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 June 30, 2014

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

Commission File Number: 333-91190

P2 SOLAR, INC.

 (Exact name of registrant as specified in its charter)

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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [ X ] Yes   [ ] No

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

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). [ ]Yes

[ X ] No

As of August 19, 2014 the Issuer had 67,338,179 shares of common stock issued and outstanding.

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PART I-FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

The financial statements of P2 Solar, Inc., a Delaware corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company in the Company's Form 10-K for the fiscal year ended March 31, 2014 and all amendments thereto.

P2 SOLAR, INC.

(A DEVELOPMENT STAGE COMPANY)

INTERIM FINANCIAL STATEMENTS

PERIOD ENDED JUNE 30, 2014

2

P2 SOLAR INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollars)

(Unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

3

P2 SOLAR INC.

INTERIM  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S. dollars)

(Unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

4

P2 SOLAR INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER EQUITY (DEFICIENCY)

(Expressed in U.S. dollars)

(Unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

5

P2 SOLAR INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars)

(Unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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P2 SOLAR INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars)

(Unaudited)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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P2 SOLAR INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. dollars)

(Unaudited)

THREE MONTHS ENDED JUNE 30, 2014

1.

BASIS OF PRESENTATION, NATURE OF OPERATIONS AND GOING CONCERN

The Company was incorporated as Spectrum Trading Inc. under the laws of the Province of British Columbia, Canada, on November 21, 1990. On May 14, 1999, the Company was discontinued in British Columbia and was reincorporated as Spectrum International Inc. in the State of Delaware, U.S.A. Effective September 3, 2004, the Company changed its name from Spectrum International Inc. to Natco International Inc. On March 11, 2009, the Company changed its name from Natco International Inc. to P2 Solar, Inc. The Company’s current business operations are focused on the construction of solar and hydro power plants located in Canada, and India.  

Interim financial statements

The financial statements included in this Form 10-Q are unaudited and have been prepared in accordance with generally accepted accounting principles of the United States for the three months ended June 30, 2014 and 2013 and with the instructions to Form 10-Q. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period financial statements should be read together with the audited financial statements and accompanying notes included in the Company's audited financial statements for the year ended March 31, 2014. In the opinion of the Company, the unaudited financial statements contained herein contain all adjustments (consisting of a normal recurring nature) necessary to present a fair statement of the results of the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.

Fair value of financial instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market.

The Company uses a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Cash is measured at level 1 input of the fair value hierarchy.

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P2 SOLAR INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. dollars)

(Unaudited)

THREE MONTHS ENDED JUNE 30, 2014

1.

BASIS OF PRESENTATION, NATURE OF OPERATIONS AND GOING CONCERN (cont’d…)

Going concern

These financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred significant operating losses over the past three years.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The Company's continued existence is dependent upon its ability to raise additional capital and to achieve profitable operations through building of power plants in India and elsewhere.

If the going concern assumptions were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported revenues and expenses and the balance sheet classifications used.

Basis of consolidation

These consolidated financial statements include the accounts of P2 Solar, Inc. (“the Company”) and its wholly owned subsidiaries, Jagat Energy Pvt. Ltd. (“Jagat”), Gill Powergen Pvt. Ltd. (“Gill Powergen”), Atlantic Power (Rajgarh) Pvt. Ltd. (“Atlantic Rajgarh”) and Atlantic Power (Tibba) Pvt. Ltd. (“Atlantic Tibba”).  All intercompany transactions and balances have been eliminated.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent authoritative accounting pronouncements

We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position and cash flows.

3.

HYDRO PROJECTS

During the year ended March 31, 2013, the Company acquired three subsidiaries: Gill Powergen, Atlantic Rajgarh and Atlantic Tibba.  These subsidiaries hold interests in certain hydro projects located in India.  Costs incurred by the Company totalled $75,855 (March 31, 2014 - $73,775) as at June 30, 2014.

4.

RELATED PARTY TRANSACTIONS

Other than as disclosed elsewhere in these financial statements, the following amounts have been recorded as transactions with related parties:

a)

Amounts due to related parties are as follows:

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P2 SOLAR INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. dollars)

(Unaudited)

THREE MONTHS ENDED JUNE 30, 2014

4.

RELATED PARTY TRANSACTIONS (cont’d…)

b)

Salaries and benefits include $17,159 (2013 - $18,289) paid or accrued to a director and officer of the Company.

5.

