UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

þ QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended June 30, 2013

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________.

 

Commission file number 000-52775

  

OCEAN ELECTRIC INC.

(Exact name of registrant as specified in its charter)

 

Nevada	20-4076559
(state or other jurisdiction of incorporation or organization)	(I.R.S. Employer I.D. No.)
112 North Curry Street Carson City, Nevada	89703
(Address of principal executive offices)	(Zip Code)

 

(775) 321-8216

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yesþ   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).   Yesþ   No o

 

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

 

Large accelerated filer o       Accelerated filer o        Non-accelerated filer o      Smaller reporting company þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o  No þ

 

As of September 9, 2013 the registrant’s outstanding stock consisted of 55,800,000 common shares at $.001 par value.

OCEAN ELECTRIC INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.		Financial Statements (unaudited)	3
		Balance Sheets	F-1
		Statements of Operations and Other Comprehensive Income	F-2
		Statements of Cash Flows	F-3
		Notes to Financial Statements	F-4
Item 2.		Management Discussion & Analysis of Financial Condition and Results of Operations	4
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	6
Item 4.		Controls and Procedures	6
PART II - OTHER INFORMATION
Item 1.		Legal Proceedings	7
Item 1A		Risk Factors	7
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3.		Defaults Upon Senior Securities	7
Item 4.		Submission of Matters to a Vote of Security Holders	7
Item 5.		Other information	7
Item 6.		Exhibits	8

2

PART I - FINANCIAL INFORMATION

OCEAN ELECTRIC INC.

(formerly known as Gold Holding Corp.)

(A Development Stage Company)

 

	Index
Balance Sheets (Unaudited)	F-1
Statements of Operations (Unaudited)	F-2
Statements of Cash Flows (Unaudited)	F-3
Notes to the Unaudited Financial Statements	F-4

3

OCEAN ELECTRIC INC.
(formerly known as Gold Holding Corp.)
(A Development Stage Company)
Balance Sheets
(Expressed in US dollars)
				June 30,		December 31,
				2013		2012
ASSETS				(Unaudited)
Current assets
	Cash			$                  8,516		$              305,601
		Total current assets		8,516		305,601
Other assets
	Prepaid Marketing Expenses (see Note 8)			296,364		296,364
	Intangible assets, net			1,486,025		1,541,887
		TOTAL ASSETS		$           1,790,905		$           2,143,852
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable and Accrued Liabilities			77,935		9,089
	Loan Payable to Related Party			16,121		16,121
	Current Portion of Long-Term Debt			490,189		462,002
		Total current liabilities		584,245		487,212
Long-Term Liabilities
	Long-term debt, Net of Current Portion			450,000		702,183
		Total long-term Liabilities		450,000		702,183
		TOTAL LIABILITIES		1,034,245		1,189,395
COMMITMENTS (See Note 8)
STOCKHOLDERS' EQUITY
	Preferred Stock
		Authorized: 5,000,000 preferred shares with a par value		-		-
		of $ 0.001 per share
		Issued and outstanding: nil preferred shares
	Common Stock
		Authorized: 250,000,000 common shares with a par value
		of $ 0.001 per share; 55,800,000 and 55,800,000 Issued		55,800		55,800
		and Outstanding as of June 30, 2013 and Dec 31, 2012
	Additional paid in capital			7,539,661		7,539,661
	Other Comprehensive Income (Loss)			(1,055)		-
	Accumulated Deficit During the Development State			(6,837,746)		(6,641,004)
		TOTAL STOCKHOLDERS' EQUITY		756,660		954,457
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$           1,790,905		$           2,143,852

