-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L6y9ImbDAOv8emLVTcHGoZ9Orlju9bfu1f4kPcIlN5/csMPnzlINwD+B4j0tqVIV /krxZFeTMW3DrCZLMlPjFg== 0001072588-10-000363.txt : 20101122 0001072588-10-000363.hdr.sgml : 20101122 20101122150637 ACCESSION NUMBER: 0001072588-10-000363 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100930 FILED AS OF DATE: 20101122 DATE AS OF CHANGE: 20101122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOMENTUM BIOFUELS, INC. CENTRAL INDEX KEY: 0000813718 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 841069035 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-50619 FILM NUMBER: 101208432 BUSINESS ADDRESS: STREET 1: 2600 SOUTH SHORE BLVD. STREET 2: SUITE 100 CITY: LEAGUE CITY STATE: TX ZIP: 77573 BUSINESS PHONE: 281 334 5161 MAIL ADDRESS: STREET 1: 2600 SOUTH SHORE BLVD. STREET 2: SUITE 100 CITY: LEAGUE CITY STATE: TX ZIP: 77573 FORMER COMPANY: FORMER CONFORMED NAME: TONGA CAPITAL CORP DATE OF NAME CHANGE: 19920703 10-Q 1 mmbfq.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2010 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _____________________ to ________________ Commission file number 000-50619 MOMENTUM BIOFUELS, INC. ----------------------- (Name of registrant in its Charter) COLORADO 84-1069035 -------- ---------- (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 7450 West 52nd Avenue, Suite M-115 ---------------------------------- Arvada, CO 80002 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (303) 305-0325 -------------- ( TELEPHONE NUMBER, INCLUDING AREA CODE) 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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.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 [ ] No [ ] Indicate by check mark whether the registrant is a large accelerated file, 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 [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X] As of November 30, 2010, there were 93,224,444 shares of the registrant's sole class of common shares outstanding.
PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Consolidated Balance Sheets - September 30, 2010 (Unaudited) and December 31, 2009 (Restated) F-1 Consolidated Statements of Operations (Unaudited) - Three and Nine months ended September 30, 2010 and 2009 and From January 1, 2010 through September 30, 2010 F-2 Consolidated Statements of Stockholders' Deficit - From January 1, 2010 through September 30, 2010 (Unaudited) F-3 Consolidated Statements of Cash Flows (Unaudited) - Nine months ended September 30, 2010 and 2009 and From January 1, 2010 through September 30, 2010 F-4 Notes to the Unaudited Consolidated Financial Statements F-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1 Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not Applicable 4 Item 4. Controls and Procedures 5 PART II - OTHER INFORMATION Item 1. Legal Proceedings - Not Applicable 7 Item 1A. Risk Factors - Not Applicable Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 7 - - Not Applicable Item 3. Defaults Upon Senior Securities - Not Applicable 7 Item 4. (Removed and Reserved) 7 Item 5. Other Information - Not Applicable 7 Item 6. Exhibits 8 SIGNATURES 9
PART I -- FINANCIAL INFORMATION Item 1. Financial Statements.
