UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark one)
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2007
Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________ to _____________
Commission File Number: 0-32873
Energroup Technologies Corporation
----------------------------------
(Exact name of small business issuer as specified in its charter)
Utah 87-0420774
---- ----------
(State of incorporation) (IRS Employer ID Number)
12890 Hilltop Road, Argyle, TX 76226
------------------------------------
(Address of principal executive offices)
(972) 233-0300
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act): YES X NO
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
July 26, 2007: 13,497,421
-------------------------
Transitional Small Business Disclosure Format (check one): YES NO X
Energroup Technologies Corporation
Form 10-QSB for the Quarter ended June 30, 2007
Table of Contents
Page
Part I - Financial Information
Item 1 Condensed Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 11
Item 3 Controls and Procedures 13
Part II - Other Information
Item 1 Legal Proceedings 13
Item 2 Recent Sales of Unregistered Securities and Use of Proceeds 13
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits 14
Signatures 14
2
Part I
Item 1 - Financial Statements
Energroup Technologies Corporation
(a development stage company)
Condensed Balance Sheet
June 30, 2007
(Unaudited)
June 30,
ASSETS 2007
------ ---------
Current Assets
Cash on hand and in bank $ 17,944
---------
Total Assets $ 17,944
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable - trade $ --
---------
Total Liabilities --
---------
Commitments and Contingencies
Stockholders' Equity Common stock - $0.001 par value.
50,000,000 shares authorized.
13,497,421 shares issued and outstanding 13,497
Additional paid-in capital 658,716
Accumulated deficit (318,732)
Deficit accumulated during the development stage (335,537)
---------
Total Stockholders' Equity 17,944
---------
Total Liabilities and Stockholders' Equity $ 17,944
=========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
3
Energroup Technologies Corporation
(a development stage company)
Condensed Statements of Operations and
Comprehensive Loss Six and Three months ended
June 30, 2007 and 2006 and
Period from December 4, 1998 (date of reentry to development stage)
through June 30, 2007
(Unaudited)
Period from
December 4, 1998
(date of reentry to
Six months Six months Three months Three months development stage)
ended ended ended ended through
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 June 30, 2007
----------- ----------- ----------- ----------- -----------
Revenues $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
Operating expenses
General and administrative costs 29,222 3,813 25,637 855 53,652
----------- ----------- ----------- ----------- -----------
Loss from operations (29,222) (3,813) (25,637) (855) (53,652)
Provision for income taxes -- -- -- -- (1,829)
----------- ----------- ----------- ----------- -----------
Net loss (29,222) (3,813) (25,637) (855) (55,481)
Other comprehensive income -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Comprehensive loss $ (29,222) $ (3,813) $ (25,637) $ (855) $ (55,481)
=========== =========== =========== =========== ===========
Loss per weighted-average share
of common stock outstanding,
computed on net loss - basic and
fully diluted $ (0.01) nil nil nil $ (0.02)
=========== =========== =========== =========== ===========
Weighted-average number
of shares of common stock
outstanding - basic and
fully diluted 5,680,391 3,641,959 7,695,223 3,641,959 3,479,823
=========== =========== =========== =========== ===========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
4
Energroup Technologies Corporation
(a development stage company)
Condensed Statements of Cash Flows
Six months ended June 30, 2007 and 2006 and
Period from December 4, 1998 (date of reentry to development stage)
through June 30, 2007
(Unaudited)
Period from
December 4, 1998
(date of reentry to
Six months Six months development stage)
ended ended through
June 30, 2007 June 30, 2006 June 30, 2007
--------- --------- ---------
Cash Flows from Operating Activities
Net loss for the period $ (29,222) $ (3,813) $ (55,481)
Adjustments to reconcile net loss
to net cash provided by
operating activities
Expenses paid with issuance of common stock -- -- 3,481
Increase (Decrease) in
Accounts payable - trade (100) 75 --
--------- --------- ---------
Net cash used in operating activities (29,322) (3,738) (52,000)
--------- --------- ---------
Cash Flows from Investing Activities -- -- --
--------- --------- ---------
Cash Flows from Financing Activities
Proceeds from sale of common stock 350,000 -- 350,000
Payment of cash dividend (280,056) -- (280,056)
Cash advanced by stockholder 4,556 3,738 --
Cash repaid to stockholder (27,234) -- --
--------- --------- ---------
Net cash provided by financing activities 47,266 3,738 69,944
--------- --------- ---------
Increase in Cash 17,944 -- 17,944
Cash at beginning of period -- -- --
--------- --------- ---------
Cash at end of period $ 17,944 $ -- $ 17,944
========= ========= =========
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid during the period $ -- $ -- $ --
========= ========= =========
Income taxes paid during the period $ 100 $ 100 $ 200
========= ========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
5
Energroup Technologies Corporation
(a development stage company)
Notes to Condensed Financial Statements
June 30, 2007 and 2006
Note A - Background and Description of Business
Energroup Technologies Corporation (Company) was incorporated under the laws of
the State of Utah on March 21, 1985, under the name of Great Lakes Funding, Inc.
