UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2009
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number: 000-20462
SOUTHERN ENERGY COMPANY, INC
(Exact name of Registrant as specified in its charter)
Nevada 95-3746596
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 W. Liberty St. 10th Floor
Reno, NV, 89505 Telephone: 800-628-5764
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Former Name, Address and Fiscal Year, If Changed Since Last Report
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 [ ]
We had a total of 70,376,485 shares of common stock issued and outstanding at
May 19, 2009.
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The interim financial statements included herein are unaudited but reflect, in
management's opinion, all adjustments, consisting only of normal recurring
adjustments, that are necessary for a fair presentation of our financial
position and the results of our operations for the interim periods presented.
Because of the nature of our business, the results of operations for the
quarterly period ended March 31, 2009 are not necessarily indicative of the
results that may be expected for the full fiscal year.
2
SOUTHERN ENERGY COMPANY INC.
(An Exploration Stage Company)
Balance Sheet
(Stated in US Dollars)
As of
March 31, December 31,
2009 2008
--------- ---------
(Audited)
Assets
Current assets
Cash $ 7 $ 13
--------- ---------
Total current assets 7 13
--------- ---------
Total Assets $ 7 $ 13
--------- ---------
Liabilities
Current liabilities
Accounts payable 92,477 85,867
Shareholder Loan $ 53,264 $ 49,644
--------- ---------
Total current liabilities 145,741 135,511
Long term liabilities -- 397,800
--------- ---------
Total Liabilities 145,741 533,311
========= =========
Equity
75,000,000 Shares Common Authorized,
70,376,485 Shares Issued @ $0.001 Per Share 70,323 50,400
Additional paid-in capital 529,678 151,800
Deficit accumulated during exploration stage (745,734) (735,498)
--------- ---------
Total stockholders equity (145,734) (533,298)
--------- ---------
Total liabilites and stockholders equity $ 7 $ 13
========= =========
The accompanying notes are an integral part of these financial statements.
3
SOUTHERN ENERGY COMPANY INC.
(An Exploration Stage Company)
Income Statement
(Stated in US Dollars)
For the For the From date of
three month three month reinstatement
period ended period ended (October 1, 1999) to
March 31, March 31, March 31,
2009 2008 2009
----------- ----------- -----------
Revenue $ -- $ -- $ --
----------- ----------- -----------
Expenses
Accounting & Professional Fees 10,237 78,269 730,313
Corporate State Filing Fees -- -- 15,421
----------- ----------- -----------
Total Expenses 10,237 78,269 745,734
----------- ----------- -----------
Provision for Income Tax -- -- --
----------- ----------- -----------
Net Income (Loss) $ (10,237) $ (78,269) $ (745,734)
=========== =========== ===========
Basic & Diluted (Loss) per Common Share (0.000) (0.000)
----------- -----------
Weighted Average Number of Common Shares 62,851,041 50,253,985
The accompanying notes are an integral part of these financial statements.
4
SOUTHERN ENERGY COMPANY INC.
(An Exploration Stage Company)
Statements of Cash Flows
(Stated in US Dollars)
For the For the From date of
three month three month reinstatement
period ended period ended (October 1, 1999) to
March 31, March 31, March 31,
2009 2008 2009
---------- ---------- ----------
OPERATING ACTIVITIES
Net income (loss) $ (10,237) $ (78,269) $ (745,734)
Accounts payable 760 77,396 92,477
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (9,477) (873) (653,257)
INVESTING ACTIVITIES
Purchase of mineral claim -- -- --
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES -- -- --
FINANCING ACTIVITIES
Common shares issued at founders @ $0.001 per share 19,923 -- 70,323
Additional paid-in capital 377,878 -- 529,678
Longterm Loan ( 397,800) -- --
Shareholders Loan 3,347 1,257 53,264
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,347 1,257 653,264
Cash at beginning of period 13 -- --
---------- ---------- ----------
CASH AT END OF PERIOD $ (6,117) $ 384 $ 7
========== ========== ==========
Cash Paid For:
Interest $ -- $ -- $ --
========== ========== ==========
Income Tax $ -- $ -- $ --
========== ========== ==========
Non-Cash Activities
Shares issued in Lieu of Payment for Service $ -- $ -- $ --
========== ========== ==========
Stock issued for accounts payable $ -- $ -- $ --
========== ========== ==========
Stock issued for notes payable and interest $ -- $ -- $ --
========== ========== ==========
Stock issued for convertible debentures and interest $ -- $ -- $ --
========== ========== ==========
Convertible debentures issued for services $ -- $ -- $ --
========== ========== ==========
Warrants issued $ -- $ -- $ --
========== ========== ==========
Stock issued for penalty on default of convertible
debentures $ -- $ -- $ --
========== ========== ==========
Note payable issued for finance charges $ -- $ -- $ --
========== ========== ==========
Forgiveness of note payable and accrued interest $ -- $ -- $ --
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
5
SOUTHERN ENERGY COMPANY INC.