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

F-1

OCEAN ELECTRIC INC.
(formerly known as Gold Holding Corp.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in US Dollars)
											From
											Inception
			Three Months Ended				Six Months Ended				(January 10,2006)
			June 30,				June 30,				Through
			2013		2012		2013		2012		June 30, 2013
			(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
REVENUES
	Revenues		$             -		$               -		$             -		$              -		$                 4,000
	Cost of sales		-		-		-		-		-
Gross profit			-		-		-		-		4,000
OPERATING EXPENSES
	Advertsing and promotion		-				-				8,410
	Amortization		27,931		27,931		55,862		55,862		189,813
	General and administrative		51,056		44,565		83,798		76,356		436,700
	Management fees		12,183		1,500,000		18,183		3,000,000		6,018,183
Total operating expenses			91,170		1,572,496		157,843		3,132,218		6,653,106
(Loss) from operations			(91,170)		(1,572,496)		(157,843)		(3,132,218)		(6,649,106)
					-				-
Other income (expense)
	Interest expense		(18,077)		(24,969)		(38,899)		(52,230)		(170,660)
	Other Expense		-		-		-		-		(17,980)
Total other income (expense)			(18,077)		(24,969)		(38,899)		(52,230)		(188,640)
NET LOSS			$  (109,247)		$ (1,597,465)		$ (196,742)		$(3,184,448)		$        (6,837,746)
Net loss per Share - Basic and Diluted			$        (0.00)		$          (0.03)		$       (0.00)		$         (0.08)		$                 (0.13)
Weighted average common and common equivalent shares outstanding
	Basic and diluted		55,800,000		50,085,714		55,800,000		42,289,011		54,197,168
Other Comprehensive income:
	Foreign Currency Translation Adjustment		(1,055)		-		(1,055)		-		(1,055)
Comprehensive Income (Loss)			$  (110,302)		$ (1,597,465)		$ (197,797)		$(3,184,448)		$        (6,838,801)

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

F-2

OCEAN ELECTRIC INC. (formerly known as Gold Holding Corp.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
							From Inception
							(January 10
			Six Months Ended				2006) through
			June 30,				June 30,
			2013		2012		2013
			(Unaudited)		(Unaudited)		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss		$       (196,742)		$    (3,184,448)		$    (6,837,746)
	Adjustments to reconcile net earnings to net cash used
	in operating activities:
	Amortization		$          55,862		55,862		189,813
	Imputed Interest		$                  -		52,058		-
	Shares issued for services		$                  -		3,000,000		6,000,000
	Changes in assets and liabilities, net of effects from acquisitions		$                  -		-		-
	Accounts payable and accrued liabilities		$          49,331		12,218		58,420
	Prepaid expenses		$                  -		2,498		-
NET CASH USED IN OPERATING ACTIVITIES			(91,549)		(61,812)		(589,513)
CASH FLOWS FROM INVESTING ACTIVITIES
	Proceeds from disposal of intangible assets		$                  -		-		-
	Acquisitions of assets		$                  -		(197,576)		(296,364)
NET CASH USED IN INVESTING ACTIVITIES			-		(197,576)		(296,364)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from related parties		$                  -		-		46,027
	Repayments of note payable		$       (223,996)		(250,080)		(728,049)
	Common stock issued for cash		$                  -		504,000		1,107,955
	Proceeds from loan payable		$          19,515		450,000		469,515
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES			(204,481)		703,920		895,448
NET CHANGE IN CASH			(296,030)		444,532		9,571
FOREIGN CURRENCY TRANSLATION LOSS-OCI			(1,055)		-		(1,055)
CASH BALANCES
	Beginning of period		305,601		297,233		-
	End of period		$            8,516		$        741,765		$            8,516
NON-CASH INVESTING AND FINANCING TRANSACTIONS :
	Debt forgiveness from related party		$                  -		$                  -		$          29,606
	Common stock issued for intangible assets		$                  -		$                  -		$        457,600
	Note payable issued for intangible assets		$                  -		$                  -		$     1,218,238
	Common stock issued for services		$                  -		$     6,000,000		$     6,000,000
SUPPLEMENTAL DISCLOSURES
	Interest paid		$          31,088		$          52,058		$   154,736.65
	Income tax paid		$                  -		$                  -		$        675,000

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

F-3

 

OCEAN ELECTRIC INC.

