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EXCEL - IDEA: XBRL DOCUMENT - CLEAN ENVIRO TECH CORPFinancial_Report.xls

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

(Mark One)  

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 31, 2012


or

 

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                                     

Commission file number 000-50693


Sky Power Solutions Corp.

(Name of Registrant as Specified in Its Charter)

 

Nevada
(State or Other Jurisdiction
of Incorporation or Organization)
  90-0314205
(I.R.S. Employer
Identification No.)


420 N. Nellis Blvd., Suite A3-146, Las Vegas, Nevada

(Address of Principal Executive Offices)

 
89110
(Zip Code)


(702) 940-9940

(Issuer’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:
None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par value $0.001per share


Indicate by check mark whether the issuer: (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.  [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, or a smaller reporting company. (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 [ X ] No

On December 17, 2012, there were 491,907,316 shares of common stock outstanding.

 

 

 

Table of Contents
 

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Unaudited Financial Statements

 

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following financial statements be read in conjunction with the year-end financial statements and notes thereto included in the Company's Annual Report on Form 10K for the year ended July 31, 2012. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

 

The results of operations for the three months ended October 31, 2012 and 2011 are not necessarily indicative of the results for the entire fiscal year or for any other period.

 

 

 

 

 

Sky Power Solutions Corp.
(A Development Stage Company)
Balance Sheets
(unaudited)
       
    October 31,    July 31, 
    2012    2012 
Assets          
           
Property and equipment, net   22,190    23,964 
Total assets  $22,190   $23,964 
           
Liabilities and Stockholders' Deficiency          
           
Current liabilities:          
Accounts payable and accrued expenses  $148,940   $125,784 
Advances   708,602    708,602 
Due to related parties   173,600    173,600 
Total current liabilities   1,031,142    1,007,986 
           
Commitments and contingencies          
Stockholders' deficiency:          
Preferred stock, $.001 par value, 10,000,000 shares authorized, 0 issued and outstanding   —      —   
Common stock, $.001 par value, 100,000,000 shares authorized as of October 31, 2012; 99,907,316 issued and outstanding at October 31, 2012 and July 31, 2012, respectively.   99,907    99,907 
Additional paid-in capital   5,828,209    5,828,209 
Accumulated deficit   (4,604,623)   (4,604,623)
Deficit accumulated during the development stage   (2,332,445)   (2,307,515)
Stockholders' deficiency   (1,008,952)   (984,022)
Total liabilities and stockholders' deficiency  $22,190   $23,964 
           
           
See accompanying notes to unaudited financial statements

 

 

Sky Power Solutions Corp.
(A Development Stage Company)
Statements of Operations
(unaudited)
       
   For the Three Months Ended  For the Period Entering the Development Stage
   October 31,  August 1, 2008 - October 31, 2012
   2012  2011       
Net sales       —      —   
                
Operating expenses:               
General and administrative   22,917    33,969    722,570 
Research and development   2,013    6,716    451,325 
                
Loss from operations   (24,930)   (40,685)   (1,173,895)
                
Other (expenses)/income               
Interest expense   —      —      (1,233,270)
Loss on disposal of assets             (26,360)
Other income   —      12,623    101,080 
                
Net loss before provision for (benefit from) income taxes   (24,930)   (28,062)   (2,332,445)
                
Provision for (benefit from) income taxes   —      —      —   
                
Net loss  $(24,930)  $(28,062)  $(2,332,445)
                
                
Net loss per common share - basic and diluted  $(0.00)  $(0.00)     
                
Weighted average number of common shares outstanding - basic and diluted   99,907,316    21,157,316      
                
                
                
See accompanying notes to unaudited financial statements

 

 

Sky Power Solutions Corp.
(A Development Stage Company)
Statements of Cash Flows
(unaudited)
               
