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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
   
  For the quarterly period ended July 31, 2014
   
[  ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
   
  For the transition period                  to __________
   
  Commission File Number:  000-53985

 

Well Power, Inc.
(Exact name of Registrant as specified in its charter)

 

 

Nevada 61-1728870
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 

 

11111 Katy Freeway - Suite # 910

Houston, Texas 77079

(Address of principal executive offices)
 
(713) 973-5738
(Registrant’s telephone number)
 
_______________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

 

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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 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 [ ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer

[ ] Non-accelerated filer

[ ] Accelerated filer

[X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 111,455,070 common shares as of September 22, 2014.

 

 

 

  TABLE OF CONTENTS

 

Page 

     
PART I – FINANCIAL INFORMATION
 
Item 1: Financial Statements  3
Item 2:

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

 4
Item 3: Quantitative and Qualitative Disclosures About Market Risk  5
Item 4: Controls and Procedures  5
 
PART II – OTHER INFORMATION
 
Item 1: Legal Proceedings  6
Item 1A: Risk Factors  6
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds  6
Item 3: Defaults Upon Senior Securities  6
Item 4: Mine Safety Disclosures  6
Item 5: Other Information  6
Item 6: Exhibits  6

 

2

  

PART I - FINANCIAL INFORMATION

 

Item 1.      Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1 Balance Sheets as of July 31, 2014 and April 30, 2014 (unaudited);
F-2 Statements of Operations for the three months ended July 31, 2014 and 2013 (unaudited);
F-3 Statements of Cash Flows for the three months ended July 31, 2014 and 2013 (unaudited); and
F-4 Notes to Financial Statements.

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended July 31, 2014 are not necessarily indicative of the results that can be expected for the full year. 

3

 

Well Power, Inc.

Balance Sheets

(unaudited)

 

  July 31,  April 30,
   2014  2014
ASSETS          
Current Assets          
Cash   $15,034   $39,832 
Prepaid expenses   2,599    —   
Total Current Assets   17,633    39,832 
Intangible Assets   375,000    400,000 
Total Assets  $392,633   $439,832 
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current Liabilities          
Accounts payable and accrued liabilities  $164,754   $323,136 
Short-term loan payable   35,000    35,000 
Due to related parties   173,559    102,759 
Stock payable   530,235    280,235 
Total Liabilities   903,548    741,130 
Contingencies and Commitments          
Stockholders’ Deficit          

Common stock, 4,500,000,000 shares authorized, $0.001 par value; 107,500,000 shares issued and outstanding

   107,500    107,500 
Additional paid-in capital   1,801,802    1,801,802 
Accumulated deficit   (2,420,217)   (2,210,600)
Total Stockholders’ Deficit   (510,915)   (301,298)
Total Liabilities And Stockholders’ Deficit  $392,633   $439,832 

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

 

F-1

 

Well Power, Inc.

Statements of Operations

(unaudited)

 

  For the  For the
  Three Months Ended  Three Months Ended
  July 31, 2014  July 31, 2013
Operating Expenses          
General and administrative  $208,647   $2,000   
Total Operating Expenses   (208,647)   (2,000)
Other Expense          
Interest expense   (970)   —   
Net Loss  $(209,617)  $(2,000)
Net Loss Per Common Share – Basic And Diluted  $(0.00)  $(0.00)
Weighted Average Common Shares Outstanding – Basic And Diluted   107,500,000    107,500,000 

 

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

 

F-2

 

Well Power, Inc.

Statements of Cash Flows

(unaudited)

 

  For the  For the
  Three Months Ended  Three Months Ended
  July 31, 2014  July 31, 2013
Cash Flows From Operating Activities          
Net loss  $(209,617)  $(2,000)
Adjustments to reconcile net loss to net cash used in operating activities:          
Changes in operating assets and liabilities:          
Prepaid expense   (2,599)   —   
Accounts payable and accrued liabilities   (133,382)   —   
Net Cash Used in Operating Activities   (345,598)   (2,000)
Cash Flows From Financing Activities          
Net advances from related parties    70,800    2,000 
Proceeds from issuances of stock payable   250,000    —   
Net Cash Provided by Financing Activities   320,800    2,000 
Net Decrease In Cash   (24,798)   —   
Cash - Beginning of Period   39,832    —   
Cash - End of Period  $15,034   $—   

Supplementary Cash Flows Information:

          
Interest paid  $—     $—   
Income taxes paid  $—     $—   

 

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

 

F-3

 

Well Power, Inc.