On January 9, 1986, the Company's Articles of Incorporation were amended to
change the name from Great Lakes Funding, Inc. to Energroup Technologies
Corporation.
In prior years, the Company, through its then wholly-owned subsidiary, Facility
Maintenance Management, Inc., began to develop, manufacture and sell interfacing
sensory and output products used in energy management control systems. In 1987,
the Company determined that its efforts to manufacture and sell interfacing
devices used in microprocessor-based control systems for heating, ventilation
and air conditioning systems would be unsuccessful, ceased its ongoing business
operations and dissolved Facility Maintenance Management, Inc.
In the opinion of the Company's then management, the Company requalified for
development stage company accounting and financial reporting, starting December
14, 1998, concurrent with the adoption of the Company's current business plan.
The Company's current business plan is to locate and combine with an existing,
privately-held company which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged. However, the
Company does not intend to combine with a private company which may be deemed to
be an investment company subject to the Investment Company Act of 1940. A
combination may be structured as a merger, consolidation, exchange of the
Company's common stock for stock or assets or any other form which will result
in the combined enterprise's becoming a publicly-held corporation.
Note B - Going Concern Uncertainty
The Company has nominal cash on hand, has no operating assets and has a business
plan with inherent risk. Because of these factors, the Company's auditors have
issued an audit opinion on the Company's financial statements which includes a
statement describing our going concern status. This means, in our auditor's
opinion on our annual financial statements for the year ended December 31, 2006
as contained in our Annual Report on Form 10-KSB, substantial doubt about our
ability to continue as a going concern exists at the date of their opinion.
The Company's current and former majority stockholders have maintained the
corporate status of the Company and have provided all nominal working capital
support on the Company's behalf. Because of the Company's lack of operating
assets, its continuance is fully dependent upon the majority stockholder's
continuing support. The majority stockholder intends to continue the funding of
nominal necessary expenses to sustain the corporate entity.
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis. Further, the Company faces considerable risk in it's business plan
and a potential shortfall of funding due to our inability to raise capital in
the equity securities market. If no additional operating capital is received
during the next twelve months, the Company will be forced to rely on existing
cash in the bank and additional funds loaned by management and/or significant
stockholders.
The Company's business plan is to seek an acquisition or merger with a private
operating company which offers an opportunity for growth and possible
appreciation of our stockholders' investment in the then issued and outstanding
common stock. However, there is no assurance that the Company will be able to
successfully consummate an acquisition or merger with a private operating
company or, if successful, that any acquisition or merger will result in the
appreciation of our stockholders' investment in the then outstanding common
stock.
The Company remains dependent upon additional external sources of financing;
including being dependent upon its management and/or significant stockholders to
provide sufficient working capital in excess of the Company's initial
capitalization to preserve the integrity of the corporate entity.
The Company anticipates offering future sales of equity securities. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
6
Energroup Technologies Corporation
(a development stage company)
Notes to Condensed Financial Statements - Continued
June 30, 2007 and 2006
Note C - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with generally
accepted accounting principles and has a year-end of December 31.
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.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-KSB containing the Company's
financial statements for the year ended December 31, 2006. The information
presented within these interim financial statements may not include all
disclosures required by generally accepted accounting principles and the users
of financial information provided for interim periods should refer to the annual
financial information and footnotes when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-QSB, are unaudited and contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and cash flows of
the Company for the respective interim periods presented. The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending December 31, 2007.
Note D - Summary of Significant Accounting Policies
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, certificates of
deposit and other highly-liquid investments with maturities of three months
or less, when purchased, to be cash and cash equivalents.
2. Income taxes
The Company uses the asset and liability method of accounting for income
taxes. At June 30, 2007 and 2006, respectively, the deferred tax asset and
deferred tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences generally represent differences in the recognition of assets
and liabilities for tax and financial reporting purposes, if any such items
exist.
As of June 30, 2007 and 2006, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods as a result of a change in
control involving 50 percentage points or more of the issued and
outstanding securities of the Company.
