Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 # 333-149617
NOVAGEN SOLAR, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
98-0471927
(I.R.S. Employer Identification number)
1440-3044 BLOOR STREET WEST, TORONTO, ONTARIO M8X 2Y8
(Address of principal executive offices)
Issuer's telephone number: 647.628.5375
Securities registered under Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.0001 PAR VALUE
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 preceding 12
months (or for such shorter period that the Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [ x ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
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 [ X ] No [ ]
As of March 31, 2011, the registrant had 43,675,900 shares of its Common Stock
outstanding.
PART I -- FINANCIAL INFORMATION
NOVAGEN SOLAR INC.
(A development stage company)
Balance Sheets
March 31, 2011
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
-----------------------------------------------------------------------------------------------
March 31 December 31
2011 2010
-----------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Prepaid expenses $ - $ 7,833
-----------------------------------------------------------------------------------------------
TOTAL ASSETS $ - $ 7,833
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 10,644 $ 3,968
Due to a related party 4,025 4,025
-----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 14,669 7,993
-----------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL
Authorized:
50,000,000 preferred shares at a par value of $0.0001 per share
Issued and outstanding: Nil
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 43,675,900 common shares 4,367 4,367
(December 31, 2010: 43,675,900)
ADDITIONAL PAID-IN CAPITAL 497,935 497,935
(DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE (516,971) (502,462)
-----------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (14,669) (160)
-----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ - $ 7,833
===============================================================================================
The accompanying notes are an integral part of these financial statements.
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Stockholders' Equity (Deficiency)
For the period from June 22, 2005 (inception) to March 31, 2011
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------------------------------------------
Deficit
accumulated Total
Additional during shareholder's
Preferred Stock Common Stock paid-in exploration equity
Shares Amount Shares Amount capital stage (deficiency)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005 - $ - 11,251,300 $ 1,125 $ 18,931 $ (6,418) $ 13,638
-----------------------------------------------------------------------------------------------------------------------------------
Net (loss) and comprehensive (loss) for the year - - - - - (5,935) (5,935)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2006 - $ - 11,251,300 $ 1,125 $ 18,931 $ (12,353) $ 7,703
-----------------------------------------------------------------------------------------------------------------------------------
Net (loss) and comprehensive (loss) for the year - - - - - 372 372
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2007 - $ - 11,251,300 $ 1,125 $ 18,931 $ (11,981) $ 8,075
-----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash - - 1,200,000 120 59,880 - 60,000
on August 6, 2008 at $0.05 per share
Net (loss) and comprehensive (loss) for the year - - - - - (29,599) (29,599)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2008 - $ - 12,451,300 $ 1,245 $ 78,811 $ (41,580) $ 38,476
-----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock - - 3,000,000 300 17,968 - 18,268
on July 10, 2009 at $0.006 per share
Rescind issuance of common stock at $0.006 per share - - (3,000,000) (300) (17,968) - (18,268)
Issuance of common stock for service - - 200,000 20 109,980 - 110,000
on September 8, 2009 at $0.55 per share
Net (loss) and comprehensive (loss) for the year - - - - - (396,673) (396,673)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2009 - $ - 12,651,300 $ 1,265 $ 188,791 $ (438,253) $ (248,197)
-----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock - - 10,000,000 1,000 99,000 - 100,000
in August 16, 2010 at $0.01 per share
Issuance of common stock for debt settlement in - - 21,224,600 2,122 210,124 - 212,246
August 16, 2010 at $0.01 per share
Cancellation of common stock - - (200,000) (20) 20 - -
Net (loss) and comprehensive (loss) for the year - - - - - (64,209) (64,209)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2010 - $ - 43,675,900 $ 4,367 $ 497,935 $ (502,462) $ (160)
-----------------------------------------------------------------------------------------------------------------------------------
Net (loss) and comprehensive (loss) for the period - - - - - (14,509) (14,509)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2011 - $ - 43,675,900 $ 4,367 $ 497,935 $ (516,971) $ (14,669)
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Operations and Comprehensive Loss
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
---------------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005
(inception) to Three months ended Three months ended
March 31, 2011 March 31, 2011 March 31, 2010
---------------------------------------------------------------------------------------------------------------
EXPENSES
Bank charges $ 390 $ (21) $ 43
Consulting fees 27,212 7,833 -
Director fees 110,000 - -
Interest expenses 1,811 - -
Marketing expense 184,591 - -
Office expenses 15,801 - 3,591
Professional fees 90,152 6,467 7,968
Resource property acquisition and exploration costs 7,568 - -
Transfer agent 3,269 230 150
Travel expenses 17,211 - 628
Write-off exploration program security deposit 7,610 - -
Project investigation 50,000 - -
Foreign exchange loss (gain) 1,356 - -
---------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS 516,971 14,509 12,380
---------------------------------------------------------------------------------------------------------------
NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD $ (516,971) $ (14,509) $ (12,380)
---------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00)
===============================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
- basic and diluted 43,675,900 12,649,078
===============================================================================================================
The accompanying notes are an integral part of these financial statements.
