Attached files
file | filename |
---|---|
EX-31.1 - CERTIFICATION - Lustros Inc. | lustros_10q-ex3101.htm |
EX-31.2 - CERTIFICATION - Lustros Inc. | lustros_10q-ex3102.htm |
EX-32.1 - CERTIFICATION - Lustros Inc. | lustros_10q-ex3201.htm |
EX-10.2 - ACQUISITION AGREEMENT - Lustros Inc. | lustros_10q-ex1002.htm |
EX-32.2 - CERTIFICATION - Lustros Inc. | lustros_10q-ex3202.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
S QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
£ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission file number: 000-30215
LUSTROS INC.
(Formerly Power-Save Energy Company)
(Exact name of registrant as specified in its charter)
Utah | 87-9369569 |
(state or other jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. No.) |
POWER-SAVE ENERGY COMPANY
(former name of former address, if changes since last report)
1005 South Center Redlands, CA 92373 |
(Address of principal executive offices) |
(909) 253-0774
(Issuer's telephone number)
with a copy to:
Zouvas Law Group, P.C.
2368 Second Avenue
San Diego, CA 92101
Telephone (619) 688-1116
Facsimile: (619) 688-1716
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 S No £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes £ No S (Not required)
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 £ | Accelerated Filer £ |
Non-Accelerated Filer £ | Smaller Reporting Company S |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S
As of, August 17, 2012, there were 70,754,821 shares of the registrant’s $0.001 par value Common Stock issued and outstanding.
LUSTROS INC.
(FORMERLY POWER-SAVE ENERGY COMPANY*)
TABLE OF CONTENTS
PAGE | |||
PART I | FINANCIAL INFORMATION | 4 | |
ITEM 1. | FINANCIAL STATEMENTS | 4 | |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 14 | |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 15 | |
ITEM 4. | CONTROLS AND PROCEDURES | 15 | |
PART II | OTHER INFORMATION | 16 | |
ITEM 1. | LEGAL PROCEEDINGS | 16 | |
ITEM 1A. | RISK FACTORS | 16 | |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 16 | |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 17 | |
ITEM 4. | MINING SAFETY DISCLOSURE | 17 | |
ITEM 5. | OTHER INFORMATION | 17 | |
ITEM 6. | EXHIBITS | 18 |
2 |
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Lustros Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "LSLD" refers to Lustros Inc.
3 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX | |
Unaudited Consolidated Balance Sheet as of June 30, 2012 |
4 |
Unaudited Consolidated Statement of Operations for the three Months Ended June 30, 2012 and Since Inception And Statement of Income for the period ending June 30, 2012 and Since Inception |
5 |
Unaudited Consolidated Statement of Cash Flows for the period Ended June 30, 2012 |
6 |
Notes to Financial Statements | 7 |
4 |
Lustros, Inc.
(An Exploration Stage Company)
Consolidated Balance Sheets
(Unaudited)
June 30, 2012 | ||||
ASSETS | ||||
Current Assets | ||||
Cash | $ | 29,034 | ||
Prepaid expenses | 948,420 | |||
Total current assets | 977,454 | |||
Non-Current Assets | ||||
Fixed asset, net | 7,809,316 | |||
Land | 549,310 | |||
Total non-current assets | 8,358,626 | |||
TOTAL ASSETS | $ | 9,336,080 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Liabilities | ||||
Accounts payable | $ | 1,293,367 | ||
Notes payable | 446,217 | |||
Notes payable - related party | 342,393 | |||
Total liabilities | 2,081,977 | |||
Stockholders' Equity | ||||
Preferred stock, $.001 par value, 10,000,000 shares authorized, 175,000 issued and outstanding | 175 | |||
Common stock, $.001 par value, 100,000,000 shares authorized, 69,674,608 issued and outstanding | 69,674 | |||
Additional paid-in capital | 5,393,467 | |||
Minority interest | 3,264,303 | |||
Other comprehensive income | 219,048 | |||
Accumulated deficit during exploration stage | (1,692,564 | ) | ||
Total stockholders' equity | 7,254,103 | |||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 9,336,080 |
See notes to consolidated financial statements
5 |
Lustros, Inc.
