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 September 30, 2011

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number:   333-103647

3Power Energy Group Inc.
(Exact Name of Registrant as Specified in its Charter)

Nevada
 
98-0393197
(State or other jurisdiction of
 
(IRS Employer
incorporation or organization)
 
Identification No.)

PO Box 50006
Sh. Rashid Building
Sh. Zayed Road
Dubai, United Arab Emirates
(Address of principal executive offices)

011 97 14 3210312
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x      No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.323.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such files).  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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer
¨
Accelerated Filer
¨
Non-Accelerated Filer
¨
Smaller reporting company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x

As of November 18, 2011, the Issuer had 107,127,408 shares of its Common Stock outstanding.
 
 
 

 

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
 4
   
Item 1: Financial Statements
  4
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operation
  15
Item 3: Quantitative and Qualitative Disclosures about Market Risk
  23
Item 4: Controls and Procedures
  23
   
PART II: OTHER INFORMATION
  24
   
Item 1: Legal Proceedings
  24
Item 1A: Risk Factors
  24
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
  24
Item 3: Defaults Upon Senior Securities
  24
Item 4: Reserved
  24
Item 5: Other Information
  24
Item 6: Exhibits
  25
   
SIGNATURES
  26
  
 
2

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in forward-looking statements made in this Quarterly Report on Form 10-Q (this “Report”) and in other reports and documents published by us from time to time. Any statements about our beliefs, plans, objectives, expectations, assumptions, future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intend,” “plan,” “projection,” “outlook” and the like, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned to carefully read all “Risk Factors” set forth under Item 1A and not to place undue reliance on any forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act. New factors emerge from time to time, and it is not possible for us to predict which will arise or to assess with any precision the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Unless otherwise provided in this Report, references to the “Company,” the “Registrant,” the “Issuer,” “we,” “us,” and “our” refer to 3Power Energy Group Inc. (formerly known as Prime Sun Power Inc.).

 
3

 
PART I
FINANCIAL INFORMATION  

3POWER ENERGY GROUP, INC.
FORMERLY KNOWN AS PRIME SUN POWER, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
   
September 30, 2011
   
March 31, 2011
 
ASSETS
           
             
Current assets:
           
Cash and cash equivalents
  $ 52,587     $ 12,734  
Accounts receivable net of allowance for doubtful accounts
    450,752       478,080  
Inventories
    -       130,246  
Work in progress
    447,055       1,602  
Due from related parties
    51,171       835,231  
Taxes receivable
    168,740       535,852  
                 
Total current assets
    1,170,305       1,993,745  
                 
Property and equipment, net
    552       565  
                 
Other assets
               
Project development rights
    3,332,100       -  
                 
Total other assets
    3,332,100       -  
                 
Total assets
  $ 4,502,957     $ 1,994,310  
                 
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
               
                 
Current liabilities:
               
Accounts payable
  $ 1,415,367     $ 1,636,236  
Accrued expenses and other current liabilities
    1,502,456       1,421,453  
Note payable - finance company
    639,059       660,073  
Note payable - shareholders
    310,848       937,500  
Accrued interest - related party
    88,983       83,122  
Due to related parties
    1,763,572       250,600  
                 
Total current liabilities
    5,720,285       4,988,984  
                 
Shareholders' deficiency:
               
Common stock, $.0001 par value, 300,000,000 shares authorized, 107,127,408 and 99,722,743 issued and outstanding at September 30, 2011, and at March 31, 2011, respectively
    10,713       9,972  
Additional paid-in capital
    3,331,359       -  
Accumulated other comprehensive (loss)
    (54,784 )     (111,589 )
Accumulated deficit
    (4,504,616 )     (2,893,057 )
                 
Total shareholders' deficiency
    (1,217,328 )     (2,994,674 )
                 
Total liabilities and shareholders' deficiency
  $ 4,502,957     $ 1,994,310  

 
4

 

3POWER ENERGY GROUP, INC.
FORMERLY KNOWN AS PRIME SUN POWER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE (LOSS)
(Unaudited)

     
Three Months Ended September 30,
   
Six Months Ended September 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Sales
  $ 14,391     $ 936,447     $ 491,092     $ 3,551,651  
                                 