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Cash Flows
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
------------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005
(inception) to Three months ended Three months ended
March 31, 2011 March 31, 2011 March 31, 2010
------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income (loss) for the period $ (516,971) $ (14,509) $ (12,380)
Adjustment for items not involving cash:
- Project investigation 50,000 - -
- Consulting fee 110,000 - -
Changes in operating assets and liabilities
- (increase) decrease in prepaid expenses - 7,833 (76)
- accounts payable and accrued liabilities 164,332 6,676 (1,821)
------------------------------------------------------------------------------------------------------------
NET CASH FROM (USED IN) OPERATING ACTIVITIES (192,639) - (14,277)
------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Convertible debenture - related party (50,000) - -
Due to a related party 62,583 - 14,233
Proceeds from issuance of common stock 180,056 - -
------------------------------------------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES 192,639 - 14,233
------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - - (44)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - - 304
------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ - $ 260
============================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
INTEREST PAID IN CASH $ - $ - $ -
------------------------------------------------------------------------------------------------------------
INCOME TAX PAID IN CASH $ - $ - $ -
------------------------------------------------------------------------------------------------------------
NON-CASH INFORMATION:
ISSUANCE OF COMMON SHARES FOR SETTLEMENT OF DEBT $ 212,246 $ - $ -
============================================================================================================
The accompanying notes are an integral part of these financial statements.
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Novagen Solar Inc. (hereinafter "the Company"), was incorporated in the State of
Nevada, U.S.A., on June 22, 2005 under the name of Pickford Minerals, Inc. The
Company's fiscal year end is December 31. On May 12, 2009, the Company changed
its name to Novagen Solar Inc.
The Company was originally engaged in the exploration of mineral deposits in
Labrador, Newfoundland, but was unable to implement its exploration program. In
April 2009, the Company began to pursue business opportunities relating to
photovoltaic solar energy.
On April 27, 2009, the Company entered into a Share Purchase Agreement (the
"Reorganization Agreement") with Novagen Solar (Canada) Ltd., a privately held
Canadian corporation formed on February 14, 2009 ("NSC"). Upon the closing of
the Reorganization Agreement on July 10, 2009, the shareholders of NSC delivered
all of their equity interests in NSC to the Company in exchange for 3,000,000
shares of common stock in the Company and 3,000,000 convertible securities of
the Company, as a result of which NSC became a wholly-owned subsidiary of the
Company (the "Reorganization"). The note is non-interest bearing, convertible
at the rate of $0.01 per share at the option of the holder. NSC is a sales
company engaged in the business of selling a variety of photovoltaic products.
At the time of the Reorganization, NSC had the exclusive right in Canada and the
non-exclusive right elsewhere to sell a line of photovoltaic products
distributed by Rainbow Solar Inc, a Delaware corporation ("RSI"). The RSI sales
license was terminated by mutual consent on November 10, 2009.