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)
For the three months ended June 30, 2012 | Inception, (January 26, 2012) to June 30, 2012 | |||||||
Revenue | $ | 31,057 | $ | 51,943 | ||||
Cost of goods sold | – | – | ||||||
Gross profit | 31,057 | 51,943 | ||||||
Operating expenses | ||||||||
General and administrative | 484,124 | 971,658 | ||||||
Payroll | 625,778 | 598,687 | ||||||
Legal and accounting | 98,294 | 99,953 | ||||||
Mining costs | 41,935 | 69,356 | ||||||
Research & development | 3,312 | 3,688 | ||||||
Total expenses | 1,253,443 | 1,743,342 | ||||||
Loss from operations | (1,222,386 | ) | (1,691,399 | ) | ||||
Other loss | (1,165 | ) | (1,165 | ) | ||||
Net loss | $ | (1,223,551 | ) | $ | (1,692,564 | ) | ||
Income per share, basic | $ | (0.02 | ) | |||||
Weighted average common shares, basic | 62,931,351 |
Statements of Comprehensive Loss
(Unaudited)
For the three months ended June 30, 2012 | Inception, (January 26, 2012) to June 30, 2012 | |||||||
Net loss | $ | (1,223,551 | ) | $ | (1,692,564 | ) | ||
Gain on foreign currency translation | 219,048 | 219,048 | ||||||
Total comprehensive loss | $ | (1,004,503 | ) | $ | (1,473,516 | ) |
See notes to consolidated financial statements
6 |
Lustros, Inc.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Inception (January 26, 2012) to June 30, 2012 | ||||
Cash flows from operating activities | ||||
Net loss | $ | (1,692,564 | ) | |
Adjustments to reconcile net loss to net cash used by operating activities | ||||
Depreciation | 31,927 | |||
Changes in operating assets and liabilities: | ||||
Accounts payable | 844,955 | |||
Prepaid expenses | (183,869 | ) | ||
Total cash used by operations | (999,551 | ) | ||
Cash flows from investing activities | ||||
Funds received in Bluestone SA acquisition | 892,294 | |||
Funds received in Power Save merger | 38,572 | |||
Disposal of Power Save operations | (20,642 | ) | ||
Purchase of fixed assets | (1,058,898 | ) | ||
Total cash used in investing activities | (148,674 | ) | ||
Cash from financing activities | ||||
Proceeds from notes payable | 2,482,211 | |||
Repayment of notes payable | (2,745,000 | ) | ||
Stock sales | 1,221,000 | |||
Total cash used in financing activities | 958,211 | |||
Effect of foreign currency exchange rate | 219,048 | |||
INCREASE IN CASH | 29,034 | |||
BEGINNING CASH | – | |||
ENDING CASH | $ | 29,034 | ||
Supplemental disclosure of cash flow information: | ||||
Interest paid | $ | (1,165 | ) | |
Income taxes paid | $ | – | ||
Supplemental disclosure of non-cash investing activities: | ||||
Common stock issued to satisfy notes payable | 1,529,000 | |||
Net assets acquired in reverse merger with Power Save | 63,207 | |||
Net assets acquired in Sulfatos Chile acquisition | (5,068,464 | ) | ||
Net assets disposed of in Power Save sale | (62,138 | ) | ||
Effect of reverse merger with Power Save | (24,635 | ) | ||
Contributed capital in Sulfatos Chile acquisition | 2,696,455 | |||
Contributed capital on Power Save sale | 41,496 |
See notes to consolidated financial statements
7 |
LUSTROS, INC.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1 - Organization and Principal Activities
Organization and Description of Business
Lustros, Inc., formerly Power-Save Energy Company, (the “Company") is the successor corporation of Mag Enterprises, Inc., a Utah corporation incorporated on July 30, 1980. On September 10, 1993, an Amendment to the Articles of Incorporation was filed to change its name from Mag Enterprises, Inc. to Safari Associates, Inc. On September 12, 2006, an Amendment to the Articles of Incorporation was filed to change its name from Safari Associates, Inc. to Power-Save Energy Company.
On February 29, 2012, Power-Save Energy Company entered into an agreement to acquire all of the capital stock of Bluestone S.A. On March 9, 2012, pursuant to a Share Exchange Agreement (the “Share Exchange Agreement”) with Bluestone, S.A., a Chilean corporation (“Bluestone”), and the shareholders of Bluestone, S.A. (“Bluestone Shareholders’), the Company acquired 100% of the outstanding shares of Common Stock of Bluestone (the “Bluestone Stock”) from Bluestone Shareholders. In exchange for the Bluestone Stock, the Company issued 60,000,000 shares of its Common Stock to the Bluestone Shareholders. As a result of closing the transaction, Bluestone Shareholders now hold approximately 96.7% of the Company’s issued and outstanding Common Stock. For accounting purposes, the Bluestone acquisition is treated as a reverse acquisition with Bluestone treated as the acquirer and the Company as the acquired party. As a result, the business and financial information included in the report is the business and financial information of Bluestone prior to March 9, 2012 and the combined entity after March 9, 2012.
