NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND 2013
NOTE 1 – ORGANIZATION AND BUSINESS
3Power Energy Group, Inc. (the “Company”)
was incorporated in the State of Nevada on December 18, 2002 under the name ATM Financial Corp. On April 1, 2008, the Company
changed its name from ATM Financial Corp. to Prime Sun Power Inc. 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 to the Seawind Group Shareholders (such acquisition
is referred to herein as the “Seawind Acquisition”). 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 the 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 the 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 the amount of 164,851
Euro ($211,972), and as such the Acquisition closed. The acquisition resulted in the Company acquiring 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 is an inactive Company and has no
material assets and liabilities as of March 31, 2014.
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 to Capital Trust Holding AG, as advisor for the Shala acquisition transaction. During the year ended March 31, 2013,
the Company accrued $600,000 due to the facilitator fees for feasibility studies in process and recorded as expenses. In
December 2013, the Company issued to Capital Trust Holding AG and its affiliates, 15,000,000 shares of its common stock,
valued at $0.04 per share in settlement of the facilitator 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 3Power
Project Services Limited as of March 31, 2014 are as follows:
Current liabilities
|
|
$
|
1,834,100
|
|
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 the date of this report. 3Power Energy Limited
had liabilities as of March 31, 2014 as below:
Current liabilities
|
|
$
|
193,697
|
|
During the year ended March 31, 2013,
the Company charged to operations £11,085 ($16,831) as loss on write-off of assets of its international subsidiaries.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The 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.
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.
Concentrations of Credit Risk
The Company’s financial instrument
that is exposed to a concentration of credit risk is cash equivalents and accounts receivable. The Company places its cash and
temporary cash investments with credit quality institutions. At times, such investments may be in excess of the deposit insurance
available. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring
process. The Company routinely assesses the financial strength of its customers and based upon factors surrounding the credit
risk, establishes an allowance, if required, for uncollectable accounts and, as a consequence, believes that its accounts receivable
credit exposure beyond such allowance is limited.
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.
Fair Values
The Company adopted the provisions of
Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10
defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact
and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels
of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets
for identical assets or liabilities.
Level 2 - Observable inputs other than
Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived
principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation
methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based
on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases,
for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined
based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was
no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.
The carrying value of the Company’s
cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable),
and other current assets and liabilities approximate fair value because of their short-term maturity.
As of March 31, 2014, the Company did
not have items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements.
Functional currency
The accompanying 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:
|
|
March 31,
2014
|
|
|
March 31,
2013
|
|
Year-end GBP: USD exchange rate
|
|
$
|
1.6637
|
|
|
$
|
1.5184
|
|
Average Yearly GBP: USD exchange rate
|
|
$
|
1.5893
|
|
|
$
|
1.5805
|
|
Impairment of long lived assets
The Company applies Accounting Standards
Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). The Statement requires that long-lived
assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating
results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted
cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates
of future discounted cash flows resulting from the use and ultimate disposition of the asset.
ASC 360-10 also requires assets to be
disposed of is reported at the lower of the carrying amount or the fair value less costs to sell.
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 March 31, 2014 and 2013, the Company has not recorded any unrecognized tax benefits.
Stock-Based Compensation
The Company measures the cost of services
received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the
fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured
on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized
over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based
compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations,
as if such amounts were paid in cash.
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 March 31, 2014 and 2013.
Non-controlling Interests
The Company adopted the accounting standard
for non-controlling interests in the consolidated financial statements as of January 1, 2009. This standard establishes accounting
and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest and
the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. This standard also establishes
reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent
and the interests of the non-controlling owner.
Contingencies
Certain conditions may exist as of the
date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or
more future events occur or fail to occur. The Company's management and legal counsel asses such contingent liabilities, and such
assessment inherently involves an exercise of judgment. In assessing loss contingencies relating to legal proceedings that are
pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought. If the assessment of the contingency indicates that it is probable that a material loss has been incurred
and the amount of the liability can be estimated, the estimated liability would be accrued in the Company's financial statements.
Cash
The Company considers all highly liquid
debt instruments purchased with a maturity date of three months or less to be cash equivalents.
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 consolidated financial
statements have been prepared on a basis that assumes the Company will continue as a going concern. As of March 31,
2014, the Company has a deficit of $16,663,194 applicable to controlling interest compared with deficit of $15,639,210 applicable
to controlling interest for the year ended March 31, 2013, and has incurred significant operating losses and negative
cash flows. For the year ended March 31, 2014, the Company sustained a net loss attributable to the Company of $1,023,984 compared
to a net loss of $2,017,095 for the year ended March 31, 2013. The Company will need additional financing which may take
the form of equity or debt and the Company has converted certain liabilities into equity.
In the event the
Company are 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 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 - NOTES PAYABLE
On March 2, 2010, the Company issued an
unsecured Senior Promissory Note ("Note") for 470,000 Euros ($639,059 at March 31, 2014) 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 10 below) The Note has not been paid by the Company. As of March 31, 2014, accrued interest on this note was
$373,342.
