Attached files
| file | filename |
|---|---|
| EX-32.1 - CLEAN POWER CONCEPTS 10Q, CERTIFICATION 906, CEO/CFO - CLEAN POWER CONCEPTS INC. | cleanpowerexh32_1.htm |
| EX-31.2 - CLEAN POWER CONCEPTS 10Q, CERTIFICATION 302, CFO - CLEAN POWER CONCEPTS INC. | cleanpowerexh31_2.htm |
| EX-31.1 - CLEAN POWER CONCEPTS 10Q, CERTIFICATION 302, CEO - CLEAN POWER CONCEPTS INC. | cleanpowerexh31_1.htm |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2009
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO _______________________
Commission File # 000-52035
CLEAN POWER CONCEPTS INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0490694
(IRS Employer Identification Number)
1620 McAra Street
Regina, Saskatchewan, Canada S4N 6H6
(Address of principal executive offices) (Zip Code)
(306) 546-8327
(Registrant’s telephone no., including area code)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller reporting company.
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | 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 x No o
The issuer had 50,016,000 shares of common stock issued and outstanding as of February 19, 2010.
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Period Ended December 31, 2009
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
|
December 31,
2009
(unaudited) |
June 30,
2009
(See Note 1) |
|||||||
|
ASSETS |
||||||||
|
CURRENT ASSETS |
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|
Cash |
$ | 1,259 | $ | 2,227 | ||||
|
Prepaid expenses |
813 | 813 | ||||||
|
Total current assets |
2,072 | 3,040 | ||||||
|
Total assets |
$ | 2,072 | $ | 3,040 | ||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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|
CURRENT LIABILITIES |
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|
Accounts payable and accrued liabilities (Note 6) |
$ | 79,312 | $ | 82,623 | ||||
|
Advances from related party (Note 6) |
54,783 | 20,183 | ||||||
|
Loans payable (Note 4) |
425,900 | 425,900 | ||||||
|
Interest payable (Note 4) |
104,604 | 83,309 | ||||||
|
Total current liabilities |
664,599 | 612,015 | ||||||
|
Total liabilities |
664,599 | 612,015 | ||||||
|
STOCKHOLDERS’ EQUITY (DEFICIT) |
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|
Stockholders’ Equity (Deficit) (Note 5): |
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|
Common shares, 1,000,000,000 shares with par value $0.001 authorized, 50,016,000 shares issued and outstanding |
$ | 50,016 | $ | 50,016 | ||||
|
Paid-in Capital |
(17,216 | ) | (17,216 | ) | ||||
|
Accumulated deficit in the development stage |
(695,327 | ) | (641,775 | ) | ||||
|
Total stockholders’ equity (deficit) |
(662,527 | ) | (608,975 | ) | ||||
|
Total liabilities and stockholders’ equity (deficit) |
$ | 2,072 | $ | 3,040 | ||||
The accompanying notes to financial statements are an integral part of these financial statements
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
|
Three months
ended
December 31,
2009 |
Three months
ended
December 31,
2008 |
Six months
ended
December 31,
2009 |
Six months
ended
December 31,
2008 |
October 17, 2005(inception)
through
December 31,
2009 |
||||||||||||||||
|
EXPENSES: |
||||||||||||||||||||
|
General and administrative expenses |
16,692 | 7,947 | 31,976 | 17,032 | 590,442 | |||||||||||||||
|
Total expenses |
16,692 | 7,947 | 31,976 | 17,032 | 590,442 | |||||||||||||||
|
Net (loss) from Operations |
$ | (16,692 | ) | $ | (7,947 | ) | $ | (31,976 | ) | $ | (17,032 | ) | $ | (590,442 | ) | |||||
|
Interest expense |
(10,560 | ) | (10,735 | ) | (21,295 | ) | (21,470 | ) | (104,604 | ) | ||||||||||
|
Net (Loss) |
$ | (27,252 | ) | $ | (18,682 | ) | $ | (53,271 | ) | $ | (38,502 | ) | $ | (695,046 | ) | |||||
|
Loss per common share, basic and diluted |
$ | Nil | $ | Nil | $ | Nil | $ | Nil | ||||||||||||
|
Weighted average shares outstanding, basic and diluted |
50,016,000 | 50,016,000 | 50,016,000 | 50,016,000 | ||||||||||||||||
The accompanying notes to financial statements are an integral part of these financial statements
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
|
Six months
ended
December 31,
2009 |
Six months
ended
December 31,
2008 |
October 17, 2005 (inception)
through
December 31,
2009 |
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Cash flows from operating activities: |
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|
Net loss for the period |
$ | (53,271 | ) | $ | (38,502 | ) | $ | (695,046 | ) | |||
|
Reconciling adjustments: |
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|
Adjustments to reconcile net loss |
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to net cash used in operating activities: |
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|
Accrued interest on loans |
21,295 | 21,470 | 104,604 | |||||||||
|
Capital contributions – expenses |
— | — | 15,000 | |||||||||
|
Net change in operating assets and liabilities |
||||||||||||
|
Prepaid expenses |
