As filed with the Securities and Exchange Commission on November 14, 2011
Registration No. 333-_____________
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
TMG ENERGY CORP.
 (Exact Name of Registrant as Specified in its Charter)

Nevada
 
1700
 
45-0665072
(State or Other Jurisdiction of
 
(Primary Standard Industrial
 
(IRS Employer
Incorporation or Organization)
 
Classification Code Number)
 
Identification No.)

 (Address, including zip code, and telephone number, including area code, of registrant’s Principal Executive Offices)

Edward Miller, Chief Executive Officer
555 Theodore Fremd Avenue
Suite C-200
Rye, New York 10580
(914) 925-0300

 (Name, address, including zip code, and telephone number, including area code, of agent for service)

Please send a copy of all communications to:
Stephen M. Fleming, Esq.
Fleming PLLC
49 Front Street, Suite 206
Rockville Centre, New York 11570
Phone: (516) 833-5034
Fax: (516) 977-1209

Approximate date of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
x
 
CALCULATION OF REGISTRATION FEE

Title of each class of
securities to be registered
 
Amount to be
registered(3)
   
Proposed maximum
offering price per unit (1)
   
Proposed
maximum
aggregate
offering price
(1)
   
Amount of
registration fee
 
Common Stock, par value $.0001 per share (2)
    20,052,883     $ 0.051     $ 1,022,697.04     $ 117.20  
 
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as amended. 

(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act. The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o). Our common stock is not traded on any national exchange or trading platform and in accordance with Rule 457 the offering price was determined by the conversion price of our convertible promissory notes sold in a private offering under Rule 506 under Regulation D as promulgated under the Securities Act of 1933, as amended.  The selling security holders may sell their shares at the fixed price of $0.05 until our common stock is quoted on the OTC Bulletin Board at which time the shares may be sold at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with the FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. There is no assurance that an active trading market for our shares will develop, or, if developed, that it will be sustained.  In the absence of a trading market or an active trading market, investors may be unable to liquidate their investment or make any profit from the investment.

(3)  Includes 19,607,843 shares of common stock issuable upon conversion of our 10% convertible promissory notes and 445,040 shares of common stock presently outstanding.
 
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant to said section 8(a), may determine.
 
 
 

 
 
The information in this prospectus is not complete and may be changed.  The selling shareholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 14, 2011
 
20,052,883 Shares
TMG Energy Corp.


Common Stock

This prospectus relates to the public offering of an aggregate of 20,052,883 shares of common stock which may be sold from time to time by the selling shareholders named in this prospectus.  We will not receive any proceeds from the sale by the selling shareholders of their shares of common stock.  We will pay the cost of the preparation of this prospectus, which is estimated at $70,000.

Our common stock is presently not traded on any market or securities exchange. The 20,052,883 shares of our common stock may be sold by selling shareholders at a fixed price of $0.05 per share until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices.  There can be no assurance that a market maker will agree to file the necessary documents with The Financial Industry Regulatory Authority (“FINRA”), which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.  We have agreed to bear the expenses relating to the registration of the shares for the selling shareholders.  There is no assurance that an active trading market for our shares will develop, or, if developed, that it will be sustained.  In the absence of a trading market or an active trading market, investors may be unable to liquidate their investment or make any profit from the investment.
 
Investing in shares of our common stock involves a high degree of risk. You should purchase our common stock only if you can afford to lose your entire investment. See “Risk Factors,” which begins on page 7.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The information in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

The selling shareholders have not engaged any underwriter in connection with the sale of their shares of common stock. The selling shareholders may sell their shares of common stock in the public market based on the market price at the time of sale or at negotiated prices. The selling shareholders may also sell their shares in transaction that are not in the public market in the manner set forth under “Plan of Distribution.”
 
The date of this Prospectus is November 14, 2011

 
 

 
 
You should rely only on the information contained in this prospectus. We have not authorized any dealer, salesperson or other person to provide you with information concerning us, except for the information contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date on the front cover page of this prospectus, regardless when the time of delivery of this prospectus or the sale of any common stock. This prospectus is not an offer to sell, nor is it a solicitation of an offer to buy, our common stock in any jurisdiction in which the offer or sale is not permitted.

 
 

 
 
TABLE OF CONTENTS

 
Page
Prospectus Summary  
  4
Risk Factors
  7
Forward-Looking Statements
  13
Use of Proceeds
  13
Selling Shareholders
  14
Plan of Distribution
  16
Market for Common Stock and Shareholder Matters
  17
Shares Available For Future Sale
18
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  19
Business
  22
Management
  26
Certain Relationships and Related Transactions
  28
Executive Compensation
  29
Director Compensation
30
Security Ownership of Certain Beneficial Owners and Management  30
Description of Securities
31
Experts
  31
Legal Matters
  31
How to Get More Information
  31
Index to Consolidated Financial Statements
F-1
 
 
3

 
 
PROSPECTUS SUMMARY
 
This summary highlights information contained elsewhere in this Prospectus and may not contain all of the information you should consider before investing in the shares.  You are urged to read this Prospectus in its entirety, including the information under “Risk Factors“, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements, before making an investment decision.

Our Company and Our Business Model
 
We are a Nevada corporation formed on March 10, 2011.  We are the sole shareholder of TMG Energy Systems Inc. (“TMG Energy Systems”, the “Company”, or, “TMG”), incorporated in the State of New York on March 11, 2011.  TMG’s principal executive offices are located at 555 Theodore Fremd Avenue, Suite C-200, Rye, NY 10580 and its telephone number is (914) 925-0300. TMG’s website address is www.tmgenergysystems.com.

Overview

Our business objective is to become an energy savings company that provides comprehensive energy efficiency and alternative energy solutions by evaluating current systems and then designing and installing efficient systems for the commercial, residential and industrial markets, initially, in the New York Tri-State area. To capture these savings opportunities, we will first identify specific savings opportunities and define the economic return associated with each recommendation. We will then design, engineer, develop and arrange financing for energy efficiency projects and clean energy projects. Finally, we intend to own and operate heat reclamation systems, which will provide energy to potential customers at lower rates than they are currently paying.

During our initial twelve months of operations, TMG intends to focus on providing contract performance services for retrofitting existing energy systems and installing, owning and operating Heat Reclamation Systems.  These systems, while complex in their internal design are relatively simple in operation. Heat Reclamation units are used in a retrofit application replacing an existing HVAC system while providing the same role and performance but with the added benefit of capturing and reutilizing thermal energy that is usually dispersed into the atmosphere as a byproduct.  This thermal energy is reutilized to fulfill demand by the facility.  TMG captures the value of this recovered thermal energy through metering points and charges the customer at the pre-agreed rates.

Other Pertinent Information

References to “we,” “us,” “our” and similar words refer to TMG Energy Corp. and its subsidiaries unless the context indicates otherwise.  Our corporate headquarters are located at 555 Theodore Fremd Avenue, Suite C-200, Rye, NY 10580. Our telephone number is is (914) 925-0300. 

 
4

 
 
The Offering

Common Stock Offered:
The selling shareholders are offering a total of 20,052,883 shares of common stock, which includes 445,040 shares of common stock presently outstanding and 19,607,843 shares of common stock that issuable upon conversion of the 10% convertible promissory notes (the “10% Notes”). 
   
Initial Offering Price:
The selling shareholders will sell our shares at $0.05 per share until our shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market prices or privately negotiated prices. This price was determined arbitrarily by us.
   
Terms of Offering:
The selling shareholders will determine when and how they will sell the common stock offered in this prospectus.
   
Termination of the Offering:
The offering will conclude when all of the 20,052,883 shares of common stock have been sold or we, in our sole discretion, decide to terminate the registration of the shares. We may decide to terminate the registration if it is no longer necessary due to the operation of the resale provisions of Rule 144 promulgated under the Securities Act of 1933. We also may terminate the offering for no reason whatsoever at the discretion of our management team.
   
Outstanding Shares of Common Stock:
20,052,883 shares which includes 445,040 shares of common stock presently outstanding as well as 19,607,843 shares of common stock issuable upon conversion of the 10% Notes.
   
Use of Proceeds:
We will receive no proceeds from the sale of any shares by the selling shareholders.
   
Risk Factors:
The purchase of our common stock involves a high degree of risk. You should carefully review and consider "Risk Factors" beginning on page 7.
 
 
5

 

Summary Financial Information
 
The following information at June 30, 2011 and for the year then ended has been derived from our audited consolidated financial statements, which appear elsewhere in this prospectus. 
 
   
As of June 30, 2011
(Audited)
 
Balance Sheet
     
Total Assets
  $ 66,634  
Total Liabilities
  $ 201,312  
Stockholders Equity (Deficit)
  $ (134,678 )
 
   
From Inception on March
10, 2011 through June 30,
2011
(Audited)
 
Income Statement
     
Revenue
  $ -0-  
Total Expenses
  $ 259,564  
Net Income (Loss)
  $ (259,564 )

 
6

 
 
RISK FACTORS
 
An investment in our common stock involves a high degree of risk.  You should carefully consider the risks described below, together with all of the other information included in this prospectus, before making an investment decision, and you should only consider an investment in our common stock if you can afford to sustain the loss of your entire investment.  If any of the following risks actually occurs, our business, financial condition or results of operations could suffer.  In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

General Risks

Risks Related to Our Business
 
We are an early stage company in an emerging market with an unproven business model and a limited operating history, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment.
 
We have only a limited operating history, and our current business and future prospects are difficult to evaluate. We commenced operations in  early March 2011. We have developed a strategy for taking advantage of today’s high energy costs, but we cannot assure you that our strategy will not fail or prove less successful than other approaches. You must consider our business and prospects in light of the risks and difficulties we encounter as an early stage company in the new and rapidly evolving online marketing industry. These risks and difficulties include:
 
 
 
our new and unproven business model;
 
 
maintaining the effectiveness of our Platform, and adapting our technology to new market opportunities and challenges;
 
 
our limited number of product offerings and risks associated with developing and selling new product offerings;
 
 
continuing to attract new clients, many of whom have not previously advertised online and may not understand the value to their businesses of our products and services; and
 
 
effectively managing rapid growth in our sales force, personnel and operations.
 
Failing to successfully address these challenges or others could significantly harm our business, financial condition, results of operations and liquidity.
 
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

In their audit opinion issued in connection with our consolidated balance sheets as of June 30, 2011 and our related consolidated statements of operations, stockholders’ deficit, and cash flows for the period ended June 30, 2011, our auditors have expressed substantial doubt about our ability to continue as a going concern given the fact that we have no revenue, have incurred significant losses since inception and we had a working capital deficiency as of June 30, 2011.  We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue in existence.  As such, we may have to cease operations and you could lose your investment.
 
Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.

We were only formed in March 2011 and have only recently commenced operations.  We have a limited operating history and have not generated revenue.  As a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data.  Because of the uncertainties related to our lack of historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses.  If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or incur losses, which may result in a decline in our stock price.

We may not be able to achieve profitability going forward.

We may incur significant operating losses which could have a negative impact on our stock price assuming a market develops at all. Our business plan is speculative and unproven. There is no assurance that we will be successful in executing our business plan or that even if we successfully implement our business plan, that we will be able to curtail our losses now or in the future.  Further, as we are a new enterprise, we expect that there will be net losses and a working capital deficiency.

 
7

 

If we are unable to develop, position and price our services to meet the energy efficiency market opportunity, our growth, if any, and results of operations would be adversely affected.

Realizing the potential of energy efficiency has been challenging because there have been perceived risks associated with the performance of relatively new energy efficiency measures. In addition, incentives to implement energy efficiency measures have been split between the party designing, constructing or purchasing a building or piece of equipment and the party that pays the operating costs for such equipment. Further, the investment in time and resources required to adequately measure and interpret energy consumption information, as well as verify savings from implemented energy efficiency retrofits, has been prohibitive for many organizations that might otherwise be interested in pursuing energy efficiency. Our success depends on market acceptance of the need to implement energy efficiency measures and our ability to develop, position and price our products and services to enable organizations to pursue energy efficiency.

The longevity of our business depends in part on our ability to enhance and sell the functionality of our solutions to become competitive and meet customer needs.

The market for energy services including our contract performance work and installing heat reclamation systems on a shared savings basis is relatively new and is characterized by rapid technological obsolescence, frequent new entrants, uncertain product life cycles, fluctuating customer demands, and evolving industry and government energy-related standards and regulations. We may not be able to successfully develop and market new, reliable, efficient clean intelligent energy solutions that comply with present or emerging demands, regulations and standards on a cost-effective basis.
 
We may not be able to successfully deploy our solutions in a timely manner.

Our growth, if any, will largely depend on our ability to successfully deploy our solutions across a large portfolio of customer facilities and an expanded geography. Our ability to successfully deploy our services depends on many factors, including, among others, our ability to:
 
 
properly staff, incentivize and mobilize personnel and subcontractors;
 
 
obtain upfront payment from our customers and additional financing to cover our installation of heat reclamation systems and other internal costs;
 
 
expand and improve our technology infrastructure; and
 
 
procure parts and equipment used in our systems, the availability of which is not within our control.

If we cannot successfully deploy our proprietary services and products for multiple sites and customers in an expanded geography, it could have a material adverse effect on our results of operations and financial condition.

We operate in a highly competitive industry and if we are unable to compete successfully our revenue and profitability will be adversely affected.

The energy savings and solutions market is highly competitive, and as it evolves, we anticipate that competition will increase in volume and intensity. We may face competition primarily from companies that focus on specific aspects of the energy savings and solutions market, many of which are regional contractors that may have more expertise in their area of focus than we do. We also compete against companies that have substantial competitive advantage because of greater name recognition, longer operating histories and larger marketing budgets, as well as substantially greater financial and other resources than us. National or global competitors could enter the market with more substantial financial and workforce resources, stronger existing customer relationships, and greater name recognition. Competitors could focus their substantial resources on developing a more attractive solution set than ours or products with technologies that reduce demand for energy beyond what our intended solutions might mitigate, and at cheaper prices.

Competition also places downward pressure on our contract prices and profit margins, which presents us with significant challenges in our ability to maintain strong growth rates and acceptable profit margins. If we are unable to meet these competitive challenges, we could lose market share to our competitors and experience an overall reduction in our profits.

 
8

 

We will be dependent on third parties to complete substantial work under our contracts. Failure of third parties to provide quality products or services in a timely manner could cause delays in delivery of our solutions.

A substantial portion of the work we perform is under contracts, including certain installation, construction and maintenance operations and will be performed by third-party subcontractors we will hire. We also rely on third-party equipment manufacturers or suppliers to provide a significant amount of the equipment and materials that is used for projects. Any delay or interruption in the work performed by third parties, our failure to hire qualified subcontractors or any defect or delay in delivering equipment or products provided to us by third parties, can adversely affect our ability to successfully complete a project. Furthermore, if such third parties fail to fulfill their contractual obligations to provide materials, equipment or labor on schedule, we may have to expedite delivery from alternate sources. During the current economic downturn, third parties may be more likely to experience financial difficulties and not be able to provide the products and services essential to our solutions. Any of these events could result in excess costs beyond our estimates, damage our reputation with existing or potential customers, and require payment by us of liquidated damages or penalties.

We bear the risk of cost overruns in a majority of our energy project contracts, which we may not be able to recover from our customers, which could result in reduced profits or losses.

