United States

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 quarterly period ended March 31, 2011

or

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________.

Commission file number 000-52258

PROPER POWER AND ENERGY, INC.

(Name of small business issuer in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

59-3681572

(I.R.S. Employer Identification No.)

405 South Dale Mabry Highway #360, Tampa, Florida 33609

 (Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code:  (904) 371-2445

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

(x) Yes (__) No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   (__) Yes (_x_) No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer (__)    Accelerated filer (__)     Non-accelerated filer (__)   Smaller reporting company (_x_)                                                 (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes (__) No ( x ). The number of shares of the issuer’s common stock, par value $.0001 per share, outstanding as of May 15, 2011 was 101,000,000.

TABLE OF CONTENTS

	Page
Part I.  Financial Information	3
Item 1.  Financial Statements.	3
Balance Sheets for the periods ending March 31, 2011 (unaudited) and December 31, 2009 (audited).	3
Statements of Operations for the three month periods ending March 31, 2011 and 2010 (unaudited).	4
Statements of Cash Flows for the three month periods ending March 31, 2011 and 2010 (unaudited).	5
Notes to Financial Statements (unaudited)	6
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.	14
Item 4.  Controls and Procedures.	14
Part II.  Other Information	14
Item 1.  Legal Proceedings.	14
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.	14
Item 3.  Defaults Upon Senior Securities.	15
Item 4.  Submission of Matters to a Vote of Securities Holders (Removed and Reserved)	15
Item 5.  Other Information.	15
Item 6.  Exhibits	15
Signatures	16

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Part I.  Financial Information

Item 1.  Financial Statements.

Proper Power and Energy, Inc.
Balance Sheet
					March 31,				December 31,
					2011				2010
					(unaudited)				(audited)
Assets
Current assets
	Cash			$	344			$	82
	Accounts receivable				1,772				-
	Advances and prepaid production costs				129,551
	Prepaid offering costs				612,000				612,000
Total current assets					743,667				612,082
Property & equipment, net of accumulated
	depreciation of  $8,547 and $7,647, respectively				29,239				30,139
Intangible property, net of accumulated
	amortization of  $21,583 and $17,458, respectively				308,417				312,542
Total Assets				$	1,081,323			$	954,763
Liabilities and Stockholders' Equity
Current liabilities
	Accounts payable and accrued expenses			$	77,413			$	56,528
	Notes payable, current portion				3,975				-
	Demand notes payable				173,969				153,469
	Notes payable to shareholders				672,705				563,154
Total current liabilities					928,062				773,151
Notes payable, net of current portion					196,025				200,000
Total liabilities					1,124,087				973,151
Stockholders' Equity
	Common Stock, $.0001 par value,  500,000,000 shares
	authorized; 101,000,000 and 101,000,000 shares
	issued and outstanding, respectively				10,100				10,100
	Additional paid-in capital				1,195,499				1,195,499
	Accumulated Deficit				(1,248,363)				(1,223,987)
Total stockholders' equity					(42,764)				(18,388)
Total Liabilities and Stockholders' Equity				$	1,081,323			$	954,763

The accompanying notes are an integral part of these financial statements.

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Proper Power and Energy, Inc.
Statement of Operations
(unaudited)
					For the Three Months Ended
					March 31,
						2011				2010
Revenues					$	1,772			$	-
Operating expenses:
	Marketing & promotion					2,045				3,773
	Professional fees					13,220				36,590
	General & administrative					418				3,416
	Amortization and depreciation					5,025				3,400
	Interest expenses					5,440				11,098
	Total operating expenses					26,148				58,277
Net income  (loss)					$	(24,376)			$	(58,277)
Earnings (loss) per share, primary
	and dilutive				$	(0.00)			$	(0.00)
Weighted average shares outstanding
	primary and dilutive					101,000,000				67,500,000

The accompanying notes are an integral part of these financial statements.

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Proper Power and Energy, Inc.
Statement of Cash Flows
(unaudited)
				For the Three Months Ended
				March 31,
					2011				2010
Cash Flows from Operating Activities:
	Net (loss) income			$	(24,376)			$	(58,277)
	Adjustment to reconcile Net Income to net
	cash provided by operations:
	Depreciation and amortization				5,025				3,400
	Stock based compensation
	Changes in assets and liabilities:
	Accounts receivable				(1,772)				-
	Advances and prepaid production costs				(129,551)				-
	Accounts payable and accrued expenses				20,885				28,668
	Net Cash (Used) Provided by Operating Activities				(129,789)				(26,209)
Cash Flows from Financing Activities:
	Proceeds from issuance of note payable				20,500				24,000
	Repayments of notes payable				-				-
	Proceeds from stockholder advances				109,551				100,000
	Repayment of stockholder advances				-				-
	Net Cash (Used) Provided by Operating Activities				130,051				124,000
Net increase/decrease in Cash					262				97,791
Cash at beginning of period					82				18,538
Cash at end of period				$	344			$	116,329
Supplemental cash flow information:
	Interest paid			$	-			$	382
	Taxes paid			$	-			$	-

The accompanying notes are an integral part of these financial statements.