Costs and Expenses
                               
Project Development Cost
    447,344     $ 405,156       654,756       2,781,924  
General and administrative expenses
    487,032       53,015       929,959       292,016  
Facilitation fee
    -       -       1,000,000       -  
Management charges
    531,775       104,167       531,775       104,167  
                                 
Total operating expenses
    1,466,151       562,338       3,116,490       3,178,107  
                                 
Income(loss) from operations
    (1,451,760 )     374,109       (2,625,398 )     373,544  
                                 
Interest expense
    178       16,284       18,246       32,343  
                                 
Net income (loss)
  $ (1,451,938 )   $ 357,825     $ (2,643,644 )   $ 341,201  
                                 
Other comprehensive income (loss)
                               
                                 
Foreign currency translation adjustment
    102,027       129,137       56,805       15,472  
                                 
Comprehensive loss
    (1,349,911 )     486,962       (2,586,839 )     356,673  
                                 
Basic earning (Loss) per common share
  $ (0.01 )   $ 0.01     $ (0.03 )   $ 0.01  
                                 
Weighted average common shares outstanding
    103,827,503       40,114,900       101,786,338       40,114,900  
 
 
5

 

3POWER ENERGY GROUP, INC.
FORMERLY KNOWN AS PRIME SUN POWER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
Six Months Ended September 30,
 
   
2011
   
2010
 
             
Cash flow from operating activities:
           
             
Net income (loss)
  $ (2,643,644 )   $ 341,201  
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Accrued fees to related party
    104,167       104,167  
Stock issued for facilitation fee
    1,000,000       -  
Accrued interest to related party
    5,861       7,794  
Depreciation and amortization
    286       267  
Changes in assets and liabilities:
               
(Increase) decrease in accounts receivable - trade
    27,328       952,830  
(Increase) decrease in inventories
    130,246       212,865  
(Increase) decrease in work in progress
    (445,453 )     (1,962,334 )
(Increase) decrease in tax receivable
    367,112       (325,528 )
Increase (decrease) in accounts payable
    (220,869 )     601,818  
Increase (decrease) in accrued expenses and other current liabilities
    81,003       2,767,946  
                 
Cash provided by (used in) operating activities
    (1,593,963 )     2,701,026  
                 
Cash flow from investing activities:
               
Additions to property and equipment
    (273 )     (41 )
                 
Cash used in investing activities
    (273 )     (41 )
                 
Cash flow from financing activities:
               
Payments on advances from related parties
    (647,666 )     (1,073,407 )
Advances from related parties
    2,297,032       -  
                 
Cash provided by (used in) financing activities
    1,649,366       (1,073,407 )
                 
Effect of exchange rate changes on cash and  cash equivalents
    (15,277 )     (141,008 )
                 
Net increase in cash and cash equivalents
    39,853       1,486,570  
                 
Cash at beginning of period
    12,734       970,227  
                 
Cash at end of period
  $ 52,587     $ 2,456,797  
                 
Supplemental disclosure of cash flow information:
               
                 
Stock issued for acquisition of project development rights
  $ 3,332,100     $ -  
 
 
6

 

3POWER ENERGY GROUP INC.
Formerly known as PRIME SUN POWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2011 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended September 30, 2011 are not necessarily indicative of the operating results for the full fiscal year or any future period.

1. 
BUSINESS DESCRIPTION

Basis of Consolidation

The consolidated financial statements include the accounts of 3Power Energy Group, Inc.  and its subsidiaries, all of which are wholly owned.  All intercompany balances and transactions have been eliminated in consolidation.

Organization and Business Description

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.

Going Concern

As shown in the accompanying financial statements, the Company has incurred a net loss of $2,643,644 for the six months ended  September 30, 2011 and has a shareholders’ deficiency of $1,217,328 at September 30, 2011.  The ability of the Company to continue as a going concern is dependent upon, among other things, its successful execution of its plan of operations and ability to raise additional financing or capital.  There is no guarantee that the Company will be able to raise additional financing or capital or sell any of services or products at a profit.  These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
7

 

Basis of Preparation

On May 13, 2011 the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Seawind Energy Limited and its subsidiaries (“Seawind Energy”), pursuant to which the Company acquired 100% of the issued and outstanding common stock of Seawind Energy, in exchange for the issuance of 40,000,000 restricted shares of the Company’s common stock .  The acquisition was accounted for as a reverse merger and, accordingly, the Company is the legal survivor and Seawind Energy is the accounting survivor.