  Three Months Ended  For the Period Entering the Development Stage
  October 31,  August 1, 2008 -
    2012    2011    October 31, 2012 
CASH FLOWS FROM OPERATING ACTIVITIES:               
Net loss  $(24,930)  $(28,062)  $(2,332,445)
Adjustments to reconcile net loss to net cash utilized by operating activities               
Depreciation   1,774    3,022    105,090 
Loss on disposal of property and equipment   —      —      26,360 
Increase (decrease) in cash flows from changes in operating assets and liabilities               
Prepaid expenses and other current assets   —      488    —   
Accounts payable and accrued expenses   23,156    4,311    1,345,023 
Net cash used in operating activities   —      (20,241)   (855,972)
CASH FLOWS FROM INVESTING ACTIVITIES:               
Additions to  property and equipment   —      —      (17,015)
Net cash used in investing activities   —      —      (17,015)
CASH FLOWS FROM FINANCING ACTIVITIES:               
Proceeds from advances   —      35,976    1,573,333 
Advances from related parties   —      —      1,150,743 
Payments on advances   —      (15,623)   (752,231)
Payments to related parties   —      —      (1,114,553)
Net cash provided by financing activities   —      20,353    857,292 
CHANGE IN CASH AND CASH EQUIVALENTS               
Net decrease in cash and cash equivalents   —      112    (15,695)
Cash and cash equivalents at beginning of year   —      7    15,695 
Cash and cash equivalents at end of year  $—     $119   $—   
SUPPLEMENTAL CASH FLOW DISCLOSURES               
Cash paid during the year for:               
Interest  $—     $—     $—   
Income taxes  $—     $—     $—   
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES               
Shares issued for related party advances  $—     $—     $4,433,858 
Shares issued for accrued interest on paid promissory note  $—     $—     $1,360,341 
See accompanying notes to unaudited financial statements

 

Sky Power Solutions Corp.
(A Development Stage Company)
Statement of Stockholders' Deficiency
For the Periods Ended As Noted
(unaudited)
                   
                   
   Number of Common Shares  Common Shares $0.001 Par Value  Additional paid in capital  Accumulated Deficit  Deficit Accumulated During the Development Stage  Total
                               
Balance August 1, 2008   1,150,007   $1,150   $132,768   $(4,604,623)  $—     $(4,470,705)
Net Loss   —      —      —      —      (898,447)   (898,447)
Balance - July 31, 2009   1,150,007    1,150    132,768    (4,604,623)   (898,447)   (5,369,152)
Net Loss   —      —      —      —      (796,949)   (796,949)
Balance - July 31, 2010   1,150,007    1,150    132,768    (4,604,623)   (1,695,396)   (6,166,101)
Issuance of common stock for related party advances   20,007,309    20,007    4,301,350    —      —      4,321,357 
Net Loss   —      —      —      —      (474,647)   (474,647)
Balance - July 31, 2011   21,157,316    21,157    4,434,118    (4,604,623)   (2,170,043)   (2,319,391)
Issuance of common stock for related party advances   3,750,000    3,750    108,750    —      —      112,500 
Issuance of common stock for accrued interest on note   75,000,000    75,000    1,285,341              1,360,341 
Net Loss   —      —      —      —      (137,472)   (137,472)
Balance - July 31, 2012   99,907,316    99,907    5,828,209    (4,604,623)   (2,307,515)   (984,022)
Net Loss   —      —      —      —      (24,930)   (24,930)
Balance - October 31, 2012   99,907,316   $99,907   $5,828,209   $(4,604,623)  $(2,332,445)  $(1,008,952)
                               
                               
See accompanying notes to financial statements

 

 

 

 

SKY POWER SOLUTIONS CORP.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

As of and for the Three Months Ended October 31, 2012

(unaudited)

Note 1. Financial Statement Presentation

Sky Power Solutions Corp. (the “Company” or “Sky Power”) following the merger with our the Company’s wholly-owned subsidiary on April 2, 2011, (formed for the sole purpose of merging with its parent), continues to work on the further development of the lithium batteries technology licensed from Li-ion Motors Corp. (“Li-ion Motors”), the Company’s former parent. Consultants for the Company are continuing work on the solar concentrating electric power generating system working independently.

 

As of August 1, 2008, the Company is considered a development stage enterprise as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities” (“ASC 915”).  The Company has limited revenue to date, continues to raise capital and there is no assurance that ultimately the Company will achieve a profitable level of operations.

 

The summary of significant accounting policies is presented to assist in the understanding of the financial statements. The financial statements and notes are the representations of management. These accounting policies conform to accounting policies generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

 

History and Nature of Business

 

On April 2, 2011, the Company’s Board of Directors (the “Board”) authorized the merger with our wholly-owned subsidiary, Sky Power Solutions Corp., and in the merger the name of our Company was changed to Sky Power Solutions Corp.

