Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - SALAMON GROUP INC | Financial_Report.xls |
EX-32.1 - EXHIBIT 32.1 - SALAMON GROUP INC | exhibit32-1.htm |
EX-31.1 - EXHIBIT 31.1 - SALAMON GROUP INC | exhibit31-1.htm |
UNITED STATES
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 March 31, 2012
SALAMON GROUP INC.
(Exact
name of registrant as specified in its charter)
Nevada | 93-1324674 |
(State or other jurisdiction of | (I.R.S. Employer Identification |
incorporation or organization) | no.) |
5-215 Neave Road | V1V 2L9 |
Kelowna, BC, Canada | (Zip Code) |
(Address of principal executive offices) |
(778)-753-5675
(Registrants telephone number,
including area code)
Securities to be registered under Section 12(b) of the Act:
Title of each class
None
Name of each exchange on which
registered
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title
of class)
Check whether the registrant (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.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) |
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 [ ] No [X]
State issuers revenues for its most recent fiscal year. $3,126
As of March 31, 2012, the aggregate market value of the Registrants voting stock held by non-affiliates was approximately $9,680,000
Number of shares of the issuers common stock, $0.001 par value, outstanding as of March 31, 2012: 40,000,000 shares
1
TABLE OF CONTENTS
PART I. | FINANCIAL INFORMATION | 3 | |
ITEM 1. | FINANCIAL STATEMENTS | 3 | |
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION | 16 | |
ITEM 4T. | CONTROLS AND PROCEDURES | 19 | |
PART II. | OTHER INFORMATION | 21 | |
ITEM 1. | LEGAL PROCEEDINGS | 21 | |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 21 | |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 21 | |
ITEM 4. | SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS | 21 | |
ITEM 5. | OTHER INFORMATION | 21 | |
ITEM 6. | EXHIBITS | 22 | |
SIGNATURES | 22 |
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS |
Salamon Group, Inc.
(A Development Stage
Company)
Consolidated Balance Sheets
(Expressed in US dollars)
March 31, | December 31, | |||||
2012 | 2011 | |||||
$ | $ | |||||
(unaudited) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash | 27,110 | 783 | ||||
Accounts receivable (net of allowance of $nil) | 969,942 | - | ||||
Costs of uncompleted contracts in excess of related billings | 630,921 | - | ||||
Loans receivable (Note 5) | - | 782,706 | ||||
Convertible note receivable (Note 4) | 500,000 | - | ||||
Short-term investment (Note 3) | 15,682,062 | - | ||||
Total Current Assets | 17,810,035 | 783,489 | ||||
Patents (Note 7) | 3,805,545 | - | ||||
Property and equipment (Note 6) | 55,815 | 46,874 | ||||
Total Assets | 21,671,395 | 830,363 | ||||
LIABILITIES AND STOCKHOLDERS DEFICIT | ||||||
Current Liabilities: | ||||||
Accounts payable and accrued liabilities | 509,290 | 287,550 | ||||
Convertible debt, net of unamortized discount of $959 (Note 9) | 28,495,836 | 366,708 | ||||
Loans payable (Note 10) | 75,068 | 353,988 | ||||
Advances from directors (Note 8) | 953,210 | 393,592 | ||||
Current portion of deferred revenues (Note 2(l)) | 2,500 | 2,500 | ||||
Total Current Liabilities | 30,035,904 | 1,404,338 | ||||
Deferred revenues, long-term portion (Note 2(l)) | 43,332 | 44,374 | ||||
Total Liabilities | 30,079,236 | 1,448,712 | ||||
Going Concern (Note 1) | ||||||
Commitments (Note 12) | ||||||
Subsequent Events (Note 14) | ||||||
Stockholders Deficit: | ||||||
Preferred stock, no par value; 10,000,000 shares authorized, no shares issued and outstanding | - | - | ||||
Common stock, $0.001 par value;
40,000,000 shares authorized,
40,000,000 (December 31, 2011 40,000,000) shares issued and outstanding |
40,000 | 40,000 | ||||
Additional paid-in capital | 2,002,125 | 2,002,125 | ||||
Common shares subscribed | 100,000 | - | ||||
Donated capital (Note 8) | 6,665 | 5,332 | ||||
Accumulated other comprehensive loss | (6,840,119 | ) | - | |||
Accumulated deficit | (3,716,512 | ) | (2,665,806 | ) | ||
Total Stockholders Deficit | (8,407,841 | ) | (618,349 | ) | ||
Total Liabilities and Stockholders Deficit | 21,671,395 | 830,363 |
See accompanying notes to the consolidated financial statements
3
Salamon Group, Inc.
