Cyber Apps World - Quarter Report: 2012 April (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended April 30, 2012
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Commission file number 000-50693
Sky Power Solutions Corp.
(Name of Registrant as Specified in Its Charter)
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Nevada
(State or Other Jurisdiction
of Incorporation or Organization)
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90-0314205
(I.R.S. Employer
Identification No.)
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420 N. Nellis Blvd., Suite A3-146, Las Vegas, Nevada
(Address of Principal Executive Offices)
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89110
(Zip Code)
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(702) 940-9940
(Issuer’s Telephone Number, Including Area Code)
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Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par value $0.001per share[Missing Graphic Reference]
Indicate by check mark whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o 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). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. (Check One):
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes x No
On June 12, 2012, there were 24,907,316 shares of common stock outstanding.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. Unaudited Financial Statements
Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following financial statements be read in conjunction with the year-end financial statements and notes thereto included in the Company's Annual Report on Form 10K for the year ended July 31, 2011. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. The results of operations for the nine months ended April 30, 2012 and 2011, are not necessarily indicative of the results for the entire fiscal year or for any other period.
Sky Power Solutions Corp.
(A Development Stage Company)
Balance Sheets
(unaudited)
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April 30,
2012
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July 31,
2011
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Assets
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Current assets:
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Cash and cash equivalents
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$ | - | $ | 7 | ||||
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Other current assets
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325 | 1,788 | ||||||
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Total current assets
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325 | 1,795 | ||||||
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Property and equipment, net
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52,534 | 60,448 | ||||||
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Total assets
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$ | 52,859 | $ | 62,243 | ||||
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Liabilities and Stockholders' Deficiency
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Current liabilities:
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Accounts payable and accrued expenses
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$ | 1,471,302 | $ | 1,445,707 | ||||
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Advances
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698,208 | 762,327 | ||||||
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Due to related parties
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173,600 | 173,600 | ||||||
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Total current liabilities
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2,343,110 | 2,381,634 | ||||||
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Commitments and contingencies
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Stockholders' deficiency:
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Preferred stock, $.001 par value, 10,000,000 shares authorized, 0 issued and outstanding
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- | - | ||||||
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Common stock, $.001 par value, 100,000,000 shares authorized as of April 30, 2012;
24,907,316 and 21,157,316 issued and outstanding at April 30, 2012 and July 31, 2011,
respectively.
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24,907 | 21,157 | ||||||
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Additional paid-in capital
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4,542,868 | 4,434,118 | ||||||
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Accumulated deficit
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(4,604,623 | ) | (4,604,623 | ) | ||||
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Deficit accumulated during the development stage
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(2,253,403 | ) | (2,170,043 | ) | ||||
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Stockholders' deficiency
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(2,290,251 | ) | (2,319,391 | ) | ||||
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Total liabilities and stockholders' deficiency
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$ | 52,859 | $ | 62,243 | ||||
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For the Nine Months Ended
April 30,
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For the Three Months Ended
April 30,
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For the Period
August 1, 2008
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2012
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2011
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2012
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2011
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- April 30, 2012
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Net sales
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$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
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Operating expenses:
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General and administrative
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92,432 | 94,451 | 26,459 | 31,549 | 671,901 | |||||||||||||||
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Research and development
