x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
MONTANA
|
82-0369233
|
|
(State
or other jurisdiction of incorporation)
|
(IRS
Employer Identification Number)
|
|
2500 CITY WEST BOULEVARD, SUITE 300 HOUSTON, TEXAS
|
77042
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
(Do
not check if smaller reporting company)
|
Page No.
|
||
PART
I FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements
|
3
|
Consolidated
Balance Sheets – September 30, 2010 (Unaudited) and December 31,
2009
|
3
|
|
Unaudited
Consolidated Statements of Operations-Three and Nine Months
Ended September 30, 2010 and 2009
|
4
|
|
Unaudited
Consolidated Statement of Changes in Stockholders’ Deficit – Period Ended
September 30, 2010
|
5
|
|
Unaudited
Consolidated Statements of Cash Flows - Nine Months Ended September 30,
2010 and 2009
|
6
|
|
Notes
to Unaudited Consolidated Financial Statements
|
7
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risks
|
20
|
Item
4T.
|
Controls
and Procedures
|
20
|
PART
II OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
20
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
21
|
Item
3.
|
Defaults
Upon Senior Securities
|
21
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
21
|
Item
5.
|
Other
Information
|
21
|
Item
6.
|
Exhibits
|
22
|
Signatures
|
23
|
ADINO
ENERGY CORPORATION
|
||||||||
Consolidated
Balance Sheet
|
||||||||
AS
OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009
|
||||||||
September
30, 2010
|
December
31, 2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Cash
in bank
|
$ | 553,452 | $ | 502,542 | ||||
Accounts
receivable, net of allowances
|
11,000 | 96,734 | ||||||
Deposits
and prepaid assets
|
13,968 | 255 | ||||||
Notes
receivable, net of unamortized discount of $64,830
|
685,170 | - | ||||||
Interest
receivable
|
375,208 | - | ||||||
Total
current assets
|
1,638,798 | 599,531 | ||||||
Fixed
assets, net of accumulated depreciation of $54,735 and $28,366,
respectively
|
436,976 | 32,659 | ||||||
Oil
and gas properties (full cost method), net of accumulated amortization,
depreciation, depletion, accretion and asset impairment
|
177,254 | - | ||||||
Note
receivable, net of unamortized discount of $114,138
|
- | 635,862 | ||||||
Goodwill
|
1,566,379 | 1,559,240 | ||||||
Other
assets
|
- | 375,208 | ||||||
Total
non-current assets
|
2,180,609 | 2,602,969 | ||||||
TOTAL
ASSETS
|
$ | 3,819,407 | $ | 3,202,500 | ||||
LIABILITIES
AND SHAREHOLDERS’ DEFICIT
|
||||||||
Account
payable
|
$ | 499,306 | $ | 511,747 | ||||
Accounts
payable - related party
|
39,304 | 42,871 | ||||||
Accrued
liabilities
|
342,303 | 330,568 | ||||||
Accrued
liabilities - related party
|
862,687 | 1,023,687 | ||||||
Contract
clawback provision
|
293,945 | - | ||||||
Notes
payable - current portion
|
1,813,479 | 291,618 | ||||||
Interest
payable
|
622,500 | 510,000 | ||||||
Derivative
liability
|
112,152 | - | ||||||
Deferred
gain - current portion
|
391,272 | 391,272 | ||||||
Total
current liabilities
|
4,976,948 | 3,101,763 | ||||||
Deferred
gain, net of current portion
|
782,563 | 1,076,022 | ||||||
Notes
payable, net of current portion
|
416,098 | 1,522,483 | ||||||
TOTAL
LIABILITIES
|
6,175,609 | 5,700,268 | ||||||
SHAREHOLDERS’