(A Development Stage
Company)
Consolidated Statements of Operations
(Expressed in US
dollars)
(Unaudited)
For the Period | |||||||||
For the Three | For the Three | from April 27, | |||||||
Months Ended | Months Ended | 2001 (Inception) | |||||||
March 31, | March 31, | to March 31, | |||||||
2012 | 2011 | 2012 | |||||||
$ | $ | $ | |||||||
Revenues | 1,042 | - | 4,168 | ||||||
Expenses | |||||||||
Bad debt | 575,068 | - | 575,068 | ||||||
Depreciation | 1,059 | - | 11,395 | ||||||
Donated rent (Note 8) | 1,333 | 1,333 | 6,665 | ||||||
General and administrative (Note 8) | 378,019 | 64,639 | 1,608,072 | ||||||
Interest expense | 96,269 | - | 166,476 | ||||||
Research and development | - | - | 315,000 | ||||||
Total Expenses | 1,051,748 | 65,972 | 2,682,676 | ||||||
Loss Before Other Expenses | (1,050,706 | ) | (65,972 | ) | (2,678,508 | ) | |||
Other Expenses | |||||||||
Impairment of intangible asset | - | - | (1,299,595 | ) | |||||
Impairment of property and equipment | - | - | (74,305 | ) | |||||
Interest income | - | - | 10,997 | ||||||
Loss before Income Taxes | (1,050,706 | ) | (65,972 | ) | (4,041,411 | ) | |||
Deferred income tax recovery | - | - | 324,899 | ||||||
Net Loss | (1,050,706 | ) | (65,972 | ) | (3,716,512 | ) | |||
Other Comprehensive Loss Item | |||||||||
Unrealized loss on available for sale securities | (6,840,119 | ) | - | (6,840,119 | ) | ||||
Comprehensive Loss | (7,890,825 | ) | (65,972 | ) | (10,556,631 | ) | |||
Loss Per Share Basic and Diluted | (0.03 | ) | (0.00 | ) | |||||
Weighted Average Shares Outstanding | 40,000,000 | 26,710,728 |
See accompanying notes to the consolidated financial statements
4
Salamon Group, Inc.
(A Development Stage
Company)
Consolidated Statements of Cash Flows
(Expressed in US
dollars)
(Unaudited)
For the Three | For the Three | For the Period | |||||||
Months Ended | Months Ended | from April 27, | |||||||
March 31, | March 31, | 2001 (Inception) | |||||||
2012 | 2011 | to March 31, 2012 | |||||||
$ | $ | $ | |||||||
Cash flow from operating activities: | |||||||||
Net loss | (1,050,706 | ) | (65,972 | ) | (3,716,512 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||
Amortization of intangible asset | - | - | 55,000 | ||||||
Bad debt expense | 575,068 | - | 575,068 | ||||||
Estimated fair value of common stock issued for patents | - | - | 315,000 | ||||||
Accretion on convertible debt | 57,333 | - | 91,708 | ||||||
Beneficial conversion of amounts due to related party | - | - | 35,833 | ||||||
Depreciation of property and equipment | 1,059 | - | 11,395 | ||||||
Estimated fair value of common stock issued for services | - | - | 168,216 | ||||||
Donated rent | 1,333 | 1,333 | 6,665 | ||||||
Deferred income tax recovery | - | - | (324,899 | ) | |||||
Impairment of write-down of intangible asset | - | - | 1,299,595 | ||||||
Impairment of write-down of property and equipment | - | - | 74,305 | ||||||
Changes in operating assets and liabilities: | |||||||||
Accounts payable | 263,579 | 9,404 | 410,318 | ||||||
Accounts receivable | 103,971 | - | 103,971 | ||||||
Accrued liabilities | - | 5,000 | - | ||||||
Deferred revenues | (1,042 | ) | - | 45,832 | |||||
Due to related party | 59,618 | - | 444,618 | ||||||
Costs of uncompleted contracts in excess of related billings | (83,886 | ) | - | (83,886 | ) | ||||
Net cash provided by (used in) operating activities | (73,673 | ) | (50,235 | ) | (487,773 | ) | |||
Cash flows from investing activities: | |||||||||
Cash received on acquisition of Sunlogics Power | - | - | 1 | ||||||
Purchase of property and equipment | - | - | (4,515 | ) | |||||
Purchase of license | - | - | (50,000 | ) | |||||
Net cash used in investing activities | - | - | (54,514 | ) | |||||
Cash flows from financing activities: | |||||||||
Bank overdraft | - | (4 | ) | - | |||||
Advances from directors | - | 50,239 | 346,415 | ||||||
Proceeds from common shares subscribed | 100,000 | - | 100,000 | ||||||
Proceeds from issuance of convertible debt | - | - | 425,000 | ||||||
Loans receivable | - | - | (428,718 | ) | |||||
Proceeds from related party note payable | - | - | 23,700 | ||||||
Issuance of common stock for cash | - | - | 103,000 | ||||||
Net cash provided by (used in) financing activities | 100,000 | 50,235 | 569,397 | ||||||
Net increase in cash | 26,327 | - | 27,110 | ||||||
Cash, beginning of period | 783 | - | - | ||||||
Cash, end of period | 27,110 | - | 27,110 | ||||||
Non-cash Financing Activities: | |||||||||
Common stock issued upon conversion of amounts due to related parties | - | - | 458,588 | ||||||
Common stock to be issued or to be issued to settle accounts payable | - | - | 28,059 | ||||||
Common stock issued upon conversion of related party note payable | - | - | 23,700 | ||||||
Common stock issued for license | - | - | 5,000 | ||||||
Common stock and warrants issued for acquisition of Sunlogics Power | - | - | 811,872 |
See accompanying notes to the consolidated financial statements
5
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
1. |
Nature of Operations and Going Concern | |
Salamon Group, Inc. (the "Company") was incorporated in the state of Nevada on April 27, 2001 (Inception). The Company is a development stage company whose principal business plan is to acquire revenue producing assets in the industry of solar energy. The Company is a development stage company as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, Development Stage Entities. | ||
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern. At March 31, 2012, the Company has accumulated losses of $3,716,512 since inception and a working capital deficit of $12,225,869 and expects to incur further losses in the development of its business, all of which cast substantial doubt about the Companys ability to continue as a going concern. | ||
Management plans to continue to provide for the Companys capital needs by issuing debt and equity securities and by the continued support of its related parties (see Note 8). The consolidated 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 be necessary should the Company be unable to continue in existence. There is no assurance that funding will be available to continue the Companys business operations. | ||
2. |
Summary of Significant Accounting Policies | |
(a) |
Basis of presentation and consolidation | |
