UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 2012
SALAMON GROUP INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
93-1324674
|
(State or other jurisdiction of
|
(I.R.S. Employer Identification
|
incorporation or organization)
|
no.)
|
|
|
5-215 Neave Road
|
V1V 2L9
|
Kelowna, BC, Canada
|
(Zip Code)
|
(Address of principal executive offices)
|
|
(778)-753-5675
(Registrants telephone number,
including area code)
Securities to be registered under Section 12(b) of the Act:
Title of each class
None
Name of each exchange on which
registered
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title
of class)
Check whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer [ ]
|
Accelerated filer
[ ]
|
Non-accelerated filer [ ]
(Do not check
if a smaller reporting company)
|
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]
State issuers revenues for its most recent fiscal year.
$
3,126
As of March 31, 2012, the aggregate market value of the
Registrants voting stock held by non-affiliates was approximately $9,680,000
Number of shares of the issuers common stock, $0.001 par
value, outstanding as of March 31, 2012: 40,000,000 shares
1
TABLE OF CONTENTS
PART I.
|
FINANCIAL INFORMATION
|
3
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
3
|
|
ITEM 2.
|
MANAGEMENTS DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
|
16
|
|
ITEM 4T.
|
CONTROLS AND PROCEDURES
|
19
|
PART II.
|
OTHER INFORMATION
|
21
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
21
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
|
21
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
21
|
|
ITEM 4.
|
SUBMISSIONS OF MATTERS TO A
VOTE OF SECURITY HOLDERS
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21
|
|
ITEM 5.
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OTHER INFORMATION
|
21
|
|
ITEM 6.
|
EXHIBITS
|
22
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|
SIGNATURES
|
22
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2
PART I FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
|
Salamon Group, Inc.
(A Development Stage
Company)
Consolidated Balance Sheets
(Expressed in US dollars)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
27,110
|
|
|
783
|
|
Accounts receivable (net of
allowance of $nil)
|
|
969,942
|
|
|
-
|
|
Costs of uncompleted contracts
in excess of related billings
|
|
630,921
|
|
|
-
|
|
Loans receivable (Note 5)
|
|
-
|
|
|
782,706
|
|
Convertible note receivable
(Note 4)
|
|
500,000
|
|
|
-
|
|
Short-term investment (Note 3)
|
|
15,682,062
|
|
|
-
|
|
Total Current Assets
|
|
17,810,035
|
|
|
783,489
|
|
|
|
|
|
|
|
|
Patents (Note 7)
|
|
3,805,545
|
|
|
-
|
|
Property and
equipment (Note 6)
|
|
55,815
|
|
|
46,874
|
|
Total Assets
|
|
21,671,395
|
|
|
830,363
|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
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Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
509,290
|
|
|
287,550
|
|
Convertible debt, net of unamortized discount
of $959 (Note 9)
|
|
28,495,836
|
|
|
366,708
|
|
Loans payable (Note 10)
|
|
75,068
|
|
|
353,988
|
|
Advances from directors (Note 8)
|
|
953,210
|
|
|
393,592
|
|
Current portion of deferred revenues (Note
2(l))
|
|
2,500
|
|
|
2,500
|
|
Total Current Liabilities
|
|
30,035,904
|
|
|
1,404,338
|
|
|
|
|
|
|
|
|
Deferred revenues, long-term portion (Note 2(l))
|
|
43,332
|
|
|
44,374
|
|
Total Liabilities
|
|
30,079,236
|
|
|
1,448,712
|
|
|
|
|
|
|
|
|
Going Concern (Note 1)
|
|
|
|
|
|
|
Commitments (Note 12)
|
|
|
|
|
|
|
Subsequent Events (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par
value; 10,000,000 shares authorized, no shares issued and outstanding
|
|
-
|
|
|
-
|
|
Common stock, $0.001 par value;
40,000,000 shares authorized,
40,000,000
(December 31, 2011 40,000,000)
shares issued and outstanding
|
|
40,000
|
|
|
40,000
|
|
Additional paid-in capital
|
|
2,002,125
|
|
|
2,002,125
|
|
Common shares subscribed
|
|
100,000
|
|
|
-
|
|
Donated capital (Note 8)
|
|
6,665
|
|
|
5,332
|
|
Accumulated other comprehensive loss
|
|
(6,840,119
|
)
|
|
-
|
|
Accumulated deficit
|
|
(3,716,512
|
)
|
|
(2,665,806
|
)
|
Total
Stockholders Deficit
|
|
(8,407,841
|
)
|
|
(618,349
|
)
|
Total Liabilities and Stockholders Deficit
|
|
21,671,395
|
|
|
830,363
|
|
See accompanying notes to the consolidated financial
statements
3
Salamon Group, Inc.
(A Development Stage
Company)
Consolidated Statements of Operations
(Expressed in US
dollars)
(Unaudited)
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
For the Three
|
|
|
For the Three
|
|
|
from April 27,
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
2001 (Inception)
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
to March 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
1,042
|
|
|
-
|
|
|
4,168
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Bad debt
|
|
575,068
|
|
|
-
|
|
|
575,068
|
|
Depreciation
|
|
1,059
|
|
|
-
|
|
|
11,395
|
|
Donated rent (Note 8)
|
|
1,333
|
|
|
1,333
|
|
|
6,665
|
|
General and administrative
(Note 8)
|
|
378,019
|
|
|
64,639
|
|
|
1,608,072
|
|
Interest expense
|
|
96,269
|
|
|
-
|
|
|
166,476
|
|
Research and development
|
|
-
|
|
|
-
|
|
|
315,000
|
|
Total Expenses
|
|
1,051,748
|
|
|
65,972
|
|
|
2,682,676
|
|
Loss Before Other Expenses
|
|
(1,050,706
|
)
|
|
(65,972
|
)
|
|
(2,678,508
|
)
|
|
|
|
|
|
|
|
|
|
|
Other Expenses
|
|
|
|
|
|
|
|
|
|
Impairment of intangible asset
|
|
-
|
|
|
-
|
|
|
(1,299,595
|
)
|
Impairment of property and equipment
|
|
-
|
|
|
-
|
|
|
(74,305
|
)
|
Interest income
|
|
-
|
|
|
-
|
|
|
10,997
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Income Taxes
|
|
(1,050,706
|
)
|
|
(65,972
|
)
|
|
(4,041,411
|
)
|
Deferred income
tax recovery
|
|
-
|
|
|
-
|
|
|
324,899
|
|
Net Loss
|
|
(1,050,706
|
)
|
|
(65,972
|
)
|
|
(3,716,512
|
)
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss Item
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available for sale
securities
|
|
(6,840,119
|
)
|
|
-
|
|
|
(6,840,119
|
)
|
Comprehensive Loss
|
|
(7,890,825
|
)
|
|
(65,972
|
)
|
|
(10,556,631
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss Per Share
Basic and Diluted
|
|
(0.03
|
)
|
|
(0.00
|
)
|
|
|
|
Weighted Average Shares Outstanding
|
|
40,000,000
|
|
|
26,710,728
|
|
|
|
|
See accompanying notes to the consolidated financial
statements
4
Salamon Group, Inc.