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10,812 | 23,527 | 788 | 6,080 | 449,312 | |||||||||||||||
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Loss from operations
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(103,244 | ) | (117,978 | ) | (27,247 | ) | (37,629 | ) | (1,121,213 | ) | ||||||||||
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Other (expenses)/income
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Interest expense
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- | (323,149 | ) | - | (105,305 | ) | (1,233,270 | ) | ||||||||||||
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Other income
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19,884 | 62,178 | - | 21,768 | 101,080 | |||||||||||||||
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Net loss before provision for (benefit from) income taxes
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(83,360 | ) | (378,949 | ) | (27,247 | ) | (121,166 | ) | (2,253,403 | ) | ||||||||||
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Provision for (benefit from) income taxes
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- | - | - | - | - | |||||||||||||||
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Net loss
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$ | (83,360 | ) | $ | (378,949 | ) | $ | (27,247 | ) | $ | (121,166 | ) | $ | (2,253,403 | ) | |||||
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Net loss per common share - basic and diluted
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$ | (0.00 | ) | $ | (0.33 | ) | $ | (0.00 | ) | $ | (0.10 | ) | ||||||||
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Weighted average number of common shares outstanding -
basic and diluted
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21,225,747 | 1,154,842 | 20,774,738 | 1,162,367 | ||||||||||||||||
See accompanying notes to unaudited financial statements
Sky Power Solutions Corp.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
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Nine Months Ended
April 30,
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For the Period
August 1, 2008
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2012
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2011
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- April 30, 2012
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (83,360 | ) | $ | (378,949 | ) | $ | (2,253,403 | ) | |||
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Adjustments to reconcile net loss to net cash utilized by operating activities
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Depreciation
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7,914 | 9,823 | 101,106 | |||||||||
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Increase (decrease) in cash flows from changes in operating assets and liabilities
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Prepaid expenses and other current assets
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1,463 | - | (325 | ) | ||||||||
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Accounts payable and accrued expenses
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25,596 | 287,286 | 1,307,045 | |||||||||
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Net cash used in operating activities
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(48,387 | ) | (81,840 | ) | (845,577 | ) | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Additions to property and equipment
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- | - | (17,015 | ) | ||||||||
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Net cash used in investing activities
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- | - | (17,015 | ) | ||||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from advances
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71,364 | 176,710 | 1,562,939 | |||||||||
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Advances from related parties
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- | 74,000 | 1,150,743 | |||||||||
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Payments on advances
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(22,984 | ) | (168,850 | ) | (752,232 | ) | ||||||
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Payments to related parties
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- | - | (1,114,553 | ) | ||||||||
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Net cash provided by financing activities
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48,380 | 81,860 | 846,897 | |||||||||
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CHANGE IN CASH AND CASH EQUIVALENTS
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Net increase (decrease) in cash and cash equivalents
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(7 | ) | 20 | (15,695 | ) | |||||||
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Cash and cash equivalents at beginning of period
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7 | 158 | 15,695 | |||||||||
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Cash and cash equivalents at end of period
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$ | - | $ | 178 | $ | - | ||||||
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SUPPLEMENTAL CASH FLOW DISCLOSURES
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Cash paid during the period for:
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Interest
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$ | - | $ | - | $ | - | ||||||
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Income taxes
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$ | - | $ | - | $ | - | ||||||
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SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
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Shares issued for related party advances
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$ | 112,500 | $ | 47,520 | $ | 47,520 | ||||||
See accompanying notes to unaudited financial statements
Sky Power Solutions Corp.
(A Development Stage Company)
Statement of Stockholders' Deficiency
For the Periods Ended As Noted
(unaudited)
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Number of
Common Shares
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Common
Shares $0.001
Par Value
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Additional paid
in capital
