Biopower Operations Corp - Quarter Report: 2012 May (Form 10-Q)

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended May 31, 2012

For the transition period from ________________ to __________________

Commission File Number: 333-172139

BioPower Operations Corporation

(Exact name of registrant as specified in its charter)

1000 Corporate Drive, Suite 200, Fort Lauderdale, Florida 33334

(Address of principal executive offices)

Issuer’s telephone number, including area code: +1 954 607 2800

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ 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.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☐(Do not check if a smaller reporting company) 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 ☐ No ☑

Common Stock $0.0001. As of July 23, 2012, 90,680,000 shares of common stock of the issuer were outstanding.

FORWARD LOOKING STATEMENTS AND ASSOCIATED RISK

Certain statements in this Report, and the documents incorporated by reference herein, constitute forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause deviations in actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied. Such factors include, but are not limited to: market and customer acceptance and demand for our products; our ability to market our products; the impact of competitive products and pricing; the ability to develop and launch new products on a timely basis; the regulatory environment, including government regulation in the United States; our ability to obtain the requisite regulatory approvals to commercialize our products; fluctuations in operating results, including spending for development and marketing activities; and other risks detailed from time-to-time in our filings with the U.S. Securities and Exchange Commission (the “SEC”).

The words "believe, expect, anticipate, intend and plan" and similar expressions identify predictive statements. These statements are subject to risks and uncertainties that cannot be known or quantified and, consequently, actual results may differ materially from those expressed or implied by such predictive statements. Readers are cautioned not to place undue reliance on these predictive statements, which speak only as of the date they are made.

Unless otherwise noted, all currency figures in this filing are in U.S. dollars.  

Introductory Comment - Use of Terminology

Throughout this Quarterly Report on Form 10-Q, the terms “we,” “us” and “our” refers to BioPower Operations Corporation and, unless the context indicates otherwise, our subsidiaries in which we hold 100% of such entities’ outstanding equity securities, including BioPower Corporation (“BioPower Corporation”), Green Oil Plantations Americas Inc. (“Green Oil”) and Green Energy Crops Corporation (“GECC”), on a consolidated basis. Unless otherwise indicated, all monetary amounts are reflected in United States Dollars.

BIOPOWER OPERATIONS CORPORATION

 (A Developmental Stage Company)

CONTENTS

PART I – FINANCIAL INFORMATION

See accompanying notes to consolidated financial statements 

 Page 1

 See accompanying notes to consolidated financial statements 

 Page 2

See accompanying notes to consolidated financial statements 

Page 3

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 page 5

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Consolidated Financial Statements

May 31, 2012

(Unaudited) 

CONTENTS

                                                                                                                                             Page(s)

Consolidated Balance Sheets –

 May 31, 2012 (Unaudited) and November 30, 2011                                                                         1

Consolidated Statements of Operations –

Three and Six Months Ended May 31, 2012 and 2011, and from

September 13, 2010 (Inception) to May 31, 2012 (Unaudited)                                                            2

Consolidated Statements of Cash Flows –

Six Months Ended May 31, 2012 and 2011, and from

September 13, 2010 (Inception) to May 31, 2012 (Unaudited)                                                           3

Consolidated Statement of Stockholders’ Deficit –

From September 13, 2010 (Inception) to May 31, 2012 (Unaudited)                                                  5

Notes to Consolidated Financial Statements (Unaudited)                                                                   8-19

Note 1 Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information.

The financial information as of November 30, 2011 is derived from audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the year ended November 30, 2011. The unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended November 30, 2011.

Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the period ended May 31, 2012, are not necessarily indicative of results for the full fiscal year.

Note 2 Nature of Operations and Summary of Significant Accounting Policies

BioPower Corporation (“BioPower” or “the Company”) was incorporated in the State of Florida on September 13, 2010. On January 5, 2011, the Company re-domiciled to Nevada and formed BioPower Operations Corporation, a Nevada corporation. On January 6, 2011, the shareholders of BioPower Corporation contributed their shares of BioPower Corporation to BioPower Operations Corporation and BioPower Corporation became a wholly-owned subsidiary.

The Company intends to grow biomass crops coupled with processing and/or conversion facilities to produce oils, biofuels, electricity and other biomass products. To date, the activities of the Company have been limited to implementing the business plan and raising capital. The Company is still in its development stage.

The Company’s fiscal year end is November 30.

Principles of Consolidation

All inter-company accounts and transactions have been eliminated in consolidation.

Development Stage

The Company's consolidated financial statements are presented as those of a development stage enterprise. Activities during the development stage primarily include negotiating distribution agreements and marketing the territory for distribution outlets for the product. The Company, while seeking to implement its business plan, will look to obtain additional debt and/or equity related funding opportunities. The Company has not generated any revenues from its planned and principal operations since inception.

Risks and Uncertainties

The Company intends to operate in an industry that is subject to rapid change. The Company's operations will be subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential risk of business failure. Also, see Note 3 regarding going concern matters.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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.

Such estimates for the periods ended May 31, 2012 and 2011, and assumptions affect, among others, the following:

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company had no cash equivalents at May 31, 2012 and August 31,2011.