On April 15, 2008, Li-ion Motors sold its controlling interest of the Company’s outstanding common stock to Blue Diamond Investments, Inc. (“Blue Diamond”) With the sale of our VoIP telecommunications business, named Zingo Telecom, Inc., on May 15, 2008, the Company intends to concentrate efforts on further development of the lithium batteries technology licensed from Li-ion Motors, the Company’s former parent.

Effective April 15, 2008, the Company entered into a License Agreement (“License Agreement”) with Li-ion Motors providing for Li-ion Motors' license to the Company of Li-ion Motors patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications (“Licensed Products”).

Under the License Agreement, Li-ion Motors has the right to purchase its requirements of lithium ion batteries from the Company, and its requirements of lithium ion batteries shall be supplied in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for our other customers. Li-ion Motors' cost for lithium ion batteries purchased from the Company is the actual manufacturing costs for such batteries for our fiscal quarter in which Li-ion Motors purchase takes place.

On May 25, 2010, the agreement was amended to grant the Company the exclusive license rights for the United States and Li-ion Motors may grant other companies rights elsewhere around the world.

Under the terms of the License Agreement, the Company agreed to invest a minimum of $1,500,000 in each of the first two years under the License Agreement in development of the technology for the Licensed Products. To date, we have not met the minimum requirements in the development of the technology, and therefore, are not compliant with our obligations under this covenant of the License Agreement. Li-ion Motors has advised the Company that it will not give notice of default against the Company for its failure to comply with this covenant over the term of the License Agreement.

Effective April 16, 2008, the Company agreed to lease approximately 5,000 square feet of space in Li-ion Motors’ North Carolina facility. The leased space was suitable, and utilized by the Company, for developmental and manufacturing operations for licensed products pursuant to the license agreement. The lease was terminated May 2012. Also, effective April 16, 2008, the Company purchased certain equipment and supplies related to the license agreement from Li-ion Motors for the purchase price of $29,005.

 

Basis of Presentation

 

Going Concern

 

The Company’s financial statements for the period ended October 31, 2012, have been prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company did not have any revenue and as of October 31, 2012, there was a working capital deficit of approximately $1 million. Management recognized that the Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and revenue to cover expenses as the Company continues to incur losses.

 

Since its incorporation, the Company financed its operations almost exclusively through advances from its controlling shareholders. The Company expects to finance operations through the sale of equity or other investments for the foreseeable future, as the Company does not receive significant revenue from its new business operations. There is no guarantee that the Company will be successful in arranging financing on acceptable terms.

 

The Company's ability to raise additional capital is affected by trends and uncertainties beyond its control. The Company does not currently have any arrangements for financing and it may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor sentiment. Market factors may make the timing, amount, terms or conditions of additional financing unavailable to it. These uncertainties raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

Common Stock

 

On September 17, 2009, the Board declared a three-for-one forward stock split that was affected in the form of a stock dividend.

Effective April 26, 2011, the Company filed with SOSN a Certificate of Change that affected a 1:300 reverse split in our outstanding common stock and a reduction of our authorized common stock in the same 1:300 ratio, from 750,000,000 shares to 2,500,000 shares.

On June 6, 2011, the Board approved the filing of a Certificate of Amendment with the Secretary of State of Nevada (“SOSN”) which gave the Company the authority to issue 100 million shares of common stock and 10 million shares of preferred stock.

On May 4, 2011, debt to Blue Diamond and its assignees in the amount of $4,321,358 was converted into 20,007,309 shares of the Company’s common stock.

On April 26, 2012, debt to Li-ion Motors was assigned to Frontline Asset Management (“Frontline”) and Windsor Capital (“Windsor”) in the amount of $112,500 which was converted into 3,750,000 shares of the Company’s common stock.

On June 11, 2012, accrued interest to Blue Diamond was assigned to various corporations in the amount of $1,360,341. Those assignees converted the debt into 75,000,000 shares of the Company’s common Stock.

All common stock references have been restated to reflect the stock splits. See Note 6 “Common Stock”, for further discussion.

Note 2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are summarized in Note 2 of the Company’s Annual Report on Form 10-K for the year ended July 31, 2012. There were no significant changes to these accounting policies during the three months ended October 31, 2012 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

 

Note 3. Fair Value Measurements

The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed financial statements on a recurring basis or on a nonrecurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:

Level 1 - Observable inputs such as quoted market prices in active markets

Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions

As of October 31, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents. The fair value of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The Company does not have any financial assets measured at fair value on a recurring basis as Level 3 and there were no transfers in or out of Level 1, Level 2 or Level 3 during the three months ended October 31, 2012 and 2011.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of October 31, 2012 and July 31, 2012.

