3POWER ENERGY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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|
June 30,
|
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March 31,
|
|
|
|
2013
|
|
|
2013
|
|
|
|
(unaudited)
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|
|
|
|
ASSETS
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|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,725
|
|
|
$
|
1,725
|
|
Prepaid and other current assets
|
|
|
15,420
|
|
|
|
15,420
|
|
Total current assets
|
|
|
17,145
|
|
|
|
17,145
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
17,145
|
|
|
$
|
17,145
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|
|
|
|
|
|
|
|
|
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LIABILITIES AND DEFICIT
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Current liabilities:
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|
|
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|
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Accounts payable and accrued expenses
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$
|
6,163,199
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|
|
$
|
6,083,176
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|
Accrued interest
|
|
|
421,376
|
|
|
|
386,051
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|
Note payable
|
|
|
639,059
|
|
|
|
639,059
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|
Due to related parties
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|
|
1,488,855
|
|
|
|
1,430,366
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|
Total current liabilities
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|
|
8,712,489
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|
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|
8,538,652
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|
|
|
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Commitments and contingencies
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-
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-
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Deficit
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Common stock,$0.0001 par value, 300,000,000 shares authorized, 113,146,380 shares issued and outstanding as of June 30, 2013 and March 31, 2013
|
|
|
11,314
|
|
|
|
11,314
|
|
Additional paid in capital
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|
|
7,306,067
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|
|
|
7,306,067
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|
Other comprehensive (loss) income
|
|
|
(192
|
)
|
|
|
2,707
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|
Accumulated deficit
|
|
|
(15,810,148
|
)
|
|
|
(15,639,210
|
)
|
Total deficit attributable to 3Power Energy Group, Inc.
|
|
|
(8,492,959
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)
|
|
|
(8,319,122
|
)
|
Non-controlling interest
|
|
|
(202,385
|
)
|
|
|
(202,385
|
)
|
Total deficit
|
|
|
(8,695,344
|
)
|
|
|
(8,521,507
|
)
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|
|
|
|
|
|
|
|
|
Total liabilities and deficit
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|
$
|
17,145
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|
|
$
|
17,145
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|
See the accompanying notes to these unaudited condensed consolidated financial statements
3POWER ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Three months ended June 30,
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2013
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|
2012
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Operating expenses:
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Selling, general and administrative
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$
|
135,614
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|
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$
|
469,189
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|
Total operating expenses
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|
135,614
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|
|
|
469,189
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|
|
|
|
|
|
|
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Loss from operations
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|
|
(135,614
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)
|
|
|
(469,189
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)
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|
|
|
|
|
|
|
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Other income (expense):
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|
|
|
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|
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Interest expense
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|
(35,325
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)
|
|
|
(24,130
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)
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Gain on settlement of accrual
|
|
|
-
|
|
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|
40,000
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|
|
|
|
|
|
|
|
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Net loss before income taxes
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|
(170,938
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)
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(453,319
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)
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|
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Provision for income taxes
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|
-
|
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|
|
-
|
|
|
|
|
|
|
|
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Net loss
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|
|
(170,938
|
)
|
|
|
(453,319
|
)
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|
|
|
|
|
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|
Non-controlling interest
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|
|
-
|
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-
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NET LOSS ATTRIBUTABLE TO 3POWER ENERGY GROUP, INC.
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|
$
|
(170,938
|
)
|
|
$
|
(453,319
|
)
|
|
|
|
|
|
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|
|
Loss per common share (basic and diluted):
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$
|
(0.00
|
)
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|
$
|
(0.00
|
)
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|
|
|
|
|
|
|
|
|
|
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Weighted average number of shares outstanding (basic and diluted)
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|
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113,146,380
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|
|
|
113,060,036
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|
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|
|
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Comprehensive loss:
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|
|
|
|
|
|
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Net loss
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|
$
|
(170,938
|
)
|
|
$
|
(453,319
|
)
|
Foreign currency translation (loss) gain
|
|
|
(2,899
|
)
|
|
|
39,048
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
(173,838
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)
|
|
|
(414,271
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)
|
Comprehensive loss attributable to non-controlling interest
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|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
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Comprehensive loss attributable to 3Power Energy Group, Inc.