Our target energy projects would be under guaranteed maximum price or fixed-price contracts, from which we would bear significant risk of cost overruns. We would establish our contract prices during the proposal process using cost and scheduling estimates, which would be based on numerous assumptions about future economic conditions, prices and availability of equipment, materials, and labor. Such contracts might be executed over a period of several months or years subsequent to the initial proposal. Our estimates might vary from actual costs for reasons due to unanticipated circumstances or technical problems such as difficulties obtaining permits or approvals, disagreement with owners on project scope, design flaws, equipment failure, nonperformance by our suppliers or subcontractors, increased cost or decreased availability of equipment, materials and labor, market conditions for electricity, fuel, and weather and other delays or regulatory changes. Might we ever fail to adjust our contract prices as a result of changed assumptions, or might our estimates ever occur to be inaccurate, and should we ever be unable to recover such costs from our customers, such might result in reduced profits or losses on such contracts.

If we are unable to recover claims against project owners for payment, our financial condition could suffer.

From time to time, particularly on our fixed price contracts, we may only be able to recover cost overruns resulting from owner-caused delays and changes in project scope via claims against project owners.

Frequently such claims are subject to prolonged arbitration or litigation proceedings for which the recovery amount, if any, may be difficult to predict. We may invest significant working capital to cover cost overruns in order to complete the project.

If we experience delays and/or defaults in customer payments, we could suffer liquidity problems or we could be unable to recover all expenditures.

Delays in customer payments may require us to make a working capital investment. If a customer defaults in making its payments on a project in which we have devoted significant resources, it could have a material negative effect on our results of operations or liquidity. During the current economic downturn, our potential customers may be more likely to delay or default on payments.

We are dependent upon our management team and development and operations personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner.

Our success depends substantially upon the continued services of Edward Miller, our CEO. We will be substantially dependent on the continued service of Mr. Miller because of the complexity of our service and technologies. Mr. Miller could terminate their employment with us at any time. The loss of Mr. Miller could seriously harm our business.

The Company is controlled by current officers, directors and principal stockholders.

Following completion of the Offering, the Company’s directors, executive officers and principal (5%) stockholders and their affiliates beneficially own approximately 44.2% of the outstanding shares of Common Stock.  Accordingly, the Company’s executive officers, directors, principal stockholders and certain of their affiliates will have the ability to control the election of the Company’s Board of Directors of the Company and the outcome of issues submitted to the Company’s stockholders.

 
9

 

Personal injury, product liability and other claims against us could have a material adverse effect on our business, results of operations and financial condition.

If our intended solutions cause serious bodily injury or property damage or otherwise fail to perform as expected, we could be exposed to personal injury or product liability claims. Some of the equipment we intend to own and install generates heat and could result in substantial personal injury to our employees or third parties, or environmental hazards if we fail to adhere to adequate safety and environmental standards and procedures, or if equipment malfunctions due to improper installation, manufacturing defects, or other causes beyond our control. Additionally, since our technology platform and some of our solutions are new, we cannot predict whether or not product liability claims will be brought against us in the future and harm our reputation and business. We cannot guarantee that our insurance providers would cover all or a portion of any losses from such claims or that we will have adequate resources to defend ourselves against such claims or pay damages.

We will need to raise additional capital to grow our business, and we may not be able to raise capital on terms acceptable to us or at all.

Operating our business and maintaining our growth efforts, requires significant cash outlays, capital expenditures and commitments. Specifically, if we purchase heat reclamation units which we own and install at our client’s facilities, we will need to raise a significant amount of capital either through the sale of equity or debt financing. Cash on hand and cash generated from operations and the offering will not be sufficient to meet our cash requirements for the next 12 months. As such, we will need to seek additional capital, potentially through debt or equity financings, to fund our business and growth. Any additional financing that we may require in the future may not be available at all or, if available, may be on terms unfavorable to us. Our inability to finance our growth, either internally or externally, would limit our growth potential and our ability to implement our business strategy.

Environmental, safety and health regulation changes could impose significant additional costs or cause the size of our market to decline.

As a seller of solutions that involve the engineering, procurement, construction, implementation, operation and maintenance of machinery, equipment and controls that often are considered capital improvements to us or our customers, we are subject to numerous environmental, safety and health regulations. If we violate any of the regulations or cause harm to others, the environment or natural resources we may be subject to civil or criminal legal actions or proceedings. Conversely, if environmental laws and regulations are reduced in number or scope, or the government changes policies regarding the funding, implementation or enforcement thereof, the size of our market could decline.

Risks Related to our Common Stock

There is no existing market for our common stock, and we do not know if one will develop to provide investors with adequate liquidity.

There has been no public market for our common stock. In order for a market to develop, we will be required to file the appropriate documents with FINRA. An active and liquid public market for our common stock may not develop or be sustained assuming we are successful in navigating the regulatory framework. The price of our common stock in any such market may be higher or lower than the price investors have paid for our common stock.
 
The price of our common stock may fluctuate significantly and investors could lose all or part of their investment.

Volatility in the market price of our common stock assuming a market develops may prevent investors from being able to sell their shares at or above the price they paid for their shares in the offering. The market price of our common stock could fluctuate for various reasons, which include:
 
 
our quarterly or annual earnings or those of other companies in our industry;
 
 
the public’s reaction to our press releases, our other public announcements and our filings with the U.S. Securities and Exchange Commission, or SEC;
 
 
changes in earnings estimates or recommendations by research analysts who may track our common stock or the stocks of other companies in our industry;
 
 
new laws or regulations or new interpretations of laws or regulations applicable to our business;
 
 
changes in accounting standards, policies, guidance, interpretations or principles;
 
 
changes in general conditions in the U.S. and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events;

 
10

 
 
 
litigation involving our company or investigations or audits by regulators into the operations of our company or our competitors; and
 
 
sales of common stock by our directors, executive officers and significant stockholders.
 
In addition, in recent months, the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. Changes may occur without regard to the operating performance of these companies. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our company.

As a public company, we will become subject to additional financial and other reporting and corporate governance requirements that may be difficult for us to satisfy, will increase our costs and may divert management attention from our business.

We have historically operated as a private company. Upon the effectiveness of this prospectus, we will become obligated to file with the SEC annual and quarterly information and other reports as required by the Securities and Exchange Act of 1934, as amended, or the Exchange Act. We will be required to ensure that we have the ability to prepare financial statements that are compliant with SEC reporting requirements on a timely basis. We will also become subject to other reporting and corporate governance requirements, including the listing standards of the applicable stock exchange on which our shares may trade and the Sarbanes-Oxley Act of 2002, or SOX, and the regulations promulgated thereunder, which will impose significant compliance obligations upon us. As a public company, we will be required to:
 
 
prepare and distribute periodic reports and other stockholder communications in compliance with our obligations under the U.S. securities laws and the rules of the applicable stock exchange on which our shares may trade;
 
 
create or expand the roles and duties of our board of directors and committees of the board;
 
 
institute more comprehensive compliance and internal audit functions;
 
 
evaluate and maintain our system of internal control over financial reporting, and report on management’s assessment thereof, in compliance with the requirements of Section 404 of SOX and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board, or PCAOB;
 
 
involve and retain to a greater degree outside counsel and accountants in the activities listed above;
 
 
establish and maintain an investor relations function; and
 
 
establish new internal policies, including those relating to disclosure controls and procedures.

The changes required by becoming a public company will require a significant commitment of additional resources and management oversight that will cause us to incur increased costs and which might place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns. In addition, we might not be successful in implementing these requirements.

As a result of becoming a public company, we will be obligated to develop and maintain proper and effective internal controls over financial reporting and will be subject to other requirements that will be burdensome and costly. We may not complete our analysis of our internal controls over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We will be required, pursuant to Section 404 of SOX to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our auditors have issued an attestation report on our management’s assessment of our internal controls.

 
11

 

We currently do not intend to pay dividends on our common stock and, consequently, the only opportunity for investors to achieve a return on their investment is if the price of our common stock appreciates.

We do not expect to pay dividends on shares of our common stock in the foreseeable future and intend to use cash to grow our business. Consequently, investors’ only opportunity to achieve a positive return on their investment will be if the market price of our common stock appreciates.

We may issue shares of preferred stock in the future that may adversely impact investors rights as holders of our common stock.
 
Our articles of incorporation authorize us to issue up to 10,000,000 shares of "blank check" preferred stock. Accordingly, our board of directors will have the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such shares, without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, investors rights as holders of common stock could be impaired thereby, including, without limitation, dilution of their ownership interests in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in the interest of investors as holders of common stock.
 
Provisions in our certificate of incorporation and bylaws and Nevada law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our stock.

Our certificate of incorporation and bylaws that will be effective immediately prior to the closing of the offering contain provisions that could depress the trading price of our stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:
 
 
authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;
 
 
do not permit cumulative voting;
 
 
provide that a special meeting of stockholders may only be called by our board of directors or our chief executive officer; and
 
 
provide that the board of directors is expressly authorized to make, alter or repeal our bylaws.
 
Our Common Stock may be subject to “penny stock” rules which may be detrimental to investors.

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share.  Such securities are subject to rules that impose additional sales practice requirements on broker-dealers who sell them.  For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser’s written consent to the transaction prior to the purchase.  Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market.  The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.  Finally, among other requirements, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  As the Shares immediately following this Offering will likely be subject to such penny stock rules, purchasers in this Offering will in all likelihood find it more difficult to sell their Shares in the secondary market.

 
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FORWARD-LOOKING STATEMENTS
 
Statements in this prospectus may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this prospectus, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus. In addition, such statements could be affected by risks and uncertainties related to the healthcare industry as a whole, changes in regulation on the state or federal level, delays in payments from third party payors, our ability to raise any financing which we may require for our operations, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus.
 
USE OF PROCEEDS
 
We will not receive any proceeds from the sale by the selling shareholders of their common stock.
 
Determination of Offering Price
 
The selling shareholders will sell the shares at $0.05 per share until our shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market prices or privately negotiated prices. The offering price was determined by the conversion price of our convertible promissory notes sold in a private offering under Rule 506 under Regulation D as promulgated under the Securities Act of 1933, as amended. There is no assurance of when, if ever, our stock will be approved for trading on the OTC Bulletin Board.
 
The offering price of the shares of our common stock has been determined arbitrarily by us and does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market. Although our common stock is not listed on a public exchange, we will be filing to obtain a listing on the OTC Bulletin Board concurrently with the filing of this prospectus. In order to be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.
 
In addition, there is no assurance that our common stock will trade at market prices in excess of the initial public offering price as prices for the common stock in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity.
 
Dilution
 
 The common stock to be sold by the selling shareholders in this Offering is common stock that is currently issued. Accordingly, there will be no dilution to our existing shareholders.

 
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SELLING STOCKHOLDERS
 
The table below sets forth information concerning the resale of the shares of common stock by the selling stockholders. We will not receive any proceeds from the resale of the common stock by the selling stockholders.
 
The following table also sets forth the name of each person who is offering the resale of shares of common stock by this prospectus, the number of shares of common stock beneficially owned by each person, the number of shares of common stock that may be sold in this offering and the number of shares of common stock each person will own after the offering, assuming they sell all of the shares offered.
 
 Name of Selling  
Stockholder 
 
Common Shares
owned by the selling
Stockholder (1)
   
Total Shares Registered
Pursuant to this
Offering
   
% of Total Issued
and Outstanding
Shares before
Offering
   
Number of Shares Owned by
Selling Stockholder After
Offering and Percent of Total
Issued and Outstanding (2)
 
                     
# of Shares
   
% of  Class
 
Michael Solomon
    250,000       5,000       *       245,000       *  
Jill Solomon
    2,700,000       54,000       *       2,646,000       3.66 %
Erica Solomon
    50,000       1,000       *       49,000       *  
Matthew Solomon
    50,000       1,000       *       49,000       *  
Jacob Solomon
    50,000       1,000       *       49,000       *  
Elinor Solomon
    2,700,000       54,000       3.73 %     2,646,000       3.66 %
Howard Solomon
    400,000       8,000       *       392,000       *  
Pearl Stein
    3,100,000       62,000       4.28 %     3,038,000       4.20 %
Ricky Solomon
    1,250,000       25,000       1.73 %     1,225,000       1.69 %
Michele Garber-Solomon
    200,000       4,000       *       196,000       *  
Jeff Finder (Montclaire Publishing)
    250,000       5,000       *       245,000       *  
Keith Goodman
    1,500,000       30,000       2.07 %     1,470,000       2.03 %
Lisa Goodman
    1,300,000       26,000       1.80 %     1,274,000       1.76 %
Michael Goodman
    400,000       8,000       *       392,000       *  
David Greenberg
    400,000       8,000       *       392,000       *  
Lainie Goldberg
    400,000       8,000       *       392,000       *  
Frank Goodman
    500,000       10,000       *       490,000       *  
Claudia Goodman
    500,000       10,000       *       490,000       *  
Michael Vulcano
    250,000       5,000       *       245,000       *  
Mariann Vulcano
    250,000       5,000       *       245,000       *  
Nathan Lowenbraum
    400,000       8,000       *       392,000       *  
Colin McCarthy
    50,000       1,000       *       49,000       *  
Rose Freda
    100,000       2,000       *       98,000       *  
John Moore
    250,000       5,000       *       245,000       *  
Deborah Eisenberg
    400,000       8,000       *       392,000       *  
Henry Steeneck
    100,000       2,000       *       98,000       *  
Amy Furey
    468,000       9,360       *       458,640       *  
Michael Furey
    468,000       9,360       *       458,640       *  
Jonathan M. Sheklow
    468,000       9,360       *       458,640       *  
Benjamin Byruch
    468,000       9,360       *       458,640       *  
Jonah Engler
    468,000       9,360       *       458,640       *  
Geoffrey M. Byruch
    468,000       9,360       *       458,640       *  
Marc Helman
    468,000       9,360       *       458,640       *  
Denise Puma
    468,000       9,360       *       458,640       *  
Alexander Romano
    468,000       9,360       *       458,640       *  
Michelle Pittman
    240,000       4,800       *       235,200       *  
Patricia Avery (3)
    490,196       490,196       *              
Warren Duffy (3)
    490,196       490,196       *              
Theodoros & Dimitrios Perides JTWROS (3)
    490,196       490,196       *              
Mark D. Greenberg (3)
    490,196       490,196       *              
O. Gene Bicknell (3)
    1,960,784       1,960,784       2.64 %            
Robert G. McKnight Irrevocable Trust (3)
    490,196       490,196       *              
Dennis Hewitt (3)
    490,196       490,196       *              
James & Rebecca Noblin JTWROS (3)
    980,392       980,392       1.34 %            
Linsay Etra Roth (3)
    490,196       490,196       *              
Glenn Harnish (3)
    490,196       490,196       *              
J. Victor & Barbara Samuels JTWROS (3)
    1,470,588       1,470,588       1.99 %            
Herbert Baumann (3)
    490,196       490,196       *              
Steven J. Henry
    980,392       980,392       1.34 %            
Douglas A. Rotoly (3)
    490,196       490,196       *              
Stephen Tolles (3)
    490,196       490,196       *              
Harold Koehne (3)
    490,196       490,196       *              
B. Michael Pisani (3)
    490,196       490,196       *              
Jospeh Fox (3)
    980,392       980,392       1.34 %            
Ed Berkley (3)
    1,960,784       1,960,784       2.64 %            
Michael Etra (3)
    490,196       490,196       *              
Richard and Ken Etra (3)
    1,470,588       1,470,588       1.99 %            
Stan Ellis (3)
    1,960,784       1,960,784       2.64 %            
Mollick Etra Etra P.S.P.T. (3)
    980,392       980,392       1.34 %            
* Less than one percent.
 
