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| EXCEL - IDEA: XBRL DOCUMENT - SavWatt USA, Inc. | Financial_Report.xls |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2011
or
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION FROM ____________ TO ___________
Commission File Number: 000-53807
SavWatt USA Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other Jurisdiction of Incorporation or Organization)
1100 Wicomico Street, Baltimore MD
(Address of principal executive offices)
(866) 641-3507
(Registrant's telephone number)
27-2478133
(I.R.S. Employer Identification No.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.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 o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
As of May 19, 2011 , there were 669,761,367 outstanding shares of the Registrant's Common Stock, $0.0001 par value.
OTHER PERTINENT INFORMATION
When used in this report, the terms "SavWatt." the Company", " we", "our", and "us" refers to SavWatt USA, Inc., a Delaware corporation formerly known as Ludvik Capital, Inc., and our subsidiary. The information which appears on our web site is not part of this report.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to raise sufficient capital to fund our ongoing operations and satisfy our obligations as they become due, including approximately $1 million of past due notes, our ability to generate any meaningful revenues, our ability to compete within our market segment, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, as well as our annual report on Form 10-K for the year ended December 31, 2010 including the risks described in Part I. Item 1A. Risk Factors of that report. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.
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SavWatt USA, Inc.
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f/k/a Ludvik Capital, Inc.
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(A Development Stage Company)
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CONSOLIDATED BALANCE SHEETS
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September 30,
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December 31,
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2011
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2010
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(Unaudited)
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ASSETS
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Current assets:
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Cash
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$ | 610 | 2,422 | |||||
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Accounts receivable
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47,132 | 619 | ||||||
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Inventory
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46,591 | 42,853 | ||||||
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Note Receivable
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- | |||||||
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Other current assets
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138,753 | 32,200 | ||||||
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Total current assets
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233,086 | 78,094 | ||||||
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Property and Equipment, net
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1,261,972 | 10,803 | ||||||
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Leasehold Improvements, net
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449,722 | |||||||
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Intangibles
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Total assets
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$ | 1,944,780 | $ | 88,897 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities:
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Accounts payable and accrued expenses
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$ | 1,488,375 | $ | 112,318 | ||||
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Due to related party
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716,496 | 504,600 | ||||||
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Stockholder loan payable
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1,129,698 | |||||||
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Accrued interest - stockholder
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103,173 | 175,596 | ||||||
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Loan payable
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- | 50,000 | ||||||
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Convertible loan payable
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341,250 | 200,000 | ||||||
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Total liabilities
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2,649,294 | 2,172,212 | ||||||
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Stockholders' deficit
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Common stock, $0.0001 par value, 5,000,000,000 shares
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and 100,000,000 shares authorized,1,957,386,179 and
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167,531,786 shares issued and outstanding, respectively
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190,514 | 16,752 | ||||||
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Preferred stock
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1,000 | - | ||||||
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Additional paid-in capital
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43,059,752 | 37,120,142 | ||||||
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Accumulated deficit during development stage
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(43,955,780 | ) | (39,220,209 | ) | ||||
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Total stockholders' deficit
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(704,514 | ) | (2,083,315 | ) | ||||
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Total liabilities and stockholders' deficit
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$ | 1,944,780 | $ | 88,897 | ||||
See accompanying notes to unaudited financial statements.