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|
$
|
(173,838
|
)
|
|
$
|
(414,271
|
)
|
See the accompanying notes to these unaudited condensed consolidated financial statements
3POWER ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Three months ended June 30,
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2013
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|
2012
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|
CASH FLOWS FROM OPERATING ACTIVITIES:
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|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(170,938
|
)
|
|
$
|
(453,319
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
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|
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Common stock issued for services rendered
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|
-
|
|
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|
20,000
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|
Gain on settlement accrual
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|
|
-
|
|
|
|
(40,000
|
)
|
Changes in operating assets and liabilities:
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|
|
|
|
|
|
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|
Prepaid and other current assets
|
|
|
-
|
|
|
|
(2,069
|
)
|
Accounts payable and accrued expenses
|
|
|
77,124
|
|
|
|
181,249
|
|
Accrued interest
|
|
|
35,325
|
|
|
|
23,964
|
|
Net cash (used in) provided by operating activities:
|
|
|
(58,489
|
)
|
|
|
(270,175
|
)
|
|
|
|
|
|
|
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|
CASH FLOWS FROM INVESTING ACTIVITIES:
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|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
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CASH FLOWS FROM FINANCING ACTIVITIES:
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|
|
|
|
|
|
|
|
Net proceeds from related party advances
|
|
|
58,489
|
|
|
|
231,051
|
|
Net cash provided by financing activities
|
|
|
58,489
|
|
|
|
231,051
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency rate change on cash
|
|
|
-
|
|
|
|
39,048
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
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|
|
-
|
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
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|
Cash and cash equivalents-beginning of period
|
|
|
1,725
|
|
|
|
6,368
|
|
Cash and cash equivalents-end of period
|
|
$
|
1,725
|
|
|
$
|
6,292
|
|
|
|
|
|
|
|
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|
Supplemental disclosures of cash flow information:
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|
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|
|
|
|
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|
Cash paid during the period for:
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|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
$
|
-
|
|
|
$
|
-
|
|
See the accompanying notes to these unaudited condensed consolidated financial statements
NOTE 1 – ORGANIZATION AND BUSINESS
3Power Energy Group, Inc. (the “Company”)
was incorporated in the State of Nevada on December 18, 2002. On March 30, 2011, the Company changed its name from Prime
Sun Power Inc. to 3Power Energy Group, Inc. and increased its authorized share capital to 300,000,000 shares. The Company
plans to pursue a business model producing renewable generated electrical power and other alternative energies.
The Company's primary efforts is to sell
electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate power
plants based on these technologies. The core approach of the Company's business is to deliver energy in markets where there is
an inherent energy gap between supply and demand or where there exists long term, stable, government back by financial support
for development of renewable energy.
On May 13, 2011, pursuant to a Stock Purchase
Agreement (the “Stock Purchase Agreement”), the Company consummated a reverse merger (“Merger”) with Seawind
Energy Limited (“Seawind Energy”), Seawind Services Limited (“Seawind Services”, and together with Seawind
Energy, the “Seawind”) and the shareholders of Seawind Energy (the “Seawind Group Shareholders” and together
with the Company, and the Seawind Companies, the “Parties”). The Seawind Companies were formed under the laws of the
United Kingdom.
In connection with the Merger, the Company
issued 40,000,000 restricted shares of the Company’s common stock (such acquisition is referred to herein as the “Seawind
Acquisition”). The Seawind was the surviving entity.
Upon completion of the Stock Purchase Agreement,
Seawind became 3Power Group, Inc.'s wholly-owned subsidiary. For accounting purposes, the acquisition has been treated as a recapitalization
of Seawind with Seawind as the acquirer (reverse acquisition). The historical financial statements prior to May 13, 2011 are those
of Seawind Energy. The Merger was accounted for as a “reverse merger”, since the stockholders of Seawind owned a majority
of the Company’s common stock immediately following the transaction and their management has assumed operational, management
and governance control.
The transaction was accounted for as a
recapitalization of Seawind pursuant to which Seawind was treated as the surviving and continuing entity. The Company
did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s
historical financial statements are those of Seawind immediately following the consummation of the reverse merger. The accompanying
consolidated financial statements give retroactive effect to the recapitalization.
In anticipation of the closing of the Stock
Purchase Agreement, the Company changed its name to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000
shares.
On July 4, 2011, the Seawind Energy Limited
and Seawind Service Limited changed their name to 3Power Energy Limited and 3Power Project Service Limited, respectively.