(A Development Stage
Company)
Consolidated Statements of Cash Flows
(Expressed in US
dollars)
(Unaudited)
|
|
For the Three
|
|
|
For the Three
|
|
|
For the Period
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
from April 27,
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
2001 (Inception)
|
|
|
|
2012
|
|
|
2011
|
|
|
to March 31, 2012
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(1,050,706
|
)
|
|
(65,972
|
)
|
|
(3,716,512
|
)
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible asset
|
|
-
|
|
|
-
|
|
|
55,000
|
|
Bad debt
expense
|
|
575,068
|
|
|
-
|
|
|
575,068
|
|
Estimated fair value of
common stock issued for patents
|
|
-
|
|
|
-
|
|
|
315,000
|
|
Accretion
on convertible debt
|
|
57,333
|
|
|
-
|
|
|
91,708
|
|
Beneficial conversion of
amounts due to related party
|
|
-
|
|
|
-
|
|
|
35,833
|
|
Depreciation of property and equipment
|
|
1,059
|
|
|
-
|
|
|
11,395
|
|
Estimated fair value of
common stock issued for services
|
|
-
|
|
|
-
|
|
|
168,216
|
|
Donated
rent
|
|
1,333
|
|
|
1,333
|
|
|
6,665
|
|
Deferred income tax
recovery
|
|
-
|
|
|
-
|
|
|
(324,899
|
)
|
Impairment of write-down of intangible asset
|
|
-
|
|
|
-
|
|
|
1,299,595
|
|
Impairment of write-down
of property and equipment
|
|
-
|
|
|
-
|
|
|
74,305
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
263,579
|
|
|
9,404
|
|
|
410,318
|
|
Accounts
receivable
|
|
103,971
|
|
|
-
|
|
|
103,971
|
|
Accrued liabilities
|
|
-
|
|
|
5,000
|
|
|
-
|
|
Deferred
revenues
|
|
(1,042
|
)
|
|
-
|
|
|
45,832
|
|
Due to related party
|
|
59,618
|
|
|
-
|
|
|
444,618
|
|
Costs of
uncompleted contracts in excess of related billings
|
|
(83,886
|
)
|
|
-
|
|
|
(83,886
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
(73,673
|
)
|
|
(50,235
|
)
|
|
(487,773
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Cash received on acquisition of Sunlogics
Power
|
|
-
|
|
|
-
|
|
|
1
|
|
Purchase of property and equipment
|
|
-
|
|
|
-
|
|
|
(4,515
|
)
|
Purchase of
license
|
|
-
|
|
|
-
|
|
|
(50,000
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash
used in investing activities
|
|
-
|
|
|
-
|
|
|
(54,514
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
-
|
|
|
(4
|
)
|
|
-
|
|
Advances from directors
|
|
-
|
|
|
50,239
|
|
|
346,415
|
|
Proceeds from common shares
subscribed
|
|
100,000
|
|
|
-
|
|
|
100,000
|
|
Proceeds from issuance of convertible debt
|
|
-
|
|
|
-
|
|
|
425,000
|
|
Loans receivable
|
|
-
|
|
|
-
|
|
|
(428,718
|
)
|
Proceeds from related party note payable
|
|
-
|
|
|
-
|
|
|
23,700
|
|
Issuance of common stock for cash
|
|
-
|
|
|
-
|
|
|
103,000
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
100,000
|
|
|
50,235
|
|
|
569,397
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
26,327
|
|
|
-
|
|
|
27,110
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
783
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
27,110
|
|
|
-
|
|
|
27,110
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash Financing Activities:
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of amounts
due to related parties
|
|
-
|
|
|
-
|
|
|
458,588
|
|
Common stock to be issued or
to be issued to settle accounts payable
|
|
-
|
|
|
-
|
|
|
28,059
|
|
Common stock issued upon conversion of related
party note payable
|
|
-
|
|
|
-
|
|
|
23,700
|
|
Common stock issued for
license
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Common stock and warrants issued for acquisition of Sunlogics Power
|
|
-
|
|
|
-
|
|
|
811,872
|
|
See accompanying notes to the consolidated financial
statements
5
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
1.
|
Nature of Operations and Going Concern
|
|
|
|
|
Salamon Group, Inc. (the "Company") was incorporated in
the state of Nevada on April 27, 2001 (Inception). The Company is a
development stage company whose principal business plan is to acquire
revenue producing assets in the industry of solar energy. The Company is a
development stage company as defined by Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) 915, Development
Stage Entities.
|
|
|
|
|
These consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America applicable to a going concern. At March 31,
2012, the Company has accumulated losses of $3,716,512 since inception and
a working capital deficit of $12,225,869 and expects to incur further
losses in the development of its business, all of which cast substantial
doubt about the Companys ability to continue as a going
concern.
|
|
|
|
|
Management plans to continue to provide for the Companys
capital needs by issuing debt and equity securities and by the continued
support of its related parties (see Note 8). The consolidated financial
statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or amounts and classification
of liabilities that might be necessary should the Company be unable to
continue in existence. There is no assurance that funding will be
available to continue the Companys business operations.
|
|
|
|
2.
|
Summary of Significant Accounting
Policies
|
|
|
|
|
(a)
|
Basis of presentation and consolidation
|
|
|
|
|
|
The consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles
in the United States and are expressed in United States dollars. The
Companys fiscal year end is December 31. These consolidated financial
statements include the accounts of its wholly-owned subsidiary Sunlogics
Power Fund Management Inc. (Sunlogics Power) from the date control was
acquired on May 12, 2011, Sunlogics Solar Inc. (Sunlogics Solar)
incorporated on March 1, 2012, and Sunlogics Tech Group Inc. incorporated
on March 1, 2012. All inter-company transactions and balances have been
eliminated.
|
|
|
|
|
(b)
|
Interim consolidated financial statements
|
|
|
|
|
|
The interim consolidated unaudited financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with
the instructions to Securities and Exchange Commission (SEC) Form 10-Q.