CAPITAL STOCK

a)

Authorized stock

The Company has authorized 500,000,000 common shares with a par value of $0.001 per share. Each common share shall entitle the holder to one vote, in person or proxy on any matter on which action of the stockholder of the corporation is sought. The Company has authorized 5,000,000 shares of preferred stock with a par value of $0.001 per share. The holders of preferred stock have no rights except as determined by the Board of Directors of the Company and/or provided by Delaware General Corporate Law.

b)

Share issuances

During the three-month period ended June 30, 2014 the Company issued 2,000,000 shares with a value of $40,000 for subscriptions received in the last period.  

c)

Share subscriptions

At June 30, 2014 there were no outstanding share subscriptions

d)

Warrants

One million warrants at exercise price of $0.10 were issued to three individuals.  These warrants are exercisable for 12 months.

e)

Stock options

No stock options were issued in this period.

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P2 SOLAR INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. dollars)

(Unaudited)

THREE MONTHS ENDED JUNE 30, 2014

5.

CAPITAL STOCK (cont’d…)

The following table summarizes stock options and warrants outstanding as of June 30, 2014:

The number of exercisable stock options as at June 30, 2014 is 6,400,000 (March 31, 2014 – 6,400,000).

The following stock options were outstanding at June 30, 2014:

At June 30, 2014, the following share purchase warrants were outstanding:

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P2 SOLAR INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. dollars)

(Unaudited)

THREE MONTHS ENDED JUNE 30, 2014

6.

 LOANS PAYABLE

During the period ended June 30, 2014, the Company entered into promissory note agreements whereby it borrowed an aggregate of $5,000 (March 31, 2014 - $268,789).  These notes bear interest between 5% to 10% per annum, are unsecured, and are payable between on demand and two years.  Out of the total amount advanced during June 30, 2014, $65,000 (March 31, 2014 - $60,000) is convertible at the lender’s option into the Company’s common shares at a conversion rate to be mutually finalized between the Company and the lender within 10 business days of the lender’s conversion request. The contingent conversion rate may give rise to a contingent beneficial conversion feature which will be calculated and adjusted if necessary on settlement of the contingency. There are no other beneficial conversion features or significant items that should be accounted for separately.  

7.

WARRANT DERIVATIVE LIABILITY

The Company’s issued and outstanding common share purchase warrants have exercise prices denominated in a foreign currency (US dollar) which is different from the Company’s functional currency (Canadian dollar). These warrants are required to be treated as a derivative liability as the amount of cash the Company will receive on exercise of the warrants will vary depending on the exchange rate. These warrants are classified as a derivative liability and recognized at fair value. Changes in the fair value of these warrants are recognized in earnings until such time as the warrants are exercised or expire. The Company recognized a loss of $42,694 from the change in fair value of the warrants for the period ended June 30, 2014.

The following table presents the reconciliation of the fair value of the warrants:

These common share purchase warrants do not trade in an active securities market, and as such, the Company has estimated the fair value of these warrants using the Black-Scholes option pricing model using the following assumptions at June 30, 2014: weighted average risk-free interest rate 0.14%, weighted average volatility 289.97%, expected dividend yield – nil, and weighted average expected life (in years) 0.96.

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ITEM 2.

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Background and Overview

P2 Solar, Inc., incorporated in the State of Delaware, has been in existence as a Company (including our predecessor British Columbia Corporation) since 1990.   The Company’s current business operations are focused on the construction of solar and hydro power plants located in India and Canada.  

Results of Operation

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the three months ended June 30, 2014, as compared to the three months ended June 30, 2013.  Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principles of the United States (“GAAP”).

Quarter ended June 30, 2014

Sales

During the three months ended June 30, 2014, the Company had sales of $nil as compared to sales of $nil during the three months ended June 30, 2013.

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Operating Expenses

During the three months ended June 30, 2014, the Company had operating expenses of $24,687 as compared to operating expenses of $137,249 during the three months ended June 30, 2013, and decrease of $112,562 or approximately 82%. The decrease in operating expenses experienced by the Company was primarily attributable to decrease in consulting fees.

Loss and Comprehensive Loss

The Company had a loss and comprehensive loss of $82,896 for the three months ended June 30, 2014, as compared to a loss and comprehensive loss of $106,487 for the three months ended June 30, 2013, an decrease of $23,591 or approximately 22%. The change in net loss experienced by the Company was primarily attributable to decrease in consulting fees and currency exchange fluctions.