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Balance Sheets September 30, 2010 December 31, 2009 -------------------------------------------- (Unaudited) (Audited) ASSETS Current Assets Cash $ - $ - Accounts Receivable, net - - Inventory - - Prepaid insurance - - --------------------- -------------------- Total current assets - - Property & equipment, net of accumulated depreciation and amortization - - Other Assets - - --------------------- -------------------- TOTAL ASSETS $ - $ - ===================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 1,946,659 $ 2,016,749 Advances - related parties 107,778 107,778 --------------------- -------------------- Total Current Liabilities 2,054,437 2,124,527 --------------------- -------------------- Long Term Liabilities Senior secured convertible note - net of discount - - --------------------- -------------------- Total Long Term Liabilities - - --------------------- -------------------- Total Liabilities 2,054,437 2,124,527 --------------------- -------------------- Stockholders' Equity (Deficit) Common stock, $0.01 par value; 500,000,000 shares authorized, 93,224,444 and 47,724,444 shares issued and outstanding on September 30, 2010 and December 31, 2009, respectively 932,244 932,244 Additional paid-in capital 15,899,448 15,679,090 Accumulated Deficit (18,735,861) (18,735,861) Deficit accumulated during development stage (150,268) - --------------------- -------------------- Total Stockholders' Equity (Deficit) (2,054,437) (2,124,527) --------------------- -------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ - $ - ===================== ==================== See the accompanying notes to the consolidated financial statements. F-1
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Statements of Operations (Unaudited) Three Months Ended September Nine Months Ended September Period From January 1, 2010 to September 2010 2009 2010 2009 30, 2010 ------------ ----------- ----------- ----------- ---------------- Revenue $ - $ - $ - $ - $ - Cost of goods sold - - - - - ------------ ----------- ----------- ----------- ---------------- Gross profit - - - - - Operating Expenses General and administrative 34,606 14,000 150,268 89,802 150,268 ------------ ----------- ----------- ----------- ---------------- Total operating expenses 34,606 14,000 150,268 89,802 150,268 ------------ ----------- ----------- ----------- ---------------- Loss from operations (34,606) (14,000) (150,268) (89,802) (150,268) ------------ ----------- ----------- ----------- ---------------- Net Loss from Operations $ (34,606) $ (14,000) $ (150,268) $ (89,802) $ (150,268) ============ =========== =========== =========== ================ Loss from discontinued operations $ - $ (576,268) $ - $(2,238,842) $ - ============ =========== =========== =========== ================ Net loss $ (34,606) $ (590,268) $ (150,268) $(2,328,644) $ (150,268) ============ =========== =========== =========== ================ Per Share Information: Weighted average number of common shares outstanding 93,224,444 47,524,444 93,224,444 47,724,444 ============ =========== =========== =========== Net loss per share from continuing operations $ (0.00) $ (0.00) $ (0.00) $ (0.00) ============ =========== =========== =========== Net loss per share from discontinued operations $ - $ (0.01) $ - $ (0.05) ============ =========== =========== =========== Net loss per share $ (0.00) $ (0.01) $ (0.00) $ (0.05) ============ =========== =========== =========== See the accompanying notes to the consolidated financial statements. F-2
MOMENTUM BIOFUELS, INC. (A Development Stage Company) Consolidated Statement of Stockholders' Deficit For the Period from January 1, 2010 through September 30, 2010 (Unaudited) Common Stock Additional Accumulated Deficit Shares Amount Paid-In Deficit Accumulated Totals Capital During the Development Stage --------------- -------------- --------------- ----------------- ------------------- --------------- Balance - January 1, 2010 93,224,444 $ 932,244 $ 15,679,090 $ (18,735,861) $ - $ (2,124,527) Cash contributed for services - - 220,358 - - 220,358 Net Income (Loss) - (150,268) (150,268) --------------- -------------- --------------- ----------------- ------------------- --------------- Balance - September 30, 2010 93,224,444 $ 932,244 $ 15,899,448 $ (18,735,861) $ (150,268) $ (2,054,437) =============== ============== =============== ================= =================== =============== See the accompanying notes to the consolidated financial statements. F-3
MOMENTUM BIOFUELS, INC. (A Development Stage Company Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, Period From January 1, 2010 to 2010 2009 September 30, 2010 ----------------- ------------------ ----------------- Cash Flows from Operating Activities Net loss $ (150,268) $ (2,328,644) $ (150,268) Adjustments to reconcile net loss to cash used in operating activities Depreciation - 340,254 - Gain (Loss) on sale of assets - - - Bad debt expense - - - Deferred loan cost expense - 39,780 - Interest expense - amortization of debt discount - 51,936 - Share based compensation - 1,183,185 - Changes in Assets and Liabilities Accounts receivable - 2,190 - Inventory - 73,552 - Prepaid expenses and other current assets - 32,063 - Accounts payable (70,090) 1,072,487 (70,090) Accrued expenses - (406,725) - ----------------- ------------------ ----------------- Net Cash Provided (Used) in Operating Activities (220,358) 60,078 (220,358) Cash Flows used in Investing Activities Other Assets - (50,000) - ----------------- ------------------ ----------------- Net Cash Provided (Used) in Investing Activities - (50,000) - Cash Flows from Financing Activities Payment of note payable - (150,000) - Loans from shareholders - 2,009 - Stock issued for cash - (80,000) - Cash contributed for services 220,358 - 220,358 Proceeds from loan payable - 105,200 - Proceeds from convertible notes 80,000 - ----------------- ------------------ ----------------- Net Cash Provided (Used) by Financing Activities 220,358 (42,791) 220,358 ----------------- ------------------ ----------------- Net (Decrease) increase in Cash - (32,713) - Cash and cash equivalents - Beginning of period - 34,559 - ----------------- ------------------ ----------------- Cash and cash equivalents - End of period $ - $ 1,846 $ - ================= ================== ================= Supplemental Disclosure of Cash Flow Information: Cash Paid During the period for: Interest $ - $ 105,453 $ - ================= ================== ================= Financing activities Loan Discount $ - $ 51,936 $ - ================= ================== ================= See the accompanying notes to the consolidated financial statements. F-4
Momentum Biofuels, Inc. (A Development Stage Company) Notes to Consolidated Financial Statements For the Nine months Ended September 30, 2010 and 2009 (Unaudited) 1. BASIS OF PRESENTATION, MANAGEMENT'S PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION: Presentation of Interim Information: The accompanying unaudited financial statements include the accounts of Momentum Biofuels, Inc. (the Company), a Colorado corporation and its wholly-owned subsidiary, Momentum Biofuels, Inc., a Texas corporation ("Momentum -Texas"). On August 21, 2009, Momentum Biofuels, Inc. ("Momentum-Texas"), a Texas corporation, entered into an Agreement with Hunt Global Resources, Inc. ("Hunt"), under the terms of which Hunt agreed to assume the obligations of Momentum-Texas and the Company through the assignment of a certain Senior Secured Promissory Note in the amount of $600,000 issued by Momentum-Colorado to a group of investors arranged by Bathgate Capital Partners, LLC, of Denver, Colorado. Hunt further agreed to assume Momentum-Texas obligations under a sub-lease agreement between Momentum-Texas and Brand Infrastructure and Services, Inc., including all past due rent, assessments and other charges related to the property covered by the sub-lease agreement, all in exchange for a conveyance of all of the right title and interest of Momentum-Texas, in and to all of its physical assets, including the biodiesel plant located in Pasadena, Texas and all intellectual property, processes, techniques and formulas for creating Biofuels and related products. Further, Momentum-Texas entered into a License Agreement with Hunt, which provided that in exchange for a grant of a license to use, improve, sublicense and commercialize the intellectual property described in the Agreement, in exchange for an agreement by Hunt to pay to Momentum-Texas, a royalty of 3% of the gross and collected revenue received by Hunt from the sale of bio-diesel and related products and from revenues received by Hunt from its proposed Commercial Sand business. Momentum-Texas assigned its rights to receive the royalty described in the License Agreement to its parent, the Company in exchange for common shares of the Company equal to 39% of the issued and outstanding stock at such date, or 40,000,000 shares, whichever sum is greater. Such shares were issued by the Company as fully paid, non-assessable and subject to a non-dilution agreement in favor of Hunt. Additionally the December 31, 2009 financial statements will be restated to properly account for the transaction with Hunt. Consequently the December 31, 2009 financial statement and the interim period financial statement for the period March 31, 2010 and June 30 2010 should not be relied upon. Basis of Presentation Restatement of Results Subsequent to the issuance of the Company's unaudited financial statements for the nine months ended September 30, 2010, the Company determined that it would restate its financial statements for the nine months ended September 30, 2009, to show discontinued operations for its operations. The unaudited statements of operations for the three and nine months ended September 30, 2009 herewith have been restated to show such discontinued operations. Interim Presentation The accompanying unaudited interim financial statements of Momentum Biofuels, Inc. (the Company), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (SEC), and should be read in conjunction with the audited financial statements and notes thereto contained in Momentum's Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for the year ended December 31, 2009, as reported in the Form 10-K have been omitted. F-5 Development Stage Company The Company has returned to a development stage company due to the change of business plan and strategies in January 2010. Accordingly, the Company's activities have been accounted for as those of a "Development Stage Company." Therefore, the Company's financial statements of operations, stockholders' equity(deficit) and cash flows disclose activity since the date of the Company's entry into the development stage. The Company after minimal operations during the year ended December 31, 2009 and its acquisition by the Hunt Group has changed its operational focus to being an intellectual property company owning specific royalty agreements as its sole source of revenue. It is the intent of management to pursue additional royalty and licensing