They do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. Therefore, these interim unaudited consolidated financial
statements should be read in conjunction with the Companys audited
financial statements and notes thereto for the year ended December 31,
2011, included in the Companys Annual Report on Form 10-K filed on April
13, 2012 with the SEC.
|
|
|
|
|
|
The interim consolidated financial statements included
herein are unaudited; however, they contain all normal recurring accruals
and adjustments that, in the opinion of management, are necessary to
present fairly the Companys consolidated financial position as at March
31, 2012 and the consolidated results of its operations and consolidated
cash flows for the three months ended March 31, 2012.
The results of operations for the three months ended March 31, 2012 are
not necessarily indicative of the results to be expected for future
quarters or the full year ending December 31,
2012.
|
6
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
2.
|
Summary of Significant Accounting Policies
(continued)
|
|
|
|
|
(c)
|
Use of estimates
|
|
|
|
|
|
The preparation of financial statements in conformity
with United States generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The Company
regularly evaluates estimates and assumptions related to deferred income
tax asset valuation allowances, stock- based payments, useful life and
valuation of property and equipment, valuation of intangible assets and
financial instrument valuations. The Company bases its estimates and
assumptions on current facts, historical experience and various other
factors that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses.
The actual results experience by the Company may differ materially and
adversely from the Companys estimates. To the extent there are material
differences between the estimates and the actual results, future results
of operations will be affected.
|
|
|
|
|
(d)
|
Foreign currency translation
|
|
|
|
|
|
The Companys and its subsidiaries functional and
reporting currency is the United States dollar. Monetary assets and
liabilities denominated in foreign currencies are translated in accordance
with ASC 830,
Foreign Currency Translation Matters
, using the
exchange rate prevailing at the balance sheet date. Gains and losses
arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of
income.
|
|
|
|
|
(e)
|
Basic and diluted net loss per share
|
|
|
|
|
|
The Company computes net loss per share in accordance
with ASC 260,
Earnings per Share
, which requires presentation of
both basic and diluted loss per share (EPS) on the face of the statement
of operations. Basic EPS is computed by dividing net loss available to
common shareholders (numerator) by the weighted average number of common
shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the
period including stock options, using the treasury stock method,
convertible preferred stock, and convertible debt, using the if-converted
method. In computing diluted EPS, the average stock price for the period
is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all
potentially dilutive common shares if their effect is antidilutive. At
March 31, 2012 there were 187,646,000 potentially dilutive instruments
outstanding.
|
|
|
|
|
(f)
|
Property and Equipment
|
|
|
|
|
|
The Companys solar powered charging station is recorded
at cost and is depreciated on a straight-line basis over its estimated
useful life of 20 years. Office furniture is depreciated on a
straight-line basis over its estimated useful life of 5 years.
|
|
|
|
|
(g)
|
Patents
|
|
|
|
|
|
Patents are stated at cost and have an indefinite
life.
|
|
|
|
|
(h)
|
Income taxes
|
|
|
|
|
|
The Company accounts for income tax using the asset and
liability method in accordance with ASC 740,
Income Taxes
. The
asset and liability method provides that deferred tax assets and
liabilities are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases of
assets and liabilities and for operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using the
currently enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company records a valuation
allowance to reduce deferred tax assets to the amount that is believed
more likely than not to be realized.
|
7
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
2.
|
Summary of Significant Accounting Policies
(continued)
|
|
|
|
|
(i)
|
Financial instruments
|
|
|
|
|
|
Pursuant to ASC 820,
Fair Value Measurements and
Disclosures
and ASC 825,
Financial Instruments,
an entity is
required to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value using a hierarchy based on
the level of independent, objective evidence when measuring fair value
using a hierarch based on the level of independent, objective evidence
surrounding the inputs used to measure fair value. The hierarchy
prioritized the inputs into three levels that may be used to measure fair
value:
|
|
|
|
|
|
Level 1
|
|
|
|
|
|
Level 1 applies to assets or liabilities for which there
are quoted prices in active markets for identical assets or
liabilities.
|
|
|
|
|
|
Level 2
|
|
|
|
|
|
Level 2 applies to assets or liabilities for which there
are inputs other than quoted prices that are observable for the asset or
liability such as quoted prices for similar assets or liabilities in
active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which significant inputs are
observable or can be derived principally from, or corroborated by,
observable data.
|
|
|
|
|
|
Level 3
|
|
|
|
|
|
Level 3 applies to assets or liabilities for which there
are unobservable inputs to the valuation methodology that are significant
to the measurement of the fair value of the assets or
liabilities.
|
|
|
|
|
|
The Companys financial instruments consist principally
of cash, accounts receivable, convertible note receivable, loans
receivable, accounts payable, loans payable, convertible debt, and
advances from directors. At March 31, 2012,
the Company estimates that the carrying values of all of its financial
instruments approximate their fair values due to the nature or duration of
these instruments.
|
|
|
|
|
|
As of March 31, 2012, assets measured at
fair value on a recurring basis presented on the Companys balance sheet
included cash with a fair value measurement of $27,110, short-term
investments of $15,682,062 using Level 1 and convertible note receivable
of $500,000 using Level 3.
|
|
|
|
|
(j)
|
Stock-based compensation
|
|
|
|
|
|
In accordance with ASC 718,
Compensation Stock Based
Compensation
and ASC 505-50,
Equity Based Payments to
Non-Employees,
the Company accounts for share-based payments using the
fair value method. All transactions in which goods or services are the
consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable.
|
|
|
|
|
(k)
|
Comprehensive loss
|
|
|
|
|
|
ASC 220,
Comprehensive Income
establishes
standards for the reporting and display of comprehensive loss and its
components in the financial statements. As at March 31, 2012, the
Companys comprehensive loss consists of net loss and unrealized losses on
available-for-sale investments.