On March 25, 2012, the Company agreed with the former management of Power-Save Energy Company to transfer the renewable energy and energy savings product business, including all assets, liabilities, and the name Power-Save Energy Company to the former management in lieu of unpaid salaries and any other potential monies owed to them.
On April 12, 2012, an Amendment to the Articles of Incorporation was filed to change its name from Power-Save Energy Company to Lustros, Inc.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements, including the estimated useful lives of tangible and intangible assets. Management believes the estimates used in preparing the financial statements are reasonable and prudent. Actual results could differ from these estimates.
Principles of Consolidation
The consolidated financial statements include the financial statements of Lustros, Inc., its wholly owned subsidiary Bluestone, and the subsidiaries and mining projects owned by Bluestone. All significant inter-company balances and transactions have been eliminated in consolidation.
Foreign Currency Translation
The financial statements of the Company’s wholly-owned subsidiary, Bluestone are measured using the local currency (the Chilean Peso (CLP) is the functional currency). Assets and liabilities of Bluestone SA are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates of exchange in effect during the period. The resulting cumulative translation adjustments have been recorded as a component of comprehensive income (loss), included as a separate item in the statement of operations. The exchange rate at June 30, 2012 was 509.73 Chilean Pesos per United States Dollar, based on historical rates from Banco Central de Chile.
8 |
The Company is exposed to movements in foreign currency exchange rates. In addition, the Company is subject to risks including adverse developments in the foreign political and economic environment, trade barriers, managing foreign operations, and potentially adverse tax consequences. There can be no assurance that any of these factors will not have a material negative impact on the Company's financial condition or results of operations in the future.
Financial Instruments
The Company's financial instruments include cash and cash equivalents, and accounts payable. At June 30, 2012 the carrying cost of these instruments approximate their fair value.
Cash Equivalents
Cash equivalents include highly liquid investments with maturities of three months or less.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed principally on the straight-line method over the estimated useful life of each type of asset which ranges from three to five years. Major improvements are capitalized, while expenditures for repairs and maintenance are expensed when incurred. Upon retirement or disposition, the related costs and accumulated depreciation are removed from the accounts, and any resulting gains or losses are credited or charged to income.
Mining Properties and Equipment
The Company will follow the successful efforts method of accounting. All developmental costs will be capitalized. Depreciation and depletion of producing properties will be computed on the unit-of-production method based on estimated proved reserves. Repairs and maintenance will be expensed, while renewals and betterments will be generally capitalized.
At least quarterly, or more frequently if conditions indicate that long-term assets may be impaired, the carrying value of our properties will be compared to management's future estimated pre-tax cash flow from the properties. If undiscounted cash flows are less than the carrying value, then the asset value will be written down to fair value. Impairment of individually significant unproved properties will be assessed on a property-by-property basis, and impairment of other unproved properties is assessed and amortized on an aggregate basis.
Revenue Recognition
Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors such as when there has been evidence of a sales arrangement, delivery has occurred, or services have been rendered, the price to the buyer is fixed or determinable, and collection is reasonably assured. The Company is responsible for warehousing and shipping the merchandise.
Stock - Based Compensation
The Company may periodically issue shares of Common Stock for services rendered or for other costs and expenses. Such shares will be valued based on the market price of the shares on the transaction date.
The Company may periodically issue stock options to employees and stock options or warrants to non-employees in non-capital raising transactions for services and for financing costs.
The Company accounts for its stock-based compensation in accordance with ASC Topic 718, "Share-Based Payment, and an Amendment of FASB Statement No. 123." The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
9 |
Earnings Per Common Share
ASC Topic 260, “Earnings Per Share”, requires presentation of basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic earnings (loss) per share is computed by dividing earnings (loss) available to Common Stockholders by the weighted average number of common shares outstanding (including shares reserved for issuance) during the period. Diluted earnings per share gives effect to all potential dilutive common shares outstanding during the period.
Going Concern
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has a limited operating history and limited funds and has an accumulated deficit of $1,692,564. These factors affect the Company’s ability to continue as a going concern.
In order to continue as a going concern and achieve a profitable level of operations, the Company will require additional cash infusions from the sale of equity and will seek to generate income from several avenues.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. The continuation as a going concern is dependent upon the ability of the Company to meet our obligations on a timely basis, and, ultimately to attain profitability.