The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in United States dollars. The Companys fiscal year end is December 31. These consolidated financial statements include the accounts of its wholly-owned subsidiary Sunlogics Power Fund Management Inc. (Sunlogics Power) from the date control was acquired on May 12, 2011, Sunlogics Solar Inc. (Sunlogics Solar) incorporated on March 1, 2012, and Sunlogics Tech Group Inc. incorporated on March 1, 2012. All inter-company transactions and balances have been eliminated. | ||
(b) |
Interim consolidated financial statements | |
The interim consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (SEC) Form 10-Q. They do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these interim unaudited consolidated financial statements should be read in conjunction with the Companys audited financial statements and notes thereto for the year ended December 31, 2011, included in the Companys Annual Report on Form 10-K filed on April 13, 2012 with the SEC. | ||
The interim consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Companys consolidated financial position as at March 31, 2012 and the consolidated results of its operations and consolidated cash flows for the three months ended March 31, 2012. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for future quarters or the full year ending December 31, 2012. |
6
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
2. |
Summary of Significant Accounting Policies (continued) | |
(c) |
Use of estimates | |
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances, stock- based payments, useful life and valuation of property and equipment, valuation of intangible assets and financial instrument valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses. The actual results experience by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. | ||
(d) |
Foreign currency translation | |
The Companys and its subsidiaries functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 830, Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. | ||
(e) |
Basic and diluted net loss per share | |
The Company computes net loss per share in accordance with ASC 260, Earnings per Share, which requires presentation of both basic and diluted loss per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, convertible preferred stock, and convertible debt, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all potentially dilutive common shares if their effect is antidilutive. At March 31, 2012 there were 187,646,000 potentially dilutive instruments outstanding. | ||
(f) |
Property and Equipment | |
The Companys solar powered charging station is recorded at cost and is depreciated on a straight-line basis over its estimated useful life of 20 years. Office furniture is depreciated on a straight-line basis over its estimated useful life of 5 years. | ||
(g) |
Patents | |
Patents are stated at cost and have an indefinite life. | ||
(h) |
Income taxes | |
The Company accounts for income tax using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. |
7
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
2. |
Summary of Significant Accounting Policies (continued) | |
(i) |
Financial instruments | |
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence when measuring fair value using a hierarch based on the level of independent, objective evidence surrounding the inputs used to measure fair value. The hierarchy prioritized the inputs into three levels that may be used to measure fair value: | ||
Level 1 | ||
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. | ||
Level 2 | ||
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable data. | ||
Level 3 | ||
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. | ||
The Companys financial instruments consist principally of cash, accounts receivable, convertible note receivable, loans receivable, accounts payable, loans payable, convertible debt, and advances from directors. At March 31, 2012, the Company estimates that the carrying values of all of its financial instruments approximate their fair values due to the nature or duration of these instruments. | ||
As of March 31, 2012, assets measured at fair value on a recurring basis presented on the Companys balance sheet included cash with a fair value measurement of $27,110, short-term investments of $15,682,062 using Level 1 and convertible note receivable of $500,000 using Level 3. | ||
(j) |
Stock-based compensation | |
In accordance with ASC 718, Compensation Stock Based Compensation and ASC 505-50, Equity Based Payments to Non-Employees, the Company accounts for share-based payments using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. | ||
(k) |
Comprehensive loss | |
ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at March 31, 2012, the Companys comprehensive loss consists of net loss and unrealized losses on available-for-sale investments. | ||
(l) |
Revenue and Deferred Revenue Recognition | |
The Company recognizes revenues from sales of goods and services only when a firm sales agreement is in place, delivery has occurred or services have been rendered and collectability of the fixed or determinable sales price is reasonably assured. The fees from the usage of its solar powered charging station are deferred and recognized as revenues over the term of the service agreement. The Company uses the completed contract method to recognize sales for certain construction and installation contracts. |
8
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
Summary of Significant Accounting Policies (continued)
(m) |
New accounting policies adopted | |
Comprehensive income | ||
In June 2011, ASC guidance was issued related to comprehensive income. Under the updated guidance, an entity will have the option to present the total of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, the update requires certain disclosure requirements when reporting other comprehensive income. The update does not change the items reported in other comprehensive income or when an item of other comprehensive income must be reclassified to income. The adoption of this updated guidance did not have a material effect on the Companys financial statements. | ||
Fair Value Accounting | ||
