Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - EQCO2, INC. | Financial_Report.xls |
| EX-31.2 - CERTIFICATION - EQCO2, INC. | clno_ex312.htm |
| EX-31.1 - CERTIFICATION - EQCO2, INC. | cnlo_ex311.htm |
| EX-32.1 - CERTIFICATION - EQCO2, INC. | clno_ex321.htm |
| EX-32.2 - CERTIFICATION - EQCO2, INC. | clno_ex322.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarter period ended January 31, 2013
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
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For the transition period form _____________, to _____________.
Commission File Number 000-52653
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CLEANTECH TRANSIT, INC.
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(Exact name of registrant as specified in its charter)
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Nevada
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98-0505768
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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11226 Pentland Downs Road Las Vegas, NV 89141
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(Address of principal executive offices)
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(702) 448-1543
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(Registrant’s telephone number)
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NA
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(Former name, former address and former fiscal year, if changed since last report)
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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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant 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 o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small reporting company” Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | Small reporting company | x |
| (Do not check if a small reporting company) | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x
As of March 5, 2013 there were 290,543,493 shares of Common Stock of the issuer outstanding.
INDEX
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Page
Number
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|||||
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PART I.
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FINANCIAL INFORMATION
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||||
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ITEM 1.
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Financial Statements (unaudited)
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1 | |||
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Condensed consolidated Balance Sheets as at January 31, 2013 and October 31, 2012
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2 | ||||
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Condensed consolidated Statement of Operations for the three month periods ended January 31, 2013 and 2012 and for the period from May 25, 2010 (Inception of Development Stage) to January 31, 2013 and for the period from June 28, 2006 (inception of pre-exploration stage) to May 24, 2010
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3 | ||||
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Consolidated Statements of Cash Flows for the three month period ended January 31, 2013 and 2012 and for the period from May 25, 2010 (Inception of Development Stage) to January 31, 2013
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4 | ||||
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Notes to the condensed consolidated financial statements.
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5 | ||||
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ITEM 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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8 | |||
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ITEM 3.
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Quantitative and Qualitative Disclosure About Market Risk
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12 | |||
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ITEM 4.
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Controls and Procedures
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12 | |||
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PART II.
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OTHER INFORMATION
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||||
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ITEM 1.
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Legal Proceedings
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13 | |||
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ITEM 1A.
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Risk Factors
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13 | |||
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ITEM 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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13 | |||
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ITEM 3.
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Defaults Upon Senior Securities
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13 | |||
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ITEM 4.
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Mine Safety Information
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13 | |||
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ITEM 5.
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Other Information
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13 | |||
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ITEM 6.
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Exhibits
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14 | |||
| SIGNATURES | 15 | ||||
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms, variations of such terms, or the negative of such terms. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in end-user demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2011, filed on February 14, 2013.
As used in this Form 10-Q, “we,” “us,” and “our” refer to Cleantech Transit, Inc., which is also sometimes referred to as the “Company.”
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
The forward-looking statements made in this report on Form 10-Q relate only to events or information as of the date on which the statements are made in this report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we expect or hope.
PART I – FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
The accompanying interim financial statements have been prepared by our management in conformity with accounting principles generally accepted in the United States of America. 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.
Operating results for the three months ended January 31, 2013 are not necessarily indicative of the results that can be expected for the year ending October 31, 2012.
1
CLEANTECH TRANSIT, INC.
(Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
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January 31,
2013
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October 31,
2012
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|||||||
| (Unaudited) | ||||||||
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ASSETS
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CURRENT ASSETS
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Cash
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$ | 838 | $ | 947 | ||||
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Total Current Assets
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838 | 947 | ||||||
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Other assets
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Prepaid Management fee
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-- | 12,600 | ||||||
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Total assets
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$ | 838 | 13,547 | |||||
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
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CURRENT LIABILITIES
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Accounts payable and accrued expenses
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$ | 57,708 | 57,353 | |||||
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Notes payable
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25,000 | 25,000 | ||||||
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Advance
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23,245 | 23,245 | ||||||
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Total Current Liabilities
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105,953 | 105,598 | ||||||
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STOCKHOLDERS’ EQUITY
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Preferred stock; Series A Convertible; $0.001 par value;
5,000,000 shares authorized; 1,282,000 issued and outstanding
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1,282 | 1,282 | ||||||
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Preferred stock; $0.001 par value; 5,000,000 shares authorized;
none issued and outstanding
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-- | -- | ||||||
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Common stock 600,000,000 shares authorized, at $0.001 par value 290,543,493 and
260,876,826 shares issued and outstanding at January 31, 2013 and October 31, 2012, respectively
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290,544 | 260,877 | ||||||
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Paid in capital
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2,281,290 | 2,257,557 | ||||||
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Deficit accumulated during the pre-exploration stage
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(219,677 | ) | (219,677 | ) | ||||
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Deficit accumulated during the development stage
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(2,458,554 | ) | (2,392,090 | ) | ||||
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Total Stockholders’ Equity
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(105,115 | ) | (92,051 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$ | 838 | $ | 13,547 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
2
CLEANTECH TRANSIT, INC.
(Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
January 31,
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From
May 25, 2010
(Inception of
Development
Stage)
to
January 31,
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From June 28, 2006 (Inception of Pre-Exploration Stage) to May 24,
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2013
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2012
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2013 |
2010
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Revenues
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$ | -- | $ | -- | $ | -- | ||||||||||
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EXPENSES
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General & administrative
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66,464 | 267,541 | 2,045,041 | -- | ||||||||||||
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Total Operating Expenses
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(66,464 | ) | (267,541 | ) | (2,045,041 | ) | -- | |||||||||
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OTHER INCOME(EXPENSE)
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Gain from bargain purchase
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110,362 | -- | ||||||||||||||
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Interest expense
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-- | (5,718 | ) | (38,213 | ) | -- | ||||||||||
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Investee losses
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-- | (18,950 | ) | (163,712 | ) | -- | ||||||||||
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Loss on Impairment of Investment
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-- | -- | (306,650 | ) | -- | |||||||||||
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Loss on conversion of debt to equity
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-- | -- | (15,300 | ) | -- | |||||||||||
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Total other expense
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-- | (24,668 | ) | (413,513 | ) | -- | ||||||||||
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Net loss from continued operations
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(66,464 | ) | (24,668 | ) | (2,458,554 | ) | -- | |||||||||
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Discontinued operations
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(219,667 | ) | ||||||||||||||
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NET LOSS
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$ | (66,464 | ) | $ | (292,209 | ) | (2,458,554 | ) | (219,667 | ) | ||||||
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NET LOSS PER SHARE: Basic and diluted
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$ | (0.00 | ) | $ | (0.00 | ) | -- | -- | ||||||||
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WEIGHTED AVERAGE OUTSTANDING SHARES : Basic and diluted
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260,876,826 | 109,905,074 | ||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
3
CLEANTECH TRANSIT, INC.
(Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
January 31,
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From
May 25, 2010
(Inception of
Development
Stage) to
January 31,
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From June 28,
2006
(Inception of Pre-Exploration Stage) to May 24,
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2013
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2012
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2013
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2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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(66,464 | ) | (292,209 | ) | (2,458,554 | ) | (219,667 | ) | ||||||||
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Adjustments to reconcile net loss to net cash used in operating activities:
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Stock based compensation
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66,000 | 262,500 | 1,472,900 | -- | ||||||||||||
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Notes issued for expenses
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-- | -- | 88,395 | -- | ||||||||||||
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Notes issued for expenses -discontinued operations
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43,523 | |||||||||||||||
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Contributed capital-expense-discontinued operations
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34,000 | |||||||||||||||
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Loss attributed to discontinued operations
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-- | |||||||||||||||
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Loss(gain) on conversion of debt
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-- | -- | 15,300 | -- | ||||||||||||
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Gain from bargain purchase
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-- | -- | (110,362 | ) | -- | |||||||||||
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Investee losses
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18,950 | 163,712 | -- | |||||||||||||
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Loss on impairment of investment
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-- | 306,650 | -- | |||||||||||||
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Changes in operating assets and liabilities:
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Accounts payable and accrued expenses
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355 | 5,719 | 101,514 | -- | ||||||||||||
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Accounts payable-discontinued operations
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-- | -- | -- | 30,757 | ||||||||||||
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Net cash used in operating activities
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(109 | ) | (5,040 | ) | (420,445 | ) | (111,387 | ) | ||||||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Investment in LLC
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-- | -- | (335,000 | ) | -- | |||||||||||
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Net cash used in investing activities