DEFICIT
|
||||||||
Preferred
stock, $0.001 par value, 20,000 shares authorized, no shares issued and
outstanding
|
- | - | ||||||
Capital
stock, $0.001 par value, 500 million shares authorized, 105,760,579 and
93,260,579 shares issued and outstanding at September 30, 2010 and
December 31, 2009, respectively
|
105,760 | 93,260 | ||||||
Additional
paid in capital
|
13,740,442 | 13,527,242 | ||||||
Retained
deficit
|
(16,202,404 | ) | (16,118,270 | ) | ||||
Total
shareholders’ deficit
|
(2,356,202 | ) | (2,497,768 | ) | ||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
$ | 3,819,407 | $ | 3,202,500 | ||||
See
accompanying notes to the financial statements
|
Three months ended
|
Nine
months ended
|
|||||||||||||||
September
30
|
September
30
|
September
30
|
September
30
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
REVENUES
AND GROSS MARGINS
|
||||||||||||||||
Terminal
operations
|
$
|
365,817
|
$
|
533,998
|
$
|
1,488,483
|
$
|
1,524,985
|
||||||||
Oil
and gas operations
|
23,202
|
-
|
23,202
|
-
|
||||||||||||
Total
revenues
|
389,019
|
533,998
|
1,511,685
|
1,524,985
|
||||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Cost
of product sales
|
9,427
|
100,374
|
239,542
|
355,868
|
||||||||||||
Payroll
and related expenses
|
5,613
|
-
|
5,613
|
-
|
||||||||||||
Terminal
management
|
100,090
|
99,990
|
300,070
|
300,990
|
||||||||||||
General
and administrative
|
197,117
|
129,245
|
515,745
|
396,034
|
||||||||||||
Legal
and professional
|
62,828
|
36,992
|
177,825
|
129,102
|
||||||||||||
Consulting
fees
|
242,749
|
127,058
|
558,680
|
599,239
|
||||||||||||
Repairs
|
1,444
|
419
|
7,807
|
602
|
||||||||||||
Depreciation
expense
|
17,465
|
2,542
|
22,550
|
9,629
|
||||||||||||
Operating
supplies
|
19,961
|
4,406
|
19,961
|
7,656
|
||||||||||||
Total
operating expenses
|
656,694
|
501,026
|
1,847,793
|
1,799,120
|
||||||||||||
OPERATING
GAIN (LOSS)
|
(267,675
|
)
|
32,972
|
(336,108
|
)
|
(274,135
|
)
|
|||||||||
OTHER
INCOME AND EXPENSES
|
||||||||||||||||
Interest
income
|
17,341
|
16,923
|
49,386
|
49,141
|
||||||||||||
Interest
expense
|
(49,317
|
)
|
(42,391
|
)
|
(129,789
|
)
|
(124,828
|
)
|
||||||||
Gain
from lawsuit
|
98,237
|
97,819
|
293,876
|
301,355
|
||||||||||||
Loss
on derivative
|
(76,314
|
)
|
-
|
(76,314
|
)
|
-
|
||||||||||
Gain
on change in fair value of clawback
|
114,815
|
-
|
114,815
|
-
|
||||||||||||
Other
income
|
-
|
3,700
|
-
|
5,904
|
||||||||||||
Total
other income and expense
|
104,762
|
76,051
|
251,974
|
231,572
|
||||||||||||
NET
INCOME (LOSS)
|
$
|
(162,913
|
)
|
$
|
109,023
|
$
|
(84,134
|
)
|
$
|
(42,563
|
)
|
|||||
Net
income (loss) per share, basic and fully diluted
|
$
|
(0.00
|
)
|
$
|
0.00
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|||||
Weighted
average shares outstanding, basic and fully diluted
|
104,151,883
|
93,260,579
|
97,203,802
|
89,879,627
|
Shares
|
Amount
|
Additional
Paid in
Capital
|
Retained
Deficit
|
Total
|
||||||||||||||||
Balance
December 31, 2009
|
93,260,579
|
$
|
93,260
|
$
|
13,527,242
|
$
|
(16,118,270
|
)
|
$
|
(2,497,768
|
)
|
|||||||||
Shares
issued for services
|
2,500,000
|
2,500
|
73,200
|
-
|
75,700
|
|||||||||||||||
Shares
issued for acquisition
|
10,000,000
|
10,000
|
