment in 2009, but that wind power capacity growth has outpaced the growth in imports in recent years. As a result, a growing amount of the equipment used in wind power projects is being sourced domestically as domestic and foreign companies seek to minimize transportation costs and currency risks by establishing local manufacturing capabilities. Imports of wind turbines and select components in 2009 are estimated at $4.2 billion, down from $5.4 billion in 2008. When presented as a fraction of total equipment-related wind turbine costs, the overall import fraction is estimated to have declined from roughly 50% in 2008 to 40% in 2009 as domestic manufacturing investments outpaced import growth.
Treasury Cash Grant Expands Financing Options, Buoys the Wind Sector. To reduce the market’s dependence on scarce and costly third-party tax equity, Section 1603 of the Recovery Act enables wind power projects to temporarily choose a 30% cash grant administered by the U.S. Treasury in lieu of either the production tax credit (PTC) or a 30% investment tax credit (ITC). Owners of more than 6,400 MW of the wind power capacity installed in 2009 elected the grant in lieu of the PTC, and as much as 2,400 MW of this capacity may not have been built in 2009 had the cash grant not been available. Only about seven of the more-than-sixty 2009 projects that elected the grant were financed using third-party tax equity; many of the rest substituted project-level term debt – which became increasingly available as 2009 progressed – in place of third-party tax equity.
Small Wind Poised to Accelerate
The industry projects 30-fold growth within as little as five years, despite the global recession. Much of this estimated growth will be spurred by the incentives provided by the Recovery Act.
Despite record growth, the residential (1-10 kW) and commercial (21-100 kW) market segments showed an approximate 20% downturn in late 2008 and early 2009 due to the broad economic recession, but also because of typical sales drop-offs during winter months. Despite the dip, early 2009 residential sales were still 15-20% higher than in early 2008.
For all market segments, the industry predicts that the federal investment tax credit will continue to help increase production and further reduce consumer costs. The “cleantech” economy sector in general has been relatively strong throughout the global recession and credit crisis, and small wind is no exception. Even amid the downturn, economies of scale are beginning to take shape in the industry and growth projections are the strongest in the industry’s 80-year history.
As payback periods continue to be reduced, we hope that the market will grow exponentially, just as the solar industry did a few years ago. Several developments are contributing to the industry’s growth and may accelerate it in the years to come. We feel that the small wind industry is reaching a point where increased performance, better incentives, and higher energy costs will combine to make wind-generated energy cheaper than utility energy. If this occurs, small wind turbine systems will become a smart investment for the ordinary rural resident.
We also anticipate that rapid growth will make established companies in this industry attractive acquisition targets for larger companies within five to seven years.
Legislative Environment
Rising energy costs have captured people’s attention and concern. Buying a wind turbine system is an action individuals and small businesses can take to address that concern. State and local governments, as well as other organizations, are also taking action by implementing initiatives and incentive programs for wind equipment purchases.
Federal Incentives
Domestic Policy
On February 17, 2009, the U.S. Federal Government signed into law the American Recovery and Reinvestment Act (“ARRA”) of 2009. The legislation includes a three-year extension of the production tax credit (“PTC”) and a new program that allows renewable energy developers the option of forgoing the PTC and instead securing a grant from the Treasury Department in the amount of a 30% investment tax credit (“ITC”). This program to help monetize renewable tax credits is considered critical for the wind industry to continue its growth in the face of the economic downturn, which has dramatically reduced the ability to secure value for renewable tax credits. Recent changes have allowed taxpayers to choose either tax credits or cash for the ITC incentive.
This legislation is the first federal incentive for the small wind industry since 1985 and provides the industry with stable, long-term policy that has historically been out of reach for other renewables industries. Industry members value its passage as an important step toward achieving political parity with the solar photovoltaics (PV) industry, small wind’s market counterpart, which has enjoyed a federal investment tax credit since 2005.
The new law authorizes an additional $1.6 billion of new clean renewable energy bonds to be distributed to tribal governments, public power providers, and electric cooperatives to finance facilities that generate electricity from renewable resources. It also provides a new 30% credit for investment in qualified property used in a “qualified advanced energy manufacturing project.”
Provisions that will facilitate the planning and building of new transmission lines include $3.25 billion in additional borrowing authority each for the Bonneville Power Administration and Western Area Power Administration for transmission lines constructed after February 17, 2009, that deliver power from renewable energy resources. In addition, the law provides $4.5 billion for the Department of Energy’s Office of Electricity Delivery and Energy Reliability (“OE”) program to accelerate the hiring of personnel, for worker training, for subsequent legislation on transmission improvements and to provide a resource assessment of future demand and transmission requirements. OE, in coordination with the Federal Energy Regulatory Commission (“FERC”), is also directed to provide technical assistance for the development of interconnection-wide transmission plans for the Eastern and Western Interconnections and the Electric Reliability Council of Texas (“ERCOT”).
Small Wind Tax Credits for Homeowners and Businesses
The ARRA includes the 30% ITC to help consumers buy small wind systems. The ARRA also removed the previous $4,000 cap on the small wind ITC. Small wind investors are now allowed to claim a full 30% ITC for qualified small wind energy property.
Many states have their own incentives for renewable small wind installations and for energy efficiency benchmarks. For example, the State of Arizona provides a tax credit equal to 25% of the small wind equipment costs up to $1,000 along with a sales tax exemption on the purchased equipment. Additionally, the local utilities provide incentives to small wind energy producers on a per watt basis for excess energy generated and sold to those utilities.
U. S. Department of Energy “20% Wind Energy by 2030” Initiative
The U.S. Department of Energy’s report, 20% Wind Energy by 2030: Increasing Wind Energy’s Contribution to U.S. Electricity Supply, found that reaching a level of 20% wind energy by 2030 was feasible under one closely examined scenario.
Included in the report is an examination of America’s technological and manufacturing capabilities, the future costs of energy sources, U.S. wind energy resources, and the environmental and economic impacts of wind development. Under the 20% wind scenario, installations of new wind power capacity would increase to more than 16,000 MW per year by 2018, and continue at roughly that rate through 2030. A total of 300,000 MW of land based and offshore wind power capacity would have to be installed to meet that level of electricity production.
Residential Energy Assistance Challenge Option
The purpose of the Residential Energy Assistance Challenge Option (“REACH”) is to minimize health and safety risks that result from high energy burdens on low-income Americans, prevent homelessness due to inability to pay energy bills, increase energy efficiency and target energy assistance to individuals in greatest need.
REACH was funded for the first time in fiscal year 1996. Up to 25% of funds appropriated for state leveraging programs may be made available for REACH incentive grants to states. Such funding may be used for costs of planning, implementing and evaluating state REACH programs. These REACH programs include implementing energy-generating equipment in lieu of paying outright energy bills for recipients.
These installations can be made in low income housing communities, senior designated communities, etc. If the function and economics make sense, a renewable energy installation could replace the need of ongoing funding for a recipient or group of recipients from the general Low-Income Home Energy Assistance Program (“LIHEAP”). If the economics are justified, the REACH funds will cover 100% of the installation cost and may also fund a 3-5 year maintenance plan as well.
The general LIHEAP program is federally funded – $5.1 billion for fiscal year 2009. Of this amount, $4.5 billion is designated for state block grants to pay directly to low-income, elderly, etc. recipients to offset costs of energy bills. In addition, 25% of the $4.5 billion can be designated for REACH programs.
Rural Energy for America Program
The Rural Energy for America Program (“REAP”) is a federally funded program administered by the United States Department of Agriculture (“USDA”) to foster rural economic development and growth. In 2008, $15.8 million was available in grants and $204 million was available in guaranteed loans. Grants can fund up to 25% of a renewable energy project’s total eligible costs. Grants are limited to $500,000 for renewable energy projects. Guaranteed loans can fund up to 75% of a project’s eligible costs with a minimum loan amount of $5,000 and a maximum loan amount of $25 million.
State, Utility and Local Incentives
At the state, utility, and local levels, policies continue to be fragmented and constantly changing across regions and even communities. Top state, utility, and local policy goals for the industry continue to be to:
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Increase the availability and size of financial incentives,
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Streamline zoning ordinances at the local or state level,
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Standardize grid interconnection rules and procedures, and
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Implement or improve state/utility net metering policies.
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Growth not just in sales, but in the number manufacturers, dealers, installers, supply chain members, and industry advocates has led to a larger industry presence at local levels, forcing permitting issues to the forefront in a greater number of communities.
A small handful of states have chosen to reduce their incentive levels on a per-project basis in order to cut costs while assisting the same (or larger) amount of consumers. The trend is not universal, however, as other states have chosen instead to expand their incentive programs with the help of increased funds through the Recovery Act.
State incentives can take the form of net metering, rebates, tax credits, and feed-in tariffs:
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Net metering allows customers to connect renewable generation equipment to their utility power system. The utility takes any excess energy produced and credits it back to the customer on a net basis. The utility in essence banks your energy for free. There are 42 states that have net metering in all or part of the state.
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Rebates are cash payments that are usually given to the installer, who must wait until the project is completed and inspected to get paid. The rebate is deducted from the project cost billed to the customer. Rebates can be based on rated power, swept area, blade length, installed cost, or projected energy generation.
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Tax credits can be based on project cost or per kW of rated capacity. Some tax credit programs have caps on maximum dollars per project or year. Some must be taken over several years and some are transferable.
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Feed-in tariffs, or production incentives as they are sometimes called, are above-market payments for energy generated from RE. These are common in Europe and interest levels are growing in the United States.
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There is also growing support for a federal Renewable Portfolio Standard (“RPS”), and many states already have one. Such standards require utilities to generate or purchase a minimum percentage of their energy from renewable sources. The target share is increased over time. Meeting the target provides another incentive for utilities to encourage small wind installations, and in some states distributed generation is part of the mandate.
The multitude of state and local incentive programs provides a more stable market, since the loss of a program in one state affects only a small part of the overall market.