Note 3 - Sulfatos Chile
Supplemental cash flows information
The following information presents supplemental cash flows information of assets acquired and liabilities assumed in connection with the Sulfatos Chile Acquisition:
Six Months Ended June 30, 2012 | ||||
Prepaid expenses | $ | 764,551 | ||
Property and equipment | 7,331,655 | |||
Accounts payable | (447,343 | ) | ||
Notes payable | (2,580,399 | ) | ||
$ | 5,068,464 | |||
Plus, cash acquired | 892,294 | |||
Total value of acquisition | $ | 5,960,758 | ||
Value of acquisition allocated to additional paid-in capital | $ | 2,696,455 | ||
Value of acquisition allocated to minority interest | $ | 3,264,303 |
On February 15, 2012, Bluestone purchased a 60% equity interest in Sulfatos Chile from Santa Teresa Minerals pursuant to the stock purchase agreement dated January 26, 2012, as amended. The interests in Sulfatos Chile were sold in exchange for (a) Santa Teresa Minerals receiving 2,000 shares of Common Stock of Bluestone, representing 20% of the outstanding capital stock of Bluestone at the time; and (b) $2.2 million, with $1.1 million paid by cancellation of a demand loan made to Santa Teresa Minerals by Angelique de Maison, a director of the Company, in January 2012, which loan had been assigned by Ms. de Maison to Bluestone, and the balance of $1.1 million to be paid in monthly installments from time to time upon demand by Santa Teresa Minerals. A total of $2,065,000 has been paid as of June 30, 2012 with $135,000 remaining as a note payable.
The transaction has been accounted for as a purchase. However, the purchase price has been allocated to additional paid-in capital and the assets and liabilities are carried over at historical costs since the purchase was between related parties. Results of operations for the acquired companies have been reflected in the Company's financial statements from the day the acquisition closed.
10 |
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of Acquisition. The allocation of the purchase price to the fair value of net assets acquired has been based on appraisals of the assets acquired:
At February 15, 2012 | ||||
Working Capital Items | ||||
Cash and cash equivalents | $ | 892,294 | ||
Prepaid expenses and other | 764,551 | |||
Accounts payable and accrued liabilities | (447,343 | ) | ||
Notes payable | (2,580,399 | ) | ||
Subtotal—Working Capital Items | 829,103 | |||
Long-lived Assets: | ||||
Property & Equipment | ||||
Land | 549,310 | |||
FFE and Equipment | 6,782,345 | |||
Subtotal—long-lived assets | 7,331,655 | |||
Total value of acquisition | $ | 5,960,758 | ||
Value of acquisition allocated to additional paid-in capital | $ | 2,696,455 | ||
Value of acquisition allocated to minority interest | $ | 3,264,303 |
In accordance with accounting principles generally accepted in the United States, the assets and liabilities acquired are carried over at their historical value because the transaction occurred between related parties.
Had the Acquisition taken place on January 1, 2012, results of operations would have reflected the following pro forma amounts for the six months ended June 30, 2012:
Three Months Ended June 30, 2012 | Six Months Ended June 30, 2012 | |||||||
Revenues | $ | 31,057 | $ | 51,942 | ||||
Operating income | 889,477 | 1,592,183 | ||||||
Net loss | $ | (85,420 | ) | $ | (1,540,241 | ) |
The principal differences between reported amounts and the pro forma amounts result from elimination of January’s operations since they were not part of the consolidated Company.