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
From date of reinstatement (October 1, 1999) to March 31, 2009
(Stated in US Dollars)
Deficit
Accumulated
During
Common Stock Paid in Exploration Total
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Shares issued to founders
at no par value 53,985 $ -- $ -- $ -- $ --
Net (Loss) for period (600,000) (600,000)
----------- ------- -------- --------- ---------
Balance, December 31, 2006 53,985 -- -- (600,000) (600,000)
Stock issued for debt -
December 19, 2007 at $0.01
per share 20,200,000 20,200 181,800 202,000
Stock issued for services -
December 19, 2007 30,000,000 30,000 (30,000) --
Net (Loss) for period (22,530) (22,530)
----------- ------- -------- --------- ---------
Balance, December 31, 2007 50,253,985 50,200 151,800 (622,530) (420,530)
Stock issued for debt -
August 1, 2008 at $0.01
per share 200,000 200 0 200
Net (Loss) for period (112,967) (112,967)
----------- ------- -------- --------- ---------
Balance, December 31, 2008 50,453,985 50,400 151,800 (735,497) (533,297)
Stock issued for debt -
February 2, 2009 at $0.0113
per share 75,000 75 775 850
Stock issued for debt -
February 3, 2009 at $0.02
per share 19,847,500 19,848 377,103 396,950
Net (Loss) for period (10,237) (10,237)
----------- ------- -------- --------- ---------
Balance, March 31, 2009 70,376,485 $70,323 $529,678 $(745,734) $(145,734)
=========== ======= ======== ========= =========
The accompanying notes are an integral part of these financial statements.
6
Southern Energy Company Inc.
(An Exploration Stage Company)
Footnotes to the Financial Statements
From Inception to March 31, 2009
(Stated in US Dollars)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Southern Energy Company Inc. was incorporated in the state of California as
Astro Systems and Engineering, Inc. on March 22, 1982. On May 28 1985, the
company changed its name to Astro Sciences Corporation. On February 8 1996,
the company changed its name to Chatcom, Inc. In September 1999 the company
filed petition under Chapter XI of the Federal Bankruptcy Code. On August
15, 2007 the company changed its name to Southern Energy Company Inc. On
December 13, 2007 the company re-domiciled to the state of Nevada.
The company is in the business of finding and developing coal and other
mineral properties in North and South America.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year-end.
b. Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement
exists, goods delivered, the contract price is fixed or determinable, and
collectability is reasonably assured.
c. Income Taxes
The Company prepares its tax returns on the accrual basis. The Company
accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("Statement 109"). Under
Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
d. Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles 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
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financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
e. Assets
The company had cash of $7 as of March 31, 2009.
f. Income
Income represents all of the company's revenue less all its expenses in the
period incurred. The Company has no revenues as of March 31, 2009 and has
paid expenses of $745,734 since inception. For the three-month period
ending March 31, 2009 it has incurred expenses of $10,237.
g. Recent Account Pronouncements
In accordance with FASB/ FAS 142 option 12, paragraph 11 "Intangible Assets
Subject to Amortization", a recognized intangible asset shall be amortized
over its useful life to the reporting entity unless that life is determined
to be indefinite. If an intangible asset has been has a finite useful life,
but the precise length of that life is not known, that intangible asset
shall be amortized over the best estimate of its useful life. The method of
amortization shall reflect the pattern in which the economic benefits of
the intangible asset are consumed or otherwise used up. If that pattern
cannot be reliable determined, a straight-line amortization method shall be
used. An intangible asset shall not be written down or off in the period of
acquisition unless it becomes impaired during that period.
In accordance with FASB 144, 25, "An impairment loss recognized for a
long-lived asset (asset group) to be held and used shall be included in
income from continuing operations before income taxes in the income
statement of a business enterprise and in income from continuing operations
in the statement of activities of a not-for-profit organization. If a
subtotal such as "income from operations" is presented, it shall include
the amount of that loss." The Company has recognized the impairment of a
long-lived asset by declaring that amount as a loss in income from
operations in accordance with an interpretation of FASB 144.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, DETERMINING
WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE
PARTICIPATING SECURITIES, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses
whether instruments granted in share-based payment transactions are
participating securities prior to vesting, and therefore need to be
included in the computation of earnings per share under the two-class
method as described in FASB Statement of Financial Accounting Standards No.