7
Energroup Technologies Corporation
(a development stage company)
Notes to Condensed Financial Statements - Continued
June 30, 2007 and 2006
Note D - Summary of Significant Accounting Policies - Continued
3. Income (Loss) per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common stockholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
At June 30, 2007 and 2006, and subsequent thereto, the Company has no
outstanding stock warrants, options or convertible securities which could
be considered as dilutive for purposes of the loss per share calculation.
Note E - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to financial risk, if any.
Note F - Income Taxes
The components of income tax (benefit) expense for each of the six month periods
ended June 30, 2007 and 2006, respectively, are as follows:
Six months Six months
ended ended
June 30, 2007 June 30, 2006
------------- -------------
Federal:
Current $ -- $ --
Deferred -- --
------- -------
-- --
------- -------
State:
Current -- --
Deferred -- --
------- -------
-- --
------- -------
Total $ -- $ --
======= =======
8
Energroup Technologies Corporation
(a development stage company)
Notes to Condensed Financial Statements - Continued
June 30, 2007 and 2006
Note F - Income Taxes - Continued
Due to the change in control effected by the note conversion on July 24, 2006,
the Company has a limited net operating loss carryforward to offset future
Federal and State income taxes. The amount and availability of any net operating
loss carryforwards will be subject to the limitations set forth in the Internal
Revenue Code. Such factors as the number of shares ultimately issued within a
three year look-back period; whether there is a deemed more than 50 percent
change in control; the applicable long-term tax exempt bond rate; continuity of
historical business; and subsequent income of the Company all enter into the
annual computation of allowable annual utilization of any net operating loss
carryforward(s).
The Company's income tax expense for each of the six month periods ended June
30, 2007 and 2006, respectively, are as follows:
Six months Six months
ended ended
June 30, 2007 June 30, 2006
------------- -------------
Statutory rate applied to income before income taxes $(9,900) $(1,300)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Other, including reserve for
deferred tax asset and application
of net operating loss carryforward 9,900 1,300
------- -------
Income tax expense $ -- $ --
======= =======
The Company's only temporary differences as of June 30, 2007 and 2006 relate to
the Company's net operating loss. Accordingly, any deferred tax asset, as fully
reserved, or liability, if any, as of June 30, 2007 and 2006, respectively, is
nominal and not material to the accompanying financial statements.
Note G - Capital Stock Transactions
On or about March 12, 2007, the Company authorized the issuance of 5,462 shares
of common stock in conjunction with a reconciliation of its stock transfer
records. The Company received a "General Release" in conjunction with this
issuance. The Company completed the issuance on the belief the recipients of the
shares may be defined as a "Protected Purchaser" under Section 70A-8-303 of the
Utah Code Annotated and Article 8 of the Uniform Commercial Code.
On May 3, 2007, the Company, along with its directors and executive officers,
entered into a Stock Purchase Agreement (Stock Purchase Agreement) with the
Halter Financial Investments, L.P., a Texas limited partnership (HFI, LP),
pursuant to which the Company agreed to sell to HFI, LP 11,200,000 shares of
unregistered, restricted common stock for $350,000 cash. This transaction closed
on May 22, 2007. The Company relied upon Section 4(2) of The Securities Act of
1933, as amended, for an exemption from registration of these shares and no
underwriter was used in this transaction. As a result of this transaction, HFI,
LP became the Company's controlling stockholder, owning approximately 82.98% of
the 13,497,421 shares currently issued and outstanding.
In conjunction with the above transaction, on May 3, 2007, certain
then-principal shareholders of the Company, as a condition of the closing of the
Stock Purchase Agreement surrendered and cancelled 1,350,000 then-issued and
outstanding shares of common stock to the Company. These shares were surrendered
as follows: Jenson Services, Inc., which then owned 2,480,500 shares (or
approximately 68% of the Company's outstanding voting securities) delivered
375,000 of its shares for cancellation; James P. Doolin, which then owned
475,000 shares (or approximately 13% of the Company's outstanding voting
securities) delivered 475,000 shares for cancellation; and his sister, Alycia
Anthony, which then owned 500,000 shares (or approximately 14% of the Company's
outstanding voting securities) delivered 500,000 shares for cancellation. All of
these cancelled shares were returned to the status of authorized and unissued
shares of the Company. No consideration was given by the Company in this
transaction. The effect of this transaction was to reduce the carrying par value
of shares surrendered and a corresponding increase to additional paid-in
capital.
9
Energroup Technologies Corporation
(a development stage company)
Notes to Condensed Financial Statements - Continued
June 30, 2007 and 2006
Note G - Capital Stock Transactions - Continued
Pursuant to the terms of the Stock Purchase Agreement, on May 3, 2007, the
Company's Board of Directors declared a special cash distribution of $0.1219 per
share to the stockholders of record of the Company as of May 17, 2007 (Record
Date). Neither HFI, LP or the shares surrendered by Jenson Services or James P.
