With us today is Frank C. Smeenk President & Chief Executive Officer of KWG Resources Inc. Mr. Smeenk discusses recent conversation with Noront Resources after proposed acquisition of Cliffs Chromite was announced.
Item 2 - Management's Discussion and Analysis or Plan of Operation
As of June 30, 2010, total assets were $21,732,501 consisting primarily of the assets of Evergreen. Current liabilities totaled $9,976,482, which consists of $3,442,298 of accounts payable and accrued expenses and $6,534,184 of notes payable. As of December 31, 2009, total assets were 227,553 and current liabilities were $3,408,590. Our revenues for the three months ended June 30, 2010 and 2009 were $135,000 and $121,393 respectively. The Company reported a loss for the three months ended June 30, 2010 of $2,092,112 versus a loss of $1,405,107 for the three months ended June 30, 2009. The increase was primarily due to non-cash charges associated with warrants and stock issued for services.
Our revenues for the six months ended June 30, 2010 and 2009 were $4,618,457 and $204,254 respectively. The Company reported a loss for the six Months Ended June 30, 2010 of $1,968,380 versus a loss of $3,339,574 for the six months ended June 30, 2009.
The home heating oil business is seasonal. In the second quarter the company did not have sales of home heating oil primarily due to the seasonality of that business. During the quarter, Price Energy did not do any appreciable marketing activities to update and activate the web site. Further it reduced programming and administrative staff pending receipt of the funding required to operate the company. Operating expenses thus were virtually nil as a result of no Cost of Sales and no administrative expenses. The Company anticipates receipt of the necessary funding as it enters the cold season and is prepared to activate its web site, address the amounts owed to its dealers and operate as it has done in prior years.
The biodiesel facility in South Carolina also did not have any sales in the second quarter. The Company delayed opening of that facility pending passage of a tax credit by the US Congress. That bill did not pass in the second quarter and the prospects for such a bill passing in 2010 are uncertain. The Company has chosen to open the facility in the third quarter with or without passage of the bill and anticipates revenue in the third quarter 2010.
Our financial statements are prepared using principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. From January 13, 2010 with the acquisition completed, the Company's operations have provided positive earnings and cash flow. Prior to the acquisition, the Company had significantly reduced overhead and operating costs. As a result of the merger with Evergreen and acquisition of assets and the positive cash flow being generated by the Company, the Company expects to be able to fund current operations and is evaluating options for recapitalization of its existing debt.
Price Energy represented the primary contributor of Revenue and Cash Flow for the Company for the Three and Six Months ended June 30, 2010. Evergreen owns 82% of the outstanding common stock of Price Energy. Price Energy is an industry leading e-commerce based business selling energy products and services to its residential and commercial customers. Through its proprietary internet platform, sales of energy through Price Energy were $4,343,885 and for the Six Months ended June 30, 2010. Sales through Price Energy through the second quarter were primarily of home heating oil. However management of Price Energy is expanding the scope and breadth of its offerings through an aggressive marketing program to include other energy related products throughout the United States.
Rental and Throughput Revenues
Evergreen's subsidiary owns the company that owns certain real estate commonly known as the Rockaway Oil Terminal located in Rockaway, New Jersey consisting of 5.8 acres, two office buildings, fuel loading rack, and fuel tanks with a storage capacity of 3,150,000 gallons (75,000 barrels). The Rockaway Terminal was acquired by Evergreen from Able Energy, Inc. on December 1, 2009. At that time, Able entered into a 20-year triple net lease with Evergreen for the use of the Rockaway Terminal (the "Lease"). An addendum to the Lease was executed whereby Evergreen shall receive throughput and delivery fees in addition to its rent under the Lease.
Evergreen owns an interest in a South Carolina Biodiesel Facility ("Biodiesel Facility"). The Biodiesel Facility is a producer of soybean oil based biodiesel, its production by-product glycerin, and has a 36-million gallon per year production capacity for biodiesel. In 2010 the US House of Representatives passed an incentive package providing for a $1.00 per gallon credit to provide incentives to produce renewable energy resources such as biodiesel. In early 2010, the Senate passed a similar piece of legislation. The bill ultimately was stripped from the consolidated bill and did not pass. The bill has been reintroduced in both houses and may be passed before the end of the year. Management has made a decision to reopen the plant in the third quarter and expects to begin operations in 2010.
In addition to the interest in the Biodiesel Facility, Evergreen owns a Fuel Contract. The Fuel Contract acquired is a five year 100,000,000 gallon per year agreement to provide diesel fuel to Green Energy Cooperative. For the period January 1, 2010 to June 30, 2010, there were no sales under this contract pending reconciliation of legislation passed in December 2010 by the US House of Representatives and in June 2010 by the US Senate whereby the incentive package providing for a $1.00 per gallon credit to provide incentives to produce renewable energy resources such as biodiesel is renewed. This legislation was stripped from a bill in Congress during the second quarter and did not pass as anticipated. A similar bill has been introduced in the third quarter.
Industrial Coatings - The Company shut down its operating plant in the United States and curtailed its staff in China. Management plans to evaluate Industrial Coating opportunities on a case by case basis. In the United States it will toll out any production needs until it is able to obtain enough sales to warrant re-opening a manufacturing facility. In China, management has reduced staff and has maintained sales contacts with certain customers, but has not had the working capital necessary to pursue certain opportunities. The Company anticipates that it will enter into sales contracts in the latter part of 2010.
RPA/Plastics Division - The Company shut down operations in this Division in the First Quarter of 2010.
Exousia has made great strides in its efforts to transform its product offerings from Industrial Coatings and Plastics to a broad provider of green energy fuel products.