Notes to the Financial Statements

(unaudited)

 

1. Nature of Business and Continuance of Operations

 

Well Power, Inc. (the “Company”) was incorporated in Nevada on March 27, 2007. On December 10, 2013, the Company effected a merger with its wholly-owned subsidiary, Well Power, Inc. As part of the merger, the Company authorized a name change from Vortec Electronics, Inc. to Well Power, Inc. On January 22, 2014, the Company entered into an Exclusive License and Distribution Agreement to distribute mobile and scalable Wellhead Micro-Refinery Units (MRU’s). Upon entering into the agreement, the Company is a business whose planned principal operations are the sales and distribution of MRU’s in the state of Texas. As at April 30, 2014, the Company has had no operating revenues to date.

 

The Company has incurred losses since inception, has negative working capital, and has not yet received revenues from sales of products or services. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company’s fiscal year end is April 30.

 

Interim Financial Statements

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained elsewhere in this prospectus. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end April 30, 2014 have been omitted.

 

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to intangible assets and 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.

 

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.

 

F-4

 

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, short term loan payable and an amount due to an officer. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Intangible Assets

Intangible assets include all costs incurred to acquire a licensing and distribution agreement. Intangible assets are recorded at cost and amortized on a straight-line basis over their estimated useful life of 5 years. Management conducts an annual assessment of the residual balances, useful lives and depreciation methods used. Changes arising from the assessment are applied by the Company prospectively.

 

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Foreign Currency Translation

The Company’s planned operations will be in the United States, which results in exposure to market risks from changes in foreign currency exchange rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. The Company's functional currency for all operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations.

 

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

Stock-Based Compensation

The expense for equity awards vested during the reporting period is in accordance with ASC Topic 718 and based upon the grant date fair value of the award. The expense is recognized over the applicable vesting period of the stock award using the straight-line method.

 

Subsequent Events

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

 

Earnings (Loss) Per Common Share

Basic EPS is computed by dividing net income (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. At July 31, 2014, the Company has no potentially dilutive securities outstanding.

 

F-5

 

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and 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 Asset

 

On January 22, 2014, the Company entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with ME Resources Corp (“MEC”), a Canadian publicly listed company. The President of the Company is related to a director of MEC. Under the License Agreement, MEC appointed the Company as its exclusive distributor of Wellhead Micro-Refinery Units (“MRUs”) for the initial state of Texas. The License Agreement is for 5 years from the date of execution, but can be extended for two successive periods of an additional 5 years each.

 

Pursuant to the License Agreement, the Company agreed to pay consideration of $400,000, payable in two instalments. $100,000 is to be paid within 30 days (paid) and the balance of $300,000 is to be paid within 90 days ($200,000 paid). At July 31, 2014, the Company recorded the costs of acquiring the license as an intangible asset, and the remaining balance of $100,000 has not been paid and is included in accounts payable and accrued liabilities. Subsequent to the quarter, the Company paid $75,000 for its remaining cash obligation. As a result of the reduction in the purchase price, the Company reduced the value of the intangible asset to $375,000, the cash paid to acquire the license.

 

4. Short-Term Loan

 

On December 18, 2013, the Company entered into a loan agreement in which the note holder agreed to provide a loan to the Company in the principal amount of up to $35,000. The loan is unsecured, bears interest at 11% per annum and is payable on September 30, 2014. As at July 31, 2014, the note holder has provided the full $35,000 to the Company, and interest of $2,275 has been accrued.