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PROPER POWER AND ENERGY, INC.

Notes to Financial Statements

March 31, 2011 and 2010

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Organization

Proper Power and Energy, Inc (“PPWE”, “The Company”) was incorporated January 1, 2000 in the State of Delaware.    Prior to the first quarter of 2009, the Company operated under the name Ivecon, Inc. (“IVEO”, “Ivecon”) as a developer of a secure (encrypted) instant messenger with integrated desktop search, media center, and commerce system. The Company also provided computer support for designing websites.

During the first quarter of 2009 the Company had a change in control.  On March 5, 2009 Ivecon entered into a material definitive agreement with Belmont Partners, LLC by which Belmont Partners LLC acquired one million (1,000,000), pre-forward split (50:1) restricted common stock shares of the Company in exchange for $157,500 in cash in a private equity transaction with the then majority shareholder.   Following the transaction, Belmont Partners, LLC became the majority shareholder with control of 74.07% of the Company’s outstanding capital stock.  At approximately this same time, the Company changed stock transfer agents to PacWest Transfer, LLC of Las Vegas, Nevada.

   

Additionally occurring on March 5, 2009, in a separate private equity transaction, Joseph Abdo acquired from Belmont Partners LLC the control block of stock in the Company consisting of one million (1,000,000) ), pre-forward split (50:1) restricted common stock shares of the Company for $250,000.  

In May 2009, the new management resulting from the change in control, changed the name from Ivecon, Inc. to Proper Power and Energy, Inc., and changed the operating direction to an oil and gas exploration and production company. The organization is committed to utilizing a very dynamic system of research and testing, and as a result of this extensive research and testing, have selected several sites with very good to excellent potential for productivity.

In February 2010, the Company changed stock transfer agents to ClearTrust Transfer, LLC of Lutz, Florida.

Nature of the Business

Proper Power and Energy, Inc. is an oil and natural gas exploration company, whose growth strategy is to acquire mineral rights and search for and develop known reserves for further production, through an efficient scientific approach toward exploration.  We have procured a scientific engineer approach, termed radiometric.  All of our prospects are classified as exploratory in nature, but they are not “wildcat” (oil wells drilled in areas not known to be oil fields) since we use radiometric data advantage, a technology based methodology.  Our prospects are separated geographically from existing oil and gas production, but they are not always separated geologically or radiologically. Therein lays the difference from “wildcatting.”

The economics of exploration with radiometrics are compelling. We believe we can reduce the finding costs and everything associated with the actual drilling and the completion risks. While there is a higher drilling risk associated with an exploratory well than with a development well, the reward potential with a successful exploratory well far exceeds the upside of any developmental well.  In time, our technology may become the industry standard.

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NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

All adjustments consisting of normal recurring adjustments necessary for a fair statement of (a) the result of operations for the three month periods ended March 31, 2011 and 2010; (b) the financial position at March 31, 2011, and (c) cash flows for the three month periods ended March 31, 2011 and 2010, have been made.

The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principals require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates.

The unaudited financial statement and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying unaudited financial statements should be read in conjunction with the financial statements for the years ended December 31, 2010 and 2009 and notes thereto in the Company’s 10-K annual report, filed with the Securities and Exchange Commission.  Operating results for the nine months ended March 31, 2011 and 2010 is not necessarily indicative of the results that may be expected for the entire year.

Fair Value Information

The Company’s balance sheets include the following financial instruments: cash, accounts receivable, accrued liabilities and amounts due to stockholder. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

Fair Value Measurement

All financial and nonfinancial assets and liabilities were recognized or disclosed at fair value in the financial statements.  This value was evaluated on a recurring basis (at least annually).  Generally accepted accounting principles in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on a measurement date. The accounting principles also established a fair value hierarchy which required an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  Three levels of inputs were used to measure fair value.

Level 1: Quotes market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that were corroborated by market data.

Level 3: Unobservable inputs that were not corroborated by market data.

Cash

The majority of cash is maintained with a major financial institution in the United States.  Deposits with this bank may exceed the amount of insurance provided on such deposits.  Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk.  The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Property and Equipment

Equipment is stated at cost.  Depreciation is computed by the straight-line method over estimated useful lives (seven years for equipment).  The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of equipment existed.