** Officer and/or director.
 
(1)           The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholders has sole or shared voting power or investment power and also any shares, which the selling stockholders has the right to acquire within 60 days. The Total Shares Registered Pursuant to this Offering reflects shares outstanding based on 72,477,000 shares of common stock outstanding.

 
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 (2)           Assumes that all securities registered will be sold.
 
 (3)           Represents shares of common stock to be issued upon conversion of the 10% Convertible Promissory Notes.
 
Issuance of Shares of Common Stock to Selling Stockholders
 
The following issuances were made by TMG Energy Corp:
 
On March 14, 2011, the Company issued 22,800,000 shares of common stock to Edward Miller, an executive officer and director of the Company, in connection with his incorporation services provided to the Company. Mr. Miller subsequently acquired 9,200,000 shares of common stock from a third party consultant in June 2011. Further, Mr. Miller entered into a side letter agreement with the Company whereby, Mr. Miller agreed that in the event the Company closes in excess of $750,000 in Notes in this Offering (the “Trigger Offering”), Mr. Miller, will, on the 120th day following closing of the Trigger Offering, return 11,400,000 shares to the Company for cancellation in the event the Company has not entered contract(s) representing a minimum of $2,500,000 in revenue. Further, Mr. Miller has also agreed to return (i) 3,066,667 shares of common stock to the Company in the event that the Company does not generate in excess of $4,000,000 in revenue during the year ended September 30, 2012, (ii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $750,000 in EBITDA during the year ended September 30, 2013 and (iii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $1,750,000 in EBITDA and $20,000,000 in revenue during the year ended September 30, 2014.

On March 14, 2011, the Company issued 12,200,000 shares of common stock to a third party consultant (the “Consultant”). The Consultant subsequently sold 9,200,000 to Mr. Miller, our sole executive officer and director.
 
On March 24, 2011, the Company issued 4,125,000 shares of common stock valued at $0.0025 per share amounts to $10,312 to Fleming PLLC for corporate legal services.
 
On March 24, 2011, the Company issued 875,000 shares of common stock valued at $0.0025 per share amounts to $2,188 to Vincent Carrubba for consulting services.
 
On March 24, 2011, the Company issued an option to Mr. Miller to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years. The vesting schedule for the option is as follows: (i) 5,000,000 shares in the event that the Company generates in excess of $3,000,000 in revenue during the year ended June 30, 2012, (ii) 10,000,000 shares of common stock in the event that the Company generates in excess of $750,000 in EBITDA during the year ended June 30, 2013 and (iii) 10,000,000 shares of common stock in the event that the Company generates in excess of $1,750,000 in EBITDA during the year ended June 30, 2014.

On March 25, 2011, the Company issued HFP Capital Markets LLC (“HFP”) a common stock purchase warrant to acquire 22,187,500 shares of common stock at an exercise price of $0.0001 per share for a period of ten years on a cashless basis. HFP has agreed to restrict their ability to exercise its warrant and receive shares of our common stock such that the number of shares of the Company common stock held by HFP and its affiliates after such conversion or exercise does not exceed 4.9% of the Company’s then issued and outstanding shares of common stock.

From March 29, 2011 through May 3, 2011, the Company sold 22,252,000 shares of common stock to 36 accredited investors for gross proceeds of $55,630. A portion of the investors that participated in this private placement offering are affiliated with HFP in that they are management, employees or family members of management or employees.
 
 
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From August 9, 2011 through October 31, 2011, we issued to 23 accredited investors an aggregate of $1,000,000 in 10% Convertible Promissory Notes (the “Notes”). Each Note is convertible, at any time at the option of the holder, into shares of common stock at an initial conversion price of $0.051 per share (the “Conversion Price”); provided, however, if the  volume weighted average price is greater than $0.075 (the “VWAP”) during any ten (10) day Trading Days (as defined below), as reported on Bloomberg, L.P., or any third party quotation service, during the period commencing on the effective date of the Form S-1 Registration Statement covering the shares of Common Stock issuable upon Conversion of the Notes (the “Effective Date”) through the three (3) month anniversary of the Effective Date, then the Conversion Price shall be reset whereby it will equal the VWAP multiplied by .75 (the “Reset Conversion Price”).  In no event shall the Reset Conversion Price be less than the Conversion Price or greater than $0.20. In the event that the Conversion Shares are registered for resale on a registration statement or may be resold in accordance with Rule 144 and the market price for the shares of Common Stock is in excess of $0.75 for a period of ten Trading Days and the average daily volume for the same period exceeds 100,000 shares per day, then the Notes will be automatically converted into shares of Common Stock of the Company. The Notes bear interest at 10% per annum and mature 18 months from the date of issuance (the “Maturity Date”). Interest shall be payable in full in cash on the Maturity Date unless converted earlier. The note holders have contractually agreed to restrict their ability to convert the Notes and receive shares of common stock such that the number of shares of common stock may not exceed 4.99% of the outstanding shares of common stock of our company. The Notes were offered and sold to the accredited investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and/or Rule 506 promulgated thereunder. Each of the investors are accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. In addition, HFP received seven and one half percent (7.5%) of the Offering, or $75,000 based on the sale of $1,000,000 in Notes.

On November 9, 2011, HFP provided the Company with four separate exercise notices of an aggregate of 10,225,000 shares of common stock.  Following each exercise, HFP assigned the shares to four employees.  In addition, HFP assigned a portion of the warrant to acquire 12,500,000 shares of common stock to three employees.  HFP continues to hold a warrant to acquire 187,500 shares of common stock.
 
The issuance of the foregoing securities in each of the transactions described above was made in reliance upon the exemption from the registration provisions of the Securities Act set forth in Section 4(2) thereof as a transaction by an issuer not involving any public offering and/or Rule 506 under Regulation D as promulgated under the Securities Act. The respective transaction documents contain representations to support our reasonable belief that each investor is an “accredited investor” as defined in Rule 501 under the Securities Act, and that such investor is acquiring such securities for investment and not with a view to the distribution thereof. At the time of their issuance, the securities described above were deemed to be restricted securities for purposes of the Securities Act and such securities (and shares issued upon exercise of the unregistered warrants will) bear legends to that effect.

PLAN OF DISTRIBUTION

The selling shareholders and any of their pledgees, donees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions or by gift. These sales may be made at fixed or negotiated prices. The selling shareholders cannot predict the extent to which a market will develop or, if a market develops, what the price of our common stock will be. If a public market develops for the common stock, the selling shareholders may sell their shares of common stock in the public market based on the market price at the time of sale or at negotiated prices. Subject to the foregoing, the selling shareholders may use any one or more of the following methods when selling or otherwise transferring shares:
 
 
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
 
 
block trades in which a broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
 
sales to a broker-dealer as principal and the resale by the broker-dealer of the shares for its account;
 
 
an exchange distribution in accordance with the rules of the applicable exchange;
 
 
privately negotiated transactions, including gifts;
 
 
covering short sales made after the date of this prospectus;
 
 
pursuant to an arrangement or agreement with a broker-dealer to sell a specified number of such shares at a stipulated price per share;
 
 
a combination of any such methods of sale; and

 
16

 
 
 
any other method of sale permitted pursuant to applicable law.

The selling shareholders may also sell shares pursuant to Rule 144 or Rule 144A under the Securities Act, if available, rather than pursuant to this prospectus.

Broker-dealers engaged by the selling shareholders may arrange for other brokers dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. None of the other selling shareholders are affiliates of broker-dealers.

A selling shareholder may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if the selling shareholder defaults in the performance of the secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.

In connection with the sale of our common stock or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions which may in turn engage in short sales of our common stock in the course of hedging the positions they assume. The selling shareholders may, after the date of this prospectus, also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge their common stock to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The selling shareholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. In the event of a transfer by a selling shareholder other than a transfer pursuant to this prospectus or Rule 144 of the SEC, we may be required to amend or supplement this prospectus in order to name the transferee as a selling shareholder.

The selling shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The selling shareholders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock.

Because the selling shareholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. Federal securities laws, including Regulation M, may restrict the timing of purchases and sales of our common stock by the selling shareholders and any other persons who are involved in the distribution of the shares of common stock pursuant to this prospectus.

We may be required to amend or supplement this prospectus in the event that (a) a selling shareholder transfers securities under conditions which require the purchaser or transferee to be named in the prospectus as a selling shareholder, in which case we will be required to amend or supplement this prospectus to name the selling shareholder, or (b) any one or more selling shareholders sells stock to an underwriter, in which case we will be required to amend or supplement this prospectus to name the underwriter and the method of sale.

We are required to pay all fees and expenses incident to the registration of the shares.
 
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
Market for Securities

There is presently no public market for our common stock and there has never been a market for our common stock. We anticipate applying for quotation of our common stock on the OTC Bulletin Board upon the effectiveness of the registration statement of which this prospectus forms a part. However, we cannot assure you that our shares will be quoted on the OTC Bulletin Board or, if quoted, that a public market will materialize.

 
17

 
 
A market maker sponsoring a company's securities is required to obtain a quotation of the securities on any of the public trading markets, including the OTC Bulletin Board. If we are unable to obtain a market maker for our securities, we will be unable to develop a trading market for our common stock. We may be unable to locate a market maker that will agree to sponsor our securities. Even if we do locate a market maker, there is no assurance that our securities will be able to meet the requirements for a quotation or that the securities will be accepted for quotation on the OTC Bulletin Board.
 
We intend to apply for quotation of the securities on the OTC Bulletin Board, but there can be no assurance that we will be able to obtain this listing. The OTC Bulletin Board securities are not quoted and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board stocks are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

As of November 11, 2011, we had 72,477,000 shares of common stock issued and outstanding and approximately 39 stockholders of record of our common stock as well as 19,607,843 shares of common stock issuable upon conversion of 10% Convertible Notes held by approximately 24 accredited investors.

Dividend Policy

The payment by us of dividends, if any, in the future rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition, as well as other relevant factors.  We have not paid any dividends since our inception and we do not intend to pay any cash dividends in the foreseeable future, but intend to retain all earnings, if any, for use in our business.

Equity Compensation Plan Information

 As of November 11, 2011, we have not adopted an equity compensation plan under which our common stock is authorized for issuance.
 
SHARES AVAILABLE FOR FUTURE SALE
 
As of November 11, 2011, we had 72,477,000 shares of common stock outstanding as well as 19,607,843 shares of common stock issuable upon conversion of 10% Convertible Notes held by approximately 24 accredited investors.  The 20,052,883 shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act.
 
The outstanding shares of our common stock not included in this prospectus will be available for sale in the public market as follows:
 
Public Float
 
Of our outstanding shares, 32,000,000 shares are beneficially owned by executive officers, directors and affiliates.  The 445,040 shares, upon registration, will constitute our public float.
 
Rule 144
 
In general, under Rule 144, as currently in effect, a person, other than an affiliate, who has beneficially owned securities for at least six months, including the holding period of prior owners is entitled to sell his or her shares without any volume limitations; an affiliate, however, can sell such number of shares within any three-month period as does not exceed the greater of:
 
 
 1% of the number of shares of common stock then outstanding, or

  
 the average weekly trading volume of common stock on the OTC Bulletin Board during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
 
 
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Sales under Rule 144 are also subject to manner-of-sale provisions, notice requirements and the availability of current public information about an issuer.  In order to effect a Rule 144 sale of common stock, the transfer agent requires an opinion from legal counsel.  Further, the six month holding period is applicable only to issuers who have been subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 for at least 90 days.  As of November 11, 2011, no shares of our common stock are available for sale under Rule 144.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described.  This discussion should be read in conjunction with our audited Consolidated Financial Statements from inception on March 10, 2011 through June 30, 2011. This discussion contains forward-looking statements.

Overview

Our business objective is to become an energy savings company that provides comprehensive energy efficiency and alternative energy solutions by evaluating current systems and then designing and installing efficient systems for the commercial, residential and industrial markets, initially, in the New York Tri-State area. To capture these savings opportunities, we will first identify specific savings opportunities and define the economic return associated with each recommendation. We will then design, engineer, develop and arrange financing for energy efficiency projects and clean energy projects. Finally, we intend to own and operate heat reclamation systems, which will provide energy to potential customers at lower rates than they are currently paying.

During our initial twelve months of operations, TMG intends to focus on providing contract performance services for retrofitting existing energy systems and installing, owning and operating Heat Reclamation Systems.  These systems, while complex in their internal design are relatively simple in operation. Heat Reclamation units are used in a retrofit application replacing an existing HVAC system while providing the same role and performance but with the added benefit of capturing and reutilizing thermal energy that is usually dispersed into the atmosphere as a byproduct.  This thermal energy is reutilized to fulfill demand by the facility.  TMG captures the value of this recovered thermal energy through metering points and charges the customer at the pre-agreed rates.
 
Results of Operations
 
For the period March 10, 2011 (inception) to June 30, 2011
 
       
       
Operating expenses
     
Selling, general and administrative
  $ 258,416  
Depreciation
    1,148  
      259,564  
         
Loss before provision for income taxes
    (259,564 )
         
Income taxes
     
         
Net loss
  $ (259,564 )
         
Net loss per share - basic and diluted
  $ (0.01 )
         
Weighted average shares outstanding - basic and diluted
    43,588,124  
 
During the period March 10, 2011 (inception) to June 30, 2011 the Company has focused its efforts on developing its business plan, identifying key personnel to execute the business plan and raising capital to support the business plan.

Revenue

The Company is in its Development stage as defined by Accounting Standards Codification subtopic 915-10 Development Stage Entities (“ASC 915-10”). To date, the Company, has not generated any revenues, has incurred expenses and has sustained losses.  Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise.

Expenses

Selling, general and administrative expenses amounted to $258,416 for the period March 10, 2011 (inception) to June 30, 2011. These expenses consisted primarily of consulting fees of $122,000, salary and wages of $56,000, temporary office space of $25,000 and professional fees of $13,000.

Net Loss

The net loss applicable to common shareholders was $259,564 for the period March 10, 2011 (inception) to June 30, 2011. For the period March 10, 2011 (inception) to June 30, 2011, the basic and diluted loss per common share was $0.01.
 
 Offering costs

On March 25, 2011, the Company issued HFP Capital Markets LLC (“HFP”) a common stock purchase warrant to acquire 22,187,500 shares of common stock at an exercise price of $0.0001 per share for a period of ten years on a cashless basis. HFP has agreed to restrict their ability to exercise its warrant and receive shares of our common stock such that the number of shares of the Company common stock held by HFP and its affiliates after such conversion or exercise does not exceed 4.9% of the Company’s then issued and outstanding shares of common stock. The warrants were valued using the Black-Scholes pricing model and we incurred a non-cash charge of approximately $53,000 that was set up as a prepaid expense as services were rendered after the close of our fiscal period ended.

Off-Balance Sheet Arrangements

Our company has no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. Our company does not engage in trading activities involving non-exchange traded contracts.
 