|
|
|
|
|
(l)
|
Revenue and Deferred Revenue Recognition
|
|
|
|
|
|
The Company recognizes revenues from sales of goods and
services only when a firm sales agreement is in place, delivery has
occurred or services have been rendered and collectability of the fixed or
determinable sales price is reasonably assured. The fees from the usage of
its solar powered charging station are deferred and recognized as revenues
over the term of the service agreement. The Company uses the completed
contract method to recognize sales for certain construction and
installation contracts.
|
8
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
Summary of Significant Accounting Policies
(continued)
|
(m)
|
New accounting policies adopted
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
In June 2011, ASC guidance was issued related to
comprehensive income. Under the updated guidance, an entity will have the
option to present the total of comprehensive income either in a single
continuous statement of comprehensive income or in two separate but
consecutive statements. In addition, the update requires certain
disclosure requirements when reporting other comprehensive income. The
update does not change the items reported in other comprehensive income or
when an item of other comprehensive income must be reclassified to income.
The adoption of this updated guidance did not have a material effect on
the Companys financial statements.
|
|
|
|
|
|
Fair Value Accounting
|
|
|
|
|
|
In May 2011, ASC guidance was issued related to
disclosures around fair value accounting. The updated guidance clarifies
different components of fair value accounting including the application of
the highest and best use and valuation premise concepts, measuring the
fair value of an instrument classified in a reporting entitys
shareholders equity and disclosing quantitative information about the
unobservable inputs used in fair value measurements that are categorized
in Level 3 of the fair value hierarchy. The adoption of this updated
guidance did not have a material effect on the Companys financial
statements.
|
|
|
|
|
(n)
|
Recent accounting pronouncements
|
|
|
|
|
|
The Company has implemented all other new accounting
pronouncements that are in effect and that may impact its financial
statements and does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on
its financial position or results of
operations.
|
3.
|
Short-term Investment
|
|
|
|
On January 9, 2012, the Company entered into a share
purchase agreement the CEO of the Company to purchase 13,248,342 common
shares of Sunlogics PLC for a purchase price of $22,522,181. The purchase
price is payable in the form of a convertible debenture. Refer to Note
9(d) and Note 8(a). The Company has classified the investment as
available-for-sale and recorded the fair value of the shares purchased of
$22,522,181. During the three months ended March 31, 2012, the Company
recorded an unrealized loss of $6,840,119 in other comprehensive loss and
reduced the carrying value of the investment to $15,682,062 as at March
31, 2012.
|
|
|
4.
|
Convertible Note Receivable
|
|
|
|
On March 2, 2012, the Company entered in an agreement
with Daystar Technologies, Inc. (Daystar) whereby the President of the
Company advanced $500,000 to DayStar on behalf of the Company in exchange
for a convertible promissory note due to the Company bearing interest at
6% per annum and a maturity date of 12 months from the closing date. The
first tranche of $400,000 closed on March 14, 2012, and the Company has
the right from the issuance date to convert all or any part of the
outstanding principal plus any amount of accrued but unpaid interest into
common stock of DayStar at $1.68 per share. The second tranche of $100,000
closed on March 16, 2012, and the Company has the right from the issuance
date to convert all or any part of the outstanding principal plus any
amount of accrued but unpaid interest into common stock of DayStar at
$1.61 per share. The $500,000 amount was advanced by the President on
behalf of the Company. Refer to Note 8(b).
|
|
|
|
The Company has classified the investment as
available-for-sale and recorded the fair value of the convertible
promissory note of $500,000 as at March 31, 2012.
|
9
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
5.
|
Loans Receivable
|
|
|
|
On October 28, 2011, the Company entered into agreement
with Radiant Offshore Fund Ltd. (Radiant Offshore) whereby Radiant
Offshore assigned secured obligations of $350,000 (CAN$350,000), a loan
agreement (the Original Loan Agreement) and debentures due from ARISE
Technologies Corporation (ARISE) and the security instruments and
guarantees for the secured obligations for consideration of $350,000
(CAN$350,000). Under the terms of the Original Loan Agreement assigned
from Radiant Offshore, the Company will advance a maximum amount of
$1,500,000 (CAN$1,500,000) to ARISE, and any loans advanced have a
maturity date of April 14, 2012 and bear interest at 12% per annum. During
the year ended December 31, 2011, the Company advanced $785,000
(CAN$785,000) to ARISE.
|
|
|
|
On January 6, 2012, the Company entered into an agreement
with ARISE to provide an additional $500,000 (CAN$500,000) the loan was
funded by Radiant Offshore and Radiant Performance on the Companys
behalf.
|
|
|
|
On January 13, 2012, the Company provided a
debtor-in-possession term loan facility (DIP Loan Facility) to ARISE.
Under the terms of the DIP Loan Facility, the Company will provide a
maximum of an additional $1,305,000 (CAN$1,305,000). The DIP loans are due
earlier of i) three months from the date of the initial advance ii)
effective date of Court-approved proposal under BIA iii) closing date of a
sale of all or substantially all of the assets of the Borrower and bear
and interest rate of 12% per annum. The DIP Loan Facility is secured by
certain assets of ARISE. Radiant Offshore and Radiant Performance advanced
$825,000 (CAN$825,000) to ARISE pursuant to the DIP Loan Facility on
behalf of the Company during the three months ended March 31,
2012.
|
|
|
|
On February 14, 2012, the Company entered into an
assignment of indebtedness agreement with Radiant Offshore and Radiant
Performance. Pursuant to the terms of the agreement, Radiant Offshore and
Radiant Performance assigned its secured obligations of $5,066,746
(CAN$5,066,746), credit agreements and security in ARISE to the Company
for a purchase price of $5,066,746 (CAN$5,066,746). On February 13, 2012,
the Company issued a convertible redeemable note in the amount of
$5,066,746 with a maturity date of February 13, 2015 to Radiant Offshore
in consideration for the assignment of indebtedness agreement. Refer to
Note 9(f).
|
|
|
|
On February 6, 2012, the Company entered into an
assignment of indebtedness agreement with Haverstock Masterfund Ltd.
