Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - 3Power Energy Group Inc. | v453368_ex32-1.htm |
| EX-31.1 - EXHIBIT 31.1 - 3Power Energy Group Inc. | v453368_ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______to______.
3Power Energy Group, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 333-103647 | 98-0393197 | ||
| (State or other jurisdiction of incorporation or | (Commission File Number) | (I.R.S. Employee Identification No.) | ||
| organization) |
PO Box 50006
Sh. Rashid Building
Sh. Zayed Road
Dubai, United Arab Emirates
(Address of principal executive office, Zip Code)
011 97 14 3210312
(Registrant’s telephone number, including area code)
Not Applicable.
(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 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. Yes ¨ No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ¨ | Accelerated filer ¨ |
| Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common equity: As of November 18, 2016, 249,949,923 shares of Common Stock, par value $0.0001 per share are issued and outstanding.
3POWER ENERGY GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
September 30, 2016
TABLE OF CONTENTS
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in forward-looking statements made in this Quarterly Report on Form 10-Q (this “Report”) and in other reports and documents published by us from time to time. Any statements about our beliefs, plans, objectives, expectations, assumptions, future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intend,” “plan,” “projection,” “outlook” and the like, constitute “forward-looking statements” . Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned to carefully read all “Risk Factors” set forth under Item 1A under the Company’s Annual Report on Form 10-K and not to place undue reliance on any forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act. New factors emerge from time to time, and it is not possible for us to predict which will arise or to assess with any precision the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Unless otherwise provided in this Report, references to the “Company,” the “Registrant,” the “Issuer,” “we,” “us,” and “our” refer to 3Power Energy Group Inc. and its subsidiaries.
3
| Item 1. | Financial Statements |
3POWER ENERGY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | March 31, | |||||||
| 2016 | 2016 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,993 | $ | 9,097 | ||||
| Prepaid and other current assets | 10,868 | 10,857 | ||||||
| Total current assets | 12,861 | 19,954 | ||||||
| Property and equipment, net | 36,054 | 37,825 | ||||||
| Total assets | $ | 48,915 | $ | 57,779 | ||||
| LIABILITIES AND DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 5,168,443 | $ | 5,252,098 | ||||
| Accrued interest | 861,067 | 768,893 | ||||||
| Notes payable | 526,894 | 533,699 | ||||||
| Due to related parties | 1,027,088 | 845,129 | ||||||
| Total current liabilities | 7,583,492 | 7,399,819 | ||||||
| Commitments and contingencies | - | - | ||||||
| Deficit | ||||||||
| Common stock,$0.0001 par value, 300,000,000 shares authorized, 249,949,923 shares issued and outstanding as of September 30, 2016 and March 31, 2016 | 24,995 | 24,995 | ||||||
| Additional paid in capital | 11,468,714 | 11,468,714 | ||||||
| Other comprehensive income | 263,118 | 83,147 | ||||||
| Accumulated deficit | (18,984,151 | ) | (18,635,088 | ) | ||||
| Total deficit attributable to 3Power Energy Group, Inc. | (7,227,324 | ) | (7,058,232 | ) | ||||
| Non-controlling interest | (307,253 | ) | (283,808 | ) | ||||
| Total deficit | (7,534,577 | ) | (7,342,040 | ) | ||||
| Total liabilities and deficit | $ | 48,915 | $ | 57,779 | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements
4
3POWER ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
| Three months ended September 30, | Six months ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | $ | 134,363 | $ | 223,926 | $ | 284,005 | $ | 500,223 | ||||||||
| Depreciation | 997 | 1,018 | 1,984 | 1,758 | ||||||||||||
| Total operating expenses | 135,360 | 224,944 | 285,989 | 501,981 | ||||||||||||
| Loss from operations | (135,360 | ) | (224,944 | ) | (285,989 | ) | (501,981 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (47,533 | ) | (42,015 | ) | (93,325 | ) | (80,624 | ) | ||||||||
| Foreign currency transaction (loss) gain | (5,015 | ) | (5,734 | ) | 6,806 | (17,202 | ) | |||||||||
| Net loss before income taxes | (187,908 | ) | (272,693 | ) | (372,508 | ) | (599,807 | ) | ||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net loss | (187,908 | ) | (272,693 | ) | (372,508 | ) | (599,807 | ) | ||||||||
| Net loss attributable to Non-controlling interest | 10,344 | 9,726 | 23,445 | 40,661 | ||||||||||||
| NET LOSS ATTRIBUTABLE TO 3POWER ENERGY GROUP, INC. | $ | (177,564 | ) | $ | (262,967 | ) | $ | (349,063 | ) | $ | (559,146 | ) | ||||