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-- | -- | (335,000 | ) | -- | |||||||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from sale of common stock
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-- | -- | -- | 29,900 | ||||||||||||
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Proceeds from loan from related party related to discontinued operations
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-- | -- | -- | 81,487 | ||||||||||||
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Proceeds from preferred shares issued for cash
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-- | -- | 590,000 | -- | ||||||||||||
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Proceeds from advances
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-- | -- | 23,245 | -- | ||||||||||||
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Proceeds from issuance of notes
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-- | 143,038 | -- | |||||||||||||
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Net cash provided by financing activities
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-- | -- | 756,283 | 111,387 | ||||||||||||
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Net Increase (Decrease) in Cash
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(109 | ) | (5,040 | ) | 838 | -- | ||||||||||
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Cash at Beginning of Period
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947 | 16,085 | -- | -- | ||||||||||||
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CASH AT END OF PERIOD
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838 | 11,045 | 838 | -- | ||||||||||||
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Supplemental disclosure of noncash financing transactions
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Notes issued for expense
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-- | -- | $ | 88,395 | ||||||||||||
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Issuance of note payable for investment in LLC
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-- | -- | $ | 25,000 | ||||||||||||
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Conversion of debt to equity (preferred shares)
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-- | -- | $ | 51,000 | ||||||||||||
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Common stock issued for prepaid management fees
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-- | -- | $ | 1,050,000 | ||||||||||||
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Common stock issued for notes payable
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$ | -- | --- | $ | 223,975 | |||||||||||
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Accrued interest contributed to capital
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$ | -- | -- | $ | 41,140 | |||||||||||
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Stock issued for compensation to related party
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$ | 53,400 | -- | $ | 422,900 | |||||||||||
The accompanying notes are an integral part of these financial statements
4
CLEANTECH TRANSIT, INC.
(Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of operations
The Company was incorporated under the laws of the State of Nevada on June 28, 2006 under the name of Patterson Brooke Resources Inc. with the authorized common stock of 200,000,000 shares at $0.001 par value. On February 14, 2008, the shareholders approved the increase of the authorized share capital from 200,000,000 shares at $0.001 par value to 600,000,000 shares at $0.001 par value.
On April 7, 2010, the Company amended its Articles of Incorporation to change its corporate name from “Patterson Brooke Resources Inc.” to “Cleantech Transit, Inc.”
Originally the Company was organized for the purpose of acquiring and developing mineral properties. The Company has decided to allow the Alice claim to lapse without renewing it on May 24, 2010. Therefore, the Company is no longer a pre-exploration stage company but is now considered a development stage company as defined under FASB ASC 915, and commenced operations in the public and private transportation bus and coach industries, providing high quality engineered modern eco-friendly vehicles in a cost conscious and environmentally sustainable manner.
On July 11, 2011 the Company formed Cleantech Energy, Inc. as a wholly owned subsidiary. There has been no activity in this entity, through January 31, 2013.
On July 25, 2011 the Company formed Cleantech Exploration Corp. as a wholly owned subsidiary. There has been no activity in this entity, through January 31, 2013.
Basis of Presentation
The interim financial statements for the three months ended January 31, 2013 and 2012 are unaudited. These financial statements are prepared in accordance with the requirements for unaudited interim periods, and consequently do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America.
The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management’s opinion all adjustments necessary for a fair presentation of the Company’s financial statements are reflected in the interim periods included, and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended October 31, 2012, filed with the SEC
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The aggregate accumulated deficit and accumulated deficit during the development stage and pre-exploration stage of the Company is $2,678,230 ($2,458,554 and $219,677, respectively). The Company has not established revenues to cover its operating costs. This uncertainty raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Company's plan. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
5
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company recognizes income and expenses based on the accrual method of accounting.
Principles of Consolidation
The consolidated financial statements of the Company include the Company and its wholly-owned and majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.
Basic and Diluted Net Income (loss) Per Share
Basic net income (loss) per share amounts is computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then the basic and diluted per share amounts are the same. As of January 31, 2013, the Company has no dilutive common stock equivalents outstanding.
Revenue Recognition
Revenue is recognized on the sale and transfer of goods or completion of service. During the three month period ending January 31, 2013, the Company did not have any revenue.
