UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE

SECURITIES EXCHANGE ACT OF 1934



FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012



COMMISSION FILE NUMBER:000-54132



11 GOOD ENERGY, INC.

(Exact name of registrant as specified in its
charter)



|DELAWARE                                                       |  | 26-0299315                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



4450 Belden Village Street N.W., Suite 800

Canton, OH 44718

(Address of principal executive offices)



(330) 492-3835

(Registrant’s telephone number, including
area code)



NOT APPLICABLE

(Former name, former address and former fiscal
year, if changed since last report)



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.



Yes [X]   No [  ]



Indicate by checkmark whether the registrant
has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was required
to submit and post such file).



Yes [  ]   No [X]



Indicate by checkmark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.



| | Large Accelerated Filer | [  ] | Accelerated Filer         | [  ]
| | ----------------------- | ---- | ------------------------- | ----
| | Accelerated Filer       | [  ] | Smaller Reporting Company | [X] 



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).



Yes [  ]   No [X]



As of August 14, 2012, the registrant
had a total of 18,028,240 shares of Common Stock issued and outstanding.
























11 GOOD ENERGY, INC. AND SUBSIDIARY



INDEX



|               |                                                                                                                                                                                                                                                           |    | Page Number
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | -----------
|               |                                                                                                                                                                                                                                                           |    |            
|PART
    I     | Financial
    Information                                                                                                                                                                                                                                 |    |            
|               |                                                                                                                                                                                                                                                           |    |            
|Item
    1.    | Financial
    Statements (unaudited)                                                                                                                                                                                                                      |    |            
|               |                                                                                                                                                                                                                                                           |    |            
|               | Condensed
    Consolidated Balance Sheets at June 30, 2012 (Unaudited) and December 31, 2011                                                                                                                                                              |    | F-1        
|               |                                                                                                                                                                                                                                                           |    |            
|               | Unaudited
    Condensed Consolidated Statements of Operations and Comprehensive Income (loss) for the three     and six months ended June
    30, 2012 and 2011 and for the period from May 23, 2007 (date of inception)
    to     June     30,     2012 |    | F-2        
|               |                                                                                                                                                                                                                                                           |    |            
|               | Unaudited
    Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2012 and 2011 and for the period from May
    23,     2007 (date of inception) to June 30, 2012                                                                 |    | F-3        
|               |                                                                                                                                                                                                                                                           |    |            
|               | Notes
    to Unaudited Condensed Consolidated Financial Statements                                                                                                                                                                                        |    | F-4        
|               |                                                                                                                                                                                                                                                           |    |            
|Item
    2.    | Management’s
    Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                 |    | 3          
|               |                                                                                                                                                                                                                                                           |    |            
|Item
    3.    | Quantitative
    and Qualitative Disclosures About Market Risk                                                                                                                                                                                            |    | 7          
|               |                                                                                                                                                                                                                                                           |    |            
|Item
    4.    | Controls
    and Procedures                                                                                                                                                                                                                               |    | 7          
|               |                                                                                                                                                                                                                                                           |    |            
|PART
    II    | Other
    Information                                                                                                                                                                                                                                     |    | 7          
|               |                                                                                                                                                                                                                                                           |    |            
|               | Exhibits                                                                                                                                                                                                                                                  |    | 7          
|               |                                                                                                                                                                                                                                                           |    |            
|SIGNATURES     |                                                                                                                                                                                                                                                           | 10
|               |                                                                                                                                                                                                                                                           |    |            
|Certifications |                                                                                                                                                                                                                                                           |   





2







11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage
company)

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                                                     |  | June 30, 2012 |             |   | December 31, 2011 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ----------------- | -
|                                                                                                                                                                                                                                                                     |  | (Unaudited)   |             |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|ASSETS                                                                                                                                                                                                                                                               |  |               |             |   |                   |  
|Current assets:                                                                                                                                                                                                                                                      |  |               |             |   |                   |  
|Cash                                                                                                                                                                                                                                                                 |  | $             | 15,932      |   |                   | $
|Inventory                                                                                                                                                                                                                                                            |  |               | 301,489     |   |                   |  
|Accounts receivable, net                                                                                                                                                                                                                                             |  |               | 19,161      |   |                   |  
|Available for sale securities                                                                                                                                                                                                                                        |  |               | 790         |   |                   |  
|Other current assets                                                                                                                                                                                                                                                 |  |               | 15,005      |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Total current assets                                                                                                                                                                                                                                                 |  |               | 352,377     |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Property, plant and equipment, net                                                                                                                                                                                                                                   |  |               | 1,980,513   |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Other assets:                                                                                                                                                                                                                                                        |  |               |             |   |                   |  
|Patents                                                                                                                                                                                                                                                              |  |               | 39,937      |   |                   |  
|Deposits                                                                                                                                                                                                                                                             |  |               | 2,163       |   |                   |  
|Total other assets                                                                                                                                                                                                                                                   |  |               | 42,100      |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Total assets                                                                                                                                                                                                                                                         |  | $             | 2,374,990   |   |                   | $
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY                                                                                                                                                                                                                       |  |               |             |   |                   |  
|Current liabilities:                                                                                                                                                                                                                                                 |  |               |             |   |                   |  
|Accounts payable and accrued liabilities                                                                                                                                                                                                                             |  | $             | 1,613,265   |   |                   | $
|Advances, related party                                                                                                                                                                                                                                              |  |               | 60,927      |   |                   |  
|Notes payable, related party                                                                                                                                                                                                                                         |  |               | 320,000     |   |                   |  
|Convertible notes payable, net of deferred debt discount of $0 and $75,139,respectively                                                                                                                                                                              |  |               | 650,000     |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Total current liabilities                                                                                                                                                                                                                                            |  |               | 2,644,192   |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Commitments and contingencies                                                                                                                                                                                                                                        |  |               | -           |   |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Stockholders’ equity:                                                                                                                                                                                                                                                |  |               |             |   |                   |  
|Series A Preferred stock, $0.0001 par value; 11,000,000 shares authorized, issued and
    outstanding at June 30, 2012 and December 31, 2011                                                                                                                         |  |               | 1,100       |   |                   |  
|Common stock, $0.0001 par value; 65,000,000 shares authorized; 20,946,562 and 20,856,562 shares issued as of June 30, 2012 and December 31, 2011, respectively; 17,991,240 and 19,901,240 shares outstanding as of June 30, 2012 and December 31, 2011, respectively |  |               | 2,095       |   |                   |  
|Additional paid in capital                                                                                                                                                                                                                                           |  |               | 26,477,538  |   |                   |  
|Common stock subscription                                                                                                                                                                                                                                            |  |               | -           |   |                   |  
|Due from shareholder                                                                                                                                                                                                                                                 |  |               | -           |   |                   |  
|Deficit accumulated during development stage                                                                                                                                                                                                                         |  |               | (25,163,325 | ) |                   |  
|Accumulated other comprehensive loss                                                                                                                                                                                                                                 |  |               | (88,910     | ) |                   |  
|Treasury stock, 2,955,322 and 955,322 shares as of June 30, 2012 and December 31,
    2011                                                                                                                                                                           |  |               | (1,497,700  | ) |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Total stockholders’ (deficit) equity                                                                                                                                                                                                                                 |  |               | (269,202    | ) |                   |  
|                                                                                                                                                                                                                                                                     |  |               |             |   |                   |  
|Total liabilities and stockholders’ (deficit) equity                                                                                                                                                                                                                 |  | $             | 2,374,990   |   |                   | $



The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements



F-1









11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage
company)

CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)