       Assets at Fair Value Using
    Quote Prices in Activated Markets for Identical Assets  Significant Other Observable Inputs   Significant Observable
Inputs
   Total  (Level 1)  (Level 2)  (Level 2)
October 31, 2012                    
Cash and cash equivalents  $—     $—     $—     $—   
July 31, 2012                    
Cash and cash equivalents  $—     $—     $—     $—   

The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values. The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of October 31, 2012.

Non-financial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. The Company's annual test on its long-lived assets indicated that the carrying value of its long-lived assets was recoverable and that no impairment existed as of the testing date.

 

Note 4. Property and Equipment

Property and equipment consists of:

   October 31, 2012  July 31, 2012
       
Equipment  $131,455   $131,455 
           
Property and equipment   131,455    131,455 
Less: Accumulated depreciation   (109,265)   (107,491)
           
Property and equipment, net  $22,190   $23,964 

Depreciation expense for the three months ended October 31, 2012 and 2011, was $1,774 and $3,022, respectively and is included in selling, general and administrative expenses on the Company’s statement of operations.

Note 5. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of:

   October 31, 2012  July 31, 2012
           
Accounts payable  $127,062   $110,856 
Wages, paid leave and payroll related taxes   7,520    7,520 
Other accrued expenses   14,358    7,408 
           
Total  $148,940   $125,784 

Note 6. Common Stock

On June 11, 2012, Blue Diamond assigned $86,155 of its debt to Eurolink Corporation (“Eurolink”) and Eurolink converted the assigned note for 4,750,000 shares of Common Stock at $0.0181379 per share.

 

On June 11, 2012, Blue Diamond assigned $86,155 of its debt to Heritage Asset Management, Inc. (“Heritage”) and Heritage converted the assigned note for 4,750,000 shares of Common Stock at $0.0181379 per share.

 

On June 11, 2012, Blue Diamond assigned $86,155 of its debt to Kisumu S.A. (“Kisumu”) and Kisumu converted the assigned note for 4,750,000 shares of Common Stock at $0.0181379 per share.

 

On June 11, 2012, Blue Diamond assigned $172,310 of its debt to Starglow Asset, Inc. (“Starglow”) and Starglow converted the assigned note for 9,500,000 shares of Common Stock at $0.0181379 per share.

 

On June 11, 2012, Blue Diamond assigned $624,850 of its debt to Domino Developments, Inc. (“Domino”) and Domino converted the assigned note for 34,450,000 shares of Common Stock at $0.0181379 per share.

 

On June 11, 2012, Blue Diamond assigned $170,496 of its debt to Honeycomb Developments, LLC (“Honeycomb”) and Honeycomb converted the assigned note for 9,400,000 shares of Common Stock at $0.0181379 per share.

 

On June 11, 2012, Blue Diamond assigned $134,220 of its debt to Legend International, LLC (“Legend”) and Legend converted the assigned note for 7,400,000 shares of Common Stock at $0.0181379 per share.

 

On April 26, 2012, Li-ion Motors assigned $112,500 of its debt to Frontline and Frontline assigned $63,000 of the assigned note to Windsor. Frontline converted the balance of the assigned note for 1,650,000 shares of Common Stock at $0.03 per share. Windsor converted the assigned note for 2,100,000 shares of Common Stock at $0.03 per share.

 

On June 6, 2011, the Company filed a Certificate of Amendment with the Secretary of State of Nevada (“SOSN”) which gave the Company the authority to issue 100 million shares of common stock and 10 million shares of preferred stock

 

On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Eurolink Corporation (“Eurolink”) and Eurolink converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.

 

On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Heritage Asset Management, Inc. (“Heritage”) and Heritage converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.

 

On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Kisumu S.A. (“Kisumu”) and Kisumu converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.

 

On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Starglow Asset, Inc. (“Starglow”) and Starglow converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.

 

 

On May 4, 2011, Blue Diamond assigned $453,600 of its debt to Domino Developments, Inc. (“Domino”) and Domino converted the assigned note for 2,100,000 shares of Common Stock at $0.216 per share.