In May 2011, ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies different components of fair value accounting including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entitys shareholders equity and disclosing quantitative information about the unobservable inputs used in fair value measurements that are categorized in Level 3 of the fair value hierarchy. The adoption of this updated guidance did not have a material effect on the Companys financial statements. | ||
(n) |
Recent accounting pronouncements | |
The Company has implemented all other new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
3. |
Short-term Investment |
On January 9, 2012, the Company entered into a share purchase agreement the CEO of the Company to purchase 13,248,342 common shares of Sunlogics PLC for a purchase price of $22,522,181. The purchase price is payable in the form of a convertible debenture. Refer to Note 9(d) and Note 8(a). The Company has classified the investment as available-for-sale and recorded the fair value of the shares purchased of $22,522,181. During the three months ended March 31, 2012, the Company recorded an unrealized loss of $6,840,119 in other comprehensive loss and reduced the carrying value of the investment to $15,682,062 as at March 31, 2012. | |
4. |
Convertible Note Receivable |
On March 2, 2012, the Company entered in an agreement with Daystar Technologies, Inc. (Daystar) whereby the President of the Company advanced $500,000 to DayStar on behalf of the Company in exchange for a convertible promissory note due to the Company bearing interest at 6% per annum and a maturity date of 12 months from the closing date. The first tranche of $400,000 closed on March 14, 2012, and the Company has the right from the issuance date to convert all or any part of the outstanding principal plus any amount of accrued but unpaid interest into common stock of DayStar at $1.68 per share. The second tranche of $100,000 closed on March 16, 2012, and the Company has the right from the issuance date to convert all or any part of the outstanding principal plus any amount of accrued but unpaid interest into common stock of DayStar at $1.61 per share. The $500,000 amount was advanced by the President on behalf of the Company. Refer to Note 8(b). | |
The Company has classified the investment as available-for-sale and recorded the fair value of the convertible promissory note of $500,000 as at March 31, 2012. |
9
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
5. |
Loans Receivable |
On October 28, 2011, the Company entered into agreement with Radiant Offshore Fund Ltd. (Radiant Offshore) whereby Radiant Offshore assigned secured obligations of $350,000 (CAN$350,000), a loan agreement (the Original Loan Agreement) and debentures due from ARISE Technologies Corporation (ARISE) and the security instruments and guarantees for the secured obligations for consideration of $350,000 (CAN$350,000). Under the terms of the Original Loan Agreement assigned from Radiant Offshore, the Company will advance a maximum amount of $1,500,000 (CAN$1,500,000) to ARISE, and any loans advanced have a maturity date of April 14, 2012 and bear interest at 12% per annum. During the year ended December 31, 2011, the Company advanced $785,000 (CAN$785,000) to ARISE. | |
On January 6, 2012, the Company entered into an agreement with ARISE to provide an additional $500,000 (CAN$500,000) the loan was funded by Radiant Offshore and Radiant Performance on the Companys behalf. | |
On January 13, 2012, the Company provided a debtor-in-possession term loan facility (DIP Loan Facility) to ARISE. Under the terms of the DIP Loan Facility, the Company will provide a maximum of an additional $1,305,000 (CAN$1,305,000). The DIP loans are due earlier of i) three months from the date of the initial advance ii) effective date of Court-approved proposal under BIA iii) closing date of a sale of all or substantially all of the assets of the Borrower and bear and interest rate of 12% per annum. The DIP Loan Facility is secured by certain assets of ARISE. Radiant Offshore and Radiant Performance advanced $825,000 (CAN$825,000) to ARISE pursuant to the DIP Loan Facility on behalf of the Company during the three months ended March 31, 2012. | |
On February 14, 2012, the Company entered into an assignment of indebtedness agreement with Radiant Offshore and Radiant Performance. Pursuant to the terms of the agreement, Radiant Offshore and Radiant Performance assigned its secured obligations of $5,066,746 (CAN$5,066,746), credit agreements and security in ARISE to the Company for a purchase price of $5,066,746 (CAN$5,066,746). On February 13, 2012, the Company issued a convertible redeemable note in the amount of $5,066,746 with a maturity date of February 13, 2015 to Radiant Offshore in consideration for the assignment of indebtedness agreement. Refer to Note 9(f). | |
On February 6, 2012, the Company entered into an assignment of indebtedness agreement with Haverstock Masterfund Ltd. (Haverstock). Pursuant to the terms of the agreement, Haverstock assigned its secured obligations of $444,747 (CAN$444,747), a promissory note of $750,000 (CAN$750,000) (includes the secured obligations) and security in ARISE to the Company for a purchase price of $444,747 (CAN$444,747) in the form of a convertible debenture. Refer to Note 9(e). | |
On March 2, 2012, Salamon Group, Inc. (Salamon) entered into an Agreement of Purchase and Sale (the Agreement) with ARISE Technologies Corporation (ARISE). Pursuant to the Agreement Salamon acquired the PV Systems Business, the PV Silicon Business and the PV Cell Business assets from ARISE for a purchase price of $5,436,493. This purchase price is equal to the assumed indebtedness due to Salamon under the Haverstock assignment, the Radiant assignment, the Original Loan Agreement, and $325,000 of amounts owing pursuant to the DIP Loan Facility at the purchase date. The loans receivable were applied against the purchase price of the assets. | |
At March 31, 2012, the Company recorded an allowance for bad debts equal to the remaining $575,000 of advances to ARISE that were not included in the Agreement. | |
6. |
Property and Equipment |
In 2011, the Company acquired a solar powered charging station. Depreciation for the three month ended March 31, 2012 was $1,059 (2011 - $nil). |
December 31, | |||||||||||||
March 31, 2012 | 2011 | ||||||||||||
Accumulated | Net Carrying | Net Carrying | |||||||||||