140,000
|
-
|
150,000
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
(84,134
|
)
|
(84,134
|
)
|
|||||||||||||
Balance
September 30, 2010
|
105,760,579
|
$
|
105,760
|
$
|
13,740,442
|
$
|
(16,202,404
|
)
|
$
|
(2,356,202
|
)
|
September
30, 2010
|
September
30, 2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (84,134 | ) | $ | (42,563 | ) | ||
Adjustments
to reconcile net loss to net cash provided from (used in) operating
activities:
|
||||||||
Depreciation
and amortization
|
22,550 | 9,629 | ||||||
Bad
debt expense
|
30,000 | - | ||||||
Options
issued for services
|
- | 21,995 | ||||||
Amortization
of discount on note receivable
|
(49,308 | ) | (39,876 | ) | ||||
Stock
based compensation
|
- | 52,500 | ||||||
Shares
issued for services
|
75,700 | 19,000 | ||||||
Amortization
of note discount
|
6,504 | - | ||||||
Loss
on derivative
|
76,314 | - | ||||||
Gain
on change in fair value of clawback provision
|
(114,815 | ) | - | |||||
Gain
on lawsuit settlement
|
(293,459 | ) | (301,355 | ) | ||||
Gain
on asset disposal
|
- | (2,204 | ) | |||||
Change
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
55,734 | (10,109 | ) | |||||
Other
assets
|
(13,713 | ) | 5,438 | |||||
Accounts
payable and accrued liabilities
|
(72,501 | ) | 391,186 | |||||
Net
cash provided from (used in) operating activities
|
$ | (361,128 | ) | $ | 103,641 | |||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases
of equipment
|
(32,772 | ) | (10,264 | ) | ||||
Principal
payments on note receivable
|
- | 44,845 | ||||||
Net
cash provided from (used in) investing activities
|
$ | (32,772 | ) | $ | 34,581 | |||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Borrowing
on debt
|
457,500 | - | ||||||
Principal
payments on note payable
|
(12,690 | ) | (6,238 | ) | ||||
Net
cash provided from (used in) financing activities
|
$ | 444,810 | $ | (6,238 | ) | |||
Net
change in cash and cash equivalents
|
50,910 | 131,984 | ||||||
Cash
and cash equivalents, beginning of period
|
502,542 | 30,228 | ||||||
Cash
and cash equivalents, end of period
|
$ | 553,452 | $ | 162,212 | ||||
Cash
paid for taxes
|
$ | - | $ | - | ||||
Cash
paid for Interest
|
$ | 12,285 | $ | 12,378 | ||||
Non-cash
transactions:
|
||||||||
Contract
clawback provision
|
$ | 293,945 | $ | - | ||||
Acquisition
purchased with stock
|
$ | 150,000 | $ | - | ||||
Asset
retirement obligation
|
$ | 19,728 | $ | - | ||||
Note
discount
|
$ | 35,838 | $ | - |
Fair
Value at July 1, 2010
|
||||
Assets
acquired:
|
||||
Tangible
drilling costs
|
$ | 155,700 | ||
Proved
oil and gas properties
|
71,060 | |||
Machinery
and equipment
|
324,861 | |||
Total
acquired asset fair value
|
551,621 | |||
Less
liability assumed:
|
||||
Contract
clawback provision
|
(408,760 | ) | ||
Consideration
- Common stock
|
(150,000 | ) | ||
Goodwill
from acquisition
|
$ | 7,139 |
Level
1:
|
Quoted
prices in active markets for identical assets or
liabilities.
|
Level
2:
|
Quoted
prices for similar assets or liabilities in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations in which all significant inputs are observable in
active markets.
|
Level
3:
|
Valuations
derived from valuation techniques in which one or more significant inputs
are unobservable.