Advertising and Market Development
The company expenses advertising and market development costs as incurred.
Financial and Concentrations Risk
The Company does not have any concentration or related financial credit risk.
6
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles accepted in the United States of America. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Impairment of Long-lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for cash, accounts payable, and convertible notes payable approximate fair values because of the immediate or short-term maturity of these financial instruments.
Recent Accounting Pronouncements
The Company does not expect the adoption of recent accounting pronouncements to have a material impact on the Company’s financial statements.
NOTE 4 - EQUITY METHOD INVESTMENT
On August 19, 2011 the Company entered into an agreement with Phoenix Biomass Energy, Inc. (and amendment dated September 28, 2011) whereby the Company obtained a 40% interest in Ortigalita Power Company, LLC. from Phoenix Biomass for $360,000. The Company is accounting for this investment under the equity method. Ortigalita is building a plant to produce electricity from waste and by-products. The Company has paid $335,000 in cash and has executed a no interest, demand note payable for the remaining balance of $25,000. The closing date of this purchase was October 31, 2011. As the Company paid less than the relative fair value of the net assets received, it has recorded a gain on bargain purchase in the amount of $110,362, in accordance with ASC 805-30.
During the nine months ended July 31, 2012, the investee reported a net loss of $163,712. The Company therefore recorded its share of these losses in the statement of operations $163,712.
On July 31, 2012 the Board of Directors reviewed the 40% interest investment the Company held in Ortigalita Power Company, LLC. It purchased from Phoenix Biomass for $360,000. The Company’s investee loss incurred through July 31, 2012 was $163,712, leaving the value of the investment as $306,650. Through the Company’s review and discussion with the controlling interest of the project, it was determined that a substantial investment would be required to bring the plant to a production level that would be profitable. As the Company is unable to make such an investment, the Company determined its investment was impaired and recorded a related impairment loss of $306,650 in its statement of operations.
7
NOTE 5 - NOTES PAYABLE
On September 30, 2011 the Company issued a no interest, demand note to Phoenix Biomass as part of the investment in the Ortigalita plant project in the amount of $25,000.
On July 20, 2012, the Company, at the request of the convertible note holders, converted $223,957 of notes to 43,068,600 shares of common stock at $0.0052 per share. As part of the conversion the accrued interest of $41,140 on the notes was forgiven by the note holders, and contributed to additional paid-in capital.
As of January 31, 2013, the Company had a note payable of $25,000 plus advances of $23,245 neither bearing any interest and due on demand.
NOTE 6 - RELATED PARTY TRANSACTIONS
On January 15, 2011, the Company received $75,000 from Zaman & Co. and issued a note payable with the conversion term. Zaman & Co. is a related party through common Directors. On July 20, 2012 the note was converted to 14,423,030 shares of common stock at $0.0052 per shares and the interest was forgiven by the note holder.
On May 9, 2011, the Company received $200 from Crown Equity Holdings, Inc., and issued a note payable. The officers and directors of the Company are also officers and directors of Crown Equity Holdings, Inc. The note was paid leaving the balance at zero.
On May 23, 2011 the Company entered into an Agreement with Crown Equity Holdings, Inc. to manage the Company for one year. Under the terms of the agreement the Company issued 5,000,000 common shares with a value of $1,050,000. The officers and directors of the Company are also officers and directors of Crown Equity Holdings, Inc.
On April 1, 2012 the Company entered into a one year management agreement with Crown Equity Holdings, Inc. Under the terms of the agreement the Company will pay Crown Equity Holdings $22,000 monthly, in cash. If the Company does not pay the amount in cash the Company will issue shares for the difference between $66,000 and the cash amount paid at the end of each quarter. The management agreement covered the period from May 1, 2012 to April 30, 2013
On January 31, 2013, the Company issued 29,666,667 shares of common stock with a value of $53,400, using the quoted value of the Company’s common stock on January 31, 2013 ($12,600 was prepaid from the previous quarter).
8
NOTE 7 - STOCKHOLDERS EQUITY
On May 23, 2011 the Company issued 5,000,000 shares of common stock to a related party for management services with a value of $1,050,000. The Company and the entity receiving shares have common officers and directors.
On July 14, 2011 the Company amended its articles of incorporation increasing its authorized capital stock to 610,000,000 consisting of 600,000,000 shares of common stock with a par value of $0.001 per shares and 10,000,000 shares of preferred stock with a par value of $0.001.