Marketable Securities

(A) Classification of Securities

At the time of acquisition, a security is designated as held-to-maturity, available-for-sale or trading, which depends on ability and intent to hold such security to maturity. Securities classified as trading and available-for-sale are reported at fair value, while securities classified as held-to-maturity are reported at amortized cost.

Any unrealized gains and losses are reported as other comprehensive income (loss). Realized gains (losses) are computed on a specific identification basis and are recorded in net capital gains (losses) on investments in the combined consolidated statements of operations.

The composition of the Company’s investments at May 31, 2012, classified as current assets, is as follows:

Investment income for the six months ended May 31, 2012 and 2011 is as follows:

(B) Other than Temporary Impairment

The Company reviews its equity investment portfolio for any unrealized losses that would be deemed other-than-temporary and require the recognition of an impairment loss in income. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments.

The Company has not recorded any impairment losses as of May 31, 2012 and 2011 respectively

Equipment

Equipment is stated at cost, less accumulated depreciation computed on a straight-line basis over the estimated useful lives. Maintenance and repairs are charged to operations when incurred.  Betterments and renewals are capitalized when deemed material.  When equipment is sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations.

Equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  There were no impairment charges taken during the periods ended May 31, 2012 and 2011.

Intangible Assets

Identifiable intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of potential impairment exist. Also see Note 7 regarding license agreement.

Investment in Joint Venture

The Company has entered into a Joint Venture with a third party to engage in the business of becoming an independent medical & health network for hospitals, physicians, outpatient and urgent care centers, dental care, vision care, insurance companies, alternative medicine, medical tourism, pharmaceutical companies, vendors and patients. The Company owns fifty percent of the joint venture and has recorded its investment on the equity basis of accounting. The Company’s proportionate share of expenses incurred by the Joint Venture will be charged to the statement of operations and adjusted against the Investment in Joint Venture. Losses from the Joint Venture are only recognized until the investment in the Joint Venture is reduced to zero. Losses in excess of the investment must be restored from future profits before the Company can recognize its proportionate share of profits. See Note 12. The Joint Venture was formally contributed on June 8, 2012. As of May 31 2012, the Joint Venture had no activity.

Beneficial Conversion Feature and Debt Discount

For conventional convertible debt where the rate of conversion is below market value at the date of agreement , the Company records a “beneficial conversion feature” (“BCF”) and related debt discount.

When the Company records a BCF the relative fair value of the BCF would be recorded as a debt discount against the face amount of the respective debt instrument. The discount would be amortized to interest expense over the life of the debt. When a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

Derivative Liabilities

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company expects to use the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management would determine if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

Once determined derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

Share-based payments

The Company recognizes all forms of share-based payments, including stock option grants, warrants, and restricted stock grants at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.

Share based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.

The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service.

When computing fair value, the Company may consider the following variables:

Earnings per share

Basic earnings (loss) per share are computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

Since the Company reflected a net loss in 2012 and 2011, considering any common stock equivalents, if exercisable, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.

The Company has the following potential common stock equivalents at May 31, 2012 and 2011:

Recent Accounting Pronouncements

There are no new accounting pronouncements that are expected to have any material impact on the Company’s consolidated financial statements.

Note 3 Going Concern

As reflected in the accompanying consolidated financial statements, the Company had net cash loss of $384,081 and net cash used in operations of $158,145 for the six months ended May 31, 2012; and a working capital deficit of $710,364 and a stockholders’ deficit of $433,879 at May 31, 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on Management's plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt or equity financings. The Company will likely rely upon related party debt or equity financing in order to ensure the continuing existence of the business.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 Equipment

At May 31, 2012 and November 30, 2011, equipment consists of the following:

Note 5 Notes Payable – Related Parties

During November 2010, the Company’s Chief Executive Officer advanced $10,927. The loan bears interest at 4%, is unsecured and due on demand.

During November 2010, a Company Director advanced $10,000. The loan bears interest at 4%, is unsecured and due on demand.

During December 2010, a Company Director advanced $506. The loan bears interest at 4%, is unsecured and due on demand.

During January 2011, the Company’s Chief Executive Officer advanced $832. The loan bears interest at 4%, is unsecured and due on demand.

During January 2011, a Company Director advanced $631. The loan bears interest at 4%, is unsecured and due on demand.

During February 2011, a Company Director advanced $985. The loan bears interest at 4%, is unsecured and due on demand.

During May 2011, the Company repaid all related party advances totaling $23,881.

During October 2011, the Company’s President/Chief Operating Officer advanced $25,000. The loan bears interest at 4%, is unsecured and due on May 31, 2012. The lender may convert the loan into 100,000 restricted shares of the Company at $0.25 per share. The Company has determined that this is conventional convertible debt, with a BCF. See Note 5(D).

During November 2011, the Company’s President/Chief Operating Officer advanced $5,000. The loan bears interest at 4%, is unsecured and due on May 31, 2012. The lender may convert the loan into 20,000 restricted shares of the Company at $0.25 per share. The Company has determined that this is conventional convertible debt, with a BCF. See Note 5(D).

As of November 30, 2011, the Company owed $479 in accrued interest, which has been recorded as a component of accounts payable and accrued expenses.

During December 2011, the Company’s President/Chief Operating Officer advanced $20,000. The loan bears interest at 4%, is unsecured and due on May 31, 2012. The lender may convert the loan into 80,000 restricted shares of the Company at $0.25 per share. The Company has determined that this is conventional convertible debt, with a BCF. See Note 5(D).