On December 1, 2009, the Reorganization Agreement was rescinded, with the former
shareholders of NSC exchanging all securities received under the Reorganization
Agreement for all the issued and outstanding shares of NSC (the "Rescission").
As part of the Rescission, on December 1, 2009 the Company issued a non-interest
bearing convertible demand note for $50,000 to NSC for the sample solar panels
used by the Company. The Company paid the note in full on August 10, 2010.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America applicable to a
going concern which assume that the Company will realize its assets and
discharge its liabilities in the normal course of business. The Company has
incurred accumulated losses of $516,971 since inception and has not generated
any revenue. The future of the Company is dependent upon its ability to develop
profitable sales and distribution operations. These factors create doubt as to
the ability of the Company to continue as a going concern. Realization values
may be substantially different from the carrying values as shown in these
financial statements should the Company be unable to continue as a going
concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
the generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates that have been made using careful judgment. The
financial statements have, in management's opinion been properly prepared within
reasonable limits of materiality and within the framework of the significant
accounting policies summarized below:
Accounting Method
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Use of Estimates
The preparation of financial statements in conformity with 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 for the reporting period. The
Company reviews its estimates on an ongoing basis. The estimates were based on
historical experience and on various other assumptions that the Company believes
to be reasonable under the circumstances. Actual results could differ from
these estimates. The Company believes the judgments and estimates required in
its accounting policies to be critical in the preparation of the Company's
financial statements.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments and short-term debt instruments with original maturities of
three months or less to be cash equivalents. As at March 31, 2011 and December
31, 2010, there were no cash equivalents.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality
financial institutions in uninsured accounts.
Foreign Currency Transactions
The Company is located and operating outside of the United States of America.
It maintains its accounting records in U.S. Dollars as follows:
At the transaction date each asset, liability, revenue and expense is translated
into U.S. dollars by the use of the exchange rate in effect at that date. At
the period end, monetary assets and liabilities are re-measured by using the
exchange rate in effect at that date. The resulting foreign exchange gains and
losses are included in operations.
Fair Value of Financial Instruments
The Company's financial instruments as defined by Accounting Standards
Codification ("ASC") 825, "Disclosures about Fair Value of Financial
Instruments," include cash and cash equivalents, accounts payable and accrued
liabilities, convertible note and due to a related party. Fair values were
assumed to approximate carrying value for these financial instruments, except
where noted. Management is of the opinion that the Company is not exposed to
significant interest or credit risks arising from these financial instruments.
The Company is operating outside the United States of America and has
significant exposure to foreign currency risk due to the fluctuation of currency
in which the Company operates and U.S. dollars.
Long-lived assets impairment
Long-lived assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360, Accounting for the
Impairment or Disposal of Long-Lived Assets.
Management considers assets to be impaired if the carrying value exceeds the
future projected cash flows from related operations (undiscounted and without
interest charges). If impairment is deemed to exist, the assets will be written
down to fair value. Fair value is generally determined using a discounted cash
flow analysis.
Stock-Based Compensation
The Company adopted ASC 718, "Share-Based Payment", to account for its stock
options and similar equity instruments issued. Accordingly, compensation costs
attributable to stock options or similar equity instruments granted are measured
at the fair value at the grant date, and expensed over the expected vesting
period. ASC 718 requires excess tax benefits be reported as a financing cash
inflow rather than as a reduction of taxes paid.
The Company did not grant any stock options during the three-month period ended
March 31, 2011.
Comprehensive Income
The Company adopted ASC 220, Reporting Comprehensive Income, which establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. The Company is disclosing this information on its
Statement of Stockholders' Equity. Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. The
Company has no elements of "other comprehensive income" for the three-month
periods ended March 31, 2011 and 2010.