 
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Liquidity and Capital Resources

Since inception we have not generated any revenues, therefore our general, administrative and other costs have exceeded the resources we have generated through operations. Management projects that we will require additional funding to expand our current operations. There is some doubt about our ability to continue as a going concern as the continuation of our business is dependent upon successful and sufficient market acceptance of our products and maintaining a break even or profitable level of operations. We have incurred operating losses and this is likely to continue into the year ended June 30, 2012. Management projects that we may require an additional $1,000,000 to $1,700,000 to fund our operating expenditures for the next twelve month period. Projected capital requirements for the next twelve month period, are broken down as follows:

Estimated Working Capital Expenditures During the Next Twelve Month Period
   
Operating expenditures
 
   
                   Marketing
$ 100,000 - $ 150,000
                   General and Administrative
$ 100,000 - $ 200,000
                   Legal and Accounting
$ 150,000 - $ 200,000
                   Working Capital
$ 560,000 - $1,000,000
                   Customer Relations
$ 80,000 - $ 130,000
                   Website Development Costs
$ 10,000 - $ 20,000
   
Total
$ 1,000,000 - $ 1,700,000

Our cash on hand as at June 30, 2011 was approximately $4,000 and we had working capital deficit of approximately $144,000. We require funds to enable us to address our minimum current and ongoing expenses, continue with marketing and promotion activity connected with the development and marketing of our products to establish market share. We anticipate that our cash on hand and the revenue that we anticipate generating going forward from our operations may not be sufficient to satisfy all of our cash requirements for the next twelve month period. If we require any additional monies during this time, we plan to raise any such additional capital primarily through the private placement of our equity or debt securities.

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on our audited annual financial statements for the period ended June 30, 2011, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors. There is substantial doubt about our ability to continue as a going concern as the continuation and expansion of our business is dependent upon obtaining further financing, successful and sufficient market acceptance of our products, and, finally, achieving a profitable level of operations. The issuance of additional equity or debt securities by us could result in a significant dilution in the equity interests of our current stockholders

The financial requirements of our company for the next twelve months are primarily dependent upon the financial support through additional private placements of our equity securities to our shareholders or new shareholders. The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current shareholders. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations. We do not currently have any plans to merge with another company, and we have not entered into any agreements or understandings for any such merger.

Going Concern Matter

Our auditors, in their report included with June 30, 2011 consolidated financial statements, expressed doubt about the Company’s ability to continue as a going concern. Our financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. The Company’s continued existence is dependent upon its ability to successfully execute its business plan  and secure additional sources of liquidity.
 
Operating Activities

Operating activities used cash of approximately $41,000 for the period from March 10, 2011 (inception) to June 30, 2011. The cash used during the period was largely the result of the net loss from operations.
 
 
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Financing Activities

Current and future operations are expected to be funded primarily through new sources of debt and/or equity financings. There is no assurance that new sources of debt or equity financings will be available on terms acceptable to the Company, or at all. Management believes that, based on the anticipated level of sales, and continued debt and equity financings, the Company can continue operating in the short-term.

From August 9, 2011 through October 31, 2011, the Company issued to 23 accredited investors an aggregate of $1,000,000 in 10% Convertible Promissory Notes (the “Notes”). Each Note is convertible, at any time at the option of the holder, into shares of common stock at an initial conversion price of $0.051 per share (the “Conversion Price”); provided, however, if the volume weighted average price is greater than $0.075 (the “VWAP”) during any ten (10) day Trading Days (as defined below), as reported on Bloomberg, L.P., or any third party quotation service, during the period commencing on the effective date of the Form S-1 Registration Statement covering the shares of Common Stock issuable upon Conversion of the Notes (the “Effective Date”) through the three (3) month anniversary of the Effective Date, then the Conversion Price shall be reset whereby it will equal the VWAP multiplied by .75 (the “Reset Conversion Price”). In no event shall the Reset Conversion Price be less than the Conversion Price or greater than $0.20. In the event that the Conversion Shares are registered for resale on a registration statement or may be resold in accordance with Rule 144 and the market price for the shares of Common Stock is in excess of $0.75 for a period of ten Trading Days and the average daily volume for the same period exceeds 100,000 shares per day, then the Notes will be automatically converted into shares of Common Stock of the Company. The Notes bear interest at 10% per annum and mature 18 months from the date of issuance (the “Maturity Date”). Interest shall be payable in full in cash on the Maturity Date unless converted earlier. The Notes were offered and sold to the accredited investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and/or Rule 506 promulgated thereunder. Each of the investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.

Commitments and Contingencies

Employment agreement

On March 23, 2011, the Company and Mr. Edward Miller, Chief Executive Officer and Director, entered into an Employment Agreement for a term of three years with the right to extend the term for a period of one year upon providing notice no later than 60 days prior to the end of the term. The Employment Agreement provides for an annual salary of $197,000 per year which will be increased to $275,000 upon the execution of contract(s) representing revenue of $2,500,000. Mr. Miller also received a stock option, which was amended and restated, to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years (See NOTE 4 to the June 30,2011 consolidated financial statements). The employment agreement also provides for standard benefits and the Company may terminate such agreement for cause.

Further, Mr. Miller entered into a side letter agreement with the Company whereby, Mr. Miller agreed that in the event the Company closes in excess of $750,000 in Convertible Promissory Notes in 2011 (the “Trigger Offering”), Mr. Miller, will, on the 120th day following closing of the Trigger Offering, return 11,400,000 shares to the Company for cancellation  in the event the Company has not entered contract(s) representing a minimum of $2,500,000 in revenue.

Further, Mr. Miller has also agreed to return (i) 3,066,667 shares of common stock to the Company in the event that the Company does not generate in excess of $4,000,000 in revenue during the year ended September 30, 2012, (ii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $750,000 in EBITDA during the year ended September 30, 2013 and (iii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $1,750,000 in EBITDA and $20,000,000 in revenue during the year ended September 30, 2014.

Consulting agreements

The Company has consulting agreements with outside contractors, certain of whom are also Company stockholders.

Litigation

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. Management is currently not aware of any such legal proceedings that they believe will have, individually or in the aggregate, a material adverse affect on the business, financial condition or operating results.

Significant Accounting Policies and Estimates

Compliance with accounting standards requires information in financial statements about the risks and uncertainties inherent in significant estimates, and the application of generally accepted accounting principles in the United States involves the exercise of varying degrees of judgment. Certain amounts included in our consolidated financial statements and related footnote disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time our consolidated financial statements are prepared. These estimates and assumptions affect the amounts we report for our assets, liabilities, revenues and expenses during the reporting period, and our disclosure of contingent assets and liabilities at the date of our consolidated financial statements. We routinely evaluate these estimates and assumptions, and any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Further information about us and information regarding our accounting policies and estimates that we consider to be significant can be found in our June 30, 2011 Annual Report.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but yet effective, accounting standards if currently adopted would have a material effect on the June 30, 2011 consolidated audited financial statements.

 
 
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BUSINESS
 
We are a Nevada corporation formed on March 10, 2011.  We are the sole shareholder of TMG Energy Systems Inc. (“TMG Energy Systems”, or, “TMG”), incorporated in the state of New York on March 11, 2011.  TMG’s principal executive offices are located at 555 Theodore Fremd Avenue Suite C-200 Rye, NY  10580 and its telephone number is 914-925-0300. TMG’s website address is www.tmgenergysystems.com.

Our objective is to become an energy savings company that provides comprehensive energy efficiency and alternative energy solutions by evaluating current systems and then designing and installing efficient systems for the commercial, residential and industrial markets in the New York Tri-State area. To capture these savings opportunities, we will first identify specific savings opportunities and define the economic return associated with each recommendation. We will then design, engineer, develop and arrange financing for energy efficiency projects and clean energy projects. Finally, we intend to own and operate heat reclamation systems, which will provide energy to potential customers at lower rates than they are currently paying.  During the second year of operations, we intend to expand into additional product offerings where we will own systems providing energy savings to customers.

Our Business

We were recently incorporated in the State of Nevada on March 10, 2011.  Our operations are primarily conducted through our wholly owned subsidiary, TMG Energy Systems Inc., a New York corporation (“TMG Subsidiary”).  TMG Subsidiary was formed on March 11, 2011.  Our principal activities to date have been focused on structuring and forming the company and raising capital.

Initial Three Months

Initially, we intend to finalize certain contracts that are currently being arranged with an existing initial set of customers.  The contracts will be focused on providing contract performance work for retrofitting existing buildings.  Our prioritized target customer list has been created and it is regularly updated via an internal process of cross-profiling building sizes with business types in the New York Tri-State Area.  Our extensive experience with similar alternative energy companies and related projects during the last ten plus years further supports our ability to strengthen our initial list.

Initial Year

During the first year TMG will focus on providing contract performance services for retrofitting existing energy systems and installing, owning and operating Heat Reclamation Systems.   These systems, while complex in their internal design are relatively simple in operation.  Heat Reclamation units are used in a retrofit application replacing an existing HVAC system while providing the same role and performance but with the added benefit of capturing and reutilizing thermal energy that is usually dispersed into the atmosphere as a byproduct.  This thermal energy is reutilized to fulfill demand by the facility.  TMG captures the value of this recovered thermal energy through metering points and charges the customer at the pre agreed rates.

Our expertise in identifying the most appropriate sustainable energy systems and specifying their proper installation is the key to establishing the most efficient installation to derive maximum financial benefit.   We achieve this through the analysis of our customers energy usage and we then indentify meaningful actions that are designed to achieve immediate energy savings through retrofitting of the existing mechanical components and/or installing a heat reclamation unit based on a shared savings platform.

The Second Year

During the second year,  we intend to expand our fleet of plants and pursue acquisitions of existing plants, that are currently under performing, utilizing our software and internal analysis systems to maximize their performance.  We also intend to evaluate and pursue other energy systems in addition to Heat Reclamation Systems.
 
 
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Industry Overview and Market Opportunity

Based on industry reports and in managements’ estimation, we believe the addressable energy efficiency target market in the New York Tri-State Area includes approximately 6,000 tall buildings in New York City as well as many 10 story low-rises, hospitals and industrial facilities across New York, New Jersey, Pennsylvania and Connecticut.  We believe the target customer list exceeds 20,000 buildings.

We believe the primary market drivers shaping energy costs include rising and uncertain energy prices, tight delivery capacity for conventional energy supplies, aging transmission and distribution infrastructure, climate change and increased sustainability pressures. We believe that addressing these influences through wholesale energy supply means is often restricted by zoning and permitting barriers, transmission constraints and long development and construction cycle times to build new power plants. As such, we believe that the lowest cost and fastest-to-implement remedies for these market drivers are on the energy demand side through efficient energy consumption. As are target market is increasingly faced with rising and uncertain energy costs, we believe companies are placing increasing importance on energy management but may lack the capabilities required to control and reduce costs.

Sales and Marketing

Target Market

We have defined our target market to include commercial, residential and industrial buildings in the New York Tri-State area large that each has annual average energy costs of at least $500,000.  We believe that our products and services appeal most strongly to customers that recognize the significance of improved energy performance and reduced carbon content, but do not have the internal expertise to develop and implement sustainability efforts. We focus on companies that experience high energy expenditures as often energy enhancements can offer material improvements to their earnings.  We intend to focus on residential buildings, office buildings and hospital and educational campuses.

Sales

We intend to market and sell our products and services though a direct sales organization which will initially solely consist of our executive officer, Mr. Miller.  We will focus our efforts initially on the New York Tri-State Area.  Our average sales cycle for our retrofitting services or the installation of hear reclamation units of six (6) to twelve (12) months.

Competitive Strengths

We believe the following competitive strengths will allow us to capture a portion of the growing energy efficiency market.

Extensive Analytical Expertise in Industrial Energy Efficiency.  Our principals have extensive energy and energy efficiency experience.

Speed of Implementation and Time to Value.  Our proprietary software can be implemented quickly, with the ability to provide quick insight into the energy usage behavior of potential customer properties.

Financed Solutions Yield Immediate Savings.  We are in the process of developing financing options designed to help potential future customers who may not otherwise have access to the capital needed to realize possible savings.

Our Growth Strategy

Key elements of our growth strategy include:

Focus on Strategic Market Segments.  Our goal is to organically penetrate the market by focusing on the New York City area where there is great demand for integrated sustainable energy solutions.

Acquire Complementary Businesses.  We hope to eventually acquire businesses, which complement and expand our end-to-end solutions-based services, technology, customer base and geographic coverage.

 
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Project Finance.  We intend to establish project financing facilities for our shared savings projects.

Strategic Alliances.  We hope to team with companies that have complementary features to TMG Energy, thereby reducing our development cost and introducing us to new customers.

Expansion.  We hope to eventually expand throughout the Northeast United States organically and through partnerships and alliances.

Competition

The energy savings sector is highly competitive, rapidly changing and fragmented. We primarily face competition from companies that focus on specific aspects of the energy savings solutions market including energy consultancies and existing equipment providers that provide turn-key solutions modeled around their equipment.  Many of our competitors in the industrial segment are local and regional consultants that are geographically concentrated and service a limited base of regular customers. These consultants may have specific energy auditing, and project design expertise, but lack the full range of services including the ability to finance, purchase and install energy savings equipment.   In addition, there are many competitors that focus on the sale of turn-key solutions modeled around their equipment.  There are also large multi-national corporations that have engineering and construction consulting services for energy efficiency projects that compete with us. These include: Chevron Energy Services, Siemens Energy and Automation and Power Technologies.  Many of these companies are involved in only project design and engineering services with an additional focus on supplying the machinery and hardware for the systems.  However, there are a handful of companies that provide monitoring, analysis, asset financing and project ownership through power purchase agreement structures.  Many of these existing and potential competitors have longer operating histories, significantly greater financial, technical and marketing resources, greater name recognition and a larger installed customer base than we will.

Intellectual Property

Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we will rely on a combination of patents, patent applications, trade secrets, including know-how, employee and third-party nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protect our proprietary rights in our technology.  As of the date hereof, we have not filed any patent application.  Upon raising the necessary capital, we intend to pursue patent and/or trademark applications covering the ISES (Integrated Sustainable Energy System).

We intend to continue to file additional patent applications with respect to our technology and maintain trade secrets as is consistent with our business plan in an ongoing effort to protect our intellectual property. We do not know whether any of our planned patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. Due to uncertainties inherent in prosecuting patent applications, sometimes patent applications are rejected and we subsequently abandon them. Even if granted, there can be no assurance that these pending patent applications will provide us with protection. It is possible that our current patent applications, or patents which we may later acquire, may be successfully challenged or invalidated in whole or in part. It is also possible that we may develop proprietary products or technologies in the future that are not patentable or that the patents of others will limit or altogether preclude our ability to do business. In addition, any patent issued to us may provide us with little or no competitive advantage, in which case we may abandon such patent or license it to another entity.

We also intend to own the material trademarks used in connection with the marketing, distribution and sale of all of our products and services in the United States.

Government Regulation
 
We are not subject to extensive government regulation.  We are required to file for local construction permits (electrical, mechanical, etc.) and utility interconnects and we must make various local and state filings related to environmental emissions.

Employees

We currently have three employees and one consultant.  Edward Miller is also the sole director and executive officer of the company.