On July 15, 2011 the Company amended its articles of incorporation increasing its authorized capital stock to 610,000,000 consisting to 600,000,000 shares of common stock with a par value of $0.001 per shares and 10,000,000 shares of preferred stock with a par value of $0.001.
On August 23, 2011 the Company designated 5,000,000 of the 10,000,000 preferred shares as Series A Convertible preferred. These share have a conversion right of 10 shares of common for each share of preferred, a voting right as a class, and liquidation preference valuation of $0.50 per share.
As of July 31, 2011, the Company had one Series A Preferred shares stock subscription with a value of $641,000. The subscription is for 1,282,000 shares of Series A preferred stock at $0.50 per share. These shares carry a conversion privilege that allows the holder to convert each share of Series A Preferred Stock into 10 shares of common stock of the Company. This subscription was filled through $590,000 in cash and conversion of notes payable of $51,000. This conversion occurred on October 31, 2011. As the securities this note was converted into were valued at $66,300, the Company recorded a loss on conversion of $15,300.
On July 1, 2012 the Company issued 1,950,000 shares of common stock to one entity with a value of $39,000 at $0.02 per share for accounts payable.
On July 1, 2012 the Company issued 5,280,000 shares of common stock to Crown Equity Holdings with a value of $66,000 at $0.0125 per share for the previous quarter management fee.
On July 20, 2012, the Company issued 43,068,600 shares of common stock with a value of $223,957 for the conversion of convertible notes to stock.
During the year ended October 31, 2012, the Company issued 60,280,000 shares of common stock with a value of $132,000 for the management fees due for the quarter ended October 31, 2012. As additional compensation to Crown Equity Holdings, the Company issued 45,673,152 shares of common stock with a value of $237,500 ($0.0052 per share) for services rendered.
On December 31, 2012 the Company filed a Security Registration Statement on Form S-8 registering 20,000,000 shares of common stock for issuance to consultants, advisors, employees and directors.
On January 31, 2013 the Company issued 29,666,667 shares of common stock to Crown Equity Holdings, Inc. with a value of $53,400 as payment for management services during the quarter ended January 31, 2013 ($12,600 was prepaid from the previous quarter).
9
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information contained in our financial statements and the notes thereto, which form an integral part of the financial statements, which are attached hereto.
The financial statements mentioned above have been prepared in conformity with accounting principles generally accepted in the United States of America and are stated in United States dollars.
Our Form 10-Q includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words such as: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Form 10-Q. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
Financial Condition as of January 31, 2013
The Company had current assets of $838 on January 31, 2013. Total current liabilities reported of $105,953 consisted of $57,708 in accounts payable and accrued expenses and $48,245 in notes payable and advances.
Deficit accumulated during the development stage increased from $2,392,090 as of October 31, 2012 to $2,458,554 as of January 31, 2013.
Background
The Company was incorporated under the laws of the State of Nevada on June 28, 2006 under the name Patterson Brooke Resources Inc. to identify and acquire a mineral property that held the potential to contain gold and/or silver mineralization. In early 2010, due to the global economic crisis, a challenging environment for raising capital and the lack of suitable drill targets discovered on the Alice Claim, the Company decided to shift our business focus to begin to explore opportunities in the development and production of hybrid, electric, alternative fuel and diesel heavy duty transit buses, luxury motor coaches and tour buses. On April 7, 2010, the Company amended the Articles of Incorporation to change the name to Cleantech Transit, Inc. Since then the Company has expanded the business focus to invest directly in specific green projects. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, the Company negotiated an agreement to invest in Phoenix Energy, a manufacturer and distributor of biomass-generated power plants.
On February 14, 2008, the Company conducted a 25 to 1 forward stock split of all issued and outstanding shares.
On October 13, 2010, the Company affected a 3 to 1 forward stock split by way of stock dividend. In accordance with the forward stock split, the Company issued a dividend of two shares of common stock of the Company for each share of common stock issued and outstanding as of the record date of October 13, 2010 (the “Stock Dividend”). The payment date for the Stock Dividend was October 13, 2010.