(formerly known as Gold Holding Corp.)

(A Development Stage Company)

Notes to Financial Statements

(unaudited)

1. Nature of Operations and Continuance of Business

Ocean Electric Inc. (the “Company”) was incorporated in the State of Nevada on January 10, 2006. On October 27, 2009, the Company changed its name from Royal Equine Alliance Corp. to Gold Holding Corp., and on January 23, 2012, changed its name from Gold Holding Corp. to Ocean Electric Inc. The Company is a development stage company that plans to focus on alternative energy sources. The Company is a development stage company as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”.    

 

Going Concern

 

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  As of June 30, 2013, the Company has negative working capital of $575,729 and an accumulated deficit of $6,837,746.  The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations.  These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.  These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  

 

2.Summary of Significant Accounting Policies

 

a)     Basis of Presentation

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars.  The Company’s fiscal year end is December 31.

 

b)     Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances.  The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.  The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.  To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

c)    Cash and cash equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

d)    Interim Financial Statements

The interim financial information referred to above are condensed and should be read in conjunction with the Company’s latest financial statements. The interim disclosures generally do not repeat those in the annual statements. The interim financial statements have been prepared and presented in conformity with accounting principles generally accepted in the United States applicable to interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The interim financial information has been prepared on a basis consistent with prior interim periods and years and includes all disclosures that are necessary and required by applicable laws and regulations.

e)    Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share.  ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.  Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

F-4

f)     Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  ASC 820 prioritizes the inputs into three levels that may be used to measure fair value

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable, loan payable to related party and long-term debt.  Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.  We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

g)   Comprehensive Loss and Other Comprehensive Income

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.  For the six months ended June 30, 2013, the Company recorded $1,055 in other comprehensive income due to the mark to market adjustment of cash and liabilities. There was no other comprehensive income for the same period in 2012.

Net Income (Loss) and Comprehensive Income for the Six Months Ended June 30, 2013:

Revenues	$0
Expenses	196,742
Net Income (Loss)	($196,742)
Other Comprehensive Income, net of tax:
Foreign currency adjustments	($1,055)
Other Comprehensive Income (Loss)	($1,055)
Comprehensive Income (Loss)	($197,797)

F-5

h)   Stock-Based Compensation
The Company accounts for stock options issued to employees in accordance with the provisions of FASB ASC 718, “Stock Compensation”.  As such, compensation cost is measured on the date of grant as the excess of current market price of the underlying stock over the exercise price.  Such compensation amounts are amortized over the respective vesting periods of the option grant.  The Company adopted the disclosure provisions of FASB ASC 718, “Accounting for Stock-Based Compensation,” and FASB ASC 718, which allows entities to provide pro forma net Income (loss) and pro forma earnings (loss) per share disclosures for employee stock option grants as if the fair-valued based method has been applied.

 

The Company accounts for stock options or warrants issued to non-employees for goods or services in accordance with the fair value method of FASB ASC 718.  Under this method, the Company records an expense equal to the fair value of the options or warrants issued.  The fair value is computed using an options pricing model.

 

i)     Prepaid Marketing Expenses
On April 16, 2012, the Company entered into an agreement with a production company, whereby the production company will produce an advertorial video project at a cost of $395,152.  As at June 30, 2013, the Company incurred $296,364 on the project. The Company intends to capitalize this project when it is completed.

j)      Intangible Assets
Intangible assets are comprised of patents and licenses relating to wave energy and wind energy technology.  The intangible assets are externally acquired and are amortized straight-line over a useful life of fifteen years with zero residual value. 

k)     Impairment of Long-Lived Assets

In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable.  Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances.  An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value

l)      Income Taxes 

Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred Income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.

m)    Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. 