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Accumulated
Deficit |
Deficit Accumulated
During the
Development Stage
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Total
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Balance August 1, 2008
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1,150,007 | $ | 1,150 | $ | 132,768 | $ | (4,604,623 | ) | $ | - | $ | (4,470,705 | ) | |||||||||||
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Net Loss
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- | - | - | - | (898,447 | ) | (898,447 | ) | ||||||||||||||||
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Balance - July 31, 2009
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1,150,007 | 1,150 | 132,768 | (4,604,623 | ) | (898,447 | ) | (5,369,152 | ) | |||||||||||||||
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Net Loss
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- | - | - | - | (796,949 | ) | (796,949 | ) | ||||||||||||||||
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Balance - July 31, 2010
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1,150,007 | 1,150 | 132,768 | (4,604,623 | ) | (1,695,396 | ) | (6,166,101 | ) | |||||||||||||||
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Issuance of common stock for related party advances
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20,007,309 | 20,007 | 4,301,350 | - | - | 4,321,357 | ||||||||||||||||||
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Net Loss
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- | - | - | - | (474,647 | ) | (474,647 | ) | ||||||||||||||||
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Balance - July 31, 2011
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21,157,316 | 21,157 | 4,434,118 | (4,604,623 | ) | (2,170,043 | ) | (2,319,391 | ) | |||||||||||||||
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Issuance of common stock for related party advances
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3,750,000 | 3,750 | 108,750 | - | - | 112,500 | ||||||||||||||||||
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Net Loss
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- | - | - | - | (83,360 | ) | (83,360 | ) | ||||||||||||||||
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Balance - April 30, 2012
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24,907,316 | $ | 24,907 | $ | 4,542,868 | $ | (4,604,623 | ) | $ | (2,253,403 | ) | $ | (2,290,251 | ) | ||||||||||
See accompanying notes to unaudited financial statements
SKY POWER SOLUTIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
April 30, 2012
(unaudited)
Note 1. Financial Statement Presentation
Sky Power Solutions Corp. (the “Company” or “Sky Power”) following the merger with our wholly-owned subsidiary on April 5, 2011 (formed for the sole purpose of merging with its parent), continues to concentrate its efforts on further development of the lithium batteries technology licensed from Li-ion Motors Corp. (“Li-ion Motors”), the Company’s former parent.
As of August 1, 2008, the Company is considered a development stage enterprise as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities” (“ASC 915”). The Company has limited revenue to date, continues to raise capital and there is no assurance that ultimately the Company will achieve a profitable level of operations.
The summary of significant accounting policies is presented to assist in the understanding of the financial statements. The financial statements and notes are the representations of management. These accounting policies conform to accounting policies generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
History and Nature of Business
On April 2, 2011, the Company’s Board of Directors (the “Board”) authorized the merger with our wholly-owned subsidiary, Sky Power Solutions Corp., and in the merger the name of our Company was changed to Sky Power Solutions Corp.
On April 15, 2008, Li-ion Motors sold its controlling interest of the Company’s outstanding common stock to Blue Diamond Investments, Inc. (“Blue Diamond”) With the sale of our VoIP telecommunications business, named Zingo Telecom, Inc., on May 15, 2008, the Company intends to concentrate efforts on further development of the lithium batteries technology licensed from Li-ion Motors, the Company’s former parent.
Effective April 15, 2008, the Company entered into a License Agreement (“License Agreement”) with Li-ion Motors providing for Li-ion Motors' license to the Company of Li-ion Motors patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications (“Licensed Products”).
Under the License Agreement, Li-ion Motors has the right to purchase its requirements of lithium ion batteries from the Company, and its requirements of lithium ion batteries shall be supplied in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for our other customers. Li-ion Motors' cost for lithium ion batteries purchased from the Company is the actual manufacturing costs for such batteries for our fiscal quarter in which Li-ion Motors purchase takes place.
On May 25, 2010, the agreement was amended to grant the Company the exclusive license rights for the United States and Li-ion Motors may grant other companies rights elsewhere around the world.
Under the terms of the License Agreement, the Company agreed to invest a minimum of $1,500,000 in each of the first two years under the License Agreement in development of the technology for the Licensed Products. To date, we have not met the minimum requirements in the development of the technology, and therefore, are not compliant with our obligations under this covenant of the License Agreement. Li-ion Motors has advised the Company that it will not give notice of default against the Company for its failure to comply with this covenant over the term of the License Agreement.
Effective April 16, 2008, the Company agreed to lease approximately 5,000 square feet of space in Li-ion Motors’ North Carolina facility. The leased space is suitable, and utilized by the Company, for developmental and manufacturing operations for licensed products pursuant to the license agreement. The leased space is on a month-to-month basis with a monthly rental of $3,038, the monthly rental to be escalated five (5%) percent annually. Also, effective April 16, 2008, the Company purchased certain equipment and supplies related to the license agreement from Li-ion Motors for the purchase price of $29,005.