Facilities

We presently lease 3,768 square feet of office space located at 555 Theodore Fremd Avenue, Suite C-200, Rye, NY 10580 at a monthly rate of $8,164 which will increase on an annual basis by $314 per month. The lease is effective through February 28, 2017.  We believe our current facilities will be adequate for the near future.

 
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Legal Proceedings

From time to time, we may become subject to various legal proceedings that arise from the normal course of business activities. In addition, from time to time, third parties may assert intellectual property infringement claims against us in the form of letters and other forms of communication. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on our results of operations, prospects, cash flows, financial position and brand.  Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding or proceedings to which we are a party or of which any of our property is subject will have a material adverse effect on our business, results of operations, cash flows or financial condition.
 
 
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MANAGEMENT
 
Executive Officers and Directors

Below are the names and certain information regarding TMG’s executive officers and directors.
 
Name
 
Age
 
Position
Edward Miller
 
39
 
Chief Executive Officer, President, Secretary, Chief Financial Officer,
Chief Accounting Officer, Treasurer and Director
 

Officers are elected annually by the Board of Directors (subject to the terms of any employment agreement), at its annual meeting, to hold such office until an officer’s successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board.

Background of Executive Officers and Directors

Edward Miller, Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Accounting Officer, Treasurer and Director of TMG Energy Corp. and TMG Energy Services Inc., has extensive experience in the New York construction industry. As an owner of The Miller Group, a commercial mechanical and general construction company, he was responsible for ensuring prominent buildings in New York City were constructed under budget and on time. The Miller Group developed a niche specializing in green and LEED building technologies. Specifically, from August, 2008 to March, 2011, Mr. Miller served as the Vice President of Operations of American DG Energy Inc. (NASDAQ: ADGE).  Prior to joining ADGE and from the years 2006 through 2008, Mr. Miller was a consultant specializing in large scale risk analysis and default surveys for some of the largest projects in the world.  In both his home market of New York and abroad Mr. Miller advised surety underwriters as to the best courses of action to get impaired contracts completed and limit cost overruns.  Mr. Miller graduated from Norwalk High School in 1990 as a National Honor Society member, enlisted in the US Navy and went on to graduate first in his class from the US Naval Intelligence Center in Dam Neck, Virginia.  From 1993 through 1996 he served as an Intelligence Specialist to the Naval Special Warfare Command and Special Operations Command.  He is a member of the greater New York Mensa chapter and holds LEED AP (Leadership in Environmental and Energy Design Accredited Professional) credentials.

Employment Agreements

On March 23, 2011, TMG Energy Corp. and Mr. Miller entered into an Employment Agreement for a term of three years with the right to extend the term for a period of one year upon providing notice no later than 60 days prior to the end of the term.  The Employment Agreement provides for an annual salary of $197,000 per year which will be increased to $275,000 upon the execution of contract(s) representing revenue of $2,500,000.  Further, Mr. Miller received an option, as amended and restated, to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years.  The vesting schedule for the option is as follows: (i) 5,000,000 shares in the event that the Company generates in excess of $3,000,000 in revenue during the year ended June 30, 2012,  (ii) 10,000,000 shares of common stock in the event that the Company generates in excess of $750,000 in EBITDA during the year ended June 30, 2013 and (iii) 10,000,000 shares of common stock in the event that the Company generates in excess of $1,750,000 in EBITDA during the year ended June 30, 2014.  The employment agreement also provides for standard benefits and the company may terminate such agreement for cause.  Further, Mr. Miller entered into a side letter agreement with the Company whereby, Mr. Miller agreed that in the event the Company closes in excess of $750,000 in Notes in this Offering (the “Trigger Offering”), Mr. Miller, will, on the 120th day following closing of the Trigger Offering, return 11,400,000 shares to the Company for cancellation in the event the Company has not entered contract(s) representing a minimum of $2,500,000 in revenue.   Further, Mr. Miller has also agreed to return (i) 3,066,667 shares of common stock to the Company in the event that the Company does not generate in excess of $4,000,000 in revenue during the year ended September 30, 2012, (ii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $750,000 in EBITDA during the year ended September 30, 2013 and (iii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $1,750,000 in EBITDA and $20,000,000 in revenue during the year ended September 30, 2014.
 
 
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Family Relationships

There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.

Involvement in Certain Legal Proceedings

None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past ten years:

1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offences;

3.
being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

4.
being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Director Independence

We currently do not have any independent directors.  Our board, in the future, intends to appoint independent directors within the meaning of applicable Nasdaq Listing Rules and the rules promulgated by the SEC.
 
 Board Committees

We presently do not have an audit committee, compensation committee or nominating committee or committees performing similar functions, as our management believes that until this point it has been premature at the early stage of our management and business development to form an audit, compensation or nominating committee.  However, our new management plans to form an audit, compensation and nominating committee upon expanding its board of directors  The audit committee will be primarily responsible for reviewing the services performed by our independent auditors and evaluating our accounting policies and system of internal controls.  We intend that the audit committee will be comprised solely of independent directors and will have an audit committee financial expert as required by the rules and regulations of the SEC.

The compensation committee will be primarily responsible for reviewing and approving our salary and benefits policies (including stock options) and other compensation of our executive officers.

The nominating committee will be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors.  The nominating committee will also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures.  Until these committees are established, these decisions will continue to be made by our board of directors.  Although our board of directors has not yet established any minimum qualifications for director candidates, when considering potential director candidates, our board of directors considers the candidate’s character, judgment, skills and experience in the context of the needs of our Company and our board of directors.

We do not have a charter governing the nominating process.  The members of our board of directors, who perform the functions of a nominating committee, are not independent because they are also our officers.  There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors.  Our board of directors does not believe that a defined policy with regard to the consideration of candidates recommended by shareholders is necessary at this time because, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level
 
 
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Code of Ethics

Our code of ethics to apply to our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There have been no transactions, or proposed transactions, which have materially affected or will materially affect us in which any director, executive officer or beneficial holder of more than 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest. We have no policy regarding entering into transactions with affiliated parties.

Mr. Miller, the sole director, is also the controlling shareholders of the Company.
 
 
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Executive Compensation
Summary Compensation Table
 
                               Incentive Plan   Deferred   All Other      
                              Compensation   Compensation   Compensation      
Name and Position
 
Year
 
Salary ($)
  Bonus ($)   Stock Awards ($)   Stock Options ($)   ($)   Earnings ($)   ($)  
Total ($)
 
Edward Miller, CEO and President
 
2011
  $ 53,422.00   $ --   $ --   $ --   $ --   $ --   $ --   $ 53,422.00  
 
Employment Agreements

On March 23, 2011, TMG Energy Corp. and Mr. Miller entered into an Employment Agreement for a term of three years with the right to extend the term for a period of one year upon providing notice no later than 60 days prior to the end of the term.  The Employment Agreement provides for an annual salary of $197,000 per year which will be increased to $275,000 upon the execution of contract(s) representing revenue of $2,500,000.  Further, Mr. Miller received an option, as amended and restated, to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years.  The vesting schedule for the option is as follows: (i) 5,000,000 shares in the event that the Company generates in excess of $3,000,000 in revenue during the year ended June 30, 2012,  (ii) 10,000,000 shares of common stock in the event that the Company generates in excess of $750,000 in EBITDA during the year ended June 30, 2013 and (iii) 10,000,000 shares of common stock in the event that the Company generates in excess of $1,750,000 in EBITDA during the year ended June 30, 2014.  The employment agreement also provides for standard benefits and the company may terminate such agreement for cause.  Further, Mr. Miller entered into a side letter agreement with the Company whereby, Mr. Miller agreed that in the event the Company closes in excess of $750,000 in Notes in this Offering (the “Trigger Offering”), Mr. Miller, will, on the 120th day following closing of the Trigger Offering, return 11,400,000 shares to the Company for cancellation in the event the Company has not entered contract(s) representing a minimum of $2,500,000 in revenue.   Further, Mr. Miller has also agreed to return (i) 3,066,667 shares of common stock to the Company in the event that the Company does not generate in excess of $4,000,000 in revenue during the year ended September 30, 2012, (ii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $750,000 in EBITDA during the year ended September 30, 2013 and (iii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $1,750,000 in EBITDA and $20,000,000 in revenue during the year ended September 30, 2014.

2011 Grants of Plan-Based Awards

Except as set forth below, the Company made no plan-based equity and non-equity awards grants to named executives in 2011.

On March 24, 2011, the Company issued an option to Mr. Miller to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years.  The vesting schedule for the option is as follows: (i) 5,000,000 shares in the event that the Company generates in excess of $3,000,000 in revenue during the year ended June 30, 2012,  (ii) 10,000,000 shares of common stock in the event that the Company generates in excess of $750,000 in EBITDA during the year ended June 30, 2013 and (iii) 10,000,000 shares of common stock in the event that the Company generates in excess of $1,750,000 in EBITDA during the year ended June 30, 2014.

Outstanding Equity Awards at Fiscal Period End

The Company had no unexercised options, stock that had not vested or equity incentive plan awards for any of our named executive officers as of June 30, 2011.

Option Exercises

During the period ended June 30, 2011 there were no options exercised by our named officers.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.  We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
 
 
29

 
 
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of our Company during the last two fiscal years is or has been indebted to our Company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

Indemnification of Directors and Officers

The Company’s directors and executive officers are indemnified as provided by the Nevada Revised Statutes and its Bylaws. These provisions state that the Company’s directors may cause the Company to indemnify a director or former director against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him as a result of him acting as a director. The indemnification of costs can include an amount paid to settle an action or satisfy a judgment.  Such indemnification is at the discretion of the Company’s board of directors and is subject to the Securities and Exchange Commission’s policy regarding indemnification.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, The Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

DIRECTOR COMPENSATION

Our directors have not received compensation for rendering services as directors since inception.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of November 11, 2011 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of our executive officers and directors; and (iii) our directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.

Name of Beneficial Owner
 
Common Stock Beneficially Owned
   
Percentage of Common Stock (2)
 
Edward Miller (1)
    32,000,000       44.2 %
                 
All officers and directors as a group (1 person)
    32,000,000       44.2 %

All officers and directors as a group (1 person)
 
 
(1)
Executive officer and/or director of TMG.
 
 
(2)
Beneficial ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table.  As the options granted to Mr. Miller are not exercisable within the next 60 days, they are not included in the above table.
 
 
30

 
 
DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 500,000,000 shares of common stock at a par value of $0.0001 per share and 10,000,000 shares of preferred stock at a par value of $0.0001 per share.  As of November 11, 2011, there are 72,477,000  shares of common stock issued and outstanding and approximately 39 stockholders of record of our common stock.  There are no shares of preferred stock issued and outstanding.
 
Holders of our common stock are entitled to one vote for each share on all matters submitted to a stockholder vote.  Holders of common stock do not have cumulative voting rights.  Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors.  Holders of our common stock representing a majority of the voting power of our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders.  A vote by the holders of a majority of the Company’s outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to the the Company’s’s articles of incorporation.

Holders of our common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds.  In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock.

The Board of Directors may later determine to issue our preferred stock.  If issued, the preferred stock may be created and issued in one or more series and with such designations, rights, preferences and restrictions as shall be stated and expressed in the resolution(s) providing for the creation and issuance of such preferred stock.  If preferred stock is issued and we are subsequently liquidated or dissolved, the preferred stockholders would have preferential rights to receive a liquidating distribution for their shares prior to any distribution to common shareholders. Although we have no present intent to do so, we could issue shares of preferred stock with such terms and privileges that a third party acquisition of our company could be difficult or impossible, thus entrenching our existing management in control of our company indefinitely.

EXPERTS

Our consolidated financial statements at June 30, 2011 and for the period then ended have been audited by RBSM LLP and are included herein in reliance upon the authority of such firm as an expert in accounting and auditing in giving such report.

LEGAL MATTERS

The validity of the shares of common stock offered through this prospectus will be passed on by Fleming PLLC, 49 Front Street, Suite #206, Rockville Centre, New York 11570.   
 
HOW TO GET MORE INFORMATION

We have filed with the SEC a Registration Statement on Form S-1 (including exhibits) under the Securities Act with respect to the shares to be sold in this Offering.  This Prospectus, which forms part of the Registration Statement, does not contain all the information set forth in the Registration Statement as some portions have been omitted in accordance with the rules and regulations of the SEC.  For further information with respect to our company and the Shares offered in this Prospectus, reference is made to the Registration Statement, including the exhibits filed thereto, and the financial statements and notes filed as a part thereof.  With respect to each such document filed with the SEC as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved.   We are not currently subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”).  As a result of the offering of the Shares of our common stock, we will become subject to the informational requirements of the Exchange Act, and, in accordance therewith, we will file quarterly and annual reports and other information with the SEC and send a copy of our annual report together with audited consolidated financial statements to each of our shareholders.  The Registration Statement, such reports and other information may be inspected and copied at the Public Reference Room of the SEC located at 100 F Street, N. E., Washington, D. C.  20549.  Copies of such materials, including copies of all or any portion of the Registration Statement, may be obtained from the Public Reference Room of the SEC at prescribed rates.  You may call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.  Such materials may also be accessed electronically by means of the SEC’s home page on the internet (http://www.sec.gov). 
 