During January 2012, the Company’s President/Chief Operating Officer advanced $20,000. The loan bears interest at 4%, is unsecured and due on May 31, 2012. The lender may convert the loan into 80,000 restricted shares of the Company at $0.25 per share. The Company has determined that this is conventional convertible debt, with a BCF. See Note 5(D).

During February 2012, the Company’s Chief Executive Officer advanced $2,500. The loan bears interest at 4%, is unsecured and due on demand.

During March 2012, the Company’s Chief Executive Officer advanced $17,000. The loan bears interest at 4%, is unsecured and due on demand.

During April 2012, the Company’s Chief Executive Officer advanced $9,000. The loan bears interest at 4%, is unsecured and due on demand.

During April 2012, a third party investor advanced $25,000. The loan bears interest at 4%, is unsecured and due on July 31, 2012. The lender may convert the loan into 100,000 restricted shares of the Company at $0.25 per share. The Company has determined that this is conventional convertible debt, with a BCF. See Note 5(D).

During May 2012, a third party investor advanced $25,000. The loan bears interest at 4%, is unsecured and due on July 31, 2012. The lender may convert the loan into 100,000 restricted shares of the Company at $0.25 per share. The Company has determined that this is conventional convertible debt, with a BCF. See Note 5(D).

During June 2012, the Company’s Chief Executive Officer advanced $1,000. The loan bears interest at 4%, is unsecured and due on demand.

As of May 31, 2012, the Company owes $2,106 in accrued interest, which has been recorded as a component of accounts payable and accrued expenses.

(D) Debt Discount

At May 31, 2012 and November 30, 2011, the Company recorded debt discounts of $120,000 and $30,000, respectively.

As a component of the computation for BCF, the Company’s market price was determined based upon the quoted trading price (once publicly traded in February 2012) or based upon recent third party cash offerings at the date of issuance (prior to February 2012). Based upon recent third part cash offerings at the date of issuance (prior to February 2012).

At May 31, 2012, the Company amortized $86,667 in debt discount.

The following is a summary of the Company’s convertible debt at May 31, 2012 and November 30, 2011.

Note 6 Stockholders’ Deficit

On September 13, 2010, the Company issued 10,000 shares of common stock to its founders for $1 ($0.0001/share). On January 5, 2011, in connection with the re-domiciling to Nevada, these shares were cancelled for no consideration.

On January 28, 2011, the Company issued one share of Series A, preferred stock for $1. This series of preferred stock had a provision that the holder of the one share, a related party controlled by the Company’s Chief Executive Officer and a Director, can vote 50.1% of the total votes. There are no preferences, dividends, or conversion rights.

In 2011, the Company issued the following shares for cash and services:

During the six months ended May 31, 2012, the Company issued the following shares for cash and services:

(1) See Note 7(B)

(2) In connection with the stock issued for services rendered, the Company determined fair value based upon the value of the services provided, which was the most readily available evidence.

On January 11, 2011, the Company issued 1-year warrants for 1,000,000 shares with a consultant, with an exercise price of $1 per share. The warrants were granted for services rendered. The warrants had a fair value of $60,800, based upon the Black-Scholes option-pricing model. The Company used the following weighted average assumptions:

Note 7 Related Party Transactions

(A) License Agreement – Former Affiliate of Chief Executive Officer

On November 30, 2010, the Company entered into an exclusive license agreement with Clenergen Corporation that is a former affiliate of the Company’s Chief Executive Officer. The license gives the Company the right to utilize Intellectual Property rights (“IP”) and technology licenses to produce high-density short rotation biomass energy crops on an exclusive basis in the United States, Central America, Mexico, and Guam excluding Cuba in perpetuity.

(B) Stock issued for license

On January 27, 2011, an agreement was executed with Green Oil Plantations Ltd. and their affiliates (“Green Oil”) for an exclusive license of fifty years in exchange for 1,000,000 shares of common stock, having a fair value of $250,000 ($0.25/share), based upon recent cash offerings to third parties, at that time, to utilize Green Oil’s licensed technologies and turnkey model for growing energy crops in North America, South America, Central America and the Caribbean excluding Cuba. 

The Company has agreed to pay a royalty fee, as a percentage, of gross revenue as follows:

If the Green Oil charges a lesser percentage to another entity, then the first $50,000,000 will be decreased to the lowest percentage charged.

No such transactions have occurred as of November 30, 2011 and through July 20, 2012.

As of May 31, 2012 and November 30, 2011 the license is summarized as follows:

Amortization expense for the fiscal years is as follows:

Note 8 Formation of Subsidiaries

On January 14, 2011, the Company formed Global Energy Crops Corporation (“GECC”), a 100% wholly owned subsidiary. GECC intends to:

On January 27, 2011, the Company formed Green Oil Plantations Americas, Inc. (“Green Oil”), a 100% wholly owned subsidiary as the operating company for the exclusive license agreement with Green Oil Plantations, Ltd. (See Note 7(B))

Both of the above subsidiaries are currently inactive except for their formation.