Regulatory Matters
We are subject to various federal and state laws and substantial regulation of the wind power industry under these laws by various government agencies. There are also government regulations in other counties that we would be subject to, particularly if we begin to sell in Europe, which has a variety of regulations regarding the installation of wind turbine systems. Incentive programs are also offered by various government agencies. Amendments to existing statutes or regulations, adoption of new statutes and regulations (including those relating to international trade) and expansion of our operations could require us to continually adapt or modify our operations to comply with applicable laws or regulations, at costs which could be substantial.
We are also subject to the laws and regulations applicable to business operations, such as business licensing requirements, income taxes and payroll taxes.
Assembly and Marketing
During 2011, we will be developing a well-organized approach to the manufacturing/assembly process to assure high-quality, rapid-development cycles and overall competiveness. We are seeking an amendment to our existing WSR license to assemble the wind turbine units, and our first facility will be located in either Arizona or Nevada. WSR will be responsible for the manufacture of the critical blade component at its plant near Boulder City, Nevada. At this time suppliers have been located for all of the non-blade components for our products. The generator part of the wind turbine system will be manufactured in China.
To launch into the important rural wind turbine market in the western United States (our initial marketing objective), we hope to join forces with some excellent partners and distributorships. We intend to recruit existing wind turbine distributors. In addition, we are currently in contact with various farm equipment dealers who have a well-established rural network of dealers throughout America, all with the ability to provide excellent sales, installation, and maintenance services. We also plan to sell distributorships to other existing service-oriented organizations.
We are currently in the process of finalizing our first two products that should be available during the second quarter of 2011. Subject to availability of adequate capital, product roll out could follow quickly in the western United States. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” below.
Competition
We compete with a number of established manufacturers, importers, and distributors who sell wind turbine systems and related equipment. These companies enjoy brand recognition which exceeds that of our brand name. We compete with several manufacturers, importers, and distributors who have significantly greater financial, distribution, advertising, and marketing resources than we do, including Southwest Wind Power, located in Flagstaff, Arizona, and Bergey Wind Power Co., located in Norman, Oklahoma.
Sharp drops in commodity prices in late 2008 and early 2009 have helped to lower the costs of solar photovoltaic cells (“PV”) considerably, which are based on the raw material polisilicon. Historically, small wind has been considerably more cost-competitive than solar PV on a cost per kilowatt-hour basis, but a surge in solar investment, a head-start on federal incentives, and falling production costs will likely result in PV costs at levels more competitive with small wind.
Small wind is still in a race with the solar photovoltaic industry toward “grid parity” – price per kilowatt-hour on par with conventional forms of electricity – and now both industries enjoy nearly identical federal incentives for a more level playing field.
There are relatively few companies competing in the small wind turbine market. We compete primarily on the basis of unit efficiency, brand name recognition, and price. We believe that our success will depend upon the unit efficiency of our products in comparison to the competition. The failure to compete successfully in the future could have a material adverse effect on our business.
Unique World-Class Competitive Technology
We believe WSR, developer of our technology, has taken a superior approach to wind turbine design based on a novel use of polyurethane and a unique blade architecture technology pioneered by inventor Richard A. Steinke. We believe Mr. Steinke’s technology allows the WindGen turbines to be smaller, more efficient, easier and less expensive to install, and operate in a very wide range of wind conditions.
Unlike other wind turbine approaches, these turbines use a 4-blade architecture similar in shape to a boat propeller, utilizing a flexible polyurethane material to more efficiently capture the wind at every wind speed (both at the low and high wind velocity). Our wind turbines operate at speeds less than five mph as compared to 7-10 mph for competitive devices. Our wind turbine is much quieter than the competition, in fact virtually silent, which can be important because sound is a real environmental issue in many locations. We believe the smaller blade size and higher efficiency means units can be installed on much shorter towers (50 feet compared to 200 - 400 foot wind farm giants) and used in far more regions of the world where the wind may not be as strong.
We believe our products will be superior to the competition for the following reasons:
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Our polyurethane blades are more durable than graphite composites and stand up better to the elements.
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Our blades do not hurt the ozone layer as they have zero emissions.
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Our blades use shorter towers, have less weight, and are easier to install.
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Our units use a simple direct drive, eliminating the need for complex, heavy, high maintenance gearing.
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Our units have a lower maintenance cost.
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Our units will have the best warranty in the industry, extendable to 10 years versus the industry standard of five years.
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We believe it is essential that our cutting-edge technology have objective validation by outside authorities. Independent technical verification will begin shortly by the University of Nevada, Las Vegas, and the Nevada Department of Engineering. A demonstration and testing site has been selected near WSR’s office in Boulder City, Nevada.
Research and Development Costs
We expect to incur minimal research and development costs on our new products in the future, because all of the blade prototype and electricity generation system development is being done by WSR.
Employees
The Company had two employees as of December 31, 2010, its Chief Executive Officer, Mr. Conquest, and its President, Mr. Martin. During 2010, the Company also used a part-time accounting consultant.
During the 2009 fiscal year, for the month of January the Company leased office space on a month-to-month basis located at 825 North 300 West, Suite N132, in Salt Lake City, Utah. Commencing in February 2009, the Company moved its offices to 3104 E. Camelback Road, Suite 242, Phoenix, Arizona 85016. The Company did not pay rent to occupy this space. Commencing in July 2009, the Company moved its offices to 14550 N. Frank Lloyd Wright Blvd., Suite 100, Scottsdale, Arizona 85260, and began paying rent in the amount of $992.52 per month on a month-to-month basis.
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LEGAL PROCEEDINGS
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The Company is not currently a party to any pending lawsuit or legal proceeding.
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RESERVED
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
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Market Information
The Company’s common stock is traded in the over-the-counter market and is quoted on the “FINRA OTC Bulletin Board” under the symbol “WGEI.” The table below sets forth, for the calendar quarters indicated, the high and low closing bid prices for the Company’s common stock as reported by the FINRA OTC Bulletin Board. These quotations represent prices between dealers without adjustment for retail markups, markdowns or commissions and may not represent actual transactions.
| Bid Price | ||||||||
| Quarter Ended |
High
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Low | ||||||
| March 31, 2009 | $ | .08 | $ | .01 | ||||
| June 30, 2009 | .15 | .05 | ||||||
| September 30, 2009 | .15 | .07 | ||||||
| December 31, 2009 | .14 | .09 | ||||||
| March 31, 2010 | $ | .205 | $ | .06 | ||||
| June 30, 2010 | .12 | .08 | ||||||
| September 30, 2010 | .195 | .06 | ||||||
| December 31, 2010 | .14 | .08 | ||||||
Shareholder Vote
On December 4, 2009, a majority of the Company’s shareholders executed a consent resolution to amend the Company’s Articles of Incorporation to change the Company’s name to WindGen Energy, Inc. and to increase the number of authorized common stock shares from 40,000,000 to 100,000,000. A Certificate of Amendment for such amendments was filed by the Company with the Secretary of State of Utah effective on December 16, 2009. The name change and the new trading symbol were approved by FINRA on March 16, 2010.
Stockholders
On March 14, 2011, there were approximately 568 record holders of the Company’s common stock. Such record holders do not include individual participants in nominee name listings.
Dividends
The Company has not paid cash dividends on its common stock since organization. For the foreseeable future, the Company expects that earnings, if any, will be retained for use in the business or be used to retire obligations of the Company.
Series A Preferred Stock
During the third quarter of 2010, we redeemed 15,762 shares of Series A Preferred and $52,488 in accrued dividends from three Series A Preferred shareholders in exchange for $15,000 in cash and 246,834 shares of restricted common stock. As of December 31, 2010, one stockholder owns an aggregate of 5,254 shares of the Company’s Series A Preferred Stock, which is 8% convertible preferred. There is no public market for the Series A Preferred Stock. Aggregate accumulated annual dividends payable on the preferred stock as of December 31, 2010 were $17,969.
Securities Authorized for Issuance - Series B Preferred Stock
On January 30, 2009, the Company entered into an agreement with MicroCor, its subsidiary (the “MicroCor Agreement”). The MicroCor Agreement provided for the Company to create a Series B class of preferred stock, without dividend or voting rights (the “Series B Preferred”), which would receive 100% of any future benefit from the sale, spin-off, merger or liquidation of MicroCor or the commercialization of its hematocrit technology should such an event occur prior to the expiration of the MicroCor Agreement. The shares of the Series B Preferred would be distributed as a dividend, subject to compliance with federal and state securities laws and regulations, to the Company’s common stockholders, as of January 30, 2009. The creation of the Series B Preferred would prevent any holder of the Company’s common stock after January 30, 2009 from sharing in any future benefit of or to MicroCor through the expiration date of January 30, 2011. The Series B Preferred Stock will no longer be issued to the common shareholders of record at January 30, 2009, as no commercial benefit from MicroCor’s hematocrit technology occurred prior to the expiration date of January 30, 2011. See “Item 1. Business - MicroCor Agreement” above.
Change in Stock Transfer Agent
Effective December 17, 2010, the Company appointed Action Stock Transfer Corporation (“ASTC”), 7069 S. Highland Drive, Suite 300, Salt Lake City, UT 84121, as its stock transfer agent. ASTC’s phone number is (801) 274-1088.
2010 Employee and Consultant Compensation Plan
Form S-8 Registration Statement. On August 17, 2010, the Company filed a Form S-8 Registration Statement (the “S-8”) registering up to 3,000,000 shares of its $.001 par value common stock (the “Stock”) to be issued pursuant to the Company’s 2010 Employee and Consultant Compensation Plan (the “Plan”). The Plan is described in the letter from the Company to its employees and consultants. The Plan is not subject to the provisions of ERISA and the Plan has no administrators.