The Seawind Companies have become wholly owned subsidiaries of the Company.  The Stock Purchase Agreement contains conventional provisions for restricted share transactions, including customary representations and warranties given by the Seawind Group Shareholders regarding the authority to execute the Stock Purchase Agreement, valid ownership and transferable title to their shares which are unencumbered, free and clear of third party claims or conflicts contingent or otherwise, and that no consent of any party is necessary or required to effectuate the transfer.  In addition, the Seawind Group Shareholders made representations and warranties which the Company has relied upon for purposes of assessing and determining the validity of the exemption of the share issuances from registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

2. 
SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The preparation of financial statements in conformity with U.S. 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 actual results experienced by the Company may differ materially from the Company’s estimates.  To the extent there are material differences between the estimates and the actual results, future results of operations will be affected and the effect could be material.

Cash and Cash equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

The Company maintains cash balances at various financial institutions.  Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000.  The Company’s accounts at these institutions may, at times, exceed the federally insured limits.  The Company has not experienced any losses in such accounts.

Property and equipment and depreciation policy

Depreciation is based on the estimated useful lives of the related assets and is computed using the straight-line method.  Equipment is recorded at cost and depreciation is provided over the useful lives of five years.

 
8

 

Income taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Impairment of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.  To determine if impairment exists, the Company compares the estimated future undiscounted cash flows from the related long-lived assets to the net carrying amount of such assets.  Once it has been determined that impairment exists, the carrying value of the assets is adjusted to the fair value.  Factors considered in the determination of the fair value.  Factors considered in the determination of the fair value include current operating results, trends and the present value of estimated expected future cash flows.

Revenue Recognition

We follow the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”.  Revenues from long term contracts are recognized on the percentage of completion method.

Work  In Progress

Work in progress represents costs and estimated earnings in excess of billings. These are the amount under customer contracts that were earned and billable but not invoices at September 30, 2011 and March 31, 2011.

Project Development Rights

These are the project rights we acquired from Power Andina Limited as disclosed in the MD&A under “Project Acquisition Option Agreement”.

 
9

 

Accounts Receivable and Allowance for Doubtful Accounts Receivable

We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required.

We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.

Inventories

Inventories are stated at the lower of cost, determined using the weighted average cost method, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

Stock based compensation

We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718, “Compensation: Stock Compensation”. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

 
10

 

Fair value measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts and notes payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.  The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes 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 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Concentration of Credit Risk

Financial instruments that potentially expose us to concentrations of credit risk consist principally of cash and cash equivalents. We maintain our cash accounts at high quality financial institutions with balances, at times, in excess of federally insured limits. As of September 30, 2011, we had no balances in excess of federally insured limits. Management believes that the financial institutions that hold our deposits are financially sound and therefore pose minimal credit risk.

Comprehensive Income

Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. For the Company, comprehensive income for the periods presented includes net income, and foreign currency translation adjustments.

Loss per share

Loss per share is computed using the weighted average number of shares outstanding during the period. Diluted loss per share is equivalent to basic loss per share.

 
11

 

Property and Equipment

Property and equipment consists of office equipment and is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets, generally 3 to 5 years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

Foreign Currency Translation and Transactions

The accompanying consolidated financial statements are presented in U.S. dollars (“USD”). The functional currency of the Company’s 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.

The exchange rates used to translate amounts in GBP into USD for the purposes of preparing the consolidated financial statements were as follows:
 
   
September 30,
   
September 30,
 
   
2011
   
2010
 
Year-end GBP : USD exchange rate
  $ 1.5625     $ 1.5825  
Average Quarterly GBP : USD exchange rate
  $ 1.6114     $ 1.5492  

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 assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related 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 a 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. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 
12

 

Recently Issued Accounting Standards

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS” (“ASU 2011-04”). The amendments in ASU 2011-04 result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendments in ASU 2011-04 to result in a change in the application of the requirements in Topic 820. ASU 2011-04 is effective prospectively for interim and annual reporting periods beginning after December 15, 2011. This ASU will become effective for the company beginning in the quarter ended January 31, 2012 and we do not expect an impact on our consolidated financial statements
 
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The guidance in ASU 2011-05 applies to both annual and interim financial statements and eliminates the option for reporting entities to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. This ASU also requires consecutive presentation of the statement of net income and other comprehensive income. Finally, this ASU requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The amendments in this ASU should be applied retrospectively and are effective for fiscal year, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to require a number of additional disclosures regarding (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15,   2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASU 2010-06 did not have a material impact on its consolidated financial statements.