128, "Earnings per Share." FSP EITF 03-6-1 is effective for financial
statements issued for fiscal years beginning on or after December 15, 2008
and earlier adoption is prohibited. We are not required to adopt FSP EITF
03-6-1; neither do we believe that FSP EITF 03-6-1 would have material
effect on our consolidated financial position and results of operations if
adopted.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 163, "Accounting for Financial Guarantee Insurance Contracts-and
interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how
8
Statement 60 applies to financial guarantee insurance contracts, including
the recognition and measurement of premium revenue and claims liabilities.
This statement also requires expanded disclosures about financial guarantee
insurance contracts. SFAS No. 163 is effective for fiscal years beginning
on or after December 15, 2008, and interim periods within those years. SFAS
No. 163 has no effect on the Company's financial position, statements of
operations, or cash flows at this time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS
No. 162 sets forth the level of authority to a given accounting
pronouncement or document by category. Where there might be conflicting
guidance between two categories, the more authoritative category will
prevail. SFAS No. 162 will become effective 60 days after the SEC approves
the PCAOB's amendments to AU Section 411 of the AICPA Professional
Standards. SFAS No. 162 has no effect on the Company's financial position,
statements of operations, or cash flows at this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities--an amendment of FASB Statement No. 133. This standard requires
companies to provide enhanced disclosures about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged
items affect an entity's financial position, financial performance, and
cash flows. This Statement is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material
impact on its consolidated financial position, results of operations or
cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107
(SAB 107), in developing an estimate of expected term of "plain vanilla"
share options in accordance with SFAS No. 123 (R), Share-Based Payment. In
particular, the staff indicated in SAB 107 that it will accept a company's
election to use the simplified method, regardless of whether the company
has sufficient information to make more refined estimates of expected term.
At the time SAB 107 was issued, the staff believed that more detailed
external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would,
over time, become readily available to companies. Therefore, the staff
stated in SAB 107 that it would not expect a company to use the simplified
method for share option grants after December 31, 2007. The staff
understands that such detailed information about employee exercise behavior
may not be widely available by December 31, 2007. Accordingly, the staff
will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for "plain vanilla" share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that
this will have an impact on the Company's consolidated financial position,
results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This
statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of
9
a subsidiary. It clarifies that a noncontrolling interest in a subsidiary
is an ownership interest in the consolidated entity that should be reported
as equity in the consolidated financial statements. Before this statement
was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed.
So-called minority interests were reported in the consolidated statement of
financial position as liabilities or in the mezzanine section between
liabilities and equity. This statement improves comparability by
eliminating that diversity. This statement is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after
December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this
statement is the same as that of the related Statement 141 (revised 2007).
The Company will adopt this Statement beginning March 1, 2009. It is not
believed that this will have an impact on the Company's consolidated
financial position, results of operations or cash flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations'. This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141.
This Statement establishes principles and requirements for how the
acquirer: (a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; (b) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain
purchase; and (c) determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of
the business combination. This statement applies prospectively to business
combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008.
An entity may not apply it before that date. The effective date of this
statement is the same as that of the related FASB Statement No. 160,
Noncontrolling Interests in Consolidated Financial Statements. The Company
will adopt this statement beginning March 1, 2009. It is not believed that
this will have an impact on the Company's consolidated financial position,
results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities--Including an Amendment of FASB Statement
No. 115. This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments in Debt
and Equity Securities applies to all entities with available for sale or
trading securities. Some requirements apply differently to entities that do
not report net income. SFAS No. 159 is effective as of the beginning of an
entity's first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of the previous fiscal year
provided that the entity makes that choice in the first 120 days of that
fiscal year and also elects to apply the provisions of SFAS No. 157 Fair
Value Measurements. The Company will adopt SFAS No. 159 beginning March 1,
2008 and is currently evaluating the potential impact the adoption of this
pronouncement will have on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
This statement defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This statement applies under
other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value
10
measurements. However, for some entities, the application of this statement
will change current practice. This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including financial statements for an
interim period within that fiscal year. The Company will adopt this
statement March 1, 2008, and it is not believed that this will have an
impact on the Company's consolidated financial position, results of
operations or cash flows.
h. Basic Income (Loss) Per Share
In accordance with SFAS No. 128-"Earnings Per Share", the basic loss per
common share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding.