Cost | Depreciation | Value | Value | ||||||||||
$ | $ | $ | $ | ||||||||||
Solar powered charging station | 127,000 | 81,185 | 45,815 | 46,874 | |||||||||
Office furniture | 10,000 | - | 10,000 | - | |||||||||
137,000 | 81,185 | 55,815 | 46,874 |
10
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
7. |
Patents | |
The Company has acquired patents from Arise Technologies Corporation on March 2, 2012 (refer to Note 13) which were allocated a fair value of $3,805,545. | ||
8. |
Related Party Transactions and Balances | |
(a) |
On January 9, 2012, the Company entered into a share purchase agreement the CEO of the Company to purchase 13,248,342 common shares of Sunlogics PLC for a purchase price of $22,522,181. The purchase price was by the issuance of a $22,522,181 convertible debenture. Refer to Notes 3 and 9(d). | |
(b) |
On March 2, 2012, the Company entered in an agreement with Daystar Technologies, Inc. (Daystar) whereby the President of the Company advanced $500,000 to DayStar on behalf of the Company in exchange for a convertible promissory note due to the Company. The advance is non-interest bearing, secured by the convertible promissory note with Daystar which is due on demand. Refer to Note 4. | |
(c) |
During the three months ended March 31, 2012, the Company recognized $1,333 (2011 - $1,333) for donated rent at $444 per month provided by the President of the Company. | |
(d) |
During the three months ended March 31, 2012, the Company recognized $75,000 (2011 - $30,000) for management services provided by the President of the Company. As at March 31, 2012, $453,210 (2011 - $393,592) is owed to the President of the Company. The amount is unsecured, non-interest bearing and due on demand. | |
(e) |
On October 31, 2011, the Company issued a $200,000 convertible note to a company that is significantly influenced by the President of the Company through an equity interest (Refer Note 9(a)). | |
(f) |
On December 15, 2011, the Company issued a $75,000 convertible note to a shareholder of the Company (see Note 9(c)). |
11
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
9. |
Convertible Debt | |
(a) |
On October 31, 2011, the Company issued a convertible note in the sum of $200,000 with a maturity date of April 30, 2012 to a company that is significantly influenced by the President of the Company through an equity interest. The note bears interest at 16% per annum and is to be paid in full on the maturity date, unless previously paid or converted into the Companys common stock. The Note holder has the right from November 10, 2011 to convert any unpaid principal portion, into common shares of the Company at a conversion price of $0.03 per share. | |
Pursuant to ASC 470-20, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $32,667 as additional paid-in capital and an equivalent discount that reduced the carrying value of the convertible debenture to $167,333. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan. | ||
During the three months ended March 31, 2012, the Company recorded accretion of discount of $24,333 increasing the carrying value of the loan to $206,865. | ||
(b) |
On November 10, 2011, the Company issued a convertible note in the sum of $150,000 with a maturity date of April 30, 2012. The note bears interest at 6% per annum and is to be paid in full on the maturity date, unless previously paid or converted into the Companys common stock. The note holder has the right from November 20, 2011 to convert any unpaid principal portion, into common shares of the Company at a conversion price of $0.025 per share. | |
Pursuant to ASC 470-20, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $24,000 as additional paid-in capital and an equivalent discount that reduced the carrying value of the convertible debenture to $126,000. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan. | ||
During the three months ended March 31, 2012, the Company recorded accretion of discount of $14,120 increasing the carrying value of the loan to $149,099. | ||
(c) |
On December 15, 2011, the Company issued a convertible note in the sum of $75,000 with a maturity date of April 30, 2012 to a shareholder of the Company. The note bears interest at 6% per annum and is to be paid in full on the maturity date, unless previously paid or converted into the Companys common stock. The note holder has the right from December 25, 2011 to convert any unpaid principal portion, into common shares of the Company at a conversion price of $0.025 per share. | |
Pursuant to ASC 470-20, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $36,000 as additional paid-in capital and an equivalent discount that reduced the carrying value of the convertible debenture to $39,000. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan. | ||
During the three months ended March 31, 2012, the Company recorded accretion of discount of $18,880 increasing the carrying value of the loan to $68,077. |
12
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
9. |
Convertible Debt (continued) | |
(d) |
On January 9, 2012, the Company issued a convertible note in the sum of $22,522,181 with a maturity date of January 9, 2013 to the president of the Company in regards to the purchase of the shares of Sunlogics. Refer to Note 3 and 8(a). The note bears no interest and is to be paid in full on the maturity date, unless previously paid or converted into the Companys common stock. The Note holder has the right from the issue date to convert any unpaid principal portion, at a conversion price per share equal to 100% of the average of the five lowest closing bid prices of the Companys common stock for the 20 trading days preceding a conversion date. The maximum conversion price is set at $0.20 per share. | |
The Company analyzed the financial instrument under ASC 815, Derivatives and Hedging, and determined that the embedded conversion feature did not meet the characteristics of a derivative instrument. Pursuant to ASC 470-20, the Company determined that there was no intrinsic value and thus no beneficial conversion feature. | ||
(e) |
On February 12, 2012, the Company issued a convertible redeemable note in the amount of CAN$444,747 with a maturity date of December 31, 2014 to Haverstock in consideration for the assignment of indebtedness agreement. Refer to Note 5. | |