 

5. Due To Related Parties

 

a) The amount due to related parties of $173,559 and $102,759 at July 31, 2014 and April 30, 2014, respectively, consists of amounts owed to officers and shareholders of the Company for amounts advanced to pay for professional services provided by the Company’s outside service providers and for consulting services rendered for periods ending on and prior to July 31, 2014. The amount is unsecured, non-interest bearing and due on demand.

 

b) On January 22, 2014, the Company entered into a License Agreement with ME Resources Corp (Note 3). The President of the Company is related to a director of MEC.

 

6. Common Stock

 

The Company’s authorized capital consisted of 4,500,000,000 shares of common stock with a par value of $0.001 per share.

 

There were 107,500,000 shares of common stock issued and outstanding as of July 31, 2014.

 

On March 10, 2014, the Company sold 431,034 units at $0.58 per unit for gross proceeds of $250,000. Each unit consisted of one common share and one share purchase warrant. Each share purchase warrant is exercisable into one additional common share at an exercise price of $0.90 per share for a period of 2 years from the date of issuance. The relative fair value of the shares and warrants is $159,475 and $90,525, respectively. As of July 31, 2014, the Company is obligated to issue 431,034 common shares with a fair value of $250,000, which has been recorded as stock payable.

 

On June 5, 2014, the Company sold 5,000,000 units at $0.05 per unit for gross proceeds of $250,000. Each unit consisted of one common share and one share purchase warrant. Each share purchase warrant is exercisable into one additional common share at an exercise price of $0.90 per share for a period of 2 years from the date of issuance. The relative fair value of the shares and warrants is $184,608 and $65,392, respectively. As of July 31, 2014, the Company is obligated to issue 5,000,000 common shares with a fair value of $250,000, which has been recorded as stock payable.

 

As July 31, 2014, pursuant to the consulting agreement described in Note 8(a), the Company is obligated to issue 93,719 common shares with a fair value of $30,235, which has been recorded as stock payable.

 

7. Stock Options

 

On March 14, 2014, the Company entered into two consulting agreements (refer to Note 8) whereby the Company granted 4,000,000 options to purchase shares of common stock exercisable for a period of two years at a price of $0.70 per share.

 

The following table summarizes information about the stock options.

 

  Number of Options  Weighted Average Exercise Price
$
  Weighted Average Remaining Contractual Life (years)  Aggregate Intrinsic Value
$
 Outstanding and exercisable, July 31, 2014    4,000,000    0.70    1.62    —   

 

8. Commitments And Contingencies

 

The Company neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

a)On January 10, 2014, the Company entered into a consulting agreement with a consultant who provided consulting services in consideration for $6,000 per month for a 4 month term. The consulting fee is payable as follows:

 

                           i.      $3,000 per month settled in shares at the end of the term of the contract. The number of shares issuable is equal to $3,000 divided by the average of the 3 lowest trading prices in the last 10 days of each month.

 

                          ii.      $3,000 per month payable in cash at the end of each month.

 

As of July 31, 2014, no shares had been issued. The company is obligated to issue 93,719 common shares.

b)On March 14, 2014, the Company entered into a consulting agreement with the President of the Company for consulting services to be provided over a one-year term in consideration for $1,000 per month for the first month, and $3,000 per month for the following eleven months. The Company will also pay an initial signing bonus of $10,000. In addition, the President of the Company was granted 2,000,000 options to purchase shares of common stock exercisable for a period of two years at a price of $0.70 per share. During the three months ended July 31, 2014, the Company recognized $9,000 in consulting fees under the agreement, and $79,000 for additional consulting fees incurred during the period.
c)On March 14, 2014, the Company entered into a consulting agreement with the CEO of the Company for consulting services to be provided over a one-year term in consideration for $3,000 per month. The Company will also pay an initial signing bonus of $10,000. In addition, the CEO of the Company was granted 2,000,000 options to purchase shares of common stock exercisable for a period of two years at a price of $0.70 per share. During the three months ended July 31, 2014, the Company recognized $9,000 in consulting fees.