— | — | (813 | ) | ||||||||
|
Accounts payable and accrued liabilities |
(3,592 | ) | 1,824 | 79,031 | ||||||||
|
Net cash provided (used) by operating activities |
(35,568 | ) | (15,208 | ) | (497,224 | ) | ||||||
|
Cash flows from investing activities: |
— | — | — | |||||||||
|
Net cash provided (used) by investing activities |
— | — | — | |||||||||
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Cash flows from financing activities: |
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|
Common stock issued for cash |
— | — | 17,800 | |||||||||
|
Loan payable |
— | — | 425,900 | |||||||||
|
Advances from related party |
34,600 | (75 | ) | 54,783 | ||||||||
|
Net cash provided by financing activities |
34,600 | (75 | ) | 498,483 | ||||||||
|
Net increase (decrease) in cash |
(968 | ) | (15,283 | ) | 1,259 | |||||||
|
Cash, beginning of period |
2,227 | 18,506 | — | |||||||||
|
Cash, end of period |
$ | 1,259 | $ | 3,223 | $ | 1,259 | ||||||
The accompanying notes to financial statements are an integral part of these financial statements
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 – Basis of Presentation
The consolidated unaudited financial statements included herein have been prepared by Clean Power Concepts Inc. and its subsidiary (collectively “Clean Power”, “We”, the “Registrant”, or the “Company”) in accordance with accounting principles generally accepted in the United States for interim
financial information. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the June 30, 2009 audited financial statements and the accompanying notes
included in the Company’s Form 10-K filed with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management’s opinion all adjustments necessary for a fair presentation of the Company’s financial statements are of a normal recurring nature and are reflected in the interim periods included.
Incorporated in Nevada as Loma Verde Inc. on October 17, 2005, the Company was established to develop projects involving exploration and development of precious and base metals reserves. On March 22, 2007, the Company incorporated a wholly owned subsidiary named Clean Power Concepts Inc. in Nevada. By agreement effective April 2,
2007, Clean Power Concepts, Inc. was merged into the Company for the sole purpose of changing the name of the Company. The Company then became the surviving entity with the name Clean Power Concepts Inc.
On October 28, 2005, the Company incorporated a British Columbia company named Loma Verde Exploration Ltd. as a wholly owned subsidiary. The financial statements of the Company are presented on a consolidated basis and include all accounts of both the Company and its subsidiary.
The Company is currently evaluating new opportunities and plans to develop a strategic plan based in the environmentally friendly green energy industry.
Our fiscal year end is June 30th.
The Company’s common stock is traded in the NASD Over-The-Counter Market under the symbol “CPOW”.
Note 2 – Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist in understanding Clean Power Concepts Inc.’s financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted
accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.
The financial statements reflect the following significant accounting policies:
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Development Stage Company
The Company is a Development Stage company and is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. As a Development stage enterprise, the Company discloses the deficit accumulated during the Development Stage and the cumulative statements of operations
and cash flows from inception to the current balance sheet date.
Consolidation of Financial Statements
The consolidated financial statements include the accounts of the Company and its 100% owned subsidiary Loma Verde Explorations Ltd. on a consolidated basis. All inter-company accounts have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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 period. Actual results could differ from those estimates.
Basic and Diluted Net Loss per Share
Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss available to common stockholders by common stock equivalents. At December 31, 2009, the Company did not have
any common stock equivalents outstanding.
Fair Value of Financial Instruments
The carrying value of accounts payable, and other financial instruments reflected in the financial statements approximates fair value due to the
short-term maturity of the instruments. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial
statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years during which the differences are expected to reverse and upon the possible realization of net operating loss carry-forwards. Additionally, the Company has not recognized any amount for a tax position taken or expected to be taken on its tax return, or for any interest or penalties.
