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 December 31, 2012

 

or

  

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______to______.

 

3Power Energy Group, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		333-103647		98-0393197
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employee Identification No.)

  

PO Box 50006

Sh. Rashid Building

Sh. Zayed Road

Dubai, United Arab Emirates

 (Address of principal executive office, Zip Code)

 

011 97 14 3210312

 (Registrant’s telephone number, including area code)

 

Not Applicable.

 

(Former name, former address and former fiscal year, if changed since last report)

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x  No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 ¨ (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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity: As of February 13, 2013, 113,096,380 ordinary shares, par value $0.0001 per share are issued and outstanding.

 

 

3POWER ENERGY GROUP, INC.

 

QUARTERLY REPORT ON FORM 10-Q

December 31, 2012

 

TABLE OF CONTENTS

 

			PAGE
PART I: FINANCIAL INFORMATION			4
Item 1:	Financial Statements		4
	Condensed Consolidated Balance Sheets as of December 31, 2012 (unaudited) and March 31, 2012		4
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2012 and 2011		5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2012 and 2011		6
	Notes to the Unaudited Condensed Consolidated Financial Statements		7
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operation		14
Item 3:	Quantitative and Qualitative Disclosures about Market Risk		17
Item 4:	Controls and Procedures		18
PART II: OTHER INFORMATION			18
Item 1:	Legal Proceedings		18
Item 1A:	Risk Factors		18
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds		18
Item 3:	Defaults Upon Senior Securities		18
Item 4:	Mine Safety Disclosures		18
Item 5:	Other Information		19
Item 6:	Exhibits		19
SIGNATURES			20

  

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in forward-looking statements made in this Quarterly Report on Form 10-Q (this “Report”) and in other reports and documents published by us from time to time. Any statements about our beliefs, plans, objectives, expectations, assumptions, future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intend,” “plan,” “projection,” “outlook” and the like, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned to carefully read all “Risk Factors” set forth under Item 1A and not to place undue reliance on any forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act. New factors emerge from time to time, and it is not possible for us to predict which will arise or to assess with any precision the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

Unless otherwise provided in this Report, references to the “Company,” the “Registrant,” the “Issuer,” “we,” “us,” and “our” refer to 3Power Energy Group Inc. and its subsidiaries (formerly known as Prime Sun Power Inc.).

 

 

PART I                   FINANCIAL INFORMATION

 

3POWER ENERGY GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		December 31,				March 31,
		2012				2012
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	1,725			$	6,368
Accounts receivable							2,151
Prepaid and other current assets			13,048				40,473
Total current assets			14,773				48,992
Other assets:
Investments			811,972				-
Total assets		$	826,745			$	48,992
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable and accrued expenses		$	6,321,434			$	5,170,413
Accrued interest payable			352,003				254,878
Notes payable			639,059				639,059
Due to related parties			1,219,560				401,925
Total current liabilities			8,532,056				6,466,275
Commitments and contingencies
Deficit
Common stock,$0.0001 par value, 300,000,000 shares authorized, 113,096,380 and 113,036,248 shares issued and outstanding as of December 31, 2012 and March 31, 2012, respectively			11,309				11,303
Additional paid in capital			7,303,222				7,283,228
Other comprehensive loss			(115,331	)			(90,307	)
Accumulated deficit			(14,905,119	)			(13,622,115	)
Total deficit attributable to 3Power Energy Group, Inc.			(7,705,919	)			(6,417,891	)
Non controlling interest			608				608
Total deficit			(7,705,311	)			(6,417,283	)
Total liabilities and deficit		$	826,745			$	48,992

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

 