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material impact on the Company’s consolidated financial statements.

 
13

 
 
3. 
NOTE PAYABLE – FINANCE COMPANY

On March 2, 2010, the Company entered into a Financing Agreement (the “Financing Agreement”) with CRG Finance AG (“CRG Finance”).  Pursuant to the Financing Agreement, CRG Finance loaned the Company a total of 470,000 Euros ($639,059 as of September 30, 2011).  In further consideration for the making of this loan, the Company shall transfer 20% of the Company’s rights to its net profits to be made in the sale of PSP Italian S.r.l. to GPR (the “Net Profit Rights”).

CRG Finance has agreed that upon receipt of its Net Profit Rights, CRG Finance will reinvest at least 50% of such Net Profit Rights into either new projects of the Company or shares of the Company, at a purchase price to be mutually agreed upon.  The Company has issued a senior promissory note to CRG Finance in the amount of 470,000 Euros ($639,059 as of September 30, 2011).  The principal of the note, along with interest at an annual rate of seven and one half percent, is due within thirty days of demand.  CRG has made a demand for payment of the Note which has not been paid by the Company.

4. 
INCOME TAXES

The Company has available approximately $3,895,000 of net operating loss carry forwards to offset future taxable income, if any.  The carry forwards expire as follows:

2022
  $ 22,000  
2023
  $ 24,000  
2024
  $ 13,000  
2025
  $ 19,000  
2026
  $ 16,000  
2027
  $ 56,000  
2028
  $ 695,000  
2029 and after
  $ 3,050,000  

Utilization of these carryforwards may be limited due to the changes in ownership.  The Company has a deferred tax asset of approximately $1,350,000 relating to available net operating loss carry forwards for which 100% valuation allowance has been provided.

5. 
FACILITATION AGREEMENT

The Company paid Viewpoint Investments Corp. (“Viewpoint”)  a $1,000,000 fee in Company Common Stock upon the closing of the acquisition of the Seawind Companies (the “Facilitation Agreement”).  Pursuant to the Facilitation Agreement, the Company has issued 19,607,843 restricted shares of the Company’s common stock to Viewpoint in consideration for services rendered to the Company. Viewpoint assisted and advised the Company with respect to identifying, negotiating and closing the transaction with the Seawind Group of Companies.  The consideration paid to Viewpoint by the Company was deemed to be fair and reasonable by our Board of Directors with respect to the creation and enhancement of share value for all shareholders responsive to the acquisition of Seawind Energy and Seawind Services due to the efforts of Viewpoint.  The number of shares issued to Viewpoint was calculated by reference to 85% of the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.

 
14

 

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

The Company's Operations

The following discussion of the financial condition and results of operations of 3Power Energy Group Inc. should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Report. This Report contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words “believes”, “anticipates,” “expects” and the like, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act.

We were incorporated in the State of Nevada on December 18, 2002, as ATM Financial Corp.  On April 1, 2008, we changed our name from “ATM Financial Corp.” to “Prime Sun Power Inc.”  On April 15, 2008, the Company changed its stock symbol from “AFIC” to “PSPW.” On March 30, 2011, the Company changed its name to 3Power Energy Group Inc. The Company’s common stock is traded on the Financial Industry Reporting Authority over-the-counter bulletin board.

The Company address is PO Box 50006, Sh. Rashid Building, Sh. Zayed Road, Dubai, United Arab Emirates.

The Company’s telephone number is + 97-14- 321-0312.

The Company’s most significant recent activities included negotiating the acquisition of Seawind Energy Services and Seawind Energy Limited which closed on May 13, 2011.  As a result of the Seawind Acquisition, the Company is no longer a “shell company” as such term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. 

The Company’s subsidiary Seawind Energy Limited has changed its name to 3Power Energy Limited.  This subsidiary continues to await the final payment for the sale of its project in Texas to Sany, a Chinese company.  Such payment is not expected until the final quarter of 2011.