Issuance of Shares. At the direction of the Company’s Board of Directors, the employees and consultants of the Company are eligible to participate in Plan. The employees and all consultants may participate in the Plan by electing to receive Registrant’s common stock for accrued and unpaid compensation at any time after August 1, 2010 on the basis of one share at a negotiated price not less than one hundred percent (100%) of the average trading price in the week prior to the shares being issued. The Stock will not be purchased in the open market.
Resale Restrictions. Shares issued pursuant to the Plan to the Company’s employees and consultants who are not affiliates of the Company are not restricted in resale or reoffer. Management employees who receive shares under the Plan will only be able to resell or reoffer their shares by means of a Reoffer Prospectus filed in a post-effective amendment to this Registration Statement and will be bound by the volume limitation of Rule 144.
Sale of Unregistered Equity Securities
During the fourth quarter of 2010, we sold 1,066,666 shares of restricted common stock for $80,000 two (2) non-accredited investors, as that term is defined by SEC Rule 501, pursuant to a Rule 506 private placement we are currently conducting. These sales to non-accredited investors were made without public solicitation. There were no underwriting discounts or commissions paid on these sales of securities. The proceeds of this offering will be used by the Company for working capital expenses.
During fiscal 2010, the Company issued 1,900,000 Shares of the Company’s restricted common stock to Wind Sail Receptor in consideration of an amendment to the Company’s 2009 License Agreement with Wind Sail Receptor.
During 2010, the Company completed the conversion of three of the four existing 8% Series A cumulative preferred shareholders by issuing 246,834 of the Company’s restricted common shares at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010.
On October 21, 2010, the Company borrowed $50,000 from a third party. The note is due on July 21, 2011 and carries an interest rate of 8% per annum. At December 31, 2010, the balance due on this note was $50,723. The note is convertible after six months at a conversion price of 55% of the market price of the common stock. At December 31, 2010, the note was convertible into approximately 1,136,364 shares of common stock.
Subsequent Events
The Company adopted ASC 855, and has evaluated all events occurring after December 31, 2010, the date of the most recent balance sheet, for possible adjustment to the financial statements or disclosures through March 31, 2011, which is the date on which the financial statements were issued. The Company has concluded that there are no significant or material transactions to be reported for the period from January 1, 2011 to March 31, 2011, other than what was reported in Note 4 to the financial statements.
During the first quarter of 2011, the Company issued 333,333 shares of restricted common stock for $25,000 to three (3) accredited investors and one (1) non-accredited investor as those terms are defined by SEC Rule 501, pursuant to a Rule 506 private placement we are currently conducting. These sales were made without public solicitation. There were no underwriting discounts or commissions paid on these sales of securities. The proceeds of this offering will be used by the Company for working capital expenses.
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SELECTED FINANCIAL DATA
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Not applicable.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Plan of Operation
During 2009 and 2010, the Company, under new management, developed a business plan for entering the wind generated energy industry. See “Item 1. Business – Plan of Operation,” “Item 1. Business – Change in Control,” and “Item 1. Business – Changes in Officers and Directors,” above.
Results of Operations
The Company had an accumulated deficit of $9,360,818 as of December 31, 2010. No revenues from operations were received in 2010 and 2009. The Company had a net loss from operations of $348,363 for the year ended December 31, 2010, compared to a net loss from operations of $175,462 for the year ended December 31, 2009.
Liquidity and Capital Resources
During the 2009 fiscal year, liquidity was generated from the private placement of restricted common stock sold upon the exercise of the options granted to Law Investments CR, S.A., a Costa Rica corporation (“LI”) pursuant to the terms of the December 8, 2008 stock purchase option agreement (the “LI Agreement”). See “Item 1. Business – Law Investments CR, S.A. and SNG Consulting, LLC Agreements” above and “Item 13. Certain Relationships and Related Transactions, and Director Independence” below.
During the year ended December 31, 2009, the Company sold 15,000,000 shares of restricted common stock for total gross proceeds of $95,000 and a promissory note for $17,500.
During the year ended December 31, 2010, we sold a total of 4,222,969 shares of restricted common stock for total gross proceeds of $316,423.
During the quarter ended September 30, 2010, we reduced our total liabilities by $134,292 through the conversion of debt and Series A Preferred in exchange for our common stock. The sum of $10,875 accrued for legal services was exchanged for 120,800 shares of the Company’s restricted common stock. Three Series A preferred shareholders converted 15,762 shares of the Series A Preferred, with a par value of $70,929, plus $52,488 of accrued dividends in exchange for 246,834 shares of the Company’s restricted common stock and $15,000 in cash. We will continue to attempt to reduce our liabilities in the future.
On October 21, 2010, the Company borrowed $50,000 from a third party. The note is due on July 21, 2011 and carries an interest rate of 8% per annum. At December 31, 2010, the balance due on this note was $50,723. The note is convertible after six months at a conversion price of 55% of the market price of the common stock. At December 31, 2010, the note was convertible into approximately 1,136,364 shares of common stock.
In 2009 and 2010, we suffered from a liquidity shortage which negatively impacted our ability to implement our new business plan for entry in the wind energy industry. As a result, the Company’s independent registered public accounting firm has issued a going concern opinion on the Company’s consolidated financial statements for the year ended December 31, 2010. See Note 1 to the financial statements.Such liquidity shortage is continuing through the first quarter of 2011. The Company is currently negotiating terms for a new convertible preferred to be issued by the Company in order to form new capital of up to $5,000,000 in order to implement its business plan in 2011.
Implementation of our new business to assemble and market wind turbines is contingent upon our ability to acquire new capital in 2011. We currently estimate we will need to generate approximately $3,500,000 of new capital during 2011 to fully implement our new business plan. We also estimate $2,000,000 of new capital would permit us to implement enough of our plan to commence minimal marketing of our wind turbine units in the first half of 2011.
We intend to acquire new capital during 2011 through the sale of equity or convertible debt or a combination of both in one or more private placements. Presently, we have no final agreement or understanding with any underwriter, investment banker or investor for any financing. There is no assurance we will be able to complete any substantial financing in the future.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Not applicable.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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24
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25
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Certified Public Accountants
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A PROFESSIONAL CORPORATION
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Brent M. Davies, CPA
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David O. Seal, CPA
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W. Dale Westenskow, CPA
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Barry D. Loveless, CPA
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| Stephen M. Halley, CPA |
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS’ REPORT
To the Board of Directors and Stockholders of
WindGen Energy, Inc.
We have audited the accompanying consolidated balance sheets of WindGen Energy, Inc. (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the two years then ended (all expressed in U.S. dollars). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements for the years ended December 31, 2010 and 2009 have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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/s/ Robison, Hill & Co. | |
| Certified Public Accountants | |||
Salt Lake City, Utah
March 31, 2011
MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF THE SEC PRACTICE SECTION and THE PRIVATE COMPANIES PRACTICE SECTION
1366 East Murray-Holladay Road, Salt Lake City, Utah 84117-5050
Telephone 801/272-8045, Facsimile 801/277-9942
CONSOLIDATED BALANCE SHEETS
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December 31
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December 31
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2010
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2009
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ASSETS
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Current Assets
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Cash & Cash Equivalents
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33,278 | 14,118 | ||||||
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Other Receivable
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20,355 | – | ||||||
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Prepaid Expenses & Other
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50,601 | 200 | ||||||
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Total Current Assets
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104,234 | 14,318 | ||||||
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Fixed Assets
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Equipment & Furniture, at Cost,
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Less Accumulated Depreciation of $6,555
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and $6,555 respectively
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– | – | ||||||
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Total Fixed Assets
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– | – | ||||||
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Other Assets
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Licensing Rights - Wind Sail Receptor, Inc.
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190,000 | – | ||||||
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Net Assets of Discontinued Operations
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– | 205 | ||||||
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TOTAL ASSETS
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294,234 | 14,523 | ||||||
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LIABILITIES & STOCKHOLDER’S EQUITY
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Current Liabilities
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Related Party Consulting Fees Payable
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125,500 | 60,000 | ||||||
|
Accounts Payable
|
3,987 | 34,720 | ||||||
|
Related Party Note Payable
|
– | 46,282 | ||||||
|
Related Party Payables
|
– | 34,510 | ||||||
|
Convertible Note Payable, net of debt discount of $27,273
|
23,451 | – | ||||||
|
Note Payable
|
– | 22,799 | ||||||
|
Preferred Stock Dividends Payable
|
17,969 | 64,309 | ||||||
|
Total Current Liabilities
|
170,907 | 262,620 | ||||||
|
Net Liabilities of Discontinued Operations
|
– | 570,019 | ||||||
|
TOTAL LIABILITIES
|
170,907 | 832,639 | ||||||
(Continued)
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS
|
December 31
|
December 31
|
|||||||
|
2010
|
2009
|
|||||||
|
STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
|
Preferred Stock, 10,000,000 shares authorized; Series A Cumulative
|
||||||||
|
convertible preferred stock, 8% cumulative, $4.50 par value,
|
||||||||
|
1,000,000 shares designated, 21,016 shares outstanding at
|
||||||||
|
December 31, 2009 (aggregate liquidation preference of $158,882),
|
||||||||
|
5,254 shares outstanding at December 31, 2010,
|
||||||||
|
(aggregate liquidation preference of $41,613)
|
23,644 | 94,573 | ||||||
|
Common Stock, $.001 par value: 100,000,000 shares authorized,
|
||||||||
|
41,238,429 and 33,629,493 shares outstanding respectively
|
41,238 | 33,629 | ||||||
|
Additionall Paid-In Capital
|
9,429,263 | 8,668,749 | ||||||
|
Stock Subscription Receivable
|
(10,000 | ) | (17,500 | ) | ||||
|
Accumulated Deficit
|
(9,360,818 | ) | (9,334,935 | ) | ||||
|
TOTAL WINDGEN STOCKHOLDERS’ EQUITY (DEFICIT)
|
123,327 | (555,484 | ) | |||||
|
Noncontrolling Interest of Discontinued Operations
|
– | (262,632 | ) | |||||
|
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)
|
123,327 | (818,116 | ) | |||||
|
TOTAL LIABILITIES & EQUITY
|
294,234 | 14,523 | ||||||
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
For Years Ended December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
REVENUES
|
$ | – | $ | – | ||||
|
OPERATING EXPENSES
|
||||||||
|
General & Administrative
|
158,831 | 38,394 | ||||||
|
Legal & Professional Fees
|
59,532 | 59,526 | ||||||
|
Related Party Consulting Fees
|
120,000 | 72,806 | ||||||
|
Related Party General & Administrative
|
10,000 | 4,736 | ||||||
|
Total Operating Expense
|
348,363 | 175,462 | ||||||
|
INCOME (LOSS) FROM OPERATIONS
|
(348,363 | ) | (175,462 | ) | ||||
|
OTHER INCOME (EXPENSE)
|
||||||||
|
Interest Income (Expense)
|
(14,861 | ) | (2,987 | ) | ||||
|
Total Other Income (Expense), Net
|
(14,861 | ) | (2,987 | ) | ||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
|
(363,224 | ) | (178,449 | ) | ||||
|
DISCONTINUED OPERATIONS (Note 8)
|
||||||||
|
Income (Loss) from operations of MicroCor, Inc.