3POWER ENERGY GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Three months ended December 31,								Nine months ended December 31,
		2012				2011				2012				2011
Sales		$	-			$	-			$	-			$	491,092
Cost of sales			-				-				-				654,756
Gross (loss) profit			-				-				-				(163,664	)
Operating expenses:
Selling, general and administrative			327,585				817,312				1,207,464				2,278,759
Loss on write-off of assets of international subsidiaries			17,917				-				17,917				-
Depreciation			-				-				-				286
Total operating expenses			345,502				817,312				1,225,381				2,279,045
Loss from operations			(345,502	)			(817,312	)			(1,225,381	)			(2,442,709	)
Other income (expense):
Interest expense			(33,740	)			(47,481	)			(97,623	)			(65,727	)
Gain on settlement of accrual			-				-				40,000				-
Net loss before income taxes			(379,242	)			(864,793	)			(1,283,004	)			(2,508,436	)
Provision for income taxes			-				-				-				-
Net loss			(379,242	)			(864,793	)			(1,283,004	)			(2,508,436	)
Non controlling interest			-				-				-				-
NET LOSS ATTRIBUTABLE TO 3POWER ENERGY GROUP, INC.		$	(379,242	)		$	(864,793	)		$	(1,283,004	)		$	(2,508,436	)
Loss per common share (basic and diluted):		$	(0.00	)		$	(0.01	)		$	(0.01	)		$	(0.02	)
Weighted average number of shares outstanding (basic and diluted)			113,096,380				113,036,248				113,084,354				113,036,248
Comprehensive loss:
Net loss		$	(379,242	)		$	(864,793	)		$	(1,283,004	)		$	(2,508,436	)
Foreign currency translation (loss) gain			-				-				(25,024	)			56,805
Comprehensive loss:			(379,242	)			(864,793	)			(1,308,029	)			(2,451,631	)
Comprehensive loss attributable to non controlling interest			-				-				-				-
Comprehensive loss attributable to 3Power Energy Group, Inc.		$	(379,242	)		$	(864,793	)		$	(1,308,029	)		$	(2,451,631	)

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

 

3POWER ENERGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

		Nine months ended December 31,
		2012				2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,283,004	)		$	(2,508,436	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			-				286
Common stock issued for services rendered			20,000				880,000
Gain on settlement accrual			(40,000	)			-
Loss on write-off of assets of international subsidiary			17,917				-
Changes in operating assets and liabilities:
Accounts receivable			2,151				32,310
Inventory			-				131,848
Prepaid and other current assets			9,508				69,006
Accounts payable and accrued expenses			591,021				815,131
Accrued interest			97,125				53,342
Net cash used in operating activities:			(585,282	)			(526,513	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			-				(273	)
Investment in Shala Energy			(211,972	)			-
Net cash used in investing activities			(211,972	)			(273	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from related party advances			817,635				525,620
Net cash provided by financing activities			817,635				525,620
Effect of foreign currency rate change on cash			(25,024	)			35,484
Net (decrease) increase in cash and cash equivalents			(4,643	)			34,318
Cash and cash equivalents-beginning of period			6,368				12,734
Cash and cash equivalents-end of period		$	1,725			$	47,052
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	-			$	-
Income taxes		$	-			$	-
Non cash investing and financing activities:
Stock issued for acquisition of project development rights		$	-			$	3,332,100

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

 

3POWER ENERGY GROUP, INC.

NOTE TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 1 –BUSINESS AND RECAPITALIZATION

 

3Power Energy Group Inc. (the “Company”) was incorporated in the State of Nevada on December 18, 2002.  On March 30, 2011, the Company changed its name from Prime Sun Power Inc. to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000 shares.  The Company plans to pursue a business model producing renewable generated electrical power and other alternative energies.

 

The Company's primary efforts is to sell electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate power plants based on these technologies. The core approach of the Company's business is to deliver energy in markets where there is an inherent energy gap between supply and demand or where there exists long term, stable, government back by financial support for development of renewable energy.

 

On May 13, 2011, pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), the Company consummated a reverse merger (“Merger”) with Seawind Energy Limited (“Seawind Energy”), Seawind Services Limited (“Seawind Services,” and together with Seawind Energy, the “Seawind”) and the shareholders of Seawind Energy (the “Seawind Group Shareholders” and together with the Company, and the Seawind Companies, the “Parties”). The Seawind Companies were formed under the laws of the United Kingdom.

 

In connection with the Merger, the Company issued 40,000,000 restricted shares of the Company’s common stock (such acquisition is referred to herein as the “Seawind Acquisition”). The Seawind was the surviving entity.

 

Upon completion of the Stock Purchase Agreement, Seawind became 3Power Energy Group, Inc.'s wholly-owned subsidiary. For accounting purposes, the acquisition has been treated as a recapitalization of Seawind with Seawind as the acquirer (reverse acquisition). The historical financial statements prior to May 13, 2011 are those of Seawind Energy. The Merger was accounted for as a “reverse merger”, since the stockholders of Seawind owned a majority of the Company’s common stock immediately following the transaction and their management has assumed operational, management and governance control.