Note 4 - Bluestone SA Acquisition
The following information presents supplemental cash flows information of assets acquired and liabilities assumed in connection with the Bluestone SA merger :
Six Months Ended June 30, 2012 | ||||
Notes receivable | $ | 18,446 | ||
Inventories | 65,565 | |||
Prepaid expenses and other | 4,765 | |||
Property and equipment | 48,406 | |||
Accounts payable | (181,172 | ) | ||
Notes payable | (19,217 | ) | ||
$ | (63,207 | ) | ||
Plus, cash acquired | 38,572 | |||
Total reverse merger business combination Bluestone and Power-Save | $ | (24,635 | ) |
11 |
The following information presents supplemental cash flows information of assets given and liabilities released in connection with the Power Save Energy business disposal on March 9, 2012:
Six Months Ended June 30, 2012 | ||||
Notes receivable | $ | (18,446 | ) | |
Inventories | (65,565 | ) | ||
Prepaid expenses and other | (4,765 | ) | ||
Property and equipment | (48,406 | ) | ||
Accounts payable | 180,103 | |||
Notes payable | 19,217 | |||
$ | 62,138 | |||
Less, cash transferred in disposal | (20,642 | ) | ||
Total disposal of Power-Save business | $ | 41,496 |
On February 29, 2012, Power-Save Energy Company, a Utah corporation, entered into an agreement to acquire all of the capital stock of Bluestone S.A. On March 9, 2012, pursuant to a Share Exchange Agreement with Bluestone, S.A., a Chilean corporation, and the shareholders of Bluestone, S.A., the Company acquired 100% of the outstanding shares of Common Stock of Bluestone from Bluestone Shareholders. In exchange for the Bluestone Stock, the Company issued 60,000,000 shares of its Common Stock to the Bluestone Shareholders. As a result of closing the transaction, Bluestone Shareholders now hold approximately 96.7% of the Company’s issued and outstanding Common Stock. For accounting purposes, the Bluestone acquisition is treated as a reverse acquisition with Bluestone treated as the acquirer and the Company as the acquired party. As a result, the business and financial information included in the report is the business and financial information of Bluestone prior to March 9, 2012 and the combined entity after March 9, 2012. The Company will undergo a full valuation of the assets, liabilities, and contingencies acquired from Bluestone within the next twelve months, and will adjust any balances accordingly.
The Company’s current primary business is the operations of Bluestone. Bluestone is a pre-revenue exploration stage Chilean company with a 60% equity ownership of Sulfatos Chile. Sulfatos Chile owns the Anico Copper Mine and is building a copper sulfate production facility specializing in the production of the highest quality food-grade copper sulfate.
Note 5 - Fixed Assets
The Company acquired fixed assets with a fair value of $7,331,655 in the Bluestone acquisition in March 2012. See Note 4- Bluestone SA Acquisition. The fixed assets are being amortized over their remaining useful lives.
Note 6 - Debt
From November 2011 through February 2012, Angelique de Maison, a director of the Company, provided a total of $1.1m in working capital advances in the form of an unsecured demand loan with no interest and no set terms of repayment to Santa Teresa Minerals. In February 2012 these advances were assigned to Bluestone, of which Ms. de Maison is a major shareholder, and were applied to the purchase of Santa Teresa Minerals’ 60% equity interest in Sulfatos Chile by Bluestone in February 2012. After the acquisition of Bluestone by Lustros in March 2012, Lustros became responsible for repayment of this debt to Ms. de Maison. In April 2012 Ms. de Maison assigned her right to repayment of $1,000,000 of this loan to two third parties who agreed to apply this debt to the purchase of 5,000,000 shares of Common Stock. In June 2012 Ms. de Maison agreed to apply the remaining $100,000 balance due under the loan to the purchase of 181,818 shares of Common Stock.
From February through June 2012, Suprafin, Ltd. (“Suprafin”) provided a total of $1,316,393 in unsecured demand loans with no interest and no set terms of repayment which was applied to the purchase of Sulfatos Chile. Zirk Engelbrect, Chief Executive Officer and a director of the Company, is an officer of Suprafin, Ltd. In May 2012 Suprafin elected to apply $429,000 of these loans toward the purchase of 100,000 shares of Preferred Stock in the Company. In June 2012 $680,000 of these loans were repaid. $207,393 remained outstanding under these loans at June 30, 2012.
$135,000 remains due to Santa Teresa Minerals for the purchase of Sulfatos Chile as a note payable. See Note 3- Sulfatos Chile.
In April 2012 Sulfatos Chile borrowed 40,500,223 CLP or approximately $79,454 from Banco de Chile for working capital purposes. This is a 12 month loan due on March 31, 2013 at 13.43% interest with payments beginning on October 1, 2012. The balance due under this loan at June 30, 2012 is 41,438,863 CLP or approximately $81,296.
Sulfatos Chile currently owes 186,011,000 CLP or approximately $364,921 for the last payment of the land acquired in the first quarter of 2011.
12 |
The following table sets forth the consolidated indebtedness of the Company at the date indicated. Inter-company transactions have been eliminated in the consolidated balance sheets:
Description | Total Due at June 30, 2012 | |||
Suprafin, Ltd. | $ | 207,393 | ||
Santa Teresa Minerals | 135,000 | |||
Banco de Chile Loan | 81,296 | |||
Land Purchase Balance | 364,921 | |||
$ | 788,610 |
Note 7 - Stockholder’s Equity
The authorized capital stock of the Company is 100,000,000 shares of common stock with a $0.01 par value and 100,000,000 shares of preferred stock with a par value of $0.01 per share. At June 30, 2012, the Company had 69,674,608 shares of its common stock issued and outstanding.