The Company’s subsidiary Seawind Services Limited changed its name to 3Power Project Services Limited.  3Power Project Services Limited continued to make progress on its engineering and supply contracts with its two Chinese customers as those projects approached completion. The first shipment of prototype components for the new 2MW wind turbine were despatched from Germany, and the close out of the detailed design phase continued. 3Power Project Services Limited also commenced work under the Project Management engagement with 3Power Energy Inc. on the ongoing development of the first 18MW of wind projects in Chile. Activities have included finalising interconnection options to grid, contractor prequalification and negotiation of power purchase agreements. Additionally, minor works were undertaken in relation to the ongoing operating and maintenance engagement for Barrick Gold in Argentina. No new work was approached or contracted, the emphasis for the company now being the successful close out of the Chinese venture and consolidation of the work being undertaken on development of the 3Power project portfolio.

 
15

 

Employees

As of November 3, 2011, the Company had 3 senior management employees.

Officer and Director Transitions

On October 19, 2011, Mr. Umamaheswaran Balasubramaniam (“Bala”) was appointed as the Company’s Chief Executive Officer.  He has served as a member of the Company’s Board since September 12, 2011.  Also on October 19, 2011, Mr. Shariff Rehman was appointed as the Company’s Chief Financial Officer.  He has served as a member of the Company’s Board since September 12, 2011. In addition, Mr. Mohammed Falaknaz and Mr. James Wilson were appointed to the Board.  Mr. Wilson is also the co-founder, chief executive officer and a director of Seawind Energy Limited and Seawind Services Limited.

On October 19, 2011, Mr. Toby Durrant resigned as the Chief Executive Officer, Chief Financial Officer, Chief Investment Officer and as a Member of the Board.

On May 13, 2011, Riccardo Valentini, Dimitris Kazantzis and Antonio Conte were appointed to the Company’s Board of Directors.  Effective June 2, 2011, Mr. Valentini was appointed as the Chief Executive Officer and Chief Financial Officer of the Company.   Mr. Valentini resigned from his positions as an officer and director of the Company on August 10, 2011.  Mr. Conte resigned as a director of the Company on August 10, 2011.

Each of Mr. Valentini and Mr. Conte entered into Separation Agreements with the Company, dated as of August 10, 2011.

Research and Development
 
The Company has not expended significant amounts on research and development.  The Company intends to assess prospective research and development undertakings during the foreseeable future and allocate a budget accordingly.

Cancellation of Credit Facility

On August 10, 2011, the Company and CR&P Holding S.p.A. mutually agreed to cancel a Financing and Security Agreement, previously entered into on March 10, 2011.

Economic and Political Risks

The Company’s operations are conducted in various regions of Eastern Europe, Asia and South America. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in these regions, and by the general state of the economy.

The Company’s operations in these regions are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

 
16

 

Seawind Acquisition

On May 13, 2011, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Seawind Energy Limited (“Seawind Energy”), Seawind Services Limited (“Seawind Services,” and together with Seawind Energy, the “Seawind Companies”) and the shareholders of Seawind Energy (the “Seawind Group Shareholders”).  The Company has acquired Seawind Energy, and its wholly owned subsidiary Seawind Services, from the Seawind Group Shareholders in exchange for the issuance of 40,000,000 restricted shares of the Company’s common stock (such acquisition is referred to herein as the “Seawind Acquisition”).  The valuation for purposes of such acquisition was determined to be $2,400,000 on the basis of an understanding between the Company and the representatives of the Seawind Companies as of January 25, 2011, with the number of shares to be issued thereof calculated by reference to the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.

The Seawind Companies have become wholly owned subsidiaries of the Company.  The Stock Purchase Agreement contains conventional provisions for restricted share transactions, including customary representations and warranties given by the Seawind Group Shareholders regarding the authority to execute the Stock Purchase Agreement, valid ownership and transferable title to their shares which are unencumbered, free and clear of third party claims or conflicts contingent or otherwise, and that no consent of any party is necessary or required to effectuate the transfer.  In addition, the Seawind Group Shareholders made representations and warranties which the Company has relied upon for purposes of assessing and determining the validity of the exemption of the share issuances from registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

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.  