|
||||||||
|
(including gain on disposal of $355,000)
|
343,488 | (105,955 | ) | |||||
|
NET INCOME (LOSS)
|
(19,736 | ) | (284,404 | ) | ||||
|
PREFERRED STOCK DIVIDENDS
|
(6,147 | ) | (7,566 | ) | ||||
|
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
|
$ | (25,883 | ) | $ | (291,970 | ) | ||
|
NET INCOME (LOSS) PER COMMON SHARE (BASIC & DILUTED)
|
||||||||
|
Continuing Operations
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
| Discontinued Operations | 0.01 | (0.00 | ) | |||||
| Net Loss | $ | (0.00 | ) | $ | (0.01 | ) | ||
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
||||||||
|
BASIC
|
37,518,066 | 22,856,265 | ||||||
|
DILUTED
|
38,662,311 | 22,887,789 | ||||||
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
|
Additional
|
||||||||||||||||||||||||
|
Preferred Stock
|
Common Stock
|
Paid-in
|
Accumulated
|
|||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
|||||||||||||||||||
|
Balance, January 1, 2009
|
21,016 | $ | 94,573 | 18,629,493 | $ | 18,629 | $ | 8,571,249 | $ | (9,042,965 | ) | |||||||||||||
|
Stock issued for cash
|
– | – | 12,666,667 | 12,667 | 82,333 | – | ||||||||||||||||||
|
Stock issued for subscription
|
– | – | 2,333,333 | 2,333 | 15,167 | – | ||||||||||||||||||
|
Preferred stock dividends
|
– | – | – | – | – | (7,566 | ) | |||||||||||||||||
|
Net loss
|
– | – | – | – | – | (284,404 | ) | |||||||||||||||||
|
Balance, December 31, 2009
|
21,016 | 94,573 | 33,629,493 | 33,629 | 8,668,749 | (9,334,935 | ) | |||||||||||||||||
|
Stock issued for cash
|
– | – | 4,222,969 | 4,223 | 312,200 | – | ||||||||||||||||||
|
Stock issued for notes payable
|
– | – | 120,800 | 121 | 10,754 | – | ||||||||||||||||||
|
Stock issued for related party payable
|
– | – | 133,333 | 133 | 9,867 | – | ||||||||||||||||||
|
Stock issued for expenses
|
– | – | 985,000 | 985 | 90,515 | – | ||||||||||||||||||
|
Stock issued for licensing rights
|
– | – | 1,900,000 | 1,900 | 188,100 | – | ||||||||||||||||||
|
Stock issued for conversion of preferred stock
|
(15,762 | ) | (70,929 | ) | 246,834 | 247 | 108,169 | – | ||||||||||||||||
|
Contributed capital from debt discount
|
– | – | – | – | 40,909 | – | ||||||||||||||||||
|
Preferred stock dividends
|
– | – | – | – | – | (6,147 | ) | |||||||||||||||||
|
Net loss
|
– | – | – | – | – | (19,736 | ) | |||||||||||||||||
|
Balance, December 31, 2010
|
5,254 | $ | 23,644 | 41,238,429 | $ | 41,238 | $ | 9,429,263 | $ | (9,360,818 | ) | |||||||||||||
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the Year Ended
|
||||||||
|
December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net Loss/Income
|
$ | (19,736 | ) | $ | (284,404 | ) | ||
|
Adjustments to reconcile Net loss
|
||||||||
|
to net cash used in operating activities:
|
||||||||
|
Gain on deconsolidation of MicroCor
|
(355,000 | ) | – | |||||
|
Common stock issued for services
|
44,250 | |||||||
|
Interest expense from debt discount
|
13,636 | – | ||||||
|
Write-down of other receivable
|
21,119 | – | ||||||
|
Related party consulting fee payable
|
65,500 | 60,000 | ||||||
|
Prepaid expense
|
(3,151 | ) | 900 | |||||
|
Accounts payable
|
(30,701 | ) | 28,055 | |||||
|
Related party payable
|
(24,510 | ) | 34,510 | |||||
|
Accrued Interest payable
|
1,225 | 2,986 | ||||||
|
Royalty payable to Related party
|
– | 40,000 | ||||||
|
Other receivable
|
(433 | ) | – | |||||
|
Net cash provided by (used in) Continuing Activities
|
(287,801 | ) | (117,953 | ) | ||||
|
Net cash provided by (used in) Discontinued Activities
|
7,120 | 53,720 | ||||||
|
Net cash provided by (used in) Operating Activities
|
(280,681 | ) | (64,233 | ) | ||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Net cash provided by Investing Activities
|
– | – | ||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Proceeds from sale of stock
|
316,423 | 95,000 | ||||||
|
Proceeds from notes payable
|
50,000 | – | ||||||
|
Proceeds from stock subscription receivable
|
7,500 | – | ||||||
|
Payments for conversion of preferred stock
|
(15,000 | ) | – | |||||
|
Payments on notes
|
(11,939 | ) | (18,238 | ) | ||||
|
Payments on notes related party loan
|
(47,143 | ) | ||||||
|
Net cash provided by Financing Activities
|
299,841 | 76,762 | ||||||
|
NET INCREASE (DECREASE) IN CASH
|
19,160 | 12,529 | ||||||
|
CASH AT BEGINNING OF PERIOD
|
14,118 | 1,794 | ||||||
| CASH AT END OF PERIOD | 33,278 | 14,323 | ||||||
| CASH FROM DISCONTINUED OPERATIONS AT END OF YEAR | – | (205 | ) | |||||
| CASH FROM CONTINUING OPERATIONS AT END OF YEAR | 33,278 | 14,118 | ||||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
|
||||||||
|
Cash paid during the year for interest
|
$ | 5,418 | $ | – | ||||
|
Cash paid during the year for income taxes
|
$ | 150 | $ | 200 | ||||
(Continued)
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the Year Ended
|
||||||||
|
December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING &
|
||||||||
|
FINANCING ACTIVITIES:
|
||||||||
|
Stock Subscription Receivable for exercise of stock options
|
$ | 10,000 | $ | 17,500 | ||||
|
Related Party Payables Converted to Common Stock
|
$ | 10,000 | $ | – | ||||
|
Notes Payable Converted to Common Stock
|
$ | 10,875 | $ | – | ||||
|
Conversion of Preferred Stock and Accrued Dividends to
|
||||||||
|
Common Stock
|
$ | 108,416 | $ | – | ||||
|
Common Stock Issued for Licensing Rights
|
$ | 190,000 | $ | – | ||||
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING DECEMBER 31, 2010 AND 2009
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
From 1989 through 2008, InMedica Development Corporation (“InMedica”) and its then majority-owned subsidiary, MicroCor, Inc. (“MicroCor”) were engaged in research and development of a device to measure hematocrit non-invasively (the “Non-Invasive Hematocrit Technology” and/or the “Technology”). Hematocrit is the percentage of red blood cells in a given volume of blood. At the present time, the test for hematocrit is performed invasively by drawing blood from the patient and testing the blood sample in the laboratory. The Hematocrit Technology is owned by MicroCor, Inc., which previously was is a 57% owned subsidiary of the Company, but during 2010 WindGen reduced its holding in MicroCor to 49%. Other owners of the subsidiary are Wescor, Inc. (37%) and Synergistic Equities Ltd. (14%). Previously the research and development by MicroCor, its various engineers, affiliates and contractors, including Wescor, did not complete a prototype suitable for commercialization. Commercialization of the Non-Invasive Hematocrit Technology is dependent upon favorable testing, Food and Drug Administration (“FDA”) approval, financing of further research and development and, if warranted, financing of manufacturing and marketing activities. On June 24, 2010 WindGen terminated the former Development Agreement with Wescor and entered into a new agreement whereby WindGen transferred 230,000 shares of MicroCor commons stock owned by WindGen reducing WindGen’s holdings in MicroCor from 1,700,000 shares to 1,470,000 common shares, reducing its ownership percentage from 57% to 49%. Since WindGen’s ownership percentage is now less than 50%, MicroCor’s financial statements are no longer consolidated with WindGen’s financial statements. Synergistic Equities, Ltd. has acquired all of the shares of MicroCor previously owned by Chi Lin Technology, Ltd.
On April 17, 2009, the Company entered into a license agreement (the “License”) with Wind Sail Receptor, Inc. of Boulder City, Nevada (“WSR”), pursuant to which the Company was granted the exclusive license to sell WSR’s wind sail receptor wind generation systems using blades of 15 feet in length or less in the United States, Canada, and the United Kingdom. Under the License, the Company must acquire 100 blades from WSR during the year after WSR is able to manufacture the receptors. WSR is hopeful of commencing manufacture of the blades in 2011. The Company is currently negotiating with WSR to add additional exclusive territory to the License and, in addition, amending the License to allow the Company to manufacture and/or assemble the WSR wind generation systems.