 
31

 

TMG ENERGY CORP.
(A Development Stage Company)


Index to Consolidated Financial Statements

   
Page
Report of Independent Registered Public Accounting Firm 
   
F-2
Consolidated Balance Sheet as of June 30, 2011
   
F-3
Consolidated Statement of Operations For the Period from March 10, 2011 (date of inception) Through June 30, 2011
   
F-4
Consolidated Statement of Stockholders’ Deficit For The Period From March 10, 2011 (date of inception) Through June 30, 2011
   
F-5
Consolidated Statement of Cash Flows For the Period From March 10, 2011 (date of inception) Through June 30, 2011
   
F-6
Notes To Consolidated Financial Statements 
 
F-7 ~ F-16
 
 
F-1

 
 
RBSM LLP
CERTIFIED PUBLIC ACCOUNTANTS
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

 
Board of Directors and Shareholders of
TMG Energy Corp.
Rye, New York

 
We have audited the accompanying consolidated balance sheet of TMG Energy Corp. and its subsidiary (the “Company”), a Development Stage company as of June 30, 2011 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the period from March 10, 2011 (date of inception) through June 30, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provided a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of TMG Energy Corp. and its subsidiary as of June 30, 2011 and the consolidated results of its operations and its cash flows for the period from March 10, 2011 (date of inception) through June 30, 2011, in conformity with accounting principles generally accepted in the United States.
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 of the accompanying consolidated financial statements, the Company is in Development stage, has no revenue, has incurred significant losses since inception, and has a working capital deficiency as of June 30, 2011, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

 

 
 /s/ RBSM LLP
New York, New York
 
November 14, 2011
 


 
F-2

 
 
 
TMG ENERGY CORP.  AND SUBSIDIARY
(a Development Stage Enterprise)
       
CONSOLIDATED BALANCE SHEET
June 30, 2011
       
ASSETS
     
Current assets:
     
Cash and cash equivalents
  $ 4,163  
Prepaid and other current assets
    53,256  
Total current assets
    57,419  
         
Property and equipment, net
    9,215  
   
       
TOTAL ASSETS
  $ 66,634  
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT
       
Current liabilities:
       
Accounts payable
  $ 5,895  
Accrued compensation expense
    53,422  
Accrued expenses and other current liabilities
    141,995  
Total current liabilities
    201,312  
         
Commitments and contingencies
    -  
         
Stockholders’ deficit:
       
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2011
    -  
Common stock, $0.0001 par value; 500,000,000 shares authorized; 62,252,000 shares issued and outstanding at June 30, 2011
    6,225  
Additional paid-in capital
    118,661  
Deficit accumulated during development stage
    (259,564 )
Total stockholders’ deficit
    (134,678 )
         
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
  $ 66,634  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3

 
 
TMG ENERGY CORP. AND SUBSIDIARY
 
(a Development Stage Enterprise)
 
       
CONSOLIDATED STATEMENT OF OPERATIONS
 
For the period March 10, 2011 (inception) to June 30, 2011
 
       
       
Operating expenses
     
Selling, general and administrative
  $ 258,416  
Depreciation
    1,148  
      259,564  
         
Loss before provision for income taxes
    (259,564 )
         
Income taxes
     
         
Net loss
  $ (259,564 )
         
Net loss per share - basic and diluted
  $ (0.01 )
         
Weighted average shares outstanding - basic and diluted
    43,588,124  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
 
TMG ENERGY CORP.  AND SUBSIDIARY
(a Development Stage Enterprise)
                               
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
For the period March 10, 2011 (inception) to June 30, 2011
                               
                               
                Additional     (Deficit) Accumulated        
    Common Stock           Paid-In     During Development        
   
Shares
   
Amount
   
Capital
   
Stage
   
Total
 
                               
Balances at March 10, 2011 (Inception)
    -     $ -     $ -     $ -     $ -  
Common stock issued in March 2011 in exchange for services rendered for forming the Company at $0.0001 per share
    35,000,000       3,500       -       -       3,500  
Common stock issued to consultants in March 2011 in exchange for services rendered at $0.0025 per share
    5,000,000       500       12,000       -       12,500  
Fair value of warrants issued in March 2011 for services related to debt issuance (prepaid)     -       -       53,256       -       53,256  
Sale of common stock in May 2011 at $0.0025 per share
    22,252,000       2,225       53,405       -       55,630  
Net loss
    -       -       -       (259,564 )     (259,564 )
Balances at June 30, 2011
    62,252,000     $ 6,225     $ 118,661     $ (259,564 )   $ (134,678 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-5

 
 
       
TMG ENERGY CORP. AND SUBSIDIARY
 
(a Development Stage Enterprise)
 
       
CONSOLIDATED STATEMENT OF CASH FLOWS
 
For the period March 10, 2011 (inception) to June 30, 2011
 
       
       
CASH FLOWS FROM OPERATING ACTIVITIES:
     
Net loss
  $ (259,564 )
Adjustments to reconcile net loss to net cash used in operating activities:
       
Depreciation
    1,148  
        Common stock issued for services     16,000  
Changes in operating assets and liabilities        
Increase in accounts payable
    5,895  
Increase in accrued compensation expense
    53,422  
Increase in accrued expenses and other current liabilities
    141,995  
Net cash used in operating activities
    (41,104 )
         
CASH FLOWS FROM INVESTING ACTIVITIES:
       
Purchases of property and equipment
    (10,363 )
Net cash used in investing activities
    (10,363 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:
       
Proceeds from sale of common stock
    55,630  
Net cash provided by financing activities
    55,630  
         
Net increase in cash and cash equivalents
    4,163  
Cash and cash equivalents, at inception
    0  
Cash and cash equivalents, end of the year
  $ 4,163  
         
Supplemental disclosures of cash flows information:
       
         
Non-cash investing and financing activities:
       
Issuance of common stock for forming the Company
  $ 3,500  
Issuance of common stock to consultants
  $ 12,500  
Fair value of warrants issued in March 2011 for services related to debt issuance (prepaid)
  $ 53,256  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-6

 
 

 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:

Business and Basis of Presentation

TMG Energy Corp. (the “TMG Energy Corp.,” the "Company"), was incorporated under the laws of the State of Nevada on March 10, 2011. The Company was formed to develop into an energy savings company that will provide comprehensive energy efficiency and alternative energy solutions by evaluating current systems and then designing and installing efficient systems for the commercial, residential and industrial markets, initially, in the New York Tri-State area. To implement its business plan, significant additional financing will be required and the Company will need to be successful in its efforts to identify and develop its customer base and products.

The Company is in the development stage as defined by Accounting Standards Codification subtopic 915-10 Development Stage Entities (“ASC 915-10”). To date, the Company, has not generated sales revenues, has incurred expenses and has sustained losses.  Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise.  For the period from inception through June 30, 2011, the Company has accumulated losses of $259,564.

The consolidated financial statements include the accounts of the Company, including TMG Energy Systems Inc., its wholly-owned subsidiary, (formerly known as TMG Energy Services, Inc.) a New York corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

The Company did not generate any revenue for the period March 10, 2011 (inception) through June 30, 2011. The Company will begin recording revenue once it is determined that, (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the Company’s price to the buyer is fixed or determinable; and (4) collectibility of the receivables is reasonably assured.

Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

The Company will consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

 
F-7

 

TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Property and Equipment

Property and equipment is recorded at cost. Depreciation of assets is provided by use of a straight-line method over the estimated useful lives of the related assets. Expenditures for replacements, renewals, and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. As of June 30, 2011, the Company did not lease or own real property, however, the Company incurred approximately $21,000 for temporary office space. Management intends to locate permanent office space in New York for our executive offices.

The Company evaluates the carrying value of items of property and equipment to be held and used whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  The carrying value of an item of property and equipment is considered impaired when the projected undiscounted future cash flows related to the asset are less than its carrying value.  The Company measures impairment based on the amount by which the carrying value of the respective asset exceeds its fair value.  Fair value will be determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved.
 
Income Taxes
 
Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) clarifies the accounting for uncertainty in tax positions and requires that a Company recognize in its financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position.  The adoption of this standard did not have a material impact on the Company's financial position, results of operations, or cash flows.

 
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company will record net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance will be established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes.
 
The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
 
 
F-8

 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)
 
For the period from March 10, 2011 (inception) to June 30, 2011, the Company incurred net operating losses in an amount exceeding the net income. However, no benefit for income taxes has been recorded due to the uncertainty of the realization of this deferred tax asset. At June 30, 2011, the Company had in excess of approximately $250,000 of federal and state net operating losses (“NOL”) allocated to continuing operations available. The net operating loss carry forward, if not utilized, for federal and state will begin to expire in 2031 and 2021, respectively.
 
Net Income (Loss) per Share

The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net earnings (losses) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding stock options and warrants (calculated using the treasury stock method). During the period March 10, 2011 (inception) though June 30, 2011, outstanding stock options and warrants was not considered because they would be anti-dilutive, thereby decreasing the net loss per common share.

Fair Value of Financial Instruments
 
Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable, accrued liabilities, and short-term borrowings, as reflected in the balance sheet, approximate fair value because of the short-term maturity of these instruments.  All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

Stock Based Compensation

Effective for the year beginning March 10, 2011 (inception), the Company has adopted Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”). This requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

As of June 30, 2011, there were 25,000,000 stock options issued with a strike price of $0.0001 per share.

Reliance on Key Personnel and Consultants

The Company had one full-time employee and 3 consultants performing various specialized services as of June 30, 2011. The Company is heavily dependent on the continued active participation of this current executive officer and consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.
 
 
F-9

 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 NOTE 2 – GOING CONCERN MATTERS

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements for the period March 10, 2011 (inception) to June 30, 2011, the Company has incurred losses of $259,564.  In addition, as of June 30, 2011, the Company had a working capital deficit of $143,893 and no revenue generating operations. These factors, among others, indicate that the Company may be unable to continue as a going concern.
 
The Company's existence is dependent upon management's ability to generate and develop business opportunities to generate profitable operations which will resolve its liquidity problems. The accompanying consolidated financial statements do not include any adjustments that may result should the Company be unable to continue as a going concern.

The Company is attempting to obtain financing for its operations. There can be no assurance that the Company will be successful in its effort to secure additional equity financing. If operations and cash flows continue to improve through these efforts, management believes that the Company can continue to successfully maintain operations. However, no assurance can be given that management's actions will result in profitable operations or the resolution of its liquidity problems.

NOTE 3 – CAPITAL STOCK
 
Preferred Stock

As set forth in the Company’s Articles of Incorporation, the Company has authorized the issuance of 10,000,000 shares of preferred stock, with a par value of $0.0001 per share. As of June 30, 2011 no preferred stock is issued and outstanding.
 
Common stock

As set forth in the Company’s Articles of Incorporation, the Company has authorized this issuance of 500,000,000 shares of common stock, with a par value of $0.0001 per share.

As of June 30, 2011, there were 62,252,000 shares of common stock issued and outstanding.
 
 
F-10

 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 3 – CAPITAL STOCK (continued)

Sales / Issuances of Unregistered Securities

On March 14, 2011, the Company issued 22,800,000 shares of common stock to Edward Miller, an executive officer and director of the Company, in connection with his incorporation services provided to the Company.  Mr. Miller subsequently purchased 9,200,000 shares of common stock from a third party consultant in June 2011. Further, Mr. Miller entered into a side letter agreement with the Company whereby, Mr. Miller agreed that in the event the Company closes in excess of $750,000 in Convertible Promissory Notes in 2011 (the “Trigger Offering”), Mr. Miller, will, on the 120th day following closing of the Trigger Offering, return 11,400,000 shares to the Company for cancellation in the event the Company has not entered contract(s) representing a minimum of $2,500,000 in revenue. Further, Mr. Miller has also agreed to return (i) 3,066,667 shares of common stock to the Company in the event that the Company does not generate in excess of $4,000,000 in revenue during the year ended September 30, 2012, (ii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $750,000 in EBITDA during the year ended September 30, 2013 and (iii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $1,750,000 in EBITDA and $20,000,000 in revenue during the year ended September 30, 2014.

On March 14, 2011, the Company issued 12,200,000 shares of common stock to a third party consultant who subsequently sold 9,200,000 shares to Mr. Miller, our sole executive officer and director, at par value.

On March 24, 2011, the Company issued 4,125,000 shares of common stock valued at $0.0025 per share amounts to $10,312 to Fleming PLLC for assistance with the formation of the Company and general corporate legal services through March 2012.

On March 24, 2011, the Company issued 875,000 shares of common stock valued at $0.0025 per share amounts to $2,188 to Vincent Carrubba for consulting services through March 16, 2012 to assist in providing business development services including reviewing and developing the business plan.

On March 24, 2011, as amended and restated, the Company issued an option to Mr. Miller to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years.  The vesting schedule for the option is as follows: (i) 5,000,000 shares in the event that the Company generates in excess of $3,000,000 in revenue during the year ended June 30, 2012,  (ii) 10,000,000 shares of common stock in the event that the Company generates in excess of $750,000 in EBITDA during the year ended June 30, 2013 and (iii) 10,000,000 shares of common stock in the event that the Company generates in excess of $1,750,000 in EBITDA during the year ended June 30, 2014. 
 
 
F-11

 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
 
NOTE 3 – CAPITAL STOCK (continued)

On March 25, 2011, the Company issued HFP Capital Markets LLC (“HFP”) a common stock purchase warrant to acquire 22,187,500 shares of common stock at an exercise price of $0.0001 per share for a period of ten years on a cashless basis. HFP has agreed to restrict their ability to exercise its warrant and receive shares of our common stock such that the number of shares of the Company common stock held by HFP and its affiliates after such conversion or exercise does not exceed 4.9% of the Company’s then issued and outstanding shares of common stock.

From March 29, 2011 through May 3, 2011, the Company sold 22,252,000 shares of common stock to 36 accredited investors at an offering price of $0.0025 for gross proceeds of $55,630.  These securities were offered and sold to accredited investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder. The investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.

All of the above offerings and sales were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of the Company or executive officers of the Company, and transfer was restricted by the Company in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment.

NOTE 4 – OPTIONS AND WARRANTS

Options

Mr. Miller, Chief Executive Officer and Director, received a stock option, which was amended and restated, to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years.  The vesting schedule for the option is as follows: (i) 5,000,000 shares in the event that the Company generates in excess of $3,000,000 in revenue during the year ended June 30, 2012,  (ii) 10,000,000 shares of common stock in the event that the Company generates in excess of $750,000 in EBITDA during the year ended June 30, 2013 and (iii) 10,000,000 shares of common stock in the event that the Company generates in excess of $1,750,000 in EBITDA during the year ended June 30, 2014.

The Company had 25,000,000 outstanding options, however, none of these options were vested as of June 30, 2011.

Warrants
 
The Company engaged HFP Capital Markets, LLC (“HFP”), a broker dealer who is a member of Financial Industry Regulatory Authority, to assist in raising capital. On March 25, 2011, the Company issued HFP a common stock purchase warrant to acquire 22,187,500 shares of common stock at an exercise price of $0.0001 per share for a period of ten years on a cashless basis. HFP has agreed to restrict their ability to exercise its warrant and receive shares of common stock such that the number of shares of the Company common stock held by HFP and its affiliates after such conversion or exercise does not exceed 4.9% of the Company’s then issued and outstanding shares of common stock.
 
 
F-12

 
 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 4 – OPTIONS AND WARRANTS (continued)

The following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common stock issued as of June 30, 2011:

Exercise
Price
 
Number
Outstanding
 
Warrants Outstanding
Weighted Average
Remaining Contractual
Life (years)
 
Weighted
Average
Exercise price
 
Number
Exercisable
 
Warrants Exercisable
Weighted
Average
Exercise Price
 
$
0.0001
 
22,187,500
 
9.75
 
$
0.0001
 
22,187,500
 
$
0.0001
 

Transactions involving the Company’s warrant issuance are summarized as follows:
 
  
 
Stock Warrants
 
       
Weighted
 
       
Exercise
 
   
Shares
 
Price
 

Outstanding at March 10, 2011 (inception)
   
     
 
Granted
   
22,187,500
    $
0.0001
 
Canceled
   
     
 
Expired
   
     
 
Exercised
   
     
 
Outstanding at June 30, 2011
   
22,187,500
   
$
0.0001
 


The fair value of the issued warrants was $53,256 and was determined using the Black-Scholes Option Pricing Model based on the following assumptions:

Significant assumptions:
                 
Risk-free interest rate at grant date
          0.26 %      
Expected stock price volatility
    70       70 %        
Expected dividend payout
                     
Expected warrant life-years (a)                                                                                    
            1          

_____________________
(a)           The expected warrant life is based on expected exercise timeframe.
 
 
F-13

 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 5 - CONTINGENCIES

Employment agreement

On March 23, 2011, the Company and Mr. Edward Miller, Chief Executive Officer and Director, entered into an Employment Agreement for a term of three years with the right to extend the term for a period of one year upon providing notice no later than 60 days prior to the end of the term. The Employment Agreement provides for an annual salary of $197,000 per year which will be increased to $275,000 upon the execution of contract(s) representing revenue of $2,500,000. Mr. Miller also received a stock option, which was amended and restated, to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years (See NOTE 4). The employment agreement also provides for standard benefits and the Company may terminate such agreement for cause.

Further, Mr. Miller entered into a side letter agreement with the Company whereby, Mr. Miller agreed that in the event the Company closes in excess of $750,000 in Convertible Promissory Notes in 2011 (the “Trigger Offering”), Mr. Miller, will, on the 120th day following closing of the Trigger Offering, return 11,400,000 shares to the Company for cancellation  in the event the Company has not entered contract(s) representing a minimum of $2,500,000 in revenue.