(Haverstock). Pursuant to the terms of the agreement, Haverstock
assigned its secured obligations of $444,747 (CAN$444,747), a promissory
note of $750,000 (CAN$750,000) (includes the secured obligations) and
security in ARISE to the Company for a purchase price of $444,747
(CAN$444,747) in the form of a convertible debenture. Refer to Note
9(e).
|
|
|
|
On March 2, 2012, Salamon Group, Inc. (Salamon) entered
into an Agreement of Purchase and Sale (the Agreement) with ARISE
Technologies Corporation (ARISE). Pursuant to the Agreement Salamon
acquired the PV Systems Business, the PV Silicon Business and the PV Cell
Business assets from ARISE for a purchase price of $5,436,493. This
purchase price is equal to the assumed indebtedness due to Salamon under
the Haverstock assignment, the Radiant assignment, the Original Loan
Agreement, and $325,000 of amounts owing pursuant to the DIP Loan Facility
at the purchase date. The loans receivable were applied against the
purchase price of the assets.
|
|
|
|
At March 31, 2012, the Company recorded an allowance for
bad debts equal to the remaining $575,000 of advances to ARISE that were
not included in the Agreement.
|
|
|
6.
|
Property and Equipment
|
|
|
|
In 2011, the Company acquired a solar powered charging
station. Depreciation for the three month ended March 31, 2012 was $1,059
(2011 - $nil).
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
2011
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Net Carrying
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Value
|
|
|
Value
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar powered charging station
|
|
127,000
|
|
|
81,185
|
|
|
45,815
|
|
|
46,874
|
|
|
Office furniture
|
|
10,000
|
|
|
-
|
|
|
10,000
|
|
|
-
|
|
|
|
|
137,000
|
|
|
81,185
|
|
|
55,815
|
|
|
46,874
|
|
10
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
7.
|
Patents
|
|
|
|
|
The Company has acquired patents from Arise Technologies
Corporation on March 2, 2012 (refer to Note 13) which were allocated a
fair value of $3,805,545.
|
|
|
|
8.
|
Related Party Transactions and Balances
|
|
|
|
|
(a)
|
On January 9, 2012, the Company entered into a share
purchase agreement the CEO of the Company to purchase 13,248,342 common
shares of Sunlogics PLC for a purchase price of $22,522,181. The purchase
price was by the issuance of a $22,522,181 convertible debenture. Refer to
Notes 3 and 9(d).
|
|
|
|
|
(b)
|
On March 2, 2012, the Company entered in an agreement
with Daystar Technologies, Inc. (Daystar) whereby the President of the
Company advanced $500,000 to DayStar on behalf of the Company in exchange
for a convertible promissory note due to the Company. The advance is
non-interest bearing, secured by the convertible promissory note with
Daystar which is due on demand. Refer to Note 4.
|
|
|
|
|
(c)
|
During the three months ended March 31, 2012, the Company
recognized $1,333 (2011 - $1,333) for donated rent at $444 per month
provided by the President of the Company.
|
|
|
|
|
(d)
|
During the three months ended March 31, 2012, the Company
recognized $75,000 (2011 - $30,000) for management services provided by
the President of the Company. As at March 31, 2012, $453,210 (2011 -
$393,592) is owed to the President of the Company. The amount is
unsecured, non-interest bearing and due on demand.
|
|
|
|
|
(e)
|
On October 31, 2011, the Company issued a $200,000
convertible note to a company that is significantly influenced by the
President of the Company through an equity interest (Refer Note
9(a)).
|
|
|
|
|
(f)
|
On December 15, 2011, the Company issued a $75,000
convertible note to a shareholder of the Company (see Note
9(c)).
|
11
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
9.
|
Convertible Debt
|
|
|
|
|
(a)
|
On October 31, 2011, the Company issued a convertible
note in the sum of $200,000 with a maturity date of April 30, 2012 to a
company that is significantly influenced by the President of the Company
through an equity interest. The note bears interest at 16% per annum and
is to be paid in full on the maturity date, unless previously paid or
converted into the Companys common stock. The Note holder has the right
from November 10, 2011 to convert any unpaid principal portion, into
common shares of the Company at a conversion price of $0.03 per
share.
|
|
|
|
|
|
Pursuant to ASC 470-20, the Company recognized the
intrinsic value of the embedded beneficial conversion feature of $32,667
as additional paid-in capital and an equivalent discount that reduced the
carrying value of the convertible debenture to $167,333. The discount is
being expensed over the term of the loan to increase the carrying value to
the face value of the loan.
|
|
|
|
|
|
During the three months ended March 31, 2012, the Company
recorded accretion of discount of $24,333 increasing the carrying value of
the loan to $206,865.
|
|
|
|
|
(b)
|
On November 10, 2011, the Company issued a convertible
note in the sum of $150,000 with a maturity date of April 30, 2012. The
note bears interest at 6% per annum and is to be paid in full on the
maturity date, unless previously paid or converted into the Companys
common stock. The note holder has the right from November 20, 2011 to
convert any unpaid principal portion, into common shares of the Company at
a conversion price of $0.025 per share.
|
|
|
|
|
|
Pursuant to ASC 470-20, the Company recognized the
intrinsic value of the embedded beneficial conversion feature of $24,000
as additional paid-in capital and an equivalent discount that reduced the
carrying value of the convertible debenture to $126,000. The discount is
being expensed over the term of the loan to increase the carrying value to
the face value of the loan.
|
|
|
|
|
|
During the three months ended March 31, 2012, the Company
recorded accretion of discount of $14,120 increasing the carrying value of
the loan to $149,099.
|
|
|
|
|
(c)
|
On December 15, 2011, the Company issued a convertible
note in the sum of $75,000 with a maturity date of April 30, 2012 to a
shareholder of the Company. The note bears interest at 6% per annum and is
to be paid in full on the maturity date, unless previously paid or
converted into the Companys common stock. The note holder has the right
from December 25, 2011 to convert any unpaid principal portion, into
common shares of the Company at a conversion price of $0.025 per
share.
|
|
|
|
|
|
Pursuant to ASC 470-20, the Company recognized the
intrinsic value of the embedded beneficial conversion feature of $36,000
as additional paid-in capital and an equivalent discount that reduced the
carrying value of the convertible debenture to $39,000. The discount is
being expensed over the term of the loan to increase the carrying value to
the face value of the loan.