Intangibles and Long-Lived Assets

The Company has been in the exploration for oil and gas since March 2009 and has not yet realized any revenues from its planned operations.  It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are to be expensed as incurred. Mineral property (Land Leases) acquisition costs are initially capitalized when incurred.  We amortize intangibles on a straight-line basis over a period of twenty years.

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Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable.  When required impairment losses on assets to be held and used are recognized based on the fair value of the asset.  The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required.  If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset.  When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.  We did not recognize any impairment losses for any periods presented.

Oil and Gas Properties

The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to income.

The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized using the units-of-production method based on estimated proved recoverable oil and gas reserves. Amortization of unevaluated and unproved property costs begins when the properties become proved or their values become impaired.  Impairment of unevaluated and unproved prospects is assessed periodically based on a variety of factors, including management’s intention with regard to future exploration and development of individually significant properties and the ability of the Company to obtain funds to finance such exploration and development.

Revenue Recognition

The Company owns a percentage of a net revenue lease on an oil and gas property.  Revenues are recorded based on the reports of the lease operator when the proceeds of the production are known and the related production costs are allocated to all lease holders.  The Company records the net amount receivable, after expenses, as net lease revenues.  

Income Taxes

The Company accounts for income taxes under the liability method.  Deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

Advertising

The costs of advertising are expensed as incurred.  Advertising expense was $2,045, and $270 for the three months ended March 31, 2011 and 2010, respectively.

Earnings (Loss) per Share

Basic earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares outstanding during the year. Diluted earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares. Due to the losses, the outstanding warrants are considered to be anti-dilutive and not included in the earnings per share calculation.

Recent Accounting Pronouncements

We have reviewed accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. We believe that there are no new or impending standards that may have an impact on our future filings.  The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

NOTE 3 – GOING CONCERN

The Company’s business plan is to acquire, explore and develop potential oil and gas producing properties. The Company has not determined whether its land leases contain oil and gas reserves that are economically recoverable.

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company has never generated revenues from oil and gas production since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future.  At March 31, 2011 the Company has limited cash resources to purchase potential oil and gas producing properties and, therefore will likely require new financing, either through issuing shares or debt, to continue the development of its business.  Management intends to offer additional common stock; however, there can be no assurance that management will be successful in raising the funds necessary to maintain operations, or that a self-supporting level of operations will ever be achieved. The likely outcome of these future events is indeterminable. The continuation of the Company as a going concern is dependent upon the ability of the Company to determine the existence of economically recoverable reserves in its resource properties, confirmation of the Company’s interests in the underlying properties, obtain necessary financing and then profitable operations.  As of March 31, 2011, the Company has generated only minimal revenues from oil and gas production and has accumulated significant losses since inception.  These financial statements do not

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include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

NOTE 4 – PROPERTY AND EQUIPMENT:

Property and equipment consist of the following at March 31, 2011 and December 31, 2009:

		March 31, 2011				December 31, 2009
Seismic Equipment		$	37,786			$	37,786
Less: Accumulated Depreciation			8,547				7,647
		$	29,239			$	30,139

Depreciation expense on equipment for the nine month periods ending March 31, 2011 and 2010 was $900 and $900, respectively.

NOTE 5 – INTANGIBLE ASSETS

The Company has entered into two land leases.  The land has been identified for future drilling and production.  The Company is currently amortizing the leases over 20 years, on a straight-line basis.  The Company will re-assess the amortization and any impairment to the properties upon further testing and production estimates.  Amortization expense for the three month period ended March 31, 2011 and 2010 was $4,125 and $2,500 respectively.  

Future amortization for the next five years ended December 31:.

2011		$        12,375
2012		16,500
2013		16,500
2014		16,500
2015		16,500
thereafter		230,042
		$      308,417

NOTE 6 – NOTES PAYABLE

The Company entered into an agreement with an unrelated company for the purchase of a land lease, in the amount of $200,000.   The promissory note is interest bearing (6%) and payable in monthly installments based on a 240 month amortization of the debt.   Per the agreement, payments have been deferred for the first 24 months and the note has a balloon provision for payment in full, including any accrued and unpaid interest.  The balloon payment is due 24 months after payments begin and installment payments are based on a 240 month repayment.

The minimum payments on the notes payable for the years ending December 31 are as follows:

2011			$	3,975
2012				5,585
2013				190,440
Thereafter				-
Total			$	200,000

The company received advances from unrelated parties in the amount of $173,969.  The advances are payable on demand and bear interest at 6%.