Note 9 Commitments and Contingencies

Commitments

(A) Lease Agreement

On March 18, 2011, the Company entered into a 26-month lease that commenced on April 1, 2011 and will expire on May 31, 2013. The Company’s monthly lease payment of $4,150 commenced on July 1, 2011. The Company will amortize rent expense on a straight-line basis over the occupancy period.

Rent expense was $22,029 and $7,343 for the six months ended May 31, 2012 and 2011, respectively.

Deferred rent payable (component of accounts payable and accrued expenses) at May 31, 2012 and August 31, 2011 was $5,747 and $8,622 respectively. Deferred rent payable is the sum of the difference between the monthly rent payment and the monthly rent expense of an operating lease that contains escalated payments in future periods.

(B) Consulting Agreements

On January 5, 2012, the Company entered into a consulting agreement for financing. The Company paid a retainer of $15,000 by issuing 60,000 shares of restricted common stock at $0.25 per share. The fair value of the Company’s common stock was based upon third party cash offerings at that time. The Company expensed this issuance as a component of general and administrative expenses.

On March 26, 2012, the Company entered into a consulting advisory agreement. The Company paid a fee of 150,000 shares of common stock, having a fair value of $97,500 ($0.65/share), based upon the quoted closing trading price.

Contingencies

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.

Note 10 Revenue - other

On February 13, 2012, the Company was engaged by a third party to provide consulting services; The Company earns fees that may be paid in cash or stock as follows:

● $120,000 upon execution of agreement (this amount has been received in the form of 15,000,000 shares ($0.008/share). The quantity of shares issued was determined based upon a formula that would require a discount to market calculation to be performed by the public entity. The Company will record the quantity of shares received as revenues, with a corresponding asset classified as available for sale securities. The fair value of the shares received upon the execution of this agreement was $253,500, as evidenced by the quoted closing trading price.

● $60,000 is due on February 13, 2013; and

● $60,000 is due on February 13, 2014

Fees are payable in the form of cash or common stock of the third party, a public company, at their discretion.

Note 11 Fair Value of Financial Assets and Liabilities

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

• Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The Company has assets measured at fair market value on a recurring basis. Consequently, the Company had gains and losses reported in the statement of comprehensive income (loss), that were attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the period ended May 31, 2012.

The following is the Company’s assets measured at fair value at May 31, 2012 and November 30, 2011.

The carrying amounts reported in the balance sheet for available for sale securities, prepaid expenses, accounts payable and accrued expenses, notes payable and convertible debt, approximate fair value based on the short-term nature of these instruments.

Note 12 Subsequent Events

On June 7, 2012, the Company issued 50,000 shares of common stock to the Chairman of the Audit Committee for services rendered, having a fair value of $11,000 ($0.22/share), based upon the quoted closing trading price.

On June 8, 2012, the Company’s Chief Executive Officer contributed 100% of his member interest in FTZ Exchange, LLC, which became a 100% wholly owned subsidiary, to the Company for no consideration. The transaction is accounted for as contributed capital from the related party having a fair value of $10,000 which is represented the net assets of the contributed entity.

FTZ combines on-line and off-line commercial trade strategies with transaction fee based revenue models to create internet exchanges to sell or source products and services to business to business (B2B), business to consumer (B2C) and government communities. There have been no transactions to date other than the formation of FTZ and the entities below.

FTZ is parent to the following entities. FTZ currently owns 50% of the Qx Health Exchange with Quture, Inc. (“TCLN”).  This exchange is for the sale of quality health products and services for the communities of health product manufacturers, insurance companies, hospitals, physicians, healthcare providers, medical tourism and patients. The Qx health Exchange has no transactions to date. The association with the QX Health Exchange is being treated as a joint venture.

FTZ also owns 100% of FTZ Energy Exchange Corporation. FTZ Energy Exchange is currently inactive.

 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Statements made in this 10-K that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934.  In  some  cases, you can  identify  forward-looking statements by terminology such  as "may",  "should", "intends", "expects", "plans", "anticipates", "believes",  "estimates", "predicts", "potential", or  "continue"  or  the  negative of  these  terms  or  other  comparable terminology.  We intend that such forward-looking statements be subject to the safe harbors for such statements.  We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  Any forward-looking statements represent management’s best judgment as to what may occur in the future.  However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected.  We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Unless the context otherwise requires, The "Company", "we," "us," and "our," refer to (i) BioPower Operations Corporation.; (ii) BioPower Corporation (“BC”), (iii) Green Oil Plantations Americas, Inc. (“GOP”), and (iv) Global Energy Crops Corporation (GECC) .

Overview

BioPower Corporation was incorporated September 13, 2010, in the State of Florida and re-domiciled as BioPower Operations Corporation which was incorporated in the State of Nevada on January 5, 2011.

We are a development stage company and have not yet generated or realized any revenues from business operations. Our auditors have issued a going concern opinion. This means there is substantial doubt that we can continue as an on-going business for the next twelve (12) months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing our products to customers. Accordingly, we must raise cash from sources other than revenues generated such as from the proceeds of loans, sale of common shares and advances from related parties.

From inception (September 13, 2010) to May 31, 2012, the company's business operations have primarily been focused on developing our business plan, developing potential products and biomass projects, becoming a trading public company through an S-1 registration statement and raising money.