agreements in the furtherance of its business objectives to maximize shareholder value and profitability. Management is also considering other opportunities in other non-related businesses. No agreements have been entered into at the time of this filing. Note 2 - Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Momentum and its wholly- owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Our significant estimates primarily relate to the assessment of warrants and debt and equity transactions and the estimated lives and methods used in determining depreciation of fixed assets. Actual results could differ from those estimates. Cash Equivalents Cash equivalents include highly liquid investments purchased with original maturities of three months or less. F-6 Share-Based Compensation Momentum measures all share-based payments, including grants of employee stock options, using a fair-value based method. The cost of services received in exchange for awards of equity instruments is recognized in the statement of operations based on the grant date fair value of those awards amortized over the requisite service period. Momentum utilizes a standard option pricing model, the Black-Scholes model, to measure the fair value of stock options granted. Income Taxes Momentum and its subsidiary file a consolidated federal tax return. Momentum uses the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities are recognized for temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, and are measured using the tax rates expected to be in effect when the differences reverse. Deferred tax assets are also recognized for operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is used to reduce deferred tax assets when uncertainty exists regarding their realization. Net Loss per Common Share Basic net loss per common share is calculated by dividing the net loss applicable to common shares by the weighted average number of common and common equivalent shares outstanding during the period. For the nine months ended September 30, 2010 and 2009, there were no potential common equivalent shares used in the calculation of weighted average common shares outstanding as the effect would be anti-dilutive because of the net loss. F-7
Description 2010 2009 - ---------------------------------------------------------------------------------------------- ------------------- Weighted average shares used to compute basic and diluted net loss per common share: 93,244,444 47,724,444 Securities convertible into shares of common stock, not used Stock warrants related to notes payable - Stock warrants for common stock 1,032,000 2,062,000 Options awarded to executives and consultants 9,250,000 9,250,000 ------------------- ------------------- Total securities convertible into shares of common stock 10,402,000 11,582,000 =================== ===================
In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-6, "Improving Disclosures about Fair Value Measurements." This update requires additional disclosure within the roll forward of activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, the update requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Levels 2 and 3. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009, except for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010. As ASU 2010-6 only requires enhanced disclosures, the Company does not expect that the adoption of this update will have a material effect on its financial statements. Note 3 - Going Concern Momentum has incurred significant losses from operations since inception and has limited financial resources. These factors raise substantial doubt about Momentum's ability to continue as a going concern. Momentum's financial statements for the nine months ended September 30, 2010 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company currently has an accumulated deficit of $18,735,861 and an accumulated deficit during the development stage of $150,268 at September 30, 2010. Momentum's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and, ultimately, achieve profitable operations. The accompanying financial statements do not include any adjustments relating to the recoverabililty and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. Note 4 - Concentration of Credit Risk At various times during the year, Momentum may have bank deposits in excess of the FDIC insurance limits. Momentum has not experienced any losses from maintaining cash accounts in excess of the federally insured limit. Management believes that it is not exposed to any significant credit risk on cash accounts. F-8 Note 5- Discontinued Operations On August 21, 2009, Momentum Biofuels, Inc. ("Momentum-Texas"), a Texas corporation, entered into an Agreement with Hunt Global Resources, Inc. ("Hunt"), under the terms of which Hunt agreed to assume the obligations of Momentum-Texas and the Company through the assignment of a certain Senior Secured Promissory Note in the amount of $600,000 issued by Momentum-Colorado to a group of investors arranged by Bathgate Capital Partners, LLC, of Denver, Colorado. Hunt further agreed to assume Momentum-Texas obligations under a sub-lease agreement between Momentum-Texas and Brand Infrastructure and Services, Inc., including all past due rent, assessments and other charges related to the property covered by the sub-lease agreement, all in exchange for a conveyance of all of the right title and interest of Momentum-Texas, in and to all of its physical assets, including the biodiesel plant located in Pasadena, Texas and all intellectual property, processes, techniques and formulas for creating Biofuels and related products. As a consequence to the above, the Company has returned to a development stage company due to the discontinuing of its prior operations. Discontinued operations consist of the following:
Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2009 2010 2009 2010 Net Sales 0 0 0 182,718 Cost of Sales 0 0 0 (161,973) ---------------- ----------------- --------------- ------------------- Gross profit 0 0 0 20,745 Operating expense 0 (568,736) 0 (2,243,936) Other income (expense) 0 (21,532) 0 (105,453) ---------------- ----------------- --------------- ------------------- Net loss on discontinued operations 0 (590,268) 0 (2,328,644) ================ ================= =============== ===================
Note 6 - Equity Transactions During the nine months ended September 30, 2010, Momentum did not issue any shares of its common stock. The Company's primary shareholder Hunt Group, contributed $220,358 to capital to cover for legal and professional expense and for payment of aged vendor balance. Note 7 - Options Options were originally issued in conjunction with employment agreements for key employees and consultants. At September 30, 2010, there were 9,250,000 issued and outstanding options, all fully vested. The weighted average exercise price for all options outstanding as of September 30, 2010 was $1. Option activity September 30, 2010 is as follows: Expiration Exercise Grant Date Date Price Beginning Granted Exercised Ending - ------------ ----------- --------- ---------- -------- ---------- ----------- 04/20/07 04/20/12 $1.00 2,250,000 2,250,000 10/16/07 10/16/12 $1.00 6,000,000 6,000,000 11/01/07 11/01/12 $1.00 1,000,000 1,000,000 --------- ------- ----------- ----------- 9,250,000 9,250,000 ========== ======= =========== =========== F-9 Note 8 - Warrant Activity Warrants activity through September 30, 2010 is as follows:
Exercise Grant Date Expiration Date Price Beginning Granted Exercised Ending - ----------------- ------------------ -------------- ---------------- ------------ --------- ------------------- 06/27/06 06/27/16 $1.00 100,000 100,000 11/30/06 11/30/16 $1.00 10,000 10,000 12/31/06 12/31/16 $1.00 10,000 10,000 01/31/07 01/31/17 $1.00 10,000 10,000 02/01/07 02/01/17 $1.00 2,000 2,000 06/25/08 06/25/15 $0.40 300,000 300,000 06/25/08 06/25/15 $0.40 600,000 600,000 - ----------------- ------------------ -------------- ---------------- ------------ --------- ------------------- 1,032,000 1,032,000
The weighted average exercise price for all warrants outstanding as of September 30, 2010 was $0.48. Note 9 - Litigation Momentum-Texas is a defendant in the following legal proceedings: Jason Gehrig v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This lawsuit involves a claim for breach of an employment contract. Depositions were completed over a year ago and there has been no activity in this litigation since. Harris County Tax Authority v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for property taxes in the amount of approximately $80,000. The Company has been negotiating a payment plan and expects to be able to pay the taxes due from royalties and licensing fees. Stuart Cater and James O'Neil v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for payment under the terms of employment settlement agreements. The issues were the subject of arbitration in mid-2009 which resulted in an award of $52,500 for each of the claimants and attorney's fees of $40,000. Arbitration award was reduced to a judgment and a Receiver was appointed to collect the judgment. Quality Carriers, Inc. v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for rental fees for tank trailers in the amount of $19,000 and seeks legal fees in the amount of $6,335. City of LaPorte Taxing Authority v. Momentum Biofuels, Inc. - This suit involves a claim for property taxes in the amount of approximately $40,000. The litigation is pending in the District Court of Harris County, Texas. F-10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS CAUTIONARY This Item 2 and the report on Form 10-Q for the period ended September 30, 2010 may contain "forward-looking statements" regarding Momentum Biofuels, Inc. (the "Company" or "Momentum"). In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. Changes in the circumstances upon which we base our predictions and/or forward-looking statements could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: (1) our limited operating history; (2) our ability to pay down existing debt; (3) the Company's ability to raise necessary financing to execute the Company's business plan; (4) potential litigation with our shareholders, creditors and/or former or current investors; (5) the Company's ability to comply with all applicable federal, state and local government and international rules and regulations; and (6) other factors over which we have little or no control. The independent registered public accounting firm's report on the Company's financial statements as of December 31, 2009, includes a "going concern" explanatory paragraph that describes substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 3 to the unaudited quarterly financial statements. OPERATIONS The Company after minimal operations during the year ended December 31, 2009 and its acquisition by the Hunt Group has changed its operational focus to being an intellectual property company owning specific royalty agreements as its sole source of revenue. It is the intent of management to pursue additional royalty and licensing agreements in the furtherance of its business objectives to maximize shareholder value and profitability. Management is also considering other opportunities in other non-related businesses. No agreements have been entered into at the time of this filing. We intend to seek, investigate and, if such investigation warrants, acquire royalty and license agreements. We will not restrict our search to any specific business, industry or geographical location, and we may participate in business ventures of virtually any nature. This discussion of our proposed business is purposefully general and is not meant to be restrictive of our unlimited discretion to search for and enter into potential business opportunities. We anticipate that we may be able to participate in only one potential business venture because of our lack of financial resources. 