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Valuation of Long-Lived Assets
The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of un-depreciated balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.
Foreign Currency
The books of the Company are maintained in United States dollars and this is the Company’s functional and reporting currency. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statements of Operations:
|
|
(i) |
Monetary items are recorded at the rate of exchange prevailing as at the balance sheet date; |
|
|
(ii) |
Non-Monetary items including equity are recorded at the historical rate of exchange; and |
|
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(iii) |
Revenues and expenses are recorded at the period average in which the transaction occurred |
Foreign currency transactions are primarily undertaken in Canadian Dollars. The Company has not to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Cash and Cash Equivalents
The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.
Recent Accounting Pronouncements
Various accounting pronouncements have been issued during 2010, 2009 and 2008, none of which are expected to have a material effect on the financial statements of the Company.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year presentation.
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Note 3 – Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company has accumulated operating losses since its inception and has limited business operations, which raises substantial doubt about the Company’s ability to continue as a going concern.
During the six month period ended December 31, 2009, the net loss attributable to Clean Power Concepts Inc. and Subsidiary was $(53,271). The continuation of the Company is dependent upon the continuing financial support of investors and stockholders of the Company. As of December 31, 2009 we projected the Company would need additional cash resources to operate during the upcoming 12 months and would raise this capital through shareholder loans from our President. The Company intends to attempt to acquire additional
operating capital through private equity offerings to the public and existing investors to fund its business plan. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue
in existence.
Note 4 – Advances and Loans Payable
As at December 31, 2009, advances of $54,783 were recorded in the books of the Company. These funds are due to a former director of the Company. This amount is unsecured, non-interest bearing and has no specific terms of repayment. During the period ended December 31, 2009, advances increased by $34,600 when a private placement subscription
submitted by the former director was at his request converted to an advance.
As at December 31, 2009, the Company had loans payable and interest payable to third parties totaling $425,900 and $104,604 respectively. Accrued interest for the six months ended December 31, 2009 totaled . These loans are uncollateralized, accrue interest at 10% per annum, are payable on demand and have no fixed repayment dates.
Note 5 – Common Stock
The Company’s common stock is traded in the NASD Over-The-Counter Market under the symbol “CPOW”
On March 7, 2007, our board of directors approved a 56 for 1 forward stock split. This became effective with the Secretary of State of Nevada on March 21, 2007 and increased our issued and outstanding share capital from 2,561,000 common shares to 143,416,000 common shares. All references to stock issued and stock outstanding have been retroactively
adjusted as if the stock split had taken place on October 17, 2005 (inception).
On April 23, 2007, several parties submitted an aggregate of 93,400,000 common shares to treasury for cancellation without consideration.
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
On October 26, 2009, the Company decreased its authorized common shares limit from 11,200,000,000 to 1,000,000,000. Shareholder approval for this change was received October 23, 2009 and a Definitive 14A was filed with the Securities Exchange Commission and recorded with the Nevada Secretary of State Corporate Registry.
During the period ended December 31, 2009, a former director of the Company who had submitted $34,600 to the Company for a private placement subscription requested that his subscription be withdrawn and that the funds provided be recorded on the books of the Company as a loan advance. The Company complied with this request.
Note 6 – Related Party Transactions
Of the $79,312 in accounts payable and accrued liabilities $75,000 is related to amounts owing to its former officers and directors for the past consulting services performed.
As at December 31, 2009, advances of $54,783 were recorded in the books of the Company. These funds are due to a former director of the Company. This amount is unsecured, non-interest bearing and has no specific terms of repayment. During the period ended December 31, 2009, advances increased by $34,600 when a private placement subscription
submitted by the former director was at his request converted to an advance.
Note 7 – Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through February 18, 2010, which is the date these consolidated financial statements were issued and reports the following events herein:
(i) Changes in Control of Registrant
Subsequent to the end of the period ended December 31, 2009, on February 3, 2010, Mr. Cory Turner resigned his positions as Director, Board Chair, President, and Chief Financial Officer of the Company and Mr. Michael Shenher was appointed to the positions of Director, Board Chair, Chair of the Audit Committee of the Board of Directors, President
and Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer. This change effected a change of control of the Company. There was no exchange of shares, consideration or financial statements or other reportable out of pocket expenses associated with this transaction. No assets or properties have been acquired nor is there any agreement for further consideration associated with the transaction.