| Loss per common share (basic and diluted): | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Weighted average number of shares outstanding (basic and diluted) | 249,949,923 | 249,949,923 | 249,949,923 | 249,949,923 | ||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | $ | (187,908 | ) | $ | (272,693 | ) | $ | (372,508 | ) | $ | (599,807 | ) | ||||
| Foreign currency translation income (loss) | 60,154 | 67,402 | 179,971 | (40,222 | ) | |||||||||||
| Comprehensive loss: | (127,754 | ) | (205,291 | ) | (192,537 | ) | (640,029 | ) | ||||||||
| Comprehensive loss attributable to non-controlling interest | 10,344 | 9,726 | 23,445 | 40,661 | ||||||||||||
| Comprehensive loss attributable to 3Power Energy Group, Inc. | $ | (117,410 | ) | $ | (195,565 | ) | $ | (169,092 | ) | $ | (599,368 | ) | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements
5
3POWER ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Six months ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (372,508 | ) | $ | (599,807 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation | 1,984 | 1,758 | ||||||
| Foreign currency transaction gain (loss) | (6,805 | ) | 17,202 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Advances from related party | 181,959 | 391,505 | ||||||
| Prepaid and other current assets | (11 | ) | (34,625 | ) | ||||
| Accounts payable and accrued expenses | 96,103 | 185,672 | ||||||
| Accrued interest | 92,174 | 80,348 | ||||||
| Net cash (used in) provided by operating activities: | (7,104 | ) | 42,053 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment | - | (40,859 | ) | |||||
| Net cash used in investing activities | - | (40,859 | ) | |||||
| Net (decrease) increase in cash and cash equivalents | (7,104 | ) | 1,194 | |||||
| Cash and cash equivalents-beginning of period | 9,097 | 1,585 | ||||||
| Cash and cash equivalents-end of period | $ | 1,993 | $ | 2,779 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
| Non-cash investing and financing activities: | - | - | ||||||
See the accompanying notes to these unaudited condensed consolidated financial statements
6
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
NOTE 1 — ORGANIZATION AND BUSINESS
3Power Energy Group, Inc. (the “Company”) was incorporated in the State of Nevada on December 18, 2002 under the name ATM Financial Corp. On April 1, 2008, the Company changed its name from ATM Financial Corp. to Prime Sun Power Inc. On March 30, 2011, the Company changed its name from Prime Sun Power Inc. to 3Power Energy Group, Inc. and increased its authorized share capital to 300,000,000 shares. The Company is in the business of producing renewable generated electrical power and other alternative energies.
The Company's primary effort is to sell electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate power plants based on these technologies. The core approach of the Company's business is to deliver energy in markets where there is an inherent energy gap between supply and demand or where there exists long term, stable, government back by financial support for development of renewable energy.
On May 13, 2011, pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), the Company consummated a reverse merger (“Merger”) with Seawind Energy Limited (“Seawind Energy”), Seawind Services Limited (“Seawind Services”, and together with Seawind Energy, the “Seawind”) and the shareholders of Seawind Energy (the “Seawind Group Shareholders” and together with the Company, and the Seawind Companies, the “Parties”). The Seawind Companies were formed under the laws of the United Kingdom.
In connection with the Merger, the Company issued 40,000,000 restricted shares of the Company’s common stock to the Seawind Group Shareholders (such acquisition is referred to herein as the “Seawind Acquisition”).
Upon completion of the Stock Purchase Agreement, Seawind became 3Power Group, Inc.'s wholly-owned subsidiary. For accounting purposes, the acquisition has been treated as a recapitalization of Seawind with Seawind as the acquirer (reverse acquisition). The historical financial statements prior to May 13, 2011 are those of Seawind Energy. The Merger was accounted for as a “reverse merger”, since the stockholders of Seawind owned a majority of the Company’s common stock immediately following the transaction and their management has assumed operational, management and governance control.
The transaction was accounted for as a recapitalization of Seawind pursuant to which Seawind was treated as the surviving and continuing entity. The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of Seawind immediately following the consummation of the reverse merger. The accompanying consolidated financial statements give retroactive effect to the recapitalization.
In anticipation of the closing of the Stock Purchase Agreement, the Company changed its name to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000 shares.
On July 4, 2011, the Seawind Energy Limited and Seawind Service Limited changed their name to 3Power Energy Limited and 3Power Project Service Limited, respectively.