On March 9, 2012, the Company issued 60,000,000 shares of its Common Stock to the Bluestone Shareholders in exchange for 100% of the outstanding stock of Bluestone SA. See Note 4.
In March 2012 an option was granted to both Zirk Engelbrecht, now our Chief Executive Officer, and Gonzalo Troncoso, now our President and Chief Operating Officer, to purchase shares of Preferred Stock at $4.29 per share. In May 2012 Mr. Engelbrecht exercised the option to purchase 100,000 shares of Preferred Stock and Mr. Troncoso exercised the option to purchase 75,000 shares of Preferred Stock. Preferred Stock is convertible to Common Stock at the rate of 100 shares of Common Stock for each share of Preferred Stock. The Company received $750,000 from the sale of these shares.
In April 2012, the Company sold 5,000,000 shares of its Common Stock in a private placement at $0.20 per share. The Company received net proceeds from the offering of $1,000,000.
In June 2012, the Company sold 1,818,182 shares of its Common Stock in a private placement at $0.55 per share. The Company received net proceeds from the offering of $1,000,000
Note 8 - Subsequent Events
In accordance with Accounting Standards Codification Topic No. 855 “Subsequent Events” (ASC 855), the Company has evaluated subsequent events through the time between the end of the reporting period and the time this Quarterly Report on Form 10-Q for the period ended June 30, 2012 was filed and has found the following events to report.
In July 2012 the Company sold 727,272 shares of its Common Stock in a private placement at $0.55 per share. The Company received net proceeds from the offering of $400,000.
In July and August 2012 the Company sold 352,941 shares of its Common Stock in a private placement at $0.85 per share. The Company received net proceeds from the offering of $300,000.
[End Notes to Financial Statements]
13 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
CORPORATE HISTORY
Power-Save Energy Company is the successor corporation of Mag Enterprises, Inc., a Utah corporation incorporated on July 30, 1980. On September 10, 1993, an Amendment to the Articles of Incorporation was filed to change the name from Mag Enterprises, Inc. to Safari Associates, Inc. On September 12, 2006, an Amendment to the Articles of Incorporation was filed to change the name from Safari Associates, Inc. to Power-Save Energy Company (the “Company”).
On February 29, 2012, Power-Save Energy Company, a Utah corporation, entered into an agreement to acquire all of the capital stock of Bluestone S.A. On March 9, 2012, pursuant to a Share Exchange Agreement (the “Share Exchange Agreement”) with Bluestone, S.A., a Chilean corporation (“BLUESTONE”), and the shareholders of BLUESTONE, S.A. (“BLUESTONE Shareholders’), the Company acquired 100% of the outstanding shares of Common Stock of Bluestone (the “Bluestone Stock”) from Bluestone Shareholders. In exchange for the Bluestone Stock, the Company issued 60,000,000 shares of its Common Stock to the Bluestone Shareholders. As a result of closing the transaction, Bluestone Shareholders now hold approximately 96.7% of the Company’s issued and outstanding Common Stock. For accounting purposes, the Bluestone acquisition is treated as a reverse acquisition with Bluestone treated as the acquirer and the Company as the acquired party. As a result, the business and financial information included in the report is the business and financial information of Bluestone prior to March 9, 2012 and the combined entity after March 9, 2012.
Through Bluestone SA we now have a majority interest in Sulfatos Chile. Our Sulfatos Chile subsidiary specializes in the production of the highest quality food-grade copper sulfate. Copper ore is processed in its copper sulfate processing plant in Puerto Oscuro, Chile. The ore is extracted from the Sulfatos Chile owned 1,325 hectare Anica copper mine or bought from local artisanal miners. Our copper sulfate facility is expected to begin processing 5,000 tons of material per month in August 2012. The current plant capacity of 15,000 tons per month will occur upon receiving permits for unlimited production which we expect to receive in April of 2013. Cash flow from this first phase is expected to begin in October of 2012 and will fund future expansion for an additional 25,000 ton processing plant.