Year ended March 31, 2014

Sales

During the twelve months ended March 31, 2014, the Company had sales of $153,055 as compared to sales of $nil during the twelve months ended March 31, 2013. The sales recorded by the Company related to the completion of the Canada Ticket Project in Langley.

Operating Expenses

During the twelve months ended March 31, 2014, the Company had operating expenses of $478,114 as compared to operating expenses of $185,077 during the twelve months ended March 31, 2013, an increase of $293,037, or approximately 156%. The increase in operating expenses experienced by the Company was primarily attributable to expenses incurred by the Company relating to the work performed on the Canada Ticket Project in Langley.

Loss and Comprehensive Loss

The Company had loss and comprehensive loss of $377,228 for the twelve months ended March 31, 2014, as compared to a loss and comprehensive loss of $200,196 for the twelve months ended March 31, 2013, a change of $177,032 or approximately 88%.  The change in loss and comprehensive loss experienced by the Company was primarily attributable to the fact that the Company experienced an increase in operating expenses during the twelve months ended March 31, 2014.

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Liquidity and Capital Resources

As of June 30, 2014, the Company’s unaudited balance sheet reflects total assets of $160,565, as compared to total assets of $157,808 during the fiscal year ended March 31, 2014, an increase of $2,757 or approximately 2%.  The increase was primarily attributable to currency exchange differences

Our unaudited balance sheet reflects that as of June 30, 2014, we have total current liabilities of $823,287, as compared to total current liabilities of $737,634 at March 31, 2014, an increase of $85,653 or approximately 12%.  The increase was primarily attributable to the fact that during the three months ended June 30, 2014, the Company received loans of approximately $5,000 from unrelated parties, plus directors’ accrued wages, loans from director, and increase in accounts payable to be used to fund operating expenses and ongoing expenses related to projects in India.  

The Company does not have sufficient assets or capital resources to pay its on-going expenses.  Additionally, the Company does not currently have the funds necessary to proceed with the development of power plants in India. To date, the Company has primarily financed its operations through equity investment from investors, shareholder loans, and credit facilities from Canadian chartered banks and increases in payables and share subscriptions. Most of the financing has been debt financing from related and un-related parties.  Currently, our estimated fixed costs at this time are approximately $4,500 per month; that figure includes $500 for utilities, $3,000 for loan interest and principle payments, and $1,000 for miscellaneous expenses. We will have to raise approximately $4,500 per month to cover operating expenses, and additional funds to cover expenses of the two acquired projects in India to establish the two power plants.

The Company estimates that the total aggregate costs for the construction of the two hydro projects will be approximately $3.7 million dollars.  The hydro project in Rajgarh located in Ludhiana, Punjab, India is estimated to cost $2.2 million and the hydro project in Tibba located in Ludhiana, Punjab, India Tibba is estimated to cost $1.5 million.   The Company anticipates that it will attempt to raise the money from local individual investors by selling convertible preferred shares.  We are currently working on the terms of the preferred shares. Furthermore, we have had preliminary discussions with a number of groups regarding the financing; we are hopeful that we will be able to obtain financing.  However, there is no guarantee that we will be successful in raising any additional capital.  If we are unable to finance the Company by debt or equity financing, or a combination of the two, we will have to look for other sources of funding to meet our requirements.  That source has not yet been identified.   

Our financial statements have been prepared on the going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. Operations to date have been primarily financed by long-term debt and equity transactions as well as increases in payables and related party loans. Our future operations are dependent upon the identification and successful completion of additional long-term or permanent equity financing, the continued support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurance that we will be successful. If we are not, we will be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy working capital and other cash requirements.

Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

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ITEM 4.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a Company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to the existence of material weaknesses in our internal controls over financial reporting.  

Insufficient segregation of duties in our finance and accounting functions due to limited personnel.  During the quarter ended June, 2014, the Chief Financial Officer with the assistance of a director handled all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements.  This creates a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC.  These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

Changes in Internal Control over Financial Reporting

There was no change in the Company's internal control over financial reporting during the period ended June 30, 2014, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II-OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

None.

ITEM 1A.

 RISK FACTORS.

Not Applicable.

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ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

None.

ITEM 5.    

OTHER INFORMATION.

None.

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ITEM 6.

EXHIBITS.

(a)

The following exhibits are filed herewith:

31.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certifications 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 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.

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.

 P2 Solar, Inc.

 By: /s/ Raj-Mohinder S. Gurm

 -----------------------------------

 Name: Raj-Mohinder S. Gurm

 Date: August 19, 2014              

 Title: Chief Executive Officer & Chief Financial Officer

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