|
September 30, 2010
|
||||||||||||||||||||
Description
|
Level 1
|
Level 2
|
Level 3
|
Total Realized
Gain (Loss) due to
valuation
|
Total Unrealized
Gain (Loss) due to
valuation
|
|||||||||||||||
Goodwill
|
$ | - | $ | - | $ | 1,566,379 | $ | - | $ | - | ||||||||||
Asher
note - derivative
|
- | - | 37,632 | (1,794 | ) | - | ||||||||||||||
BWME
notes - derivative
|
- | - | 64,978 | (64,978 | ) | - | ||||||||||||||
Haag
warrants - derivative
|
- | - | 9,542 | (9,542 | ) | - | ||||||||||||||
Contract
clawback provision
|
293,945 | 114,815 | - | |||||||||||||||||
Total
|
$ | - | $ | - | $ | 1,972,476 | $ | 38,501 | $ | - |
December 31, 2009
|
||||||||||||||||||||
Description
|
Level 1
|
Level 2
|
Level 3
|
Total Realized
Gain (Loss) due to
valuation
|
Total Unrealized
Gain (Loss) due to
valuation
|
|||||||||||||||
Goodwill
|
$ | - | $ | - | $ | 1,566,379 | $ | - | $ | - | ||||||||||
Total
|
$ | - | $ | - | $ | 1,566,379 | $ | - | $ | - |
September
30, 2010
|
December 31, 2009
|
|||||||
Sundlun,
net of unamortized discount of $64,830 and $114,138,
respectively
|
$
|
685,170
|
$
|
635,862
|
||||
Less:
current portion
|
(685,170
|
)
|
-
|
|||||
Total
long-term notes receivable
|
$
|
-
|
$
|
635,862
|
September
30, 2010
|
December 31, 2009
|
|||||||
Machinery
and equipment
|
$
|
417,161
|
$
|
-
|
||||
Vehicles
|
47,427
|
47,427
|
||||||
Leasehold
improvements
|
23,789
|
10,264
|
||||||
Office
equipment
|
3,334
|
3,334
|
||||||
Subtotal
|
491,711
|
61,025
|
||||||
Less:
Accumulated depreciation
|
(54,735
|
)
|
(28,366
|
)
|
||||
Total
|
$
|
436,976
|
$
|
32,659
|
September
30, 2010
|
December 31, 2009
|
|||||||
Tangible
drilling costs
|
$
|
86,900
|
$
|
-
|
||||
Proved
oil and gas properties
|
71,060
|
-
|
||||||
Asset
retirement cost
|
19,294
|
-
|
||||||
Total
|
$
|
177,254
|
$
|
-
|
September
30, 2010
|
December 31, 2009
|
|||||||
Accrued
accounting and legal fees
|
$
|
116,100
|
$
|
119,000
|
||||
Customer
deposits
|
110,000
|
110,000
|
||||||
Property
and payroll tax accrual
|
62,760
|
76,446
|
||||||
Asset
retirement obligation
|
19,728
|
-
|
||||||
Deferred
lease liability
|
33,715
|
25,122
|
||||||
Total
accrued liabilities
|
$
|
342,303
|
$
|
330,568
|
||||
Accrued
salaries-related party
|
$
|
862,687
|
$
|
1,023,687
|
September
30, 2010
|
December 31, 2009
|
|||||||
Note
payable - Stuart Sundlun, bearing interest of 10% per
annum, due August 7, 2011
|
$
|
1,500,000
|
$
|
1,500,000
|
||||
Note
payable - Bill Gaines, non interest bearing, due on demand
|
2,000
|
9,000
|
||||||
Note
payable - Gulf Coast Fuels, bearing interest of $25,000
|
275,000
|
275,000
|
||||||
Note
payable - Asher, bearing interest of 8% per annum, due May 13, 2011, net
of discount of $29,334
|
28,166
|
-
|
||||||
Notes
payable - BWME, bearing interest at 8% per annum, due September 2,
2013,
|
400,000
|
-
|
||||||
Note
payable - GMAC, bearing interest of 11.7% per annum with 60 monthly
payments of $895, due May 13, 2013
|
24,411
|
30,101
|
||||||
Total
notes payable
|
$
|
2,229,577
|
$
|
1,814,101
|
||||
Less:
current portion
|
(1,813,479
|
)
|
(291,618
|
)
|
||||
Long
term note payable
|
$
|
416,098
|
$
|
1,522,483
|
Derivative Liability
|
December 31, 2009
|
Additions
|
Gain (loss)
from valuation
|
September 30, 2010
|
||||||||||||
Asher
note - derivative liability
|
- | $ | 35,838 | $ | 1,794 | $ | 37,632 | |||||||||
BWME
notes - derivative liability
|
- | - | 64,978 | 64,978 | ||||||||||||
Haag
warrants - derivative liability
|