Doolin or Alycia Anthony participated in the special cash distribution. The
special cash distribution was paid on May 29, 2007, to stockholders of record on
the Record Date, subject to the closing of the Stock Purchase Agreement. The
special cash distribution was paid to the holders of an aggregate 2,297,421
shares of its common stock, after giving effect to the cancellation of 1,350,000
shares discussed above, which will resulted in a total cash distribution of
approximately $280,000. The special cash distribution was a condition of the
closing of the Stock Purchase Agreement.
Further, the Stock Purchase Agreement contains covenants that require HFI, LP,
in its capacity as controlling stockholder of the Company following closing, to
agree that it will not approve any reverse splits other than a one-time reverse
split of not greater than 1-for-7 without the prior consent of the Company's
former officers as representatives of the Company's continuing stockholders;
that it will not authorize the issuance of any additional shares of common stock
or securities convertible into shares of common stock except in connection with
a combination transaction with a corporation with current business operations (a
"Going Public Transaction"); and that it will not allow the Company to enter
into a Going Public Transaction unless the Company, on a combined basis with the
operating entity with which it completes a Going Public Transaction, satisfies
the financial conditions for listing on the NASDAQ Small-Cap Market immediately
following the closing of the Going Public Transaction. The Stock Purchase
Agreement also grants demand and "piggy back" registration rights to HFI, LP and
the any continuing holders of the Company's common stock that are deemed to be
"restricted securities."
(Remainder of this page left blank intentionally)
10
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Caution Regarding Forward-Looking Information
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) Results of Operations
The Company had no revenue for either of the six month periods ended June 30,
2007 and 2006, respectively.
General and administrative expenses for the six month periods ended June 30,
2007 and 2006 were related the maintenance of the corporate entity, legal costs
related to the May 2007 change in control and related sale of common stock, and
compliance with the Securities Exchange Act of 1934, as amended.
Earnings per share for the respective six month periods ended June 30, 2007 and
2006 were $(0.01) and $-0-, respectively, based on the weighted-average shares
issued and outstanding at the end of each respective period.
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under the Securities Exchange Act of 1934 unless and until
such time that the Company completes a business combination transaction.
At June 30, 2007 and 2006, respectively, the Company had working capital of
approximately $17,944 and $(20,773), respectively.
It is the belief of management and significant stockholders that they will
provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity will be present. However, there is no legal
obligation for either management or significant stockholders to provide
additional future funding. Should this pledge fail to provide financing, the
Company has not identified any alternative sources. Consequently, there is
substantial doubt about the Company's ability to continue as a going concern.
The Company's need for working capital may change dramatically as a result of
any business acquisition or combination transaction. There can be no assurance
that the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
11
Plan of Business
General
The Company intends to locate and combine with an existing, privately-held
company which is profitable or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, the Company does
not intend to combine with a private company which may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, the Company's management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage attorneys
and/or accountants in its efforts to investigate a combination candidate and to
consummate a business combination. The Company may require payment of fees by
such combination candidate to fund the investigation of such candidate. In the
event such a combination candidate is engaged in a high technology business, the
Company may also obtain reports from independent organizations of recognized
standing covering the technology being developed and/or used by the candidate.
The Company's limited financial resources may make the acquisition of such
reports difficult or even impossible to obtain and, thus, there can be no
assurance that the Company will have sufficient funds to obtain such reports
when considering combination proposals or candidates. To the extent the Company
is unable to obtain the advice or reports from experts, the risks of any
combined enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal stockholders or general
partners:
(1) will not have been convicted of securities fraud, mail fraud, tax
fraud, embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
(2) will not have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
(3) will not have been a defendant in a civil action which resulted in a
final judgement against it or him awarding damages or rescission based
upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination candidates.
Such persons will also ask pertinent questions of others who may be involved in
the combination proceedings. However, the officers and directors of the Company
will not generally take other steps to verify independently information obtained
in this manner which is favorable. Unless something comes to their attention
which puts them on notice of a possible disqualification which is being
concealed from them, such persons will rely on information received from the
management of the prospective combination candidate and from others who may be
involved in the combination proceedings.
12
(3) Liquidity and Capital Resources
It is the belief of management and significant stockholders that they will
provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity will be present. However, there is no legal
obligation for either management or significant stockholders to provide
additional future funding. Should this pledge fail to provide financing, the
Company has not identified any alternative sources. Consequently, there is
substantial doubt about the Company's ability to continue as a going concern.
The Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location
of a merger or acquisition candidate. Accordingly, there can be no assurance
that sufficient funds will be available to the Company to allow it to cover the
expenses related to such activities.