The Note bears interest at 5% per annum and shall increase to 10% upon default. So long as there is no event of default, the Company has sufficient number of authorized shares of Common Stock reserved for issuance upon full conversion and the Companys stock is trading at or below $0.50 per share, the Company has the option to redeem this Note and pay the holder 100% of the unpaid principal and accrued interest at any time. In the event that the trading price of the Companys common stock is below the $0.50, the Company has the option to prepay a portion of the outstanding principal equal to 100% of the unpaid principal divided by thirty-six plus one months interest. The Note is to be paid in full on the maturity date, unless previously paid or converted into the Companys common stock. The Note holder has the right to convert any unpaid principal and accrued interest, at a conversion price per share equal to 70% of the average of the five lowest closing bid prices of the Companys common stock for the 20 trading days preceding a conversion date. The Note is secured by assets purchased from ARISE in the form of a convertible debenture. | ||
The Company analyzed the financial instrument under ASC 815, Derivatives and Hedging, and determined that the embedded conversion feature did not meet the characteristics of a derivative instrument. Pursuant to ASC 470-20, the Company determined that there was no intrinsic value and thus no beneficial conversion feature. | ||
(f) |
On February 13, 2012, the Company issued a convertible redeemable note in the amount of $5,066,746 with a maturity date of February 13, 2015 to Radiant Offshore in consideration for the assignment of indebtedness agreement. Refer to Note 5. | |
The Note bears interest at 5% per annum and shall increase to 10% upon default. So long as there is no event of default, the Company has sufficient number of authorized shares of Common Stock reserved for issuance upon full conversion and the Companys stock is trading at or below $0.50 per share, the Company has the option to redeem this Note and pay the holder 100% of the unpaid principal and accrued interest at any time. In the event that the trading price of the Companys common stock is below the $0.50, the Company has the option to prepay a portion of the outstanding principal equal to 100% of the unpaid principal divided by thirty-six plus one months interest. The Note is to be paid in full on the maturity date, unless previously paid or converted into the Companys common stock. The Note holder has the right to convert any unpaid principal and accrued interest, at a conversion price per share equal to 70% of the average of the five lowest closing bid prices of the Companys common stock for the 20 trading days preceding a conversion date. The Note is secured by assets purchased from ARISE. | ||
The Company analyzed the financial instrument under ASC 815, Derivatives and Hedging, and determined that the embedded conversion feature did not meet the characteristics of a derivative instrument. Pursuant to ASC 470-20, the Company determined that there was no intrinsic value and thus no beneficial conversion feature. |
13
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
10. |
Loans Payable | |
During the year ended December 31, 2011, Radiant Offshore Fund Ltd. (Radiant Offshore) and Radiant Performance Fund LP. (Radiant Performance) funded $360,000 (CAN$360,000) of the loans advanced to ARISE. During the three months ended March 31, 2012, Radiant Offshore and Radiant Performance funded an additional $1,325,000 (CAN$1,325,000) of the loans advanced to ARISE. Refer to Note 5. | ||
The portion funded by Radiant Offshore and Radiant Performance have been recorded as loans payable. The loans payable to Radiant Offshore and Radiant Performance are non-interest bearing and due on demand. Any funds received by the Company from ARISE must first be used to repay Radiant Offshore and Radiant Performance. No repayments were received from ARISE and made to Radiant Offshore or Radiant Performance for the year ended December 31, 2011 or the three months ended March 31, 2012. | ||
On February 13, 2012, the Company issued a convertible redeemable note (included in the $5,066,746 convertible redeemable note) in the amount of to secure $1,610,000 (CAN$1,610,000) of the loans payable to ARISE. Refer to Note 5. At March 31, 2012, $75,068 (CAN$75,000) of loans payable remain outstanding to Radiant Offshore and Radiant Performance. | ||
11. |
Share Purchase Warrants | |
On May 12, 2011, the Company issued 20,000,000 share purchase warrants upon the purchase of Sunlogics Power. The share purchase warrants are exercisable at a price of $0.001 per share and expire on May 12, 2016. | ||
12. |
Commitments and Contingencies | |
(a) |
Indemnities | |
During the normal course of business, the Company has made certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of Nevada. These indemnities include certain agreements with the Companys officers under which the Company may be required to indemnify such person for liabilities arising out of their employment relationship. The duration of these indemnities and guarantees varies and, in certain cases, is indefinite. The majority of these indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. | ||
Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets. | ||
(b) |
On March 16, 2012, subsequently amended on March 19, 2012, the Company entered into an agreement to purchase 100% of the outstanding shares of Eco Energy Solutions (Australia) PTY Ltd., a private company located in Australia involved in the design, supply and installation of renewable energy projects, for a purchase price consisting of 8,000,000 warrants exercisable for $0.001 per share until March 14, 2013. As May 22, 2012, the transaction had not yet closed. | |
(c) |
On March 30, 2012, the Company entered into a memorandum of agreement and binding letter of intent to acquire a 100% interest in Solar Samoa Ltd., a private solar energy company, for a purchase price of $3,100,000. As at May 22, 2012, a definitive agreement has not been entered into. | |
(d) |
On December 30, 2011, the Company entered into an agreement to purchase solar modules in the amount of $20,291,000. The purchase agreement was cancelled as at March 31, 2012. |
14
Salamon Group, Inc.