4
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
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From Inception
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| Three months | Three months | Ninw months | Ninw months |
(October 20, 2006)
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Ended
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Ended
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Ended
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Ended
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through
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September30,
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September30,
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September30,
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September30,
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September30,
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2011
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2010
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2011
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2010
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2011
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REVENUES
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$ | (9,611 | ) | $ | - | $ | 2,680 | $ | - | $ | 19,030 | |||||||||
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EXPENSES
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General and administrative
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563,053 | 20,625 | 1,387,090 | 105,819 | 2,505,404 | |||||||||||||||
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Professional fees
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197,411 | 165,776 | 429,257 | 255,776 | 2,378,310 | |||||||||||||||
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Bad debt expense-related party
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67,199 | 67,199 | 285,835 | |||||||||||||||||
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Stock based compensation
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12,605 | 143,167 | - | 36,285,098 | ||||||||||||||||
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Total Expenses
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840,268 | 186,401 | 2,026,713 | 361,595 | 41,454,647 | |||||||||||||||
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LOSS FROM OPERATIONS
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(849,878 | ) | (186,401 | ) | (2,024,032 | ) | (361,595 | ) | (41,435,616 | ) | ||||||||||
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OTHER INCOME (EXPENSE)
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Other income
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5,000 | 5,000 | 5,010 | |||||||||||||||||
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Interest expense
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(121,490 | ) | (67,642 | ) | (167,446 | ) | (411,072 | ) | (246,319 | ) | ||||||||||
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Interest expense - stockholder
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(947,969 | ) | ||||||||||||||||||
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Loss on settlement of related party debt
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- | (10,000 | ) | |||||||||||||||||
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Dissolution of majority owned subsidiary
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5,356 | |||||||||||||||||||
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Amortization of debt discount
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1,131,870 | (359,000 | ) | (1,849,870 | ) | |||||||||||||||
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Debt Conversion Expense
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(1,569,259 | ) | - | (2,219,350 | ) | - | (2,920,997 | ) | ||||||||||||
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Total Other Income (Expense)
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(558,879 | ) | (62,642 | ) | (2,745,796 | ) | (406,072 | ) | (5,964,789 | ) | ||||||||||
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NET LOSS
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$ | (1,408,758 | ) | $ | (249,043 | ) | $ | (4,769,829 | ) | $ | (767,667 | ) | $ | (47,400,406 | ) | |||||
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NET LOSS PER SHARE, BASIC AND DILUTED
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$ | (0.001 | ) | $ | (0.00 | ) | $ | (0.004 | ) | $ | (0.008 | ) | ||||||||
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WEIGHTED AVERAGE NUMBER OF COMMON
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SHARES OUTSTANDING, BASIC AND DILUTED
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1,646,979,672 | 108,927,074 | 1,251,315,662 | 91,777,095 | ||||||||||||||||
See accompanying notes to unaudited financial statements.
5
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
SavWatt USA. Inc. formerly known as Ludvik Capital, Inc. (hereinafter "the Company") was incorporated on October 20, 2006 under the laws of the State of Delaware for the purpose of becoming a successor corporation by merger with Patriot Advisors, Inc. and Templar Corporation, pursuant to a plan of reorganization and merger approved by the United States Bankruptcy Court, District of Maine in Case No. 04-20328 whereby Ludvik Capital, Inc is the continuing entity.
The Company's business plan consisted of investing in public and private companies, providing long term equity and debt investment capital to fund growth and acquisitions and recapitalizations of small and middle market companies in a variety of industries primarily located in the United States.
Since inception, the Company has had minimal operations and no revenues earned. On April 5, 2010, the Company amended its articles of incorporation and changed its name to SavWatt USA, Inc.
SavWatt USA, Inc. ("SavWatt") business plan is to capitalize on the largely unaddressed commercial and consumer market for energy-efficient LED lighting by investing in product and corporate marketing. With public relations and advertising throughout the media, a recognized, popular consumer LED brand will be cultivated, spearheading and establishing a leading market share in the growing energy-efficient bulb sector during the next three to five years. SavWatt has the exclusive marketing rights in the United States to sell LED street lighting for a number of asian companies.
The Company is a development stage enterprise.
The Company's year end is December 31.
The Company's corporate headquarters were originally located in Virginia but are currently located in Baltimore MD.
GOING CONCERN AND BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company incurred net losses of $3,410,368 for the nine months ended September 30, 2011. In addition, the Company has incurred a net loss from inception (October 20, 2006) through September 30, 2011 and accumulated deficit amounting to $42,630,577 Since its inception, the Company has generated minimal revenues and has minimal cash resources.
These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's efforts have been directed towards the development and implementation of a plan to generate sufficient revenues to cover all of its present and future costs and expenses.
Management is taking steps to address this situation. The Company has determined that it cannot continue with its business operations as outlined in its original business plan because of a lack of financial resources; therefore, management has redirected their focus towards identifying and pursuing options regarding the development of a new business plan and direction. The Company intends to explore various business opportunities that have the potential to generate positive revenue, profits and cash flow in order to financially accommodate the costs of being a publicly held company. The Company is in the process of raising capital by implementing its business plan in LED lighting and expects to generate sufficient revenue by the fourth quarter of 2011 with a positive cash flow. Until then, the Company the Company will not have the required capital resources or credit lines available that are sufficient to fund operations.