Basis of Presentation
Going Concern
The Company’s financial statements for the period ended April 30, 2012, have been prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company did not have any revenue and as of April 30, 2012, there was a working capital deficit of approximately $2.3 million. Management recognized that the Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and revenue to cover expenses as the Company continues to incur losses.
Since its incorporation, the Company financed its operations almost exclusively through advances from its controlling shareholders. The Company expects to finance operations through the sale of equity or other investments for the foreseeable future, as the Company does not receive significant revenue from its new business operations. There is no guarantee that the Company will be successful in arranging financing on acceptable terms.
The Company's ability to raise additional capital is affected by trends and uncertainties beyond its control. The Company does not currently have any arrangements for financing and it may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor sentiment. Market factors may make the timing, amount, terms or conditions of additional financing unavailable to it. These uncertainties raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Common Stock
On September 17, 2009, the Board declared a three-for-one forward stock split that was effected in the form of a stock dividend.
Effective April 26, 2011, the Company filed with SOSN a Certificate of Change that effected a 1:300 reverse split in our outstanding common stock and a reduction of our authorized common stock in the same 1:300 ratio, from 750,000,000 shares to 2,500,000 shares.
On June 6, 2011, the Board approved the filing of a Certificate of Amendment with the Secretary of State of Nevada (“SOSN”) which gave the Company the authority to issue 100 million shares of common stock and 10 million shares of preferred stock.
On May 4, 2011, debt to Blue Diamond and its assignees in the amount of $4,321,358 was converted into 20,007,309 shares of the Company’s common stock.
On April 26, 2012, debt to Li-ion Motors was assigned to Frontline Asset Management (“Frontline”) and Winsor Capital (“Winsor”) in the amount of $125,000 which was converted into 3,750,000 shares of the Company’s common stock.
All common stock references have been restated to reflect the stock splits. See Note 6 “Common Stock”, for further discussion.
Note 2. Summary of Significant Accounting Policies
The Company’s significant accounting policies are summarized in Note 2 of the Company’s Annual Report on Form 10-K for the year ended July 31, 2011. There were no significant changes to these accounting policies during the nine months ended April 30, 2012, and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.
Note 3. Fair Value Measurements
The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed financial statements on a recurring basis or on a nonrecurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
Level 1 - Observable inputs such as quoted market prices in active markets
Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions
As of April 30, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents. The fair values of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The Company does not have any financial assets measured at fair value on a recurring basis as Level 3 and there were no transfers in or out of Level 1, Level 2 or Level 3 during the nine months ended April 30, 2012, and 2011.
The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of April 30, 2012, and July 31, 2011.
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Assets at Fair Value Using
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Total
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Quoted Prices in
Activated Markets for Identical Asssets
(Level 1)
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Significant Other
Observable Inputs
(Level 2)
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Significant Observable
Inputs
(Level 2)
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April 30, 2012
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Cash and cash equivalents
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$ | - | $ | - | $ | - | $ | - | |||||||
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July 31, 2011
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Cash and cash equivalents
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$ | 7 | $ | 7 | $ | - | $ | - | |||||||
The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values. The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of April 30, 2012.
Non-financial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual depletion of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related net book value. As of the balance sheet date, the carrying value of its long-lived assets are recoverable and no impairment existed.
Note 4. Property and Equipment
Property and equipment consists of:
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April 30, 2012
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July 31, 2011
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Equipment
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$ | 131,455 | $ | 131,455 | ||||
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Leasehold improvements
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26,360 | 26,360 | ||||||
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Property and equipment
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157,815 | 157,815 | ||||||
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Less: Accumulated depreciation
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(105,281 | ) | (97,367 | ) | ||||
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Property and equipment, net
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$ | 52,534 | $ | 60,448 | ||||
Depreciation expense for the nine months ended April 30, 2012 and 2011, was $7,914 and $9,823, respectively. For the three months ended April 30, 2012 and 2011, depreciation expense was $2,407 and $3,482, respectively and is included in selling, general and administrative expenses on the Company’s statement of operations.