|                                                                      |  | Three months ended June 30, |            |   | Six months ended June 30, |   |            | From May 23, 2007 (date of inception)
through June
    30, 2012 | 
|--------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | --------------------------------------------------------------- | 
|                                                                      |  | 2012                        |            |   | 2011                      |   |            | 2012                                                            | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|REVENUE:                                                              |  |                             |            |   |                           |   |            |                                                                 | 
|Sales                                                                 |  | $                           | 55,680     |   |                           | $ | 68,291     |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Cost of sales                                                         |  |                             | 85,565     |   |                           |   | 154,112    |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Gross loss                                                            |  |                             | (29,885    | ) |                           |   | (85,821    | )                                                               | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|OPERATING EXPENSES:                                                   |  |                             |            |   |                           |   |            |                                                                 | 
|General, selling and administrative expenses                          |  |                             | 1,402,052  |   |                           |   | 2,622,851  |                                                                 | 
|Research and development                                              |  |                             | -          |   |                           |   | 23,162     |                                                                 | 
|Impairment of goodwill                                                |  |                             | -          |   |                           |   | -          |                                                                 | 
|Depreciation and amortization                                         |  |                             | 33,758     |   |                           |   | 29,185     |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Total operating expenses                                              |  |                             | 1,435,810  |   |                           |   | 2,675,198  |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|LOSS FROM OPERATIONS                                                  |  |                             | (1,465,695 | ) |                           |   | (2,761,019 | )                                                               | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Other income/(expense):                                               |  |                             |            |   |                           |   |            |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Interest income                                                       |  |                             | —          |   |                           |   | —          |                                                                 | 
|Interest expense                                                      |  |                             | (44,990    | ) |                           |   | (8,726     | )                                                               | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Realized (loss) gain on sale of securities                            |  |                             | -          |   |                           |   | (195,300   | )                                                               | 
|Gain on sale of property, plant and equipment                         |  |                             | 10,424     |   |                           |   | —          |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Loss before provision for income taxes                                |  |                             | (1,500,261 | ) |                           |   | (2,965,045 | )                                                               | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Provision for income taxes                                            |  |                             | —          |   |                           |   | —          |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS                          |  | $                           | (1,500,261 | ) |                           | $ | (2,965,045 | )                                                               | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Net loss per common share basic and fully diluted                     |  | $                           | (0.08      | ) |                           | $ | (0.15      | )                                                               | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Weighted average number of shares outstanding basic and fully diluted |  |                             | 19,507,722 |   |                           |   | 19,877,996 |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Comprehensive loss:                                                   |  |                             |            |   |                           |   |            |                                                                 | 
|Net loss                                                              |  | $                           | (1,500,261 | ) |                           | $ | (2,965,045 | )                                                               | 
|Unrealized (loss) gain on securities available for sale               |  |                             | -          |   |                           |   | 193,320    |                                                                 | 
|                                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Comprehensive loss                                                    |  | $                           | (1,500,261 | ) |                           | $ | (2,771,725 | )                                                               | 



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements





F-2









11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage
company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS

(unaudited)



|                                                                                           |  |                           |            |   |                                                             | 
|------------------------------------------------------------------------------------------ |  | ------------------------- | ---------- | - | ----------------------------------------------------------- | 
|                                                                                           |  | Six months ended June 30, |            |   | From
May 23, 2007
(date of inception)
through
June 30, 2012 | 
|                                                                                           |  | 2012                      |            |   | 2011                                                        | 
|Cash flows from operating activities:                                                      |  |                           |            |   |                                                             | 
|Net loss                                                                                   |  | $                         | (2,176,060 | ) |                                                             | 
|Adjustments to reconcile net loss to net cash used in operating activities:                |  |                           |            |   |                                                             | 
|Depreciation and amortization                                                              |  |                           | 210,509    |   |                                                             | 
|Amortization of debt discount                                                              |  |                           | 175,139    |   |                                                             | 
|Equity compensation of services by a related party                                         |  |                           | -          |   |                                                             | 
|Equity compensation of services to consultant                                              |  |                           | -          |   |                                                             | 
|Reserve for due to shareholder                                                             |  |                           | 108,519    |   |                                                             | 
|Fair value of warrants issued in connection with related party debt                        |  |                           | 557,270    |   |                                                             | 
|Fair value of stock options and warrants issued for services                               |  |                           | 696,117    |   |                                                             | 
|Expenses paid by related party on behalf of the Company in exchange for notes payable      |  |                           | 34,000     |   |                                                             | 
|Impairment of goodwill                                                                     |  |                           | -          |   |                                                             | 
|Gain on sale of property and equipment                                                     |  |                           | (25,748    | ) |                                                             | 
|Realized loss on sale of securities available for sale                                     |  |                           | -          |   |                                                             | 
|Changes in operating assets and liabilities:                                               |  |                           |            |   |                                                             | 
|Inventory                                                                                  |  |                           | 21,933     |   |                                                             | 
|Accounts receivable                                                                        |  |                           | 24,745     |   |                                                             | 
|Other current assets                                                                       |  |                           | 10,673     |   |                                                             | 
|Accounts payable and accrued liabilities                                                   |  |                           | 251,685    |   |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Net cash used in operating activities                                                      |  |                           | (111,218   | ) |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Cash flows from investing activities:                                                      |  |                           |            |   |                                                             | 
|Acquisition, net of cash acquired                                                          |  |                           | -          |   |                                                             | 
|Proceeds from sale of property and equipment                                               |  |                           | 40,755     |   |                                                             | 
|Purchase of property, plant and equipment                                                  |  |                           | -          |   |                                                             | 
|Payments for acquisition of patent                                                         |  |                           | -          |   |                                                             | 
|Proceeds from sale of securities available for sale                                        |  |                           | -          |   |                                                             | 
|Purchase of securities available for sale                                                  |  |                           | -          |   |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Net cash provided by (used in) investing activities                                        |  |                           | 40,755     |   |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Cash flows from financing activities:                                                      |  |                           |            |   |                                                             | 
|Proceeds from sale of shares to founders                                                   |  |                           | -          |   |                                                             | 
|Due from shareholder/related party                                                         |  |                           | -          |   |                                                             | 
|(Repayment of) proceeds from related party advance                                         |  |                           | (6,500     | ) |                                                             | 
|Proceeds from common stock subscription and sale of common stock                           |  |                           | -          |   |                                                             | 
|Proceeds from issuance of convertible notes                                                |  |                           | 100,000    |   |                                                             | 
|Proceeds from related party note payable                                                   |  |                           | -          |   |                                                             | 
|Purchase of treasury stock                                                                 |  |                           | -          |   |                                                             | 
|Payments of related party note payable                                                     |  |                           | (20,000    | ) |                                                             | 
|Payments of notes payable                                                                  |  |                           | -          |   |                                                             | 
|Payments of convertible notes                                                              |  |                           | -          |   |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Net cash provided by financing activities                                                  |  |                           | 73,500     |   |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Net increase (decrease) in cash and cash equivalents                                       |  |                           | 3,037      |   |                                                             | 
|Cash and cash equivalents at beginning of period                                           |  |                           | 12,895     |   |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Cash and cash equivalents at end of period                                                 |  | $                         | 15,932     |   |                                                             | 
|                                                                                           |  |                           |            |   |                                                             | 
|Supplemental disclosures of cash flow information:                                         |  |                           |            |   |                                                             | 
|Income taxes paid                                                                          |  | $                         | -          |   |                                                             | 
|Interest paid                                                                              |  | $                         | -          |   |                                                             | 
|Non cash investing and financing activities:                                               |  |                           |            |   |                                                             | 
|Common stock issued to acquire 11 Good’s Energy, LTD                                       |  | $                         | -          |   |                                                             | 
|Common stock issued in exchange for convertible note and accrued interest                  |  | $                         | -          |   |                                                             | 
|Common stock subscribed for conversion of convertible notes                                |  | $                         | -          |   |                                                             | 
|Treasury stock received in exchange for related party note receivable and accrued interest |  | $                         | -          |   |                                                             | 
|Beneficial conversion feature and value of warrants in conjunction with debt               |  | $                         | 175,139    |   |                                                             | 





The accompanying
notes are an integral part of these unaudited condensed consolidated financial statements.





F-3









11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage
company)

NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 AND
2011



NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES



Basis and business presentation



The accompanying unaudited
condensed consolidated financial statements of 11 Good Energy, Inc., (the “Company”), have been prepared in
accordance with Regulation S-X of the Securities and Exchange Act, as amended, and instructions to Form 10-Q. Certain
information and note disclosures normally included in annual consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the
Company believes that the disclosures made are adequate to make the information not misleading.



In the opinion of management,
the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated
financial statements and reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The results from operations for the three months and six month period ended June 30, 2012
are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.



The unaudited condensed
consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes
thereto for the year ended December 31, 2011, included in the Company’s annual report on its Form 10-K filed with the
SEC on April 16, 2012.



The condensed
consolidated financial statements as of December 31, 2011 contained herein have been derived from the audited consolidated
financial statements at December 31, 2011 but do not include all disclosures required by the accounting principles generally
accepted in the United States of America.



The consolidated financial statements include
the accounts of the Company, and its wholly-owned subsidiaries 11 Good’s Energy, LTD (“11 Good’s”) and
11 Good Energy Sciences, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.



Dependency on key management



Gary R. Smith, Chief Operating Officer and
a director, has tentatively agreed to act as interim Chief Executive Officer and E. Jamie Schloss, a director of the Company, has
agreed to serve as interim Chief Financial Officer. As both of these appointments are expected to be for a short term, the success
of the Company and its ability to pursue its business strategy will depend upon the successful recruitment and retention of highly
skilled and experienced managerial, marketing and technical personal. The Company can provide no assurances that such personnel
will be obtained by us on terms satisfactory to us, if at all.



Reclassifications



Certain reclassifications have been made to
prior periods consolidated financial statements and notes thereto for comparative purposes to conform to current period’s
presentation. These reclassifications have no effect on previously reported results of operations.



New 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.



Estimates



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



NOTE 2 – GOING CONCERN MATTERS



The Company’s unaudited
condensed 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 unaudited
condensed consolidated financial statements, the Company incurred net losses attributable to common shareholders of
$2,176,060 and used of $111,218 in cash for operating activities for the six months ended June 30, 2012, has a
negative working capital (current liabilities exceeded current assets) of $2,291,815 and a deficit accumulated
during development stage of $25,163,325 as of June 30, 2012. These factors among others may indicate that the Company will be
unable to continue as a going concern for a reasonable period of time.