Regardless 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 stock in lieu of cash.
Item 3 - Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (Exchange Act), as of June 30, 2007. Based on this evaluation, our
principal executive officer and principal financial officer concluded that our
disclosure controls and procedures are effective in alerting them on a timely
basis to material information relating to our Company required to be included in
our reports filed or submitted under the Exchange Act.
(b) Changes in Internal Controls
There were no significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls over
financial reporting that occurred during the quarter ended June 30, 2007 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Recent Sales of Unregistered Securities and Use of Proceeds
On or about March 12, 2007, the Company authorized the issuance of 5,462 shares
of common stock in conjunction with a reconciliation of its stock transfer
records. The Company received a "General Release" in conjunction with this
issuance. The Company completed the issuance on the belief the recipients of the
shares may be defined as a "Protected Purchaser" under Section 70A-8-303 of the
Utah Code Annotated and Article 8 of the Uniform Commercial Code.
On May 3, 2007, the Company, along with its directors and executive officers,
entered into a Stock Purchase Agreement (Stock Purchase Agreement) with the
Halter Financial Investments, L.P., a Texas limited partnership (HFI,LP),
pursuant to which the Company agreed to sell to HFI, LP 11,200,000 shares of
unregistered, restricted common stock for $350,000 cash. This transaction closed
on May 22, 2007. The Company relied upon Section 4(2) of The Securities Act of
1933, as amended, for an exemption from registration of these shares and no
underwriter was used in this transaction. As a result of this transaction, HFI,
LP became the Company's controlling stockholder, owning approximately 82.98% of
the 13,497,421 shares currently issued and outstanding.
In conjunction with the above transaction, on May 3, 2007, certain
then-principal shareholders of the Company, as a condition of the closing of the
Stock Purchase Agreement surrendered and cancelled 1,350,000 then-issued and
outstanding shares of common stock to the Company. These shares were surrendered
as follows: Jenson Services, Inc., which then owned 2,480,500 shares (or
approximately 68% of the Company's outstanding voting securities) delivered
375,000 of its shares for cancellation; James P. Doolin, which then owned
475,000 shares (or approximately 13% of the Company's outstanding voting
securities) delivered 475,000 shares for cancellation; and his sister, Alycia
Anthony, which then owned 500,000 shares (or approximately 14% of the Company's
outstanding voting securities) delivered 500,000 shares for cancellation. All of
these cancelled shares were returned to the status of authorized and unissued
shares of the Company. No consideration was given by the Company in this
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transaction. The effect of this transaction was to reduce the carrying par value
of shares surrendered and a corresponding increase to additional paid-in
capital.
Pursuant to the terms of the Stock Purchase Agreement, on May 3, 2007, the
Company's Board of Directors declared a special cash distribution of $0.1219 per
share to the stockholders of record of the Company as of May 17, 2007 (Record
Date). Neither HFI, LP or the shares surrendered by Jenson Services or James P.
Doolin or Alycia Anthony participated in the special cash distribution. The
special cash distribution was paid on May 29, 2007, to stockholders of record on
the Record Date, subject to the closing of the Stock Purchase Agreement. The
special cash distribution was paid to the holders of an aggregate 2,297,421
shares of its common stock, after giving effect to the cancellation of 1,350,000
shares discussed above, which will resulted in a total cash distribution of
approximately $280,000. The special cash distribution was a condition of the
closing of the Stock Purchase Agreement.
Further, the Stock Purchase Agreement contains covenants that require HFI, LP,
in its capacity as controlling stockholder of the Company following closing, to
agree that it will not approve any reverse splits other than a one-time reverse
split of not greater than 1-for-7 without the prior consent of the Company's
former officers as representatives of the Company's continuing stockholders;
that it will not authorize the issuance of any additional shares of common stock
or securities convertible into shares of common stock except in connection with
a combination transaction with a corporation with current business operations (a
"Going Public Transaction"); and that it will not allow the Company to enter
into a Going Public Transaction unless the Company, on a combined basis with the
operating entity with which it completes a Going Public Transaction, satisfies
the financial conditions for listing on the NASDAQ Small-Cap Market immediately
following the closing of the Going Public Transaction. The Stock Purchase
Agreement also grants demand and "piggy back" registration rights to HFI, LP and
the any continuing holders of the Company's common stock that are deemed to be
"restricted securities."
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
stockholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Energroup Technologies Corporation
Dated: August 15, 2007 /s/ Timothy P. Halter
------------- ---------------------
Timothy P. Halter
President, Chief Executive Officer,
Chief Financial Officer and Sole Director
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