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GALENFEHA, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 15, 2014

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in this report and those in our Form 10-K filed with the Securities and Exchange Commission on March 27, 2014. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including but not limited to, those described under "Risk Factors" included in Part II, Item IA of this report.

Background Overview

Galenfeha incorporated in the State of Nevada on March 14, 2013, as a for-profit company with a fiscal year end of December 31. Our executive office is located at 2705 Brown Trail, Suite 100, Bedford, Texas 76021. Our Telephone numbers are Toll free 1-800-280-2404, International 1-817-945-6448, and our facsimile number is 817-887-1455. Our email address is info@galenfeha.com and our website address is www.galenfeha.com.

The purpose of the company is to offer energy producer's contractual engineering services and develop alternative power products that will assist these producers in reducing cost and operate more efficiently. To date, operations have been on a limited basis. Since our inception, we have focused on developing the company, research and development, and the commercialization of our new products. Recently we began acquiring inventory for the production of company's patent pending new battery technology. These batteries provide an environmentally friendly, inherently safe, internally temperature regulated un-interruptible power supply for oil and gas well location monitoring and measurement equipment. By the end of first quarter 2014, these batteries had proven effective in the field, and in April 2014, the company ordered the first material to begin production of these batteries. During the first part of third quarter, the company began manufacturing the larger 120 amp hour batteries. During the first part of third quarter, the company began selling said batteries. The company will begin adding additional products by the end of third quarter, and hope to be manufacturing 40 and 30 amp hour units. The company's immediate future goals are to reduce operating cost with initial design and manufacturing associated with the startup of production. Some of these goals will be met by larger production runs, more products made in the United States thereby reducing cost of shipping which in turn will help increase profit margins. Management is anticipating profitability by the end of third quarter.

Since the company's inception, the company has accomplished key milestones outlined in our 2013-2014 statement of work. A majority of the monies spent to date have been for initial financing actives related to creating a public company, developing new products, R&D cost, and purchasing inventor for production. We anticipate that by the end of third quarter 2014, the company will become profitable, and that the initial cost for formation activities will be greatly reduced, and the majority use of capital will be in research and development of new products.

A condensed version of our anticipated 2014 Statement of Work is as follows:

1. Finalize test results in the field for new battery technology. (3/14) (complete) 2. Open manufacturing facility offices in Louisiana. (5/14) (complete) 3. Begin production of our first line of products (6/14)( complete) 4. Develop new products (7/14-12/14) (on going) 5. Search for merger acquisitions for Engineering, Oil, and Gas production (ongoing)



Results of Operations for the Three Months ending June 30, 2014

Assets

At June the end of first quarter 2014, we had total assets of $588,468, of which $183,123 was in cash.

Revenues

Revenues for the three months ended June 30, 2014 and 2013 were $8,000 and $0, respectively. Sales commenced in June 2014.

Cost of Revenues

Cost of Revenues for the three months ended June 30, 2014 and 2013 were $10,041.46 and $0, respectively. 2014 costs were cost of materials and manufacturing supplies.

Operating Expense

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Total operating expenses for the three months ended June 30, 2014 and 2013 were $108,774 and $30,614, respectively. Expenses increased as the Company incurred engineering and other professional expenses in preparation for the manufacturing of batteries compared to 2013 when the Company had compliance costs and research and development.

Net Loss

Net loss for the three months ended June 30, 2014 and 2013 were $110,775 and $30,607 respectively as the Company had increased expenses in 2014 for research and development and implementing business plan.; in 2013 there were compliance costs and minimal research and development.

Results of Operations for the Six Months ending June 30, 2014

Revenues

Revenues for the six months ended June 30, 2014 and 2013 were $8,000 and $0, respectively. Sales commenced in June 2014.

Cost of Revenues

Cost of Revenues for the six months ended June 30, 2014 and 2013 were $10,041 and $0, respectively. 2014 costs were cost of materials and manufacturing supplies.

Operating Expense

Total operating expenses for the six months ended June 30, 2014 and 2013 were $162,363 and $31,729, respectively. Expenses increased as the Company incurred engineering and other professional expenses in preparation for the manufacturing of batteries compared to 2013 when the Company had compliance costs and research and development.

Net Loss

Net loss for the six months ended June 30, 2014 and 2013 were $164,369 and $31,722 respectively as the Company had increased expenses in 2014 for research and development and implementing business plan.; in 2013 there were compliance costs and minimal research and development.

Liquidity and Capital Resources

At June 30, 2014, we had $183, 123 in cash compared to $73,480 at December 31, 2013. Our current commitments are research and development expenses related to the development of new technologies for energy producers and the administrative support services. We have sufficient cash for short-term operations and have raised funds through the registration statement to continue research and start production.

Critical Accounting Policies and Estimates

Our critical accounting policies are disclosed in our Form 10-K filed with the Securities and Exchange Commission on March 27, 2014. During the period ended June 30, 2014 there have several critical accounting policies adopted with the implementation of the business plan.

REVENUE RECOGNITION

The Company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed and determinable price with a reasonable assurance of collection, passage of title to the customer as indicated by shipping terms and fulfillment of all significant obligations, pursuant to the guidance provided by Accounting Standards Codification ("ASC") Topic 605. For sales to all customers, including manufacturer representatives, distributors or their third-party customers, these criteria are met at the time product is shipped. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. In addition, judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured. The Company estimates customer product returns based on historical return patterns and reduces sales and cost of sales accordingly.

ACCOUNTS RECEIVABLE

Accounts receivable represents the uncollected portion of amounts recorded as revenues. Management performs periodic analyses to evaluate all outstanding accounts receivable to estimate an allowance for doubtful accounts that may not be collectible, based on the best facts available to management. Management considers historical collection patterns, accounts receivable aging trends and specific identification of disputed invoices in its analyses. After all reasonable attempts to collect a receivable have failed, the receivable is directly written off.

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INVENTORIES

Inventories are stated at the lower of cost, determined on a first-in, first-out basis ("FIFO"), or market, including direct material costs and direct and indirect manufacturing costs.

PROPERTY

Property, plant and equipment is recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years for furniture, fixtures, and equipment. Expenditures for repairs and maintenance are charged to expense as incurred.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs, predominately internal labor costs and costs of materials, are charged to expense when incurred.

SHIPPING AND HANDLING CHARGES

The Company incurs costs related to shipping and handling of its manufactured products. These costs are expensed as incurred as a component of cost of sales. Shipping and handling charges related to the receipt of raw materials are also incurred, which are recorded as a cost of the related inventory.

Equity Distribution

Since our incorporation, we have raised capital through private sales of our common equity. As of August 14, 2014, we have issued 77,812,000 shares of our common stock to various shareholders, in exchange for cash.

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 of operations, liquidity, capital expenditures or capital resources that is material to investors.


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Source: Edgar Glimpses


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