Diluted loss per common share is computed similar to basic loss per common
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive. At March 31, 2009, the Company has no stock equivalents that were
anti-dilutive and excluded in the earnings per share computation.
i. Cash and Cash Equivalents
For purposes of the statement of cash flows, the company considers all
highly liquid investments purchased with maturity of three months or less
to be cash equivalents. As of March 31, 2009 the company had cash of $7.
j. Liabilities
Liabilities are made up of current liabilities and long-term liabilities.
Current liabilities include accounts payable of $92,477. There are no
long-term liabilities outstanding for the company.
Share Capital
a) Authorized:
100,000,000 common shares with a par value of $0.001
b) Issued:
As of March 31, 2009, there are seventy million three hundred seventy six
thousand four hundred eighty five. (70,376,485) shares issued and
outstanding at a value of $0.001 per share
There are no preferred shares authorized. The Company has issued no
preferred shares.
The Company has no stock option plan, warrants or other dilutive
securities.
11
k. Advertising
The company has not paid any advertising expenses to date.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal
course of business. However, the Company has accumulated a loss and is new.
This raises substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from this uncertainty.
As shown in the accompanying financial statements, the Company has incurred
a net loss of $745,734 for the period from inception to March 31, 2009 and
has not generated any revenues. The future of the Company is dependent upon
its ability to obtain financing and upon future profitable operations from
the development of acquisitions. Management has plans to seek additional
capital through a private placement and public offering of its common
stock. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets, or the amounts of
and classification of liabilities that might be necessary in the event the
Company cannot continue in existence.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS.
The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements involve risks and uncertainties,
including statements regarding Southern Energy Company Inc.'s (the "Company")
capital needs, business strategy and expectations. Any statements contained
herein that are not statements of historical facts may be deemed to be
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should", "expect", "plan",
"intend", "anticipate", "believe", "estimate", "predict", "potential" or
"continue", the negative of such terms or other comparable terminology. Actual
events or results may differ materially. In evaluating these statements, you
should consider various factors, including the risks outlined below, and, from
time to time, in other reports the Company files with the SEC. These factors may
cause the Company's actual results to differ materially from any forward-looking
statement. The Company disclaims any obligation to publicly update these
statements, or disclose any difference between its actual results and those
reflected in these statements. The information constitutes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.
As used in this quarterly report, the terms "we," "us," "our," and "our company"
mean Southern Energy Company Inc. unless otherwise indicated. All dollar amounts
in this quarterly report are in U.S. dollars unless otherwise stated.
OVERVIEW.
Southern Energy Company Inc. was incorporated in the state of California as
Astro Systems and Engineering, Inc. on March 22, 1982. On May 28 1985, the
company changed its name to Astro Sciences Corporation. On February 8 1996, the
company changed its name to Chatcom, Inc. In September 1999 the company filed
petition under Chapter XI of the Federal Bankruptcy Code. On August 15, 2007 the
company changed its name to Southern Energy Company Inc. On December 13, 2007
the company re-domiciled to the state of Nevada.
The company is in the business of finding and developing coal and other mineral
properties in North and South America.
We are an exploration stage company and we have not realized any revenues to
date. We do not have sufficient capital to enable us to commence and complete
our exploration program. We will require financing in order to conduct the
exploration program described in the section entitled, "Business of the Issuer."
We are not a "blank check company," as we do not intend to participate in a
reverse acquisition or merger transaction. A "blank check company" is defined by
securities laws as a development stage company that has no specific business
plan or purpose or has indicated that its business plan is to engage in a merger
or acquisition with an unidentified company or companies, or other entity or
person.
13
RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2009.
The accompanying financial statements show that the Company has incurred a net
loss of $10,237 for the three month period ended March 31, 2009 and has not yet
generated any revenues that can offset operating expenses. We anticipate that we
will not earn revenues until such time as we have entered into commercial
production, if any, of our mineral properties. We are presently in the
exploration stage of our business and we can provide no assurance that we will
discover commercially exploitable levels of mineral resources on our properties,
or if such resources are discovered, that we will enter into commercial
production of our mineral properties.
LIQUIDITY AND FINANCIAL CONDITION.