Acquisition of Shala Energy sh p k:
On June 5, 2012, the Company and Shala
Energy sh.p.k ("Shala") executed a master acquisition agreement (the “Acquisition Agreement”) where Shala
agreed to transfer and the Company agreed to acquire 75% of the equity of Shala. Under the Acquisition Agreement (the “Acquisition”),
the closing of the acquisition is subject to the Company’s completion and satisfaction of the due diligence on Shala and
Shala’s partners with respect to their shares in Shala and upon the Company’s payment of the first year premium for
the insurance bond premium issued in favor of the Ministry of Economy, Trade and Energy of Republic of Albania in replacement of
then existing bank guarantee issued in favor of Ministry of Economy, Trade and Energy of Republic of Albania for the Shala River
Concession Agreement, in amount of 7,230,315 Euro (the “Required Insurance Bond Premium”).
On
August 10, 2012, after the conclusion of the due diligence efforts, the Company made the first year payment of required Insurance
Bond Premium in amount of 164,851 Euro ($211,972), and as such the Acquisition closed. Such acquisition brought the Company 75%
of the interest in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania. The Shala
River Project finalization is in process with the Ministry of Albania.
Shala Energy being an inactive Company
and having no material assets and liabilities as of June 30, 2013.
In connection the acquisition of Shala,
the Company is obligated for an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's
common stock. During the year ended March 31, 2013, the Company accrued $600,000 due to the facilitator for feasibility studies
in process and recorded as expenses. As of June 30, 2013 and March 31, 2013, the Company had $600,000 accrued fees for feasibility
studies.
Liquidation/winding up of international
subsidiaries:
On October 8, 2012, the High Court of Justice
in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of 3Power Project Services Limited,
a wholly owned subsidiary of the Company’s Subsidiary, 3Power Energy Limited.
By the letter of The Insolvency Service
dated October 12, 2012, the Company was required to provide information relating to 3Power Project Services Limited to the Official
Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official
Receiver’s Office to review the prospect of recovering the assets of 3Power Project Services Limited for the benefit of creditors.
The company was also required to deliver
to the Official Receiver’s Office certain assets (cash or cheques) and accounting records that are still in its possession
or control. The Company has attended the interview and delivered all the available accounting records to the Officer Receiver’s
Office. No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing.
The major classes of liabilities of the
subsidiary as of June 30, 2013 are as follows:
Current liabilities
|
|
$
|
1,676,564
|
|
On January 17, 2013, the Company filed
a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy Limited, a wholly owned
subsidiary of the Company. Such strike-off application has yet to be approved as of date this report. The Company had liabilities
as of June 30, 2013 as below:
Current liabilities
|
|
$
|
177,059
|
|
During the year ended March 31, 2013, the
Company charged to operation £11,085 ($16,831) as loss on write-off of assets of its international subsidiaries.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The following (a) condensed consolidated
balance sheet as of March 31, 2013, which has been derived from audited consolidated financial statements, and (b) the unaudited
condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q
and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete
financial statements.
In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for
the three months ended June 30, 2013 are not necessarily indicative of results that may be expected for the year ending March 31,
2014. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended March 31, 2013 included in the Company’s Annual Report on Form 10-K, filed
with the Securities and Exchange Commission (“SEC”) on July 22, 2013.
Basis of presentation:
The unaudited condensed consolidated financial
statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation
Revenue Recognition
The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria
(3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and
the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards
Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements
that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing
605-25 on the Company's financial position and results of operations was not significant.
Use of estimates
The preparation of financial statements
in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
For purposes of the Statements of Cash
Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash
equivalents.
Comprehensive Income (Loss)
The Company applies Statement of Accounting
Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the
reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of
a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes
in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other
comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for
sale securities.
Functional currency
The accompanying unaudited condensed consolidated
financial statements are presented in U.S. dollars ("USD"). The Company's functional currency is British pounds ("GBP").
The consolidated financial statements are translated into USD in accordance with Codification ASC 830,
Foreign Currency Matters
.
All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, shareholders' equity
is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting
periods. The resulting translation adjustments are reported as other comprehensive income and accumulated other comprehensive income
in the shareholders' equity in accordance with Codification ASC 220,
Comprehensive Income
.
Translation gains and losses that arise
from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into
GBP at the rate on the date of the transaction and included in the results of operations as incurred. There were no material transaction
gains or losses in the periods presented.