(ii) Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers
Subsequent to the end of the period ended December 31, 2009, on February 3, 2010, Mr. Cory Turner resigned his positions as Director, Board Chair, President, and Chief Financial Officer of the Company and Mr. Michael Shenher was appointed to the positions of Director,
CLEAN POWER CONCEPTS INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Board Chair, Chair of the Audit Committee of the Board of Directors, President and Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer. Additionally on February 3, 2010, Mr. Cory Turner received affirmation from the Board of Directors to continue in his position as Secretary and Treasurer of the Company. Mr.
Turner resigned his positions as Director, Board Chair, President, and Chief Financial Officer with the Company for personal reasons and there was no disagreement with the Company relating to its operations, policies or practices. A copy of this Report was sent to Mr. Turner by the Company for his review prior to filing of this Report. Mr. Turner has not provided, and has indicated to the Company that he does not plan to provide, any correspondence regarding the circumstances surrounding his resignation from
these positions.
Each of the aforementioned events was reported in a Current Report on Form 8-K filed with the Securities Exchange Commission on February 4, 2010.
ITEM 2. MANAGEMENTS’ DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This quarterly report on Form 10-Q contains "forward-looking statements" relating to the registrant which represent the registrant's current expectations or beliefs including, statements concerning registrant’s operations, performance, financial condition and growth. For this purpose, any statement contained in this quarterly report
on Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "anticipation", "intend", "could", "estimate", or "continue" or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel and variability of quarterly results, ability of
registrant to continue its growth strategy and competition, certain of which are beyond the registrant's control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.
Overview
Clean Power Concepts Inc. (“Clean Power”, “We”, or the “Company”) was incorporated in the State of Nevada on October 17, 2005. On October 28, 2005, we incorporated a British Columbia company named Loma Verde Explorations Ltd. as a wholly owned subsidiary. Our financial statements are presented on a consolidated
basis and include all accounts of both the Company and its subsidiary. Our fiscal year end is June 30th.
The Company’s common stock is traded in the NASD Over-The-Counter Market under the symbol “CPOW”.
Since inception the Company has not been involved in any bankruptcy, receivership or similar proceedings.
Since inception the Company the reclassification, consolidation, or merger arrangements in which the Company has been involved are as follows: The Company was incorporated in Nevada as Loma Verde Inc. on October 17, 2005. On March 22, 2007, the Company incorporated a wholly owned subsidiary named Clean Power Concepts Inc. in Nevada. By
agreement effective April 2, 2007, Clean Power Concepts, Inc. was merged into the Company for the sole purpose of changing the name of the Company. The Company then became the surviving entity with the name Clean Power Concepts Inc.
We are currently evaluating new opportunities and plans to develop a strategic plan based in the environmentally friendly green energy industry.
Recent Developments
Officer Change
Due to time constraints associated with other business interests, Mr. Ralph Proceviat resigned as Chief Financial Officer on October 22, 2009. At that same date, Mr. Cory Turner assumed the position of Chief Financial Officer.
Change in Control
On February 3, 2010, Mr. Cory Turner resigned his positions as Director, Board Chair, President, and Chief Financial Officer of the Company and Mr. Michael Shenher was appointed to the positions of Director, Board Chair, Chair of the Audit
Committee of the Board of Directors, President and Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer. This change effected a change of control of the Company. There was no exchange of shares, consideration or financial statements or other reportable out of pocket expenses associated with this transaction. No assets or properties have been acquired nor is there
any agreement for further consideration associated with the transaction. Additionally on February 3, 2010, Mr. Cory Turner received affirmation from the Board of Directors to continue in his position as Secretary and Treasurer of the Company.
Due to time constraints associated with other business interests, Mr. Ralph Proceviat resigned as Chief Financial Officer on October 22, 2009. Cory Turner has assumed the position of interim Chief Financial Officer.
New Management
Michael Shenher, executive MBA (marketing), CAIB, has had 25 years of progressively more responsible management positions and entrepreneurial success. Mr. Shenher founded General Bio Energy Inc. (‘General Bio’) in 2006. General Bio was originally an alternative energy company and evolved into a bio oil refinery enterprise specializing
in petroleum and protein based product supplements and replacements such as General Bio’s MOPO brands of environmentally friendly high performance lubricants. Mr. Shenher’s employment background also includes: President & CEO of General Bio’s predecessor Canadian Green Fuels, 2006-2010; Chief of Staff to a Canadian Federal Member of Parliament 2004-2007; General Manager, Shenher Insurance and Financial Services 1997-2006; and Regional Manager, Equifax Canada Inc. 1992-1997.