Note 5. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of:
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April 30, 2012
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July 31, 2011
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Accounts payable
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$ | 103,191 | $ | 54,983 | ||||
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Wages, paid leave and payroll related taxes
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7,520 | 5,383 | ||||||
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Other accrued expenses
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250 | 25,000 | ||||||
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Accrued interest - related parties
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1,360,341 | 1,360,341 | ||||||
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Total
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$ | 1,471,302 | $ | 1,445,707 | ||||
Note 6. Common Stock
On April 26, 2012, L-ion Motors assigned $125,000 of its debt to Frontline and Frontline assigned $63,000 of the assigned note to Winsor. Frontline converted the balance of the assigned note for 1,650,000 shares of Common Stock at $0.03 per share. Winsor converted the assigned note for 2,100,000 shares of Common Stock at $0.03 per share.
On June 6, 2011, the Company filed a Certificate of Amendment with the Secretary of State of Nevada (“SOSN”) which gave the Company the authority to issue 100 million shares of common stock and 10 million shares of preferred stock
On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Eurolink Corporation (“Eurolink”) and Eurolink converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.
On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Heritage Asset Management, Inc. (“Heritage”) and Heritage converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.
On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Kisumu S.A. (“Kisumu”) and Kisumu converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.
On May 4, 2011, Blue Diamond assigned $216,000 of its debt to Starglow Asset, Inc. (“Starglow”) and Starglow converted the assigned note for 1,000,000 shares of Common Stock at $0.216 per share.
On May 4, 2011, Blue Diamond assigned $453,600 of its debt to Domino Developments, Inc. (“Domino”) and Domino converted the assigned note for 2,100,000 shares of Common Stock at $0.216 per share.
On May 4, 2011, Blue Diamond assigned $453,600 of its debt to Honeycomb Developments, LLC (“Honeycomb”) and on Honeycomb converted the assigned note for 2,100,000 shares of Common Stock at $0.216 per share.
On May 4, 2011, Blue Diamond assigned $453,600 of its debt to Legend International, LLC (“Legend”) and Legend converted the assigned note for 2,100,000 shares of Common Stock at $0.216 per share.
On May 4, 2011, Blue Diamond converted the principal balance of its note of $2,049,037.52 for 9,486,285 shares of Common Stock at $0.216 per share.
Effective April 26, 2011, we filed with SOSN a Certificate of Change that effected a 1:300 reverse split in our outstanding common stock and a reduction of our authorized common stock in the same 1:300 ratio, from 750,000,000 shares to 2,500,000 shares.
On April 25, 2011, the Board approved the conversion of $47,520 of debt due to Blue Diamond Investments for 220,000 shares of our common stock at $0.216 per share.
Conversion price was equal to fair market value of common share on the date of conversion.
On September 17, 2009, the Company’s Board of Directors declared a three-for-one forward stock split of the Company’s common stock that was effected in the form of a stock dividend. A three-for-one forward split in our common stock was effective October 19, 2009. The Certificate of Change filed with the Nevada Secretary of State on September 18, 2009, providing for the forward split, changed the number of shares of our outstanding common stock from 115,000,000 to 345,000,000, and the number of shares of our authorized common stock increased in the same ratio, from 250,000,000 to 750,000,000.
See Note 7 “Net Loss Per Common Share,” for the impact on the Company’s loss per share amounts as a result of the 2011 reverse stock split. This reverse stock split resulted in the reduction of approximately 344,885,000 shares of common stock and was accounted for by the transfer of $343,850 from common stock to additional paid-in-capital which is the amount equal to the par value of the reduction of shares to effect the reverse stock split.
Note 7. Net Loss Per Common Share
Loss per share is computed based on the weighted average number of shares outstanding during the year. Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares and potential common shares during the specified periods. The Company has no outstanding options, warrants or other convertible instruments that could affect the calculated number of shares.
The following table sets forth the reconciliation of the basic and diluted net loss per common share computations for the nine months ended April 30, 2012 and 2011.