The exchange rates used to translate amounts
in GBP into USD for the purposes of preparing the consolidated financial statements were as follows:
|
|
June 30,
2013
|
|
|
March 31,
2013
|
|
Period-end GBP: USD exchange rate
|
|
$
|
1.5208
|
|
|
$
|
1.5184
|
|
Average Yearly GBP: USD exchange rate
|
|
$
|
1.5356
|
|
|
$
|
1.5805
|
|
Per share data:
The Company accounts for net loss per share
in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires
presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities
with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS.
Basic and diluted net loss per common share
is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect
to the exchange ratio in the Share Exchange in May 2011 (see Note 1), which was accounted for as recapitalization of the Company.
The Company had no common stock equivalents as of June 30, 2013 and 2012.
Income taxes
Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from
an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of June 30, 2013 and March 31, 2013, the Company has not recorded any unrecognized tax benefits.
Segment Information
Accounting Standards Codification subtopic
Segment Reporting 280-10 (“ASC 280-10”) establishes standards for reporting information regarding operating segments
in annual financial statements and requires selected information for those segments to be presented in interim financial reports
issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources
and assess performance. The information disclosed herein materially represents all of the financial information related to the
Company’s principal operating segment.
Accounting for Stock-Based Compensation
The Company accounts for stock, stock options
and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 480-10, Distinguishing Liabilities
from Equity (“ASC 480-10”) which addresses the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. Therefore, results include non-cash compensation expense as a result of the issuance of stock,
stock options and warrants and we expect to record additional non-cash compensation expense in the future.
The Company follows Accounting Standards
Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees
and non-employees be recognized in the income statement based on their fair values.
Recent Accounting Pronouncements
There were various updates recently issued
by the Financial Accounting Standards Board, most of which represented technical corrections to the accounting literature or application
to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results
of operations or cash flows.
NOTE 3 - GOING CONCERN MATTERS
The accompanying unaudited condensed consolidated
financial statements have been prepared on a basis that assumes the Company will continue as a going concern. As of
June 30, 2013, the Company has a deficit of $15,810,148 applicable to controlling interest compared with deficit of $15,639,210
applicable to controlling interest as of March 31, 2013, and has incurred significant operating losses and negative cash
flows. For the three months ended June 30, 2013, the Company sustained a net loss of $170,938 compared to a net loss of $453,319
for the three months ended June 30, 2012. The Company will need additional financing which may take the form of equity or debt
and the Company has converted certain liabilities into equity.
The Company has undertaken further steps
as part of a plan to improve operations with the goal of sustaining its operations for the next twelve months and beyond to address
its lack of liquidity by raising additional funds, either in the form of debt or equity or some combination thereof. However,
there can be no assurance that the Company can successfully accomplish these steps and or business plans, and it is uncertain that
the Company will achieve a profitable level of operations and be able to obtain additional financing.
In the event the Company is not able to
increase its working capital, the Company will not be able to implement or may be required to delay all or part of its business
plan, and their ability to attain profitable operations, generate positive cash flows from operating and investing activities and
materially expand the business will be materially adversely affected. The accompanying unaudited condensed consolidated financial
statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification
of liabilities that might be necessary should the company be unable to continue in existence.
NOTE 4 - NOTE PAYABLE
On March 2, 2010, the Company issued an
unsecured Senior Promissory Note ("Note") for 470,000 Euros ($639,059 at June 30, 2013) initially due on December 31,
2010 including interest at 7.5% per annum. Upon default by the Company on January 1, 2011, the interest rate of 15% per annum applies.
On November 14, 2012, the note holder filed a complaint in the District Court of Southern District of New York demanding payment.
(See Note 8 below)
The Note has not been paid by the Company.
NOTE 5 - COMMON STOCK
The Company is authorized to issue 300,000,000
shares of $0.0001 par value common stock. As of June 30, 2013 and March 31, 2013, 113,146,380 shares were issued and outstanding.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company’s current and former
officers and stockholders have advanced funds on a non-interest bearing basis to the Company for travel related and working capital
purposes. The Company has not entered into any agreement on the repayment terms for these advances. As of June 30, 2013 and March
31, 2013, there were $1,488,855 and $1,430,366 advances outstanding, respectively.
As of June 30, 2013 and March 31, 2013
the Company owed approximately £117,918 ($179,330) and £117,918 ($179,047), respectively, to Seawind Marine Limited,
a company controlled by the directors, Mr. T P G Adams and Mr. J R Wilson.