Mr. Shenher has participated on Saskatchewan’s roundtable contributing to the Canada West Foundation’s position paper entitled ‘Canada's Power Play: The Case for a Canadian Energy Strategy for a Carbon-Constrained World’ and Mr. Shenher currently sits on the ‘Biofuels and Bioproducts Sector Team’ of Enterprise
Saskatchewan which reports directly to the Saskatchewan Minister of Enterprise on alternative energy policy matters. Mr. Shenher is a 2005 recipient of the Saskatchewan Centennial Medal of Honour and is a former board member of City of Regina Parks and Recreation Advisory Board; the Better Business Bureau; and numerous other community, charity, sports and business advocacy boards.
The Company is now evaluating new opportunities and plans to develop a strategic plan based in the environmentally friendly green energy industry.
Results of Operations for the Three and Six Month Periods Ended December 31, 2009 and December 31, 2008 and the period from October 17, 2005 (inception) to December 31, 2009 (the “Development stage Period”)
Revenues
Since inception we have earned $nil in revenues.
Operating Expenses
Our operating expenses are presently classified into one category:
- General and Administrative expenses
General and Administrative Expenses
General and administrative expenses were $16,692 and $31,976 versus $7,947 and $17,032 for the three and six month periods ended December 31, 2009 versus December 31, 2008. For the Development stage Period administrative expenses totaled $590,442. Administrative fees were primarily composed of office expenses and filing costs related
to our financial statements. During upcoming quarters, we project general and administration expenses will increase substantially as we implement our development plans.
Net Losses
We incurred net losses of $(27,252) and $(53,271) versus $(18,682) and $(38,502) for the three and six month periods ended December 31, 2009 versus December 31, 2008. For the Development stage Period net losses totaled $(695,046).
Material Events and Uncertainties
Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in mineral resource markets. There can be no assurance that we will successfully address such risks, expenses and difficulties and cannot assure you
that we will become profitable in the future.
Liquidity and Capital Resources
Since the date of our incorporation, we have raised $17,800 though private placements of our common shares; $54,783 through related party advances, and $425,900 via loans. As of December 31, 2009 we had cash on hand of $1,259 and a prepaid expense balance of $813. We project we will need to raise additional funds during the coming twelve months
and expect we will receive sufficient shareholder loans from our President to cover our operating requirements. However, we also project we will need to attempt to raise additional equity to provide the funds necessary to explore and develop our current property and have plans to pursue further sales of common shares to existing shareholders and the public.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EXCHANGE RATE FLUCTUATION RISK
Our reporting currency is United States Dollars. Our transactions are primarily conducted in US$ but also include transactions in other currencies, notably the Canadian Dollar. Foreign currency rate fluctuations may have a material impact on the Company’s financial reporting. These fluctuations may have positive or negative
impacts on the results of operations of the Company.
We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2009. Based on this evaluation, our management has concluded that our disclosure controls and procedures adequately ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The evaluation did not identify any change in our internal control over financial reporting that occurred during the quarter ended December 31, 2009 that has materially affected or is reasonably likely to materially affect our internal control over such reporting.
The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, the registrant's principal executive officer, or persons performing similar functions, and effected by the registrant's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
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(1) |
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant; |
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(2) |
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and |
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(3) |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, or use or disposition of the registrant's assets that could have a material effect on the financial statements. |
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of our Chief Executive Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2009 using the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness
of internal control over financial reporting as of September 30, 2009, the Company determined that there were control deficiencies that constituted material weaknesses, as described below:
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(1) |
Certain entity level controls establishing a “tone at the top” were considered material weaknesses. The Company has no audit committee and there is an inadequate amount of review by management of the financial statement reporting process. There is no policy on fraud and no code of ethics at this time, though the Company plans to implement such policies in fiscal 2010. A whistleblower policy is not necessary
given the small size of the organization. |
Management is currently evaluating remediation plans for the above control deficiency.
Accordingly, the Company concluded that this control deficiency resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of September 30, 2009 based on criteria established in Internal Control—Integrated Framework issued by COSO
and as such its internal control over financial reporting was deemed to be ineffective.