Castor Project

The Company has begun the process to obtain financing for a castor plantation and milling operation to supply castor oil to the U.S.A. and/or international marketplace. We have located a hybrid seed that should result in high yields per acre. We have identified unique growing protocols that also may enhance the yield of seed thus oil by weight. We have identified engineering firms to prepare both general and site specific engineering for permitting and construction purposes. We have identified the mill equipment to process the seed into oil and the agricultural equipment required to facilitate the growing protocols that have been identified. We are currently working on the development of a long-term (greater than one year) purchase agreement for the sale of castor oil. Although we have discussed various potential sites in the center of Florida, we have not made a final determination of the specific location. 

The U.S.A. currently imports almost 100% of the castor oil used as a feedstock into the personal care, pharmaceuticals, polymers and plastics, adhesives, coatings and other specialty chemical markets. The Company proposes to develop a project in Florida to grow proven hybrid castor which can be harvested within 110 days per crop.  Given the rainfall, the temperature profile and the nature of the soil, it is anticipated that the land when developed will produce 2.6 to 3.0 metric tons of oil seeds per acre based on two crops per year. We will process the seeds into oil (43% of seed weight) with our own, vertically integrated mill which we consider critical to this project.

Based on our ability to obtain financing in this fiscal year, we hope to realize revenues and profits from this operation in 2013.

In addition, at this time we are also in discussions for a potential castor project in South America.

There can be no assurance the above Castor Projects will ever be achieved.

Other Niche Market Technologies

Our experienced management team has been reviewing and doing due diligence for biomass products and processes that we believe will provide short term revenue and profitability for the Company. We review business plans and technologies to determine if they meet our potential short-term goals and criteria. There can be no assurance that the Company will ever successfully commence any of the above.

RESULTS OF OPERATIONS

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect that we will require additional capital to meet our operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

Three Months Ended May 31, 2012 Compared to the Three Months Ended May 31, 2011

The following analysis reflects the consolidated results of operations of BioPower Operations Corporation and its subsidiaries.

Neither Net Sales nor Cost of Sales was realized during either three month period.

Operating Expenses and Depreciation. Operating expenses and depreciation for the three month period ended May 31, 2012 of $327,506 increased $108,240 as compared with $219,266 for the three month comparable period ended in 2011.

              General and administrative expenses primarily consist of development costs, corporate overhead, accrued payroll and payroll taxes, financial and administrative contracted services for professional fees including legal and accounting, SEC filing fees, insurance and stock based compensation.

     Wage and wage related costs which include salaries, commissions, taxes and benefits, increased $10,418 (7%), in as much as three ended May 31, 2012 includes three month’s compensation for Ms. Nelson and Messrs. Kohn and Shepherd and an executive assistant as compared with 2011 which includes three months compensation for Ms. Nelson and Messrs. Kohn and Shepherd and two months’ compensation for an executive assistant.

Professional fees include legal, accounting, stock transfer agent, SEC filing, and general consulting fees. Professional fees increased for the three months ended May 31, 2012 versus the same period last year by $88,564 for an increase of 310% primarily resulting from a significant increase in consulting fees incurred in conjunction with the engagement of investment banking firms for fund raising and paid in restricted common stock at fair market value.

Insurance costs for the three months ended May 31, 2012, were $15,977 compared to $403 for the same period in 2011, an increase of $15,574 attributable to the cost of directors’ and officers’ liability insurance in 2012 which was not in effect in 2011.

Rent was $11,014 an increase of 45% for the three months ended May 31, 2012, as compared to $7,597 for the same period in 2011, due to the Company’s corporate office rental commencing in April 2011 resulting in two months’ cost in 2011 as compared with three months’ cost in 2012.

Travel expense for the three months ended May 31, 2012 of $16,051 as compared with the same period for 2011 of $23,182 for a decrease of $7,130 (31%) is a result of international travel associated with our licensed technologies in 2011 that was not repeated during the same period of 2012.

Miscellaneous expense decreased by $2,606 (18%) to $12,072 for the three months ended May 31, 2012, as compared to $14,678 for the same period in 2011. The decrease is attributable to a mix of increasing and decreases expenses that are not material in aggregate.

Depreciation and amortization expense increased marginally to $2,656 for the three months ended May 31, 2012 as compared with $2,376 for the same period of 2011 as a result of the timing of acquisition of computer equipment during the start-up of our operations in 2011.

Interest Expense increased significantly from $170 in 2011 as compared with $53,960 for the three month period in 2012. This is primarily attributable to the debt discount on the convertible note for the $70,000 loan to the Company from the President and COO, Dale Shepherd.

Net (Loss) and Net (Loss) per Share.  Net Loss for the three months ended May 31, 2012 was $384,122 as compared with $221,812 for the same period in 2011, for an increase in net loss of $162,310 . The increased net loss for the three months ended May 31, 2012 as compared with the same period in 2011 arose primarily from the timing differences from 2011 when we started our operations as compared with three full months of operations in the comparable period in 2012. In addition there were loans to the company in the comparable 2012 period with discounting treatment that resulted in an increase in recorded interest cost. Key account changes for the three month comparative period include (i) increased professional fees of $88,564, (ii) increased interest costs of $53,790 and (iii) increased insurance costs of $15,574.

Six Months Ended May 31, 2012 compared to the Six Months Ended May 31, 2011

The following analysis reflects the consolidated results of operations of BioPower Operations Corporation and its subsidiaries.