7
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
Acquisition of Shala Energy sh .p .k:
On June 5, 2012, the Company and Shala Energy sh.p.k ("Shala") executed a master acquisition agreement (the “Acquisition Agreement”) where Shala agreed to transfer and the Company agreed to acquire 75% of the equity of Shala. Under the Acquisition Agreement (the “Acquisition”), the closing of the acquisition was subject to the Company’s completion and satisfaction of the due diligence on Shala and Shala’s partners with respect to their shares in Shala and upon the Company’s payment of the first year premium for the insurance bond premium issued in favor of the Ministry of Economy, Trade and Energy of Republic of Albania in replacement of the then existing bank guarantee issued in favor of Ministry of Economy, Trade and Energy of Republic of Albania for the Shala River Concession Agreement, in the amount of 7,230,315 Euro (the “Required Insurance Bond Premium”). Shala is a firm specializing in developing hydro-electric projects, owning and operating sustainable energy projects in the hydro, wind and solar power sectors in Albania.
On August 10, 2012, after the conclusion of the due diligence efforts, the Company made the first year payment of required Insurance Bond Premium in the amount of 164,851 Euro ($211,972), and as such the Acquisition closed. The acquisition resulted in the Company acquiring 75% of the interest in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania. The Shala River project finalization is in process with the Ministry of Albania.
In connection the acquisition of Shala, the Company is obligated for an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's common stock to Capital Trust Holding AG, as advisor for the Shala acquisition transaction. During the year ended March 31, 2013, the Company accrued $600,000 due to the facilitator fees for feasibility studies in process and recorded as expenses. In December 2013, the Company issued to Capital Trust Holding AG and its affiliates, 15,000,000 shares of its common stock, valued at $0.04 per share in settlement of the facilitator fees for feasibility studies.
During the year ended March 31, 2016, Shala began operations, acquiring assets and incurring costs. As such, its activity is including in the consolidated balance sheet and statement of operations for the current period.
Liquidation/winding up of international subsidiaries:
On October 8, 2012, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of 3Power Project Services Limited, a wholly owned subsidiary of the Company’s Subsidiary, 3Power Energy Limited.
By the letter of The Insolvency Service dated October 12, 2012, the Company was required to provide information relating to 3Power Project Services Limited to the Official Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official Receiver’s Office to review the prospect of recovering the assets of 3Power Project Services Limited for the benefit of creditors.
The Company was also required to deliver to the Official Receiver’s Office certain assets (cash or cheque) and accounting records that are still in its possession or control. The Company has attended the interview and delivered all the available accounting records to the Officer Receiver’s Office. No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing.
On January 17, 2013, the Company filed a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy Limited, a wholly owned subsidiary of the Company. Such strike-off application has yet to be approved as of the date of this report.
Consolidated 3Power Energy Limited (including liabilities of 3Power Project Services Limited) had liabilities as of September 30, 2016 as below:
| Current liabilities | $ | 1,580,736 |
8
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The following (a) condensed consolidated balance sheet as of March 31, 2016, which has been derived from audited consolidated financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended September 30, 2016 are not necessarily indicative of results that may be expected for the year ending March 31, 2017. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended March 31, 2016 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on July 14, 2016.
Basis of presentation:
The unaudited condensed consolidated financial statements include the accounts of the Company and it’s wholly and majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
Use of estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
9
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
Comprehensive Income (Loss)
The Company applies Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.
Functional currency
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars ("USD"). The Company's functional currencies are British pounds ("GBP") and Albania Lek (“LEK”). The consolidated financial statements are translated into USD in accordance with Codification ASC 830, Foreign Currency Matters. All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, shareholders' equity is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting periods. The resulting translation adjustments are reported as other comprehensive income (loss) and accumulated other comprehensive income in the shareholders' equity in accordance with Codification ASC 220,
Comprehensive Income.
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into GBP at the rate on the date of the transaction and included in the results of operations as incurred. There were no material transaction gains or losses in the periods presented.
The exchange rates used to translate amounts in GBP and LEK into USD for the purposes of preparing the consolidated financial statements were as follows:
Balance sheet:
| September 30, | March 31, | |||||||
| 2016 | 2016 | |||||||
| Period-end GBP: USD exchange rate | $ | 1.297 | $ | 1.436 | ||||
| Period-end LEK: USD exchange rate | $ | 0.008 | $ | 0.008 | ||||
Income statement:
| September 30, | September 30, | |||||||
| 2016 | 2015 | |||||||
| Average Six Month GBP: USD exchange rate | $ | 1.373 | $ | 1.541 | ||||
| Average Six Month LEK: USD exchange rate | $ | 0.0080 | $ | 0.0078 | ||||
10
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
Per share data:
The Company accounts for net loss per share in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic and diluted net loss per common share is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect to the exchange ratio in the Merger in May 2011 (see Note 1), which was accounted for as recapitalization of the Company. The Company had no common stock equivalents as of September 30, 2016 and 2015.