 

On May 4, 2011, Blue Diamond assigned $453,600 of its debt to Honeycomb Developments, LLC (“Honeycomb”) and Honeycomb converted the assigned note for 2,100,000 shares of Common Stock at $0.216 per share.

 

On May 4, 2011, Blue Diamond assigned $453,600 of its debt to Legend International, LLC (“Legend”) and Legend converted the assigned note for 2,100,000 shares of Common Stock at $0.216 per share.

 

On May 4, 2011, Blue Diamond converted the principal balance of its note of $2,049,037.52 for 9,486,285 shares of Common Stock at $0.216 per share.

 

Effective April 26, 2011, the Company filed with SOSN a Certificate of Change that affected a 1:300 reverse split in the Company’s outstanding common stock and a reduction of our authorized common stock in the same 1:300 ratio, from 750,000,000 shares to 2,500,000 shares.

On April 25, 2011, the Board approved the conversion of $47,520 of debt due to Blue Diamond Investments for 220,000 shares of our common stock at $0.216 per share.

Conversion price was equal to fair market value of common share on the date of conversion.

On September 17, 2009, the Company’s Board of Directors declared a three-for-one forward stock split of the Company’s common stock that was effected in the form of a stock dividend. A three-for-one forward split in our common stock was effective October 19, 2009. The Certificate of Change filed with the Nevada Secretary of State on September 18, 2009, providing for the forward split, changed the number of shares of our outstanding common stock from 115,000,000 to 345,000,000, and the number of shares of our authorized common stock increased in the same ratio, from 250,000,000 to 750,000,000.

Effective April 26, 2011, the Company filed with SOSN a Certificate of Change that affected a 1:300 reverse split in the Company’s outstanding common stock and a reduction of our authorized common stock in the same 1:300 ratio, from 750,000,000 shares to 2,500,000 shares.

See Note 7 “Net Loss Per Common Share,” for the impact on the Company’s loss per share amounts as a result of the 2011 reverse stock split. This reverse stock split resulted in the reduction of approximately 344,885,000 shares of common stock and was accounted for by the transfer of $343,850 from common stock to additional paid-in-capital which is the amount equal to the par value of the reduction of shares to affect the reverse stock split.

 

Note 7. Net Loss Per Common Share

Loss per share is computed based on the weighted average number of shares outstanding during the year. Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares and potential common shares during the specified periods. The Company has no outstanding options, warrants or other convertible instruments that could affect the calculated number of shares.

The following table sets forth the reconciliation of the basic and diluted net loss per common share computations for the three months ended October 31, 2012 and 2011.

   Three Months Ended  Three Months Ended
   October 31, 2012  October 31, 2011
   Income  Shares  Per-Share  Income  Shares  Per-Share
    (Numerator)    (Denominator)    Amount    (Numerator)    (Denominator)    Amount 
                               
                               
Net (loss)  $(24,930)            $(28,062)          
                               
Basic loss per common share   (24,930)   99,907,316    (0.00)   (28,062)   21,157,316    (0.00)
                               
Effect of dilutive securities   —                —             
                               
Diluted loss per common share  $(24,930)   99,907,316    (0.00)  $(28,062)   21,157,316    (0.00)

 

Note 8. Related Party Transactions

On December 15, 2010, the Company issued a non-interest bearing, due on demand, promissory note to Mehboob Charania, (former chief executive and principal financial officer) for which it has received advances of $173,600 and repaid $0. The related party transaction amounts are reported as current due to the relationship.

 

Note 9. Advances

The Company's principal financing source in the last two fiscal years had been from its former parent, Li-ion Motors. On October 2, 2012, the Company’s entire debt to Li-ion was assigned to Frontline Asset Management, Inc. (“Frontline”). At October 31, 2012 and July 31, 2012, the Company owed Li-ion Motors $0 and $708,602, respectively. During the three months ended October 31, 2012 and 2011, the Company received advances totaling $0 and $35,976, respectively; and made payments of $0 and $15,263 ($3,000 in cash and $12,263 in reimbursement for one leased employee), respectively.

At October 31, 2012 and July 31, 2012, the Company owed Frontline $708,602 and $0, respectively. During the three months ended October 31, 2012 and 2011, the Company received advances totaling $0 and $0, respectively; and made payments of $0 and $0, respectively. As were the terms with Li-ion Motors, the assigned debt remains and any subsequent debt we incur is interest free. No term has been set for repayment and no payment is expected until the Company has begun to become a profitable venture.