Consolidated Statement of income

Net Revenues. Net revenues were $253,500 for the six month period ended May 31, 2012 compared to $0 for the six month comparable period in 2011 for an increase of $253,500. This increase was due to a non-core business consulting agreement paid in stock and valued at the date of agreement during the December to February quarter.

Cost of Sales. There is no cost of sales as operations have not commenced.

Operating Expenses and Depreciation. Operating expenses and depreciation for the six month period ended May 31, 2012 of $552,852 increased $79,259 as compared with $473,593 for the six month comparable period ended in 2011.

      General and administrative expenses primarily consist of development costs, corporate overhead, accrued payroll and payroll taxes, financial and administrative contracted services for professional fees including legal and accounting, SEC filing fees, insurance and stock based compensation.

Wage and wage related costs which include salaries, commissions, taxes and benefits, increased $82,835 (37%), inasmuch as six months 2012 includes six month’s compensation for Ms. Nelson and Messrs. Kohn and Shepherd and an executive assistant as compared with the same start-up period in 2011 which includes five months compensation for Ms. Nelson and Mr. Kohn, four months’ compensation for Mr. Shepherd and two months compensation for an executive assistant.

Professional fees include legal, accounting, stock transfer agent, SEC filing, and general consulting fees. Professional fees decreased for the six months ended May 31, 2012 versus the same period last year by $39,968, a decrease of 23% primarily resulting from a significant decrease in legal and accounting fees incurred in conjunction with the S-1 filing in 2011, offset partially by increased fundraising costs for the engagement of investment banking firms in the March through May period of 2012.

Insurance costs in the six months ended May 31, 2012, were $31,943 compared to $403 for the same period in 2011, an increase of $31,540. The increase is attributed primarily to directors’ and officers’ liability insurance (D&O) being bound effective August 2011 with no such D&O cost in the comparable 2011 period.

Rent was $22,029 through May 31, 2012 (six months’ rental cost) an increase of $14,432 as compared with $7,597 for the six months ended May 31, 2011(two months’ rental cost) due to the Company’s corporate office rental commencing in April 2011.

Travel expense for the six months ended May 31, 2012 of $32,198 as compared to the same period for 2011 of $27,820, or an increase of $4,378 (16%) is a result of continued activity related to fund raising and development of projects.

Miscellaneous expense decreased by $16,868 (45%) to $20,504 for the six months ended May 31, 2012, as compared with $37,372 for the same period in 2011. The decrease is attributable to a mix of increasing and decreases expenses that are not material by nature.

Depreciation and amortization expense in our operating expenses for the six months ended May 31, 2012 of $5,283 compared to $2,376 the same period for 2011 as a result primarily due to the timing of the acquisition of assets during the start-up phase of the business.

Interest Expense for the six months ended May 31, 2012 was $84,729 as compared with interest expense of $384 for the same period last year. The increase in interest expense is primarily the result of debt discount on the convertible note for the $70,000 loan to the Company from the President and COO, Dale Shepherd.

  Net loss for the six months ended May 31, 2012 was $384,081 as compared with $473,977 for the same period in 2011, for a decreased net loss of $89,896. The decreased net loss for the six months ended May 31, 2012 compared to the same period in 2011 arose primarily from the consulting revenue of $253,500 realized in the December to February quarter of 2012 and reduced professional fees of $39,968 offset partially by (i) increased wage and wage related costs of $82,835, (ii) increased interest costs of $84,345, (iii) increased insurance costs of $31,540 and (iv) increased rent costs of $14,432.

Liquidity and Financial Condition

Cash Flows from Operating Activities

Net cash used in operating activities was $158,145 for the six month period ended May 31, 2012 as compared with net cash used of $117,515 for the comparable period in 2011 resulting in an increase in cash used of $40,630. The increase in the cash used in operating activities is due to a decrease in net loss of $89,896, an increase in depreciation of $2,099, a increase in stock issued for services of $47,500, an increase in amortization of debt discount $83,096, a decrease in warrants issued for services of $60,800, an increase in accrued expenses to related parties of $301,087 a decrease in accounts payable and accrued liabilities of $262,659 and an increase in prepaid expenses of $183 and an increase in availiable-for-sale securities received as revenue of $253,500.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $0 for the six months ended May 31, 2012 as compared to $25,284 for the comparable period in 2011.

Cash Flows from Financing Activities

We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the six month period ended May 31, 2012 cash flows provided by financing activities was $168,500 as compared to $287,463 for the comparable period in 2011. The decrease was a result of less money being received from proceeds from the issuance of common stock and an increase in loans. Management is seeking, and expects to continue to seek to raise additional capital through equity or debt financings, including through one or more equity or debt financings to fund its operations, and pay amounts due to its creditors and employees. However, there can be no assurance that the Company will be able to raise such additional equity or debt financing or obtain such bank borrowings on terms satisfactory to the Company or at all.

As of May 31, 2012, our company had a working capital deficit of approximately $710,364.

Cash and Cash Equivalents

Our cash increased during the six months ended May 31, 2012 by $10,355, compared to an increase in cash during the same period in 2011 of $144,664. As outlined above, the increase in cash for the current fiscal period was the result of; (i) cash used in operating activities of $117,515, (ii) cash used in investing activities of $0, and (iii) an increase in cash by $168,500 from financing activities.