The Company’s existence is dependent
upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance
that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity
problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue
as a going concern.



F-4







11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage
company)

NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 AND 2011



NOTE 3 – INTANGIBLE ASSETS



Patents



Patents are capitalized at incurred costs and
are amortized ratably over the lesser of their economic or legal life. Effective January 1, 2012 the patents are being amortized
over a 12 month life and $20,594 and $39,937 was amortized during the three and six months ended June 30, 2012, respectively.



NOTE 4 – INVENTORIES



Inventory is stated at the lower of cost or
market. The cost is determined using the first-in first-out method. Costs of finished goods inventory include costs associated
with the procurement and transportation of Soybean oil and other raw materials used in the manufacture of G2 Diesel.



As of June 30, 2012 and December 31, 2011,
inventories are comprised of the following:



|              |  | 2012 |         |  | 2011 |  
|------------- |  | ---- | ------- |  | ---- | -
|              |  |      |         |  |      |  
|Raw materials |  | $    | 235,279 |  |      | $
|Finished fuel |  |      | 66,210  |  |      |  
|              |  |      |         |  |      |  
|Total         |  | $    | 301,489 |  |      | $



NOTE 5 – OTHER CURRENT ASSETS



Other current assets as of June 30, 2012 and
December 31, 2011 are comprised of the following:



|                       |  | 2012 |        |  | 2011 |  
|---------------------- |  | ---- | ------ |  | ---- | -
|Prepaid insurance      |  | $    | 15,005 |  |      | $
|Prepaid other expenses |  |      | -      |  |      |  
|                       |  |      |        |  |      |  
|Total                  |  | $    | 15,005 |  |      | $



NOTE 6 – PROPERTY, PLANT AND EQUIPMENT



The Company’s property, plant and equipment
at June 30, 2012 and December 31, 2011 consist of the following:



|                                 |  | 2012 |           |  | 2011 |  
|-------------------------------- |  | ---- | --------- |  | ---- | -
|                                 |  |      |           |  |      |  
|Leasehold improvements           |  | $    | 345,381   |  |      | $
|Factory equipment                |  |      | 2,364,478 |  |      |  
|Furniture and fixtures           |  |      | 21,709    |  |      |  
|Office equipment                 |  |      | 20,545    |  |      |  
|Vehicles                         |  |      | -         |  |      |  
|Computer equipment and soft ware |  |      | 102,846   |  |      |  
|Web design                       |  |      | 51,505    |  |      |  
|Total                            |  |      | 2,906,464 |  |      |  
|Less accumulated depreciation    |  |      | 925,951   |  |      |  
|                                 |  |      |           |  |      |  
|Net                              |  | $    | 1,980,513 |  |      | $



Property and equipment are recorded on the
basis of cost. For financial statement purposes, property, plant and equipment are depreciated using the straight-line method over
their estimated useful lives.



The Company recorded a gain
of $10,424 and $25,748 from the sale of equipment for the three and six months ended June 30, 2012, respectively.



Depreciation expense was
$90,159 and $95,827 for the  three months ended June 30, 2012 and 2011, respectively, of which $76,995 and $66,642 were
included as part of cost of sales, respectively.



Depreciation expense was
$170,572 and $191,653 for the six months ended June 30, 2012 and 2011, respectively, of which $124,293 and $133,282 were
included in cost of sales, respectively.



F-5







11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 AND 2011



NOTE 7 – CONVERTIBLE NOTES PAYABLE



A summary of convertible notes payable as of
June 30, 2012 and December 31, 2011 are as follows:



|                                                                                    |  | 2012 |         |  | 2011 |  
|----------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | -
|                                                                                    |  |      |         |  |      |  
|Senior convertible note, 11% per annum, due December 31, 2011, currently in default |  | $    | 250,000 |  |      | $
|Senior convertible note, 11% per annum, due December 31, 2011; currently in default |  |      | 100,000 |  |      |  
|Senior convertible note, 11% per annum, due March 8, 2012, currently in default     |  |      | 200,000 |  |      |  
|Senior Convertible note, 11% per annum, due April 18, 2012 , currently in default   |  |      | 100,000 |  |      |  
|Total                                                                               |  |      | 650,000 |  |      |  
|Less current portion                                                                |  |      | 650,000 |  |      |  
|                                                                                    |  |      |         |  |      |  
|Long term portion                                                                   |  | $    | -       |  |      | $



During
the six months ended June 30, 2012 the Company issued of $100,000 in unsecured Convertible
Promissory Notes that matured April 18, 2012. The Promissory Notes bears interest at a rate of 11% per annum and are convertible
into 33,333 shares of the Company’s common stock, at a conversion rate of $3.00 per share. Interest can also be converted
into common stock at the conversion rate of $3.00 per share. In connection with the issuance of the Convertible Promissory Notes,
the Company issued warrants to purchase 60,000 shares of the Company’s common stock at $5.00 per share through December
31, 2014. In accordance ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the notes. The
Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company
recognized and measured an aggregate of $100,000 of the proceeds during the six months ended June 30, 2012, which is equal to
the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the note.
The debt discount attributed to the beneficial conversion feature is amortized over the note’s maturity period as interest
expense. The remaining unamortized debt discount has been fully amortized at maturity date, April 18, 2012.



The Company valued the warrants in accordance with ASC 470-20 using the
Black-Scholes pricing model and under the following assumptions: contractual terms of 2 to 3 years, an average risk free
interest rate of 0.35% a dividend yield of 0%, and volatility of 129.65%. The debt discount attributed to the value of the
warrants issued is amortized over the notes’ maturity period as interest expense.



The Company
recognized amortization debt discount of $19,779 and $175,139 to current period operations as interest expense for the three and
six months ended June 30, 2012, respectively.



NOTE 8 – RELATED PARTY TRANSACTIONS



Due to related party



During the year ended
December 31, 2011 the Company’s prior year’s officers advanced an aggregate of $67,427 for working capital
purposes to the Company. The advances are short term, non-interesting bearing and are due upon demand.



During the six months ending
June 30, 2012 the Company repaid $6,500 in advances due to a related party.



Notes payable, related party



A summary of notes payable, related party as
of June 30, 2012 and December 31, 2011 are as follows:



|                                                                                               |  | 2012 |         |  | 2011 |  
|---------------------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | -
|                                                                                               |  |      |         |  |      |  
|Note payable, issued May 15, 2011 with interest at 9% per annum, due on demand,unsecured       |  | $    | 50,000  |  |      | $
|Note payable, issued August 5, 2011 with interest at 6% per annum, due on demand, unsecured    |  |      | 100,000 |  |      |  
|Note payable, issued August 11, 2011 with interest at 6% per annum, due on demand, unsecured   |  |      | 68,000  |  |      |  
|Note payable, issued August 19, 2011 with interest at 6% per annum, due on demand, unsecured   |  |      | 68,000  |  |      |  
|Note payable, issued November 21, 2011 with interest at 6% per annum, due on demand, unsecured |  |      | -       |  |      |  
|Note payable, issued May 4, 2012 with interest at Nil%, due on demand, unsecured               |  |      | 34,000  |  |      |  
|Total                                                                                          |  |      | 320,000 |  |      |  
|Less current portion                                                                           |  |      | 320,000 |  |      |  
|Long term portion                                                                              |  | $    | —       |  |      | $



F-6







11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012, AND 2011



NOTE 8 – RELATED PARTY TRANSACTIONS
(CONT’D)



During the six months ended June 30, 2012, a related party paid $34,000 of the Company’s operating expenses
directly to certain vendors in exchange for a note payable due on demand at non-interest bearing.



In connection with the issuance of the August,
2011 promissory notes, the Company issued detachable warrants granting the holders the right to acquire an aggregate of 180,000
shares of the Company’s common stock at $3.00 per share. The warrants expire three years from the issuance. In accordance
with ASC 470-20, the Company recognized the value attributable to the warrants in the amount of $139,145 to additional paid in
capital and a charge to interest in 2011’s operations. The Company valued the warrants in accordance with ASC 470-20 using
the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, an average risk free interest rate
of 0.34% to 0.49%, a dividend yield of 0%, and volatility of 126.31% to 127.23%.



On May 4, 2012, the
Company cancelled the warrants to purchase of its common stock in an aggregate of 180,000 shares at $3.00 per share with a
term of 3 years issued in connection with the related party promissory notes in August 2011 and replaced with new warrants to
purchase 330,000 shares at $1.00 per share with a term of 5 years. The Company valued the warrants based on Black-Scholes
pricing model and under the following assumptions: contractual terms of 5 years, an average risk free interest rate of 0.35%,
a dividend yield of 0%, and volatility of 129.65%. The Company also issued to Mr. Lane 50,000 warrants to purchase common
shares at $1.00 each exercisable for a term of 5 years.



The Company recorded an incremental charge of $557,270 to its operations
on the modification date, May 4, 2012 resulted from the modified terms and the increased shares.



