Notes to Consolidated Financial Statements (Unaudited)
March 31, 2013
NOTE 1–ORGANIZATION AND BASIS OF PRESENTATION
Organization and Liquidation –
On October 16, 2000, iShopper.com, Inc. changed its name to Ensurge, Inc., which is referred to herein as the Company. On January 1, 2002, the Company began liquidation of its assets.
During 2009 the Company started a new phase of operations with the mining industry; accordingly, the accompanying financial statements are presented on a GAAP basis of accounting, rather than on a liquidation basis.
Basis of Presentation –
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. These unaudited condensed financial statements should be read in conjunction with the Company’s annual financial statements and the notes thereto for the year ended December 31, 2012, included in the Company’s annual report on Form 10-K, especially the information included in Note 1 to those financial statements, “Summary of Significant Accounting Policies.” In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to fairly present the Company’s financial position as of March 31, 2013, and its results of operations and cash flows for the three months ended March 31, 2013 and 2012. The results of operations for the three months ended March 31, 2013, may not be indicative of the results that may be expected for the year ending December 31, 2013.
Business Condition
– The Company has suffered losses from operations, and the Company had a working capital deficit in the amount $3,608,330 at March 31, 2013.
During the month of October 2011 the Company entered into two twelve month convertible Notes Payable for $605,000 each, for a total funding of $1,210,000, with an initial issue discount of 10% and total proceeds of $1,100,000, which are collateralized by all the assets of the Company. These notes may be converted at a fixed price of $0.50 per share of the Company’s common stock, which may be converted at the option of the lender. These notes also include 950,000 warrants each for a total of 1,900,000 warrants at an exercise price of $1.00 per share and have a cashless exercise provision. The warrants have a 5 year term. In case of default, the Note may be converted into common stock at $0.50 per share. During November 2012, the Company negotiated an extension of these two notes payable, which are due on March 15, 2013 and are currently in default. The principal was increase from $550,000 per note to $756,250, or a total of $1,512,500. As part of this negotiation to extend the note, the Company agreed to pay a total of 900,000 shares of common stock.
Effective March 2, 2012, the Company accepted $380,000 in private placement funds from accredited investors in exchange for units consisting of seven hundred sixty thousand (760,000) shares of the Company’s common stock, plus three hundred eighty thousand (380,000) warrants with an exercise price of $1.00.
During November 2012 the Company entered into several 12 month notes payable for an aggregate of $150,000.
The proceeds of the financing are being used by the Company to fund the exploration for gold mines or to acquire relating mining assets, either directly or through one or more partnerships or joint ventures, in Brazil or elsewhere in South America.
Principles of Consolidation
– The financial statements have been consolidated with its wholly owned subsidiary, Ensurge Brazil, LTDA., which was incorporated in Sao Paulo, Brazil on April 18, 2011. Currently the Brazil entity has no assets, liabilities, revenues or expenses.
Basic and Diluted Earnings Per Share
– Basic earnings per common share is computed by dividing net gain by the weighted-average number of common shares outstanding during the period. Diluted gain per share is calculated to give effect to potentially issuable common shares, which include stock options and stock warrants except during loss periods when those potentially issuable common shares would decrease loss per share. As of March 31, 2013, the Company had a total of 8,330,000 warrants outstanding which all have a 5 year term. As of March 31, 2013, the Company had a total of 7,500,000 options of which 7,500,000 have vested and none have been exercised. The options are all 10 year options with an exercise price ranging from $0.14 to $0.50.
Warrants:
The Company has granted warrants to purchase shares of Common Stock.
Warrants outstanding and exercisable at March 31, 2013 are as follows:
Range of
exercise price
|
|
|
Number
Outstanding
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
Weighted Average
Exercise Price
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.14 to $1.00
|
|
|
|
8,330,000
|
|
3.12 years
|
|
$
|
0.49
|
|
|
$
|
(3,998,400
|
)
|
Recently-Enacted Accounting Standards
Accounting Standards Update (“ASU”) No. 2011-09 through ASU No. 2013-07 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.
NOTE 2 – COMMITMENTS AND CONTINGENCIES
As part of our notes payable agreement, the lending parties are entitled to royalty payments per the terms of each agreement. These royalties are based upon the contract between the wholly owned subsidiary, Ensurge Brasil, LTDA, and the mine owner in Brazil. However, this contract has currently expired and the Company feels there is no further obligation or liabilities to either the mine owner or the note holders for these royalties.
NOTE 3 – ISSUANCE OF STOCK
There has been no stock transactions for the quarter ending March 31, 2013.
NOTE 4 – LEGAL ISSUES
On March 25, 2013 a Complaint was filed against Ensurge, by Randall K. Edwards and Gaia, Silva, Gaede & Associates in the amount of $74,924 and $18,627, respectively. These are liabilities for services performed, however, due to lack of funding the Company has not been able to pay these amount owed. These liabilities are booked as part of accounts payable.
NOTE 5 – SUBSEQUENT EVENTS
During April 2013, the Company entered into a 60 day note payable in the amount of $15,000, with an annual interest rate of 10%. This note is with a related party.
On May 8, 2013, in order to more fully devote his time and attention to the funding and opportunities of the Company’s Brazilian subsidiary, Ensurge Brasil LTDA, the Company has accepted the resignation of Jordan Estra as the Company’s Director and President/CEO and caused his appointment to the Board of Directors of its subsidiary Ensurge Brasil LTDA. The Company’s CFO, Jeff Hanks, shall be the Company’s acting President until replacement.
On May 9, 2013, the Company entered into a 6 month note payable in the amount of $23,000, with Workhorse Capital Leasing, LLC, with an annual interest rate of 22%.
On May 15, 2013, the Company entered into an agreement with Next View Capital, LP and Zadar, LLC, which have notes payable with an aggregate total of $ $1,512,500. As part of this agreement, these two notes will be moved to the Company’s wholly owned subsidiary, Ensurge Brasil, LTDA, thereby releasing Ensurge, Inc. of this Liability. As part of this agreement the Company will issue 1,000,000 shares of common stock to each note holder.
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued, and has determined there are no other events to disclose.