Changes in Internal Controls
During the period ended December 31, 2009 there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Remediation Initiatives
Although our Company is unable to meet the standards under COSO because of the limited funds available to a shell company of our size and stage of development, we are committed to improving our financial organization. As funds become available, we will undertake to: (1) create a position to segregate duties consistent with control
objectives, (2) increase our personnel resources and technical accounting expertise within the accounting function (3) appoint one or more outside directors to our board of directors who shall be appointed to the audit committee of our Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and (4) prepare and implement sufficient written policies and checklists which will set forth procedures for
accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. However, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
ITEM 1A. RISK FACTORS
Much of the information included in this quarterly report includes or is based upon estimates, projections or other forward-looking statements. Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements,
and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
Such estimates, projections or other forward-looking statements involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates,
projections or other forward-looking statements. Prospective investors should consider carefully the risk factors set out below in connection with an evaluation of our business:
THE COMPANY'S LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO JUDGE ITS PROSPECTS
The Company has a limited operating history upon which an evaluation of the Company, its current business and its prospects can be based. You should consider any purchase of the Company's shares in light of the risks, expenses and problems frequently encountered by all companies in the early stages of its corporate development.
SCARCITY OF, AND COMPETITION FOR, BUSINESS OPPORTUNITIES AND COMBINATIONS MAKE NEGATIVELY IMPACT OUT FUTURE PERFORMANCE
We are, and will continue to be, an insignificant participant amongst numerous other companies seeking a suitable business opportunity or business combination. A large number of established and well-financed entities, including venture capital firms, are actively seeking suitable business opportunities or business combinations which may also
be desirable target candidates for us. Virtually all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we do. We are, consequently, at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. We will also compete with numerous other small public companies seeking suitable business opportunities or business combinations.
LIQUIDITY AND CAPITAL RESOURCES ARE UNCERTAIN
For the six months ended December 31, 2009, the Company had a Net Loss of $(53,271) and a substantial amount of debt in the form of demand loans. We have had negative cash flows from operations and if we are not able to obtain further financing, our business operations may fail. We had a working capital deficiency of $(662,527) as
of December 31, 2009. We do not have sufficient funds to independently finance the acquisition and development of prospective business opportunities in alternative industries and we do not expect to generate any revenues for the foreseeable future. Accordingly, the Company will need to raise additional capital by way of an offering of equity
securities, an offering of debt securities, or by obtaining financing through a bank or other entity. The Company has not established a limit as to the amount of debt it may incur nor has it adopted a ratio of its equity to debt allowance. If the Company needs to obtain additional financing, there is no assurance that financing will be available from any source, that it will be available on terms acceptable to us, or that any future offering of securities will be successful. Obtaining additional financing is
subject to a number of factors, including economic factors, investor sentiment and any business opportunities or prospective property interests that we may enter into in the future. Financing, therefore, may not be available on acceptable terms, if at all. The most likely source of future funds presently available to us is through the sale of equity capital. If additional funds are raised through the issuance of equity securities, there may be a significant dilution in the value of the Company’s
outstanding common stock. The Company could suffer adverse consequences if it is unable to obtain additional capital which would cast substantial doubt on its ability to continue its operations and growth. If we are unable to raise additional funds when required, we may be forced to delay our plan of operation and our entire business may fail.
THE COMPANY CURRENTLY RELIES ON CERTAIN KEY INDIVIDUALS AND THE LOSS OF ONE OF THESE CERTAIN KEY INDIVIDUALS COULD HAVE AN ADVERSE EFFECT ON THE COMPANY
The Company's success depends to a certain degree upon certain key members of the management. These individuals are a significant factor in the Company's growth and success. The loss of the service of members of the management and advisory board could have a material adverse effect on the Company. In particular, the success of the Company
is highly dependent upon the efforts of the President & CEO, CFO, PAO, Chair & Director of the Company, the loss of whose services would have a material adverse effect on the success and development of the Company.
THE COMPANY DOES NOT MAINTAIN KEY MAN INSURANCE TO COMPENSATE THE COMPANY FOR THE LOSS OF CERTAIN KEY INDIVIDUALS
The Company does not anticipate having key man insurance in place in respect of its senior officers or personnel, although the Board has discussed and investigated the prospect of obtaining key man insurance for our CEO.