- | - | 9,542 | 9,542 | ||||||||||||
Total
|
- | $ | 35,838 | $ | 76,314 | $ | 112,152 |
For
the three months ended September 30,
|
For
the nine months ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Numerator:
|
||||||||||||||||
Basic
net income (loss)
|
$ | (162,913 | ) | $ | 109,023 | $ | (84,134 | ) | $ | (42,563 | ) | |||||
Diluted
net income (loss)
|
$ | (162,913 | ) | $ | 109,023 | $ | (84,134 | ) | $ | (42,563 | ) | |||||
Denominator:
|
||||||||||||||||
Basic
weighted average common shares outstanding
|
104,151,883 | 93,260,579 | 97,203,802 | 89,879,627 | ||||||||||||
Effect
of dilutive securities
|
||||||||||||||||
Convertible
note - Asher
|
1,104,504 | 0 | 372,214 | 0 | ||||||||||||
Dilutive
weighted average common shares outstanding
|
105,256,388 | 93,260,579 | 97,576,016 | 89,879,627 | ||||||||||||
Basic
net income (loss) per share
|
$ | ( 0.00 | ) | $ | 0.00 | $ | ( 0.00 | ) | $ | (0.00 | ) | |||||
Diluted
net income (loss) per share
|
$ | ( 0.00 | ) | $ | 0.00 | $ | ( 0.00 | ) | $ | (0.00 | ) |
Quarter
Ended
|
Quarter
Ended
|
Nine Months
Ended
|
Nine Months
Ended
|
|||||||||||||||||||||||||||||
September 30,
2010
|
%
|
September 30,
2009
|
%
|
September 30,
2010
|
%
|
September 30,
2009
|
%
|
|||||||||||||||||||||||||
Customer
A
|
$
|
-
|
0
|
%
|
$
|
53,550
|
9
|
%
|
$
|
13,402
|
1
|
%
|
$
|
160,650
|
10
|
%
|
||||||||||||||||
Customer
B
|
$
|
366,000
|
100
|
%
|
$
|
48,906
|
9
|
%
|
$
|
1,020,000
|
69
|
%
|
$
|
308,103
|
20
|
%
|
||||||||||||||||
Customer
C
|
$
|
-
|
0
|
%
|
$
|
219,744
|
39
|
%
|
$
|
142,642
|
10
|
%
|
$
|
545,693
|
35
|
%
|
||||||||||||||||
Customer
D
|
$
|
-
|
0
|
%
|
$
|
116,023
|
20
|
%
|
$
|
61,110
|
4
|
%
|
$
|
347,325
|
22
|
%
|
||||||||||||||||
Customer
E
|
$
|
-
|
0
|
%
|
$
|
90,000
|
16
|
%
|
$
|
251,042
|
17
|
%
|
$
|
90,000
|
6
|
%
|
Exhibit
|
||
Number
|
Exhibit
|
|
3.1
|
Articles
of Incorporation (as amended January 30, 2008) (incorporated by reference
to our Form 10-K filed on March 18, 2009)
|
|
3.2
|
By-laws
of Golden Maple Mining and Leaching Company, Inc. (now Adino Energy
Corporation) (incorporated by reference to our Form 10-K filed on March
18, 2009)
|
|
10.1
|
Terminaling
Services Agreement for Commingled Products
|
|
10.2
|
Amendment
to Terminaling Agreement
|
|
10.2
|
Lease
with Lone Star Fuel Storage and Transfer, LLC (incorporated by
reference to our Form 10-K filed on March 18, 2009)
|
|
10.3
|
Resolution
of the Board of Directors of February 20, 2009 (incorporated by reference
to our Form 10-Q filed on August 7, 2009)
|
|
10.4
|
Resolution
of the Board of Directors of March 26, 2009 (incorporated by reference to
our Form 10-Q filed on August 7, 2009)
|
|
10.5
|
Resolution
of the Board of Directors of June 30, 2009 (incorporated by reference to
our Form 10-Q filed on November 10, 2009)
|
|
10.6
|
Resolution
of the Board of Directors of December 30, 2009 (incorporated by reference
to our Form 10-Q filed on November 10, 2009)
|
|
10.7
|
Membership
Interest Purchase Agreement
|
|
10.8
|
Post-Closing
Agreement
|
|
14
|
Code
of Business Conduct and Ethics (incorporated by reference to our Form
10-K filed on March 18, 2009)
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Rule
15d-14(a) of the Exchange Act
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 15d-14(a) of the Exchange
Act
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
ADINO
ENERGY CORPORATION
|
|
By:
|
/s/
Timothy G. Byrd, Sr.
|
Timothy
G. Byrd, Sr.
|
|
CEO,
CFO and Director
|
|
November
19, 2010
|