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Three Months Ended
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Three Months Ended
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April 30, 2012
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April 30, 2011
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Income
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Shares
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Per-Share
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Income
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Shares
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Per-Share
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(Numerator)
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(Denominator)
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Amount
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(Numerator)
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(Denominator)
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Amount
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Net (loss)
|
$ | (83,360 | ) | $ | (378,949 | ) | ||||||||||||||||||
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Basic loss per common share
|
(83,360 | ) | 21,225,747 | (0.00 | ) | (378,949 | ) | 1,154,842 | (0.33 | ) | ||||||||||||||
|
Effect of dilutive securities
|
- | - | ||||||||||||||||||||||
|
Diluted loss per common share
|
$ | (83,360 | ) | 21,225,747 | (0.00 | ) | $ | (378,949 | ) | 1,154,842 | (0.33 | ) | ||||||||||||
Net loss per common share for the nine months ended April 30, 2011, has been revised. All share and per share amounts have been restated to reflect the one-for-three hundred reverse stock split as discussed in Note 6.
The amounts previously reported for the three months ended April 30, 2011, were as follows:
|
Nine Months Ended
|
Three Months Ended
|
|||||||
|
April 30, 2011
|
April 30, 2011
|
|||||||
|
Basic and Diluted Loss Per Common Share
|
$ | (0.32 | ) | $ | (0.11 | ) | ||
|
Weighted Average Number of Shares
|
||||||||
|
Outstanding -Basic and Diluted
|
1,175,099 | 1,097,759 | ||||||
Note 8. Related Party Transactions
On April 15, 2008, Blue Diamond assumed Li-ion Motors’ debt due from Sky Power. At April 30, 2012 and July 31, 2011, Blue Diamond was owed $0 and $0, respectively. During the three and nine months ended January 31 2012, the Company did not receive or make any payments to Blue Diamond. Interest for the nine months ended April 30, 2012 and 2011, was $0 and $217,844, respectively. Interest for the three months ended April 30, 2012 and 2011, was $0 and $108,922, respectively. Interest due to Blue Diamond at April 30, 2012 and July 31, 2011, was $1,359,767 and $1,359,767, respectively, which is included in accounts payable and accrued expenses on the Company’s balance sheet. The related party transaction amounts are reported as current due to the relationship and bear an interest rate of 10 % per annum.
On December 15, 2010, the Company issued a non-interest bearing, due on demand, promissory note to Mehboob Charania, (chief executive and principal financial officer) for which we have received advances of $173,600 and repaid $0. The related party transaction amounts are reported as current due to the relationship.
Note 9. Advances
The Company's principal financing source in the last two fiscal years has been from its former parent, Li-ion Motors. At April 30, 2012 and July 31, 2011, the Company owed Li-ion Motors $698,208 and $762,327, respectively. During the nine months ended April 30, 2012 and 2011, the Company received advances totaling $71,364 and $176,710, respectively; and made payments totaling $22,894 (all in the form of reimbursement for one leased employee) and $168,850 ($106,631 in cash and $62,219 in reimbursement for one leased employee), respectively. During the three months ended April 30, 2012 and 2011, the Company received advances totaling $16,826 and $67,430, respectively; and made payments totaling $125,000(from assignment of debt to Frontline) and $54,440 ($32,631 in cash and $21,809 in reimbursement for one leased employee), respectively. The advances are interest free. No term has been set for repayment and no payment is expected until the Company has begun to produce battery cells and has become a profitable venture.
Note 10. Income Taxes
At April 30, 2012 and July 31, 2011, the Company has deferred tax assets as a result of the net operating losses incurred from inception. The resulting deferred tax assets are reduced by a valuation allowance as discussed in Note 1, equal to the deferred tax asset as it is unlikely, based on current circumstances, that the Company will ever realize a tax benefit. Deferred tax assets and the corresponding valuation allowances amounted to approximately $1.8 million and $1.8 million at April 30, 2012 and July 31, 2011, respectively. The statutory tax rate is 35% and the effective tax rate is zero.