On August 19, 2011 the Company entered into an agreement with Phoenix Biomass Energy, Inc. (and amendment dated September 28, 2011) whereby the Company obtained a 40% interest in Ortigalita Power Company, LLC. from Phoenix Biomass for $360,000. The Company is accounting for this investment under the equity method. Ortigalita is building a plant to produce electricity from waste and by-products. The Company has paid $335,000 in cash and has executed a no interest, demand note payable for the remaining balance of $25,000. The closing date of this purchase was October 31, 2011. As the Company paid less than the relative fair value of the net assets received, it has recorded a gain on bargain purchase in the amount of $110,362, in accordance with ASC 805-30.
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As of July 31, 2012 the Company reviewed the investment and elected to impair it investment for a loss of $306,650.
Critical Accounting Policies
The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management of our company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. We believe certain critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. A description of our critical accounting policies is set forth in our Annual Report on Form 10-K for the year ended October 31, 2011. For the three month period ended January 31, 2013, there have been no material changes or updates to our critical accounting policies.
Results of Operations
The following discussion of the financial condition, results of operations, cash flows and changes in our financial position should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended October 31, 2011 included in our Annual Report on Form 10-K filed on February 14, 2013. On May 24, 2010 the Company changed its focus from exploration of mineral properties, to manufacturing, marketing and distributing in the urban mass transit sector.
During the three month periods ended January 31, 2013 and 2012 the Company did not produce any revenue.
Operating expenses for the three months ended January 31, 2013 were $66,464 compared to $267,541 during the same period in 2012. Expenses during 2013 were due to the management fee for managing the Company. Interest expense was zero for the three months period ending January 31, 2013 compared to $5,718 for the same period in 2012.
Period from inception, June 28, 2006, to January 31, 2013
The Company has accumulated a total deficit of $2,678,231. Deficit accumulated during the pre-exploration stage was $219,677 and accumulated during the development stage was $2,458,554.
As a development stage company, the Company is currently have limited operations, principally directed at potential acquisition targets and revenue-generating opportunities.
Liquidity and Capital Resources
As of January 31, 2013, the Company has current assets of $ 838. As at January 31, 2013, the Company’s current liabilities were $105,953 resulting in negative working capital of $105,115. Cash used in operating activities was $109 for the three month period ended January 31, 2013, compared to $5,040 during the same period in 2011. The decrease in 2013 was due to a lower net loss, lower stock compensation, and no investee loss. Cash used in investing activities was zero for the three month period ended January 31, 2013 and zero for the same period in 2012. Cash from financing activities was zero for the three month period ended January 31, 2013and zero during the same period in 2012.
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Off-Balance Sheet Arrangements
The Company has not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company has carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer along with the Chief Financial Officer, of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e) and 15a-15(e)) as of January 31, 2013ursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Principal Executive Officer along with the Principal Financial Officer concluded that disclosure controls and procedures are not effective as of January 31, 2013 in ensuring that information required to be disclosed by us in reports that are file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis. These material weaknesses include the following:
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the Company does not have an Audit Committee.
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there are no written internal control procedurals manual which outlines the duties and reporting requirements of the officers. This lack of a written internal control procedurals manual does not meet the requirements of the SEC or good internal control policies.
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there are no effective controls instituted over financial disclosure and the reporting processes.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the three months ended January 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 1A: RISK FACTORS
Not applicable
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 31, 2013 the Company issued 29,666,667 shares of common stock to Crown Equity Holdings, Inc. with a value of $53,400 as payment for management services during the quarter ended January 31, 2013.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: MINE SAFETY INFORMATION
None
ITEM 5: OTHER INFORMATION
On December 31, 2012 the Company filed Security Registration Statement on Form S-8 registering 20,000,000 shares of common stock for issuance to consultants, advisors, employees and directors.
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ITEM 6: EXHIBITS
The following exhibits are included as part of this report:
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31.1
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Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
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31.2
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Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
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32.1
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
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32.2
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
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101.INS **
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XBRL Instance Document
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101.SCH **
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XBRL Taxonomy Extension Schema Document
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101.CAL **
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF **
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB **
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE **
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XBRL Taxonomy Extension Presentation Linkbase Document
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* Filed herewith.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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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.
| CLEANTECH TRANSIT, INC. | |||
| (Registrant) | |||
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Date: March 5, 2013
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By: |
/s/ Kenneth Bosket
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Kenneth Bosket,
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| President, Chief Executive Officer | |||
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(Principal Executive Officer)
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