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SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
The Company has minimal operating costs and expenses at the present time due to its limited business activities. The Company, however, will be required to raise additional capital over the next twelve months to meet its current administrative expenses, and it may do so in connection with or in anticipation of possible acquisition transactions. This financing may take the form of additional sales of its equity securities and/or loans from its directors. There is no assurance that additional financing will be available, if required, or on terms favorable to the Company.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
The foregoing unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2010. In the opinion of management, the unaudited interim financial statements furnished herein include adjustments, all of which are of a normal recuing nature, necessary for a fair statement of the results for all the interim periods presented. Operating results for the three and six month periods ending September 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the accompanying financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of SavWatt USA, Inc., as well as Pro Eco Solutions, LLC for the period from November 1, 2010 through September 30, 2011 and are prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). All significant intercompany accounts and transactions between the Company and its subsidiary have been eliminated upon consolidation.
NONCONTROLLING INTERESTS
Noncontrolling interests in our subsidiary are recorded in accordance with the provisions of ASC 810, "Consolidation" and are reported as a component of equity. In November 2010 the Company formed a joint venture in the form of a limited liability company Pro Eco Solutions LLC ("LLC"), whose purpose is specializing in comprehensive support services for all energy services companies and performance contractors. The Company was a 50.1% member/owner and the Company's President, was also the chief executive officer of the LLC. During the quarter ended September 30, 2011 the LLC members decided to dissolve the LLC. Previously reflected losses attributable the non-controlling member have been assumed by the Company and are reflected as such for all periods presented in the accompanying financial statements.
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SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
DEVELOPMENT STAGE ACTIVITIES
The Company has been in the development stage since its formation.
From the Company's inception through March 2010, the Company was engaged in the business of providing long-term equity and debt investment capital to fund growth, acquisitions and recapitalizations of small and middle market companies in a variety of industries, primarily located in the United States. The Company during this time frame had been very active and had conducted substantial operations, as discussed in our numerous reports with the SEC during 2007 through the present.
In 2010, the Company changed its name to SavWatt USA, Inc. to reflect our new primary business of producing, marketing and selling Light Emitting Diode ("LED") lighting. In furtherance of our new business, we have obtained the exclusive marketing rights in the United States to sell LED street lighting for Unilumin, a Chinese company as well as setting up its distribution and production center in Maryland.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all short-term debt with original maturities of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments may include cash, accounts receivable, inventory, other assets, loans payable and related accrued interest, and accounts payable. All such instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at September 30, 2011 and December 31, 2010.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at the amount the Company expects to collect. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company's estimate of the allowance for doubtful accounts will change.
Accounts receivable are presented net of an allowance for doubtful accounts of $0.
As of December 31, 2010 the Company wrote off a related party receivable amounting to $218,636 and recorded a bad debt expense, based on management's Company's evaluation of the balance and certainty that the balance would not be collectible in the future.
PROPERTY AND EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
8
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
Depreciation is provided for over the estimated useful lives of the related asset using the straight-line method. As of September 30, 2011 property and equipment consists of primarily computer equipment.
Included in leasehold improvements are costs related to the construction of the manufacturing facility in Baltimore Maryland. As we have not fully commenced operations in this facility as of September 30, 2011, the leasehold improvements have not been amortized
The estimated useful lives for significant equipment categories are from 3 to 5 years.
INVENTORY
The Company's inventory consists of entirely of finished goods, and is valued at lower of cost or market price. Cost is determined on a first-in, first-out ("FIFO") basis. To ensure inventory is carried at the lower of cost or market, the Company periodically evaluates the carrying value and also periodically performs an evaluation of inventory for excess and obsolete items. Such evaluations are based on management's judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.
REVENUE RECOGNITION
Revenue is recognized when all of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller's price to the buyer is fixed and determinable; and, (4) collectability is reasonably assured. The Company has earned minimal revenue since inception.
USE OF ESTIMATES
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
PROVISION FOR TAXES
Income taxes are provided based upon the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the "more likely than not" standard to allow recognition of such an asset.