Under current tax laws, the cumulative operating losses incurred amounting to approximately $6.6 million and $6.6 million at April 30, 2012 and July 31, 2011, respectively, will begin to expire in 2023.
Section 382 of the U.S. Internal Revenue Code imposes an annual limitation on loss carry-forwards to offset taxable income when an ownership change occurs. The Company meets the definition of an ownership change and some of the net operating loss carry-forwards will be limited.
Note 11. Commitments and Contingencies
The Company entered into a month to month lease agreement with Li-ion Motors Corp. for 5,000 square feet within Li-ion Motors’ Mooresville facility on April 16, 2008 at the rate of $3,038. Approximately 80% of this space has been converted into offices and a battery development workshop including a dry room.
Total rent expense for the nine months ended April 30, 2012 and 2011, was $29,189 and $31,694, respectively. Rental expense for the three months ended April 30, 2012 and 2011, was $8,826 and $10,656, respectively.
ITEM 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations.
Forward Looking Statements
This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in this section.
Introduction
We were incorporated on July 15, 2002 under the laws of the State of Nevada. We changed our business in 2008, entering into a license agreement with Li-ion Motors on April 15, 2008, for the license of the development of their lithium battery technology. We sold our Zingo Telecom, Inc. and M/S Zingo Bpo Services Pvt. Ltd. subsidiaries that offered telecommunications services to business and residential customers utilizing VoIP technology on May 15, 2008. To reflect our new business, we changed our name from Zingo, Inc. to Superlattice Power, Inc. on April 25, 2008 and on April 5, 2011, we merged with our wholly-owned subsidiary, Sky Power Solutions Corp., and in the merger the name of the Company was changed to Sky Power Solutions Corp.
We entered into a license agreement with Li-ion Motors on April 15, 2008, for the license of the technology related to the development of their lithium battery technology. We also leased space within Li-ion’s plant and created a chemical lab and manufacturing facility to begin work on the lithium battery technology we had licensed .
Results Of Operations for the Nine months Ended April 30, 2012
We incurred a net loss of $83,360 during the nine months ended April 30, 2012, which included: general and administrative (G&A) costs of $94,432; research and development (R&D) expenses of $10,812; and other income of $19,884. During the three months ended April 30, 2012, the Company incurred a net loss of $27,427 which included: G&A costs of $26,459 and R&D expenses of $788.
2012 Compared to 2011
For the nine months ended April 30, 2012 our net loss decreased to $83,360 from $378,949 for the same period ending April 30, 2011. The decrease was primarily due to no interest expense from debt and the reduction in other income of $42,294 for a leased employee to our former parent, Li-ion Motors.
Our net loss for the three months ended April 30, 2012 decreased to $27,247 from $121,166 for the same period ending April 30, 2011. The decrease was primarily due to no interest expense from debt and the reduction in other income of $21,768 for a leased employee to our former parent, Li-ion Motors.
Plan of Operations
Commercial Initiatives
We are developing rechargeable lithium ion batteries for power production for a variety of uses. We plan to pioneer a superlattice cathode material for the use in lithium ion rechargeable batteries.
License Agreement with Li-ion Motors
Effective April 15, 2008, we entered into a License Agreement with Li-ion Motors, our former controlling stockholder, providing for Li-ion Motors’ license to us of their patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications.
Under the License Agreement, Li-ion Motors has the right to purchase its requirements of lithium ion batteries from us, and its requirements of lithium ion batteries shall be supplied in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for our other customers. Li-ion Motors cost for lithium ion batteries purchased from us will be our actual manufacturing costs for such batteries for our fiscal quarter in which Li-ion Motors’ purchase takes place. On May 25, 2010 the Agreement was amended limiting us to only the United States with Li-ion Motors able to grant other licenses to companies in other parts of the world.