Further, Mr. Miller has also agreed to return (i) 3,066,667 shares of common stock to the Company in the event that the Company does not generate in excess of $4,000,000 in revenue during the year ended September 30, 2012, (ii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $750,000 in EBITDA during the year ended September 30, 2013 and (iii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $1,750,000 in EBITDA and $20,000,000 in revenue during the year ended September 30, 2014.

Consulting agreements

The Company has consulting agreements with outside contractors, certain of whom are also Company stockholders.

Litigation

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. Management is currently not aware of any such legal proceedings that they believe will have, individually or in the aggregate, a material adverse affect on the business, financial condition or operating results.

NOTE 6 – INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of the Company’s deferred tax assets as of June 30, 2011 are as follows:
 
   
2011
       
Deferred tax assets:
               
Net operating losses
  $  101,250          
Total gross deferred tax assets
     101,250          
Less valuation allowance
     (101,250        
Net deferred tax asset
  $ 0          
             
 
 
F-14

 
 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 6 – INCOME TAXES (continued)

The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible. At June 30, 2011, the Company has available net operating loss carry forwards of approximately $250,000 for federal and state income tax purposes. The net operating losses will expire through 2031 and 2021 for federal and state income tax purposes, respectively. The ultimate realization of the net operating losses may be limited if an ownership change occurs under Internal Revenue Code section 382. The Company has fully reserved the tax benefit of the temporary differences as the likelihood of realization of the benefit cannot be established.

For the period ended June 30, 2011, the provision (benefit) for income taxes reconciles to the amount computed by applying the federal statutory rate to (loss) before provision for income taxes as follows:

   
2011
 
Computed expected federal tax benefits
 
$
 88,250
 
Permanent difference
   
 
State and local income taxes, net of federal benefit
   
13,000
 
Change in valuation reserve
   
(101,250
)
Provision for income taxes
 
$
-0-
 

NOTE 7 – SUBSEQUENT EVENTS
  
On August 1, 2011, the Company and Bradley Michaelis, its Vice President Engineering, Research and Development, entered into an employment agreement with an annual salary of $130,000 which includes a bonus plan and stock grants upon reaching certain milestones.

On August 1, 2011, the Company and Jessica Miller (no relation to the Chief Executive Officer), its Office Manager, entered into an employment agreement with an annual salary of $65,000 which includes a bonus plan and stock grants upon reaching certain milestones.

On August 23, 2011, the Company established its corporate headquarters in Rye, New York. The lease commenced on September 27, 2011 and has a term through February 28, 2017. The base rent charge will approximate $8,200 a month and escalate to $9,700 a month by the end of the lease.
 
 
F-15

 
 
TMG ENERGY CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

NOTE 7 – SUBSEQUENT EVENTS (continued)

From August 9, 2011 through October 31, 2011, the Company issued to 23 accredited investors an aggregate of $1,000,000 in 10% Convertible Promissory Notes (the “Notes”). Each Note is convertible, at any time at the option of the holder, into shares of common stock at an initial conversion price of $0.051 per share (the “Conversion Price”); provided, however, if the  volume weighted average price is greater than $0.075 (the “VWAP”) during any ten (10) day Trading Days (as defined below), as reported on Bloomberg, L.P., or any third party quotation service, during the period commencing on the effective date of the Form S-1 Registration Statement covering the shares of Common Stock issuable upon Conversion of the Notes (the “Effective Date”) through the three (3) month anniversary of the Effective Date, then the Conversion Price shall be reset whereby it will equal the VWAP multiplied by .75 (the “Reset Conversion Price”). In no event shall the Reset Conversion Price be less than the Conversion Price or greater than $0.20. In the event that the Conversion Shares are registered for resale on a registration statement or may be resold in accordance with Rule 144 and the market price for the shares of Common Stock is in excess of $0.75 for a period of ten Trading Days and the average daily volume for the same period exceeds 100,000 shares per day, then the Notes will be automatically converted into shares of Common Stock of the Company. The Notes bear interest at 10% per annum and mature 18 months from the date of issuance (the “Maturity Date”). Interest shall be payable in full in cash on the Maturity Date unless converted earlier. The Notes were offered and sold to the accredited investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and/or Rule 506 promulgated thereunder. Each of the investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.

In addition, HFP Capital Markets LLC received seven and one half percent (7.5%) of the Offering, or $75,000 based on the sale of $1,000,000 in Notes for their efforts raising the capital and $1,500 was paid out of the proceeds for escrow fees.

On November 9, 2011, HFP provided the Company with four separate exercise notices of an aggregate of 10,225,000 shares of common stock.  Following each exercise, HFP assigned the shares to four employees.  In addition, HFP assigned a portion of the warrant to acquire 12,500,000 shares of common stock to three employees.  HFP continues to hold a warrant to acquire 187,500 shares of common stock
 
 
F-16

 
 
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, if any, payable by the Registrant relating to the sale of common stock being registered.  All amounts are estimates except the SEC registration fee.
 
SEC registration fee  
  $ 209.72  
Printing and engraving expenses  
    5,000.00 *
Legal fees and expenses  
    5,000.00 *
Accounting fees and expenses  
    50,000.00 *
Miscellaneous expenses  
    10,000.00 *
   
  $ 70,209.72 *
*  Estimated.

The Company has agreed to bear expenses incurred by the selling shareholders that relate to the registration of the shares of common stock being offered and sold by the selling shareholders.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our officers and directors are indemnified as provided by the Nevada Revised Statutes and our bylaws. Under the NRS, unless modified by a corporation’s articles of incorporation, a director is not liable to a corporation, its shareholders or creditors for damages unless the director’s action or failure constituted a breach of fiduciary duty and such breach involved intentional misconduct, fraud or a knowing violation of law.  
 
Our bylaws provide that we will indemnify our directors and officers to the fullest extent permissible under Nevada law if such person acted in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of TMG and, with respect to any criminal action, had no reasonable cause to believe such conduct was unlawful.  TMG may purchase and maintain insurance or make other financial arrangements on behalf of any individual entitled to indemnity.  Our bylaws also provide that we will advance all expenses incurred to any person entitled to indemnity upon receipt of an undertaking by or on behalf of such person to repay said amounts should it be ultimately determined that the person was not entitled to indemnification.

Our bylaws further provide that discretionary indemnification may be authorized (a) by the shareholders; (b) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding; or (c) by independent legal counsel in a written opinion (i) if ordered by a majority vote of disinterested directors or (ii) if a quorum of disinterested directors cannot be obtained.    
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
 
The following issuances were made by TMG Energy Corp:

On March 14, 2011, the Company issued 22,800,000 shares of common stock to Edward Miller, an executive officer and director of the Company, in connection with his incorporation services provided to the Company.  Mr. Miller subsequently acquired 9,200,000 shares of common stock from a third party consultant in June 2011.    Further, Mr. Miller entered into a side letter agreement with the Company whereby, Mr. Miller agreed that in the event the Company closes in excess of $750,000 in Notes in this Offering (the “Trigger Offering”), Mr. Miller, will, on the 120th day following closing of the Trigger Offering, return 11,400,000 shares to the Company for cancellation in the event the Company has not entered contract(s) representing a minimum of $2,500,000 in revenue.  Further, Mr. Miller has also agreed to return (i) 3,066,667 shares of common stock to the Company in the event that the Company does not generate in excess of $4,000,000 in revenue during the year ended September 30, 2012, (ii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $750,000 in EBITDA during the year ended September 30, 2013 and (iii) 3,066,666 shares of common stock to the Company in the event that the Company does not generate in excess of $1,750,000 in EBITDA and $20,000,000 in revenue during the year ended September 30, 2014.

 
32

 

On March 14, 2011, the Company issued 12,200,000 shares of common stock to a third party consultant (the “Consultant”).  The Consultant subsequently sold 9,200,000 to Mr. Miller, our sole executive officer and director.

On March 24, 2011, the Company issued 4,125,000 shares of common stock valued at $0.0025 per share amounts to $10,312 to Fleming PLLC for corporate legal services.

On March 24, 2011, the Company issued 875,000 shares of common stock valued at $0.0025 per shares amounts to $2,188 to Vincent Carrubba for consulting services.

On March 24, 2011, the Company issued an option to Mr. Miller to acquire an aggregate of 25,000,000 shares of common stock at $.0001 per share for a period of ten years.  The vesting schedule for the option is as follows: (i) 5,000,000 shares in the event that the Company generates in excess of $3,000,000 in revenue during the year ended June 30, 2012,  (ii) 10,000,000 shares of common stock in the event that the Company generates in excess of $750,000 in EBITDA during the year ended June 30, 2013 and (iii) 10,000,000 shares of common stock in the event that the Company generates in excess of $1,750,000 in EBITDA during the year ended June 30, 2014.

On March 25, 2011, the Company issued HFP Capital Markets LLC (“HFP”) a common stock purchase warrant to acquire 22,187,500 shares of common stock at an exercise price of $0.0001 per share for a period of ten years on a cashless basis.   HFP has agreed to restrict their ability to exercise its warrant and receive shares of our common stock such that the number of shares of the Company common stock held by HFP and its affiliates after such conversion or exercise does not exceed 4.9% of the Company’s then issued and outstanding shares of common stock.

From March 29, 2011 through May 3, 2011, the Company sold 22,252,000 shares of common stock to 36 accredited investors for gross proceeds of $55,630.  A portion of the investors that participated in this private placement offering are affiliated with HFP in that they are management, employees or family members of management or employees.

From August 9, 2011 through October 31, 2011, we issued to 23 accredited investors an aggregate of $1,000,000 in 10% Convertible Promissory Notes (the “Notes”). Each Note is convertible, at any time at the option of the holder, into shares  of common stock at an initial conversion price of $0.051 per share (the “Conversion Price”); provided, however, if the  volume weighted average price is greater than $0.075 (the “VWAP”) during any ten (10) day Trading Days (as defined below), as reported on Bloomberg, L.P., or any third party quotation service, during the period commencing on the effective date of the Form S-1 Registration Statement covering the shares of Common Stock issuable upon Conversion of the Notes (the “Effective Date”) through the three (3) month anniversary of the Effective Date, then the Conversion Price shall be reset whereby it will equal the VWAP multiplied by .75 (the “Reset Conversion Price”).  In no event shall the Reset Conversion Price be less than the Conversion Price or greater than $0.20. In the event that the Conversion Shares are registered for resale on a registration statement or may be resold in accordance with Rule 144 and the market price for the shares of Common Stock is in excess of $0.75 for a period of ten Trading Days and the average daily volume for the same period exceeds 100,000 shares per day, then the Notes will be automatically converted into shares of Common Stock of the Company. The Notes bear interest at 10% per annum and mature 18 months from the date of issuance (the “Maturity Date”). Interest shall be payable in full in cash on the Maturity Date unless converted earlier.  The note holders have contractually agreed to restrict their ability to convert the Notes and receive shares of common stock such that the number of shares of common stock may not exceed 4.99% of the outstanding shares of common stock of our company.  The Notes were offered and sold to the accredited investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and/or Rule 506 promulgated thereunder. Each of the investors are accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.  In addition, HFP received seven and one half percent (7.5%) of the Offering, or $75,000 based on the sale of $1,000,000 in Notes.

 
On November 9, 2011, HFP provided the Company with four separate exercise notices of an aggregate of 10,225,000 shares of common stock.  Following each exercise, HFP assigned the shares to four employees.  In addition, HFP assigned a portion of the warrant to acquire 12,500,000 shares of common stock to three employees.  HFP continues to hold a warrant to acquire 187,500 shares of common stock.
 
The issuance of the foregoing securities in each of the transactions described above was made in reliance upon the exemption from the registration provisions of the Securities Act set forth in Section 4(2) thereof as a transaction by an issuer not involving any public offering and/or Rule 506 under Regulation D as promulgated under the Securities Act. The respective transaction documents contain representations to support our reasonable belief that each investor is an “accredited investor” as defined in Rule 501 under the Securities Act, and that such investor is acquiring such securities for investment and not with a view to the distribution thereof. At the time of their issuance, the securities described above were deemed to be restricted securities for purposes of the Securities Act and such securities (and shares issued upon exercise of the unregistered warrants will) bear legends to that effect.
 
 
33

 

The issuance of the foregoing securities in each of the transactions described above was made in reliance upon the exemption from the registration provisions of the Securities Act set forth in Section 4(2) thereof as a transaction by an issuer not involving any public offering and/or Rule 506 under Regulation D as promulgated under the Securities Act. The respective transaction documents contain representations to support our reasonable belief that each investor is an “accredited investor” as defined in Rule 501 under the Securities Act, and that such investor is acquiring such securities for investment and not with a view to the distribution thereof. At the time of their issuance, the securities described above were deemed to be restricted securities for purposes of the Securities Act and such securities (and shares issued upon exercise of the unregistered warrants will) bear legends to that effect.

ITEM 16. EXHIBITS
EXHIBIT INDEX

Exhibit No.
 
Description
     
3.1
 
Certificate of Incorporation
3.2
 
Bylaws
4.1
 
Form of 10% Convertible Promissory Notes
4.2
 
Amended and Restated Stock Option Agreement, dated June 6, 2011, by and Between TMG Energy Corp. and Edward Miller
4.3
 
Common Stock Purchase Warrant  issued to HFP Capital Markets LLC
5.1
 
Opinion of Fleming PLLC
10.1
 
Employment Agreement, dated March 24, 2011, by and between TMG Energy Corp. and Edward Miller
14.1
 
Code of Ethics of TMG Energy Corp.
21.1
 
List of Subsidiaries
23.1
 
Consent of Fleming PLLC (included in Exhibit 5.1)
23.1
 
Consent of RBSM LLP
 
ITEM 17.  UNDERTAKINGS.

The undersigned company hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement, and

(iii) Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for determining liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
(4) That, for the purpose of determining liability under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
 
 
34

 

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
 
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
 
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
 
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(5) That, for the purpose of determining liability under the Securities Act to any purchaser: Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of TMG pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
  
SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rye, State of New York on this 14th  day of November 2011.
 
   
TMG ENERGY CORP.
 
       
 
By:
/s/ Edward Miller
 
   
Edward Miller, Chief Executive Officer, President,
 Secretary, Chief Financial Officer, Chief Accounting
Officer, Treasurer and Director (Principal Executive,
 Financial and Accounting Officer)
 

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.  
         
Signature
 
Title
 
Date
         
/s/ Edward Miller   
 
Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Accounting Officer, Treasurer and Director (Principal Executive, Financial and Accounting Officer)(Principal Executive Officer)
 
November 14, 2011    
Edward Miller 
       
 
 
35

 
 
 

 
 
 

 
 
 
 

 
 


BYLAWS

OF

TMG ENERGY CORP.

(the "Corporation")

Section 1.              Certificates Representing Stock.  (a) Certificates representing stock in the corporation shall be signed by, or in the name of, the corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation.  Any or all the signatures on any such certificate may be a facsimile.  In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

(b)           Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the Nevada Revised Statutes.  Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares.

(c)           The corporation may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate or uncertificated shares.