 

F-7

d)On July 25, 2014, the Company entered into a $10,000 8% Convertible Promissory Note with a non-related third party. Under the terms of the Convertible Promissory Note, all principal and interest matures on July 25, 2015. The third party shall have the right to convert any unpaid sums into common stock of the Company at the rate of the lesser of $.09 per share or 50% of the lowest trade reported in the 10 days prior to date of conversion, subject to adjustment as described in the note. As at July 31, 2014, the Company has not received any proceeds under the convertible note. Refer to Note 9(d).

 

9. Subsequent Events

a)On August 6, 2014, the Company entered into a Note Purchase Agreement and $275,000 10% Convertible Promissory Note with a non-related third party. Under the terms of the Convertible Promissory Note, the Company will receive principal in one or more installments with a Maturity Date for the Note of July 29, 2015. The third party shall have the right to convert any unpaid sums into common stock of the Company at the rate of the lesser of $0.08 per share or 55% of the lowest trade reported in the 15 days prior to date of conversion, subject to adjustment as described in the note.
b)On August 21, 2014, the Company entered into a convertible debenture with a non-related third party pursuant to which the Company borrowed $133,000. The convertible debenture bears interest at 2% per annum, and the principal and all unpaid interest is due on January 15, 2015. The convertible debenture is convertible at any time at the third party’s option into shares of the Company’s common stock at a variable conversion price of 45% of the lowest traded price during the 15 days prior to the notice of conversion, subject to adjustment as described in the convertible debenture.
c)On August 26, 2014, the Company entered into an Equity Purchase Agreement and Registration Rights Agreement with Premier Venture Partners, LLC (“Premier”) whereby Premier is obligated, providing the Company has met certain conditions including the filing of a Form S-1 Registration Statement for the shares to be acquired, to purchase up to ten million dollars ($10,000,000) of the Company’s common stock at the rates set forth in the Equity Purchase Agreement. On September 5, 2014, the Company issued 1,977,535 common shares with a fair value of $134,670 to Premier. On September 11, 2014, the Company issued an additional 1,977,535 common shares with a fair value of $105,205 to Premier.
d)On September 16, 2014, a non-related third party paid $10,000 of legal fees on behalf of the Company as proceeds from the $10,000 convertible note described in Note 8(d).

 

F-8

 

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

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Company Overview

 

We have acquired an exclusive license from ME Resource Corp. (“MEC”), a Canadian publicly listed company that is creating mobile and scalable Wellhead Micro-Refinery Units (MRUs) deployable close to the wellhead to process raw natural gas into liquid fuels and clean power. As a result of the license with MEC, we are now in the business of distributing MRUs in the State of Texas and from there into other geographical areas.

 

The product is still under development, which is ongoing, and the first MRU is expected to occur within a year. Discussions are ongoing to raise capital to begin construction of a commercial unit. There is no assurance that we will be able to raise the capital needed to develop the first MRU. Our expectation is that we will obtain financing, chose a site for the MRU, and begin construction of the unit in the third quarter. As such, we will not be able to realize any revenue from the sale of MRUs until the development has completed and a commercialized product is ready for launch.

 

Our plan is to assist the development of the MRUs and distribute them in our licensed territory. We hope to provide oil and gas producers and operators in the State of Texas a solution to process otherwise wasted natural gas, including stranded, shut-in, flared and vented gas and produce valued end-products including engineered fuel (diesel, diluents, synthetic crude) and electrical power. The MRU is a novel method and apparatus, for producing chemicals, heat, energy and water from a methane-containing gas. The innovative method and apparatus makes use of heterogeneous catalysis in a single-vessel, beginning with the partial oxidation of methane to produce synthesis gas followed by a Fischer-Tropsch reaction to produce chemicals and other end products with no excess hydrogen.

 

Under our license agreement, we agreed to pay MEC $400,000 for our exclusive license, which money will go toward the unit cost of an MRU at $800,000 or, alternatively, a revenue sharing arrangement where MEC leases the MRU at 50% unit cost and shares in 50% of the net revenue generated. In either event, this money will be applied to the technical and engineering development of the first demonstration MRU in the territory and may be used to develop catalyst for specific engineered fuels.

