Cyber Apps World - Quarter Report: 2015 January (Form 10-Q)

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

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, 2015

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                                     

Commission file number 000-50693

Clean Enviro Tech 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 $0.001 per 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 March 20, 2015, there were 97,588,721 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, 2014. 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 six months ended January 31, 2015 and 2014 are not necessarily indicative of the results for the entire fiscal year or for any other period. 

CLEAN ENVIRO TECH CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

As of and for the Three and Six Months Ended January 31, 2015

(unaudited)

Note 1. Summary of Significant Accounting Policies

Condensed Interim Financial Statements – The accompanying unaudited condensed financial statements include the accounts of Clean Enviro Tech Corp. (the “Company” or “Clean Enviro”). These financial statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. Therefore, these statements should be read in conjunction with the most recent annual financial statements of Clean Enviro for the year ended July 31, 2014 included in the Company’s Form 10-K filed with the Securities and Exchange Commission. In particular, the Company’s significant accounting principles were presented as Note 2 to the Financial Statements in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed financial statements are not necessarily indicative of the results that may be expected for the full year ending July 31, 2015.

Going Concern - The Company’s financial statements for the period ended January 31, 2015, 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 January 31, 2015, there was a working capital deficit of $170,956. 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 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.

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, 2014. There were no significant changes to these accounting policies during the six months ended January 31, 2015 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

Note 2. Common Stock

On January 26, 2015 the Company increased the authorized common stock from 10,000,000 shares to 250,000,000 shares. The increase was approved by shareholder vote at a special called meeting held January 16, 2015.

On January 22, 2015, the Company issued 87,750,000 shares of common stock for the conversion of $526,500 in convertible notes payable (see Note 5).

Note 3. 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 three months ended January 31, 2015 and 2014.

Note 4. Notes Payable

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 transaction amounts are reported as current due to the fact that they are due upon demand.

On November 1, 2014, the note was assigned to Frontline Asset Management, a related party (“Frontline”) and was converted in January 2015.

Note 5. Convertible Notes Payable and Due to Related Party

At July 31, 2014, the Company owed Frontline $214,682 from debt assumed in 2012, recorded on the balance sheet as Advances. Various advances from the same party for operating expenses since that time have been booked as accounts payable. During the six months ended January 31, 2015 and 2014, the Company received advances totaling $32,530 and $18,893, respectively; and made payments of $0 and $0, respectively. The assigned debt and any subsequent debt we incur is interest free. No term has been set for repayment and no payment is expected until the Company has begun to become a profitable venture.

On January 20, 2015, the Company consolidated Frontline’s liabilities consisting of accounts payable of $167,985, Due to Related Parties of $173,600 and Advances of $214,682 by executing a convertible promissory note for a total amount of $556,267. The loan bears no interest and is due upon demand. The debt is convertible at $0.006 per share. This resulted in a debt discount from the beneficial conversion feature of $370,845 for the intrinsic value of the beneficial conversion feature. This discount was fully amortized during the period, due to the fact that the convertible note is due on demand.

On January 22, 2015 Frontline assigned $526,500 of the convertible note to non-related parties after which the conversion option for the full $526,500 was exercised, resulting in the issuance of 87,750,000 shares of common stock (see Note 2).

As of January 31, 2015, after the consolidation of these liabilities, assignment to third parties and subsequent conversion, the balance of convertible notes related party is $29,767 and due to related party is $32,530.

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. 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.  December 24, 2012 Sky Power Solutions merged with our wholly-owned subsidiary, Clean Enviro Tech Corp., and in the merger changed the name of the Company to Clean Enviro Tech Corp.

Clean Enviro’s physical assets are currently in storage as we search for a new facility. Consultants work on our residential Solar Concentrating, Electric Power Generation Systems independently. 

Results of Operations for the Three months Ended January 31, 2015

We incurred a net loss of $394,835 during the three months ended January 31, 2015, which included: general and administrative (G&A) costs of $23,990 and research and development (“R&D”) expenses of $0 and interest expense related to beneficial conversion feature of $370,845.

2015 Compared to 2014

Our net loss for the three months ended January 31, 2015 increased to $394,835 from $15,025 for the same period ending January 31, 2014. The increase was primarily due to an increase in interest expense related to beneficial conversion feature.

Plan of Operations

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. When testing is completed, we will work with manufactures to make these available to homeowners. We also plan to develop safe rechargeable lithium ion battery systems for varied applications. We plan to pioneer a superlattice cathode material for the use in lithium ion rechargeable batteries.

Liquidity and Capital Resources

As of January 31, 2015, we had cash on hand of $0 and liabilities of $170,956 as compared with liabilities of $664,958 at July 31, 2014, and our property plant and equipment decreased to $2,580 at January 31, 2015, as compared with $3,225 at July 31, 2014. Accounts payable and accrued expenses decreased at January 31, 2015, to $108,639 as compared with $276,676 at July 31, 2014, and advances were $0 at January 31, 2015, as compared to $214,682 at July 31, 2014 and notes payable were $32,550 at January 31, 2015, as compared to $173,600 at July 31, 2014 and convertible notes payable was $29,767 at January 31, 2015, as compared to $0 at July 31, 2014.

At January 31, 2015, we had a working capital deficiency of $170,956 and a stockholders' deficit of $168,376.

We used net cash in operating activities of $0 in the six months ended January 31, 2015, as compared with $0 in the comparable period in 2014, and cash flows used in investing activities for the purchase of property, plant and equipment was $0 during 2015 and $0 in 2014.

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.

Interest Rate Risk - Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. Investments that are classified as cash and cash equivalents have original maturities of three months or less. Our interest income is sensitive to changes in the general level of U.S. interest rates. We do not have significant short-term investments, and due to the short-term nature of our investments, we believe that there is not a material risk exposure.

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 4. Controls and Procedures.

As of the end of the fiscal quarter covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and Principal Financial and Accounting Officer concluded that the Company’s disclosure controls and procedures are not effective in timely alerting her to material information relating to the Company (including its consolidated subsidiaries) required to be included in this Quarterly Report on Form 10-Q. There have been no changes in the Company’s internal controls or in other factors which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

PART II. OTHER INFORMATION

Stock

On January 26, 2015 the Company increased the number of authorized shares of common stock from ten million shares to two hundred fifty million shares. The increase was approved by shareholder vote at a special meeting held January 16, 2015.

ITEM 6. Exhibits

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of 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.