Section 2.              Uncertificated Shares.  Subject to any conditions imposed by the Nevada Revised Statutes, the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the corporation shall be uncertificated shares.  Within a reasonable time after the issuance or transfer of any uncertificated shares, the corporation shall send to the registered owner thereof any written notice prescribed by the Nevada Revised Statutes.

 
 

 

Section 3.              Fractional Share Interests.  The corporation may, but shall not be required to, issue fractions of a share.  If the Corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or bearer form (represented by a certificate) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share.  A certificate for a fractional share or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation.  The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing the full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose.

Section 4.              Stock Transfers.  Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and, in the case of shares represented by certificates, on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon.

Section 5.              Record Date For Stockholders.  In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting.  If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.  In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors.  If no record date has been fixed by the Board of Directors, the record date for determining the stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the Nevada Revised Statutes, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Nevada, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meeting of stockholders are recorded.  Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested.  If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Nevada Revised Statutes, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.  In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action.  If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 
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Section 6.              Meaning of Certain Terms.  As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the Nevada Revised Statutes confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificate of incorporation, except as any provision of law may otherwise require.

Section 7.              Stockholder Meetings.

-           Time.  The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors, provided that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting.  A special meeting shall be held on the date and at the time fixed by the directors.

-           Place.  Annual meetings and special meetings shall be held at such place, within or without the State of Nevada, as the directors may, from time to time, fix.  Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Nevada.

-           Call.  Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting.

-           Notice or Waiver of Notice.  Written notice of all meetings shall be given, stating the place, date, hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined.  The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes.  The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called.  The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the Nevada Revised Statutes.  Except as otherwise provided by the Nevada Revised Statutes, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation.  Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail.  If a meeting is adjourned to another time, not more than thirty days hence, and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting.  Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein.  Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, not the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.

 
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-           Stockholder List.  The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.  The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders.

-           Conduct of Meeting.  Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting-the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders.  The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting.

-           Proxy Representation.  Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting.  Every proxy must be signed by the stockholder or by his attorney-in-fact.  No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period.  A duly executed proxy shall be irrevocable if it states that is irrevocable and, if, and only as long as it is coupled with an interest sufficient in law to support an irrevocable power.  A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.

 
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-           Inspectors.  The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof.  If any inspector or inspectors are not appointed, the person presiding at the meeting may, but need not appoint one or more inspectors.  In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat.  Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of his ability.  The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question, or matter determined by him or them and execute a certificate of any fact found by him or them.  

-           Quorum.  The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business.  The stockholders presents may adjourn the meeting despite the absence of a quorum.

-           Voting.  Each share of stock shall entitle the holder thereof to one vote.  Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.  Any other action shall be authorized by a majority of the votes cast except where the Nevada Revised Statutes prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the certificate of incorporation and these Bylaws.  In the election of directors, and for any other action, voting need not be by ballot.

Section 8.              Stockholder Action Without Meetings.  Any action required by the Nevada Revised Statutes to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.  Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.  

ARTICLE II

DIRECTORS

Section 1.              Functions and Definition.  The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the corporation.  The Board of Directors shall have the authority to fix the compensation of the members thereof.  The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies.

Section 2.              Qualifications and Number.  A director need not be a stockholder, a citizen of the United States, or a resident of the State of Nevada.  The initial Board of Directors shall consist of one (1) person.  Thereafter, the number of directors may be increased or decreased from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be one (1).

 
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Section 3.              Election and Term.  The first Board of Directors, unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators and shall hold office until first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal.  Any director may resign at any time upon written notice to the corporation.  Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting resignation or removal.  Except as the Nevada Revised Statutes may otherwise require, in the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director.  

Section 4.              Meetings.

-               Time.  Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble.

-               Place.  Meetings shall be held at such place within or without the State of Nevada as shall be fixed by the Board.

 
-               Call.  No call shall be required for regular meetings for which the time and place have been fixed.  Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of the President, or of a majority of the directors in office.

-               Notice or Actual or Constructive Waiver.  No notice shall be required for regular meetings for which the time and place have been fixed.  Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat.  Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time stated therein.  Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice.

-               Quorum and Action.  A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board.  A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place.  Except as herein otherwise provided, and except as otherwise provided by the Nevada Revised Statutes, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.  The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the Nevada Revised Statutes and these Bylaws which govern a meeting of the directors held to fill vacancies and newly created directorships in the Board or action of disinterested directors.

 
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Any member or members of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.

Chairman of the Meeting.  The Chairman of the Board, if any and if present and acting, shall preside at all meetings.  Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside.

Section 5.              Removal of Directors.  Except as may otherwise be provided by the Nevada Revised Statutes, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

Section 6.              Committees.  The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation.  The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the corporation with the exception of any authority the delegation of which is prohibited by the Nevada Revised Statutes, and may authorize the seal of the corporation to be affixed to all papers which may require it.

Section 7.              Written Action.  Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

Section 8.              Board of Advisors.  The Board of Directors, in its discretion, may establish a Board of Advisors, consisting of individuals who may or may not be stockholders or directors of the Corporation. The purpose of the Board of Advisors would be to advise the officers and directors of the Corporation with respect to such matters as such officers and directors shall choose, and any other matters which the members of such Board of Advisors deem appropriate in furtherance of the best interest of the Corporation.  The Board of Advisors shall meet on such basis as the members thereof may determine.  The Board of Directors may eliminate the Board of Advisors at any time.  No member of the Board of Advisors, nor the Board of Advisors itself, shall have any authority of the Board of Directors or any decision-making power and shall be merely advisory in nature. Unless the Board of Directors determines another method of appointment, the President shall recommend possible members of the Board of Advisors to the Board of Directors, who shall approve such appointments or reject them.

 
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ARTICLE III

OFFICERS

The officers of the corporation shall consist of a President and a Secretary, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Treasurer, a Chairman of the Board, a Vice-Chairman of the Board, an Executive Vice- President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers with such title as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing him, no officer other than the Chairman or Vice-Chairman of the Board, if any, need be a director.  Any number of offices may be held by the same person, as the directors may determine.

Unless otherwise provided in the resolution choosing him, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified.

All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolutions of the Board of Directors designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions may be inconsistent therewith.  The Secretary or an Assistant Secretary of the corporation shall record all of the proceedings of all meetings and actions in writing of stockholders, directors, and committees of directors, and shall exercise such additional authority and perform such additional duties as the Board shall assign to him.  Any officer may be removed, with or without cause, by the Board of Directors.  Any vacancy in any office may be filled by the Board of Directors.

ARTICLE IV

CORPORATE SEAL

The corporate seal shall be in such form as the Board of Directors shall prescribe.

ARTICLE V

FISCAL YEAR

The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors.

ARTICLE VI

AMENDMENT

These Bylaws may be adopted, amended or repealed at any time by the unanimous written consent of the Board of Directors.

 
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NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

Principal Amount: $______
Issue Date: ______ __, 2011
Purchase Price: $______
 

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, TMG ENERGY CORP., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of [   ], a [   ] corporation, or registered assigns (the “Holder”) the sum of $_________ together with any interest as set forth herein, on [insert date 18 months from issuance date] (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.  This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of fifteen percent (15%) per annum from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the Issue Date, shall be computed on the basis of a 365-day year and the actual number of days elapsed.  All payments due hereunder (to the extent not converted into common stock, $0.0001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America.  All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.  Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 
 

 

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1           Conversion Right.  The Holder shall have the right at any time during the period beginning on the date hereof to convert all or any part of the outstanding and unpaid principal amount of this Note or related interest into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price  (the “Conversion Price”) determined as provided herein (a “Conversion”).  In the event that the shares of Common Stock issuable upon conversion of this Note are registered for resale on a registration statement or may be resold in accordance with Rule 144 and the market price for the shares of Common Stock is in excess of $0.75 for a period of ten Trading Days and the average daily volume for the same period exceeds 100,000 shares per day, then the Note will be automatically converted into shares of Common Stock of the Company at the applicable Conversion Price.  However, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock.  For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver).  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”).  The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date.

 
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1.2           Conversion Price.  The conversion price is $0.051 (the “Conversion Price”); provided, however, if the  volume weighted average price is greater than $0.075 (the “VWAP”) during any ten (10) day Trading Days (as defined below) , as reported on Bloomberg, L.P., or any third party quotation service, during the period commencing on the effective date of the Form S-1 Registration Statement covering the shares of Common Stock issuable upon Conversion of the Notes (the “Effective Date”) through the three (3) month anniversary of the Effective Date, then the Conversion Price shall be reset whereby it will equal the VWAP multiplied by .75 (the “Reset Conversion Price”).  In no event shall the Reset Conversion Price be less than the Conversion Price or greater than $0.20.  “Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCBB or other trading platform, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

1.3           Authorized Shares.  The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement.  The Borrower is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”).  The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations.  The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.

If, at any time a Holder of this Note submits a Notice of Conversion, and the Borrower does not have sufficient authorized but unissued shares of Common Stock available to effect such conversion in accordance with the provisions of this Article I (a “Conversion Default”), the Borrower shall issue to the Holder all of the shares of Common Stock which are then available to effect such conversion.

1.4          Method of Conversion.

(a)           Mechanics of Conversion.  Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 
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(b)           Surrender of Note Upon Conversion.  Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted.  The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.  In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error.  Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c)           Payment of Taxes.  The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d)           Delivery of Common Stock Upon Conversion.  Upon receipt by the Borrower from the Holder of a facsimile transmission (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) (such second business day being hereinafter referred to as the “Deadline”) in accordance with the terms hereof and the Purchase Agreement.

(e)           Obligation of Borrower to Deliver Common Stock.  Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.  If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.  The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 
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(f)           Intentionally left blank.

(g)           Failure to Deliver Common Stock Prior to Deadline.  Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is more than three (3) business days after the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock.  Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note.

1.5           Concerning the Shares.  The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless  (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of  counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).  Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”

 
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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act and the shares are so sold or transferred, (ii) such Holder provides the Borrower or its transfer agent with reasonable assurances that the Common Stock issuable upon conversion of this Note (to the extent such securities are deemed to have been acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.

1.6           Effect of Certain Events.

(a)           Effect of Merger, Consolidation, Etc.  At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:  (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Principal plus all Interest and Default Interest, if any or (ii) be treated pursuant to Section 1.6(b) hereof.  “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)           Adjustment Due to Merger, Consolidation, Etc.  If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof.

 
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(c)           Adjustment Due to Distribution.  If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d)           Adjustment Due to Dilutive Issuance.  If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance; provided, however, any issuance of securities to an executive officer, employee or consultant or in connection with an acquisition or merger, will not be considered a Dilutive Issuance.

1.7           Trading Market Limitations.  Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 19.9% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof.  Once the Maximum Share Amount has been issued (the date of which is hereinafter referred to as the “Maximum Conversion Date”), if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount (a “Trading Market Prepayment Event”), in lieu of any further right to convert this Note, and in full satisfaction of the Borrower’s obligations under this Note, the Borrower shall pay to the Holder, within fifteen (15) business days of the Maximum Conversion Date (the “Trading Market Prepayment Date”), an amount equal to 125% times the sum of (a) the then outstanding principal amount of this Note immediately following the Maximum Conversion Date, plus (b) accrued and unpaid interest on the unpaid principal amount of this Note to the Trading Market Prepayment Date.  As used herein, “Shareholder Approval” means approval by the shareholders of the Borrower to authorize the issuance of the full number of shares of Common Stock which would be issuable upon full conversion of the then outstanding Notes but for the Maximum Share Amount.

 
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1.8           Status as Shareholder.  Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms  of this Note.  Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.  In all cases, the Holder shall retain all of its rights and remedies  for the Borrower’s failure to convert this Note.

1.9           Prepayment.  The Borrower may only prepay the Note if consented to by the Holder in writing.

ARTICLE II.  CERTAIN COVENANTS

2.1           Sale of Assets.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.  Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.2           Advances and Loans.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances in existence or committed on the date hereof.
 
ARTICLE III.  EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1           Failure to Pay Principal or Interest.  The Borrower fails to pay the principal hereof or interest thereon when due on this Note.

 
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3.2           Conversion and the Shares.  The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note and such failure continues for a period of ten (10) business days.

3.3           Breach of Covenants.  The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

3.4           Breach of Representations and Warranties.  Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5           Receiver or Trustee.  The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6           Judgments.  Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7           Bankruptcy.  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8           Liquidation.  Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.9           Cessation of Operations.     Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.10         Maintenance of Assets.     The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

 
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Upon the occurrence of an Event of Default, or at any time thereafter, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, upon providing the Borrower with written notice and the right to cure such Event of Default during the ten (10) business day period following the receipt of such written notice, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law including the payment of all outstanding Principal and Interest.

ARTICLE IV. MISCELLANEOUS

4.1           Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Borrower, to:
TMG ENERGY CORP.
c/o Fleming PLLC
49 Front Street, Suite #206
Rockville Centre, New York 11570
Attn: Edward Miller, Chief Executive Officer
facsimile: 516-977-1209

 
With a copy by fax only to (which copy shall not constitute notice):

Fleming PLLC
Attn: Stephen M. Fleming, Esq.
49 Front Street, Suite 206, Rockville Centre, NY 11570
facsimile: (516) 977-1209

 
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If to the Holder:
________________
________________
________________

Attn: [  ]
facsimile: [  ]

With a copy by fax only to (which copy shall not constitute notice):

[  ]
 
4.3           Amendments.  This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.  The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4           Assignability.  This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns.  Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act).  Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5           Cost of Collection.  If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6           Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Borrower and Holder waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 
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4.7           Certain Amounts.  Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note.  The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8           Purchase Agreement.  By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this _____ __, 2011.

 
TMG ENERGY CORP.
   
  By:
 
 
Edward Miller
 
Chief Executive Officer

 
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NOTICE OF CONVERSION

The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of TMG ENERGY CORP., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of ________ __, 2011 (the “Note”), as of the date written below.  No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

 
o
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker:
Account Number:

 
o
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
____________________
____________________
____________________
Attention:
FAX:

Date of Conversion:
_____________
Applicable Conversion Price:
$____________
Number of Shares of Common Stock to be Issued
 
Pursuant to Conversion of the Notes:
______________
Amount of Principal Balance Due remaining
 
Under the Note after this conversion:
______________

[  ]
 
By:_____________________________
Name:
Title:
Date:  ______________

 
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TMG ENERGY CORP.
AMENDED AND RESTATED STOCK OPTION AGREEMENT
 
    
This Amended and Restated Stock Option Agreement ("Agreement") is made and entered into as of the date set forth below, by and between TMG ENERGY CORP., a Nevada corporation (the "Company"), and Edward Miller (herein, the "Optionee"):

In consideration of the covenants herein set forth, the parties hereto agree as follows:

1.  Option Information.
 
(a)
Date of Option:
June 6, 2011 (originally issued March 24, 2011)
 
(b)
Number of Shares:
25,000,000
 
(c)
Exercise Price:
$0.0001 per share
 
2.  Acknowledgements.  The Board has authorized the granting to Optionee of a stock option ("Option") to purchase shares of common stock of the Company ("Stock") upon the terms and conditions hereinafter stated and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act") provided by Rule 701 thereunder.

3.  Shares; Price.  The Company hereby grants to Optionee the right to purchase, upon and subject to the terms and conditions herein stated, the number of shares of Stock set forth in Section 1 above (the "Shares") for cash  at the price per Share set forth in Section 1 above (the "Exercise Price").