Income Taxes
The Company has adopted ASC 740, Accounting for Income Taxes, which requires the
Company to recognize 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 and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic and Diluted Loss Per Share
In accordance with ASC 260 - "Earnings Per Share", the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would be outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. As at March 31, 2011 and March 31,
2010, the basic loss per share was equal to diluted loss per share as there was
no dilutive instrument.
Business Combinations
ASC 805 applies the acquisition method of accounting for business combinations
established in ASC 805 to all acquisitions where the acquirer gains a
controlling interest, regardless of whether consideration was exchanged. ASC
805 establishes principles and requirements for how the acquirer: a) recognizes
and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree; b)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase; and c) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. The adoption of the standard did not have
a material impact on the Company
Non-controlling Interests in Consolidated Financial Statements
ASC 160 requires companies with noncontrolling interests to disclose such
interests clearly as a portion of equity but separate from the parent's equity.
The noncontrolling interest's portion of net income must also be clearly
presented on the Income Statement.
Disclosure about Derivative Instruments and Hedging Activities
ASC 815-10 requires companies with derivative instruments to disclose
information that should enable financial-statement users to understand how and
why a company uses derivative instruments, how derivative instruments and
related hedged items are accounted for under ASC 815 "Accounting for Derivative
Instruments and Hedging Activities" and how derivative instruments and related
hedged items affect a company's financial position, financial performance and
cash flows.
Determination of the Useful Life of Intangible Assets
The Company adopted FSP No. 142-3, "Determination of the Useful Life of
Intangible Assets" ("FSP 142-3"), as codified in ASC subtopic 350-30,
Intangibles - Goodwill and Other: General Intangibles Other than Goodwill (ASC
350-30) and ASC topic 275, Risks and Uncertainties (ASC 275), which amends the
factors an entity should consider in developing renewal or extension assumptions
used in determining the useful life of recognized intangible assets under FASB
Statement No. 142, as codified in ASC topic 350, Intangibles Goodwill and Other
(ASC 350). This new guidance applies prospectively to intangible assets that are
acquired individually or with a group of other assets in business combinations
and asset acquisitions.
Accounting for Convertible Debt Instruments
The Company adopted FASB Staff Position ("FSP") APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)", as coded in ASC 470 "debt". ASC 470
specifies that issuers of convertible debt instruments that may be settled in
cash upon conversion (including partial cash settlement) should separately
account for the liability and equity components in a manner that will reflect
the entity's nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods.
Accounting for Financial Guarantee Insurance Contracts
The Company adopted ASC 944-20, "Accounting for Financial Guarantee Insurance
Contracts" (formerly SFAS No. 163, Accounting for Financial Guarantee Insurance
- an interpretation of FASB Statement No. 60, Accounting and Reporting by
Insurance Enterprises). ASC 944-20 requires that an insurance enterprise
recognize a claim liability prior to an event of default (insured event) when
there is evidence that credit deterioration has occurred in an insured financial
obligation. The adoption of ASC 944-20 has no effect on the Company's financial
reporting at this time.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share-Based Payments Transactions
The Company adopted ASC 260-10, "Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities." ASC 260-10
provides that unvested share-based payment awards that contain non-forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. Upon adoption, a company is required
to retrospectively adjust its earnings per share data (including any amounts
related to interim periods, summaries of earnings and selected financial data)
to conform with the provisions of ASC 260-10.
Equity Method Investment Accounting Considerations
The Company adopted ASC 323-10, "Equity Method Investment Accounting
Considerations" that addresses how the initial carrying value of an equity
method investment should be determined, how an impairment assessment of an
underlying indefinite-lived intangible asset of an equity method investment
should be performed, how an equity method investee's issuance of shares should
be accounted for, and how to account for a change in an investment from the
equity method to the cost method. The adoption of ASC 323-10 did not have a
material impact on our financial condition or results of operations.
Fair Value Measurement and Disclosures
The Company adopted ASC 820 Fair Value Measurements and Disclosures ("ASC 820").