The Company also issued
options andwarrants to purchase a total of 350,000 shares of its common stock at
$5.00 per share with a term of 5 years to  three directors and their affiliatedcompanies.



Facilities



Since April 1, 2008, the Company has occupied
warehouse space provided by one of the Company’s founders. The Company agreed to pay a total of $1 per month for the space.
The Company records this fee as rent expense when incurred. During this time period, the Company constructed a leasehold improvement
to the leased warehouse space for the purpose of locating our bio-fuel manufacturing facility.



The Company also leases office space for its
executive and administrative offices at a rent of $4,500 per month to month basis.



Receivable from purchase of treasury stock



Pursuant to his employment agreement, Frederick
C. Berndt, a former director and founder, entered into a revolving note agreement with the Company beginning on November 11,
2007. The Company initiated the note arrangement to allow Mr. Berndt to assist the Company, primarily in the early stages of development,
personally with operating capital as required. In addition, the Company initiated the note to allow the Company to assist Mr. Berndt
with cash advances used for costs incurred during the process of improving the Company’s marketing, political and regulatory
exposure. The cash advances exceeded the amounts of reimbursable costs resulting in amounts Mr. Berndt owed back to the Company.
Mr. Berndt has agreed to reimburse the Company for the excess costs of these promotions. These costs consisted primarily of travel
and sponsorship costs. The Company charges 5% interest per annum calculated on the last day of the year based on an average of
the quarterly balance of the note. The balance of the note including interest of $27,915 became due on December 31, 2009, with
a term of 30 days to settle the note payable.



On December 15, 2009, the
Company accepted 425,000 shares of the Company’s common stock held by Mr. Berndt in full settlement of the outstanding
note receivable and related accrued interest for $787,144 and recorded an accrued liability due to Mr. Berndt for $62,856.
The fair value of the shares issued was determined based on the recent sale of the Company’s common stock. The amount
due to Mr. Berndt at June 30, 2012 was $60,927.



In November 2010, the Company
advanced $53,519 to acquire the Company’s common stock (treasury stock) from a shareholder. During the year ended
December 31, 2011, the Company advanced an additional $55,000 to acquire the Company’s common stock (treasury stock)
from the same shareholder. As of December 31, 2011, the common stock has not been received and accordingly was accounted for
as due from shareholder and included in the stockholders’ equity.



Consistent with ASC 505-10-45 (“Equity-Other
Presentation”), the amount recorded on the balance sheet at December 31, 2011 was presented as a deduction from stockholders’
equity. This is also consistent with Rule 5-02.30 of Regulation S-X of the Code of Federal Regulations.



As of June 30, 2012,
the Company’s management performed an assessment of the collectibility of the amount due from shareholders of $108,519
and provided a full reserve and changed to operations for the six months ended June 30, 2012.





NOTE 9 – CAPITAL STOCK



Preferred stock



On June 22, 2007, the Board of Directors designated
11,000,000 shares as Series A preferred stock (“Series A Preferred Stock”), with a par value of $0.0001 per share.
This is the total number of authorized preferred Series A shares outstanding. The preferred stock is not entitled to any preference
upon liquidation, dividend rights and has no conversion rights into the Company’s common stock. The Series A Preferred Stock
is entitled to one vote equivalent to one share of common stock on the record date for the vote or consent of shareholders, and
with respect to such vote, each holder of Series A Preferred Stock shall have full voting rights and powers equal to the voting
rights and powers of the holders of the Company’s common stock.



On June 22, 2007, the Company issued at par
value an aggregate of 11,000,000 shares of preferred stock to a founder for activities prior to the formation of the Company and
relating to its incorporation.



As of June 30, 2012 and December 31, 2011,
there were 11,000,000 Series A preferred stock issued and outstanding.



F-7







11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 AND 2011



NOTE 9 – CAPITAL STOCK (continued)



Common stock



In March 2010, the Board
approved and the stockholders ratified an increase in the number of authorized common shares to 65,000,000. To reflect this
change, a certificate of amendment to the Company’s certificate of incorporation was filed with the Secretary of state
of the state of Delaware on March 22, 2010.



On May 23, 2007, the Company
issued at par value an aggregate of 9,700,000 shares of common stock to founders for activities prior to the formation of the
Company and relating to its incorporation.



On June 27, 2007, the Company issued an aggregate
of 300,000 shares of common stock in exchange for future services valued at $156,000. The fair value of the common stock was determined
based upon the quoted market price on the date of issuance of the shares. Management assumes all responsibility for the amounts
recorded as a result of the consulting services performed.



On October 23, 2007, the Company issued, at
par value, an aggregate of 4,285,714 shares of its common stock in connection with the acquisition of 11 Good’s wholly owned
subsidiary.



Between August 2009 and February 2010, the
Company has received net proceeds of $10,253,069, through the subscription for common stock consisting of 3,977,333 shares of common
stock and 1,988,667 warrants. All common shares subscribed were issued during the year ended December 31, 2010. Between April and
May 2011, the Company received additional gross proceeds of $225,000 from the sale of 45,000 shares of Common Stock at $5.00 per
share and two year Warrants to purchase 22,500 shares, exercisable at $7.50 per share from date of issuance through June 30, 2013.
Between July 2011 and December 2011, the Company received $270,000 from the sale of 90,000 shares of common stock at $3.00 per
share and Warrants to purchase 90,000 shares, exercisable at $5.00 per share from two years from the date of issuance. The 90,000
shares of common stock have not been issued as of December 31, 2011 and were accounted for as common stock subscription payable,
which shares were issued on March 20, 2012.



As of March 31, 2012, there
were 20,946,562 shares issued and as a result of there being 955,322 shares held in treasury, the outstanding shares were
reduced to 19,901,240. In April, 2012, Mr. Berndt, a former officer and director of the Company, agreed to return
2,000,000 shares of common stock to the Company (which are being held as treasury stock) , as described below, thereby
reducing the outstanding shares to 17,991,240 at June 30, 2012.



On April 9, 2012, Mr.
Berndt in connection with his resignation (see Note 13 – Subsequent Events) agreed to transfer his 11,000,000 shares of
the Company’s Series A Preferred Stock to John D. Lane. Mr. Berndt also agreed to return to the Company’s
treasury 2,000,000 shares of Common Stock owned by him which were reclaimed and are being held as treasury stock in exchange
for Warrants to purchase 2,000,000 shares of Common Stock, exercisable over a term of five years at $5.00 per share. The
Warrants provide for a cashless exercise of same in the event the Company’s Common Stock is exercised at a time when
the Company’s Common Stock is trading on NASDAQ, Exchange or Over-the-Counter Market at a price of at least $15.00
per share.



As of June 30, 2012 and
December 31, 2011, there were 20,946,562 and 20,856,562 common shares issued and 17,991,240 and 19,901,240 shares
outstanding, respectively.



NOTE 10– COMMITMENTS AND CONTINGENCIES



Employment and consulting contracts



As of June 30, 2012 and December 31, 2011,
all commitments for business consulting services expired and are on a month to month basis.



Litigation



In September 2011, William L. Miller “Plaintiff”
commenced an action in the Court of Common Pleas, Stark County, Ohio, against Frederick C. Berndt and 11 Good Energy, Inc. “Defendants”
Plaintiff alleges that Mr. Berndt incurred charges for expenses relating to the business of the Corporation utilizing Plaintiff’s
credit card account with American Express, which card Plaintiff allegedly permitted Mr. Berndt to utilize so long as Defendants
would repay Plaintiff prior to the time he became liable for interest and penalties. The cause of action for breach of contract
and unjust enrichment seeks the return of approximately $81,000 allegedly loaned by Plaintiff to the Defendants. From monies the
Company owes Frederick C. Berndt, the Company recorded the $81,000 liability due to the filed judgment Mr. Berndt has agreed to
reduce the balance due to him in the amount of $81,000 from the funds he advanced to the Company. In 2012, the Company paid approximately
$11,000 to Mr. Miller and Mr. Berndt paid approximately $13,500 to Mr. Miller. At June 30, 2012, Mr. Miller was owed approximately
$56,000 plus interest. While the Company does not accept any legal liability to Mr. Miller in this matter, it has fully accrued
any possible liability pending the outcome of this matter, by conditionally offsetting(reducing) amounts owed by the Company to
Mr. Berndt.



In February 2012, a stockholder “Plaintiff”
commenced a lawsuit against the Company and other Defendants in the Circuit Court in Orange County, Florida. The lawsuit pertains
to the stockholders’ investment of $400,000 in the Company’s securities.



F-8







11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 AND 2011



NOTE 10 – COMMITMENTS AND CONTINGENCIES (continued)



Prior to the filing of
the lawsuit, Frederick C. Berndt, the former Chief Executive Officer of the Company, initially verbally agreed with the
stockholder to return his $400,000 in periodic payments against the return and cancellation of the related securities. The
Company made payment of $108,519 before ceasing of making any additional payments. The Plaintiff has failed to return to the
Company the securities which relate to the monies received by Plaintiff. Plaintiff is alleging fraud in the inducement as it
pertains to his investment in the Company as well as fraudulent and negligent misrepresentations, breach of contract and
conversion. Plaintiff is seeking damages which include, but are not limited to $400,000 (less payments received by
Plaintiff), attorney, court costs and interest. The Company anticipates that upon receipt of funding and/or its common stock
begins trading on a public market, this shareholder would be able to sell their common stock.