Income taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of September 30, 2016 and March 31, 2016, the Company has not recorded any unrecognized tax benefits.
Segment Information
Accounting Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”) establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment.
Accounting for Stock-Based Compensation
The Company accounts for stock, stock options and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Therefore, results include non-cash compensation expense as a result of the issuance of stock, stock options and warrants and we expect to record additional non-cash compensation expense in the future.
The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.
11
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
Recent Accounting Pronouncements
There were various updates recently issued by the Financial Accounting Standards Board, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
NOTE 3 — GOING CONCERN MATTERS
The accompanying unaudited condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern. As of September 30, 2016, the Company has accumulated deficit of $18,984,151 applicable to controlling interest as compared with a deficit of $18,635,088 applicable to controlling interest as of March 31, 2016, and has incurred significant operating losses and negative cash flows. For the six months ended September 30, 2016, the Company sustained a net loss of $349,063 compared to a net loss of $559,146 for the six months ended September 30, 2015. The Company will need additional financing which may take the form of equity or debt and the Company has converted certain liabilities into equity. In the event the Company are not able to increase its working capital, the Company will not be able to implement or may be required to delay all or part of its business plan, and their ability to attain profitable operations, generate positive cash flows from operating and investing activities and materially expand the business will be materially adversely affected. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the company be unable to continue in existence.
NOTE 4 — PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 2016 and March 31, 2016 summarized as follows:
September 30, 2016 | March 31, 2016 | |||||||
| Furniture and equipment | $ | 14,611 | $ | 14,382 | ||||
| IT and other equipment | 27,275 | 27,192 | ||||||
| 41,886 | 41,574 | |||||||
| Less accumulated depreciation | (5,832 | ) | (3,749 | ) | ||||
| $ | 36,054 | $ | 37,825 | |||||
Property and equipment are recorded on the basis of cost. For financial statement purposes, property, plant and equipment are depreciated using the straight-line method over their estimated useful lives.
Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment in accordance with the guidance for impairment of long lived assets.
During the three and six months ended September 30, 2016, the Company charged to operations depreciation expense of $997 and $1,984, respectively, and $1,018 and $1,758 for the three and six months ended September 30, 2015.
12
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
NOTE 5 — NOTES PAYABLE
On March 2, 2010, the Company issued an unsecured Senior Promissory Note ("Note") for 470,000 Euros ($526,894 at September 30, 2016) initially due on December 31, 2010 including interest at 7.5% per annum. Upon default by the Company on January 1, 2011, the interest rate of 15% per annum applies. The Note has not been paid by the Company. As of September 30, 2016, accrued interest on this note was $778,232.
On November 14, 2012, CRG Finance AG (“CRG”) filed a complaint in the District Court for Southern District of New York for allegedly beaching a promissory note.
On January 17, 2013, the Company filed a motion to compel arbitration and on May 23, 2013, the Court granted the Company’s Motion to Compel and ordered that CRG file its claims as an AAA arbitration.
The Final Hearing in the AAA arbitration took place on February 27, 2014, wherein the Company was not able to establish its defense due to the lack of evidence from Rudana. The AAA Arbitrator entered an award of Euro 470,000 plus interest at the annual rate of 7.5% against the Company. As of March 31, 2014, the total award against the Company is Euro 728,241 ($816,795). On or about April 4, 2014, in an effort to perfect this award against the Company, CRG filed a petition with the Southern District of New York seeking to confirm the award. In addition, the Company accrued total of $56,835 as reimbursement of attorney fees and cost incurred by CRG and $15,500 as administrative fees and compensation to the Arbitrator. On July 8, 2014, a judgment has been entered against 3Power in the Southern District of New York in the amount of $1,086,186. That judgment remains unpaid.
NOTE 6 — COMMON STOCK
The Company is authorized to issue 300,000,000 shares of $0.0001 par value common stock. As of September 30, 2016 and March 31, 2016, 249,949,923 shares were issued and outstanding.
NOTE 7 — RELATED PARTY TRANSACTIONS
The Company’s current and former officers and stockholders have advanced funds on a non-interest bearing basis to the Company for travel related and working capital purposes. The Company has not entered into any agreement on the repayment terms for these advances. As of September 30, 2016 and March 31, 2016, there were $1,027,088 and $845,129 advances outstanding, respectively.
As of September 30, 2016 and March 31, 2016, the Company owed approximately £117,918 ($152,929) and £117,918 ($169,421), respectively, to Seawind Marine Limited, a company controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson, included in accounts payable and accrued expenses in balance sheet.