Based on our current operating plan, we do not expect to generate revenue that
is sufficient to cover our expenses for at least the next year. In addition, we
do not have sufficient cash and cash equivalents to execute our operations for
the next year. We will need to obtain additional financing to operate our
business for the next twelve months. We will raise the capital necessary to fund
our business through a private placement and public offering of our common
stock. Additional financing, whether through public or private equity or debt
financing, arrangements with shareholders or other sources to fund operations,
may not be available, or if available, may be on terms unacceptable to us. Our
ability to maintain sufficient liquidity is dependent on our ability to raise
additional capital. If we issue additional equity securities to raise funds, the
ownership percentage of our existing shareholders would be reduced. New
investors may demand rights, preferences or privileges senior to those of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either short or long-term capital requirements, our
operations and liquidity could be materially adversely affected and we could be
forced to cease operations.
OFF-BALANCE SHEET ARRANGEMENTS.
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
stockholders.
INFLATION.
In the opinion of management, inflation has not had a material effect on our
operations.
CONSULTANTS.
The Company currently has no stock option plan.
RESEARCH AND DEVELOPMENT EXPENDITURES.
We have not incurred any research or development expenditures since our
incorporation.
PATENTS AND TRADEMARKS.
We do not own, either legally or beneficially, any patent or trademark.
14
REGISTRATION STATEMENT.
On June 27, 2006, we filed a SB-1 with the Security and Exchange Commission as
defined in Rule 12b-2 (ss. 240.12b-2) of the Securities Exchange Act of 1934
(the "Exchange Act"). The purpose of this registration was to register a class
of securities under Section 12 (g) of the Exchange Act. In July of 2006, The
Company filed an amendment to the registration statement on the form SB-1.
HOLDERS OF OUR COMMON STOCK.
As of March 31, 2009, we had approximately 270 stockholder(s) holding 70,376,485
shares of our common stock.
DIVIDENDS.
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. We would not be able to pay our debts as they become due in the usual
course of business; or
2. Our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends and we do not plan to declare any dividends
in the foreseeable future.
ITEM 3. CONTROLS AND PROCEDURES.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange
Act of 1934 as a process designed by, or under the supervision of, the company's
principal executive and principal financial officers and effected by the
company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America and
includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and
directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
15
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of the
inherent limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
As of March 31, 2009 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and SEC guidance on conducting such assessments. Based on
that evaluation, they concluded that, during the period covered by this report,
such internal controls and procedures were not effective to detect the
inappropriate application of US GAAP rules as more fully described below. This
was due to deficiencies that existed in the design or operation of our internal
controls over financial reporting that adversely affected our internal controls
and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were: (1) lack of a functioning audit committee due
to a lack of a majority of independent members and a lack of a majority of
outside directors on our board of directors, resulting in ineffective oversight
in the establishment and monitoring of required internal controls and
procedures; (2) inadequate segregation of duties consistent with control
objectives; and (3) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were identified
by our Chief Executive Officer in connection with the review of our financial
statements as of March 31, 2009
Management believes that the material weaknesses set forth in items (2) and (3)
above did not have an effect on our financial results. However, management
believes that the lack of a functioning audit committee and the lack of a
majority of outside directors on our board of directors results in ineffective
oversight in the establishment and monitoring of required internal controls and
procedures, which could result in a material misstatement in our financial
statements in future periods.
MANAGEMENT'S REMEDIATION INITIATIVES.
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives
and will increase our personnel resources and technical accounting expertise
within the accounting function when funds are available to us. And, we plan to
appoint one or more outside directors to our board of directors who shall be
appointed to an audit committee resulting in a fully functioning audit committee
who will undertake the oversight in the establishment and monitoring of required
internal controls and procedures such as reviewing and approving estimates and
assumptions made by management when funds are available to us.
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Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by December 31, 2009. Additionally, we plan to test our updated
controls and remediate our deficiencies by December 31, 2009.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING.
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not a party to any material legal proceedings and to our knowledge, no
such proceedings are threatened or contemplated.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to our security holders for a vote during the period
ending March 31, 2009.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit Number Description of Exhibit
-------------- ----------------------
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
31.1 Certification by Chief Executive Officer and Chief Financial
Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the
Exchange Act, promulgated pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith
32.1 Certification by Chief Executive Officer and Chief Financial
Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the
Exchange Act and Section 1350 of Chapter 63 of Title 18 of
the United States Code, promulgated pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 filed herewith
----------
(1) Filed with the SEC as an exhibit to our Company's Registration Statement on
Form S-3, filed with the Commission on November 21, 1995.
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 19, 2009
Southern Energy Company Inc.
Signature Title Date
--------- ----- ----
By: /s/ Ricardo Munoz Chief Executive Officer, May 19, 2009
----------------------------- Chief Financial Officer,
Ricardo Munoz President, Secretary, Treasurer
and Director (Principal
Executive Officer and Principal
Accounting Officer)
18