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JA ENERGY - 10-Q/A - Management's Discussion and Analysis of Financial Condition and Results of Operations

February 14, 2014

Forward-Looking Information

This Quarterly Report on Form 10-Q/A contains forward-looking statements. When used in this Quarterly Report on Form 10-Q/A, the words "anticipate," "believe," "estimate," "will," "plan," "seeks," "intend," and "expect" and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions, or expectations may not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied, by the forward-looking statements contained in this Quarterly Report on Form 10-Q/A. Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in this Quarterly Report on Form 10-Q/A. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this Quarterly Report on Form 10-Q/A. Except as required by federal securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2013.

a. Results of Operations Revenues

We earned $5,000 in revenues since our inception through November 30, 2013. These revenues represent the sale of 5,000 pounds of Jerusalem Artichoke Seeds at $1.00 per pound. These seeds came from a Jerusalem Artichoke planting that took place in Colorado last growing season. This sale represents the entire crop available for sale, as the balance of the crop was lost due to an early season heat wave.

For the three months ending November 30, 2013, we experienced a net loss of $(111,038) as compared to a net loss of $(54,137) for the same period last year. The net loss for the three months ending November 30, 2013 consisted of general and administrative expenses of $89,054, interest expense of 5,984, and consulting fees of $16,000. Our auditor issued an opinion that our financial condition raises substantial doubt about the Company's ability to continue as a going concern.


For the three month period ending November 30, 2013, the Company experienced general and administrative expenses of $89,054 as compared to $54,137 for the same period last year. For the three month period ending November 30, 2013, the Company experienced consulting fees of $16,000 as compared to $8,000 for the same period last year. For the three month period ending November 30, 2013, the Company experienced interest expense of $5,984 as compared to $0 for the same period last year. These expenses represented increased start-up costs as the Company begins its business operations. We anticipate our operating expenses will increase as we build our operations.

Since the Company's inception, on August 26, 2010, the Company had a net loss of $(2,502,736).

Going Concern

The financial statements included with this quarterly report have been prepared in accordance with generally accepted accounting principles applicable to a going concern which contemplates the realization of assets business. As of November 30, 2013, the Company has recognized $5,000 in revenues and has accumulated operating losses of approximately $2,502,736 since inception. The Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. Management plans to raise equity capital to finance the operating and capital requirements of the Company. Amounts raised will be used to further development of the Company's products, to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes. While the Company is putting forth its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. Our financial statements do not include any adjustments that might arise from this uncertainty.

Plan of Operation

Management believes, if it can begin selling its MDU in fiscal year 2013-2014, the Company will be able to generate profit during the coming year. Management believes that revenue from MDU sales will most likely exceed any anticipated expenses for the coming year.

The Company's need for capital may change dramatically if it can generate additional revenues from its operations. In the event the Company requires additional funds, the Company will have to seek loans or equity placements to cover such cash needs. There are no assurances additional capital will be available to the Company on acceptable terms.

Summary of any product research and development that we will perform for the term of our plan of operation.

JA Energy plans manufacture and sell the Modular Distillation Units (MDU) which will convert blackstrap molasses into ethanol. The Modular Distillation Unit has been designed and a prototype has been built. The Company does not anticipate performing any additional significant MDU research and development under our current plan of operation. The prototype MDU is recorded as an asset on the November 30, 2013 balance sheet, at $ 216,851.

On October 25, 2013 we filed Patent Application Docket No. 0348730-PROV2 for a second-generation Modular Distillation Unit, formally known as "Method of Producing Fuel and Modular Distillation Unit." The newly designed MDU has significant modifications and additional accessories compared to the previous model. The following is a brief description of each of the design changes:

1. Dual shipping container configuration - The expanded system now requires two 40'X8' conex

boxes to house additional tanks and equipment. The boxes are to be installed side by side

with a 36'' wide by 6'-8'' tall man opening between the two boxes.

2. Piping and Hoses - Modular piping, valve, and piping racks have been designed to

accommodate quicker assembly of the units. Individual racks will be assembled with quick

connect hoses, control valves, and pumps then moved into place within the MDU for quick


3. Installation Rails - Steel slide rails are provided on one side and the ceiling of each of the

containers. The modular support racks quickly tie into the rails. With the support racks locked

in place with the support rails the racks now act as tank support and lockdown.