As of June 30, 2013 and March 31, 2013
the Company owed approximately £177,548 ($270,015) and £177,548 ($269,589), respectively to Seawind International Limited,
a company controlled by the directors, Mr. T P G Adams and Mr. J R Wilson.
As of June 30, 2013 and March 31, 2013,
the Company owed approximately £88,753 ($134,976) and £88,753 ($134,762), respectively to Power Products Ltd (f/k/a
Enerserve Limited), a company under the control of Mr. T P G Adams and Mr. J R Wilson.
At June 30, 2013 and March 31, 2013, the
company owed Mr. J R Wilson (ex-Director) £1,144 ($1,740) and £1,144 ($1,737), respectively.
During the three months ended June 30,
2013 and 2012, the Company charged to operation $90,000 and $135,000 as salary to Board members, respectively.
NOTE 7 - NON CONTROLLING INTEREST
The Company has a 50% interest in American
Seawind Energy LLC, a company registered in the State of Texas, United States of America and as of June 30, 2013, 75% interest
in Shala Energy sh pk, a Company registered in the Republic of Albania. Both companies are inactive as of June 30, 2013
A reconciliation of the non-controlling
loss attributable to the Company:
Net loss Attributable to the Company and
transfers (to) from non-controlling interest for the three months ended June 30, 2013:
|
|
American
Seawind
Energy LLC
|
|
|
Shala
Energy
sh pk
|
|
Net loss
|
|
$
|
-
|
|
|
$
|
-
|
|
Average Non-controlling interest percentage
|
|
|
50.0
|
%
|
|
|
25.0
|
%
|
Net loss attributable to the non-controlling interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Net loss Attributable to the Company and
transfers (to) from non-controlling interest for the three months ended June 30, 2012:
|
|
American
Seawind
Energy LLC
|
|
|
Shala
Energy
sh pk
|
|
Net loss
|
|
$
|
-
|
|
|
$
|
-
|
|
Average Non-controlling interest percentage
|
|
|
50.0
|
%
|
|
|
25.0
|
%
|
Net loss attributable to the non-controlling interest
|
|
$
|
-
|
|
|
$
|
-
|
|
The following table summarizes the changes
in Non-controlling Interest from April 1, 2012 through June 30, 2013:
|
|
American
Seawind
Energy LLC
|
|
|
Shala
Energy sh pk
|
|
|
Total
|
|
Balance, April 1, 2012
|
|
$
|
608
|
|
|
$
|
-
|
|
|
$
|
608
|
|
Net loss attributable to the non-controlling interest
|
|
|
-
|
|
|
|
(202,993
|
)
|
|
|
(202,993
|
)
|
Balance, March 31, 2013
|
|
|
608
|
|
|
|
(202,993
|
)
|
|
|
(202,385
|
)
|
Net loss attributable to the non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance, June 30, 2013
|
|
$
|
608
|
|
|
$
|
(202,993
|
)
|
|
$
|
(202,385
|
)
|
NOTE 8- COMMITMENTS AND CONTINGENCIES
Litigations
On November 14, 2012, CRG Finance AG (“CRG”)
filed a complaint in the District Court for Southern District of New York for allegedly beaching a promissory note (See Note 4
above). However, the Company’s contention is that the promissory note was satisfied by a third party, Rudana Investment Group
AG.
On January 17, 2013, the Company filed
a motion to compel arbitration and on May 23, 2013, the Court granted the Company’s Motion to Compel and ordered that CRG
file its claims as a AAA arbitration. On June 5, 2013, CRG filed its statement of claim with the AAA in the International Center
for Disputed Resolution division. The Company’s answer is due on or before July 8, 2013. The Company denies the allegations
in the Complaint and claims it is without merit. As of the date of filing of this report, there has been no change in status of
this litigation,
The Company is subject to certain legal
proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements
may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial
position, results of operations or liquidity.
NOTE 9 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events
through, August 14, 2013, the date the financial statements are available to be issued. As of August 14, 2013 there are no subsequent
events.
Item 2.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion provides information
which management believes is relevant to an assessment and understanding of our results of operations and financial condition.
The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Quarterly Report
on Form 10-Q. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties.
Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
Overview
We were formed on December 18, 2002 as
a Nevada “C” Corporation as ATM Financial Corp. On November 10, 2006, our President and Chief Executive
officer resigned to pursue other interests. We suspended all prior business plans as of that date. During the first quarter of
the year ended December 31, 2008, we began considering a new business model involving solar power and other renewable energies. On
April 1, 2008, we changed our name from “ATM Financial Corp.” to “Prime Sun Power Inc.” On April
15, 2008, we changed our stock symbol from “AFIC” to “PSPW.” On March 30, 2011, we changed our name to
3Power Energy Group, Inc.
The Business
The principle business of Company is to
sell electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate
power plants based on these technologies. The core approach of the Company’s business is to deliver energy in markets where
there is an inherent energy gap between supply and demand or where there exists long term, stable, government-backed financial
support for the development of renewable energy. The strategic plan of the Company is to develop power plants and sell electricity
in mature and emerging international energy markets at secure rates with the highest potential margins for return on investment.
The Company’s focus is in the Balkan
Countries (Turkey, Albania, Bulgaria, Romania and Italy). The Company also has plans to expand into the US market.
The Company presently faces a number of challenges, including
raising additional capital, identifying commercially viable qualified projects, obtaining rights
and licenses for development, interacting with local governments, identifying and entering into agreements with appropriate subcontractors
for the development and operation of our energy production facilities, and hiring and retaining qualified staff.
Current Focus and Plan of Operation
We currently have only one project, a hydro-electrical
project of a total installed power of 127.6 MW of Shala River in Albania, and the commercialization of this project is in its infancy.
Our intended markets may not utilize our producible products, and it may not be commercially successful. We intend to develop additional
projects but none have proven to be commercially viable or successful.
Albania Hydro Power Concession
On August 10, 2012, we closed the acquisition
of 75% of the equity of Shala Energy sh.p.k (“Shala Energy”). Shala Energy possesses the concession right in a hydro-electrical
project of a total installed power of 127.6 MW of Shala River in Albania.
In connection with the acquisition of Shala,
the Company is obligated to pay an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's
common stock. The Company has not made such payment yet. As of June 30, 2013, the Company has accrued $600,000 due to the
facilitator for feasibility studies in process.
After closing and through March 2013, the
Company refined and updated its feasibility study initially completed in 2009.
Starting February 2013,
the Company has commenced the preliminary project design. The Company engaged a consortium of Indian industrial companies with
leading expertise globally in hydro power projects engineering, financing, construction and operation. The consortium undertook
to cover the cost of the development work and produce the bankable study in cooperation and with 3power control. The consortium
is getting in return the exclusive first right on the project construction as a general contractor.
The power plant’s
total construction cost is estimated to be USD 250M. The Company is now seeking capital to fund the project. As of June 30,
2013, Shala Energy is an inactive company and has no material assets and liabilities.
Recent Development
3Power Services (formerly known as
Seawind Service) Liquidation
On October 8, 2012, the High Court of Justice
in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of 3Power Services (formerly
known as Seawind Service), a wholly owned subsidiary of the Company’s Subsidiary, 3Power Energy (formerly known as Seawind
Energy).
By the letter of The Insolvency Service
dated October 12, 2012, the Company was required to provide information relating to 3Power Project Services Limited to the Official
Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official
Receiver’s Office to review the prospect of recovering the assets of 3Power Project Services Limited for the benefit of creditors.
The company was also required to deliver
to the Official Receiver’s Office certain assets (cash or cheques) and accounting records that are still in its possession
or control. The Company has attended the interview and delivered all the available accounting records to the Officer Receiver’s
Office. No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this report.
3Power Energy (formerly known as
Seawind Energy) Dissolution
On January 17, 2013, the Company filed
a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy (formerly known as Seawind
Energy), a wholly owned subsidiary of the Company. Such Strike off application has yet to be approved as of this report.
Results of Operations For The Three
Months Ended June 30, 2013 And 2012
We have revenues from operations in the
amount of $Nil for the three months ended June 30, 2013 and 2012.
We incurred operating expenses of $135,614
for the three months ended June 30, 2013 compared to $469,189 for the three months ended June 30, 2012. This decrease was mostly
attributable to reductions in staffing and operating costs in the current period as compared to the same period prior year. The
only expenses incurred in the current period were in connection with finalizing projects for execution.
Our interest expense was $35,325 for the
three months ended June 30, 2013 as compared to $24,130 for the same period last year. The increase of $11,195 or 46% is due primarily
to compounding of interest associated with note obligations.