|
|
|
|
|
|
During the three months ended March 31, 2012, the Company
recorded accretion of discount of $18,880 increasing the carrying value of
the loan to $68,077.
|
12
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
9.
|
Convertible Debt (continued)
|
|
|
|
|
(d)
|
On January 9, 2012, the Company issued a convertible note
in the sum of $22,522,181 with a maturity date of January 9, 2013 to the
president of the Company in regards to the purchase of the shares of
Sunlogics. Refer to Note 3 and 8(a). The note bears no interest and is to
be paid in full on the maturity date, unless previously paid or converted
into the Companys common stock. The Note holder has the right from the
issue date to convert any unpaid principal portion, at a conversion price
per share equal to 100% of the average of the five lowest closing bid
prices of the Companys common stock for the 20 trading days preceding a
conversion date. The maximum conversion price is set at $0.20 per
share.
|
|
|
|
|
|
The Company analyzed the financial instrument under ASC
815, Derivatives and Hedging, and determined that the embedded
conversion feature did not meet the characteristics of a derivative
instrument. Pursuant to ASC 470-20, the Company determined that there was
no intrinsic value and thus no beneficial conversion feature.
|
|
|
|
|
(e)
|
On February 12, 2012, the Company issued a convertible
redeemable note in the amount of CAN$444,747 with a maturity date of
December 31, 2014 to Haverstock in consideration for the assignment of
indebtedness agreement. Refer to Note 5.
|
|
|
|
|
|
The Note bears interest at 5% per annum and shall
increase to 10% upon default. So long as there is no event of default, the
Company has sufficient number of authorized shares of Common Stock
reserved for issuance upon full conversion and the Companys stock is
trading at or below $0.50 per share, the Company has the option to redeem
this Note and pay the holder 100% of the unpaid principal and accrued
interest at any time. In the event that the trading price of the Companys
common stock is below the $0.50, the Company has the option to prepay a
portion of the outstanding principal equal to 100% of the unpaid principal
divided by thirty-six plus one months interest. The Note is to be paid in
full on the maturity date, unless previously paid or converted into the
Companys common stock. The Note holder has the right to convert any
unpaid principal and accrued interest, at a conversion price per share
equal to 70% of the average of the five lowest closing bid prices of the
Companys common stock for the 20 trading days preceding a conversion
date. The Note is secured by assets purchased from ARISE in the form of a
convertible debenture.
|
|
|
|
|
|
The Company analyzed the financial instrument under ASC
815, Derivatives and Hedging, and determined that the embedded
conversion feature did not meet the characteristics of a derivative
instrument. Pursuant to ASC 470-20, the Company determined that there was
no intrinsic value and thus no beneficial conversion feature.
|
|
|
|
|
(f)
|
On February 13, 2012, the Company issued a convertible
redeemable note in the amount of $5,066,746 with a maturity date of
February 13, 2015 to Radiant Offshore in consideration for the assignment
of indebtedness agreement. Refer to Note 5.
|
|
|
|
|
|
The Note bears interest at 5% per annum and shall
increase to 10% upon default. So long as there is no event of default, the
Company has sufficient number of authorized shares of Common Stock
reserved for issuance upon full conversion and the Companys stock is
trading at or below $0.50 per share, the Company has the option to redeem
this Note and pay the holder 100% of the unpaid principal and accrued
interest at any time. In the event that the trading price of the Companys
common stock is below the $0.50, the Company has the option to prepay a
portion of the outstanding principal equal to 100% of the unpaid principal
divided by thirty-six plus one months interest. The Note is to be paid in
full on the maturity date, unless previously paid or converted into the
Companys common stock. The Note holder has the right to convert any
unpaid principal and accrued interest, at a conversion price per share
equal to 70% of the average of the five lowest closing bid prices of the
Companys common stock for the 20 trading days preceding a conversion
date. The Note is secured by assets purchased from ARISE.
|
|
|
|
|
|
The Company analyzed the financial instrument under ASC
815, Derivatives and Hedging, and determined that the embedded
conversion feature did not meet the characteristics of a derivative
instrument. Pursuant to ASC 470-20, the Company determined that there was
no intrinsic value and thus no beneficial conversion
feature.
|
13
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
10.
|
Loans Payable
|
|
|
|
|
During the year ended December 31, 2011, Radiant Offshore
Fund Ltd. (Radiant Offshore) and Radiant Performance Fund LP. (Radiant
Performance) funded $360,000 (CAN$360,000) of the loans advanced to
ARISE. During the three months ended March 31, 2012, Radiant Offshore and
Radiant Performance funded an additional $1,325,000 (CAN$1,325,000) of the
loans advanced to ARISE. Refer to Note 5.
|
|
|
|
|
The portion funded by Radiant Offshore and Radiant
Performance have been recorded as loans payable. The loans payable to
Radiant Offshore and Radiant Performance are non-interest bearing and due
on demand. Any funds received by the Company from ARISE must first be used
to repay Radiant Offshore and Radiant Performance. No repayments were
received from ARISE and made to Radiant Offshore or Radiant Performance
for the year ended December 31, 2011 or the three months ended March 31,
2012.
|
|
|
|
|
On February 13, 2012, the Company issued a convertible
redeemable note (included in the $5,066,746 convertible redeemable note)
in the amount of to secure $1,610,000 (CAN$1,610,000) of the loans payable
to ARISE. Refer to Note 5. At March 31, 2012, $75,068 (CAN$75,000) of
loans payable remain outstanding to Radiant Offshore and Radiant
Performance.
|
|
|
|
11.
|
Share Purchase Warrants
|
|
|
|
|
On May 12, 2011, the Company issued 20,000,000 share
purchase warrants upon the purchase of Sunlogics Power. The share purchase
warrants are exercisable at a price of $0.001 per share and expire on May
12, 2016.
|
|
|
|
12.
|
Commitments and Contingencies
|
|
|
|
|
(a)
|
Indemnities
|
|
|
|
|
|
During the normal course of business, the Company has
made certain indemnities and guarantees under which it may be required to
make payments in relation to certain transactions. The Company indemnifies
its directors, officers, employees and agents to the maximum extent
permitted under the laws of the State of Nevada. These indemnities include
certain agreements with the Companys officers under which the Company may
be required to indemnify such person for liabilities arising out of their
employment relationship. The duration of these indemnities and guarantees
varies and, in certain cases, is indefinite. The majority of these
indemnities and guarantees do not provide for any limitation of the
maximum potential future payments the Company could be obligated to
make.