NOTE 7 – INCOME TAXES

The Company has not recognized an income tax benefit for the current quarter and year to date, based on uncertainties concerning its ability to generate taxable income in future periods.  The tax benefit for the current period presented is offset by a valuation allowance (100%) established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not.  In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.  As of March 31, 2011, the Company has incurred losses of approximately $868,000. 

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NOTE 8 – EQUITY

Stock Issuances

The Company has entered into consulting agreements for the purposes of raising capital investments.  The consulting firms will make strategic introductions to funding groups, investment banking firms, and/or other sources interested in furthering the business of PPWE.  In the event that a private/public financing transaction is arranged and successfully implemented using a source first introduced to the Company by the consulting firm in the next 24 months, the consulting firm shall be entitled to receive an advisory fee at closing equal to 10% of the gross proceeds received by the Company.

On November 17, 2010, the Company issued 3,000,000 shares of common stock for a revenue interest in a land lease in Kentucky.

On December 20, 2010, the Company issued 2,500,000 shares of common stock to each of the four (4) officers as compensation for services, 500,000 shares of common stock to an outside consultant for services and 20,000,000 shares of common stock for costs associated with private placement memorandums and the raising of capital.

Options and Warrants

During the nine month period ended September 30, 2009, the Company issued 100,000 options, with an exercise price of $2, to a current shareholder for $26,658.

The Company issued an additional 100,000 warrants in 2009, with exercise prices of $1.50 to $2.00 per share, to certain service providers for work performed.   Based on the fair market stock price at the date of the agreement compared to the exercise price, with consideration of the length of time and the stock price volatility, there was no recognition of compensation expense, since the option price exceeded the current valuation of the option.

In December 2010, Company issued 349,550 warrants, with an exercise price of $2, and a term of six months, to a current shareholder for $6,991.

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NOTE 9 – RELATED PARTY TRANSACTIONS

 

During 2009 the majority shareholder transferred ownership of common stock in settlement of amounts due to consultants, in the amount of $590,000, valued at the shares fair market trading value at the time of settlement.   The use of shares was made for operating cash requirements.  During January 2010, the majority shareholder loaned the company an additional $100,000 in cash.  In December 2010, $115,000 of the loan was repaid.  As of March 31, 2011 the balance due to the majority shareholder is $563,154. The amount due to the shareholder is interest bearing at 2% per annum with no repayment terms and the amount is payable upon demand.  All interest on this debt has been accrued.

During the three months ended March 31, 2011, a shareholder has loaned the Company a total of $109, 551 to help fund the production at the leased property in Kentucky.  The loans are unsecured, bear no interest and are payable on demand.  

The Company has limited needs for office space and is currently performing administrative tasks from offices provided by related parties as needed and at no charge.  The current arrangements are temporary and the Company is actively seeking a facility to occupy upon funding of their plan of operations.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

NOTE 10 –  CONTINGENCIES

From time to time the Company may be a party to litigation matters involving claims against the Company.  Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward Looking Statements.

This quarterly report on Form 10-Q of Proper Power and Energy, Inc. for the period ended March 31, 2011 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby.  To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements which, by definition, involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management's Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements. Where, in any forward-looking statement, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.

The following are factors that could cause actual results or events to differ materially from those anticipated, and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the costs and effects of legal proceedings.

You should not rely on forward-looking statements in this quarterly report. This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by Proper Power and Energy, Inc. For example, a few of the uncertainties that could affect the accuracy of forward-looking statements include:

 

1.

Our business strategy;

2.

Our financial position;

3.

The extent to which we are leveraged;

4.

Our cash flow and liquidity;

5.

Our inability to obtain additional financing in order to fund our operations, capital expenditures, and to meet our other obligations;

6.

Our inability to attract and retain key personnel;

7.

Cost associated with perfecting title for mineral rights in some of our properties.

8.

Uncertainty in exploring for oil and producing oil and gas;

9.

Availability of drilling and production equipment and field service providers;

10.

Disruption of operations and damages due to natural disasters;

11.

Availability, cost and adequacy of insurance coverage;

12.

Competition in the oil and gas industry;

13.

The effects of government regulation and permitting and other legal requirements;

14.

Declines in the prices of oil and gas affecting our estimated operating results and cash flow;

15.

Economic slowdowns that can adversely affect consumption of oil and gas by businesses and consumers

Financial information provided in this Form 10-Q, for periods subsequent to December 31, 2010, is preliminary and remains subject to audit.  As such, this information is not final or complete, and remains subject to change, possibly materially.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion, analysis of financial condition should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report.