Note 10. Income Taxes

At October 31, 2012 and July 31, 2012, the Company has deferred tax assets as a result of the net operating losses incurred from inception. The resulting deferred tax assets are reduced by a valuation allowance as discussed in Note 1, equal to the deferred tax asset as it is unlikely, based on current circumstances, that the Company will ever realize a tax benefit. Deferred tax assets and the corresponding valuation allowances amounted to approximately $1.8 million and $1.8 million at October 31, 2012 and July 31, 2012, respectively. The statutory tax rate is 35% and the effective tax rate is zero.

Under current tax laws, the cumulative operating losses incurred amounting to approximately $6.7 million and $6.7 million at October 31, 2012 and July 31, 2012, respectively, and will begin to expire in 2023.

Section 382 of the U.S. Internal Revenue Code imposes an annual limitation on loss carry-forwards to offset taxable income when an ownership change occurs. The Company meets the definition of an ownership change and some of the net operating loss carry-forwards will be limited.

 

Note 11. Subsequent Events

On November 1, 2012, Frontline assigned $61,740 of its debt to Brothers Capital Corp. (“Brothers”) and Brothers converted the assigned note for 49,000,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Reliable Investments Corp. (“Reliable”) and Reliable converted the assigned note for 49,000,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Platinum Capital Holdings Corp. (“Platinum”) and Platinum converted the assigned note for 49,000,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Wazalmin Capital Corp. (“Wazalmin”) and Wazalmin converted the assigned note for 49,000,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Nexium Financial Inc. (“Nexium”) and Nexium converted the assigned note for 49,000,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Artic Orchards Ltd. (“Artic”) and Artic converted the assigned note for 49,000,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to SSR Investments Corp. (“SSR”) and SSR converted the assigned note for 49,000,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $30,870 of its debt to ALG Financial, LLC (“ALG”) and ALG converted the assigned note for 24,500,000 shares of Common Stock below fair market value at $0.00126 per share.

On November 1, 2012, Frontline assigned $30,870 of its debt to Kisumu, S.A. (“Kisumu”) and Kisumu converted the assigned note for 24,500,000 shares of Common Stock below fair market value at $0.00126 per share.

ITEM 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations.

 

Forward Looking Statements

 

This quarterly report contains forward-looking statements that involve risks and uncertainties.  We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements.  Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many  reasons,  including the risks faced by us described in this section.

 

Introduction

 

We were incorporated on July 15, 2002 under the laws of the State of Nevada. We changed our business in 2008, entering into a license agreement with Li-ion Motors on April 15, 2008, for the license of the development of their lithium battery technology. We sold our Zingo Telecom, Inc. and M/S Zingo BPO Services Pvt. Ltd. subsidiaries that offered telecommunications services to business and residential customers utilizing VoIP technology on May 15, 2008.  To reflect our new business, we changed our name from Zingo, Inc. to Superlattice Power, Inc. on April 25, 2008 and on April 5, 2011, we merged with our wholly-owned subsidiary, Sky Power Solutions Corp., and in the merger the name of the Company was changed to Sky Power Solutions Corp.  

 

We entered into a license agreement with Li-ion Motors on April 15, 2008, for the license of the technology related to the development of their lithium battery technology. We also leased space within Li-ion’s plant and created a chemical lab and manufacturing facility to begin work on the lithium battery technology we had licensed. Effective May 31, 2012, our lease was terminated with Li-ion Motors due to the closure of their facility. Sky Power’s physical assets are currently in storage as we search for a new facility. Consultants continue working on our residential Solar Concentrating, Electric Power Generation Systems from independent locations . 

 

 

 

 

Results of Operations for the Three months Ended October 31, 2012

 

We incurred a net loss of $24,930 during the three months ended October 31, 2012, which included: general and administrative (G&A) costs of $22,917 and research and development (“R&D”) expenses of $2,013

 

2012 Compared to 2011

 

Our net loss for the three months ended October 31, 2012 decreased to $24,930 from $28,062 for the same period ending October 31, 2011. The decrease was primarily due to a reduction in rental expenses.