During the year ended March 31, 2014,
the Company executed a promissory note for $179,129 to a significant shareholder for services previously rendered. The note is
payable on demand, non-interest bearing and unsecured. In March 2014, the Company issued an aggregate of 6,513,782 shares valued
at $0.03 per share in full satisfaction of promissory note.
NOTE 5 - COMMON STOCK
The Company is authorized to issue 300,000,000
shares of $0.0001 par value common stock. As of March 31, 2014 and 2013, 203,561,951 and 113,146,380 shares were issued and outstanding,
respectively.
In May 2012, the Company issued 60,132
shares of its common stock in exchange for services rendered valued at $20,000 and charged to operations.
In March 2013, the Company issued 50,000
shares of its common stock to U Bala in exchange for accrued salaries fair valued at $0.057 per share. In connection with the
settlement, the Company recognized a gain on settlement of accrual of $32,150 during the year ended March 31, 2013.
On August 15, 2013, the Company issued
an aggregate of 34,288,606 shares in settlement of outstanding related party advances of $1,371,544.
In December 2013, the Company issued an
aggregate of 15,000,000 shares valued at $0.04 per share in settlement of outstanding facilitator fees dues of $600,000 (Note
1).
In March 2014, the Company issued an aggregate
of 7,968,328 shares valued at $0.0275 per share in settlement of outstanding note payable of $179,129 and related accrued fees
of $40,000.
In March 2014, the Company issued an aggregate
of 22,249,546 shares valued at $0.0275 per shares is settlement of outstanding related party advances of $611,862.
In March 2014, the Company issued 10,909,091
shares valued at $0.0275 per shares is settlement of outstanding accrued salaries of $300,000.
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 March 31, 2014 and 2013,
there were $168,480 and $1,430,366 advances outstanding, respectively (See Note 5 above for repayment by shares).
As of March 31, 2014 and 2013 the Company
owed approximately £117,918 ($196,180) and £117,918 ($179,047), respectively, to Seawind Marine Limited, a company
controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson.
As of March 31, 2014 and 2013 the Company
owed approximately £177,548 ($295,387) and £177,548 ($269,589), respectively to Seawind International Limited, a company
controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson.
As of March 31, 2014 and 2013, the Company
owed approximately £88,753 ($147,658) and £88,753 ($134,762), respectively to Power Products Ltd (Enerserve Limited
f/k/a), a company under the control of Mr. T P G Adams and Mr. J R Wilson, former directors of the Company.
As of March 31, 2014 and 2013, the company
owed Mr. J R Wilson (ex-Director) £1,144 ($1,903) and £1,144 ($1,737), respectively.
During the year ended March 31, 2014 and
2013, the Company charged to operation $180,000 and $360,000, respectively, respectively, as salary to Board members.
During the year ended March 31, 2014 and
2013, the Company charged to operation $180,000 and $180,000, respectively, as consulting fees to a significant shareholder for
services provided.
During the year ended March 31, 2013,
the Company charged to operation £184,248 ($290,725) as management charges to Board members of subsidiaries.
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 7 - LOSS PER SHARE
The following table presents the computation of basic and diluted
loss per share:
|
|
March 31,
2014
|
|
|
March 31,
2013
|
|
Net loss available for common shareholders
|
|
$
|
(1,023,984
|
)
|
|
$
|
(2,017,095
|
)
|
Basic net loss per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
Weighted average common shares outstanding-basic
|
|
|
147,455,593
|
|
|
|
113,091,018
|
|
Diluted net loss per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
Weighted average common shares outstanding-diluted
|
|
|
147,455,593
|
|
|
|
113,091,018
|
|
The Company had no common stock equivalents
as of March 31, 2014 and 2013.
NOTE 8 - 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 March 31, 2014, 75% interest
in Shala Energy sh pk, a Company registered in the Republic of Albania. Both companies were inactive as of March 31, 2014.
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 year ended March 31, 2014:
|
|
American
|
|
|
Shala
|
|
|
|
Seawind
|
|
|
Energy
|
|
|
|
Energy LLC
|
|
|
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 year ended March 31, 2013:
|
|
American
|
|
|
Shala
|
|
|
|
Seawind
|
|
|
Energy
|
|
|
|
Energy LLC
|
|
|
sh pk
|
|
Net loss
|
|
$
|
-
|
|
|
$
|
(811,972
|
)
|
Average Non-controlling interest percentage
|
|
|
50.0
|
%
|
|
|
25.0
|
%
|
Net loss attributable to the non-controlling interest
|
|
$
|
-
|
|
|
$
|
(202,993
|
)
|
The following table summarizes the changes
in Non-controlling Interest from April 1, 2012 through March 31, 2014:
|
|
American
|
|
|
|
|
|
|
|
|
|
Seawind
|
|
|
Shala
|
|
|
|
|
|
|
Energy LLC
|
|
|
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, March 31, 2014
|
|
$
|
608
|
|
|
$
|
(202,993
|
)
|
|
$
|
(202,385
|
)
|
NOTE 9 - INCOME TAXES
The Company utilizes ASC 740 “Income
Taxes”, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the consolidated financial statement or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between consolidated financial statements and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse.