On March 7, 2012, Jason A.
Weiss “Plaintiff” commenced an action in the Court of Common Pleas, Stark County, Ohio against Defendants, 11
Good Energy and Frederick C. Berndt “Defendants.” Mr. Weiss alleges that he was employed by the Company for a
term of one year at a salary of $15,000 per month that he was entitled to receive relocation expenses and reimbursement of
certain expenses and he was entitled to receive 130,000 shares of Common Stock of the Company upon his commencing of
employment with Defendant, 11 Good Energy, in January 2011. Plaintiff alleges that Defendants made various representations to
him pertaining to his employment and otherwise which were false and misleading. Plaintiff is suing the Defendants for breach
of contract, unjust enrichment, promissory estoppel, fraudulent inducement, seeking to pierce the corporate veil, wrongful
termination in violation of public policy and Defendants’ liability under the whistle blower provisions of Ohio law.
The amount of money being sought by Plaintiff will be the amount allegedly damaged and proven at trial. The Company believes
this suit to be from a disgruntled former consultant. We had no written agreement with Mr. Weiss and worked with him on
certain marketing efforts on the condition of performance. He performed none of his promised actions and we terminated our
relationship with the Plaintiff. The Company plans to vigorously contest these allegations and is contemplating a countersuit
for damages to the Company.



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 its business. The Company
is currently not aware of any such legal proceedings other than described above that it believes they may have, individually or
in the aggregate, a material adverse effect on its business, financial condition or operating results.



We are unable to determine the outcome of the
above lawsuits and or the related costs, if any, at this time.



NOTE 11 – FAIR VALUE



ASC 825-10 defines fair value as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions
that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk
of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be
used to measure fair value:



Level 1 - Quoted prices in active markets for
identical assets or liabilities.



Level 2 - Observable inputs other than Level
1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived
principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.



Level 3 - Unobservable inputs to the valuation
methodology that are significant to the measurement of fair value of assets or liabilities.



To the extent that valuation
is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires
more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value
measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.
Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted
of the following items as of June 30, 2012:



|                              |  | Total |     |  | Quoted Prices inActive Markets forIdenticalInstrumentsLevel 1 |   |     | SignificantOtherObservableInputsLevel 2 |  |   | SignificantUnobservableInputsLevel 3 | 
|----------------------------- |  | ----- | --- |  | ------------------------------------------------------------- | - | --- | --------------------------------------- |  | - | ------------------------------------ | 
|                              |  |       |     |  |                                                               |   |     |                                         |  |   |                                      | 
|Assets :                      |  |       |     |  |                                                               |   |     |                                         |  |   |                                      | 
|Securities available for sale |  | $     | 790 |  |                                                               | $ | 790 |                                         |  | $ | —                                    | 
|                              |  |       |     |  |                                                               |   |     |                                         |  |   |                                      | 
|Total                         |  | $     | 790 |  |                                                               | $ | 790 |                                         |  | $ | —                                    | 



F-9







11 GOOD ENERGY, INC. AND SUBSIDIARY

(a development stage company)

NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012 AND 2011



NOTE 11 – FAIR VALUE (continued)



The following table provides a summary of changes
in fair value of the Company’s Level 1 financial assets as of June 30, 2012:



|Balance, December 31, 2010: |  | $ | 576,990  |  
|--------------------------- |  | - | -------- | -
|Securities sold             |  |   | (773,851 | )
|Unrealized gain             |  |   | 197,801  |  
|Balance, December 31, 2011  |  | $ | 940      |  
|Unrealized loss             |  |   | (150     | )
|Balance, June 30, 2012      |  | $ | 790      |  



The Company adopted the provisions
of ASC 825-10 prospectively effective as of the beginning of Fiscal 2008. For financial assets and liabilities included within
the scope of ASC 825-10, the Company will be required to adopt the provisions of ASC 825-10 prospectively as of the beginning
of Fiscal 2009. The adoption of ASC 825-10 did not have a material impact on our consolidated financial position or results of
operations.



The fair value of the assets, securities available
for sale, at June 30, 2012 was grouped as Level 1 valuation as the market price was readily available.



NOTE 12 – EMPLOYMENT AGREEMENT



On May 15, 2012, the Company entered
into an employment agreement dated as of May 9, 2012 to engage Mario Larach as Chief Executive Officer and a director of the Company,
it being understood that he would assume these positions the morning after the Company filed its Form 10-Q for the quarter ended
March 31, 2012. Mr. Larach will be paid $10,000 per month, which will increase to $16,250 per month at such time as the Company
raises additional financing of at least $2,000,000 (the “financing”). Mr. Larach also would have been entitled
to receive a $20,000 signing bonus payable upon the Company completing such financing. Mr. Larach received warrants to purchase
200,000 shares of the Company’s Common Stock exercisable over a term of five years at an exercise price of $5 per share,
with 50,000 vested immediately. These Warrants contain a cashless exercise provision in the event the Company’s Common Stock
is trading in the Over-the-Counter Market at a price above $15 per share for at least ten consecutive trading days. Mr. Larach
was issued fully vested Warrants to purchase 50,000 shares of Common Stock also exercisable at $5 per share for a period of five
years from the date that Mr. Larach joined the Board of Directors. These Warrants do not have a cashless exercise provision. Six
months after commencement of his employment contract, the Board of Directors will meet with Mr. Larach to review his performance
and his compensation. While the term of his employment agreement is for a term of two years, there are provisions in the contract
which could lead to an earlier termination (see Note 13 – Subsequent Events).



NOTE 13 – SUBSEQUENT EVENTS



On July 16, 2012, Mario
Larach resigned as an officer and director of the Company and terminated his employment with the Company and while he is
reserving all rights he may have under his employment agreement. The Company has taken the position that he has not performed
under the terms of the agreement and portions thereof are cancelled upon his resignation.



Gary R. Smith; who serves as
Chief Operating Officer, become the Company’s interim Chief Executive Officer until Mr. Larach’s success is elected.



In July, 2012, the
Company received a total of $111,000 from two investors to purchase 37,000 shares of Common Stock at $3.00 per share.  A
substantial portion of these funds are being utilized by the Company to install storage facilities which are owned by
the Company at various fuel storage terminals of Kenan Advantage Group (“KAG”). Installation of these storage
facilities should be completed by the end of September 2012. Management believes that KAG will purchase approximately 20,000
gallons of bio diesel per month for these storage facilities. Based upon the current selling price of our G2 Diesel of $5.15
per gallon, sales by the Company to these storage facilities would generate approximately $100,000 per month
after installation is completed. Further, the glycerin by-product from the production of approximately 20,000 gallons
of G2 Diesel per month is expected to yield an estimated 2,200 gallons of crude glycerin. The Company has an independent
sales agreement with a third party to make every effort to sell its glycerin by product to dairy farmers and to then pay 50%
of all sales collected to the Company.



There can be no assurance
that the Company’s G2 Diesel and glycerin product will be successfully sold.



F-10







ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Forward-Looking Statements



The information contained in
this Form 10-Q for the six months ended June 30, 2012 and documents incorporated herein by reference are intended to update
the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and such
information presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” “Risk Factors” and other information contained in such
Form 10-K and other Company filings with the Securities and Exchange Commission (“SEC”).



This Quarterly Report on Form
10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties, and actual results could be significantly different than those discussed in this
Form 10-Q. Certain statements contained in Management’s Discussion and Analysis, particularly in “Liquidity and
Capital Resources,” and elsewhere in this Form 10-Q are forward-looking statements. These statements discuss, among
other things, expected growth, future revenues and future performance. Although we believe the expectations expressed in such
forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business, a number
of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether
oral or written, made by us or on our behalf. The forward-looking statements are subject to risks and uncertainties
identified under the “Risk Factors” section of the aforementioned Form 10-K for the fiscal year ended December
31, 2011. The risk factors of said Form 10-K should not be construed as an exhaustive list of all factors that could cause
actual results to differ materially from those expressed in forward-looking statements made by us. All
forward-looking statements included in this document are made as of the date hereof, based on information available to the
Company on the date thereof, and the Company assumes no obligation to update any forward-looking statements.



Overview



11 Good Energy, Inc. is a Delaware corporation
formed on May 23, 2007 for the purposes of developing, testing, manufacturing and distributing bio-fuel with energy related plans
and pursuits relying on the commercialization of our proprietary fuel product, G2 Diesel, as discussed below.