 

Plan of Operations

 

Currently we have in development a Stand Alone Residential Solar Concentrating Electric Power Generation System. Our system has proprietary elements that make it unique, with better functionality than other systems. We designed and developed this system as we anticipate that the North American Power Grid will not be able to support the recharging of anticipated sales of totally electric vehicles and other electric needs in the coming years. We are developing safe rechargeable battery systems for varied applications ranging from portable electronics to onboard energy storage in EVs. Lithium ion batteries are rechargeable and composed of cathode, anode, separator and electrolytes. In 1990, Sony (Japan) introduced the lithium ion battery and used an expensive cathode material, which was also unsafe. We are pioneering a superlattice cathode material for the use in lithium ion rechargeable batteries.

 

The Solar Concentrating Electric Power Generation System is an extremely efficient photovoltaic solar power generation unit. This system is able to produce in excess of 2 Kilowatts (kw) of electric power with ZERO emissions with Sun Light as the only fuel including built-in heat capture to provide hot water to users.

 

The lithium ion batteries that we plan to develop are rechargeable batteries composed of cells linked together, each cell created from lithiated cathode powder coated on aluminum foil (electrode material that the electron flows out from during charge) and anode powder coated on copper foil (electrode material that the electro flows into during charge) with a separator (polymer material in between anode and cathode) in a mixture of electrolytes, which is an ionically conductive medium.

 

Our goal is to continually improve our proprietary semi-solid synthesis process for the development of lithium ion rechargeable battery technologies to meet the growing needs for a less expensive, high-energy density, extended life and fast recharging battery while keeping safety as a priority.

 

We use a proprietary superlattice cathode material and its technically advanced synthesis process. Our other technical expertise includes Battery Management Systems (“BMS”) and a high current rate battery charger. A typical battery pack will consist of a number of lithium ion cells and a BMS.

 

Our technology development is in the initial phase of prototyping and testing. Once a prototype is successfully obtained, we plan to work closely with production specialists in the battery industry and material synthesis to lead the battery manufacturing unit along with marketing and sales teams. Our primary focus will then simultaneously operate research and development, production and marketing of the new products.

 

Sources and Availability of Raw Materials

 

We have used raw materials from several manufacturers in the United States, such as Alfa Aesar, Pred Chemicals, TIMCAL and Ferro Corporation. We use different types of lithium, manganese, cobalt, nickel and titanium salts, electrolytes, copper and aluminum foil which are available in large scale.

 

License Agreement with Li-Ion Motors

 

Effective April 15, 2008, we entered into a License Agreement (“License Agreement”) with Li-ion Motors providing for Li-ion Motors’ license to us of Li-ion Motors patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications (“Licensed Products”).

 

Under the License Agreement, Li-ion Motors has the right to purchase its requirements of lithium ion batteries from us, and its requirements of lithium ion batteries shall be supplied in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for our other customers. Li-ion Motors’ cost for lithium ion batteries purchased from us is our actual manufacturing costs for such batteries for our fiscal quarter in which Li-ion Motors purchase takes place. On May 25, 2010 our agreement was amended to provide that we have exclusive license rights for the United States and Li-ion Motors may grant other companies rights elsewhere around the world.

 

We have agreed to invest a minimum of $1,500,000 in each of the first two years under the License Agreement in development of the technology for the Licensed Products. In the initial year under the License Agreement, the Company invested approximately $264,043 in the development of technology, and therefore is not in compliance with its obligations under this covenant of the license agreement.  Li-ion Motors has advised us that it will not give notice of default against us for our failure to comply with this over the term of the License Agreement. As of fiscal year ended July 31, 2012; we are still not in compliance under this covenant.

 

On April 16, 2008, we lease approximately 5,000 square feet of space (“Leased Space”) in Li-ion Motors’ North Carolina facility, such Leased Space was to be suitable for, and utilized by us for, our developmental and manufacturing operations for Licensed Products pursuant to the License Agreement, that lease was terminated May 31, 2012, when Li-ion closed their facility. The Leased Space, had been leased by Li-ion Motors to us on a month-to-month basis at a monthly rental of $3,038, the monthly rental to be escalated five (5%) percent annually. Effective April 16, 2008, Li-ion Motors also sold us for the purchase price of $29,005, specified equipment and supplies related to the licensed field.