9
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive.
The average number of common shares outstanding for the period from Inception ( October 20, 2006) through September 30, 2011 has been retroactively adjusted for the 2:1 forward stock split effective August 17, 2007.
STOCK BASED COMPENSATION
The Company accounts for stock based compensation transactions with employees under the provisions of ASC Topic No. 718, "Compensation, Stock Compensation" ("Topic No. 718"). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of the Company's equity instruments are estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of Topic No. 718.
The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, "Equity-Based Payments to Non-Employees" ("Topic No. 505-50"). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, which ever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of the equity instrument is estimated using the Black- Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to receive cash for the goods or services instead of paying with or using the equity instrument.
FORWARD STOCK SPLIT
All references to the Company's outstanding shares, and options, have been adjusted to give effect to the 2 for 1 forward stock split effective August 17, 2007.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior periods’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or the sum of stockholders’ deficit.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY
The Financial Accounting Standards Board's ("FASB") Accounting Standards Codification (ASC) became effective on July 1, 2009. At that date, the ASC became FASB's officially recognized source of authoritative U.S. generally accepted accounting principles ("GAAP") applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants ("AICPA"), Emerging Issues Task Force ("EITF") and related literature. Rules and interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, could have a material effect on the accompanying financial statements.
10
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
NOTE 3 - FAIR VALUE MEASUREMENTS
The Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company's financial position or operating results, but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
These inputs are prioritized below:
Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity's own assumptions. The Company did not have any Level 1, Level 2 or Level 3 assets or liabilities as of September 30, 2011 and December 31, 2010.
The Company discloses the estimated fair values for all financial instruments for which it is practicable to estimate fair value. As of December 31, 2010 and September 30, 2011, the fair value short-term financial instruments including subscriptions receivable, loans payable, accounts payable and accrued expenses, approximates book value due to their short-term duration.
In addition, the Financial Accounting Standards Board ("FASB") issued, "The Fair Value Option for Financial Assets and Financial Liabilities," effective for January 1, 2008. This guidance expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value option for any of its qualifying financial instruments.
NOTE 4 -STOCKHOLDER LOANS
On December 14th 2006, the Company entered into an Advisory Agreement with Ludvik Nominees Pty Ltd (a Company 100% owned by Frank Kristan) for services to be rendered which were payable based on 3% assets under management and 20% of net profits of Ludvik Capital. The term of the agreement was approximately 11 years, maturing on December 31, 2017.
Frank Kristan served as President and Chief Executive Officer of the Company from inception, October 20, 2006 through September 30, 2010 and is also the President of Ludvik Nominees Pty Ltd. On September 30, 2010, Frank Kristan resigned as President and Director of the Company.
11
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
On September 30, 2010 the original 2006 agreement was terminated and a settlement agreement was created to resolve any outstanding obligations with respect to the 2006 agreement. In accordance with the settlement agreement both parties agreed that since advisory fees under the December 14th 2006 Agreement were based on the assets under management that had no value, the Advisor had the option to get paid a fee of $30,000 per month starting October 2006 including interest. Furthermore, the remaining principal balance plus accrued interest as of September 30, 2010 was rolled over into a Secured Convertible Note amounting to $1,503,167.
From the period from inception, October 20, 2006 through the termination of the original agreement, September 30, 2010, the Company issued its advisors 32,394,269 shares of common stock as payment for services amounting to $484,250.
This note was payable on September 30, 2010 and bears an interest rate of 12% per annum payable at the end of the term. Upon default, the unpaid principal balance of this note and any accrued and unpaid interest bear interest at the rate of 18%. The outstanding balance and accrued interest, all or in part, is convertible at the option of the holder into the Company's common stock at a conversion price of 50% of the stock price, with a minimum of $.01 per share. As of December 31, 2010 and as of the date of this filing, this note was in default. In April 2011, the Company received a waiver of the default and extended the due date of the note to December 31, 2011, at an interest rate of 18%.
In the 3rd and 4th quarter of 2010 this stockholder assigned $373,469 of the loan payable to investors (as discussed in Note 9)
In the 1st quarter 2011, the stockholder assigned $580,000 of the loan payable to investors and converted $46,927 into 4,692,700 shares of common stock.