On October 23, 2007, we completed the purchase
of an existing biodiesel manufacturer, 11 Good’s Energy, LTD, a limited liability company (becoming our wholly-owned subsidiary),
formed in the State of Ohio in February 2006. Historically, our subsidiary has been a development stage company, which has primarily
engaged in research activities to develop a proprietary manufacturing process to produce bio-fuel for diesel applications.



In early 2008, we began construction on our
manufacturing facility at the location of our operating subsidiary in Magnolia, Ohio (Magnolia Plant). In June 2008, we began placing
tanks and constructing the infrastructure of the Magnolia Plant. Unfortunately, the industry experienced changes in fire suppression
regulations requiring us to invest over $1,500,000 in additional infrastructure not anticipated in the original capital expenditure
budget. We had to cease plant construction and operations from November 2008 to October 2009 in order to secure the financing and
make the necessary changes to the fire suppression system and design of the Magnolia Plant.



Acquisition of 11 Good’s Energy, LTD



As a result of the purchase of 11 Good’s
Energy, LTD (“11 Good’s”) all of the assets, liabilities and proprietary technology of 11 Good’s were transferred
to us by the former partners of 11 Good’s in exchange for cash of $611,900, $111,230 in assumed liabilities and 4,285,714
shares of common stock of the company valued at $429. The assets and liabilities of 11 Good’s were recorded at fair market
value at the time of acquisition. 11 Good’s is our sole subsidiary and operations and the management of 11 Good’s and
us are the same. The consolidated financial statements include the accounts of us and our wholly-owned subsidiary and all intercompany
balances and transactions have been eliminated.



The Company accounts for acquisitions in accordance
with the provisions of ASC 805-10. The Company assigns to all identifiable assets acquired a portion of the cost of the acquired
company equal to the estimated fair value of such assets at the date of acquisition. The Company records the excess of the cost
of the acquired company over the sum of the amounts assigned to identifiable assets acquired as goodwill. Management determined
the fair values assigned to inventory based upon selling prices less cost of disposal and the Company’s profit allowance
and the case of work in process less cost to complete. The Fair value of plant and equipment are based on current replacement costs.
The Company recorded goodwill in the amount of $639,504 as a result of the acquisition of 11 Good’s Energy LTD during the
year ended December 31, 2007. The Company accounts for and reports acquired goodwill under Accounting Standards Codification subtopic
350-10, Intangibles-Goodwill and Other (“ASC 350-10”). The Company does not amortize goodwill. In accordance with ASC
350-10, the Company tests its intangible assets for impairment on an annual basis or more often if events and circumstances warrant.
Any write-downs will be included in results from operations.



Development Stage Company - Product Development



We are currently in an early stage of our current
business plan. We have limited operating history with respect to the construction and operation of biodiesel refineries for our
own use. In this respect, from May 23, 2007 (date of inception) through June 30, 2012, our cumulative revenues totaled $824,313
and our deficit accumulated during our development stage was $25,163,325. Further, our operating subsidiary incurred from February
2006 through October 2007, costs of approximately $100,000 in the development of our subsidiary’s proprietary manufacturing
process and G2 Diesel product which are not reflected in our accumulated deficit since their costs were incurred prior to the acquisition
date of our subsidiary. These costs were primarily comprised of feedstock materials, labor and facilities costs. Since the acquisition,
we have further developed our process and product through testing and trials and have expended money on labor, consulting, facilities
and media productions in order to further our product development. Currently, the development of the fuel’s functionality
is complete, although we continue to incur research and development costs to develop new feedstock alternatives and to improve
materials procurement and fuel manufacturing techniques.



3







Critical Accounting Policies



Our discussion and analysis of our financial
condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of financial statements requires management to make estimates
and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates including, but not limited
to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the
basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting
policies affect our more significant judgments and estimates in the preparation of our financial statements.



Revenue Recognition. We recognize revenue
from product sales in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement exists (through written sales documentation); (2) delivery has occurred
(through delivery into customer’s tanks and acceptance); (3) the selling price is fixed and determinable; and (4) collectability
is reasonably assured. For criteria (1) we generate a sales order and a shipping document defining number of gallons of fuel ordered,
delivery and payment terms based on standing customer data and the customers purchase order. For criteria (2) we ensure delivery
has occurred by documented delivery terms defining where the customer accepts the fuel delivery. Fuel stored off-site by the company
remains as inventory until the customer receives the fuel from the offsite storage facility. For criteria (3) management determines
the selling price based on feedstock costs and our desired margin level. Our selling price fluctuates as feedstock prices increase
or decrease, primary the cost of soybean oil. Currently, management determines our selling price on a weekly basis. For criteria
(4) we establish creditworthiness of the customer based on a review of established credit limits and current financial health of
the entity placing the fuel order. Provisions for estimated returns and allowances, and other adjustments are provided for in the
same period the related sales are recorded, although we have not experienced any such items to date and do not expect any significant
provisions in the future. We have no discount, rebate or warranty programs. Payments received in advance are deferred until revenue
recognition is appropriate. We have no post-delivery obligations related to our products.



Inventory Valuation. We are required
to make judgments based on historical experience and future expectations, as to the realizability of our inventory. We make these
assessments based on the following factors: (a) existing orders and usage, (b) age of the inventory, and (c) historical experience.



Property and Equipment. We are required
to make judgments based on historical experience and future expectations, as to the realizability of our property and equipment.
We made these assessments based on the following factors: (a) the estimated useful lives of such assets, (b) technological changes
in our industry, and (c) the changing needs of our customers.



Fair Value of Intangible Assets. We
have adopted Statement of Accounting Standards Codification subtopic 805-10 (“ASC 805-10”). ASC 805-10 requires that
long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability
may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period.



Stock-Based Compensation



We account for our stock based compensation
under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or
services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those
equity instruments.



There were no employee stock options and employee
stock purchases granted to employees and directors during the period from May 23, 2007 (date of inception) through December 31,
2008.



During
the six months ended June 30, 2012, the Company issued warrants to purchase its common stock of a total
350,000 shares to its directors and consultants at $1.00 to $5.00 per share which
commence vesting in April, 2012 with a term of 5 years. There were no other unvested options outstanding as of the date
of adoption of FASB ASC Topic 718.



We use the fair value method for equity instruments
granted to non-employees (if any) and will use the Black-Scholes model for measuring the fair value of options, if issued. The
stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services
is completed (measurement date) and is recognized over the vesting periods.



Results of Operations



By virtue of our purchase of 11 Good’s,
which became our sole operations, the Company is considered to be in the development stage in accordance with the FASB ASC Topic
915 – Development Stage Enterprises. Since its inception, the Company has devoted substantially all of its time
to raising capital, obtaining financing, research and development activities and obtaining many governmental organizations, municipalities
and corporations to test our G2 Diesel and its performance as a blend with traditional #2 diesel fuel. We also have an agreement
with a third party to purchase the glycerin produced as a by-product of the production of G-2 diesel as a disinfectant to be used
to treat cows and other animals.



4







Three months Ended June 30, 2012 Compared to the three months
ended June 30, 2011



The following table sets forth certain selected
unaudited condensed consolidated statement of operations data for the periods indicated:



|                                    |  | Three Months Ended June 30, |           
|----------------------------------- |  | --------------------------- | ----------
|                                    |  | 2012                        |           
|Revenue                             |  | $                           | 55,680    
|Cost of goods sold                  |  |                             | 85,565    
|Gross loss                          |  |                             | (29,885   
|                                    |  |                             |           
|Operating expenses:                 |  |                             |           
|Selling, general and administrative |  |                             | 1,402,052 
|Research and development            |  |                             | -         
|Depreciation and amortization       |  |                             | 33,758    
|                                    |  |                             |           
|Total operating expenses:           |  |                             | 1,435,810 
|                                    |  |                             |           
|Loss from operations                |  |                             | (1,465,695
|                                    |  |                             |           
|Other income/expense:               |  |                             |           
|Interest expense, net               |  |                             | (44,990   
|Other income (expense), net         |  |                             | 10,424    
|                                    |  |                             |           
|Net loss                            |  | $                           | (1,500,261



Revenues decreased by $12,611
for the three months ended June 30, 2012 of $55,680 compared to revenues in the three months ended June 30, 2011 of
$68,291.



The minimal revenues
recognized in the quarter ended June 30, 2012 are due primarily to retracting our business due to cash restraints. Most of
our testing programs completed in mid-2011 did not generate the demand originally anticipated. Our largest customer, the
Kenan Advantage group completed their testing and agreed to convert  terminals     located in Ohio and Pennsylvania to sell
G2 Diesel. The build out requires approximately $120,000 to complete. Therefore we have been unable to operate our plant
without the capital to purchase raw materials leading to an inventory allocation requirement with the Kenan advantage group.
We currently deliver to one of their terminals using the finished fuel we have on hand to keep that terminal using G2 Diesel.
In July 2012, we received a cash infusion of $111,000 from the sale of common stock and we ordered storage tanks to be
installed at various Kenan’s terminals. When storage tanks are installed at these locations by about September 30,
2012, we expect to sell to Kenan about 20,000 gallons per month of G-2 diesel.