 

 

 

 

 

Liquidity and Capital Resources

 

As of October 31, 2012, we had cash on hand of $0 and liabilities of $1,031,142 as compared with $1,007,986 at July 31, 2012, and our property plant and equipment decreased to $22,190 at October 31, 2012, as compared with $23,964 at July 31, 2012. Accounts payable and accrued expenses increased at October 31, 2012, to $148,940 as compared with $125,784 at July 31, 2012, and advances and due to related parties were $882,202 at October 31, 2012, as compared to $882,202 at July 31, 2012.

 

At October 31, 2012, we had a working capital deficiency of $1,031,142 and a stockholders' deficit of $996,202.

 

We used net cash in operating activities of $0 in the three months ended October 31, 2012, as compared with $20,241 in the comparable period in 2011, and cash flows used in investing activities for the purchase of property, plant and equipment was $0 during 2012 and $0 in 2011.

 

During the three months ended October 31, 2012, we received $0 and repaid $0, to a related party as compared with advances from related parties of $0 and repayments of $0 in 2011.

 

During the three months ended October 31, 2012 we received $0 from the proceeds from our promissory note to Li-ion Motors Corp. and repaid $0 as compared to advances received in 2010, of $35,976 and repayment of $15,623.

 

Since our incorporation, we have financed our operations almost exclusively through advances from our controlling shareholders. We expect to finance operations through the sale of equity or other investments for the foreseeable future, as we do not receive significant revenue from our new business operations.  There is no guarantee that we will be successful in arranging financing on acceptable terms.

 

Our ability to raise additional capital is affected by trends and uncertainties beyond our control. We do not currently have any arrangements for financing and we may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor sentiment. Market factors may make the timing, amount, terms or conditions of additional financing unavailable to us.

 

Our auditors are of the opinion that our continuation as a going concern is in doubt.  Our continuation as a going concern is dependent upon continued financial support from our shareholders and other related parties.

 

Critical Accounting Issues

 

The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses, and related disclosures of contingent assets  and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to intangible assets, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on  various assumptions that are believed to be reasonable under the circumstances,  the results of which form the basis for making judgments about carrying values  of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

 

 

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Commodity Price Risk – The raw materials for manufacturing our batteries could be affected by changes in the commodities markets, and if we commence manufacturing our own lithium ion batteries, we could be subject to this risk.

 

ITEM 4. Controls and Procedures.

 

The Company's Chief Executive Officer and Principal Financial Officer are primarily responsible for the accuracy of the financial information that is presented in this Quarterly Report. This officer has, as of the close of the period covered by this Quarterly Report, evaluated the Company's disclosure controls and procedures (as defined in Rules 13a-14c and 15d-14c promulgated under the Securities Exchange Act of 1934) and determined that such controls and procedures were effective in ensuring that material information relating to the Company was made known to her during the period covered by this Quarterly Report. In such officer’s evaluation, no changes were made to the Company's internal controls in this period that have materially affected, or are reasonably likely materially to affect, the Company’s internal control over financial reporting.

 

PART II. OTHER INFORMATION

 


 

ITEM 6. Exhibits

 

31  Certification  of  Chief Executive Officer and Principal  Financial Officer Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002, filed herewith.
    
32  Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section  1350,  as
Adopted  Pursuant  to  Section  906 of the Sarbanes-Oxley Act of 2002, filed herewith.
    
101.INS  XBRL Instance Document
    
101.SCH  XBRL Taxonomy Extension Schema Document
 
101.CAL  XRL Taxonomy Calculation Linkbase Document
    
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document
    
101.LAB  XBRL Taxonomy Label Linkbase Document
    
101.PRE  XBRL Taxonomy Presentation Linkbase Document

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 

 

SIGNATURES

 

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

 

    SKY POWER SOLUTIONS CORP.
     
By:   /s/ Liudmilla Voinarovska
    Chief Executive Officer and Principal Financial Officer
     
    Date: December 17, 2012

 

 

EXHIBIT 31

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

CERTIFICATION

 

I, Liudmilla Voinarovska, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Sky Power Solutions Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

 

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: December 17, 2012  /s/ Liudmilla Voinarovska
   Liudmilla Voinarovska, Chief Executive Officer and Principal Financial Officer

 

 

 

EXHIBIT 32

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Sky Power Solutions Corp. (the “Company”) on Form 10-Q for the three months ended October 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Liudmilla Voinarovska, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 

    /s/ Liudmilla Voinarovska
    Liudmilla Voinarovska
December 17, 2012   Chief Executive Officer and Principal Financial Officer