 

The transaction was accounted for as a recapitalization of Seawind pursuant to which Seawind was treated as the surviving and continuing entity.  The Company did not recognize goodwill or any intangible assets in connection with this transaction.  Accordingly, the Company’s historical financial statements are those of Seawind immediately following the consummation of the reverse merger. The accompanying unaudited condensed consolidated financial statements give retroactive effect to the recapitalization.

 

In anticipation of the closing of the Stock Purchase Agreement, the Company changed its name to 3Power Energy Group, Inc. and increased its authorized share capital to 300,000,000 shares.

 

On July 4, 2011, the Seawind Energy Limited and Seawind Service Limited changed their name to 3Power Energy Limited and 3Power Project Service Limited, respectively.

 

On October 8, 2012, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of 3Power Project Services Limited, a wholly owned subsidiary of the Company’s Subsidiary, 3Power Energy Limited.

 

By the letter of The Insolvency Service dated October 12, 2012, the Company was required to provide information relating to 3Power Project Services Limited to the Official Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official Receiver’s Office to review the prospect of recovering the assets of 3Power Project Services Limited for the benefit of creditors.

 

 

3POWER ENERGY GROUP, INC.

NOTE TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

The company was also required to deliver to the Official Receiver’s Office certain assets (cash or cheques) and accounting records that are still in its possession or control. The Company has attended the interview and delivered all the available accounting records to the Officer Receiver’s Office. No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing.

 

The major classes of assets and liabilities of the subsidiary are as follows:

 

Current assets		$	17,143
Current liabilities		$	1,781,956

 

On January 17, 2013, subsequent to these financial statements, the Company filed a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy Limited, a wholly owned subsidiary of the Company with assets and liabilities as below:

 

Current assets		$	774
Current liabilities		$	188,189

 

During the nine months ended December 31, 2012, the Company charged to operation £11,085 ($17,917) as loss on write-off of above assets of its international subsidiaries.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

Interim Financial Statements

 

The following (a) condensed consolidated balance sheet as of March 31, 2012, which has been derived from audited consolidated financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended December 31, 2012 are not necessarily indicative of results that may be expected for the year ending March 31, 2013. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended March 31, 2012 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on July 16, 2012.

 

Basis of presentation:

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

 

 

3POWER ENERGY GROUP, INC.

NOTE TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.

 

Use of estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

 

Comprehensive Income (Loss)

 

The Company applies Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.

 

Per share data:

 

Basic and diluted net loss per common share is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect to the exchange ratio in the Share Exchange in May 2011 (see Note 1), which was accounted for as recapitalization of the Company.

 

Functional currency

 

The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars ("USD"). The Company's functional currency is British pounds ("GBP"). The unaudited condensed consolidated financial statements are translated into USD in accordance with Codification ASC 830, Foreign Currency Matters. All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, shareholders' equity is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting periods. The resulting translation adjustments are reported as other comprehensive income and accumulated other comprehensive income in the shareholders' equity in accordance with Codification ASC 220, Comprehensive Income.

 

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into GBP at the rate on the date of the transaction and included in the results of operations as incurred. There were no material transaction gains or losses in the periods presented.

 

The exchange rates used to translate amounts in GBP into USD for the purposes of preparing the consolidated financial statements were as follows:

 

 

3POWER ENERGY GROUP, INC.

NOTE TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

		December 31, 2012				March 31, 2012
Period-end GBP: USD exchange rate		$	1.6153			$	1.5987
Average Period GBP: USD exchange rate		$	1.5790			$	1.5963

 

Income taxes

 

Income tax provisions or benefits for interim periods are computed based on the Company’s estimated annual effective tax rate. Based on the Company's historical losses and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is not more likely than not that deferred tax assets will be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates or anticipated that its net deferred tax assets at December 31, 2012 and March 31, 2012 would be fully offset by a valuation allowance, there is no federal or state income tax benefit for the three and nine months ended December 31, 2012 and 2011 related to losses incurred during such periods.