(A Development Stage Company)
Notes
to the Consolidated Financial Statements for the three months ended March 31,
2012 and 2011
(Expressed in US dollars)
(Unaudited)
13. |
Acquisition of ARISE Technologies Corporation On March 2, 2012, the Company entered into a agreement (the Purchase Agreement) to purchase certain assets of the PV Silicon Business, the PV Cell Business, and the PV Systems Business (the Assets) from ARISE for a purchase price of $5,436,493 which is equal to the assumed indebtedness due to Salamon under the Haverstock assignment, the Radiant assignment, the Original Loan Agreement, and $325,000 of amounts owing pursuant to the DIP Loan Facility at the purchase date. The acquisition of the Assets has been accounted for as an asset acquisition. The Companys allocation of the purchase cost to the assets acquired and liabilities assumed is based upon their estimated fair values at the time of acquisition. The Company is currently in the process of completing the determination of the fair values for the assets and liabilities acquired. As a result, the purchase price allocation is subject to change in 2012 as the valuation process is completed. The following is a summary of the purchase price allocation at the date of acquisition based upon the estimated fair value of the assets acquired and liabilities assumed: |
Consideration Given: | ||||
Settlement of $5,436,493 of assumed debt | $ | 5,436,493 | ||
Net assets acquired at fair value | ||||
Accounts receivable | $ | 1,073,913 | ||
Patents | 3,805,545 | |||
Office furniture | 10,000 | |||
Costs of uncompleted contracts in excess of related billings | 547,035 | |||
Net assets at estimated fair value | $ | 5,436,493 |
14. |
Subsequent Events | |
(a) |
Subsequent to March 31, 2012, the Company received proceeds of $300,000 for 1,500,000 common shares subscribed. As at May 22, 2012, the common shares have yet to be issued. | |
(b) |
On April 13, 2012, the Company entered into an agreement to acquire solar assets from Earth Right Energy LLC for considerations of $1,350,000 payable in equal value of shares in the Company. As at May 22, 2012, the common shares have yet to be issued. | |
(c) |
On April 16, 2012, the Company entered into an agreement to install solar electric system with Earth Right Energy LLC for cash payments of $540,000. |
15
Item 2. Managements Discussion and Analysis or Plan of Operation.
On May 12, 2011, we completed the acquisition of Sunlogics Power Fund Management Inc. Sunlogics Power Fund is focused on the acquisition of solar powered electricity generating facilities which have long term power purchasing agreements in place with local power utilities and commercial users. On March 2, 2012, we completed the acquisition of the Systems Business and certain Silicon technology from arise Technologies Corporation. On March 16, 2012 we entered into an agreement to purchase 100% of the issued shares of Eco energy Solutions Australia and on March 30, 2012 executed an MOU and Binding Letter of Intent to acquire Solar Samoa Limited.
For the period from inception (April 27, 2001) through March 31, 2012, our deficit accumulated has amounted to $3,716,512.
As reported in the Report of Independent Registered Public Accounting Firm on our December 31, 2011 financial statements, we have suffered recurring losses from operations, we have a working capital deficit and a deficit accumulated during the development stage. These items raise substantial doubt about our ability to continue as a going concern.
The Company plans to generate revenues through: i) the sale of solar powered electricity to local power utilities and end users through long term power purchase agreements; and ii) by acquiring solar power generating plants which the Company is currently identifying with potential sellers in the United States, Canada and other parts of the world. If the Company is successful in acquiring revenue producing renewable energy projects, we intend to finance our operations through a combination of debt and/or equity financing.
If we are unable to generate sufficient revenue from operations to implement our plans, we intend to explore all available alternatives for debt and/or equity financing, including but not limited to private and public securities offerings. Accordingly, we expect that it will be necessary for us to raise additional funds in the event that we are unable to generate any revenue from operations and if only a minimal level of revenue is generated in accordance with our expectations.
Results of Operations
The operating results and cash
flows are presented for the three months periods ended March 31, 2012 and 2011.
Summary of Period End Results | ||||||
Three Months Ended | ||||||
March 31, | March 31, | |||||
2012 | 2011 | |||||
Revenue | $ | 1,042 | $ | - | ||
Expenses | (1,051,748 | ) | (65,972 | ) | ||
Net Income (Loss) | $ | (1,050,706 | ) | $ | (65,972 | ) |
Revenues
For the three months period ended March 31, 2012, we had total revenue of $1,042, compared to Nil for the three month period ended March 31, 2011, an increase of $1,042 from revenues for usage of the Companys solar powered charging station.
As of March 31, 2012 deferred revenue totalled $45,832.