|
|
|
|
|
|
Historically, the Company has not been obligated to make
significant payments for these obligations and no liabilities have been
recorded for these indemnities and guarantees in the accompanying balance
sheets.
|
|
|
|
|
(b)
|
On March 16, 2012, subsequently amended on March 19,
2012, the Company entered into an agreement to purchase 100% of the
outstanding shares of Eco Energy Solutions (Australia) PTY Ltd., a private
company located in Australia involved in the design, supply and
installation of renewable energy projects, for a purchase price consisting
of 8,000,000 warrants exercisable for $0.001 per share until March 14,
2013. As May 22, 2012, the transaction had not yet closed.
|
|
|
|
|
(c)
|
On March 30, 2012, the Company entered into a memorandum
of agreement and binding letter of intent to acquire a 100% interest in
Solar Samoa Ltd., a private solar energy company, for a purchase price of
$3,100,000. As at May 22, 2012, a definitive agreement has not been
entered into.
|
|
|
|
|
(d)
|
On December 30, 2011, the Company entered into an
agreement to purchase solar modules in the amount of $20,291,000. The
purchase agreement was cancelled as at March 31,
2012.
|
14
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
13.
|
Acquisition of ARISE Technologies Corporation
On March 2, 2012, the Company entered into a agreement
(the Purchase Agreement) to purchase certain assets of the PV Silicon
Business, the PV Cell Business, and the PV Systems Business (the Assets)
from ARISE for a purchase price of $5,436,493 which is equal to the
assumed indebtedness due to Salamon under the Haverstock assignment, the
Radiant assignment, the Original Loan Agreement, and $325,000 of amounts
owing pursuant to the DIP Loan Facility at the purchase date.
The acquisition of the Assets has been accounted for as
an asset acquisition.
The Companys allocation of the purchase cost to the
assets acquired and liabilities assumed is based upon their estimated fair
values at the time of acquisition. The Company is currently in the process
of completing the determination of the fair values for the assets and
liabilities acquired. As a result, the purchase price allocation is
subject to change in 2012 as the valuation process is completed. The
following is a summary of the purchase price allocation at the date of
acquisition based upon the estimated fair value of the assets acquired and
liabilities assumed:
|
|
Consideration Given:
|
|
|
|
|
|
|
|
|
|
Settlement of $5,436,493 of assumed debt
|
$
|
5,436,493
|
|
|
Net assets acquired at fair value
|
|
|
|
|
Accounts receivable
|
$
|
1,073,913
|
|
|
Patents
|
|
3,805,545
|
|
|
Office furniture
|
|
10,000
|
|
|
Costs of uncompleted contracts in excess of
related billings
|
|
547,035
|
|
|
Net assets at estimated fair value
|
$
|
5,436,493
|
|
14.
|
Subsequent Events
|
|
|
|
|
(a)
|
Subsequent to March 31, 2012, the Company received
proceeds of $300,000 for 1,500,000 common shares subscribed. As at May 22,
2012, the common shares have yet to be issued.
|
|
|
|
|
(b)
|
On April 13, 2012, the Company entered into an agreement
to acquire solar assets from Earth Right Energy LLC for considerations of
$1,350,000 payable in equal value of shares in the Company. As at May 22,
2012, the common shares have yet to be issued.
|
|
|
|
|
(c)
|
On April 16, 2012, the Company entered into an agreement
to install solar electric system with Earth Right Energy LLC for cash
payments of $540,000.
|
15
Item 2.
Managements Discussion and Analysis or
Plan of Operation.
On May 12, 2011, we completed the acquisition of Sunlogics
Power Fund Management Inc. Sunlogics Power Fund is focused on the acquisition of
solar powered electricity generating facilities which have long term power
purchasing agreements in place with local power utilities and commercial users.
On March 2, 2012, we completed the acquisition of the Systems Business and
certain Silicon technology from arise Technologies Corporation. On March 16,
2012 we entered into an agreement to purchase 100% of the issued shares of Eco
energy Solutions Australia and on March 30, 2012 executed an MOU and Binding
Letter of Intent to acquire Solar Samoa Limited.
For the period from inception (April 27, 2001) through March
31, 2012, our deficit accumulated has amounted to $3,716,512.
As reported in the Report of Independent Registered Public
Accounting Firm on our December 31, 2011 financial statements, we have suffered
recurring losses from operations, we have a working capital deficit and a
deficit accumulated during the development stage. These items raise substantial
doubt about our ability to continue as a going concern.
The Company plans to generate revenues through: i) the sale of
solar powered electricity to local power utilities and end users through long
term power purchase agreements; and ii) by acquiring solar power generating
plants which the Company is currently identifying with potential sellers in the
United States, Canada and other parts of the world. If the Company is successful
in acquiring revenue producing renewable energy projects, we intend to finance
our operations through a combination of debt and/or equity financing.
If we are unable to generate sufficient revenue from operations
to implement our plans, we intend to explore all available alternatives for debt
and/or equity financing, including but not limited to private and public
securities offerings. Accordingly, we expect that it will be necessary for us to
raise additional funds in the event that we are unable to generate any revenue
from operations and if only a minimal level of revenue is generated in
accordance with our expectations.
Results of Operations
The operating results and cash
flows are presented for the three months periods ended March 31, 2012 and 2011.
Summary of Period End Results
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2012
|
|
|
2011
|
|
Revenue
|
$
|
1,042
|
|
$
|
-
|
|
Expenses
|
|
(1,051,748
|
)
|
|
(65,972
|
)
|
Net Income (Loss)
|
$
|
(1,050,706
|
)
|
$
|
(65,972
|
)
|
Revenues
For the three months period ended March 31, 2012, we had total
revenue of $1,042, compared to Nil for the three month period ended March 31,
2011, an increase of $1,042 from revenues for usage of the Companys solar
powered charging station.
As of March 31, 2012 deferred revenue totalled $45,832.
