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Competitive business conditions, the issuer’s competitive position in the industry, and methods of competition
The industries in which we compete and intend to compete are highly competitive and, especially in the area of biofuel production, characterized by rapid technological advancement. Many of our competitors have greater resources than we do.
We compete in our current areas of operation by offering what we believe to be superior service at competitive prices. We also intend to be competitive by acquiring operating companies in the Waste Water Services sector and developing commercial applications to convert the collected waste into fuel and organic nutrients (fertilizer).
Sources and availability of labor, raw materials and the names of principal suppliers
Labor required to provide these services are made available either through existing employees or by subcontractors, depending on the demands of the project and availability of resources.
The supplies and materials required to conduct our operations are available through a wide variety of sources and are currently obtained through, a wide variety of sources.
Capital Resources
We are party to no binding agreements which would commit us to any material capital expenditures. We plan to attempt to acquire operating companies in the Wastewater Services sector and develop commercial applications to convert our vertically collected waste to energy and organic nutrients (fertilizer) and build and operate a significant waste collection and treatment plant in Central Florida.
We are currently investigating opportunities regarding the acquisition of companies in the Wastewater Services sector as well as the leasing or acquisition of companies in the Wastewater Services sector.
In the event that we enter into a binding agreement to either (a) acquire a company or companies in the Wastewater Services sector or (b) lease or acquire companies in the Wastewater Services sector we believe we will be required to undertake significant capital expenditures. Historically, our sources of liquidity have been (a) Revenues from operations (b) Loans from senior officers and (c) Bank Line of Credit.
In the event that we are required to raise additional cash from outside sources, we may issue equity securities or incur additional debt. There is no assurance that such funding, if required, will be available to us or, if available, will be available upon terms favorable to us.
Results of Operations for the Three and Nine Months ended September 30, 2011
Revenues for the three months ended September 30, 2011 were $1,422,018, as compared to $1,001,093 for the three months ended September 30, 2010. Revenues for the nine months ended September 30, 2011 were $4,378,747, as compared to $1,137,215 for the nine months ended September 30, 2010. This increase was primarily attributable to our acquisition of Brownies Waste Water Solutions, Inc. and the purchase and deployment of a substantial amount of equipment from Clean Fuel LLC. The Clean Fuel LLC equipment acquisition allowed us to grow substantially. The Brownies business combination was effective in providing a strong presence in Florida; however, we had to update much of the business and revenue model to make Brownies a competitive business in this industry.
Cost of goods sold for the three months ended September 30, 2011 was $1,110,311, as compared to $142,096 for the three months ended September 30, 2010. Cost of goods sold for the nine months ended September 30, 2011 was $3,004,779, as compared to $195,786 for the nine months ended September 30, 2010. This increase was due to the major equipment purchase from Clean Fuel LLC, which increased our costs, and our acquisition of Brownies in July 2010, which expanded our business in 2011, but not the first six months of 2010. The revamping to make the Brownies business model competitive in the industry also contributed to the increase in 2011 costs.
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General and administrative expense for the three months ended September 30, 2011 was $567,073, as compared to $753,113 for the three months ended September 30, 2010. General and administrative expenses for the nine months ended September 30, 2011 were $2,002,229, as compared to $2,514,793 for the nine months ended September 30, 2010. The primary reason the expenses decreased was that in 2010 we had a substantial amount of non-cash, non-recurring expenses related to the issuance of common stock for marketing and consulting expense, which was partially offset by higher salary expense during the 2011 period.
Interest expense for the three months ended September 30, 2011 was $28,046, as compared to $70,792 for the three months ended September 30, 2010. Interest expense for the nine months ended September 30, 2011 was $135,161, as compared to $1,312,748 for the nine months ended September 30, 2010. During 2010, we issued shares of the Company to certain debt holders to satisfy outstanding notes payable and recorded additional interest of $46,401 and $856,146 of interest expense, which represented the excess of the fair market value of the shares issued over the carrying amount of the debt satisfied, during the three and nine months ended September 30, 2010. During the nine months ended September 30, 2010, we also recorded $112,500 of interest expense related to the amortization of debt discount, versus $32,704 during the same period of 2011.
Net loss for the three months ended September 30, 2011 was $293,509, as compared to $20,894 for the three months ended September 30, 2010. Net loss for the for the nine months ended September 30, 2011 was $791,718, as compared to $2,944,451 for the nine months ended September 30, 2010. The primary reason the losses decreased was that in 2010 we had a substantial amount of non-cash, non-recurring expenses related to the issuance of common stock as described above.
Liquidity and Capital Resources
Our cash (used in) provided by operating activities was ($249,846) and $44,317 for the nine months ended September 30, 2011 and 2010, respectively. The decrease is mainly attributable to the acquisition of Brownies Waste Water Solutions, Inc. and the costs incurred to update much of the business and revenue model to make Brownies a competitive business in this industry.
Cash used in investing activities was $190,052 and $58,674 for the nine months ended September 30, 2011 and 2010, respectively. We acquired new equipment for our company in 2011.
Cash provided by financing activities was $338,663 and $302,126 for the nine months ended September 30, 2011 and 2010, respectively. During the nine months ended September 30, 2011, we received proceeds from notes payable and lines of credit of $813,007 from unrelated third parties and $68,800 from related parties, repaid notes payable and a convertible note of $605,826 and received net proceeds from warrant exercises of $50,000.
The Company has a net loss for the nine months ended September 30, 2011 of $791,718, an accumulated deficit at September 30, 2011 of $21,271,322, cash flows used in operating activities of $249,846 and needs additional cash flows to maintain its operations.
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