UPON COMPLETION OF A BUSINESS OPPORTUNITY OR COMBINATION, THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO SUCCESSFULLY MANAGE OR ACHIEVE GROWTH OF THAT BUSINESS OPPORTUNITY OR COMBINATION
Our ability to achieve growth upon the acquisition of a suitable business opportunity or business combination will be dependent upon a number of factors including our ability to hire and train management and other employees and the adequacy of our financial resources. There can be no assurance that we will be able to successfully
manage any business opportunity or business combination. Failure to manage anticipated growth effectively and efficiently could have a material adverse effect on our company.
IF WE COMPLETE A BUSINESS OPPORTUNITY OR COMBINATION, WE MAY BE REQUIRED TO ISSUE A SUBSTANTIAL NUMBER OF COMMON SHARES WHICH WOULD DILUTE THE SHAREHOLDINGS OF OUR CURRENT SHAREHOLDERS AND MAY RESULT IN A CHANGE OF CONTROL OF OUR COMPANY
We may pursue the acquisition of a business opportunity or a business combination with a private company. The likely result of such a transaction would result in our company issuing common shares to shareholders of such private company. Issuing previously authorized and unissued common shares in the capital of our company
will reduce the percentage of common shares owned by existing shareholders and may result in a change in the control of our company and our management.
THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO SUCCESSFULLY IDENTIFY AND EVALUATE A SUITABLE BUSINESS OPPORTUNITY.
The success of our company following an entry into any business opportunity or business combination will depend to a great extent on the operations, financial condition and management of any identified business opportunity. While management intends to seek business opportunities and/or business combinations with entities with established operating
histories, there is no assurance that we will successfully locate business opportunities meeting such criteria. In the event that we complete a business combination or otherwise acquire a business opportunity, the success of our operations may be dependent upon management of the successor firm or venture partner firm, together with a number of other factors beyond our control.
Risks Associated with Our Common Stock
OUR COMMON STOCK IS ILLIQUID AND THE PRICE OF OUR COMMON STOCK MAY BE NEGATIVELY IMPACTED BY FACTORS WHICH ARE UNRELATED TO OUR OPERATIONS.
Our common stock currently trades on a limited basis on the OTC Bulletin Board. Trading of our stock through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market
price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price
of securities issued by many companies for reason unrelated to their operating performance and could have the same effect on our common stock.
THE VALUE AND TRANSFERABILITY OF THE COMPANY'S SHARES MAY BE ADVERSELY IMPACTED BY THE LIMITED TRADING MARKET FOR ITS SHARES AND THE PENNY STOCK RULES
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules,
which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized risk disclosure document
in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account.
The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers
to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
THE FINANCIAL INDUSTRY REGULATORY AUTHORITY (‘FINRA’) HAS ADOPTED SALES PRACTICE REQUIREMENTS WHICH MAY ALSO LIMIT A SHAREHOLDER’S ABILITY TO BUY AND SELL OUR STOCK.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell
our stock and have an adverse effect on the market for its shares.
FUTURE SALES OF SHARES MAY ADVERSELY IMPACT THE VALUE OF THE COMPANY'S STOCK.
If required, the Company may seek to raise additional capital through the sale of common stock. Future sales of shares by the Company or its stockholders could cause the market price of its common stock to decline.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not make any sales of equity securities during the quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has no senior securities outstanding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 26, 2009, the Company decreased its authorized common shares limit from 11,200,000,000 to 1,000,000,000. Shareholder approval for this change was received October 23, 2009 and a Definitive 14A was filed with the Securities Exchange Commission and recorded with the Nevada Secretary of State Corporate Registry.
There were no other matters during the quarter ended December 31, 2009, which were submitted to a vote of the Company's security holders, through the solicitation of proxies or otherwise.
ITEM 5. OTHER INFORMATION
(a) During the quarter there was no information which would have been required to be filed via a report on Form 8-K which was not filed as such.
(b) During the quarter there were no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.
EXHIBIT INDEX
|
Number |
Exhibit Description |
|
3.1 |
Articles of Incorporation* |
|
3.2 |
Certificate of Amendment of Articles of Incorporation* |
|
3.3 |
Bylaws* |
* Filed as an exhibit to our registration statement on Form SB-2 filed May 1, 2006 and incorporated herein by this reference
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CLEAN POWER CONCEPTS INC.
/s/ Michael Shenher
Michael Shenher
President & CEO, CFO, PAO,
Director, and Chair
Dated: February 19, 2010
20