As of September 30, 2016 and March 31, 2016, the Company owed approximately £177,548 ($230,264) and £177,548 ($255,096), respectively to Seawind International Limited, a company controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson, included in accounts payable and accrued expenses in balance sheet.
As of September 30, 2016 and March 31, 2016, the Company owed approximately £88,753 ($115,105) and £88,753 ($127,518), respectively to Power Products Ltd (Enerserve Limited f/k/a), a company under the control of Mr. T P G Adams and Mr. J R Wilson, former directors of the Company, included in accounts payable and accrued expenses in balance sheet.
As of September 30, 2016 and March 31, 2016, the company owed Mr. J R Wilson (ex-Director) £1,144 ($1,483) and £1,144 ($1,644), respectively, included in accounts payable and accrued expenses in balance sheet.
During the three months ended September 30, 2016 and 2015, the Company charged to operation $45,000 and $45,000 as salary to Board members, respectively.
13
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
During the six months ended September 30, 2016 and 2015, the Company charged to operation $90,000 and $90,000 as salary to Board members, respectively.
NOTE 8 — NON CONTROLLING INTEREST
The Company has a 50% interest in American Seawind Energy LLC, a company registered in the State of Texas, United States of America and as of September 30, 2016, 75% interest in Shala Energy sh.pk, a Company registered in the Republic of Albania. American Seawind Energy LLC was inactive as of September 30, 2016.
A reconciliation of the non-controlling loss attributable to the Company:
Net loss Attributable to the Company and transfers (to) from non-controlling interest for the three months ended September 30, 2016:
| American | Shala | |||||||
| Seawind | Energy | |||||||
| Energy LLC | sh pk | |||||||
| Net loss | $ | - | $ | 41,378 | ||||
| Average Non-controlling interest percentage | 50.0 | % | 25.0 | % | ||||
| Net loss attributable to the non-controlling interest | $ | - | $ | 10,344 | ||||
Net loss Attributable to the Company and transfers (to) from non-controlling interest for the six months ended September 30, 2016:
| American | Shala | |||||||
| Seawind | Energy | |||||||
| Energy LLC | sh pk | |||||||
| Net loss | $ | - | $ | 93,782 | ||||
| Average Non-controlling interest percentage | 50.0 | % | 25.0 | % | ||||
| Net loss attributable to the non-controlling interest | $ | - | $ | 23,445 | ||||
Net loss Attributable to the Company and transfers (to) from non-controlling interest for the three months ended September 30, 2015:
| American | Shala | |||||||
| Seawind | Energy | |||||||
| Energy LLC | sh pk | |||||||
| Net loss | $ | - | $ | 38,904 | ||||
| Average Non-controlling interest percentage | 50.0 | % | 25.0 | % | ||||
| Net loss attributable to the non-controlling interest | $ | - | $ | 9,726 | ||||
Net loss Attributable to the Company and transfers (to) from non-controlling interest for the six months ended September 30, 2015:
| American | Shala | |||||||
| Seawind | Energy | |||||||
| Energy LLC | sh pk | |||||||
| Net loss | $ | - | $ | 162,642 | ||||
| Average Non-controlling interest percentage | 50.0 | % | 25.0 | % | ||||
| Net loss attributable to the non-controlling interest | $ | - | $ | 40,661 | ||||
14
3POWER ENERGY GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
The following table summarizes the changes in Non-controlling Interest from April 1, 2015 through September 30, 2016:
| American | ||||||||||||
| Seawind | Shala | |||||||||||
| Energy LLC | Energy sh pk | Total | ||||||||||
| Balance, April 1, 2015 | $ | 608 | $ | (202,993 | ) | $ | (202,385 | ) | ||||
| Net loss attributable to the non-controlling interest | - | (81,423 | ) | (81,423 | ) | |||||||
| Balance, March 31, 2016 | 608 | (284,416 | ) | (283,808 | ) | |||||||
| Net loss attributable to the non-controlling interest | - | (23,445 | ) | (23,445 | ) | |||||||
| Balance, September 30, 2016 | $ | 608 | $ | (307,861 | ) | $ | (307,253 | ) | ||||
NOTE 9 — COMMITMENTS AND CONTINGENCIES
Wuersch Settlement
In November 2011, the Company entered into a Settlement Agreement (the “Wuersch Agreement”) with Wuersch & Gering LLP (“Wuersch”). The Wuersch Agreement provided that Wuersch will accept a cash payment of $50,000, payable in five equal installments, and 2,000,000 options to purchase shares of our common stock at $0.54 per share as full satisfaction of debt obligations to Wuersch of $518,359. The five cash payment installments of $10,000 were due on the 15th calendar day of each month beginning November 15, 2011 and ending on March 15, 2012. Two installment payments were made to Wuersch. The total outstanding balance as of September 30, 2016 and March 31, 2016 is $504,518.