1 We intend to participate in a business opportunity only after the negotiation and execution of appropriate written business agreements. Although the terms of such agreements cannot be predicted, generally we anticipate that such agreements will (i) require specific representations and warranties by all of the parties; (ii) specify certain events of default; (iii) detail the terms of closing and the conditions which must be satisfied by each of the parties prior to and after such closing; (iv) outline the manner of bearing costs, including costs associated with the Company's attorneys and accountants; (v) set forth remedies on defaults; and (vi) include miscellaneous other terms. The Company is dependent on raising additional equity and/or, debt to fund any negotiated settlements with its outstanding creditors and meet the Company's ongoing operating expenses. There is no assurance that Momentum will be able to raise the necessary equity and/or debt that it will need to be able to negotiate acceptable settlements with its outstanding creditors or fund its ongoing operating expenses. Momentum cannot make any assurances that it will be able to raise funds through such activities. There can be no assurance that the Company will be able to carry out its business plan. Historically, our cash needs have been satisfied primarily through proceeds from private placements of our equity securities and debt instruments, but we cannot guarantee that such financing activities will be sufficient to fund our current and future projects and our ability to meet our cash and working capital needs. No commitments to provide additional funds have been made by management or other stockholders. Irrespective of whether the Company's cash assets prove to be inadequate to meet the Company's operational needs, the Company might seek to compensate providers of services by issuances of its common stock in lieu of cash. RESULTS OF OPERATIONS - --------------------- Results of Operations For Three Months Ended September 30, 2010 Compared To The Three Months Ended September 30, 2009. The Company did not recognize any revenues from its operational activities, during the three months ended September 30, 2010 and 2009. During the three months ended September 30, 2010, the Company incurred $34,606 in expenses compared to expenses of $14,000 during the three months ended September 30, 2009. The increase in total expenses of $20,606 is a result of an increase in legal and accounting expenses. Results of Operations For Nine months ended September 30, 2010 compared To The Nine months ended September 30, 2009. The Company did not recognize any revenues for the nine months ending September 30, 2010 and 2009. During the nine months ended September 30, 2010, the Company incurred operating expenses of $150,268 compared to $89,809 during the nine months ended September 30, 2009 The increase was a result of increased legal and accounting fees associated with the discontinued operation. During the nine months ended September 30, 2010, the Company recognized a net loss of $150,268 compared with a net loss of $89,802 for the nine months ended September 30, 2009. 2 LIQUIDITY AND CAPITAL RESOURCES At September 30, 2010, the Company had $0 in cash and $0 in other assets with which to conduct its operations. At September 30, 2010, the Company had total liabilities of $2,054,437. There can be no assurance that the Company will be able to carry out its business plan. Historically, our cash needs have been satisfied primarily through proceeds from private placements of our equity securities and debt instruments, but we cannot guarantee that such financing activities will be sufficient to fund our current and future projects and our ability to meet our cash and working capital needs. No commitments to provide additional funds have been made by management or other stockholders. Irrespective of whether the Company's cash assets prove to be inadequate to meet the Company's operational needs, the Company might seek to compensate providers of services by issuances of its common stock in lieu of cash. Net cash used by operating activities during the nine months ended September 30, 2010 was $220,358. During the nine months ended September 30, 2009, the Company provided net cash of $60,078 in operating activities. During the nine months ended September 30, 2009, net losses of $2,238,644 were adjusted for the non-cash items of $340,254 in depreciation and amortization expense and $1,183,185 in share based compensation. During the nine months ended September 30, 2010, the net cash used by its investing activities was $0. During the nine months ended September 30, 2009, the Company used $50,000 in its investing activities. Net cash provided by financing activities during the nine months ended September 30, 2010 was $220,358. During the nine months ended September 30, 2009, financing activities used net funds in the amount of $42,791. Management will need to seek and obtain additional funding, via loans or private placements of stock, for future operations and to provide required working capital. Management cannot make any assurances it will be able to complete such a transaction. 