16
Expenses
The major components of our expenses for the three month period are outlined below:
Three Months Ended | ||||||
March 31, | March 31, | |||||
2012 | 2011 | |||||
Bad Debt | $ | 575,068 | $ | - | ||
Depreciation | 1,059 | - | ||||
Donated Rent | 1,333 | 1,333 | ||||
General and Administrative | 378,019 | 64,639 | ||||
Interest Expense | 96,269 | - | ||||
Total Expenses | $ | 1,051,748 | $ | 65,972 |
For the three month period ended March 31, 2012, we had total operating expenses of $1,051,748, compared to $65,972 for the three month period ended March 31, 2011, an increase of $985,776.
For the three month period ended March 31, 2012, we had total general and administrative expenses of $378,019, compared to $64,639 for the three month period ended March 31, 2011, an increase of $313,380.
For the three month period ended March 31, 2012, we had management fees of $75,000, compared to $30,000 for the three month period ended March 31, 2011.
For the three month period ended March 31, 2012, we had bad debt of $575,068 compared to Nil for the three month period ended March 31, 2011, an increase of $575,068.
For the three month period ended March 31, 2012, we had interest expense of $96,269 compared to Nil for the three month period ended March 31, 2011, an increase of $96,269.
The net loss for the three month period ended March 31, 2012 was $1,050,706 compared to $65,972 for the three month period ended March 31, 2011, an increase of $984,734.
Liquidity and Capital Resources
Working Capital
At Mar 31, | At December | |||||
2012 | 31, 2011 | |||||
Current Assets | $ | 17,810,035 | $ | 783,489 | ||
Current Liabilities | (30,035,904 | ) | (1,404,338 | ) | ||
Working Capital | $ | (12,225,869 | ) | $ | (620,849 | ) |
Cash Flows | 3 Months Ended | |||||
March 31, | March 31, | |||||
2012 | 2011 | |||||
Net Cash Provided By (Used In) Operating Activities | $ | (73,673 | ) | $ | (50,235 | ) |
Net Cash from Investing Activities | - | - | ||||
Net Cash (Used In) Provided By Financing Activities | 100,000 | 50,235 | ||||
Net Change in Cash During Period | $ | 26,327 | $ | - |
17
Financing Requirements
From inception to March 31, 2012, we have suffered cumulative losses in the amount of $3,716,512. Since our inception, we have funded operations through common stock issuances, related party loans, and the support of creditors in order to meet our strategic objectives. Our management believes that sufficient funding will be available to meet our business objectives, including anticipated cash needs for working capital, and are currently evaluating several financing options, including a public offering of securities. However, there can be no assurance that we will be able to obtain sufficient funds to continue our operations. As a result of the foregoing, our independent auditors believe there exists substantial doubt about our ability to continue as a going concern. There is no assurance that we will be able to obtain additional financing if and when required. We anticipate that additional financing may come in the form of sales of additional shares of our common stock which may result in dilution to our current shareholders.
Financial Condition, Capital Resources and Liquidity
As of March 31, 2012, we have a deficit accumulated during the development stage of $3,716,512. At March 31, 2012, we had assets totalling $21,671,395 and liabilities of $30,079,236 attributable to amounts due to related parties, convertible notes, accounts payable and deferred revenue.
We currently have a working capital deficit and there can be no assurance that our financial condition will improve.
Even though we believe, without assurance, that we will obtain sufficient capital with which to implement our business plan on a limited scale, we are not expected to continue in operation without an infusion of capital. In order to obtain additional equity financing, we may be required to dilute the interest of existing shareholders.
Our ability to continue as a going concern is dependent upon our ability to acquire revenue producing assets.
Net Operating Losses
As of March 31, 2012, we have accumulated a net loss of $3,716,512.
Research and Development
Not Applicable.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Material Commitments for Capital Expenditures
On March 16, 2012, subsequently amended on March 19, 2012, the Company entered into an agreement to purchase 100% of the outstanding shares of Eco Energy Solutions (Australia) PTY Ltd., a private company located in Australia involved in the design, supply and installation of renewable energy projects, for a purchase price consisting of 8,000,000 warrants exercisable for $0.001 per share until March 14, 2013.
On March 30, 2012, the Company entered into a memorandum of agreement and binding letter of intent to acquire 100% interest in Solar Samoa Ltd, a private solar energy company, for a purchase price of $3,100,000.
On December 30, 2011 the Company entered into an agreement to purchase solar modules in the amount of $20,291,000. The purchase agreement was cancelled as at March 31, 2012.
Critical Accounting Policies
There were no changes to the critical accounting policies as discussed in our 2011 Form 10-K.
Item 4(T). Controls and Procedures.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
19
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the first quarter of our fiscal year ended December 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
20
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II - Other Information
Item 1. Legal Proceedings
We know of no legal proceedings to which we are a party or to which any of our property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against us.
Item 2. Unregistered Sales of Equity securities and Use of Proceeds
None
Item 3. Defaults Upon Senior securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None
21
Item 6. Exhibits.
Exhibit | Description | |
No. | ||
2.1 | Articles of Incorporation | (1) |
2.2 | Bylaws | (1) |
2.3 | Initial List of Officers, Directors and Registered Agent | (1) |
31.1 | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act | (2) |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act | (2) |
(1) |
Incorporated by reference to the exhibits of the Registration Statement on Form 10-KSB filed with the Securities and Exchange Commission on August 6, 2004. |
(2) |
Filed herewith. |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SALAMON GROUP INC. | |
Dated: May 23, 2012 | By: /s/ Michael Matvieshen |
22