Plan of Operation

The Company is planning to develop, construct and operate wind energy power plants, solar photovoltaic power plants, biomass power plants and other renewable technologies. The Company expects to sell the electrical power produced to private and utility customers.   In regard to our wind energy power plant business, we intend to commence operations in South America with wind energy projects in Chile.  We intend to acquire the development rights to build two wind energy projects, with a total capacity of 58MW and expect that first power-to-grid will be achieved in the first quarter of 2012.  We intend to enter into sub-contractor arrangements with high quality and expert Chilean companies and organizations to provide the engineering, construction, procurement, installation and commissioning of the projects.  We intend to enter into long term operating and maintenance agreements with the wind turbine equipment supplier.  Our Company will sell the energy under power purchase agreements to private customers, in the public spot-price market, or a combination of both.  We intend to increase our wind energy project portfolio in Chile further by acquiring the development rights to build other attractive projects and in parallel expect to undertake project development of green-field sites.  We intend to expand our wind energy operations in other Latin American countries by entering into strategic alliances with local partners to create a strong local presence in countries such as Peru, Ecuador and Argentina, and create a wind energy portfolio through a combination of acquiring the development rights to wind energy projects, and carrying out project development of green-field sites.  We anticipate expanding our wind energy operations into Asia through strategic alliances with local partners and by acquiring the development rights to build suitable wind energy projects.

We anticipate that our solar energy power plant business will do business mainly in Europe.  We expect our Company will operate photovoltaic energy production parks in which solar electrical power is produced for sale to local electrical grids. We intend to enter into strategic alliances and sub-contractor arrangements with other companies and organizations with respect to engineering, construction, procurement and installation as well as companies engaged in the manufacture and/or assembly of solar modules.

 
17

 
 
The Company presently faces a number of challenges, including raising additional capital, indentifying commercially viable qualified projects, obtaining rights and licenses for development, interacting with local governments, indentifying and entering into agreements with appropriate subcontractors for the development and operation of our energy production facilities, and hiring and retaining qualified staff.

Project Acquisition Agreement

Enerserve Ltd.

The Company has entered into an acquisition agreement with Enerserve Ltd. (“Enerserve”), to acquire a wind energy project in Chile consisting of thirty two turbine locations (the “Enerserve Project”).   Enerserve has already obtained and/or is in the process of finalizing the necessary agreements, permits, wind measurement data, and all other requisites necessary for the Enerserve Project.  Enerserve has agreed to complete the development of the Enerserve Project through the stage where all required construction permits are obtained and in order.  Enerserve shall then provide support services to the Company throughout the construction stage in all matters related to permits and consents.  The Enerserve Project and all ancillary rights, agreements, permits, data and other requisites for the construction and connection to the electrical grid shall be vested in the Company by transferring the Enerserve Project to 3Power Energia S.A.

Project Acquisition Agreement
 
Power Andina Limited
 
The Company has entered into an acquisition agreement with Power Andina Limited (“PAL”), to acquire a 49MW wind energy project in Chile consisting of thirty two turbine locations (the “PAL1 Project”).   PAL has already obtained and/or is in the process of finalizing the necessary agreements, permits, wind measurement data, and all other requisites necessary for the PAL1 Project.  PAL has agreed to complete the development of the PAL1 Project through the stage where all required construction permits are obtained and in order.  PAL shall then provide support services to the Company throughout the construction stage in all matters related to permits and consents.  The PAL1 Project and all ancillary rights, agreements, permits, data and other requisites for the construction and connection to the electrical grid shall be vested in the Company by transferring the PAL1 Project to 3Power Energia S.A., a Chilean registered company.
 
Project Acquisition Option Agreement
 
Power Andina Limited
 
The Company has entered into an option agreement with Power Andina Limited (“PAL”), to acquire a 9MW wind energy project in Chile consisting of six turbine locations (the “PAL2 Project”).   PAL has already obtained and/or is in the process of finalizing the necessary agreements, permits, wind measurement data, and all other requisites necessary for the Project. PAL shall then provide support services to the Company throughout the construction stage in all matters related to permits and consents.  Upon exercise of the option by the Company under the PAL agreement, the PAL2 Project and all ancillary rights, agreements, permits, data and other requisites for the construction and connection to the electrical grid shall be vested in the Company by transferring the PAL2 Project to a new Company wholly-owned subsidiary, 3Power Energia S.A., a Chilean registered company.
 
 
18

 

Results of Operations

Sales

During the six month periods ended September 30, 2011, the Company’s sales totaled $491,092, which was a decline from total sales of $3,551,651 as of September 30, 2010. The decline was due to the completion of projects in Latin America and fewer new contracts were secured as of September 30, 2011.