3.Intangible Assets 

			June 30, 2013			December 31, 2012
		(unaudited)				(audited)
Wave energy technology		1,218,238				1,218,238
Wind energy technology			457,600			457,600
Gross intangibles			1,675,838			1,675,838
Accumulated amortization			(189,813)			(133,951)
Net intangible assets		$	1,486,025		$	1,541,887

The amortization expense for the three months ending June 30, 2013 was $27,931, compared to $27,931 for the same period in 2012. The amortization for the six months ending June 30, 2013 was $55,862, compared to $55,862 for the same period in 2012.

F-6

On October 3, 2011, the Company acquired all of the rights and patents to a wave energy technology developed by Hidroflot, S.A.  The purchase price is $1,400,000 for the technology, which is payable in thirty-three monthly installments, and has been recorded at the present value of $1,218,238, based on the present value of payments.

On December 13, 2011, the Company acquired all of the rights and patents to an off-shore wind energy technology developed by Green& Blue Sustainable Technologies.  The Company issued 25,000,000 common shares as full payment for the acquisition, with a market value of $457,600.

 

 

Estimated Amortization Expense		$
For the year ended December 31, 2013		55,862
For the year ended December 31, 2014		111,724
For the year ended December 31, 2015		111,724
For the year ended December 31, 2016		111,724
After December 31, 2016		1,094,991
Total		1,486,025

 

4. Long-Term Debt

 

		June 30, 2013			December 31, 2012
Loan Payable (Hidroflot and Zenith Equity Group)	$	940,189		$	1,164,185
Less: Current portion		(490,189)			(462,002)
Long-Term Liabilities	$	450,000		$	702,183

 

On June 26, 2012, the Company entered into a loan agreement with Zenith Equity Group providing for a loan of $450,000.  The loan will accrue simple interest of 3.5% on the outstanding principal amount and to be repaid in full due on or before June 27, 2015.  As at June 30, 2013 and December 31, 2012, the loan amount is $450,000  and accrued interest is $15,923.

On April 3, 2013, the Company received an unsecured loan from Hidroflot, S.A. of $ 19,515. There is no interest rate associated to the outstanding principal and a repayment schedule has not yet been established as of August 21, 2013.

As at June 30, 2013 and December 31, 2012, the Company owed $490,189 and  $714,186, respectively of debt relating to the acquisition of the wave energy technology, as noted in Note 3.  The amount owing is payable in equal monthly installments as follows:

		Total Payment	Unrealized Interest	Principal
		$	$	$
2013		300,151	24,033	276,118
2014		259,577	7,394	252,183
Total		559,728	31,427	528,301

 

The repayment schedule for the note payable is accelerated to three equal monthly payments of the remaining outstanding amounts at such time where the Company generates $10,000,000 in direct revenues from the technology.  

As of June 30, 2013, the Company did not make a payment of a monthly installment due on the current reporting period. The $490,189 balance disclosed as the Current Portion of the outstanding note is net of $ 38,111 unpaid principal, which has been classified as Accounts Payable.

The Company is required to make the following principal repayments on the long-term debt:

		$
2013		238,006
2014		252,183
2015		450,000
Total		940,189

 

 

 

F-7

5. Accounts Payable

On June 30, 2013, the Company recorded $ 42,514 in Accounts Payable to reflect an installment of the Hidroflot Loan that remained unpaid as of the end of the period.

On April 3, 2013, the Company received an unsecured loan from Hidroflot, S.A. of $ 19,515. There is no interest rate associated to the outstanding principal and a repayment schedule has not yet been established as of September 9, 2013.

As of June 30, 2013, the Company had a balance of $77,935 in Accounts Payable in comparison to $ 9,089 as of December 31, 2012.