 

Accounting for Stock-Based Compensation

 

The Company accounts for stock, stock options and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Therefore, results include non-cash compensation expense as a result of the issuance of stock, stock options and warrants and we expect to record additional non-cash compensation expense in the future.

 

The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non employees be recognized in the income statement based on their fair values.

 

Reclassification

 

Certain reclassifications have been made to prior periods' data to conform to the current period's presentation. These reclassifications had no effect on reported income or losses.

 

Recent Accounting Pronouncements

 

There were various updates recently issued by the Financial Accounting Standards Board, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

 

NOTE 3 - GOING CONCERN MATTERS

 

The accompanying unaudited condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern.  As of December 31, 2012, the Company has a deficit of $14,905,119 applicable to controlling interest compared with deficit of $13,622,115 applicable to controlling interest as of March 31, 2012, and has incurred significant operating losses and negative cash flows. For the nine months ended December 31, 2012, the Company sustained a net loss of $1,283,004 compared to a net loss of $2,508,436 for the nine months ended December 31, 2011. The Company will need additional financing which may take the form of equity or debt and the Company has converted certain liabilities into equity.

 

 

3POWER ENERGY GROUP, INC.

NOTE TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

The Company has undertaken further steps as part of a plan to improve operations with the goal of sustaining its operations for the next twelve months and beyond to address its lack of liquidity by raising additional funds, either in the form of debt or equity or some combination thereof.  However, there can be no assurance that the Company can successfully accomplish these steps and or business plans, and it is uncertain that the Company will achieve a profitable level of operations and be able to obtain additional financing.

 

In the event the Company is not able to increase its working capital, the Company will not be able to implement or may be required to delay all or part of its business plan, and their ability to attain profitable operations, generate positive cash flows from operating and investing activities and materially expand the business will be materially adversely affected. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the company be unable to continue in existence.

 

NOTE 4 - NOTE PAYABLE

 

On March 2, 2010, the Company issued an unsecured Senior Promissory Note ("Note") for 470,000 Euros ($639,059 at December 31, 2012) initially due on December 31, 2010 including interest at 7.5% per annum. Upon default by the Company on January 1, 2011, the interest rate of 15% per annum applies on a cumulative basis. CRG has made a demand for payment of the Note which has not been paid by the Company.

 

NOTE 5- FACILITATION AGREEMENT

 

The Company paid Viewpoint Investments Corp. (“Viewpoint”) a $1,000,000 fee during the year ended March 31, 2012 in Company’s Common Stock upon the closing of the acquisition of the Seawind Companies (the “Facilitation Agreement”).  Pursuant to the Facilitation Agreement, the Company during the year ended March 31, 2012, issued 19,607,843 restricted shares of the Company’s common stock to Viewpoint in consideration for services rendered to the Company. Viewpoint assisted and advised the Company with respect to identifying, negotiating and closing the transaction with the Seawind Group of Companies.  The consideration paid to Viewpoint by the Company was deemed to be fair and reasonable by Company’s Board of Directors with respect to the creation and enhancement of share value for all shareholders responsive to the acquisition of Seawind Energy and Seawind Services due to the efforts of Viewpoint.  The number of shares issued to Viewpoint was calculated by reference to 85% of the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.

 

NOTE 6- POWER ACQUISITION AGREEMENT

 

On May 5, 2011, Company entered into an agreement with Power Andina Limited (“PAL”), as agreed being the owner of the project will accept $2,000,000 worth of Company’s common stock on signing of the agreement and will in return, grant the Company an exclusive option to acquire the complete rights to the project by paying $1,750,000. In the event that the Company fails to make payment within twenty days period PAL shall at its sole discretion have the immediate right to terminate the agreement. The Company issued the shares (valued at $3.3 million) but was in default of paying $1,750,000. Since the Company breached its agreement with PAL, the Company has charged the cost of the option to acquire the complete rights to operations during the year ended March 31, 2012. In addition being default on the agreement, Company also accrued termination penalty of $500,000 as an additional charge to operations during the year ended March 31, 2012.

 

 

3POWER ENERGY GROUP, INC.