In the 2nd quarter 2011, the stockholder assigned $854,893 of the loan payable to investors and converted $10,000 into 5,000,000 shares of common stock.
NOTE 6 - RELATED PARTY TRANSACTIONS
On September 30, 2010, Isaac H. Sutton was elected to the Board of Directors and currently serves as the Company's new President and sole director.
As of December 31, 2010, the Company recorded $30,000 expense related to consulting fees earned by the Company's President for 6 months.
During the Period of April 1, 2010 - December 31, 2010, the Company received short term funding from Sutton Global Associates, Inc., which is a related party since this company is controlled by Isaac H. Sutton the Company's President and Sole Director. As of December 31, 2010, the Company owes $479,600 to Sutton Global Associates, Inc.
During 2010, the Company advanced certain monies to GoIP Global, a related party controlled by Isaac H. Sutton the Company's President and Sole Director, to fund its operations. In addition, the Company entered into a one year agreement with GoIP where as GoIP provided messaging services to the Company. As of December 31, 2010, the Company's payable related to these services amounted to $25,000.
12
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
In December 2010, the Company wrote off $218,636 due from another affiliated company SavWatt Industries, LLC, a company later controlled by Isaac H. Sutton. The original owners are now employees of the Company. The Company determined that this amount would not be collectible and therefore recorded this amount as bad debt expense.
In the three months ending September 30, 2011, the Company received short term funding from Sutton Global Associates, Inc. of approximately $430,000. In January 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock. As of September 30, 2011 the balance due to Sutton Global amounted to $218,945.
In April and June 2011, Sutton Global Associates converted $600,000 of its short term funding in to into two Notes. The Notes bear interest at a rate of 6 % per annum and are convertible into common stock of the Company at the discretion of the holder. The notes are due in April and June of 2012. The Company recorded a $257,142 discount on this convertible debt and amortized $63,121 of this discount, recorded as interest expense during the three months ended September 30, 2011.
In April 2011, Sutton Global Associates assigned $300,000 of amount owed to them to a shareholder of the Company.
In July 2011, Sutton Global Associates converted $250,000 of amounts owed to them into 5,000,000 shares of Preferred A shares.
The total balance owing to Sutton Global Associates is $741,591 at September 30, 2011.
NOTE 7 – DEBT
Short term Convertible Debt
In August 2010 through December 2010 a stockholder assigned $373,469 of his loan payable to investors transferring all the rights and interests of the original note (as disclosed in Note 6). As of December 31, 2010 the assignee debt holders have converted $173,469 of their outstanding debt into 18,374,278 shares of the Company's common stock resulting in the loan payable balance of $200,000.
During the nine months ended September 30, 2011, the Company entered into several short-term convertible notes with a total face amount of $605,500. These notes bear interest rates ranging from 5% to 18% payable in full in twelve months or less and which were convertible into shares of Company's common stock at discounts to market on their dates of conversion ranging from 30% to 50% from the market price. These notes have a minimum conversion floors ranging from $0.01 to $0.0001 per share. Included in these notes was a note for $25,000 due in March 2012. This note is reflected as a current liability as the Company reasonably expects this note to convert to common stock within one year from the date of issuance.
With respect to the convertibility feature of the notes entered into during the nine months ended September 30, 2011 the Company recorded a total beneficial conversion of $975,500 and amortized $775,048 of this discount, recorded as interest expense during the nine months ended September 30, 2011.
As of September 30, 2011 the balance of the Company’s short term convertible notes amounted to $341,250. The interest on these debentures is accrued and due at the end of the term. The accrued interest amounted to approximately $85,000 and is included in accounts payable and accrued expenses.
13
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
NOTE 8 - EQUITY TRANSACTIONS FROM INCEPTION
On October 20, 2006, Ludvik Capital, Inc. was formed to be the successor corporation by merger of Patriot Advisors, Inc. and Templar Corporation.
Pursuant to a court order in the US bankruptcy court and December 12th Stock Purchase Agreement between the Company and Ludvik Nominees Pty Ltd, Patriot Advisors, Inc. and Templar Corporation merged with the Ludvik Capital, Inc, whereby the surviving corporation became the registrant, Ludvik Capital, Inc.