On December 4, 2009, the Company changed its name from InMedica Development Corp to WindGen Energy, Inc.
Basis of Presentation
The Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company generated negative cash flows from operations of $280,681 and $64,233 in 2010 and 2009, respectively, and net losses from operations of $348,363 and $175,462 in 2010 and 2009, respectively. As of December 31, 2010 the Company had an accumulated deficit of $9,360,818 and a working capital deficit of $66,673. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s continued existence is dependent upon its ability to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company. Management’s operating plan includes pursuing additional fund raising as well as research and development.
Principles of Consolidation
The consolidated financial statements include the accounts of WindGen Energy, Inc. (“WindGen”) and its majority owned subsidiary, MicroCor, Inc. (“MicroCor”) through June 24, 2010. As of June 24, 2010, MicroCor’s financial statements are no longer being consolidated with WindGen’s financial statements. (See Note 8.)
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial reporting and tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws. A valuation allowance is provided when it is more likely than not that all or some portion of the deferred income tax assets will not be realized.
Equipment and Furniture
Equipment and furniture are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets which range from three to five years.
|
Equipment and Furniture consist of the following:
|
December 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Equipment
|
$
|
6,555
|
$
|
244,033
|
||||
|
Furniture
|
–
|
11,188
|
||||||
|
6,555
|
255,221
|
|||||||
|
Less accumulated depreciation
|
(6,555
|
)
|
(255,221
|
)
|
||||
|
Total
|
$
|
–
|
$
|
–
|
||||
Depreciation expense for the years ended December 31, 2010 and 2009 was $0 and $0, respectively.
Research and Development
Research and development costs are expensed as incurred.
Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted net loss per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other common stock equivalents were exercised or converted into common stock. At December 31, 2010 and 2009, respectively, there were 1,144,245 and 31,524 potentially dilutive common stock equivalents. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net loss per common share.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
Comprehensive Income
There are no components of comprehensive income other than the net loss.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits.
Fair Value of Financial Instruments
The carrying value of the Company’s financial instruments, including receivables, accounts payable, accrued liabilities, and notes payable at December 31, 2010 and 2009 approximates their fair values due to the short-term nature of these financial instruments.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are recorded under the provisions of the Financial Accounting Standards Board (FASB) ASC 350 (formerly Statement ASC No. 142 (SFAS 142), Goodwill and Other Intangible Assets). ASC 350 requires that an intangible asset that is acquired either individually or with a group of other assets (but not those acquired in a business combination) shall be initially recognized and measured based on its fair value. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired.
Costs of internally developing, maintaining and restoring intangible assets (including goodwill) that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, are recognized as an expense when incurred.
An intangible asset (excluding goodwill) with a definite useful life is amortized; an intangible asset with an indefinite useful life is not amortized until its useful life is determined to be no longer indefinite. The remaining useful lives of intangible assets not being amortized are evaluated at least annually to determine whether events and circumstances continue to support an indefinite useful life. If and when an intangible asset is determined to no longer have an indefinite useful life, the asset shall then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangibles that are subject to amortization.
An intangible asset (including goodwill) that is not subject to amortization shall be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. In accordance with ASC 350, goodwill is not amortized.
It is the Company’s policy to test for impairment no less than annually, or when conditions occur that may indicate an impairment. The Company’s intangible assets, which consist of licensing rights valued at $190,000 recorded in connection with the acquisition of the license related to the agreement with Wind Sail Receptor, Inc., were acquired in 2009 and will be tested for impairment in 2011. The licensing rights were determined to have an indefinite life as of December 31, 2010.
Recent Accounting Standards
In December 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-29 (ASU 2010-29), Business Combinations (Topic 805) – Disclosure of Supplementary Pro Forma Information for Business Combinations. This Accounting Standards Update requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. The amendments in this Update affect any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2010-29 to have a material effect on its financial position, results of operations or cash flows.
In August 2010, the FASB issued Accounting Standards Update 2010-22 (ASU 2010-22), Accounting for Various Topics -- Technical Corrections to SEC Paragraphs - An announcement made by the staff of the U.S. Securities and Exchange Commission. This Accounting Standards Update amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics. The Company does not expect the provisions of ASU 2010-22 to have a material effect on its financial position, results of operations or cash flows.
In August 2010, the FASB issued Accounting Standards Update 2010-21 (ASU 2010-21), Accounting for Technical Amendments to Various SEC Rules and Schedules: Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. The Company does not expect the provisions of ASU 2010-21 to have a material effect on its financial position, results of operations or cash flows.
In July 2010, the FASB issued Accounting Standards Update 2010-20 (ASU 2010-20), Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The amendments in this Update are to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. The disclosures about activity that occurs during the reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The Company does not expect the provisions of ASU 2010-20 to have a material effect on its financial position, results of operations or cash flows.
In April 2010, the FASB issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue Recognition – Milestone Method (Topic 605). ASU 2010-17 provides guidance on applying the milestone method of revenue recognition in arrangements with research and development activities. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Company’s adoption of the provisions of ASU 2010-17 did not have a material impact on its revenue recognition.
In March 2010, the FASB issued Accounting Standards Update 2010-11 (ASU 2010-11), Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company’s adoption of the provisions of ASU 2010-11 did not have a material effect on its financial position, results of operations or cash flows.
In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), Consolidation (Topic 810): Amendments for Certain Investment Funds. The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted. The Company’s adoption of provisions of ASU 2010-10 did not have a material effect on its financial position, results of operations or cash flows.
In February 2010, the FASB issued ASU No. 2010-09 Subsequent Events (ASC Topic 855) - Amendments to Certain Recognition and Disclosure Requirements (ASU 2010-09). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position, results of operations or cash flows.
In January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-09). ASU 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.
NOTE 2 - NOTES PAYABLE
On December 31, 2008, the Company converted $21,509 of accounts payable due to its attorney into a promissory note. The note is due on demand and carries an interest rate of 6% per annum. This note is secured by the proceeds of option exercises by SNG Consulting LLC pursuant to its option to acquire 5,000,000 shares of the common stock of the Company, but only by such proceeds as correspond to exercises after the initial minimum share purchase option exercise by Law Investments. In the event of such option exercise, such revenues shall be applied first to the retirement of these notes. (See Note 5.) At December 31, 2009, the balance due on this note was $22,799. During 2010, the Company paid-off the balance of this note by issuing 120,800 shares of the Company’s restricted common stock at $0.075 per share pursuant to the Company’s existing private placement offering. and paying cash for the remainder of the balance.
On October 21, 2010, the Company borrowed $50,000 from a third party. The note is due on July 21, 2011 and carries an interest rate of 8% per annum. At December 31, 2010, the balance due on this note was $50,723. The note is convertible after six months at a conversion price of 55% of the market price of the common stock. Since the note contains a beneficial conversion feature, the intrinsic value of the conversion feature was calculated at the commitment date of October 21, 2010. At that date, the market price of the stock was $.105, the conversion price would have been $.05775, and the note would have been convertible into 865,801 shares of common stock. The intrinsic value was calculated to be $40,909, which was recorded to debt discount and to additional paid-in capital. The debt discount is being amortized over six months. At December 31, 2010, the remaining debt discount was $27,273. At December 31, 2010, the note was convertible into approximately 1,136,364 shares of common stock.
NOTE 3 - INCOME TAXES
Deferred income tax assets consisted of the following:
|
December 31,
|
December 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Net operating loss carry forwards
|
$
|
409,339
|
$
|
871,511
|
||||
|
Future deductions temporary differences related
|
||||||||
|
to compensation, reserves, and accruals
|
–
|
4,647
|
||||||
|
Less valuation allowance
|
(409,339
|
)
|
(876,158
|
)
|
||||
|
Deferred income tax assets
|
$
|
–
|
$
|
–
|
||||
The valuation allowance decreased $466,819 in 2010. At December 31, 2010, the Company had consolidated net operating loss carry-forwards for federal income tax purposes of approximately $1,270,000. These net operating loss carry-forwards expire at various dates beginning in 2011 through 2029. Due to the uncertainty with respect to ultimate realization, the Company has established a valuation allowance for all deferred income tax assets.
NOTE 4 - COMMON STOCK TRANSACTIONS
On December 4, 2009, the Company changed its total authorized common shares from 40,000,000 to 100,000,000 shares.
During 2009, the Company issued 15,000,000 shares of common stock for cash of $95,000 and a stock subscription receivable of $17,500. The stock issuances were the result of the exercise of a stock purchase option agreement with Law Investments CR, S.A., a Costa Rica corporation. During 2010, $7,500 was paid toward the subscription receivable, leaving a balance of $10,000 at December 31, 2010.
During 2010, the Company issued 4,222,969 shares of common stock for cash of $316,423 pursuant to the Company’s Private Placement Memorandum.
During 2010 the Company completed the conversion of three of the four existing 8% Series A cumulative preferred shareholders by issuing 246,834 of the Company’s restricted common shares at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010.
During 2010, the Company issued 254,133 Shares of the Company’s restricted common stock for the conversion of debt in the amount of $20,875.
During 2010 the Company issued 1,900,000 Shares of the Company’s restricted common stock to Wind Sail Receptor in consideration of an amendment to the Company’s 2009 License Agreement with Wind Sail Receptor. The shares were value at $.10 per share.
During 2010 the Company registered 3,000,000 shares of its common stock pursuant to regulation S-8. As of December 31, 2010, 700,000 of these shares have been issued for consulting services valued at $63,000. The consulting services were originally recorded as a prepaid expense. As of December 31, 2010, the prepaid expense related to this stock issuance was $47,250.
During 2010, the Company issued 285,000 shares of the Company’s restricted common stock for services valued at $28,500.
During the first quarter of 2011, the Company issued 333,333 shares of restricted common stock for cash of $25,000, as part of the Company’s Private Placement Memorandum.
