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| SLRE.OB > SEC Filings for SLRE.OB > Form 10-Q on 20-May-2009 | All Recent SEC Filings |
20-May-2009
Quarterly Report
This Management's Discussion and Analysis of Financial Condition and Results of Operations and other parts of this quarterly report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by words such as "anticipates," "expects," "believes," "plans," "predicts," and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to those discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition below. The following discussion should be read in conjunction with our financial statements and notes thereto included in this report. Our fiscal year end is December 31. All information presented herein is based on the three month periods ended March 31, 2009.
The Company's plan of operation for the coming year is to actively pursue development stage assets and emerging businesses with which to merge or acquire. We intend to function as a business incubator for assets and businesses that focus on (i) cost-effective renewable energy sources that do not threaten the environment, and (ii) practical solutions to mitigate the effects of traditional energy sources' unintended consequences concerning global climate change. We will fund the process of driving emerging technologies towards commercial applications through debt or equity offerings tied to our common stock.
We have not yet entered into any agreement, nor do we have any commitment or understanding to enter into or become engaged in any transaction, as of the date of this filing.
The Company's plan of operation over the next twelve months will require a minimum of $100,000 to identify a suitable business opportunity for development through merger or acquisition. Should the Company decide to develop a business opportunity through merger or acquisition, our funding requirements will change. We will also require up to $1,000,000 to satisfy current amounts payable. Financing to meet these cash requirements is not currently available.
During the three month period ended March 31, 2009, the Company was focused on
(i) pursuing financing commitments for its plan of operation, (ii) continuing
the search for a business opportunity to develop through merger or acquisition,
and (iii) satisfying continuous public disclosure requirements.
The Company has not generated any revenues from inception and has discontinued operations. Since we have no current ability to generate revenue, we expect to incur losses for the foreseeable future.
Net Losses
For the period from January 5, 1994 (inception) to March 31, 2009 the Company recorded a net loss of $15,004,175. Net losses for the three months ended March 31, 2009 were $25,485 as compared to $294,581 for the three months ended March 31, 2008. The decrease in net losses over the comparative three month periods can be attributed to the fall in general and administrative expenses as the result of our discontinuation of operations related to "iron fertilization" and "cold fusion". We expect to continue to incur net losses over the next twelve months as we seek out another business opportunity for development through merger or acquisition.
During 2007 Planktos Corp., formerly a majority owned subsidiary of the Company, purchased a research vessel for $800,000 which vessel was sold during 2008 for $1,000,000. Otherwise, the Company has expended no significant amount on capital expenditures for the period from inception to March 31, 2009.
Income Tax Expense (Benefit)
The Company may have a prospective income tax benefit resulting from a net operating loss carryforward and start up costs that could offset future operating profits.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations over the past three years.
Liquidity and Capital Resources
The Company is in the development stage and, since inception, has experienced significant changes in liquidity, capital resources and stockholders' equity. We have been funded since inception from public or private debt or equity placements or by major shareholders in the form of loans. All of our projects have been experimental in nature and virtually all of the financing raised to date has been either allocated for or related to general and administrative or research and the development activities.
The Company had a working capital deficit of $1,040,842 as of March 31, 2009, up from $1,015,357 as of December 31, 2008. As of March 31, 2009 our current and total assets were $40,587, consisting of cash in the amount of $2,754 and a receivable related to the sale of our interest in Planktos Corp. Our current liabilities totaled $1,081,429, which included a note payable to a related party of $376,521, advances payable of $444,650, and accounts payable with accrued expenses of $100,355. Net stockholders' deficit in the Company was $1,040,842 as of March 31, 2009, up from $1,015,357 at December 31, 2008.
Cash flow used in operating activities was $9,010,973 for the period from inception to March 31, 2009. Cash flow used in operating activities for the three months ended March 31, 2009 was $11,099 as compared to $608,175 for the three months ended March 31, 2008. The decrease in cash flow used in operating activities in the current period was due primarily to the decrease in cash flow used in operating activities and the decrease in cash flow used by discontinued operating activities over the comparative periods.
Cash flow provided by investing activities was $3,040,494 for the period from inception to March 31, 2009. Cash flow provided by investing activities for the three months ended March 31, 2009 was $0 as compared to cash flow provided by investing activities of $1,000,000 for the three months ended March 31, 2008. Cash flows provided by investing activities in the prior period can be attributed to the sale of the research vessel formerly owned by Planktos Corp.
Cash flow provided by financing activities was $5,973,233 for the period from inception to March 31, 2009. Cash used in financing activities for the three months ended March 31, 2009 was $0 as compared to cash used in financing activities of $184,138 for the three months ended March 31, 2008. Cash flow used in financing activities in the prior period can be attributed to the repayment of related party loans and advances.
The Company does not expect to pay cash dividends in the foreseeable future.
The Company had no lines of credit or other bank financing arrangements.
The Company has no defined benefit plan or contractual commitment with any of its officers or directors.
The Company has no current plans for the purchase or sale of any plant or equipment.
