Cyber Apps World - Quarter Report: 2013 April (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number 000-50693

Clean Enviro Tech Corp.

(Formerly Sky Power Solutions Corp.)

(Name of Registrant as Specified in Its Charter)

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

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   [ ]  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 [X] 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 [ ] Accelerated filer [ ] Non-accelerated filer [ ] 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).

[ ] Yes [X] No

On June 12, 2013, there were 9,838,721 shares of common stock outstanding.

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, 2012. 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 and three months ended April 30, 2013 and 2012, are not necessarily indicative of the results for the entire fiscal year or for any other period.

CLEAN ENVIRO TECH CORP.

(FORMERLY SKY POWER SOLUTIONS CORP.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

April 30, 2013

(unaudited)

Note 1. Financial Statement Presentation

Clean Enviro Tech Corp. (formerly Sky Power Solutions Corp.) (the “Company” or “Clean”) following the merger with the Company’s wholly-owned subsidiary on December 24,2012 (formed for the sole purpose of merging with its parent), continues to work on the further development of the lithium batteries technology licensed from Terra Inventions Corp. (formerly Li-ion Motors Corp.) (“Terra”), the Company’s former parent. Consultants for the Company are continuing work on the solar concentrating electric power generating system working independently.

The balance sheet as of April 30, 2013 and the statement of operations, stockholders’ deficiency and the cash flows for the periods presented have been prepared by Clean Enviro Tech Corp. (a “Development Stage Company”) and are unaudited. The financial statements are prepared in accordance with the requirements for unaudited interim periods and consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, change in stockholders’ deficiency and cash flows for the periods presented have been made. The information for the balance sheet as of July 31, 2012, are derived from audited financial statements of the Company.

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, Terra 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 Terra, the Company’s former parent.

Effective April 15, 2008, the Company entered into a License Agreement (“License Agreement”) with Terra Inventions providing for Terras' license to the Company of Terras’ patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications (“Licensed Products”).

Under the License Agreement, Terra 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. Terras' cost for lithium ion batteries purchased from the Company is the actual manufacturing costs for such batteries for our fiscal quarter in which Terras’ purchase takes place.

On May 25, 2010, the agreement was amended to grant the Company the exclusive license rights for the United States and Terra 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. Terra 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 Terra’s’ North Carolina facility. The leased space was suitable, and utilized by the Company, for developmental and manufacturing operations for licensed products pursuant to the license agreement. The lease was terminated May 2012. Also, effective April 16, 2008, the Company purchased certain equipment and supplies related to the license agreement from Terra for the purchase price of $29,005.

Basis of Presentation

Going Concern

The Company’s financial statements for the period ended April 30, 2013, 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, 2013, there was a working capital deficit of approximately $550,000. 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 affected in the form of a stock dividend.

Effective April 26, 2011, the Company filed with SOSN a Certificate of Change that affected a one-for-three hundred reverse split in our outstanding common stock and a reduction of our authorized common stock in the same one-for-three hundred, 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 Terra was assigned to Frontline Asset Management (“Frontline”) and Windsor Capital (“Windsor”) in the amount of $112,500 which was converted into 3,750,000 shares of the Company’s common stock.

On June 11, 2012, accrued interest to Blue Diamond was assigned to various corporations in the amount of $1,360,341. Those assignees converted the debt into 75,000,000 shares of the Company’s common Stock.

On November 1, 2012, debt to Frontline was assigned to Kisumu S.A. in the amount of $493,920 which was converted into 7,840,000 shares of the Company’s common stock.

Effective January 18, 2013 as approved by the Financial Industry Regulatory Authority (“FINRA”), the Company’s Certificate of Change filed with SOSN affected a one-for-fifty reverse split in the Company’s outstanding common stock and a reduction of our authorized common stock in the same one-for-fifty ratio, from 100,000,000 shares to 10,000,000 shares.

All common stock references have been restated to reflect the stock splits. See Note 5 “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, 2012. There were no significant changes to these accounting policies during the nine months ended April 30, 2013, 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. Property and Equipment

Property and equipment consists of:

Depreciation expense for the nine months ended April 30, 2013 and 2012, was $5,269 and $7,914, respectively. For the three months ended April 30, 2013 and 2012, depreciation expense was $1,720 and $2,407, respectively and is included in selling, general and administrative expenses on the Company’s statement of operations.