Working Capital Information - The following table presents a summary of our working capital at the end of each period:

Six Month Period Ended May 31, 2012

At May 31, 2012, we had a working capital deficit of $710,364 compared with a working capital deficit at November 30, 2011 of $537,566 or an increase in working capital deficit of $172,798 . As of May 31, 2012 we had cash of $16,466 as compared to $6,111 on November 30, 2011. The increase in cash is the net result of our operating, investing and financing activities outlined above.

As of May 31, 2012, our current assets were $246,405 compared to $12,465 in current assets at November 30, 2011. Current assets were comprised of $16,466 in cash, $222,000 in marketable securities and $7,939 in prepaid expenses at May 31, 2012, and $6,111 in cash and $6,354 in prepaid expenses at November 30, 2011. As at May 31, 2012, our current liabilities were $956,769 compared to $550,031 at November 30, 2011. At May 31, 2012, our current liabilities were comprised of accounts payable and accrued expenses of $81,446, accrued expenses related parties of $760,156, notes payable to related party of $28,500, net convertible debt of 16,667 and net related party convertible debt of $70,000 as compared to November 30, 2011 with current liabilities comprised of $87,775 in accounts payable, accrued expenses, related parties $ 458,685 accrued expenses and net related party convertible debt of $3,571.

We are a development stage company whose revenue generating activities have not produced sufficient funds for profitable operations, and we have incurred operating losses since inception. Accordingly, we have continued to utilize the cash raised in our financing activities to fund our operations. In addition to raising cash through additional financing activities, we may supplement our future working capital needs through the extension of trade payables and increases in accrued expenses. In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon our continued operations, which in turn is dependent upon our ability to meet our financial requirements, raise additional financing, and the success of our future operations.

Additional Capital

To the extent that additional capital is raised through the sale of our equity or equity-related securities of our subsidiaries, the issuance of our securities could result in dilution to our stockholders. No assurance can be given that we will have access to the capital markets in the future, or that financing will be available on terms acceptable to satisfy our cash requirements, implement our business strategies. If we are unable to access the capital markets or obtain acceptable financing, our results of operations and financial condition could be materially and adversely affected.  We may be required to raise substantial additional funds through other means. We have not begun to receive revenues from our cord projects or services at this point. Management may seek to raise additional capital through one or more equity or debt financings or through bank borrowings.  We cannot assure our stockholders that our technology and products will be commercially accepted or that revenues will be sufficient to fund our operations.

If adequate funds are not available to us, we may be required to curtail operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our potential projects or products.

PLAN OF OPERATION AND FUNDING

            Since inception (September 13, 2010) to May 31, 2012, the Company has incurred a total of $1,518,791 plus interest expense of $88,799 on the start-up, development and administrative costs. We have not yet generated any revenue from business operations.

           Since inception (September 13, 2010), the majority of the company's time has been spent refining its business plan, conducting industry research, developing potential projects, licensing biomass opportunities, reviewing technologies, preparing an S-1and preparing for additional financing, funding of operations and funding of projects.

           The Company is a development stage company focused on growing biomass crops coupled with processing and/or conversion facilities to produce oils, biofuels, electricity and other biomass products.

           BioPower is focused on a short term strategy for growing a biomass crop that can be converted into bio oils, biofuels and steam. The Company has begun the process to obtain financing for a castor plantation and milling operation to supply castor oil to the U.S.A. marketplace. We are currently in discussions of a long-term (greater than one year) purchase agreement. The U.S.A. currently imports almost 100% of the castor oil used as a feedstock into the personal care, pharmaceuticals, polymers and plastics, adhesives, coatings and other specialty chemical markets. The Company proposes to develop a project in Florida to grow proven hybrid castor which can be harvested within 110 days per crop. Given the rainfall, the temperature profile and the nature of the soil, it is anticipated that the land when developed will produce 2.6 to 3.0 tons of oil seeds per acre based on two crops per year. We will process the seeds into oil (43% of seed weight) with our own, vertically integrated mill which we consider critical to this project.

           In addition, we have been in discussions for a potential biomass project in South America.

          Our experienced management team also continually searches for biomass products and processes that we believe will provide short term revenue and profitability for the Company. We review business plans and technologies to determine if they meet our potential short-term goals and criteria.

           Biomass is all plant and animal matter on the Earth's surface. Harvesting biomass such as crops, trees or dung and using it to generate energy such as heat, electricity or motion, is bioenergy. Biomass is a very broad term which is used to describe material of recent biological origin that can be used either as a source of energy or for its chemical components. As such, it includes trees, crops, algae and other plants, as well as agricultural and forest residues. It also includes many materials that are considered as wastes by our society including food and drink manufacturing effluents, sludge, manures, industrial (organic) by-products and the organic fraction of household waste.

           Our long-term strategy, is to develop our core biomass projects yielding net cash flow from operations from the production of bio-oils, biofuels, fertilizer or other products. 

           We intend to operate our Company through four wholly-owned subsidiaries, FTZ Exchange, LLC, BioPower Corporation, Global Energy Crops Corporation and Green Oil Plantations Americas Inc.  Other subsidiaries may be formed as required to operate the Company.