As defined in ASC 820, fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In order to increase
consistency and comparability in fair value measurements, ASC 820 establishes a
fair value hierarchy that prioritizes observable and unobservable inputs used to
measure fair value into three broad levels, which are described below:
- Level 1: Quoted prices (unadjusted) in active markets that are accessible
at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
- Level 2: Inputs other than quoted prices within Level 1 that are
observable for the asset or liability, either directly or indirectly.
- Level 3: Unobservable inputs that are used when little or no market data
is available. The fair value hierarchy gives the lowest priority to Level 3
inputs
In determining fair value, the Company utilizes valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible as well as considers counterparty credit risk in
its assessment of fair value.
The Company's financial instruments consist principally of cash and cash
equivalents, accounts payable and accrued liabilities, convertible debenture -
related party, and due to a related party. Pursuant to ASC 820, the fair value
of cash and cash equivalents is determined based on "Level 1" inputs, which
consist of quoted prices in active markets for identical assets. The recorded
values of all other financial instruments approximate their current fair values
because of their nature and respective maturity dates or durations.
Recently Adopted Accounting Pronouncements
In February 2010, the FASB issued ASC No. 2010-09, "Amendments to Certain
Recognition and Disclosure Requirements", which eliminates the requirement for
SEC filers to disclose the date through which an entity has evaluated subsequent
events. ASC No. 2010-09 is effective for its fiscal quarter beginning after 15
December 2010. The Company adopted this standard on January 1, 2011 and the
adoption of ASC No. 2010-09 did not have a material impact on the Company's
financial statements.
In April 2010, the FASB issued ASU 2010-13, "Compensation-Stock Compensation
(Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security
Trades," or ASU 2010-13. This ASU provides amendments to Topic 718 to clarify
that an employee share-based payment award with an exercise price denominated in
currency of a market in which a substantial portion of the entity's equity
securities trades should not be considered to contain a condition that is not a
market, performance, or service condition. Therefore, an entity would not
classify such an award as a liability if it otherwise qualifies as equity. The
amendments in this ASU are effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2010. The Company
adopted this standard on January 1, 2011 and the adoption of ASU 2010-11 did not
have a material impact on the Company's financial statements.
In May 2010, the FASB issued Accounting Standards Update 2010-19 (ASU 2010-19),
Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency
Exchange Rates. The amendments in this Update are effective as of the
announcement date of March 18, 2010. The Company adopted this standard on
January 1, 2011 and the adoption of ASU 2010-11 did not have a material impact
on the Company's financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements
In April 2011, the FASB issued authoritative guidance to clarify when a
restructuring constitutes a troubled debt restructuring. In evaluating whether a
restructuring constitutes a troubled debt restructuring, a creditor must
separately conclude that two conditions exist: (1) the restructuring constitutes
a concession and (2) the debtor is experiencing financial difficulties. The
guidance will be effective for interim and annual reporting periods beginning
after June 15, 2011 and will be applied retrospectively to the beginning of the
annual period of adoption. The Company does not anticipate that the guidance
will have an impact on the Company's financial statements.
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the Company's financial statements
upon adoption.
NOTE 3 - PREPAID EXPENSES
On August 24, 2010, the Company entered into a consulting agreement with a
shareholder of the Company for corporate development services and fund raising
for a period of six months commencing on September 1, 2010. The Company agreed
to pay $23,500 for the service in advance. As at December 31, 2010, the Company
has paid $23,500 in respect of the consulting services, of which $15,667 was
expensed in fiscal 2010 and the balance of $7,833 was expensed in the three
month period ended March 31, 2011.
NOTE 4 - PREFERRED AND COMMON STOCK
The Company has 50,000,000 shares of preferred stock authorized and none issued.
The Company has 100,000,000 shares of common stock authorized, of which
43,675,900 shares are issued and outstanding. All shares of common stock are
non-assessable and non-cumulative, with no preemptive rights.
On September 8, 2009, the Company issued 200,000 common shares to a director of
the Company as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000. On March 31, 2010 the former
director surrendered these shares to the Company.