6.   Related Party Transactions

 

a)     As at June 30, 2013 and December 31, 2012, the Company owed $15,796 to the former President of the Company.  The amounts were used to fund operations.  The amounts owing are unsecured, non-interest bearing, and due on demand.

b)    As at June 30, 2013 and December 31, 2012, the Company owed $325 to the President and CEO of the Company. The amounts were used to fund operations. The amounts owing are unsecured, non-interest bearing, and due on demand.

c)     On October 3, 2011, the Company purchased the rights to a wave energy technology from Hidroflot, S.A., a company solely owned by the President of the Company, for $1,400,000 (see note 3).

d)    On December 13, 2011, the Company purchased the rights to an off-shore wind energy technology from Green & Blue Sustainable Technologies, a company solely owned by the President of the Company, for 25,000,000 common shares with a fair value of $457,600 (see note 3).

e)     On April 27, 2012, the Company issued 20,000,000 shares with a fair value of $6,000,000 to the director for serviced provided and to be provided from January 1, 2012 to December 31, 2012

 

7. Share Capital

 

a)      On February 24, 2012, the Company increased the number of common shares authorized from 75,000,000 common shares to 250,000,000 common shares.

b)      On March 26, 2012, the Company issued 1,400,000 common shares for proceeds of $ 504,000.

c)      On April 27, 2012, the Company issued 20,000,000 common shares with a fair value of $6,000,000 to the President of the Company for management fees.

 

8. Commitments

On April 16, 2012, the Company entered into an agreement with a production company, whereby the production company will produce an advertorial video project at a cost of $395,152, to be paid according to the following schedule

·

50% ($197,576) upon signing of the agreement (paid);

·

25% ($98,788) prior to commencement of animation (paid); and

·

25% ($98,788) on delivery of the final video project.

The video production is scheduled to be completed in October 2013. The Company intends to capitalize this project when it is completed it will depreciate it in two years.

9. Subsequent Events

As of June 30, 2013, interest expense of $5,030 was reclassified from the 1st quarter expense to a second quarter expense.  The total interest reported for June 30, 2013 is appropriate.  Also, certain amounts on the inception to date statement of cash flows have been reclassified from operating to financing activity to conform with the June 2013 numbers. 

 

F-8

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement

 

This report on Form 10-Q contains certain forward-looking statements.  All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

 

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues.  Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors.  These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements.  The following discusses our financial condition and results of operations based upon our financial statements which have been prepared in conformity with accounting principles generally accepted in the United States.  It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

 

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q.  The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

 

Overview

 

We were incorporated pursuant to the laws of the State of Nevada on January 10, 2006.  We are a startup company and have realized minimal revenues of $4,000.  Our efforts, to date, have focused primarily on the development and implementation of our business plan.

 

Liquidity and Capital Resources

 

As of June 30, 2013, we had cash and cash equivalents of $8,516 and a working capital deficit of $575,729.  As of June 30, 2013 our accumulated deficit was $6,837,746.  For the six months ended June 30, 2013 our net loss was $196,742 compared to net loss of $3,184,448 during the same period in 2012.  This decrease in net loss was due to reduced management fees.

 

We used net cash of $91,549 from operating activities for the six months ended June 30, 2013 compared to the net cash of $61,812 used in operating activities for the same period in 2012.  We did not use any money in investing activities for the six months ended June 30, 2013 compared to the net cash of $197,576 used in investing activities for the same period in 2012.  We used net cash of $204,481 in financing activities for the six months ended June 30, 2013 compared to receiving net cash of $703,920 in financing activities for the same period in 2012.  

 

These financial statements have been prepared on the assumption that we are a going concern, meaning we will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.  Different bases of measurement may be appropriate when a company is not expected to continue operations for the foreseeable future.  Our continuation as a going concern is dependent upon our ability to attain profitable operations and generate funds there-from, and/or raise equity capital or borrowings sufficient to meet current and future obligations.  Management plans to raise equity financings over the next twelve months to finance operations.  There is no guarantee that we will be able to complete any of these objectives.  We have incurred losses from operations since inception and at June 30, 2013, have a working capital deficiency and an accumulated deficit that creates substantial doubt about our ability to continue as a going concern.