Note 4. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of:

Note 5. Common Stock

Effective January 18, 2013, the Company filed with SOSN a Certificate of Change that affected a 1:50 reverse split in the Company’s outstanding common stock and a reduction of our authorized common stock in the same 1:50 ratio, from 100,000,000 shares to 10,000,000 shares.

On November 1, 2012, Frontline assigned $61,740 of its debt to Brothers Capital Corp. (“Brothers”) and Brothers converted the assigned note for 49,000,000 shares of Common Stock at a discounted price of $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Reliable Investments Corp. (“Reliable”) and Reliable converted the assigned note for 49,000,000 shares of Common Stock at a discounted price $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Platinum Capital Holdings Corp. (“Platinum”) and Platinum converted the assigned note for 49,000,000 shares of Common Stock at a discounted price $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Wazalmin and Wazalmin converted the assigned note for 49,000,000 shares of Common Stock at a discounted price $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Nexium Financial Inc. (“Nexium”) and Nexium converted the assigned note for 49,000,000 shares of Common Stock at a discounted price $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to Artic Orchards Ltd. (“Artic”) and Artic converted the assigned note for 49,000,000 shares of Common Stock at a discounted price $0.00126 per share.

On November 1, 2012, Frontline assigned $61,740 of its debt to SSR Investments Corp. (“SSR”) and SSR converted the assigned note for 49,000,000 shares of Common Stock at a discounted price $0.00126 per share.

On November 1, 2012, Frontline assigned $30,870 of its debt to ALG Financial, LLC (“ALG”) and ALG converted the assigned note for 24,500,000 shares of Common Stock at a discounted price $0.00126 per share.

On November 1, 2012, Frontline assigned $30,870 of its debt to Kisumu, S.A. (“Kisumu”) and Kisumu converted the assigned note for 24,500,000 shares of Common Stock at a discounted price $0.00126 per share.

On June 11, 2012, Blue Diamond assigned $86,155 of its debt to Eurolink Corporation (“Eurolink”) and Eurolink converted the assigned note for 4,750,000 shares of Common Stock at $0.0181379 per share.

On June 11, 2012, Blue Diamond assigned $86,155 of its debt to Heritage Asset Management, Inc. (“Heritage”) and Heritage converted the assigned note for 4,750,000 shares of Common Stock at $0.0181379 per share.

On June 11, 2012, Blue Diamond assigned $86,155 of its debt to Kisumu S.A. (“Kisumu”) and Kisumu converted the assigned note for 4,750,000 shares of Common Stock at $0.0181379 per share.

On June 11, 2012, Blue Diamond assigned $172,310 of its debt to Starglow Asset, Inc. (“Starglow”) and Starglow converted the assigned note for 9,500,000 shares of Common Stock at $0.0181379 per share.

On June 11, 2012, Blue Diamond assigned $624,850 of its debt to Domino Developments, Inc. (“Domino”) and Domino converted the assigned note for 34,450,000 shares of Common Stock at $0.0181379 per share.

On June 11, 2012, Blue Diamond assigned $170,496 of its debt to Honeycomb Developments, LLC (“Honeycomb”) and Honeycomb converted the assigned note for 9,400,000 shares of Common Stock at $0.0181379 per share.

On June 11, 2012, Blue Diamond assigned $134,220 of its debt to Legend International, LLC (“Legend”) and Legend converted the assigned note for 7,400,000 shares of Common Stock at $0.0181379 per share.

On April 26, 2012, Terra assigned $112,500 of its debt to Frontline and Frontline assigned $63,000 of the assigned note to Windsor. Frontline converted the balance of the assigned note for 1,650,000 shares of Common Stock at $0.03 per share. Windsor 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 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, the Company filed with SOSN a Certificate of Change that affected a 1:300 reverse split in the Company’s 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, except for the conversion of shares on November 1, 2012, which were converted below fair value. For the nine months ended April 30, 2013, the Company recorded a loss on extinguishment of debt in the amount of $329,280 in connection with the 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.

Effective April 26, 2011, the Company filed with SOSN a Certificate of Change that affected a 1:300 reverse split in the Company’s 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.

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 on January 18, 2013, resulted in the reduction of approximately 97,909,000 shares of common stock and was accounted for by the transfer of $97,909 from common stock to additional paid-in-capital which is the amount equal to the par value of the reduction of shares to affect the reverse stock split.