Under the terms of the Reorganization, on July 10, 2009, the Company issued
3,000,000 common shares at deemed value of $0.006 per share to the shareholders
of Novagen Solar (Canada) Ltd. The shares were surrendered to the Company on
December 1, 2009, as part of the Rescission.
On August 16, 2010, the Company issued 21,224,600 shares of common stock to
three of its creditors at a price of $0.01 per share, in full and final
settlement of a debt of $212,246 owed to the creditors. One of the creditors
was the sole director of the Company, and he received 5,855,800 shares of common
stock in full and final settlement of $58,558 owed to him by the Company for
expenses incurred on the Company's behalf.
On August 16, 2010 the Company issued 10,000,000 shares of common stock at a
price of $0.01 per share to five purchasers for total cash proceeds of $100,000.
NOTE 5 - SEGMENT INFORMATION
The Company currently conducts all of its operations in Canada.
NOTE 6 - RELATED PARTY TRANSACTIONS
As at March 31, 2011 the Company owed $4,025 (December 31, 2010 - $4,025) to the
sole director of the Company, for expenses he paid on behalf of the Company. The
amount is non-secured, non-interest bearing and due on demand.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR PLAN OF OPERATION SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE RELATED NOTES. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE
RISKS AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. OUR ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS.
OVERVIEW
Until July 10, 2009, our business plan was to explore our mineral property to
determine whether it contained commercially exploitable reserves of valuable
minerals. Our plan was to commence a mineral exploration program that would
have involved expanded geological mapping, and geochemical sampling that would
cover previously established grid areas, as well as other prospective sites that
might have been developed to delineate either base metals or industrial
minerals. Due to higher than anticipated fuel costs, we were unable to commence
our exploration program as planned in 2008. By the second quarter of 2009, we
had insufficient capital to initiate and complete our program. In light of
market conditions, our management determined in our second fiscal quarter of
2009 that it was in our best interests to review opportunities in the field of
solar energy.
On April 27, 2009, we entered into the Reorganization Agreement with the
stockholders of NSC to acquire all the issued and outstanding shares of NSC.
NSC was the exclusive sales agent in Canada of RSi, and a non-exclusive sales
agent for RSi everywhere else in the world. The acquisition of NSC was closed
on July 10, 2009. As a result of the acquisition, we abandoned our mineral
exploration interests and began pursuing the marketing, sale and distribution of
PV products as our primary business.
On November 10, 2009, we agreed with NSC and RSi to terminate the Sales License
granting NSC the right to sell photovoltaic products distributed by RSi. The
termination released all parties to the sales license from all claims and
obligations arising from the sales license or the termination thereof. On
December 1, 2009, the acquisition of NSC was rescinded, resulting in all issued
and outstanding shares of NSC being returned to the original NSC stockholders in
exchange for all securities issued by the Company as part of the acquisition.
As part of the rescission of our acquisition of NSC, on December 31, 2009 we
issued a non-interest bearing demand note for $50,000 to NSC for the acquisition
of the solar panels. On August 10, 2010, we repaid the demand note in full.
Our business is in the early stages of development. We presently do not have
sufficient funds to sustain minimal operations for the next 12 months. We do
not currently have any cash flows from operations and our available capital is
insufficient to implement our business plan and fund business operations long
enough to become cash flow positive or to achieve profitability. Our management
believes that a minimum of $600,000 will be required to execute our business
plan and secure development and regulatory approvals for solar power stations
over the next twelve months. Our currently available capital and cash flows
from operations are insufficient to execute our current business plan and fund
business operations long enough to become cash flow positive or to achieve
profitability. Our ultimate success will depend upon our ability to raise
capital.
We will be required to pursue sources of additional capital through various
means, including joint venture projects and debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, and the issuance of
warrants or other derivative securities, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital and
financing, including investment banking fees, legal fees, accounting fees,
printing and distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities we may issue,
such as convertible notes and warrants, which will adversely impact our
financial condition.