3 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements included in this Quarterly Report on Form 10-Q requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The more significant accounting estimates inherent in the preparation of the Company's financial statements include estimates as to the valuation of equity related instruments issued, and valuation allowance for deferred income tax assets. Our accounting policies are described in the notes to financial statements included in this Annual Report on Form 10K. The more critical accounting policies are as described below. The Company believes that the following are some of the more significant accounting policies and methods used by the Company: o share-based compensation SHARE-BASED COMPENSATION The Company measures all share-based payments, including grants of employee stock options, using a fair-value based method. The cost of services received in exchange for awards of equity instruments is recognized in the statement of operations based on the grant date fair value of those awards amortized over the requisite service period. The Company utilizes a standard option pricing model, the Black-Scholes model, to measure the fair value of stock options granted. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - NOT APPLICABLE 4 ITEM 4 CONTROLS AND PROCEDURES Disclosures Controls and Procedures We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures are not effective in timely alerting them to material information required to be included in our periodic SEC filings, as a result of material weaknesses in our internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 5 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Momentum-Texas is a defendant in the following legal proceedings: Jason Gehrig v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This lawsuit involves a claim for breach of an employment contract. Depositions were completed over a year ago and there has been no activity in this litigation since. Harris County Tax Authority v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for property taxes in the amount of approximately $80,000. The company has been negotiating a payment plan and expects to be able to pay the taxes due from royalties and licensing fees. Stuart Cater and James O'Neil v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for payment under the terms of employment settlement agreements. The issues were the subject of arbitration in mid-2009 which resulted in an award of $52,500 for each of the claimants and attorney's fees of $40,000. Arbitration award was reduced to a judgment and a Receiver was appointed to collect the judgment. Quality Carriers, Inc. v. Momentum Biofuels, Inc. filed in the District Court of Harris County, Texas. - This suit involves a claim for rental fees for tank trailers in the amount of $19,000 and seeks legal fees in the amount of $6,335. City of LaPorte Taxing Authority v. Momentum Biofuels, Inc. - This suit involves a claim for property taxes in the amount of approximately $40,000. The litigation is pending in the District Court of Harris County, Texas. ITEM 1A. RISK FACTORS. Not applicable to smaller reporting companies. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. REMOVED AND RESERVED. ITEM 5. OTHER INFORMATION. None 7 ITEM 6. EXHIBITS. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. 31.1 Certification by the Chief Executive and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification by the Chief Executive and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 8 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MOMENTUM BIOFUELS, INC. (The Registrant) Date: November 22, 2010 By: /s/George Sharp --------------- George Sharp, Chief Executive Officer, and Principal Accounting Officer 9 EX-31 2 ex31.txt Exhibit 31.1 CERTIFICATION OF PERIODIC REPORT I, George Sharp, certify that: 1. I have reviewed this annual report on Form 10-Q of Momentum Biofuels, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's 4th quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: November 22, 2010 /s/ George Sharp ------------ George Sharp, Chief Executive Officer and Director (Principal Executive & Accounting Officer) EX-32 3 ex32.txt Exhibit 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report on Form 10-Q of Momentum Biofuels, Inc. for the quarter ended September 30, 2010, I, George Sharp, Principal Executive and Accounting Officer of Momentum Biofuels, Inc., hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that: a) such Quarterly Report on Form 10-Q of Momentum Biofuels, Inc. for the quarter ended September 30, 2010, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and b) the information contained in such Quarterly Report on Form 10-Q of Momentum Biofuels, Inc. for the quarter ended September 30, 2010, fairly presents, in all material respects, the financial condition and results of operations of Momentum Biofuels, Inc. Date: November 22, 2010 /s/George Sharp --------------- George Sharp, Chief Executive Officer (Principal Executive and Accounting Officer) This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----