NOTE 5 - STOCK OPTIONS
All of the outstanding stock options at December 31, 2008 were either exercised or cancelled during 2009. There are no outstanding stock options at December 31, 2010.
NOTE 6 - PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock. The Company’s board of directors designated 1,000,000 shares of this preferred stock as Series A Cumulative Convertible Preferred Stock (“Series A Preferred”) with a par value of $4.50 per share. Holders of the Series A Preferred receive annual cumulative dividends of eight percent, payable quarterly, which dividends are required to be fully paid or set aside before any other dividend on any class or series of stock of the Company is paid. As of December 31, 2009, cumulative preferred stock dividends payable in the amount of $64,309, or $2.70 per share are due and payable. Holders of the Series A Preferred receive no voting rights but do receive a liquidation preference of $4.50 per share, plus accrued and unpaid dividends. Series A Preferred stockholders have the right to convert each share of Series A Preferred to the Company’s common stock at a rate of 1.5 common shares to 1 preferred share.
During 2010, the Company completed the conversion of three of the four existing 8% Series A cumulative preferred shareholders by issuing 246,834 of the Company’s restricted common shares at a price of $0.50 per share plus a $5,000 cash payment to each preferred shareholder. The conversion of these preferred shares reduced the dividends payable from $64,309 at December 31, 2009 to $17,969 at December 31, 2010.
On January 30, 2009, the Company entered into an agreement with MicroCor, its subsidiary (the “MicroCor Agreement”). The MicroCor Agreement provides for the Company to create a Series B class of preferred stock, without dividend or voting rights (the “Series B Preferred”), which will receive 100% of any future benefit from the sale, spin-off, merger or liquidation of MicroCor or the commercialization of its hematocrit technology. The shares of the Series B Preferred will be distributed as a dividend, subject to compliance with federal and state securities laws and regulations, to the Company’s common stockholders, as of January 30, 2009. The creation of the Series B Preferred will prevent any holder of the Company’s common stock after January 30, 2009 from sharing in any future benefit of or to MicroCor through the expiration date of January 30, 2011. The Series B Preferred Stock will not be issued to the common shareholders of record at January 30, 2009 inasmuch as no benefit occurred prior to the expiration date of January 30, 2011.
NOTE 7 – EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock:
|
For the Years Ended
|
||||||||
|
December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Net Income (Loss)
|
$
|
(19,736
|
)
|
$
|
(284,404
|
)
|
||
|
Less: preferred dividends
|
(6,147
|
)
|
(7,566
|
)
|
||||
|
Income (Loss) available to common stockholders used in basic EPS
|
$
|
(25,883
|
)
|
$
|
(291,970
|
)
|
||
|
Convertible preferred stock
|
6,147
|
7,566
|
||||||
|
Convertible notes payable
|
–
|
–
|
||||||
|
Income (Loss) available to common stockholders after assumed
|
||||||||
|
Conversion of dilutive securities
|
$
|
(19,736
|
)
|
$
|
(284,404
|
)
|
||
|
Weighted average number of common shares used in basic EPS
|
37,518,066 |
22,856,265
|
||||||
|
Effect of dilutive securities:
|
||||||||
|
Convertible preferred stock
|
7,881
|
31,524
|
||||||
|
Convertible notes payable
|
1,136,364
|
–
|
||||||
|
Options
|
–
|
–
|
||||||
|
Weighted average number of common shares and dilutive potential
|
||||||||
|
common stock used in diluted EPS
|
38,662,311
|
22,887,789
|
||||||
NOTE 8 – DISCONTINUED OPERATIONS
On June 24, 2010, WindGen Energy, Inc. entered into an agreement with MicroCor, Inc., Chi Lin Technology Co., Ltd. and Wescor, Inc., whereby WindGen will transfer 230,000 shares of MicroCor common stock owned by WindGen to Wescor, reducing WindGen’s holdings in MicroCor from 1,700,000 common shares to 1,470,000 common shares. WindGen’s percentage of ownership of MicroCor will be reduced from approximately 57% to 49%. Since WindGen’s ownership percentage will be below 50%, MicroCor’s financial statements will no longer be consolidated with WindGen’s financial statements.
The assets and liabilities of MicroCor, Inc. included in the consolidated financial statements of WindGen, Inc. consisted of the following at December 31, 2010 and December 31, 2009:
|
December 31,
|
December 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Cash
|
$
|
–
|
$
|
205
|
||||
|
Net assets of discontinued operations
|
$
|
–
|
$
|
205
|
||||
|
Accounts payable
|
$
|
–
|
$
|
5,381
|
||||
|
Accrued interest
|
–
|
45,112
|
||||||
|
Related party royalty payable
|
–
|
153,333
|
||||||
|
Related party notes payable
|
–
|
133,560
|
||||||
|
Current portion of long-term debt
|
–
|
232,633
|
||||||
|
Net liabilities of discontinued operations
|
$
|
–
|
$
|
570,019
|
||||
|
Non-controlling interest of discontinued operations
|
$
|
–
|
$
|
(262,632
|
)
|
|||
Net assets and liabilities to be disposed of have been separately classified in the accompanying consolidated balance sheet at December 31, 2010 and December 31, 2009. The December 31, 2009 balance sheet has been restated to conform to the current year’s presentation.
Operating results of this discontinued operation for the years ended December 31, 2010 and 2009 are shown separately in the accompanying consolidated statement of operations. The operating statement for the year ended December 31, 2009 has been restated to conform to the current year’s presentation and are also shown separately. The operating results of this discontinued operation for the year ended December 31, 2010 and 2009 consist of:
|
For the Year Ended
|
||||||||
|
December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Sales
|
$
|
–
|
$
|
–
|
||||
|
General and administrative
|
–
|
(45,304
|
)
|
|||||
|
Legal and professional
|
–
|
(12,312
|
)
|
|||||
|
Interest Expense
|
–
|
(19,760
|
)
|
|||||
|
Gain on deconsolidation of MicroCor
|
355,000
|
–
|
||||||
|
Net Income (Loss) attributable to non-contolling interest
|
(11,512
|
)
|
(28,579
|
)
|
||||
|
Net Income (Loss) from discontinued operations
|
$
|
343,488
|
$
|
(105,955
|
)
|
|||
NOTE 9 - RELATED PARTY TRANSACTIONS
During 2009, the Company accrued consulting expenses of $60,000 from officers of the Company. During 2010, the Company accrued additional consulting expenses from officers of $65,500.
During 2009, an entity associated with Company, paid various expenses on behalf of the Company. At December 31, 2009, the Company owes $24,514 to the related entity. During 2010, the Company paid-off the balance due to the related party by issuing 133,333 shares of the Company’s restricted common stock at $0.075 per share pursuant to the Company’s existing private placement offering. and paying cash for the remainder of the balance.
NOTE 10 - JOINT DEVELOPMENT AGREEMENT
Effective September 7, 2004, InMedica and MicroCor entered into the Joint Development Agreement pursuant to which Wescor, a Utah medical technology company (“Wescor”) assumed responsibility for the day to day operation of MicroCor and the conduct of research and development of the Hematocrit Technology. During 2008 Wescor advised the Company and Chi Lin that its parent corporation was interested in shifting Wescor’s resources previously dedicated to the research and development of the Hematocrit Technology to other projects. As a result, Wescor ceased all research and development efforts on the Hematocrit Technology. On June 24, 2010 WindGen terminated the former Development Agreement with Wescor and entered into a new agreement whereby WindGen transferred 230,000 shares of MicroCor commons stock owned by WindGen reducing WindGen’s holdings in MicroCor from 1,700,000 shares to 1,470,000 common shares, reducing its ownership percentage from 57% to 49%. Since WindGen’s ownership percentage is now less than 50%, MicroCor’s financial statements are no longer consolidated with WindGen’s financial statements. This transaction had the impact on WindGen’s financial statements of reducing the Company’s liabilities from December 31, 2009 in the amount of $570,019. Synergistic Equities, Ltd. has acquired all of the shares of MicroCor previously owned by Chi Lin Technology, Ltd.
NOTE 11 - ROYALTY RIGHTS
At December 31, 2010 the Company had no outstanding Royalty Rights payable to any person or entity.
NOTE 12 – UNCERTAIN TAX POSITIONS
Effective January 1, 2007, the Company adopted the provisions of ASC 740 (formerly FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”). ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The adoption of the provisions of ASC 740 did not have a material impact on the Company’s condensed consolidated financial position and results of operations. At December 31, 2010, the Company had no liability for unrecognized tax benefits and no accrual for the payment of related interest.
Interest costs related to unrecognized tax benefits are classified as “Interest Expense, Net” in the accompanying consolidated statements of operations. Penalties, if any, would be recognized as a component of “Selling, general and administrative expenses”. The Company recognized $0 of interest expense related to unrecognized tax benefits for the year ended December 31, 2010. In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. With few exceptions, the Company is generally no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2007. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2010:
|
United States (a)
|
2007 – Present
|
|
| __________ | ||
|
(a) Includes federal as well as state or similar local jurisdictions, as applicable.
|
||
NOTE 13 – SUBSEQUENT EVENTS
The Company adopted ASC 855, and has evaluated all events occurring after December 31, 2010, the date of the most recent balance sheet, for possible adjustment to the financial statements or disclosures through March 31, 2011, which is the date on which the financial statements were issued. The Company has concluded that there are no significant or material transactions to be reported for the period from January 1, 2011 to March 31, 2011, other than what was reported in Note 4.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
During the Company’s two most recent fiscal years and any subsequent interim period, there were no disagreements with accountants on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s) if not resolved to the satisfaction of the former accountants would have caused them to make reference to the subject matter of the disagreement(s) in connection with their reports.
| ITEM 9A. |
CONTROLS AND PROCEDURES
|
Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2010. The evaluation included certain control areas in which are material to Company and its size as an Exploration Stage Company.
Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective as of the Evaluation Date, and we have discovered no material weakness
Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. The Company’s internal control over financial reporting includes those policies and procedures that:
|
(i)
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
|
(ii)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
|
(iii)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2010, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), that has been modified to more appropriately reflect the current limited operational scope of the Company. The Company used the COSO guide - The Internal Control over Financial Reporting - Guidance for Smaller Public Companies to implement the Company’s internal controls. Additionally, the limited scope of operations of the Company means that traditional separation of duties controls are not used by the Company as a result of the limited staffing within the Company. The Company relies on alternative procedures to overcome this non-material control weakness. Based on its assessment, management concluded that its internal control over financial reporting was effective as of December 31, 2010.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to recent statute.
Changes in Internal Control Over Financial Reporting
During the fiscal quarter ended December 31, 2010, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B. |
OTHER INFORMATION
|
Not applicable.
| ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Directors and Executive Officers of InMedica
The following table furnishes information concerning the officers and Directors of the Company for the indicated period, and their business backgrounds for at least the last five years:
|
Name
|
Age
|
Position
|
||
|
Ronald Conquest
|
66
|
Chairman of the Board, Chief Executive Officer and Director since January 30, 2009; Secretary/Treasurer and Chief Financial Officer from March 18, 2010 until April 21, 2010
|
||
| David P. Martin | 67 | President and Director since April 29, 2009 | ||
|
Christopher R. Miller
|
41
|
Secretary/Treasurer, Chief Financial Officer and Director from January 30, 2009 until March 18, 2010
|
||
| Wendy Carriere | 40 | Secretary/Treasurer, Chief Financial Officer and Director since April 21, 2010 |
Ronald Conquest - Director, Chairman of the Board and Chief Executive Officer of the Company since January 30, 2009. Over the past four decades, Mr. Conquest has developed a diversified business management background, including ownership and/or operation of, or involvement with, a wide variety of public and private companies in the United States, Canada, Mexico, Brazil, United Kingdom, Costa Rica, Peoples Republic of China, and the Commonwealth of Independent States (former USSR). Mr. Conquest’s executive experience includes Chairman of the Board and CEO level corporate management, along with domestic and international corporate finance with public and private corporations. Mr. Conquest’s corporate structuring background includes corporate mergers, acquisitions and reorganizations, initial public offerings, public shell reverse mergers, corporate public relations and securities market making. He also has experience in concept development, business plan development, business organization, strategic planning, start-up, sales, marketing and promotion, and personnel management. Since 2001, he has acted as a financial consultant with regard to investment and merchant banking and acquisitions and mergers under the trade name The Conquest Group located in Phoenix, Arizona. Mr. Conquest was educated at the University of Oklahoma, studying Mathematics and Engineering.
David P. Martin - President and Director since April 29, 2009. From November 1999 to December 2008, Mr. Martin was Vice President of Sales and Marketing for Amerityre Corporation, a publicly traded company located in Boulder City, Nevada, which invents and markets polyurethane tires for non-traditional tire applications. From January 2009 until his appointment with Registrant, Mr. Martin had been retired. From 1979 to 1994, Mr. Martin was a licensed securities broker with Paine Webber, Thomson, McKinnon Securities and Prudential Securities.
Christopher R. Miller - Director and Chief Financial Officer of the Company from January 30, 2009 until March 18, 2010. Mr. Miller graduated from Arizona State University in 1994 with a Bachelor of Science Degree in Finance. From 1994 through 2000, Mr. Miller held various positions at U-Haul® International, Inc. As Treasurer of U-Haul® Self Storage Corporation (a subsidiary of U-Haul® International) and Senior Financial Analyst for UHAL, Mr. Miller’s responsibilities included the organization, underwriting, negotiation, auditing, financial modeling, management and reporting for the company’s acquisitions and financings. Mr. Miller was involved with the management, purchase and financing of over $300 million of self-storage facilities funded primarily through CMBS placements and synthetic lease transactions involving Merrill Lynch-Canada, First Union, Wells Fargo and GE Capital. Mr. Miller’s responsibilities also included the management, development and mentoring of three MBA level financial analysts comprising U-Haul’s Management Information Analysis Department, along with producing U-Haul’s monthly Board of Directors presentation on company financial performance. Beginning in late 2000, Mr. Miller became Chief Financial Officer for AutoAuto Wash®, a start-up operation of car wash facilities. His active employment included capital raising, operations, facility openings, accounting and marketing, facilitating the growth of the chain to 27 facilities nationally in just over a year. From 2002 through the present, Mr. Miller has been providing financial consulting services to a wide variety of organizations specializing in asset valuation, business start-up and financing and private and public company valuations. Projects include self-storage portfolio acquisitions, retail start-up operations and exclusive high-rise and low-density beachfront condominium developments. Beginning in June 2006 to the present, Mr. Miller has been providing public company valuation, financial modeling and due diligence services to Doherty & Company, LLC, a Los Angeles based licensed broker-dealer specializing in venture capital, private equity funding, mergers and acquisitions advisory, and valuations for early stage companies. Since 2003, Mr. Miller has offered specialized consulting services to entrepreneurs, private investment companies and licensed securities brokers-dealers under the name Sun Capital, LLC located in Phoenix, Arizona.
Wendy Carriere - Secretary/Treasurer, Chief Financial Officer and Director since April 21, 2010. Ms. Carriere earned a Bachelors of Science Business Administration from the University of Nevada-Las Vegas in 1993. From January 2010 to present, Ms. Carriere was the owner and Chief Executive Officer of Fair Debt Servicing located Southern California, specializing in servicing loans for large institutional investors. From June 2007 to December 2009, Ms. Carriere was President of Nationwide Auction Finance in Southern California, a subsidiary company of publicly traded Entrade. Nationwide originated loans to individuals and provided loan servicing and collections to its own portfolio. From November 2005 to present, she has served as Chief Financial Officer and Controller of Data Control Corporation in Sacramento, a parent company with subsidiaries specializing in web-based data warehousing, print media publishing and large scale software development. From March 2004 to May 2005, Ms. Carriere was Chief Financial Officer for Newgen Results Corp., a wholly-owned subsidiary of TeleTech located in San Diego with annual revenues of $100M, providing auto dealerships with a complete suite of customer relationship management solutions.
Each Director serves until the next annual meeting of shareholders or until a successor is elected and qualified. Officers serve at the pleasure of the Board of Directors. No arrangement or understanding exists between any officer or Director and any other person pursuant to which he was nominated or elected as Director or selected as an officer.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s Directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities to file with the Securities and Exchange Commission (“SEC”) initial reports of ownership (Form 3) and reports of changes in ownership (Forms 4 and 5) of equity securities of the Company. Officers, Directors and shareholders holding greater than 10% are required to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of any such reports furnished to the Company, during the fiscal year ended December 31, 2010, and thereafter, all Section 16(a) filing requirements applicable to officers, Directors and shareholders holding greater than 10% have been filed, except: (i) David P. Martin, President of the Company, did not file his Form 4s relating to the disposition of shares of common stock in March 2010, and the acquisition of shares of common stock in August 2010 and February 2011, (ii) Law Investments CR, S.A., as a holder of more than 10% of the Company’s equity securities, did not file Form 4s relating to the disposition of shares of common stock during 2010, and (iii) Mr. Conquest, in his capacity as President and a Director of LI and the beneficial owner of such shares, did not file his Form 4s relating to the disposition of shares by LI during 2010. Form 4s for Mr. Martin, Law Investments CR, S.A. and Mr. Conquest are in process and will be filed as soon as possible.
Code of Ethics
The Company has adopted a code of ethics for its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. A copy of the Code of Ethics will be furnished upon request without charge.
Audit Committee Financial Expert
The Company’s Board of Directors does not have an “audit committee financial expert,” within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. Like many small companies, it is difficult for the Company to attract and retain Board members who qualify as “audit committee financial experts.”
Nominating Committee
The full Board of Directors of the Company functions as a nominating committee to select potential additional Directors of the Company. The Board has not specifically designated a separate nominating committee because all three members of the Board of Directors desire to be involved in the selection of any new Director.
| ITEM 11. |
EXECUTIVE COMPENSATION
|
The table below discloses the compensation of the executive officers of the Company during the three fiscal years ended December 31, 2010:
| Executive Compensation Table | ||||||||||||||||||
|
Annual Compensation
|
||||||||||||||||||
|
Name and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||
|
Ronald Conquest
|
2010
|
$ | 60,000 | (1) | $ | – | $ | – | $ | 60,000 | ||||||||
|
Chief Executive Officer
|
2009
|
$ | 30,000 | (1) | $ | – | $ | – | $ | 30,000 | ||||||||
|
since January 30, 2009
|
2008
|
$ | – | $ | – | $ | – | $ | – | |||||||||
| Chief Financial Officer from March 18, 2010 | ||||||||||||||||||
| until April 21, 2010 | ||||||||||||||||||
|
David P. Martin
|
2010
|
$ | 60,000 | (2) | $ | – | $ | – | $ | 60,000 | ||||||||
|
President
|
2009
|
$ | 30,000 | (2) | $ | – | $ | – | $ | 30,000 | ||||||||
| since April 21, 2009 |
2008
|
$ | – | $ | – | $ | – | $ | – | |||||||||
| Christopher R. Miller | 2010 | $ | – | $ | – | $ | – | $ | – | |||||||||
|
Chief Financial Officer
|
2009 | $ | – | $ | – | $ | – | $ | – | |||||||||
| from January 30, 2009 until March 18, 2010 | ||||||||||||||||||
| Wendy Carriere | 2010 | $ | – | $ | – | $ | – | $ | – | |||||||||
| Chief Financial Officer | ||||||||||||||||||
| since April 21, 2010 | ||||||||||||||||||
__________
|
(1)
|
Commencing July 1, 2009, the Company has accrued, but not paid, a consulting fee of $5,000 per month for Mr. Conquest. To date a total of $39,500 has been paid.
|
|
(2)
|
Commencing July 1, 2009, the Company has accrued, but not paid, a salary of $5,000 per month for Mr. Martin. To date a total of $15,000 has been paid.
|
Since the beginning of the last fiscal year, there have been no stock options or stock appreciation rights granted to or exercised by officers named in the executive compensation table. The Company presently has no plan for the payment of any annuity or pension retirement benefits to any of its officers or Directors, and no other remuneration payments, contingent or otherwise, are proposed to be paid in the future to any officer or Director, directly or indirectly. Directors have not been compensated for services and there are plans for a Director’s compensation plan to be implemented prior to the end of 2011.