 

The payment to MEC was due in two installments: i) $100,000 within thirty (30) days of January 29, 2014; and ii) balance of $300,000 within ninety (90) days of January 29, 2014. We have made total cash payments of $375,000 subsequent to the quarter ended July 31, 2014.. MEC reduced the purchase price to $375,000 and as a result, we reduced the value of the licence to $375,000.

 

Results of Operations for the Three Months Ended July 31, 2014 and 2013

 

We generated no revenue for the three months ended July 31, 2014 and 2013. We do not anticipate earnings revenues until we are able to distribute the MRUs under our license with MEC.

 

Our operating expenses during the three months ended July 31, 2014 were $208,647, compared with $2,000 for the same period ended July 31, 2013. Our operating expenses during the three months ended July 31, 2014 consisted mainly of consulting fees of $141,096, general and administrative fees of $27,236, and professional fees of $23,129.

 

We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to the continued development of the MRUs, consulting fees to our management, general and administrative expenses and the professional fees associated with our reporting obligations under the Securities Exchange Act of 1934.

 

We, recorded a net loss of $209,617 for the three months ended July 31, 2014, compared with a net loss of $2,000 for the three months ended July 31, 2013.

 

4

 

Liquidity and Capital Resources

 

As of July 31, 2014, we had total current assets of $17,633. We had $903,548 in current liabilities as of July 31, 2014. Thus, we had a working capital deficit of $885,915 as of July 31, 2014.

 

Operating activities used $345,598 in cash for three months ended July 31, 2014. Our net loss of $209,617 and $133,382 decrease in accounts payable and accrued liabilities mainly accounted for our negative operating cash flow. Financing activities during the three months ended July 31, 2014 generated $320,800 in cash, represented by $250,000 in proceeds from the sale of our stock and $70,800 in net advances from related parties.

 

We have entered into a number of loan agreements in an effort to provide needed financing. From July 25, 2014 to the present, those loans and their terms are detailed in our Current Report on Form 8-K that we filed with the SEC on August 27, 2014.

 

Despite the financing received, we have insufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

Off Balance Sheet Arrangements

 

As of July 31, 2014, there were no off balance sheet arrangements.

 

Going Concern

 

We have incurred losses since inception, have negative working capital, and have not yet received revenues from sales of products or services. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4.     Controls and Procedures

 

Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of July 31, 2014. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of July 31, 2014, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of July 31, 2014, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending April 30, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended July 31, 2014 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 1.     Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

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

 

On June 5, 2014, we sold 5,000,000 units at $0.05 per unit for gross proceeds of $250,000. Each unit consisted of one common share and one share purchase warrant. Each share purchase warrant is exercisable into one additional common share at an exercise price of $0.90 per share for a period of 2 years from the date of issuance. We are obligated to issue 5,000,000 common shares with a fair value of $250,000, which has been recorded as stock payable.

 

As July 31, 2014, pursuant to the consulting agreement, we are obligated to issue 93,719 common shares with a fair value of $30,325, which has been recorded as stock payable.

 

On August 26, 2014, we entered into an Equity Purchase Agreement and Registration Rights Agreement with Premier Venture Partners, LLC (“Premier”) whereby Premier is obligated, providing we have met certain conditions including the filing of a Form S-1 Registration Statement for the shares to be acquired, to purchase up to $10,000,000 of our common stock at the rates set forth in the Equity Purchase Agreement. On September 5, 2014, we issued 1,977,535 common shares with a fair value of $134,670 to Premier. On September 11, 2014, we issued an additional 1,977,535 common shares with a fair value of 105,205 to Premier.

 

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

 

Item 3.     Defaults upon Senior Securities

 

None

 

Item 4.     Mine Safety Disclosures

 

None

 

Item 5.     Other Information

 

None

 

Item 6.      Exhibits

 

Exhibit Number Description of Exhibit
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted 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

 

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SIGNATURES

 

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Well Power, Inc.
   
Date: September 22, 2014
   
 

By: /s/ Cristian Neagoe

Cristian Neagoe

Title: Chief Executive Officer and Director

 

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