NOTE TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 7- ACQUISITION OF SHALA ENERGY SH.P.K

 

On June 5, 2012, the Company and Shala Energy sh.p.k ("Shala") executed a master acquisition agreement (the “Acquisition Agreement”) where Shala agreed to transfer and the Company agreed to acquire 75% of the equity of Shala. Under the Acquisition Agreement (the “Acquisition”), the closing of the acquisition is subject to the Company’s completion and satisfaction of the due diligence on Shala and Shala’s partners with respect to their shares in Shala and upon the Company’s payment of the first year premium for the insurance bond premium issued in favor of the Ministry of Economy, Trade and Energy of Republic of Albania in replacement of then existing bank guarantee issued in favor of Ministry of Economy, Trade and Energy of Republic of Albania for the Shala River Concession Agreement, in amount of 7,230,315 Euro (the “Required Insurance Bond Premium”). The Acquisition Agreement provides that the closing of the acquisition shall occur no later than June 15, 2012.

 

In late July 2012, the Company and Shala verbally agreed to extend the closing deadline for the acquisition under the Acquisition Agreement to August 10, 2012.

 

On August 10, 2012, after the conclusion of the due diligence efforts, the Company made the first year payment of required Insurance Bond Premium in amount of 164,851 Euro ($211,972), and as such the Acquisition closed. Such acquisition brought the Company 75% of the interest in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania.  The Shala River Project finalization is in process with the Ministry of Albania.

 

Shala Energy being an inactive Company and having no material assets and liabilities as of December 31, 2012.

 

In connection the acquisition of Shala, the Company is obligated for an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's common stock. As of December 31, 2012, the Company accrued $600,000 due to the facilitator for feasibility studies in process and recorded as other assets on the Company's unaudited condensed consolidated balance sheet.

 

NOTE 8 - COMMON STOCK

 

The Company is authorized to issue 300,000,000 shares of $0.0001 par value common stock. As of December 31, 2012 and March 31, 2012, 113,096,380 and 113,036,248 shares were issued and outstanding, respectively.

 

In May 2012, the Company issued 60,132 shares of its common stock in exchange for services rendered valued at $20,000 and charged to operations.

 

NOTE 9 - RELATED PARTY TRANSACTIONS

 

The Company’s current and former officers and stockholders have advanced funds on a non-interest bearing basis to the Company for travel related and working capital purposes. The Company has not entered into any agreement on the repayment terms for these advances. As of December 31, 2012 and March 31, 2012, there were $1,219,560 and $401,925 advances outstanding, respectively.

 

The Company has consulting agreements with outside contractors, certain of whom are also company stockholders. The agreements are generally month to month.

 

As of December 31, 2012 and March 31, 2012 the Company owed approximately £117,918 ($190,603) and £117,865 ($188,431), respectively, to Seawind Marine Limited, a company controlled by the directors, Mr. T P G Adams and Mr. J R Wilson.

 

 

3POWER ENERGY GROUP, INC.

NOTE TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

As of December 31, 2012 and March 31, 2012 the Company owed approximately £177,548 ($286,988) and £158,407 ($253,245), respectively to Seawind International Limited, a company controlled by the directors, Mr. T P G Adams and Mr. J R Wilson.

 

As of December 31, 2012 and March 31, 2012 the Company owed approximately £88,753 ($143,460) and £88,753 ($141,889), respectively to Power Products Ltd (f/k/a Enerserve Limited), a company under the control of Mr. T P G Adams and Mr. J R Wilson.

 

At December 31, 2012 and March 31, 2012, the company owed Mr. J R Wilson (Director) £1,144 ($1,849) and £1,144 ($1,829), respectively.

 

During the nine months ended December 31, 2012, the Company charged to operation $405,000 as salary to Board members of parent company.

 

During the nine months ended December 31, 2012, the Company charged to operation £184,248 ($290,725) as management charges to Board members of subsidiaries.

 

During the nine months ended December 31, 2012, the Company charged to operation £11,085 ($17,917) as loss on write-off of assets of its international subsidiaries.

 

NOTE 10 - NON CONTROLLING INTEREST

 

The Company has a 50% interest in American Seawind Energy LLC, a inactive company registered in the State of Texas, United States of America.