Our ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the renewable energy
industry, and the fact that we have not been profitable, which could impact the
availability or cost of future financings. If the amount of capital we are able
to raise from financing activities, together with our revenue from operations,
is not sufficient to satisfy our capital needs, even to the extent that we
reduce our operations accordingly, we may be required to cease operations.
There is no assurance that we will be able to obtain financing on terms
satisfactory to use, or at all. We do not have any arrangements in place for
any future financing. If we are unable to secure additional funding, we may
cease or suspend operations. We have no plans, arrangements or contingencies in
place in the event that we cease operations.
We have not earned revenue since inception and we presently have no solar power
installations in operation. Since inception, we have suffered recurring losses
and net cash outflows from operations, and our activities have been financed
from the proceeds of share subscriptions and loans from management and
non-affiliated third parties. We expect to continue to incur substantial losses
to implement our business plan. We have not established any other source of
equity or debt financing and there can be no assurance that we will be able to
obtain sufficient funds to implement our business plan. As a result of the
foregoing, our auditors have expressed substantial doubt about our ability to
continue as a going concern in our financial statements for the period ended
March 31, 2011. If we cannot continue as a going concern, then investors may
lose all of their investment.
RESULTS OF OPERATIONS
We recorded a net loss of $14,509 for the three month period ended March 31,
2011, compared with a net loss of $12,380 for the period ended March 31, 2010.
Operating expenses consisted of professional fees, consulting fees and other
general corporate expenses.
Consulting fees for the three month period ended March 31, 2011 were $7,833
compared with $Nil for the three month period ended March 31, 2010. All
consulting fees incurred by Novagen in the first fiscal quarter of 2011 were
related to Novagen's corporate development initiatives.
Professional fees were $6,467 for the three month period ended March 31, 2011,
compared with $7,968 for the three month period ended March 31, 2010.
Professional fees for the first fiscal quarter of 2011 were due to audit
expenses.
Office and other general expenses were $209 for the three month period ended
March 31, 2011, compared with office and general expenses of $4,412 for the
three month period ended March 31, 2010.
LIQUIDITY AND CAPITAL RESOURCES.
As of March 31, 2011, our total liabilities were $14,669 comprised of $10,644 in
trade debt arising from professional fees and $4,025 owing to a director for
expenses incurred on our behalf. As of December 31, 2010, total liabilities
were $7,993 comprised of $3,968 in trade debt and $4,025 owning to a director
for expenses incurred on our behalf.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of March 31, 2011, we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer (who are one and the same person), of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended. Based solely on the material
weaknesses described below, our Chief Executive Officer and Chief Financial
Officer concluded that, as of March 31, 2011 the Company's disclosure controls
and procedures were not effective:
1. The Company presently has only one officer and no employees. Inasmuch as
there is no segregation of duties within the Company, there is no management
oversight, no one to review control documentation and no control documentation
is being produced.
CHANGES IN DISCLOSURE CONTROLS AND PROCEDURES
There were no changes in disclosure controls and procedures that occurred during
the period covered by this report that have materially affected, or are
reasonably likely to materially effect, our disclosure controls and procedures.
We will not be implementing any changes to our disclosure controls and
procedures until there is a significant change in our operations or capital
resources.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither Novagen nor any of its officers or directors is a party to any material
legal proceeding or litigation and such persons know of no material legal
proceeding or contemplated or threatened litigation. There are no judgments
against Novagen Solar Inc. or its officers or directors. None of our officers or
directors have been convicted of a felony or misdemeanour relating to securities
or performance in corporate office.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
and are not required to provide the information required under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not sell any securities during the three month period ended
March 31, 2011.
ITEM 3. DEFAULT UPON SENIOR NOTES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
EXHIBIT DESCRIPTION
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NOVAGEN SOLAR INC.
Date: May 10, 2011 /s/ Thomas Mills
Thomas Mills
President, Chief Executive Officer,
Chief Financial Officer, and
Principal Accounting Office