Ludvik Nominees Pty Ltd was issued 40,000,000 shares (post forward stock split), of which approximately 18 million shares of Ludvik common stock were issued to old creditors of Patriot Advisors and Templar Corp as payment for past outstanding services and approximately 22 million shares of Ludvik common stock were held by Ludvik Nominees Pty Ltd. for the initial capital of $20,000.
On February 7, 2007 the United States Bankruptcy Court for the District of Maine entered an order confirming the December 12, 2006 agreement with the Debtor whereby, there were 40,000,000 (post forward stock split) unrestricted shares of the Company's Common Stock issued to creditors and plan participants .
In April 2010, the Company amended its Articles of Incorporation changing the name of the Company to SavWatt Usa, Inc. and increasing the authorized capital stock from 100,000,000 to 2,000,000,000 and 200,000,000 shares of preferred stock.
In January 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.
In July 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.
The issuance of common stock from inception, October 20, 2006 through the year ended December 31, 2010 is summarized in the table below:
|
Number of shares of common stock
|
Fair Value at Issuance
|
Per Share Value at Issuance
|
||||||||||
|
Stock issued upon merger in accordance with Court Order
|
40,000,000 | $ | 20,000 | $ | 0.0005 | |||||||
|
Stock issued in connection with acquisition
|
24,196 | - | - | |||||||||
|
Stock issued for services
|
38,905,710 | 13,061,326 | .0395 - 5.52 | |||||||||
|
Stock issued to retire debt - Shareholder loans
|
32,394,269 | 23,494,294 | .040 - 1.01 | |||||||||
|
Common stock issued for cash
|
37,333,333 | 315,000 | .003 - .01 | |||||||||
|
Fair value of common stock issued for interest
|
500,000 | 21,249 | 0.0425 | |||||||||
|
Common stock issued pursuant to note holder debt conversion
|
18,374,278 | 173,469 | .009 - .01 | |||||||||
| 167,531,786 | 37,085,338 | |||||||||||
14
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On July 1, 2010, the Company entered into an employment agreement with Michael Haug, as the Company's CEO, which responsibilities include running the daily operations of SavWatt USA, Inc. The term of the agreement is for one year at a salary of $84,000, and may be renewed upon mutual agreement by the Company and the employee.
On February 11, 2011, the Company entered into a lease for approximately 24,561 square feet at 1100 Wicomico Street, Suite 700, Baltimore, Maryland, under a written lease for a term of ten years. This new facility will be the Company's new principal executive offices, as well as a manufacturing and assembly facility. We will not have to pay rent on this facility until February 1, 2012. In accordance with ASC 840 Leases, the Company has recorded a $41,139 liability in recognition of this rent holiday. Thereafter, the Company will pay rent as follows:
|
February 1, 2012 - January 31, 2013 $ 9,926.74 per month
February 1, 2013 - January 31, 2016 $11,564.14 per month
February 1, 2016 - January 31, 2019 $12,526.11 per month
February 1, 2019 - January 31, 2021 $13,549.49 per month
|
NOTE 11 - SUBSEQUENT EVENTS
Subsequent to the balance sheet date, the Company has issued common and preferred stock for cash, debt and interest and services. In April 2010, the Company amended its Articles of Incorporation increasing the authorized capital stock from 2,000,000,000 shares of common stock to 4,800,000,000
15
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY FORWARD - LOOKING STATEMENT
This Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the statements contained in this Form 10-Q for SavWatt USA, Inc., formerly known as Ludvik Capital, Inc. ("Company"), discuss future expectations, contain projections of results of operation or financial condition or state other "forward-looking" information. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions.
Management expresses its expectations, beliefs and projections in good faith and believes the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, Management cannot assure current stockholders or prospective stockholders that these expectations, beliefs and projections will prove to be correct. Such forward-looking statements reflect the current views of Management with respect to the Company and anticipated future events.
Management cautions current stockholders and prospective stockholders that such forward-looking statements, including, without limitation, those relating to the Company's future business prospects, demand for its products, revenues, capital needs, expenses, development and operation costs, wherever they occur in this Form 10-Q, as well as in the documents incorporated by reference herein, are not guarantees of future performance or results, but are simply estimates reflecting the best judgment of Management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by such forward-looking statements.