Note 6. 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, 2013 and 2012.

Net loss per common share for the Nine and three months ended April 30, 2012, has been revised. All share and per share amounts have been restated to reflect the one-for-fifty reverse stock split as discussed in Note 6.

The amounts previously reported for the nine and three months ended April 30, 2012, were as follows:

Note 7. Related Party Transactions

On December 15, 2010, the Company issued a non-interest bearing, due on demand, promissory note to Mehboob Charania, (former chief executive and principal financial officer) for which it has received advances of $173,600 and repaid $0. The related party transaction amounts are reported as current due to the relationship.

Note 8. Advances

The Company's principal financing source in the last two fiscal years had been from its former parent, Terra. On October 2, 2012, the Company’s entire debt of to Terra was assigned to Frontline Asset Management, Inc. (“Frontline”). At April 30, 2013 and July 31, 2012, the Company owed Terra $0 and $708,602, respectively.

During the nine months ended April 30, 2013 and 2012, the Company received advances from Terra totaling $0 and $71,364, respectively; and made payments totaling $0 and $22,894 (all in the form of reimbursement for one leased employee), respectively. During the three months ended April 30, 2013 and 2012, the Company received advances from Terra totaling $0 and $16,826, respectively; and made payments totaling $0 and $112,500 (from assignment of debt to Frontline), respectively.

On October 2, 2012, Frontline obtained the receivable from Terra in the amount of $708,602. On November 1, 2012, $493,920 was converted into Common Shares, leaving a balance due to Frontline of $214,682. At April 30, 2013 and July 31, 2012, the Company owed Frontline $284,094 and $0, respectively.

During the nine months ended April 30, 2013 and 2012, the Company received advances from Frontline totaling $69,412 and $0, respectively; and made payments totaling $0 and $0, respectively. During the three months ended April 30, 2013 and 2012, the Company received $13,939 and $0, respectively; and made payments totaling $0 and $0, respectively.

As were the terms with Terra, the assigned of debt to Frontline, continues to be, as does any subsequent debt we incur interest free. No term has been set for repayment and no payment is expected until the Company has begun to become a profitable venture.

Note 9. Income Taxes

At April 30, 2013 and July 31, 2012, 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 $1.9 million and $1.8 million at April 30, 2013 and July 31, 2012, 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 $6.8 million and $6.6 million at April 30, 2013 and July 31, 2012, 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.

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 Terra Inventions 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.  On December 24, 2012 we merged with our wholly owned subsidiary, Clean Enviro Tech Corp. taking that as our new name.

We entered into a license agreement with Terra on April 15, 2008, for the license of the technology related to the development of their lithium battery technology. We also leased space within Terra’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 and Three Months Ended April 30, 2013

We incurred a net loss of $389,072 during the nine months ended April 30, 2013, which included: general and administrative (G&A) costs of $57,312; research and development (R&D) expenses of $2,480; and a loss on extinguishment of debt of $329,280. During the three months ended April 30, 2013, the Company incurred a net loss of $11,726 which included: G&A costs of $11,394, and R&D expenses of $332.

2013 Compared to 2012

For the nine months ended April 30, 2013 our net loss increased to $389,072 from $83,360 for the same period ending April 30, 2012. The increase was primarily due to the loss on extinguishment of debt of $329,280.

Our net loss for the three months ended April 30, 2013 decreased to $11,726 from $27,247 for the same period ending April 30, 2012. The decrease was primarily due to salaries and wages and facility rental expense.

Plan of Operations

Commercial Initiatives

Currently we have in development a Stand Alone Residential Solar Concentrating Electric Power Generation System. Our system has proprietary elements that make it unique, with better functionality than other systems. We designed and developed this system as we anticipate that the North American Power Grid will not be able to support the recharging of anticipated sales of totally electric vehicles and other electric needs in the coming years. We are developing safe rechargeable battery systems for varied applications ranging from portable electronics to onboard energy storage in EVs. Lithium ion batteries are rechargeable and composed of cathode, anode, separator and electrolytes. In 1990, Sony (Japan) introduced the lithium ion battery and used an expensive cathode material, which was also unsafe. We are pioneering a superlattice cathode material for the use in lithium ion rechargeable batteries.