Under Section 2.2 of the License Agreement, we have agreed to invest a minimum of $1,500,000 in each of the first two years of the term of the License Agreement in development of the technology for the Licensed Products. In the initial year under the License Agreement, we invested approximately $264,043 in the development of our technology, and therefore are not in compliance with our obligations under this covenant of the License Agreement. Li-ion Motors has advised us that it will not give notice of default against us for our failure to comply with this covenant over the term of the License Agreement.
Effective April 16, 2008, we agreed to lease approximately 5,000 square feet of space in Li-ion Motors’ North Carolina facility, such Leased Space to be suitable for, and utilized by us for, our developmental and manufacturing operations for Licensed Products pursuant to the License Agreement. The Leased Space is leased by Li-ion Motors to us on a month-to-month basis at a monthly rental of $3,038, the monthly rental to be escalated five (5%) percent annually. Effective April 16, 2008, Li-ion Motors also sold us for the purchase price of $29,005, specified equipment and supplies related to the licensed intellectual property.
Liquidity and Capital Resources
As of April 30, 2012, we did not have any cash on hand and liabilities of $2,343,110 as compared with $2,381,634 at July 31, 2011, and our property plant and equipment decreased to $52,534 at April 30, 2012, as compared with $60,448 at July 31, 2011. Accounts payable and accrued expenses increased at April 30, 2012, to $1,471,302 as compared with $1,445,707 at July 31, 2011, and advances and due to related parties decreased to $871,808 at April 30, 2012, as compared to $935,927 at July 31, 2011.
At April 30, 2012, we had a working capital deficiency of $2,342,785 and a stockholders' deficit of $2,290,251.
We used net cash in operating activities of $48,387 in the nine months ended April 30, 2012, as compared with $81,840 in the comparable period in 2011, and cash flows used in investing activities for the purchase of property, plant and equipment was $0 during 2012 and $0 in 2011.
During the nine months ended April 30, 2012, we received $0 and repaid $0, to a related party as compared with advances from related parties of $74,000 and repayments of $0 in 2011.
During the nine months ended April 30, 2012, we received $71,364 from the proceeds from our promissory note to Li-ion Motors Corp. and repaid $22,984 as compared to advances received in 2011, of $176,710 and repayment of $168,850.
Since our incorporation, we have financed our operations almost exclusively through advances from our controlling shareholders. We expect to finance operations through the sale of equity or other investments for the foreseeable future, as we do not receive significant revenue from our new business operations. There is no guarantee that we will be successful in arranging financing on acceptable terms.
Our ability to raise additional capital is affected by trends and uncertainties beyond our control. We do not currently have any arrangements for financing and we may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor sentiment. Market factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
Our auditors are of the opinion that our continuation as a going concern is in doubt. Our continuation as a going concern is dependent upon continued financial support from our shareholders and other related parties.
Critical Accounting Issues
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to intangible assets, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Commodity Price Risk – The raw materials for manufacturing our batteries could be affected by changes in the commodities markets, and if we commence manufacturing our own lithium ion batteries, we could be subject to this risk.
ITEM 4T. Controls and Procedures.
The Company's Chief Executive Officer and Principal Financial Officer is primarily responsible for the accuracy of the financial information that is presented in this Quarterly Report. This officer has, as of the close of the period covered by this Quarterly Report, evaluated the Company's disclosure controls and procedures (as defined in Rules 13a-14c and 15d-14c promulgated under the Securities Exchange Act of 1934) and determined that such controls and procedures were effective in ensuring that material information relating to the Company was made known to him during the period covered by this Quarterly Report. In such officer’s evaluation, no changes were made to the Company's internal controls in this period that have materially affected, or are reasonably likely materially to affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 6. Exhibits
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31
|
||
|
32
|
|
101.INS
|
XBRL Instance Document **
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document **
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase **
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document **
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document **
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document **
|
** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and otherwise are not subject to liability under those sections
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SKY POWER SOLUTIONS CORP.
|
||
|
By:
|
/s/ Mehboob Charania
|
|
|
Chief Executive Officer and Principal Financial Officer
|
||
|
Date: June 12, 2012
|