4. Distiller - The distiller has been reduced in size and volume and provided with 4 cracking

towers instead of 3. In addition the tank is now provided with a copper wire mesh screen

below the coil, a copper evaporative plate located above the coil, and a stainless steel

distribution header. The copper evaporative plate improves the flow of the ethanol production

from the distiller tank. The plate has dimples and small 1/16th diameter holes and larger

openings below each of the cracking towers. The lid lifting handle has also been improved to

where it can be folded out of the way of foot traffic when the lid is closed. The tank lid will also

be provided with improved lockdown clamps.

5. Cooling system - A closed loop chilled water system is now a part of the unit. With a small (1

ton) air cooled chiller the closed loop will cool down the cracking towers and tower condensers

with more efficiency and controllability. Additionally the system will provided cooling to the

pasteurization system as described in item #6. The new cooling system significantly

decreases water usage.

6. Water - A pasteurization system has been added which ensures all of the tanks to be free of

contamination. Source water provided to the MDU will either flow through a flat plate

exchanger or pass through a coil located in the stillage tank to increase the temperature of the

water from 65F to 180F at a minimum. Once the water is heated is passed through a filtration

system and then cooled back down prior to feeding the fermentation process.

7. Tank cleaning - A control valve has been added at the pasteurization system where 180F

water can be diverted to each of the fermentation tanks at 50 gallons at time to sanitize the

tanks via rotary unions and spinning spray arms prior to the fermentation process.

8. Rigid piping systems - The closed loop heating system piping has been changed from a

conventional sweat fitting system to a pro-fit system which increases assembly time and

eliminates leaks due to poor workmanship. The closed loop cooling system will also be a profit

system. Pro-fitŪ is a product of NIBCO.

9. Distiller distribution - The previous MDU was equipped with a 1,000 psi pump that provided

fermentation to the misting ring located within the distiller tank. This has been removed and

replaced with a standard pressure feed pump and stainless steel header located at one end of

the copper evaporative plate.

Patent Application No. 61/909,919, Ref. No. 0348730-PROV3 for the MEG, formally known as "Electrical Generation System, Method of Producing Electrical Energy, And Manufacturing An Electrical Generation System" was filed on November 27, 2013. The Modular Electric Generator (MEG) uses proven technologies to generate base load electricity to supply local energy needs. We expect to begin manufacturing and shipping units in 2014. Like the MDU, our MEG can be dropped anywhere in the world. Stated simply, the MEG consists of a single heating unit that fires a bank of five heat differential engines, each capable of driving a 10kW generator. Each unit is housed in a standard 20' shipping container that includes an onboard chiller to increase efficiency.

MEGs can be deployed singly to produce 50kW of power or in series where more capacity is needed, producing energy in multiples of 50kW. The MEG is quiet enough to place next to a hotel, and environmentally clean enough to operate even inside a building. It can be powered by a wide variety of fuels, making it usable in both developed and developing countries. Significant research and development will be performed as the MEG prototype is built this year and brought online.

We are developing other energy systems to complement the MDU and the MEG, such as concentrated solar power (CSP) and biodiesel production. Multiple products are now in development and will be systematically brought online as each is ready. These and other systems now in development will require significant research and development as they are brought to market.

Expected purchase or sale of plant and significant equipment

With the exception of Modular Distillation Units, we do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.

Significant changes in the number of employees

As of November 30, 2013, we have three employees total, all full-time. As we gear up for MDU production we will add approximately ten employees. When MEG production begins, that number will grow to as many as twenty.

Liquidity and Capital Resources

As of November 30, 2013 the Company has current assets of $3,555 and current liabilities of $591,607. As of November 30, 2013, the Company's total assets were $235,072 and total liabilities of $602,052. The Company is authorized to issue 70,000,000 shares of its $0.001 par value common stock and 5,000,000 shares of its $0.001 par value preferred stock. As of November 30, 2013, the Company has 38,402,385 shares of common stock issued and outstanding.

The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity, activities and operations. These limitations have adversely affected the Company's ability to obtain certain projects and pursue additional business. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. In order for the Company to remain a Going Concern it will need to find additional capital. Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained on terms favorable to the Company, or at all.

JA Energy Funding Requirements

JA Energy needs funding to fully execute its business plan. JA Energy will require at least $1.5 million to acquire other business opportunities, market its services, and build a client base. Future funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets. This could materially adversely affect the Company's business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or products might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable to the Company, or at all, and such financing, if available, might be dilutive.

Off-Balance Sheet Arrangements

We do not have any 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 or operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

Revenue Recognition: We recognize revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonable assured.

New Accounting Standards

Management has evaluated recently issued accounting pronouncements through November 25, 2013 and concluded that they will not have a material effect on the financial statements as of November 30, 2013.

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Source: Edgar Glimpses

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