 

A reconciliation of the non controlling loss attributable to the Company:

 

Net loss Attributable to the Company and transfers (to) from non-controlling interest for the three and nine months ended December 31, 2012:

 

Net loss		$	-
Average Non-controlling interest percentage			50.0	%
Net loss attributable to the non-controlling interest		$	-

 

The following table summarizes the changes in Non Controlling Interest from April 1, 2011 through December 31, 2012:

 

Balance, April 1, 2011		$	608
Non controlling interest portion of contributed capital			-
Net loss attributable to the non-controlling interest			-
Balance, March 31, 2012			608
Net loss attributable to the non-controlling interest			-
Balance,  December 31, 2012		$	608

 

NOTE 11 - SUBSEQUENT EVENTS

 

On January 17, 2013, subsequent to these financial statements, the Company filed a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy Limited, a wholly owned subsidiary of the Company with assets and liabilities as below:

 

Current assets		$	774
Current liabilities		$	188,189

 

During the nine months ended December 31, 2012, the Company charged to operation $774 as loss on write-off of above assets of its international subsidiary.

 

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

 

Overview

 

We were formed on December 18, 2002 as a Nevada “C” Corporation as ATM Financial Corp.  On November 10, 2006, our President and Chief Executive officer resigned to pursue other interests. We suspended all prior business plans as of that date. During the first quarter of the year ended December 31, 2008, we began considering a new business model involving solar power and other renewable energies.  On April 1, 2008, we changed our name from “ATM Financial Corp.” to “Prime Sun Power Inc.”  On April 15, 2008, we changed our stock symbol from “AFIC” to “PSPW.” On March 30, 2011, we changed our name to 3Power Energy Group Inc.

 

Our principle business is to sell electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate power plants based on these technologies. The core approach of our business is to deliver energy in markets where there is an inherent energy gap between supply and demand or where there exists long term, stable, government backed financial support for the development of renewable energy. Our strategic plan is to develop power plants and sell electricity in mature and emerging international energy markets at secure rates with the highest profit margins.

 

As of December 31, 2012, we have only one project, a 19.5 mega watt (“MW”) Chilean wind farm project, and the commercialization of this project is in its infancy. Our intended markets may not utilize our producible products, and it may not be commercially successful. We intend to develop additional projects but none have proven to be commercially viable or successful.

 

As of December 31, 2012, the Company has a deficit of $14,905,119 applicable to controlling interest compared with deficit of $13,622,115 applicable to controlling interest as of March 31, 2012, and has incurred significant operating losses and negative cash flows. For the nine months ended December 31, 2012, the Company sustained a net loss of $1,283,004 compared to a net loss of $2,508,436 for the nine months ended December 31, 2011. The Company will need additional financing which may take the form of equity or debt and the Company has converted certain liabilities into equity.

 

The Company has undertaken further steps as part of a plan to improve operations with the goal of sustaining its operations for the next twelve months and beyond to address its lack of liquidity by raising additional funds, either in the form of debt or equity or some combination thereof.  However, there can be no assurance that the Company can successfully accomplish these steps and or business plans, and it is uncertain that the Company will achieve a profitable level of operations and be able to obtain additional financing.

 

In the event the Company is not able to increase its working capital, the Company will not be able to implement or may be required to delay all or part of its business plan, and their ability to attain profitable operations, generate positive cash flows from operating and investing activities and materially expand the business will be materially adversely affected.

 

Recent Developments

 

Acquisition of Shala

 

On August 10, 2012, we closed the acquisition of 75% of the equity of Shala Energy sh.p.k. Such acquisition brought the Company 75% of the interest in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania.

 

In connection the acquisition of Shala, the Company is obligated for an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's common stock. As of December 31, 2012, the Company accrued $600,000 due to the facilitator for feasibility studies in process and recorded as other assets on the Company's unaudited condensed consolidated balance sheet.

 

3Power Project Services Limited Liquidation

 

On October 8, 2012, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of 3Power Project Services Limited, a wholly owned subsidiary of the Company’s Subsidiary, 3Power Energy Limited.

 

By the letter of The Insolvency Service dated October 12, 2012, the Company was required to provide information relating to 3Power Project Services Limited to the Official Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official Receiver’s Office to review the prospect of recovering the assets of 3Power Project Services Limited for the benefit of creditors.

 

The company was also required to deliver to the Official Receiver’s Office certain assets (cash or cheques) and accounting records that are still in its possession or control. The Company has attended the interview and delivered all the available accounting records to the Officer Receiver’s Office. No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing. 