For the years ended March 31, 2014 and
2013, the Company had available for U.S federal income tax purposes net operating loss carryovers of approximately $2,893,000
and $1,870,000 respectively, which expire beginning in 2032. The net operating loss carryovers may be subject to limitations under
Internal Revenue Code due to significant changes in the Company’s ownership. The Company has provided a full valuation
allowance against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the earnings
history of the Company it is more likely than not that the benefits will not be realized.
For the years ended March 31, 2014 and
2013, the Company had available for UK income tax purposes net operating loss carryovers of approximately $2,228,000 and $2,228,000,
respectively, which can be carried forward indefinitely. The Company has provided a full valuation allowance against the
amount of UK unused net operating loss benefit, since management believes that, based upon the earnings history of
the Company, it is more likely than not that the benefits will not be realized.
The income tax provision (benefit) consists
of the following:
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Federal:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
420,000
|
|
|
|
434,000
|
|
|
|
|
420,000
|
|
|
|
434,000
|
|
|
|
|
|
|
|
|
|
|
State and local:
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
(420,000
|
)
|
|
|
(434,000
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
Following tax rates were used to calculate
deferred taxes for the years ended March 31, 2014 and 2013:
For US Entity:
|
|
|
|
|
Statutory federal income tax rate
|
|
|
35.00
|
%
|
State income taxes rate
|
|
|
8.84
|
%
|
|
|
|
|
|
Effective tax rate
|
|
|
43.84
|
%
|
For UK Entity:
|
|
|
|
|
Statutory federal income tax rate
|
|
|
24.00
|
%
|
The Company has filed its tax returns
through March 31, 2013.
The provisions of ASC 740 require companies
to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained
upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740
also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.
Management does not believe that the Company
has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly,
the adoption of these provisions of ASC 740 did not have a material effect on the Company’s financial statements. The Company’s
policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
All tax years for the Company remain subject
to future examinations by the applicable taxing authorities.
NOTE 10- COMMITMENTS AND CONTINGENCIES
Wuersch Settlement
In November 2011, the Company entered
into a Settlement Agreement (the “Wuersch Agreement”) with Wuersch & Gering LLP (“Wuersch”). The Wuersch
Agreement provided that Wuersch will accept a cash payment of $50,000, payable in five equal installments, and 2,000,000 options
to purchase shares of our common stock at $0.54 per share as full satisfaction of debt obligations to Wuersch of $518,359. The
five cash payment installments of $10,000 were due on the 15th calendar day of each month beginning November 15, 2011 and ending
on March 15, 2012. Two installment payments were made to Wuersch. The total outstanding balance as of March 31, 2014 and 2013
is $504,518.
Hellenic Settlement
On November 15, 2011, the Company entered
into a Settlement Agreement (the “Hellenic Agreement”) with Hellenic Technologies (“Hellenic”). The Hellenic
Agreement provided that Hellenic will accept cash payments of $70,000, payable in five equal installments, and 1,260,000 shares
of common stock as full satisfaction of debt obligations to Hellenic of $700,000. The five cash payment installments of $14,000
were due beginning November 14, 2011 and continuing on the 15th calendar day of each month thereafter until paid in full. Two
installments were paid as of March 31, 2012. The Company has also issued 1,260,000 of Common stock valued at $630,000 during the
year ended March 31, 2012. The outstanding balance as of March 31, 2014 and 2013 is $28,000.
Litigation
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 filed its statement answer on July 8, 2013. The Company denies the allegations in
the complaint and claims it is without merit. In defense of the action, the Company’s counsel vigorously sought documents
from Rudana in an effort to establish the Company’s defense. However, due to the fact that Rudana was in the midst of a
bankruptcy action in the Swiss Bankruptcy Court, the Company’s counsel sought an order from the AAA Arbitrator authorizing
the Swiss Bankruptcy Court to provide documents establishing Rudana’s satisfaction of the debt. On or about December 13,
2013, the AAA Arbitrator entered such an order and the Company’s counsel requested the documents. However, after the Company’s
counsel made several requests to postpone the arbitration to allow time to receive the requested documents, the Company was not
able to obtain the necessary documents from the Swiss Bankruptcy Court.
The Final Hearing in the AAA arbitration
took place on February 27, 2014, wherein the Company was not able to establish its defense due to the lack of evidence from Rudana.
The AAA Arbitrator entered an award of Euro 470,000 plus interest at the annual rate of 7.5% against the Company. As of March
31, 2014, the total award against the Company is Euro 728,241 ($1,012,401). On or about April 4, 2014, in an effort to perfect
this award against the Company, CRG filed a petition with the Southern District of New York seeking to confirm the award. In
addition, the Company accrued total of $56,835 as reimbursement of attorney fees and cost incurred by CRG and $15,500 as administrative
fees and compensation to the Arbitrator. On July 8, 2014, a judgment has been entered against 3Power in the Southern District
of New York in the amount of $1,086,186.
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 11 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date
the consolidated financial statements were available to be issued as follows:
In June 2014, the Company issued 20,330,996 shares of its common
stock in settlement of $375,826 loan from related party.