During the three month periods ended September 30, 2011, the Company’s sales totaled $14,391, which was a decline from total sales of $936,447 as of September 30, 2010.

In the both periods of six months and three months ended September 30, 2011 as compared with the same period of last year, the company’s sales, expenses and gross profit declined due to reduced operations.

The Company has incurred an increase in operating expenses during this reporting period from the last comparative periods. This increase was mostly attributable to a facilitation fee expense of $1,000,000 incurred by the company in the first quarter 2011 and expenses related to a new contract entered by the company in the second quarter 2011. 

Cost and Expenses

Operating Expenses for the six months ended September 30, 2011 were $3,116,490, as compared to $3,178,107 for the six months ended September 30, 2010. The increase was primarily due to the $1,000,000 facilitation fees we paid in stock during the period ended June 30, 2011 and the increase cost of various filing expenses to maintain the public company status.  The increases were offset by a decrease of $2,127,168 in project development cost due to reduced operations.

Operating Expenses for the three months ended September 30, 2011 were $1,466,150 as compared to $157,182 for the three months ended September 30, 2010.  The increase was primarily due to the increase costs of various filing expenses to maintain the public company status.

 
19

 

Liquidity and Capital Resources

As of September 30, 2011, we have funded our operations primarily through loans from related parties.

Net cash used by operating activities was $1,593,963 during the six months ended September 30, 2011 compared to net cash provided by operating activities $2,701,026. The increase of $4,294,989 for cash used by operating activities was due primarily to the decrease in accounts payable and accrued liabilities and the increase in net loss.

Net cash used in investing activities was $273 for the six months ended September 30, 2011 compared to $41 for the six months ended September 30, 2010. The increase is due to increase expenditures in fixed assets acquisition.

Net cash provided by financing activities was $1,649,366 for the six months ended September 30, 2011 compared to net cash used in financing activities of $1,073,407 for the six months ended September 30, 2010. The $2,722,773 increase in cash provided by financing activities was due to increase in loans from shareholders and decrease in payments to related parties.

Our total cash and cash equivalents at September 30, 2011 was $52,587, which was more than the Company’s cash and cash equivalents at March 31, 2011 of $12,734.  

As of September 30, 2011, our total assets were $4,502,957, which was an increase from $1,994,310 as of March 31, 2011.  Our total current liabilities were $5,720,285 as of September 30, 2011, which was an increase from $4,988,984 as of March 31, 2011.

Our activities to date have consumed substantial amounts of cash.  We will need to raise additional capital to implement our new 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.  

Our future capital requirements will depend on a number of factors, including our ability to grow our revenues and manage our business. Our growth will depend upon our ability to raise additional capital, possibly through the issuance of long-term or short-term indebtedness or the issuance of our equity securities in private or public transactions. If we are successful in raising equity capital, because of the number and variability of factors that will determine our use of the capital, our ultimate use of the proceeds may vary substantially from our current plans.  Global financial market conditions will be relevant to the Company’s ability to raise funds and make sales in the particular markets in which we will be active. While the Company believes that the opportunity exists to proceed in spite of these factors, major market disruptions, recent adverse changes in global market conditions, and the regulatory climate may affect our business.
 
The Company will require no less than $2,000,000 in additional funding in order to conduct proposed operations for the next year.  Should the Company fail to raise such funds, the Company will not be able to commence construction of the solar power plants. In order to commence construction on all of the Company’s currently contemplated projects, the Company would be required to raise 15,000,000 Euros (approximately $19,220,000) to acquire definitive licenses to own and operate solar parks, and then organize construction bridge loans to pay for the construction of the solar parks.

 
20

 

Demand from CRG Finance AG

On March 2, 2010, the Company entered into a Financing Agreement (the “Financing Agreement”) with CRG Finance AG (“CRG Finance”).  Pursuant to the Financing Agreement, CRG Finance loaned the Company a total of 470,000 Euros ($639,059 as of September 30, 2011).  In further consideration for the making of this loan, the Company agreed to transfer 20% of the Company’s rights to its net profits to be made in the sale of PSP Italian S.r.l (the “Net Profit Rights”).  CRG Finance previously agreed that upon receipt of its Net Profit Rights, CRG Finance would reinvest at least 50% of such Net Profit Rights into either new projects of the Company or shares of the Company, at a purchase price to be mutually agreed upon.   The principal of the note, along with interest at an annual rate of seven and one half percent, is due within thirty days of demand.  CRG has made a demand for payment of the Note which has not been paid by the Company.