 

 

3Power Energy Limited Dissolution

 

On January 17, 2013, the Company filed a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy Limited, a wholly owned subsidiary of the Company. Such Strike off application has yet to be approved as of this Report.  

 

Results of Operations For The Three Months Ended December 31, 2012 And 2011

 

We have revenues from operations in the amount of $Nil for the three months ended December 31, 2012 and December 31, 2011. In 2011, we had ceased operations in our operating subsidiary.

 

We incurred operating expenses of $1,225,381 for the nine months ended December 31, 2012 compared to $2,279,045 for the nine months ended December 31, 2011. This decrease was mostly attributable to reductions in staffing and operating costs in the current period as compared to the same period prior year and a facilitation fee expense of $1,000,000 incurred by the company in 2011. There were only expenses incurred in the current period as the process of finalizing projects for execution. In addition, during the nine months ended December 31, 2012, the Company wrote off $17,917 of assets from liquidating its subsidiary as compared to Nil for the previous year.

 

Our interest expense was $33,740 for the three months ended December 31, 2012 as compared to $47,481 for the same period last year. The decrease of $13,741 or 29% is due primarily to less interest bearing note obligations.

 

Results of Operations For The Nine Months Ended December 31, 2012 And 2011

 

We have revenues from operations in the amount of $Nil for the nine months ended December 31, 2012, as compared to revenues of $491,092 for the nine months ended December 31, 2011. In 2011, we had ceased operations in our operating subsidiary.

 

We incurred operating expenses of $1,225,381 for the nine months ended December 31, 2012 compared to $2,279,045 for the nine months ended December 31, 2011. This decrease was mostly attributable to reductions in staffing and operating costs in the current period as compared to the same period prior year and a facilitation fee expense of $1,000,000 incurred by the company in 2011 and there were only expenses incurred in the current period as the process of finalizing projects for execution. In addition, during the nine months ended December 31, 2012, the Company wrote off $17,917 of assets from liquidating its subsidiary as compared to Nil for the previous year.

 

Our interest expense was $97,623 for the nine months ended December 31, 2012 as compared to $65,727 for the same period last year. The increase of $31,896 or 49% is due primarily to more interest bearing note obligations compared to last year.

 

During the nine months ended December 31, 2012, we realized a gain on settlement of an outstanding accrual of $40,000 compared to nil for the same period, last year.

 

Net cash used in operating activities was $585,282 for the nine months ended December 31, 2012 compared to net cash used in operating activities of $526,513 for the nine months ended December 31, 2011. The negative cash flow from operating activities consists of $1,283,004 net loss, net with common stock issued for services of $20,000, loss on write-off of assets of international subsidiaries of $17,917, decrease in accounts receivable others of $2,151, decrease in prepaid and other current assets of $27,425, increase in accounts payable and accrued expenses of $591,021and increase in accrued interest of $97,125, net with a gain on settlement of accrual of $40,000.

 

Net cash used in investing activities was $211,972 for the nine months ended December 31, 2012 compared to net cash used in investing activities of $273 for the nine months ended December 31, 2011. The net cash used in the current period was payments for investment activity.

 

Net cash provided by financing activities was $817,635 for the nine months ended December 31, 2012 compared to net cash provided by financing activities of $525,620 for the nine months ended December 31, 2011. The increase in cash provided by financing activities was due to more loans received from shareholders and related parties.

 

 

Liquidity and Capital Resources

 

Our total cash and cash equivalents as of December 31, 2012 was $1,725 compared to the total cash and cash equivalents of $6,368 as of March 31, 2012.

 

As of December 31, 2012, our total assets were $826,745 compared to total assets $48,992 as of March 31, 2012 and the total current liabilities were $8,532,056 as of December 31, 2012 compared to $6,466,275 as of March 31, 2012. Increase in assets is due to the 4% total project cost of $600,000 and the Insurance Bond Premium of 164,851 Euro ($211,972) as a part of Master Acquisition Agreement with Shala Energy and the increase in liabilities is due to the debts/expenses paid by related party Falak Holding and accrued project cost of $600,000.

 

Our pre-operational activities to date have consumed substantial amounts of cash. Our negative cash flow from operations is expected to continue and accelerate in the foreseeable future as the Company invests in capital expenditures to commence operations.