16
Expenses
The major components of our expenses for the three month period
are outlined below:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2012
|
|
|
2011
|
|
Bad Debt
|
$
|
575,068
|
|
$
|
-
|
|
Depreciation
|
|
1,059
|
|
|
-
|
|
Donated Rent
|
|
1,333
|
|
|
1,333
|
|
General and Administrative
|
|
378,019
|
|
|
64,639
|
|
Interest Expense
|
|
96,269
|
|
|
-
|
|
Total Expenses
|
$
|
1,051,748
|
|
$
|
65,972
|
|
For the three month period ended March 31, 2012, we had total
operating expenses of $1,051,748, compared to $65,972 for the three month period
ended March 31, 2011, an increase of $985,776.
For the three month period ended March 31, 2012, we had total
general and administrative expenses of $378,019, compared to $64,639 for the
three month period ended March 31, 2011, an increase of $313,380.
For the three month period ended March 31, 2012, we had
management fees of $75,000, compared to $30,000 for the three month period ended
March 31, 2011.
For the three month period ended March 31, 2012, we had bad
debt of $575,068 compared to Nil for the three month period ended March 31,
2011, an increase of $575,068.
For the three month period ended March 31, 2012, we had
interest expense of $96,269 compared to Nil for the three month period ended
March 31, 2011, an increase of $96,269.
The net loss for the three month period ended March 31, 2012
was $1,050,706 compared to $65,972 for the three month period ended March 31,
2011, an increase of $984,734.
Liquidity and Capital Resources
Working Capital
|
|
At Mar 31,
|
|
|
At December
|
|
|
|
2012
|
|
|
31,
2011
|
|
Current Assets
|
$
|
17,810,035
|
|
$
|
783,489
|
|
Current Liabilities
|
|
(30,035,904
|
)
|
|
(1,404,338
|
)
|
Working Capital
|
$
|
(12,225,869
|
)
|
$
|
(620,849
|
)
|
Cash Flows
|
|
3 Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2012
|
|
|
2011
|
|
Net Cash Provided By (Used In) Operating
Activities
|
$
|
(73,673
|
)
|
$
|
(50,235
|
)
|
Net Cash from Investing Activities
|
|
-
|
|
|
-
|
|
Net Cash (Used In) Provided By Financing
Activities
|
|
100,000
|
|
|
50,235
|
|
Net Change in Cash During Period
|
$
|
26,327
|
|
$
|
-
|
|
17
Financing Requirements
From inception to March 31, 2012, we have suffered cumulative
losses in the amount of $3,716,512. Since our inception, we have funded
operations through common stock issuances, related party loans, and the support
of creditors in order to meet our strategic objectives. Our management believes
that sufficient funding will be available to meet our business objectives,
including anticipated cash needs for working capital, and are currently
evaluating several financing options, including a public offering of securities.
However, there can be no assurance that we will be able to obtain sufficient
funds to continue our operations. As a result of the foregoing, our independent
auditors believe there exists substantial doubt about our ability to continue as
a going concern. There is no assurance that we will be able to obtain additional
financing if and when required. We anticipate that additional financing may come
in the form of sales of additional shares of our common stock which may result
in dilution to our current shareholders.
Financial Condition, Capital Resources and Liquidity
As of March 31, 2012, we have a deficit accumulated during the
development stage of $3,716,512. At March 31, 2012, we had assets totalling
$21,671,395 and liabilities of $30,079,236 attributable to amounts due to
related parties, convertible notes, accounts payable and deferred revenue.
We currently have a working capital deficit and there can be no
assurance that our financial condition will improve.
Even though we believe, without assurance, that we will obtain
sufficient capital with which to implement our business plan on a limited scale,
we are not expected to continue in operation without an infusion of capital. In
order to obtain additional equity financing, we may be required to dilute the
interest of existing shareholders.
Our ability to continue as a going concern is dependent upon
our ability to acquire revenue producing assets.
Net Operating Losses
As of March 31, 2012, we have accumulated a net loss of
$3,716,512.
Research and Development
Not Applicable.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
Material Commitments for Capital Expenditures
On March 16, 2012, subsequently amended on March 19, 2012, the
Company entered into an agreement to purchase 100% of the outstanding shares of
Eco Energy Solutions (Australia) PTY Ltd., a private company located in
Australia involved in the design, supply and installation of renewable energy
projects, for a purchase price consisting of 8,000,000 warrants exercisable for
$0.001 per share until March 14, 2013.
On March 30, 2012, the Company entered into a memorandum of
agreement and binding letter of intent to acquire 100% interest in Solar Samoa
Ltd, a private solar energy company, for a purchase price of $3,100,000.
On December 30, 2011 the Company entered into an agreement to
purchase solar modules in the amount of $20,291,000. The purchase agreement was
cancelled as at March 31, 2012.
Critical Accounting Policies
There were no changes to the critical accounting policies as
discussed in our 2011 Form 10-K.
Item 4(T).
Controls and Procedures.
Managements Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Exchange Rule 13a-15(f). Our internal control over financial reporting is a
process designed to provide reasonable assurance to our management and board of
directors regarding the reliability of financial reporting and the preparation
of the financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America.
19
Our internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America, and our receipts and expenditures of are being made only in accordance
with authorizations of our management and directors; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal controls over
financial reporting may not prevent or detect misstatements. All internal
control systems, no matter how well designed, have inherent limitations,
including the possibility of human error and the circumvention of overriding
controls. Accordingly, even effective internal control over financial reporting
can provide only reasonable assurance with respect to financial statement
preparation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting during the first quarter of our fiscal year ended December 31, 2012,
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management does not expect that our Disclosure Controls and
internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management or board override
of the control.
20
The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
PART II - Other Information
Item 1.
Legal Proceedings
We know of no legal proceedings to which we are a party or to
which any of our property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against us.
Item 2.
Unregistered Sales of Equity securities
and Use of Proceeds
None
Item 3.
Defaults Upon Senior
securities
None
Item 4.
Submission of Matters to a Vote of
Security Holders.
None
Item 5.
Other Information
None
21
Item 6.
Exhibits.
(1)
|
Incorporated by reference to the exhibits of the
Registration Statement on Form 10-KSB filed with the Securities and
Exchange Commission on August 6, 2004.
|
(2)
|
Filed herewith.
|
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
SALAMON GROUP INC.
|
Dated: May 23, 2012
|
By:
/s/ Michael Matvieshen
|
22