Critical Accounting Policies

Revenue Recognition

We follow the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”.  Revenues from long term contracts are recognized on the percentage of completion method.

Accounts Receivable and Allowance for Doubtful Accounts Receivable

We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required.

We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.

Inventories

Inventories are stated at the lower of cost, determined using the weighted average cost method, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

 
21

 

Foreign Currency Translation and Transactions

The accompanying consolidated financial statements are presented in U.S. dollars (“USD”). The functional currency of the Company’s 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.

Off Balance Sheet Arrangements

As of September 30, 2011, we did not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.  

 
22

 

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4.
CONTROLS AND PROCEDURES

As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of our management, including our Acting Chief Executive Officer and Acting Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934 (the “Exchange Act”). In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our disclosure controls and procedures regarding a lack of adequate personnel and adequate segregation of duties.  Based on their evaluation of our disclosure controls and procedures as of September 30, 2011, the Company’s Acting Chief Executive Officer and Acting Chief Financial Officer have concluded that, as of that date, the Company’s disclosure controls and procedures were not effective for the purposes described above.

The material weakness identified by Management consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of the Company. The Company’s bookkeeping and accounting functions are overseen by a single individual who serves as a consultant to the Company, which prevents us from segregating duties within the Company’s disclosure control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. Accordingly, based on their evaluation of the Company’s disclosure controls and procedures as of September 30, 2011, the Company’s Acting Chief Executive Officer and its Acting Chief Financial Officer have concluded that, as of that date, the Company’s disclosure controls and procedures were not effective for the purposes described above. The Company intends to take steps to remediate such procedures as soon as reasonably possible.

There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 2011 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting. 

 
23

 

PART II.
OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

Not Applicable.

ITEM 1A.
RISK FACTORS

Not Applicable.

ITEM 2:
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Not Applicable.
 
ITEM 3:
DEFAULTS UPON SENIOR SECURITIES

On March 2, 2010, the Company entered into a Financing Agreement (the “Financing Agreement”) with CRG Finance AG (“CRG Finance”).  Pursuant to the Financing Agreement, CRG Finance loaned the Company a total of 470,000 Euros ($639,059 as of September 30, 2011).  In further consideration for the making of this loan, the Company agreed to transfer 20% of the Company’s rights to its net profits to be made in the sale of PSP Italian S.r.l (the “Net Profit Rights”).  CRG Finance previously agreed that upon receipt of its Net Profit Rights, CRG Finance would reinvest at least 50% of such Net Profit Rights into either new projects of the Company or shares of the Company, at a purchase price to be mutually agreed upon.   The principal of the note, along with interest at an annual rate of seven and one half percent, is due within thirty days of demand.  CRG has made a demand for payment of the Note which has not been paid by the Company.

ITEM 4:
RESERVED

Not Applicable.

ITEM 5:
OTHER INFORMATION

Not Applicable. 
 
24

 

ITEM 6.
EXHIBITS
 
Exhibit
 
Description
     
10.32
 
Separation Agreement, by and between the Company and Riccardo Valentini, dated as of August 10, 2011, incorporated by reference to Exhibit 10.32 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 16, 2011.
     
10.33
 
Separation Agreement, by and between the Company and Antonio Conte, dated as of August 10, 2011, incorporated by reference to Exhibit 10.33 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 16, 2011.
     
10.34
 
Termination Agreement, by and between the Company CR & Partners Holding, dated as of August 10, 2011, incorporated by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 16, 2011.
     
10.35
 
Riccardo Valentini Resignation Letter, dated as of August 10, 2011, incorporated by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 16, 2011.
     
10.36
 
Antonio Conte Resignation Letter, dated as of August 10, 2011, incorporated by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 16, 2011.
     
31.1
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1
  
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2
 
Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
 
 
25

 

SIGNATURES

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

 
3POWER ENERGY GROUP INC.
     
 
By:
/s/ Umamaheswaran Balasubramaniam
   
Name: 
Umamaheswaran Balasubramaniam
   
Title:
Chief Executive Officer

 
By:
/s/ Shariff Rehman
   
Name: 
Shariff Rehman
   
Title:
Principal Financial Officer and
Chief Accounting Officer

Dated:      November 21, 2011

 
26

 
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