NO COMPARABLE INFORMATION
There is no relevant comparable historic financial information for the current quarter ended June 30, 2012 and the six months ended June 30, 2011, as Bluestone SA’s operations did not begin until January 2012. Therefore, limited information is provided in our Results of Operations section below.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 2012
Revenue for the three and six months ended June 30, 2012 was $31,057 and $51,943, respectively for the sale of copper and copper sulfate. Gross profit for the three and six months ended June 30, 2012 was $31,057 and $51,943 respectively. We expect revenues to increase significantly after the full scale launch of our copper sulfate production facility in Q4 2012.
Operating expenses for the three and six months ended June 30, 2012 was $1,253,443 and $1,743,342, respectively. Operating expenses were primarily associated with the operations of Sulfatos Chile in the ordinary course of business as well as legal and accounting expenses required by a public company.
Due to the losses during the period the Company has not recorded a provision for income taxes. The Company will carry back any net operating loss to recover taxes paid in prior periods.
14 |
LIQUIDITY AND CAPITAL RESOURCES.
As of June 30, 2012 the current liabilities exceeded the current assets by $1,104,523. Cash for the period ended June 30, 2012 was $29,034 primarily from the sales of stock and intercompany loans.
Cash Requirements
During the next twelve months, the Company plans to satisfy its cash requirements by income from operations as well as additional equity financing and contributions from its current principal shareholders and other investors. The Company intends to undertake additional private placements of its securities in order to raise future development and operating capital. The Company depends upon capital to be derived from contributions from its principal shareholders and future financing activities such as subsequent offerings of its securities. There can be no assurance that the Company will be successful in raising the capital it requires through the sale of its securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act").
Based on this evaluation, our principal executive and principal financial and accounting officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of June 30, 2012.
Changes in Internal Control over Financial Reporting
On March 9, 2012 Trisha Malone was appointed as the Chief Financial Officer of the Company.
Louis Fox resigned as Chief Financial Officer. The resignation was not the result of any disagreement with us on any matter relating to our operations, policies or practices.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
15 |
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 18, 2011, 142 Cross Street, LLC filed a Complaint against the Company in San Luis Obispo Superior Court, seeking damages for breach of contract. The suit arises from a dispute surrounding a commercial real estate lease. This case was settled.
On September 21, 2011, Chris Frye filed a lawsuit against the Company in California Superior Court alleging, among other things, breach of contract surrounding the Company’s CBS Television solar project. Chris Frye also filed a cross-complaint in a New Mexico action filed by Uni-Rac involving similar subject matter. The Company vigorously denies all the allegations and insists the lawsuit is an attempt on Chris Frye’s part to evade paying an outstanding invoice owed to the Company. The California Suit has since been dismissed in its entirety and the cross-complaint in New Mexico has been dismissed as well. Chris Frye and Power-Save have joined forces to combat Uni-Rac in the New Mexico portion of the case, which is reduced to a dispute of less than $200,000 regarding the racking supplied in relation to the CBS project.1
Other than the foregoing, we know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.2
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
A. | During the Quarter |
Preferred Stock
In May 2012 Mr. Engelbrecht exercised the option to purchase 100,000 shares of Preferred Stock and Mr. Troncoso exercised the option to purchase 75,000 shares of Preferred Stock. The Company received $750,000 from the sale of these shares.
Common Stock
In April 2012 the Company sold 5,000,000 shares of its Common Stock in a private placement at $0.20 per share. The Company received net proceeds from the offering of $1,000,000.
In June 2012 the Company sold 1,818,182 shares of its Common Stock in a private placement at $0.55 per share. The Company received net proceeds from the offering of $1,000,000.
The shares of Common Stock of the Company issued pursuant to the Share Exchange Agreement were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. A copy of the Share Exchange Agreement is attached hereto and is hereby incorporated by this reference. All references to the Share Exchange Agreement and other exhibits to this Current Report are qualified, in their entirety, by the text of such exhibits.
B. | Subsequent Issuances |
In July 2012 the Company sold 727,272 shares of its Common Stock in a private placement at $0.55 per share. The Company received net proceeds from the offering of $400,000.
In July and August 2012 the Company sold 727,272 shares of its Common Stock in a private placement at $0.85 per share. The Company received net proceeds from the offering of $300,000.
__________________________
1 As of March 31, 2012, Power-Save Energy Company’s assets and liabilities were transferred to Michael Forster pursuant to a settlement Agreement. As such, the lawsuits listed above, although filed against the Company while it was operating as Power-Save Energy Company, are the sole responsibility of Michael Forster.
2 As of March 31, 2012, Power-Save Energy Company’s assets and liabilities were transferred to Michael Forster pursuant to a settlement Agreement. As such, the lawsuits listed above, although filed against the Company while it was operating as Power-Save Energy Company, are the sole responsibility of Michael Forster.