Hellenic Settlement
On November 15, 2011, the Company entered into a Settlement Agreement (the “Hellenic Agreement”) with Hellenic Technologies (“Hellenic”). The Hellenic Agreement provided that Hellenic will accept cash payments of $70,000, payable in five equal installments, and 1,260,000 shares of common stock as full satisfaction of debt obligations to Hellenic of $700,000. The five cash payment installments of $14,000 were due beginning November 14, 2011 and continuing on the 15th calendar day of each month thereafter until paid in full. Two installments were paid as of March 31, 2012. The Company has also issued 1,260,000 of Common stock valued at $630,000 during the year ended March 31, 2012. The outstanding balance as of September 30, 2016 and March 31, 2016 is $28,000.
Litigation
The Company is subject to certain legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.
NOTE 10 — SUBSEQUENT EVENTS
The Company has evaluated subsequent events through, the date of unaudited condensed consolidated financial statements are available to be issued. There are no subsequent events.
15
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
Overview
We were incorporated in the State of Nevada on December 18, 2002, as ATM Financial Corp.
On May 13, 2011 the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Seawind Energy Limited (“Seawind Energy”) and its subsidiary Seawind Services Limited (“Seawind services”), pursuant to which the Company acquired 100% of the issued and outstanding common stock of Seawind Energy, in exchange for the issuance of 40,000,000 restricted shares of the Company’s common stock (such transaction as “Seawind Acquisition”). The acquisition was accounted for as a reverse merger and, accordingly, the Company is the legal survivor and Seawind Energy is the accounting survivor.
For accounting purposes, Seawind Energy was the surviving entity. The transaction was accounted for as a recapitalization of Seawind Energy pursuant to which Seawind Energy was treated as the surviving and continuing entity. The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of Seawind Energy immediately following the consummation of the reverse merger.
In anticipation of the closing of the Stock Purchase Agreement, on March 30, 2011 the Company changed its name to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000 shares. On July 4, 2011, Seawind Energy and Seawind Service changed their name to 3Power Energy Limited (“3Power Energy”) and 3Power Project Service Limited (“3Power Service”), respectively. Both 3Power Energy and 3Power Service are inactive as of September 30, 2016.
The Business
The principle planned business of the Company is to sell electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate power plants based on these technologies. The core approach of the Company’s planned business is to deliver energy in markets where there is an inherent energy gap between supply and demand or where there exists long term, stable, government backed financial support for the development of renewable energy. The strategic plan of the Company is to develop power plants and sell electricity in mature and emerging international energy markets at secure rates with the highest potential margins for return on investment.
Acquisition of Shala Energy sh .p .k:
On June 5, 2012, the Company and Shala Energy sh.p.k ("Shala") executed a master acquisition agreement (the “Acquisition Agreement”) whereby Shala agreed to transfer and the Company agreed to acquire 75% of the equity of Shala. Under the Acquisition Agreement (the “Acquisition”), the closing of the acquisition was subject to the Company’s completion and satisfaction of the due diligence on Shala and Shala’s partners with respect to their shares in Shala and upon the Company’s payment of the first year premium for the insurance bond premium issued in favor of the Ministry of Economy, Trade and Energy of Republic of Albania in replacement of the then existing bank guarantee issued in favor of Ministry of Economy, Trade and Energy of Republic of Albania for the Shala River Concession Agreement, in the amount of 7,230,315 Euro (the “Required Insurance Bond Premium”). Shala is a firm specializing in developing hydro-electric projects, owning and operating sustainable energy projects in the hydro, wind and solar power sectors in Albania.
16
On August 10, 2012, after the conclusion of the due diligence efforts, the Company made the first year payment of required Insurance Bond Premium in the amount of 164,851 Euro ($211,972), and as such the Acquisition closed. The Acquisition resulted in the Company acquiring 75% of the interest in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania. The Shala River project finalization is in process with the Ministry of Albania.
In connection the acquisition of Shala, the Company is obligated for an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's common stock to Capital Trust Holding AG, as advisor for the Shala acquisition transaction. During the year ended March 31, 2013, the Company accrued $600,000 due to the facilitator fees for feasibility studies in process and recorded as expenses. In December 2013, the Company issued to Capital Trust Holding AG and its affiliates, 15,000,000 shares of its common stock, valued at $0.04 per share in settlement of the facilitator fees for feasibility studies.