Important factors that may cause actual results to differ from projections include, for example:
* the success or failure of management's efforts to implement their business strategy;
* the ability of the Company to raise sufficient capital to meet operating requirements;
* the uncertainty of consumer demand for our products, services and technologies;
* the ability of the Company to protect its intellectual property rights;
* the ability of the Company to compete with major established companies;
* the effect of changing economic conditions;
* the ability of the Company to attract and retain quality employees;
* the current global recession and financial uncertainty; and
* other risks which may be described in future filings with the SEC.
Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such
14forward-looking statements. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
16
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
GENERAL
The Company was incorporated on October 20, 2006, under the name of Ludvik Capital, Inc. We changed our name to SavWatt USA, Inc. on April 5, 2010. On January 12, 2007, we filed a Form 10 registration statement under section 12(g) of the Securities Exchange Act of 1934, as amended ("Exchange Act"). As a consequence of filing our Form 10, we became subject to the periodic reporting requirements of the Exchange Act and were required to file Annual Reports of Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements pursuant to Regulation 14A and Schedule 14C Information Statements pursuant to the Exchange Act.
The financial statements included in this Form 10-Q have been prepared in accordance with generally accepted accounting principles for financial information and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for smaller reporting companies. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the period from October 20, 2006 (Inception) to September 30, 2011 have been reflected herein.
The results of operations for the period from October 20, 2006 (Inception) to September 30, 2011 are not necessarily indicative of the results to be expected in the future. These statements should be read in conjunction with the audited financial statements for the year ended December 31, 2010 included in our previously filed Form 10-K.
RESULTS OF OPERATIONS
The Company has not generated any revenues since its inception on October 20,2006.
FOR THE NINE MONTHS ENDED September 30, 2011 and 2010
The Company's operations for the nine months ended September 30, 2011 and 2010 consist of General and administrative expenses incurred in the amount of $1.387,090 and $105,819 respectively and professional fees amounting to $429,257 and $255,776, respectively.
FOR THE PERIOD FROM OCTOBER 20, 2006 (INCEPTION) TO September 30, 2011.
Expenses from inception consist of professional fees of $2,378,310 and general and administrative expenses consisting of organization and related expenses of $2,505,404 and $36,285,098 related to stock based compensation.
LIQUIDITY AND CAPITAL RESOURCES
We had minimal cash on hand as of September 30, 2011 and a working capital deficiency of $12,416,208. We will continue to need additional cash during the following twelve months and these needs will coincide with the cash demands resulting from implementing our business plan and remaining current with our Securities and Exchange Commission filings. There is no assurance that we will be able to obtain additional capital as required, or obtain the capital on acceptable terms and conditions.
17
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has not begun generating significant revenues, and is still considered a development stage company, has experienced recurring net operating losses from operations and had a net loss from operations of $4,769,829 for the nine months ended September 30, 2011 These factors raise substantial doubt about the Company's ability to continue as a going concern.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. We will need to raise funds or implement our business plan to continue operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2010, that our disclosure controls and procedures were effective as of December 31, 2010.
(b) Changes in Internal Control over Financial Reporting During the quarter ended September 30, 2011, we did not make any changes in our internal controls over financial reporting.
18
SavWatt USA, Inc.
f/k/a Ludvik Capital, Inc.
(Development Stage Company)
Notes to Consolidated Financial Statements
From Inception, October 20, 2006 through September 30, 2011
(Unaudited)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any threatened or pending litigation against the Company.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. (REMOVED AND RESERVED)
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index below for exhibits required by Item 601 of regulation S-K.
EXHIBIT INDEX
| Exhibit | Description | |
| 31.1 | Certification under Section 302 of Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification under Section 906 of Sarbanes-Oxley Act of 2002. |
19
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SavWatt USA, Inc. | |||
|
Dated: November 21, 2011
|
By:
|
/s/ Isaac H. Sutto | |
| Isaac H. Sutton | |||
| Chief Executive Officer | |||
In accordance with the Securities Exchange Act of 1934, this amended report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
Dated: November 21, 2011
|
By:
|
/s/ Isaac H. Sutton | |
| Isaac H. Sutton | |||
| Chief Executive Officer |
20