The Company has had independently run studies conducted that provide
proof of the benefits G2 usage provides to diesel engines in three forms.



Better Mileage – Longer Engine Life –
Cleaner Emissions



The one thing that 11 Good
Energy has lacked is the ability to establish and maintain relationships with potential clients and to guaranty delivery of
products. Management has identified lack of sales personnel available to build out and maintain these relationships.
Upon receipt of additional financing, of which there can be no assurances given that such financing would be obtained by us
on satisfactory terms, if at all, by employing two proven sales executives that have worked in networking and relationship
driven businesses, management believes we can quickly expand into our target markets, which include the following:



Trucking Lines – Transit Authorities – Tugs and Ferries
– Short Haul Train Lines

School Bus Fleets – Fleet Operators



If needed outside sales
consultants will be compensated on a per gallon sales commission basis. Our sales and marketing approach is to utilize our
relationship with Kenan and successful independent studies as tools to increase sales.



Cost of goods sold
was $85,565 for the three months ended June 30, 2012 and $154,112 for the three months ending June 30, 2011. Cost of goods sold
exceeded revenues for both periods as a result of applying fixed factory depreciation and overhead to cost of goods sold, even
though only a small volume of sales were generated.Costs of goods sold primarily consist of the procurement and transportation
of soybean oil, ethanol and other raw materials used in the manufacture of G2 Diesel; including payroll costs associated with labor,
depreciation of manufacturing equipment, manufacturing facilities expense, insurance costs and other operating costs directly related
to production.



During the three month period
ended period June 30, 2012, depreciation and amortization of $33,758 included in operating expenses increased by $4,573
from $29,185 in the comparable three month period in 2011 primarily due to the amortization of patent expenses in 2012.



Selling, general,
and administrative expenses for the three months ended June 30, 2012 were $1,402,052 compared with $2,622,851 in the
comparable period in 2011, a decrease of $1,220,799. Such decreased costs include, among others, payroll and related
expenses, insurance costs and occupancy costs. The decrease in selling, general and administrative expenses in 2012 over the
comparable period of the prior year is primarily related to a reduction in payments of common stock to consultants and
employees of $658,508,  and decrease in consulting, legal, and accounting fees, and as well other overhead expenses such as
travel, marketing and promotional expenses.



The net loss attributable to common shareholders
was $1,500,261 in the three months ended June 30, 2012 as compared to $2,965,045 for the comparable period in 2011, a decrease
in net loss of $1,464,784.



5







As of June 30, 2012, we have
no long-term contracts or backlog of orders from customers to purchase our G2 Diesel fuel or our crude glycerin by-product
described herein. In general, the testing programs and sales efforts conducted with potential customers have shown a longer
order cycle than first anticipated 11 Good Energy has allocated its marketing efforts toward fleet users. These are customers
that have centralized fueling and their vehicles return to the terminal every day after usage. This allows the vehicles to
receive consistent product. 11 Good Energy’s key strategic partner and largest customer is the Kenan Advantage Group
(The KAG.) The KAG distributes over 20 billion gallons of liquid fuels and specialty chemicals annually making them the
largest transportation company of bulk transport in the United States. After extensive testing, the KAG has  authorized 11
Good Energy to build storage tanks and containment pads at  terminals in    Ohio and Pennsylvania as a phase 1
of development. In addition to being a user of G2 Diesel, the KAG also assists 11 Good in providing logistic solutions
through the utilization of their fleet.



Six months Ended June 30, 2012 Compared to the Six months
Ended June 30, 2011



The following table sets forth certain selected
unaudited condensed consolidated statement of operation data for the periods indicated:





|                                        |  | Six Months Ended June 30, |           
|--------------------------------------- |  | ------------------------- | ----------
|                                        |  | 2012                      |           
|Revenue                                 |  | $                         | 116,548   
|Cost of
    goods sold                  |  |                           | 262,239   
|                                        |  |                           |           
|Gross loss                              |  |                           | (145,691  
|                                        |  |                           |           
|Operating expenses:                     |  |                           |           
|Selling, general
    and administrative |  |                           | 1,742,640 
|Research and development                |  |                           | -         
|Depreciation
    and amortization       |  |                           | 86,206    
|                                        |  |                           |           
|Total operating
    expenses:           |  |                           | 1,828,846 
|                                        |  |                           |           
|Loss from operations                    |  |                           | (1,974,537
|                                        |  |                           |           
|Other income/expense:                   |  |                           |           
|Interest expense,
    net               |  |                           | (227,271  
|Other
    income (expense), net         |  |                           | 25,748    
|                                        |  |                           |           
|Net loss                                |  | $                         | (2,176,060



For the six months ended June
30, 2012, the Company had revenues of $116,548 compared with $97,513 in the comparable period in 2011, an increase of $19,035
due primarily to the sale of our glycerin by-product.



Cost of goods sold was $262,239 for the six months ended June 30, 2012 and $268,508 for the six months ending
June 30, 2011. Cost of goods sold exceeded revenues for both periods as a result of applying fixed factory depreciation and overhead
to cost of goods sold, even though only a small volume of sales were generated. Costs of goods sold primarily consist of the procurement and transportation of soybean oil, ethanol and other raw materials used
in the manufacture of G2 Diesel; including payroll costs associated with labor, depreciation of manufacturing equipment, manufacturing
facilities expense, insurance costs and other operating costs directly related to production.



General, selling and
administrative expenses were $1,742,640 compared with $3,584,110, a decrease of $1,841,470 in the comparable period in 2011.
Approximately $600,000 of this decrease was as a result of lower costs of options and warrants issued to employees and
non-employees and the costs of warrants issued in conjunction with notes issued. The remainder of the decrease was due to
lower costs of salaries, legal fees, and other operating expenses.



No research and development costs were incurred in the six months
ended June 30, 2012 compared with $123,713 incurred in 2011.



Depreciation and amortization
included in operating expenses was $86,206 compared with $58,371 in the comparable period in 2011, an increase of decrease
of $27,835.



Interest expenses were
$227,271 in the six months ended June 30, 2012 compared with $8,726 of  interest expenses in the comparable period in 2011,
an increase of $218,545 primarily due to interest on the convertible notes outstanding and the amortization of debt discount
attributable to the notes of $175,139.



Net loss for the six month period
ending June 30, 2012 was $2,176,060 compared with a loss of $4,158,999 in the comparable period in 2011, a decrease $1,982,939
due primarily to the changes set forth above.



Liquidity
and Capital Resources



The
company had cash and cash equivalents of $15,932 at June 30, 2012 compared with cash of $12,895 at December 31, 2011.



Net
cash used in operating activities for the six months ended June 30, 2012 was $111,218 compared with $1,205,563 in the comparable
period in 2011. Cash used in operations was a result of a net loss for the period of $2,176,060 partially offset by amortization
of debt discount of $175,139, reserved for due from shareholder of $108,519, depreciation and amortization of $210,509, fair value
of stock-based compensation related to the warrants issued in connection with related party debt and stock options granted for
services of $1,253,387, expenses paid by related party on behalf of the Company in exchange for a promissory note of $34,000,
gain on sale of property and equipment of $25,748, decrease of account receivable of $24,745, decrease in inventory of $21,933,
decrease of other current assets of $10,673 and an increase in account payables and accrued liabilities of $251,685.



Net
cash provided by investing activities for the six months ended June 30, 2012 was $40,755 as a result of the proceeds of sale
of certain property and equipment compared to net cash provided by investing activities of $553,562 primarily due to proceeds
received from sale of security available for sale in the comparable period in 2011.



Net
cash provided by financing activities for the six months ended June 30, 2012 was $73,500 compared with $632,641 in the comparable
period in 2011. The decrease during the six months ended June 30, 2012 in net cash provided by financing activities primarily
resulted from proceeds from issuance of convertible notes of only $100,000, which offset by repayment of related party advances
of $6,500 and payments of related party note payable of $20,000.



The
Company’s 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, the Company incurred net losses attributable to common shareholders of $2,176,060 and used cash of $111,218 for operating
activities for the six months ended June 30, 2012, incurred negative working capital (current liabilities exceeded current
assets) of $2,291,815 and deficit accumulated during development stage of $25,163,325 as of June 30, 2012. These factors among
others may indicate that the Company may be unable to continue as a going concern for a reasonable period of time.



The
Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional
funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or
the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might
result should the Company be unable to continue as a going concern.



We
are currently in the process of attempting to raise capital through a private placement sale of common stock. No assurances can
be given that we will be able to successfully raise the financing necessary to continue as a going concern.



We anticipate that our future
liquidity requirements will arise from the need to finance our accounts receivable and inventories, and from the need to fund
our current obligations and capital expenditures. The primary sources of funding for our current operations will be cash generated
from operations and the sale of current inventory and raising additional capital from the sale of equity and debt securities.



Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements.



6







Item 3. Quantitative and Qualitative Disclosures About
Market Risk



Market risk is the risk of loss arising from
adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary
exposure to market risk is interest rate risk associated with our short term money market investments. The Company does not have
any financial instruments held for hedging or other speculative purposes and does not invest in derivative financial instruments,
interest rate swaps or other investments that alter interest rate exposure.