During the six months ended September 30, 2016, Shala began operations, acquiring assets and incurring costs. As such, this activity is including in our unaudited condensed consolidated balance sheet and statement of operations for the current period.
Current Focus
We currently have only one project, a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania, and the commercialization of this project is in its infancy. Our intended markets may not utilize our producible products, and it may not be commercially successful.
We intend to develop additional projects but to date, none have proven to be commercially viable or successful.
Results of Operations For The Three Months Ended September 30, 2016 And 2015
We had no revenues from operations for the three months ended September 30, 2016 and 2015.
We incurred operating expenses of $135,360 for the three months ended September 30, 2016 compared to $224,944 for the three months ended September 30, 2015. The decrease is due to less, consulting fees, travel and other cost in the current period as compared to prior year in addition to depreciation expense of $997 incurred with our majority owned subsidiary Shala Energy as compared to $1,018 for the same period last year.
Our interest expense was $47,533 for the three months ended September 30, 2016 as compared to $42,015 for the same period in 2015. The increase of $5,518 or due primarily to compounding of interest associated with note obligations. Additionally, we recognized a foreign currency transaction loss of $5,015 during the three months ended September 30, 2016 as compared to a loss of $5,734 last year.
Results of Operations For The Six Months Ended September 30, 2016 And 2015
We had no revenues from operations for the six months ended September 30, 2016 and 2015.
We incurred operating expenses of $285,989 for the six months ended September 30, 2016 compared to $501,981 for the six months ended September 30, 2015. The decrease is due to less, consulting fees, travel and other cost in the current period as compared to prior year in addition, offset by depreciation expense of $1,984 incurred with our majority owned subsidiary Shala Energy as compared to $1,758 for the same period last year.
Our interest expense was $93,325 for the six months ended September 30, 2016 as compared to $80,624 for the same period in 2015. The increase of $12,701 or due primarily to compounding of interest associated with note obligations. Additionally, we recognized a foreign currency transaction gain of $6,806 during the six months ended September 30, 2016 as compared to a loss of $17,202 last year.
17
Liquidity and Capital Resources
Our total cash and cash equivalents as of September 30, 2016 was $1,993 compared to the total cash and cash equivalents of $9,097 as of March 31, 2016.
As of September 30, 2016, our total current assets were $12,861 compared to total current assets $19,954 as of March 31, 2016 and the total current liabilities were $7,583,492 as of September 30, 2016 compared to $7,399,819 as of March 31, 2016. The increase in current liabilities was primarily due increase in of $181,959 related party debt and in accounts payable and accrued expenses of $8,519.
Net cash used in operating activities was $7,104 for the six months ended September 30, 2016 compared to net cash provided by operating activities of $42,053 for the six months ended September 30, 2015. The cash flow used in operating activities consists of $372,508 net loss, with payments on the Company’s behalf by related party of $181,959 and depreciation of $1,984, foreign currency transaction gain of $6,805, an increase in prepaid and other assets of $11, increase in accounts payable and accrued expenses of $96,103 and an increase in accrued interest of $92,174.
Net cash used in investing activities was $-0- and $40,859 for the six months ended September 30, 2016 and 2015, respectively. Cash used in 2015 reflects purchases of equipment by our majority owned subsidiary, Shala Energy.
Net cash provided by financing activities was $Nil for the six months ended September 30, 2016 and 2015.
Our pre-operational activities to date have consumed substantial amounts of cash. Our negative cash flow from operations is expected to continue and accelerate in the foreseeable future as the Company invests in capital expenditures to commence operations.
We will need to raise additional capital to implement our business plan and continue operations for any length of time. We are seeking alternative sources of financing, through private placement of securities and loans from our shareholders in order for us to maintain our operations. We cannot guarantee that we will be successful in raising additional cash resources for our operations.
The independent registered public accounting firm’s report on our March 31, 2016 consolidated financial statements included in our Form 10-K states that our difficulty in generating sufficient cash flow to meet our obligations and sustain operations raise substantial doubts about our ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified several accounting principles that we believe are key to the understanding of our financial statements. These important accounting policies require management’s most difficult, subjective judgments.
18
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
Comprehensive Income (Loss)
The Company applies Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
Foreign Currency Translation and Transactions
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars (“USD”). The functional currency of our subsidiaries is British pounds (“GBP”) and Albania Lek (“LEK”). The financial statements of subsidiaries are translated into USD in accordance with the Codification ASC 830, “Foreign Currency Matters”. All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, shareholders’ equity is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting periods. The resulting translation adjustments are reported as other comprehensive income and accumulated other comprehensive income in shareholders’ equity in accordance with the Codification ASC 220, “Comprehensive Income.”
Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into GBP at the rate on the date of the transaction and included in the results of operations as incurred. There were no material transaction gains or losses in the periods presented.
Income taxes
Income tax provisions or benefits for interim periods are computed based on the Company’s estimated annual effective tax rate. Based on the Company's historical losses and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is not more likely than not that deferred tax assets will be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates or anticipated that its net deferred tax assets at September 30, 2016 and March 31, 2016 would be fully offset by a valuation allowance, there is no federal or state income tax benefit for the six months ended September 30, 2016 and 2015 related to losses incurred during such periods.
Off Balance Sheet Transactions
We do not have any off-balance sheet transactions.
19
Recently Issued Accounting Pronouncements
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.
Inflation
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.
Disclosure of Contractual Obligations
The Company does not have any significant contractual obligations which could negatively impact our results of operations and financial condition.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Smaller reporting companies are not required to provide the information required by this item.
| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934 (the “Exchange Act”). In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our disclosure controls and procedures regarding a lack of adequate personnel and adequate segregation of duties. Based on management’s evaluation of our disclosure controls and procedures as of September 30, 2016, our Chief Executive Officer/Chief Financial Officer has concluded that, as of that date, our disclosure controls and procedures were not effective.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. Therefore while there are some compensating controls in place, it is difficult to ensure effective segregation of accounting and financial reporting duties. Management reported a material weakness resulting from the combination of the following significant deficiencies:
| • | Lack of segregation of duties in certain accounting and financial reporting processes including the approval and execution of disbursements; | |
| • | The Company’s corporate governance responsibilities are performed by the Board of Directors; we do not have independent Board of Directors, we do not have an audit committee or compensation committee. Because our Board of Directors only meets periodically throughout the year, several of our corporate governance functions are not performed concurrent (or timely) with the underlying transaction, evaluation, or recordation of the transaction. |
While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full time staff. We may not be able to fully remediate the material weakness until we increase operations at which time we would expect to hire more staff.
20
Plan for Remediation of Material Weaknesses
To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees and engage outsourced accounting professionals, which will enable us to implement adequate segregation of duties within the internal control framework. We will continue to monitor and assess the costs and benefits of additional staffing.
Changes in Internal Control over Financial Reporting
No changes were made to our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| Item 1. | Legal Proceedings |
On November 14, 2012, CRG Finance AG (“CRG”) filed a complaint in the District Court for Southern District of New York for allegedly beaching a promissory note (See Note 5 above).
On January 17, 2013, the Company filed a motion to compel arbitration and on May 23, 2013, the Court granted the Company’s Motion to Compel and ordered that CRG file its claims as an AAA arbitration.
The Final Hearing in the AAA arbitration took place on February 27, 2014, wherein the Company was not able to establish its defense due to the lack of evidence from Rudana. The AAA Arbitrator entered an award of Euro 470,000 plus interest at the annual rate of 7.5% against the Company. As of March 31, 2014, the total award against the Company is Euro 728,241 ($816,795). On or about April 4, 2014, in an effort to perfect this award against the Company, CRG filed a petition with the Southern District of New York seeking to confirm the award. In addition, the Company accrued total of $56,835 as reimbursement of attorney fees and cost incurred by CRG and $15,500 as administrative fees and compensation to the Arbitrator.
On July 8, 2014, a judgment has been entered against 3Power in the Southern District of New York in the amount of $1,086,186. That judgment remains unpaid.
| Item 1A. | Risk Factors |
Smaller reporting companies are not required to provide the information required by this item.
| Item 2. | Unregistered Sales of Equity Securities And Use Of Proceeds |
None
| Item 3. | Defaults Upon Senior Securities |
The information regarding CRG Finance contained under Item 1 of Part II above is incorporated herein by reference in response to this item.
21
| Item 4. | Mine Safety Disclosures |
Not Applicable.
| Item 5. | Other Information |
None.
| Item 6. | Exhibits. |
(a) Exhibits
| Exhibit Number |
Description | |
| 31.1* | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1+ | Certification of Principal Executive officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
* Filed herewith.
+ In accordance with the SEC Release 33-8238, deemed being furnished and not filed.
23
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.
| 3POWER ENERGY GROUP, INC. | |||
| Dated: November 18, 2016 | By: | /s/ Sharif Rahman | |
| Name: | Sharif Rahman | ||
| Title: | Chief Executive Officer and Chief Financial Officer | ||
| (Principal Executive Officer, Principal Financial and Chief Accounting Officer) | |||
24