During the three months ended June 30,
2012, we realized a gain on settlement of an outstanding accrual of $40,000 compared to $Nil for the same period, current year.
Liquidity and Capital Resources
Our total cash and cash equivalents as
of June 30, 2013 was $1,725 compared to the total cash and cash equivalents of $1,725 as of March 31, 2013.
As of June 30, 2013, our total assets were
$17,145 compared to total assets $17,145 as of March 31, 2013 and the total current liabilities were $8,712,489 as of June 30,
2013 compared to $8,538,652 as of March 31, 2013. The increase in current liabilities was primarily due to increase in accounts
payable, accrued expense and accrued interest of $115,348 and the amount due to related parties of $58,489.
Net cash used in operating activities was
$58,489 for the three months ended June 30, 2013 compared to net cash used in operating activities of $270,175 for the three months
ended June 30, 2012. The negative cash flow from operating activities consists of $170,938 net loss, net with increase in accounts
payable and accrued expenses of $77,124 and increase in accrued interest of $35,325.
Net cash used in investing activities was
$Nil for the three months ended June 30, 2013 and 2012.
Net cash provided by financing activities
was $58,489 for the three months ended June 30, 2013 compared to net cash provided by financing activities of $231,051 for the
three months ended June 30, 2012. The decrease in cash provided by financing activities was due to a decline in loans being issued
by shareholders and related parties.
Our pre-operational activities to date
have consumed substantial amounts of cash. Our negative cash flow from operations is expected to continue and accelerate in the
foreseeable future as the Company invests in capital expenditures to commence operations.
We will need to raise additional capital
to implement our business plan and continue operations for any length of time. We are seeking alternative sources of financing,
through private placement of securities and loans from our shareholders in order for us to maintain our operations. We cannot guarantee
that we will be successful in raising additional cash resources for our operations.
The independent registered public accounting
firm’s report on our March 31, 2013 consolidated financial statements included in our Form 10-K states that our difficulty
in generating sufficient cash flow to meet our obligations and sustain operations raise substantial doubts about the our ability
to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might
result should the Company be unable to continue as a going concern.
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 of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our
Board of Directors, we have identified several accounting principles that we believe are key to the understanding of our financial
statements. These important accounting policies require management’s most difficult, subjective judgments.
Revenue Recognition
The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria
(3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and
the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards
Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements
that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing
605-25 on the Company's financial position and results of operations was not significant.
Foreign Currency Translation and
Transactions
The accompanying unaudited condensed consolidated
financial statements are presented in U.S. dollars (“USD”). The functional currency of our subsidiaries is British
pounds (“GBP”). The financial statements of subsidiaries are translated into USD in accordance with the Codification
ASC 830, “Foreign Currency Matters”. All assets and liabilities were translated at the current exchange
rate, at respective balance sheet dates, shareholders’ equity is translated at the historical rates and income statement
items are translated at the average exchange rate for the reporting periods. The resulting translation adjustments are
reported as other comprehensive income and accumulated other comprehensive income in shareholders’ equity in accordance with
the Codification ASC 220, “Comprehensive Income.”
Transaction gains and losses that arise
from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into
GBP at the rate on the date of the transaction and included in the results of operations as incurred. There were no
material transaction gains or losses in the periods presented.
Income taxes
Income tax provisions or benefits for interim
periods are computed based on the Company’s estimated annual effective tax rate. Based on the Company's historical losses
and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is not more likely
than not that deferred tax assets will be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates
or anticipated that its net deferred tax assets at June 30, 2013 and March 31, 2013 would be fully offset by a valuation allowance,
there is no federal or state income tax benefit for the three months ended June 30, 2013 and 2012 related to losses incurred during
such periods.
Accounting for Stock-Based Compensation
We account for stock, stock options and
warrants using the fair value method promulgated by Accounting Standards Codification subtopic 480-10, Distinguishing Liabilities
from Equity (“ASC 480-10”) which addresses the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. Therefore, our results include non-cash compensation expense as a result of the issuance of
stock, stock options and warrants and we expect to record additional non-cash compensation expense in the future.
We follow Accounting Standards Codification
subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees
be recognized in the income statement based on their fair values.
Off Balance Sheet Transactions
We do not have any off-balance sheet transactions.
Recently Issued 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 our consolidated financial position, results of operations or cash flows.
Inflation
We do not believe that inflation has had
a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant
inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure
to do so could adversely affect our business, financial condition and results of operations.