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Results of Operations and Critical Accounting Policies and Estimates

The results of operations are based on preparation of financial statements in conformity with accounting principles generally accepted in the United States.  The preparation of financial statements requires management to select accounting policies for critical accounting areas as well as estimates and assumptions that affect the amounts reported in the financial statements.  The Company’s accounting policies are more fully described in Note 2 to the Notes of Financial Statements and in the Company’s annual financial statements filed with Form 10-K.

Results of Operations

The Company received net lease revenues during the three month period ended march 31, 2011. The Company had no revenues for the three month period ended March 31, 2010.  All production expenses were deducted before the Company recognized the revenue.

Operating expenses were $26,148 and $58,277 for the three month periods ended March 31, 2011 and 2010, respectively.  The decrease is due to reductions of professional fees and interest charges.  

  

The Company does not expect to generate any significant increases in revenue to cover the operating expenses.   The Company may incur significant operating expenses in the fulfillment of the obligations of a reporting company under the Securities Exchange Act of 1934 unless and until such time that the Company begins meaningful operations.

Liquidity and Capital Resources

As of March 31, 2011 our cash increased, due mostly to the loans the Company received from its majority shareholder and minor revenue.  

Our Plan of Operation for the next twelve months is to raise capital to implement our strategy. We do not have the necessary cash and revenue to satisfy our cash requirements for the next twelve months. We anticipate that we will use the funds raised in this offering and revenues generated to fund the hiring of employees, equipment purchases, office improvements, and marketing activities and working capital. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then we may not be able to expand our operations. If adequate funds are not available, we believe that our officers and directors will contribute funds to pay for some of our expenses. However, we have not made any arrangements or agreements with our officers and directors regarding such advancement of funds. We do not know whether we will issue stock for the loans or whether we will merely prepare and sign promissory notes. If we are forced to seek funds from our officers or directors, we will negotiate the specific terms and conditions of such loan when made, if ever.

Expected purchases or sale of plant and significant equipment

Expenditures are planned based upon our abilities to fully fund our plan of operations.

Off-Balance Sheet Arrangements

We have made no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Controls and Procedures.

(a)   

Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

With respect to the period ending March 31, 2011, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934.  

Based upon our evaluation regarding the period ending March 31, 2011, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has concluded that its disclosure controls and procedures were not effective due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review.  Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.  

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  However, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

(b)

Changes in Internal Controls.

There have been no changes in the Company’s internal control over financial reporting during the period ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Part II.  Other Information

Item 1.  Legal Proceedings.

None.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

During the nine month period ending March 31, 2011, the Company did not issue any unregistered shares of its common stock.

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Item 3. Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Security Holders.

This Item 4 was removed and reserved by Release No. 33-9089A, effective February 28, 2010.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit Number and Description

Location Reference

(a)

Financial Statements

Filed Herewith

(b)

Exhibits required by Item 601, Regulation SB;

(3.0)

Articles of Incorporation

(3.1)

Initial Articles of Incorporation filed

See Exhibit Key

with SB-2 Registration Statement

on April 26, 2006

(3.2)

Amendment to Articles of Incorporation

See Exhibit Key

filed with SB-2 Registration Statement

on April 26, 2006

(3.3)

Bylaws filed with SB-2 Registration

See Exhibit Key

Statement on April 26, 2006

(11.0)

Statement re:  computation of per share

Note 2 to

Earnings

Financial Stmts.

(14.0)

Code of Ethics

See Exhibit Key

(31.1)

Certificate of Chief Executive Officer

Filed herewith

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

(31.2)

Certificate of Chief Financial Officer

Filed herewith

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

(32.1)

Certification of Chief Executive Officer

Filed herewith

pursuant to 18 U.S.C. § 1350,

as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

(32.2)

Certification of Chief Executive Officer

Filed herewith

pursuant to 18 U.S.C. § 1350,

as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

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Exhibit Key

3.1

Incorporated by reference herein to the Company’s Form SB-2

Registration Statement filed with the Securities and Exchange

Commission on April 26, 2006.

3.2

Incorporated by reference herein to the Company’s Form SB-2

Registration Statement filed with the Securities and Exchange

Commission on April 26, 2006.

3.3

Incorporated by reference herein to the Company’s Form SB-2

Registration Statement filed with the Securities and Exchange

Commission on April 26, 2006.

14.0

Incorporated by reference herein to the Company’s Form SB-2

Registration Statement filed with the Securities and Exchange

Commission on April 26, 2006.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PROPER POWER AND ENERGY, INC.

Date: May 16, 2011

By: /s/ Joseph E. Abdo

JOSEPH E. ABDO,

Chief Executive Officer

Date: May 16, 2011

By: /s/ Lior Segal

LIOR SEGAL,

Chief Financial Officer

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