 

We will need to raise additional capital to implement our new business plan and continue operations for any length of time. We are seeking alternative sources of financing, through private placement of securities and loans from our shareholders in order for us to maintain our operations. We cannot guarantee that we will be successful in raising additional cash resources for our operations.

 

The independent registered public accounting firm’s report on our March 31, 2012 consolidated financial statements included in our Form 10-K states that our difficulty in generating sufficient cash flow to meet our obligations and sustain operations raise substantial doubts about the our ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified several accounting principles that we believe are key to the understanding of our financial statements. These important accounting policies require management’s most difficult, subjective judgments.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

 

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.

 

 

Foreign Currency Translation and Transactions

 

The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars (“USD”). The functional currency of our subsidiaries is British pounds (“GBP”). The financial statements of subsidiaries are translated into USD in accordance with the Codification ASC 830, “Foreign Currency Matters”.  All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, shareholders’ equity is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting periods.  The resulting translation adjustments are reported as other comprehensive income and accumulated other comprehensive income in shareholders’ equity in accordance with the Codification ASC 220, “Comprehensive Income.”

 

Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into GBP at the rate on the date of the transaction and included in the results of operations as incurred.  There were no material transaction gains or losses in the periods presented.

 

Income taxes

 

Income tax provisions or benefits for interim periods are computed based on the Company’s estimated annual effective tax rate. Based on the Company's historical losses and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is not more likely than not that deferred tax assets will be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates or anticipated that its net deferred tax assets at December 31, 2012 and March 31, 2012 would be fully offset by a valuation allowance, there is no federal or state income tax benefit for the three and nine months ended December 31, 2012 and 2011 related to losses incurred during such periods.

 

Accounting for Stock-Based Compensation

 

We account for stock, stock options and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Therefore, our results include non-cash compensation expense as a result of the issuance of stock, stock options and warrants and we expect to record additional non-cash compensation expense in the future.

 

We follow Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non employees be recognized in the income statement based on their fair values.

 

Off Balance Sheet Transactions

 

We do not have any off-balance sheet transactions.

 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

 

Smaller reporting companies are not required to provide the information required by this item.

 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934 (the “Exchange Act”). In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our disclosure controls and procedures regarding a lack of adequate personnel and adequate segregation of duties.  Based on their evaluation of our disclosure controls and procedures as of December 31, 2012, our Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, our disclosure controls and procedures were not effective for the material weakness due to a lack of adequate personnel and adequate segregation of duties.

 

Our bookkeeping and accounting functions are overseen by a single individual who serves as our consultant, which prevents us from instituting supervision and segregating duties within our disclosure control system. The inadequate staffing and lack of segregation of duties could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. We intend to take steps to remediate such procedures as soon as reasonably possible.

 

Changes in Internal Control over Financial Reporting

 

No changes were made to our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Except as described in the sections entitled “3Power Project Services Limited Liquidation” and “3Power Energy Limited” under Recent Developments of Item 2 above, there is no material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of our property is the subject.

 

Item 1A. Risk Factors

 

Smaller reporting companies are not required to provide the information required by this item.

 

Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

On January 1, 2011, the Company defaulted on the repayment of an unsecured senior promissory note issued to CRG on March 2, 2010 (the “Note”). The Note was due on December 31, 2010 for a principal amount of 470,000 Euros with interest at 7.5% per annum. Upon default by the Company, the interest rate of 15% per annum applies on a cumulative basis. CRG has made a demand for payment of the Note which has not been paid by the Company as of the filing of this Report.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits.

 

(a)  Exhibits

 

Exhibit Number		Description
31.1*		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+		Certification of Principal Executive officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document.

 

* Filed with this report.

+ In accordance with the SEC Release 33-8238, deemed being furnished and not filed.

** Furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise not subject to liability under these sections.

 

 

SIGNATURES

 

 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	3POWER ENERGY GROUP INC.
Dated:  February 14, 2013	By:	/s/ Umamaheswaran Balasubramaniam
		Name:	Umamaheswaran Balasubramaniam
		Title:	Chief Executive Officer
			(Duly Authorized Officer and Principal Executive Officer )
Dated:  February 14, 2013	By:	/s/ Shariff Rehman
		Name:	Shariff Rehman
		Title:	Chief Financial Officer
			(Duly Authorized Officer and Principal
			Financial and Chief Accounting