16 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
None.
ITEM 5. OTHER INFORMATION
Quarterly Events
On April 09, 2012 The Company announced its name change from Power-Save Company to Lustros, Inc. to better reflect the focus of the business in the mining sector.
On April 18, 2012, Gonzalo Troncoso resigned as Secretary of the Company. Mr. Troncoso retains his position as President. His resignation from the Secretary position is not the result of a disagreement with the Company.
On April 18, 2012, Trish Malone was appointed as Secretary of the Company. She holds this position in addition to being the current Chief Financial Officer of the Company.
On April 18, 2012 the Board of Directors approved the appointment of Gonzalo Troncoso as Chief Operating Officer.
On April 18, 2012 the Board of Directors approved the appointment of Larry A. Zielke as Senior Vice President and General Counsel.
On April 18, 2012 Gonzalo Troncoso was appointed as a member of the Board of Directors.
On April 18, 2012 Zirk Engelbrecht was appointed as a member of the Board of Directors.
On April 18, 2012 William H. Lavin was appointed as a member of the Board of Directors.
On April 18, 2012 Benjamin R. Dickey was appointed as a member of the Board of Directors.
On April 18, 2012 Trisha Malone was appointed as a member of the Board of Directors.
On May 24, 2012 Myoung Won Sohn was appointed as a member of the Board of Directors.
On June 22, 2012, Robert Dickey was elected to serve as an alternate director of the Company. Mr. Dickey's role as alternate director shall be to fill any future vacancies that may occur as the result of the absence or unavailability of any of the directors of the Company.
On June 28, 2012, we dismissed Gruber & Company, LLC as our independent auditor. This dismissal of Gruber & Company was approved by our board of directors (we have no audit committee).
Gruber & Company’s reports on our consolidated financial statements for each of our fiscal years ended December 31, 2011, December 31, 2010 and December 31, 2009 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that each of such reports contained a going concern qualification.
During the years ended December 31, 2011 and December 31, 2010 and the interim period between December 31, 2011 and June 28, 2012: (i) there were no disagreements between our company and Gruber & Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Gruber & Company’s satisfaction, would have caused Gruber & Company to make reference to the subject matter of the disagreement in connection with its report for such years; and (ii) Gruber & Company did not advise us of any of the events requiring reporting in this Current Report on Form 8-K under Item 304(a)(1)(v) of Regulation S-K.
We provided Gruber & Company with a copy of the disclosures made in this report before this report was filed with the Securities and Exchange Commission. We requested that Gruber & Company furnish a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements that are related to Gruber & Company.
17 |
On June 28, 2012, we engaged De Joya Griffith & Company, LLC (“De Joya Griffith”) to serve as our independent auditors for the fiscal year ending December 31, 2012. The engagement of De Joya Griffith was approved by our board of directors.
During the years ended December 31, 2011 and December 31, 2010 and the interim period between December 31, 2011 and June 28, 2012, neither we nor anyone acting on our behalf consulted De Joya Griffith regarding either (i) the application of accounting principles to a specific, completed or proposed transaction, or the type of audit opinion that might be rendered on our financial statements, or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
ITEM 6. EXHIBITS
Exhibit Number |
Description of Exhibit |
Filing | ||
10.01 | Share Exchange Agreement between Power-Save Energy and Bluestone SA and their Shareholders | Incorporated by reference as filed on Form 8-K on March 12, 2012. | ||
10.02 | Asset Purchase Agreement between Power-Save Energy Company/Lustros, Inc. and Michael Forster and SLO 3 Holdings, Inc. | Filed herewith. | ||
31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. | ||
31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. | ||
32.01 | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | ||
32.02 | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | ||
101.INS | XBRL Instance Document* | |||
101.SCH | XBRL Taxonomy Extension Schema* | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase* | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase* | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase* | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase* |
* Pursuant to Rule 405(a)(2) of Regulation S-T, the Company will furnish the XBRL Interactive Data Files with detailed footnote tagging as Exhibit 101 in an amendment to this Form 10-Q within the permitted 30-day grace period granted for the first quarterly period in which detailed footnote tagging is required.
18 |
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.
LUSTROS, INC. | |
Dated: August 20, 2012 | /s/ Zirk Engelbrecht |
By: Zirk Engelbrecht Its: Chief Executive Officer | |
Dated: August 20, 2012 | /s/ Trisha Malone |
By: Trisha Malone Its: Chief Financial Officer |
19