Compensation Committee, Interlocks and Insider Participation
The full Board of Directors of the Company functions as a compensation committee. The Board has not specifically designated a separate compensation committee due to the relatively small size of the Company.
| ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
The following table sets forth certain information as of December 31, 2010, with respect to the beneficial ownership of the Company’s common stock by each executive officer and Director of the Company and each person known by the Company to be the beneficial owner of more than 5% of the Company’s outstanding shares of common stock.
|
Name, Address and Position of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership (1)
|
Percent of
Class (2)
|
||
| Principal Stockholders: | ||||
|
Brook Technologies, Inc.
5250 Lakeshore Road, Suite 1409
Burlington, ON Canada L7L 5L2
|
3,043,704
|
7.4%
|
||
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The John Galt Society LLC
2040 South Parkwood Circle
Spokane, WA 99223
|
2,250,000 |
5.5%
|
||
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Larry E. Clark
1036 Oak Hills Way
Salt Lake City, Utah 84108
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2,197,025
|
5.3%
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||
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Law Investments CR, S.A.
14550 Frank Lloyd Wright Blvd.
Suite 100
Scottsdale, Arizona 85260
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5,023,573 (3)
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12.2%
|
| Officers and Directors:(5) | ||||
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Ronald Conquest,
Chairman, Chief Executive Officer
and Director
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5,023,573 (4)
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12.2%
|
||
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David P. Martin
President and Director
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3,051,273
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7.4%
|
||
|
|
|
|
||
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Wendy Carriere
Secretary/Treasurer,
Chief Financial Officer
and Director
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0
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0%
|
||
|
All Executive Officers and Directors as a
|
8,074,846
|
19.6%
|
_______________
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*
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Less than 1%.
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(1)
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Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. The inclusion herein of such shares listed as beneficially owned does not constitute an admission of beneficial ownership.
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(2)
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Based on 41,238,429 shares of common stock outstanding as of December 31, 2010.
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(3)
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Assumes the issuance of 1,333,333 shares upon payment of the $10,000 balance due on the promissory note from Law Investments CR, S.A. See “Item 13. Certain Relationships and Related Transactions, and Director Independence” below.
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(4)
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These shares represent the shares currently issued and the 1,333,333 shares to be issued to Law Investments CR, S.A. upon payment of the $10,000 balance due on the promissory note from Law Investments CR, S.A., of which Ronald Conquest is a Director and President. See “Item 13. Certain Relationships and Related Transactions, and Director Independence” below.
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(5)
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The address of our officers and Directors is c/o WindGen Energy, Inc., 14550 N. Frank Lloyd Wright Blvd., Suite 100, Scottsdale, Arizona 85260.
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| ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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No officer, Director, nominee for Director, or associate of any such officer, Director or nominee has been, since the beginning of the last fiscal year, or is presently indebted to the Company. There have been no transactions since the beginning of the Company’s last fiscal year, nor are there any proposed transactions, in which any officer, Director, nominee or principal security holder has a direct or indirect material interest, except as follows:
On June 24, 2010, the Company, Chi Lin Technology Co., Ltd., a corporation organized and existing under the laws of the Republic of China (“Chi Lin”), MicroCor and Wescor executed an amendment (the “Amendment”) to the Wescor Agreement. The Company owned 57% of MicroCor as a result of the Wescor Agreement and Wescor and Chi Lin owned the interest in MicroCor. MicroCor owns three (3) patents covering various aspects of its hematocrit technology.
The Amendment provided for: (i) all debts between the parties to be extinguished and cancelled; (ii) the Company to transfer such stock ownership to Wescor so that Wescor would own 36.8% of MicroCor and the Company would only own 49.0% of MicroCor; and (iii) the Company to loan funds to MicroCor for the maintenance of its patents through 2011. The Amendment was effective as of March 31, 2010.
The Amendment also provides that in the event there are any net revenues from MicroCor’s hematocrit technology in the future, such net revenues will be distributed as follows: (i) the first $150,000 to Wescor; (ii) the Company will be repaid any sums loaned to MicroCor for the patent maintenance; (iii) the next $150,000 split pro-rata 80% to the Company and 20% to Chi Lin; and (iv) the remaining net revenues split pro-rata among MicroCor’s three shareholder’s: the Company (49.0%); Wescor (36.8%) and Chi Lin (14.2%). On September 15, 2010, Synergistic Equities Ltd acquired the Chi Lin 14.2% shareholding of MicroCor.
As a result of the Company transferring shares in MicroCor to Wescor pursuant to the Amendment, the Company’s ownership in MicroCor became only 49.0%. Therefore, the financial statements of MicroCor are no longer consolidated into and reported with the financial statements of the Company.
On December 8, 2008, the Company entered into a stock purchase option agreement with Law Investments CR, S.A., a Costa Rica corporation (“LI”). The agreement with LI is hereinafter referred to as (the “LI Agreement”). Pursuant to the terms of the LI Agreement, the Company granted to LI a one-year option to purchase up to 15,000,000 restricted shares of the Company’s common stock at a purchase price of $0.0075 per share (the “LI Options”). The LI Options under the LI Agreement were transferable by LI. During the fourth quarter of 2009, LI exercised its remaining 5,078,333 options for $38,087.50. LI used cash to exercise its options, except for a promissory note for $17,500 delivered to the Company on December 31, 2009 for the purchase of its final 2,333,333 shares. This promissory note bears interest at 6% per annum and is payable on demand. As of December 31, 2010, there remains a balance due on the LI promissory note of $10,000. Ronald Conquest, the Chairman of the Board and Chief Executive Officer of the Company, is the President and a Director of LI.
| ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES
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The following is a summary of the fees billed to us by Robison, Hill & Company for professional services rendered for the years ended December 31, 2010 and 2009:
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Service
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2010
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2009
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||||||
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Audit Fees
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$ | 19,221 | $ | 21,168 | ||||
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Audit-Related Fees
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– | – | ||||||
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Tax Fees
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1,000 | 832 | ||||||
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All Other Fees
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– | – | ||||||
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Total
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$ | 20,221 | $ | 22,000 | ||||
Audit Fees. Consists of fees billed for professional services rendered for the audits of our consolidated financial statements, reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with filings with the Securities and Exchange Commission and related comfort letters and other services that are normally provided by Robison, Hill & Company in connection with statutory and regulatory filings or engagements.
Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors. The Board is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is as to the particular service or category of services and is generally subject to a specific amount. The independent auditors and management are required to periodically report to the Board regarding the extent of services of the independent auditors in accordance with this pre-approval and the fees incurred to date. The Board may also pre-approve particular services on a case-by-case basis. The Board pre-approved 100% of the Company’s 2008 and 2009 audit fees, audit-related fees, tax fees, and all other fees.
| ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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(a) (1) Financial Statements
The Consolidated Financial Statements of the Company are set forth in Item 8 of this Report as listed on the Index to Consolidated Financial Statements on Page 23 of this Report.
(a) (2) Financial Statement Schedules
All schedules are omitted because they are not applicable, or are not required, or because the required information is included in the Consolidated Financial Statements or notes thereto.
(a) (3) Exhibits
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Exhibit No.
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Description
|
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| 3.1 | Certificate of Amendment filed with the Nevada Secretary of State on December 16, 2009 (1) | |
| 10.1(a) | Option to Purchase Common Stock between Synergistic Equities Ltd. and Chi Lin Technologies Co., Ltd., dated January 28, 2010 (2) | |
| 10.1(b) | Proxy dated January 28, 2010 between Chi Lin Technology Co., Ltd., Larry Clark and Richard Bruggeman (3) | |
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10.2
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Joint Development Agreement Amendment between the Company, Chi Lin Technology Co., Ltd., MicroCor, Inc., and Wescor, Inc. (4)
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10.3
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Proxy dated July 20, 2010 between Chi Lin Technology Co., Ltd., Larry Clark and Richard Bruggeman(5)
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21
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Subsidiaries of the Company *
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31.1
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Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
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31.2
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Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
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32.1
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Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act *
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32.2
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Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act *
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__________________
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*
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Filed herewith.
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(1)
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Incorporated by reference to Exhibit 3.1 of the Annual Report on Form 10-K filed by the Company on April 15, 2010.
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(2)
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Incorporated by reference to Exhibit 10.1(e) of the Annual Report on Form 10-K filed by the Company on April 15, 2010.
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(3)
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Incorporated by reference to Exhibit 10.1(f) of the Annual Report on Form 10-K filed by the Company on April 15, 2010.
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(4)
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Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by the Company on on June 30, 2010.
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(5)
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Incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q filed by the Company on August 13, 2010.
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In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| WINDGEN ENERGY, INC. | ||
| |
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| Date: March 31, 2011 | By: | /s/ Ronald Conquest |
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||
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Ronald Conquest
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
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||
In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated:
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Signature
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Date
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|||
| By: | /s/ Ronald Conquest |
March 31, 2011
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||
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||||
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Ronald Conquest
Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)
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| By: | /s/ David P. Martin |
March 31, 2011
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||
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||||
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David P. Martin
President, Chief Operating
Officer and Director
(Principal Operating Officer)
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| By: | /s/ Wendy Carriere |
March 31, 2011
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||||
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Wendy Carriere
Secretary/Treasurer,
Chief Financial Officer and Director
(Principal Accounting Officer)
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51