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Results of Operations for the three months ended June 30, 2013 compared to the three months ended June 30, 2012 and from inception to June 30, 2013.

 

Limited Revenues

 

Since our inception on January 10, 2006 to June 30, 2013, we have earned limited revenue of $4,000.  As of June 30, 2013, we have an accumulated deficit of $6,837,746 and we did not earn any revenues during the three months ending on June 30, 2013.  At this time, our ability to generate any significant revenues continues to be uncertain.  Our financial statements contain an additional explanatory paragraph in Note 1, which identifies issues that raise substantial doubt about our ability to continue as a going concern.  Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.

 

Net Loss

 

We incurred a net loss of $109,247 for the three months ended June 30, 2013, compared to a net loss of $1,597,465 for the same period in 2012.  This reduction in net loss was due to a decrease in management fees.  From inception on January 10, 2006 to June 30, 2013, we have incurred a net loss of $6,837,746.  Our basic and diluted loss per share was $0.00 for the three months ended June 30, 2013, and $0.03 for the same period in 2012.

 

Expenses

 

Our total operating expenses decreased from $1,572,496 to $91,170 for the three months ended June 30, 2013 compared to the same period in 2012.  This decrease in expenses is mostly due to lower management fees.  Since our inception on January 10, 2006 to June 30, 2013, we have incurred total operating expenses of $6,653,106.

 

Results of Operations for the six months ended June 30, 2013 compared to the six months ended June 30, 2012

Limited Revenues

We did not earn any revenues during the six months ending on June 30, 2013, and we did not earn any revenues earned during the same period in 2012.  At this time, our ability to generate any significant revenues continues to be uncertain.

Net Income/Loss

We had a net loss of $196,742 for the six months ended June 30, 2013, compared to a net loss of $3,184,448, for the same period in 2012.  This decrease in net loss was mostly due to lower management fees.  Our basic and diluted net income (loss) per share was ($0.00) for the six months ended June 30, 2013, and ($ 0.08) for the same period in 2012.  

Expenses

Our total operating expenses decreased from $3,132,218 to $157,843 for the six months ended June 30, 2013 compared to the same period in 2012.  This decrease in expenses is mostly due to lower management fees.

Inflation

 

We have not experienced any impact on our operations from inflationary factors.  The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position.  The net operating losses shown would be greater than reported if inflation was a factor and was reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

  

Off-Balance Sheet Arrangements

 

As of June 30, 2013, we had no off-balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2013 (the “Evaluation Date”). Based upon the evaluation of our disclosure controls and procedures as of the Evaluation Date, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

 

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

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PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

 

As of September 9, 2013 there are no material pending legal proceedings, to which we or any of our subsidiaries are a party or of which any of our properties is the subject.  Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.

 

Item 1A.  Risk Factors

 

There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

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

 

None.

 

Item 3.  Defaults Upon Senior Securities

 

None.

  

Item 4.  Mine Safety Disclosure.

 

Not Applicable.

 

Item 5.  Other Information

 
None.

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ITEM 6.  EXHIBITS 

Exhibit Number	Exhibit Description
31.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EX-101.INS	XBRL Instance Document
EX-101.SCH	XBRL Taxonomy Extension Schema
EX-101.CAL	XBRL Taxonomy Extension Calculation Linkbase
EX-101.LAB	XBRL Taxonomy Extension Label Linkbase
EX-101.PRE	XBRL Taxonomy Extension Presentation Linkbase
EX-101.DEF	XBRL Taxonomy Extension Definition Linkbase

SIGNATURES

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

 

	OCEAN ELECTRIC INC.
		(REGISTRANT)
Date:   September 17, 2013	/s/  Ricardo Prats
		Ricardo Prats
		President, Chief Executive Officer, Chief Financial Officer and Director
		(Authorized Officer for Registrant)

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