The Solar Concentrating Electric Power Generation System is an extremely efficient photovoltaic solar power generation unit. This system is able to produce in excess of 2 Kilowatts (kw) of electric power with ZERO emissions with Sun Light as the only fuel including built-in heat capture to provide hot water to users.

The lithium ion batteries that we plan to develop are rechargeable batteries composed of cells linked together, each cell created from lithiated cathode powder coated on aluminum foil (electrode material that the electron flows out from during charge) and anode powder coated on copper foil (electrode material that the electro flows into during charge) with a separator (polymer material in between anode and cathode) in a mixture of electrolytes, which is an ionically conductive medium.

Our goal is to continually improve our proprietary semi-solid synthesis process for the development of lithium ion rechargeable battery technologies to meet the growing needs for a less expensive, high-energy density, extended life and fast recharging battery while keeping safety as a priority.

We use a proprietary superlattice cathode material and its technically advanced synthesis process. Our other technical expertise includes Battery Management Systems (“BMS”) and a high current rate battery charger. A typical battery pack will consist of a number of lithium ion cells and a BMS.

Our technology development is in the initial phase of prototyping and testing. Once a prototype is successfully obtained, we plan to work closely with production specialists in the battery industry and material synthesis to lead the battery manufacturing unit along with marketing and sales teams. Our primary focus will then simultaneously operate research and development, production and marketing of the new products.

Sources and Availability of Raw Materials

We have used raw materials from several manufacturers in the United States, such as Alfa Aesar, Pred Chemicals, TIMCAL and Ferro Corporation. We use different types of lithium, manganese, cobalt, nickel and titanium salts, electrolytes, copper and aluminum foil which are available in large scale.

License Agreement with Terra

Effective April 15, 2008, we entered into a License Agreement (“License Agreement”) with Terra providing for Terra’ license to us of Terra patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications (“Licensed Products”). 

Under the License Agreement, Terra 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. Terra’ cost for lithium ion batteries purchased from us is our actual manufacturing costs for such batteries for our fiscal quarter in which Terra purchase takes place. On May 25, 2010 our agreement was amended to provide that we have exclusive license rights for the United States and Terra may grant other companies rights elsewhere around the world. 

We have 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. In the initial year under the License Agreement, the Company invested approximately $264,043 in the development of technology, and therefore is not in compliance with its obligations under this covenant of the license agreement.  Terra has advised us that it will not give notice of default against us for our failure to comply with this over the term of the License Agreement. As of fiscal year ended July 31, 2012; we are still not in compliance under this covenant.

On April 16, 2008, we lease approximately 5,000 square feet of space (“Leased Space”) in Terra’ North Carolina facility, such Leased Space was to be suitable for, and utilized by us for, our developmental and manufacturing operations for Licensed Products pursuant to the License Agreement, that lease was terminated May 31, 2012, when Li-ion closed their facility. The Leased Space, had been leased by Terra 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, Terra also sold us for the purchase price of $29,005, specified equipment and supplies related to the licensed field.

Liquidity and Capital Resources

As of April 30, 2013, we had cash on hand of $0 and liabilities of $568,589 as compared with $1,007,986 at July 31, 2012, and our property plant and equipment decreased to $18,696 at April 30, 2013, as compared with $23,964 at July 31, 2012. Accounts payable and accrued expenses increased at April 30, 2013, to $180,307 as compared with $125,784 at July 31, 2012, and advances and due to related parties were $388,282 at April 30, 2013, as compared to $882,202 at July 31, 2012.

At April 30, 2013, we had a working capital deficiency of $549,893 and a stockholders' deficit of $549,893.

We used net cash in operating activities of $0 in the nine months ended April 30, 2013, as compared with $48,387 in the comparable period in 2012, and cash flows used in investing activities for the purchase of property, plant and equipment was $0 during 2013 and $0 in 2012.

During the nine months ended April 30, 2013, we received $0 and repaid $0, to a related party as compared with advances from related parties of $0 and repayments of $0 in 2012.

During the nine months ended April 30, 2013, we received $0 from the proceeds from our promissory note to Terra Corp. and repaid $0 as compared to advances received in 2012, of $71,364 and repayment of $22,984.

During the nine months ended debt to Frontline was assigned to Kisumu S.A. in the amount of $493,920 which was converted into 7,840,000 shares of the Company’s common stock.

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

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.