Item 4. Controls and Procedures



We maintain disclosure controls and procedures,
which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including
our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.



Under the supervision and with the participation
of our management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our
management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of the end of
the period covered by this report due to the Company’s limited resources and limited number of employees. To mitigate the
current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the
use of legal and outsourced accounting professionals. As we grow, we expect to increase our number of employees, which, we believe,
will enable us to implement adequate segregation of duties within the internal control framework.



There were no changes in the Company’s
internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are
reasonably likely to materially affect the Company’s internal control over financial reporting.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



As of the filing date of this Form 10-Q,
we are a party to several legal proceedings. See Note 10 for a detailed explanation of litigation matters.



Item 1A. Risk Factors



As a Smaller Reporting Company as defined
Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations
and therefore are not required to provide the information requested by this Item 1A. Nevertheless, the Company encourages stockholders
of the Company to read the risk factors contained under Item 1A of the Company’s Form 10-K filed with the Securities and
Exchange Commission on April 16, 2012 for the fiscal year ended December 31, 2011.



Item 2. Changes in Securities



| | (a) | Recent sales of unregistered Securities.
| | --- | ----------------------------------------



From January 1, 2012 through June 30,
2012, we had limited private sales of our securities, summarized as follows:



|Date of Sale  |  | Title of Security  |  | Number Sold                                      |  | Consideration Received and Description of
    Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to
    Purchasers |  | Exemption from Registration Claimed (3) |  | If Option, Warrant or Convertible Security, terms of exercise or conversion
|------------- |  | ------------------ |  | ------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ---------------------------------------------------------------------------
|              |  |                    |  |                                                  |  |                                                                                                                                                   |  |                                         |  |                                                                            
|January 2012  |  | Notes and Warrants |  | $100,000 principal amount;
        60,000 shares |  | $100,000; no commissions paid                                                                                                                     |  | Rule 506                                |  | Exercisable as of January 18, 2012 at $5.00 per share through December 2014
|              |  |                    |  |                                                  |  |                                                                                                                                                   |  |                                         |  |                                                                            
|February 2012 |  | Options/Warrants   |  | 300,000 shares                                   |  | Services rendered; no commissions paid                                                                                                            |  | Rule 506 and/or Section 4(2)            |  | (1)                                                                        
|              |  |                    |  |                                                  |  |                                                                                                                                                   |  |                                         |  |                                                                            
|April 2012    |  | Warrants(2)        |  | 380,000 shares                                   |  | Services rendered; no commissions paid                                                                                                            |  | Section 4(2)                            |  | (2)                                                                        
|              |  |                    |  |                                                  |  |                                                                                                                                                   |  |                                         |  |                                                                            
|April 2012    |  | Warrants           |  | 2,000,000 shares                                 |  | Services rendered; no commissions paid                                                                                                            |  | Section 3a(9)                           |  | (3) (4)                                                                    
|              |  |                    |  |                                                  |  |                                                                                                                                                   |  |                                         |  |                                                                            
|May 2012      |  | Warrants(5)        |  | 50,000 shares                                    |  | Services rendered; no commissions paid                                                                                                            |  | Section 4(2)                            |  | (3)                                                                        



7







|(1) |  | Includes warrants to purchase
100,000 shares of Common Stock exercisable at $5.00 per share over a period of five years. Also includes options to purchase 200,000
shares of the Company’s Common Stock exercisable over a period of three years at $5.00 per share which commence vesting
in April, 2012.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Exercisable at $1.00 per share over a
                                                                                                                                             period of 5 years, 330,00 warrants were issued in replacement with the previous 180,000 warrants issued in connection
                                                                                                                                             with
                                                                                                                                             the
                                                                                                                                             related party notes payable in prior year, and 50,000 warrants under the same terms were issued for services.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Exercisable at $5.00 per share
over a period of 5 years.
|--- |  | --------------------------------------------------------

|(4) |  | Warrants issued in exchange
for the 2,000,000 shares of the Company’s common stock returned by Mr. Berndt in connection with his resignation on April
9, 2012.                                               
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) |  | An employee received warrants to purchase 200,000 shares and then subsequently terminated his
                                                     agreement resulting in a net retention of 50,000 warrants.



Item 3. Defaults Upon
Senior Securities



None.



Item 4. Mine Safety Disclosures



Not applicable.



Item 5. Other Information



See “Note 13 in the “Notes
to Consolidated Financial Statements.”



Item 6. Exhibits



Except for the exhibits listed below,
other required exhibits have been previously filed with the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended.



Except as otherwise noted, all exhibits were
previously filed with the Securities and Exchange Commission under its Form S-1 Registration Statement, file No. 333-166149.



|Exhibit No. |  | Description of Exhibit                                                          
|----------- |  | --------------------------------------------------------------------------------
|            |  |                                                                                 
|2.1         |  | Agreement and Plan of Organization between Registrant and 11 Good’s Energy, LTD.
|            |  |                                                                                 
|2.2         |  | Corrections to Exhibit 2.1                                                      
|            |  |                                                                                 
|3.1         |  | Certification of Incorporation                                                  
|            |  |                                                                                 
|3.2         |  | By-Laws                                                                         
|            |  |                                                                                 
|3.3         |  | Certificate of Amendment to Certificate of Incorporation                        
|            |  |                                                                                 
|3.4         |  | Certificate of Designation                                                      
|            |  |                                                                                 
|10.1        |  | Employment Contract - Frederick C. Berndt                                       
|            |  |                                                                                 
|10.2        |  | Employment Contract - Daniel Lapp                                               
|            |  |                                                                                 
|10.3        |  | Employment Contract - Aaron Harnar                                              
|            |  |                                                                                 
|10.4        |  | Consulting Agreement with Clayton R. Livengood                                  
|            |  |                                                                                 
|10.5        |  | Employment Agreement - Gary R. Smith                                            



8







|10.6         |  | Finder’s Agreement - Jesup Lamont                                                                                                                                                
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             |  |                                                                                                                                                                                  
|10.7         |  | Consulting Agreement with Capital Keys                                                                                                                                           
|             |  |                                                                                                                                                                                  
|10.8         |  | Consulting Agreement with California Strategies                                                                                                                                  
|             |  |                                                                                                                                                                                  
|10.9         |  | Office Lease dated April 25, 2007 between the Registrant and Triad Realty, LLC, including a First Lease Amendment dated June 21, 2007 and a Second Amendment dated July 15, 2009.
|             |  |                                                                                                                                                                                  
|10.10        |  | Employment Contract – Mario Larach dated as of May 9, 2012 (Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on May 17, 2012.                           
|             |  |                                                                                                                                                                                  
|10.11        |  | Sales Representative Agreement with Max V LLC dated May 15, 2012 (Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on May 17, 2012.                     
|             |  |                                                                                                                                                                                  
|21.1         |  | Subsidiary of Registrant                                                                                                                                                         
|             |  |                                                                                                                                                                                  
|31.1         |  | Principal Executive Officer Rule 13a-14(a)/15d-14(a) Certification (*)                                                                                                           
|             |  |                                                                                                                                                                                  
|31.2         |  | Principal Financial Officer Rule 13a-14(a)/15d-14(a) Certification (*)                                                                                                           
|             |  |                                                                                                                                                                                  
|32.1         |  | Principal Executive Officer Section 1350 Certification (*)                                                                                                                       
|             |  |                                                                                                                                                                                  
|32.2         |  | Principal Financial Officer Section 1350 Certification (*)                                                                                                                       
|             |  |                                                                                                                                                                                  
|101.INS XBRL |  | Instance Document (**)                                                                                                                                                           
|             |  |                                                                                                                                                                                  
|101.SCH XBRL |  | Taxonomy Extension Schema Document (**)                                                                                                                                          
|             |  |                                                                                                                                                                                  
|101.CAL XBRL |  | Taxonomy Extension Calculation Linkbase Document (**)                                                                                                                            
|             |  |                                                                                                                                                                                  
|101.DEF XBRL |  | Taxonomy Extension Definition Linkbase Document (**)                                                                                                                             
|             |  |                                                                                                                                                                                  
|101.LAB XBRL |  | Taxonomy Extension Labels Linkbase Document (**)                                                                                                                                 
|             |  |                                                                                                                                                                                  
|101.PRE XBRL |  | Taxonomy Extension Presentation Linkbase Document (**)                                                                                                                           



* Filed herewith.

** Filed by amendment.



9







SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                          | 11 GOOD ENERGY, INC.                                                
|------------------------- | --------------------------------------------------------------------
|                          |                                                                     
|Date: August 23,
    2012 | By:                                                                 
|                          | Gary Smith, President (interim principal executive officer)         
|                          |                                                                     
|Date: August 23, 2012     | By:                                                                 
|                          | E. Jamie Schloss,                                                   
|                          | Interim Chief Financial Officer(interim principal financial officer)



10