We estimate our maximum operating expenses and working capital requirements for the next twelve month period to be as follows:

            We anticipate that we will be required to raise additional funds through private sales of debt or equity securities of our company, to fund our operations and execute our business plan. There is no assurance that the financing will be completed on terms advantageous to us, or at all. If we are not successful in raising additional funding, we may be forced to curtail or cease some of all of our operations and/or curtail or elect not to proceed with certain aspects of our business plan.

             We may also encounter unforeseen costs that could also require us to seek additional capital.  As a result, we will need to raise additional debt and/or equity funding.  However, no assurance can be given that we will be able to sell any of such securities.   An inability to obtain such funding would prevent us from developing any biomass feedstock plantations.  Our ability to obtain additional capital also will depend on market conditions, national and global economies and other factors beyond our control.   The terms of any future debt or equity funding that we may obtain may be unfavorable to us and to our stockholders. 

            If we are successful and we are able to raise the entire $5,000,000, we will have sufficient funds to meet business development activity costs  for  the  current fiscal  year,  and  we  will  be  able  to implement key aspects of  our  business  plan,  including  business  development costs  for  our  energy growing operations.    We would have a total of $1,700,000 remaining for working capital.   We expect these amounts will be sufficient to initiate and sustain our business development activities for one year.

             Upon  having  been  successful in raising  $2,500,000, the salary  obligation to our CEO,  President and Director of Business Strategy  will come  into  effect,  and  any  amounts  accrued to  date,  and  monthly amounts  going  forward,

will be payable for a period up to one year including accruals.   The initial annual amounts are $200,000, $150,000 and $125,000 respectively.

             The  amount  and timing  of additional funds that  might  be required cannot  be definitively stated  as at the  date  of this  report  and will  be dependent on a variety  of factors,  including  the success  of our initial  operations and the rate  of future  expansion that  we might  plan  to undertake.  If we were  to determine that  additional funds are required, we would  be required  to raise  additional capital  either by way of loans  or equity,  which,  in the case  of equity,  would  be potentially dilutive  to existing stockholders.   The Company cannot be certain that we will be able to raise any additional capital to fund our operations or expansion past the current fiscal year.

FTZ Exchange LLC.

Subsequent to May 31, 2012 our CEO contributed 100% of the FTZ Exchange LLC. to the Company. The FTZ Exchange, LLC is a licensing company that licenses business know-how and technology to build transaction fee based exchanges for the sale of products and services in vertical markets. FTZ’s first license is a joint venture to form the Qx Health Exchange with Quture, Inc. FTZ owns 50% of the Qx Health Exchange. Our FTZ strategy is to build or license many exchanges in joint venture or to launch exchanges that are 100% Company owned. We intend to launch an Energy Exchange which can sell energy related products and services globally. Some of these products will include energy credits, as previously mentioned in our S-1, biofuels, bio-oils and commodities including oil, gas, electric and many other energy related products and services.

The Company intends to raise money for the exchanges by selling stock in the exchanges versus selling common stock of BioPower so that we will not directly dilute the Company’s shareholders. The Company believes that each exchange will establish its own value and therefore the dilution for each exchange will be dictated by its value.

OUR CHALLENGES

Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous challenges and risks including for example:

 OFF-BALANCE SHEET ARRANGEMENTS

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

GOING CONCERN

The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This item is not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2012. Based on that evaluation, our management concluded that our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three-month period ended May 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us. As of the date of this Quarterly Report, no director or officer is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On January 5, 2012, the Company entered into a non-exclusive agreement with Halcyon Cabot Partners, an investment banking firm, to act as our advisor to raise up to $5,000,000 in capital and $500,000 in the form of a Bridge Loan.  The initial term of the agreement was four months. The Company agreed to pay a retainer fee of $15,000, by issuing 60,000 shares of restricted common stock at $.25 per share. The shares issued are exempt from registration under Sec. 4(2) of the Securities Act of 1933. The Company has notified Halcyon that they failed to provide the services in the agreement and therefore the Company does not owe the 60,000 shares.

On February 22, 2012 a shareholder purchased 200,000 shares of restricted common stock at $.25 per share. The shares issued are exempt from registration under Sec. 4(2) of the Securities Act of 1933.

On March 26, 2012 the Company entered into an agreement with Tejas Securities Group, Inc. as its financial advisor in connection with a proposed offering and private placement of investment capital of up to Twenty Million Dollars ($20,000,000) in the form of senior, junior, convertible or subordinated debt, preferred equity or common equity financing for a Castor Project and in connection with the proposed offering and private placement of investment capital of up to Five Million dollars ($5,000,000) in the form of common stock, at the corporate holding company level.

The Company agreed to pay a retainer fee of $97,500, by issuing 150,000 shares of restricted common stock at $.65 per share. The shares issued are exempt from registration under Sec. 4(2) of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

No report required.

ITEM 4. MINE SAFETY DISCLOSURES

No report required.

ITEM 5. OTHER INFORMATION.

No report required.

Item 6. Exhibits.

The following exhibits are being filed as part of this Quarterly Report on Form 10-Q.

Exhibit

Number               Exhibit Description

31.1                  Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)or 15d-14(a)

31.2                   Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a)

101                    Interactive data files pursuant to Rule 405 of Regulation S-T.*

* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.