The Company currently has no employees and has no plans to hire any employees in the near future.
Off Balance Sheet Arrangements
As of March 31, 2009, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to stockholders.
Critical Accounting Policies
In the notes to the audited consolidated financial statements for the year ended December 31, 2008 included in the Company's Form 10-K, the Company discussed those accounting policies that are considered to be significant in determining the results of operations and our financial position. We believe that the accounting principles utilized by us conform to accounting principles generally accepted in the United States of America.
The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions.
The Company's audit expressed substantial doubt as to the Company's ability to continue as a going concern as a result of recurring losses, lack of revenue-generating activities and an accumulated deficit of $14,978,690 as of December 31, 2008. Our accumulated deficit increased to $15,004,175 as of March 31, 2009. The Company's ability to continue as a going concern is subject to our ability to obtain funding from outside sources. Management's plan to address our ability to continue as a going concern, include: (i) obtaining funding from private placement sources; (ii) obtaining additional funding from the sale of our securities; (iii) generating revenues from the development of a business opportunity through acquisition or merger; and (iv) obtaining loans and grants from various financial institutions, where possible. Although management believes that it will be able to obtain the necessary funding to allow us to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful.
Forward Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled Management's Discussion and Analysis of Financial Condition and Results of Operations, with the exception of historical facts, are forward looking statements. A safe-harbor provision may not be applicable to the forward looking statements made in this current report Forward looking statements reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements. These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not materialize. These statements include, but are not limited to, statements concerning:
· the sufficiency of existing capital resources;
· our anticipated financial performance;
· our ability to raise additional capital to fund cash requirements for future operations;
· uncertainties related to the development of our technologies;
· the volatility of the stock market; and
· general economic conditions.
We wish to caution readers that our operating results are subject to various risks and uncertainties that could cause our actual results to differ materially from those discussed or anticipated including the factors set forth in the section entitled Risk Factors included elsewhere in this report. We also wish to advise readers not to place any undue reliance on the forward looking statements contained in this report, which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update or revise these forward looking statements to reflect new events or circumstances or any changes in our beliefs or expectations, other than is required by law.
Stock-Based Compensation
We have adopted Financial Accounting Standards Board ("FASB") No. 123 (revised
2004) (Statements of Financial Accounting Standards ("SFAS") No. 123R),
Share-Based Payment, which addresses the accounting for stock-based payment
transactions in which an enterprise receives employee services in exchange for
(a) equity instruments of the enterprise or (b) liabilities that are based on
the fair value of the enterprise's equity instruments or that may be settled by
the issuance of such equity instruments.
Recent Accounting Pronouncements
In November 2008, the FASB issued EITF No. 08-7, Accounting for Defensive Intangible Assets ("EITF 08-7"). EITF 08-07 applies to all acquired intangible assets in which the acquirer does not intend to actively use the assets but intends to hold (lock up) the asset to prevent its competitors from obtaining access to the asset (a defensive asset), assets that the acquirer will never actually use, as well as assets that will be used by the acquirer during a transmission period when the intention of the acquirer is to discontinue the use of those assets. EITF 08-7 is effective as of January 1, 2009. The Company does not expect the adoption of EITF 08-7 to have a material impact on its consolidated financial statements.
In June 2008, the FASB issued Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB SFAS No. 128, "Earnings per Share." FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial position and results of operations if adopted.
In May, 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60 ("SFAS 163"). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. SFAS 163 also clarifies how SFAS 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. SFAS 163 requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of SFAS 163 will improve the quality of information provided to users of financial statements. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for some disclosures about the insurance enterprise's risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period (including interim periods) beginning after issuance of SFAS 163. Except for those disclosures, earlier application is not permitted. The adoption of this statement will have no material effect on the Company's financial condition or results of operations.
In May, 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). The sources of accounting principles that are generally accepted are categorized in descending order of authority as follows:
b. FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and Statements of Position
c. AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF D-Topics)
d. Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry.
The adoption of SFAS 162 will have no material effect on the Company's financial condition or results of operations.
In March 2008, the FSAB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities-an amendment of FASB Statement No. 133" (SFAS
No. 161). SFAS 161 changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity's financial position, financial performance, and
cash flows. SFAS 161 is intended to enhance the current disclosure framework in
Statement 133. SFAS 161 requires that objectives for using derivative
instruments be disclosed in terms of underlying risk and accounting designation.
This disclosure better conveys the purpose of derivative use in terms of the
risks that the entity is intending to manage. Disclosing the fair values of
derivative instruments and their gains and losses in a tabular format should
provide a more complete picture of the location in an entity's financial
statements of both the derivative positions existing at period end and the
effect of using derivatives during the reporting period. Disclosing information
about credit-risk-related contingent features should provide information on the
potential effect on an entity's liquidity from using derivatives. Finally, SFAS
161 requires cross-referencing within the footnotes, which should help users of
financial statements locate important information about derivative instruments.
The adoption of SFAS 161 will have no material effect on the Company's
financial condition or results of operations.
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