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 November 30, 2014

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

 For the transition period from __________ to __________

000-53598

Commission File Number

SAUER ENERGY, INC.

(Name of small business issuer in its charter)

  

                  Nevada                                                                                                   26-3261559

(State or other jurisdiction of incorporation or organization)                (I.R.S. Employer

        Identification No.)                                                                                              

  

4670 Calle Carga,Unit A Camarillo, CA 93012

                                                (Address of principal executive offices)

                                                                 888-829-8748

                                               (Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X  No o

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 filer.  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 [X]

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

 Yes  [   ]   No [X]  

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 115,150,246 shares of common stock, par value $0.0001 per share, as of January 15, 2014.

Page 1 of 30

SAUER ENRGY, INC.

REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

  

	Page
PART I – Financial Information
Item 1.  Financial Statements (Unaudited)	3
Item 2.   Management’s Discussion and Analysis of
Financial Condition and Results of Operations	21
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	22
Item 4T. Controls and Procedures	22
PART II – Other Information
Item 1.  Legal Proceedings	25
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.  Defaults Upon Senior Securities	25
Item 4.  Mine Safety Disclosures	25
Item 5.  Other Information	25
Item 6.   Exhibits	25
Signatures	26

  

SAUER ENERGY, INC.
(A Development Stage Enterprise)
Balance Sheets
	November 30	August 31
	2014	2014
	(Unaudited)
ASSETS
Current Assets
Cash	$               276,026	$               459,363
Petty Cash	1,500	1,500
Prepaid Expenses	431	593
	277,957	461,456
Property and Equipment, net	132,202	146,704
Other Assets
Intangible Assets	1,392,483	1,410,973
Security Deposit	14,000	14,000
	1,406,483	1,424,973
Total Assets	$            1,816,642	$            2,033,133
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities	$                 11,918	$                 21,516
Convertible Loan and Interest Payable	600,000	600,000
Derivative Liability on Convertible Loans	775,000	1,025,000
Total Current Liabilities	1,386,918	1,646,516
Commitments and Contingencies	-	-
Stockholders' Equity
Common Stock, $0.0001 par value; authorized
650,000,000 shares  authorized,
115,150,246 shares  issued and outstanding as of
August 31 & November 30, 2014, respectively	11,515	11,515
Additional Paid-In Capital	8,191,503	8,191,503
Accumulated deficit during the development stage	(7,773,294)	(7,816,401)
Total Stockholders' Equity	429,724	386,617
Total Liabilities and Stockholders' Equity	$            1,816,642	$            2,033,133

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

SAUER ENERGY, INC.
(A Development Stage Enterprise)
Statement of Operations
(Unaudited)
			Inception
			(August 7 2008)
	For the Quarter Ended		through
	November 30,		November 30,
	2014	2013(Restated)	2014
Revenue	$ -	$ -	$ -
General and        Administrative Expenses:
Professional Fees	28,425	52,091	478,227
Consulting	43,814	24,131	1,397,485
Research &    development expense	39,614	23,705	1,081,813
Other general and     administrative expenses	95,040	87,278	2,716,149
	206,893	187,205	5,673,674
Loss from operations	(206,893)	(187,205)	(5,673,674)
Other Income (expense)
Settlement expense	-	-	(1,101,685)
Interest and finance	-	(1,667)	(222,935)
Changes in derivative liability	250,000	8,336	(775,000)
	250,000	6,669	(2,099,620)
Income (Loss) before taxes	43,107	(180,536)	(7,773,294)
Provision (credit) for taxes	-	-	-
Net Income (Loss)	$ 43,107	$ (180,536)	$ (7,773,294)
Basic earnings (loss)         per  common share, basic:	$ 0.00	($0.00)
diluted:	$ 0.00	($0.00)
Weighted average        number of common
shares outstanding, basic:	115,150,246	115,150,246
diluted:	127,650,246	115,150,246

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

SAUER ENERGY, INC.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
For the period from inception (August 7, 2008) to November 30, 2014
																		Accumulated
																		Deficit				Total
				Common Stock							Additional								during the				Shareholders'
				Number of						Paid-In				Share				Development				Equity
				Shares			Amount			Capital				Subscriptions				Stage				(Deficit)
Inception: August 7, 2008		-			$ -			$ -				$ -				$ -				$ -
	Shares issued for cash		500,000			500			12,000												12,500
	Recapitalization		(499,675)			(500)			500												-
	Development stage net (loss)																(45,541)				(45,541)
Balances August 31, 2008		325			$ -			$ 12,500								(45,541)				(33,041)
	Shares issued for cash		138,937,175			13,894			(13,894)												-
	Development stage net (loss)																(12,666)				(12,666)
Balances August 31, 2009		138,937,500			$ 13,894			$ (1,394)				$ -				$ (58,207)				$ (45,707)
	Shares cancellation		(67,437,500)			(6,744)			6,744												-
	Shares subscription for cash								157,200												157,200
	Development stage net (loss)																(214,899)				(214,899)
Balances August 31, 2010		71,500,000			$ 7,150			$ 162,550				$ -				$ (273,106)				$ (103,406)
	Shares issued for service fee		552,900			55			664,675												664,730
	Shares subscriptions for cash												63,910								63,910
	Shares issued for cash		3,537,849			354			856,899												857,253
	Development stage net (loss)																(1,366,199)				(1,366,199)
Balances August 31, 2011		75,590,749			$ 7,559			$ 1,684,124				$ 63,910				$ (1,639,305)				$ 116,288
	Shares subscriptions for cash												334,893								334,893
	Shares issued for cash		1,275,357			128			382,473				(382,601)				-				-
	Shares issued for services		522,000			52			266,168												266,220
	Shares issued for services		200,000			20			102,180				(200)								102,000
	Shares issued for services		535,000			53			272,797												272,850
	Stock issued for cash		650,000			65			194,935												195,000
	Corrected error in stock								1,002				(1,002)								-
	Shares issued for cash		24,000			2			5,998												6,000
	Shares issued for legal fees @$0.60		125,000			13			74,987												75,000
	Shares issued for legal fees		25,000			3			14,997												15,000
	Shares issued for services		363,000			36			123,384												123,420
	Shares issued for intangibles and equipment		6,000,000			600			1,499,400												1,500,000
	Share subscriptions												180,000								180,000
	Share subscriptions												7,000								7,000
	Shares issued for cash		808,000			81			201,919				(202,000)								-
	Shares issued for services		100,000			10			11,990												12,000
	Shares issued for services		1,000,000			100			119,900												120,000
	Development stage net (loss)																(1,713,636)				(1,713,636)
Balances August 31, 2012		87,218,106			$ 8,722			$ 4,956,254				$ -				$ (3,352,941)				$ 1,612,035
	Shares issued for cash pursuant to an investment agreement		950,980			95			119,905												120,000
	Shares issued for cash		200,000			20			49,980												50,000
	Shares issued for services		100,000			10			20,990												21,000
	Shares issued for commitment fees		1,479,963			148			324,852												325,000
	Shares issued for services		12,000			1			2,519												2,520
	Shares issued pursuant to 1st Amendment		2,000,000			200			429,800												430,000
	Shares issued for services		240,000			24			28,776												28,800
	Shares issued for services		250,000			25			24,975												25,000
	Shares issued for PPM		400,000			40			99,960												100,000
	Certificate #4339 recalled		(1,479,963)			(148)			(324,852)												(325,000)
	Shares issued for services		220,000			22			74,778												74,800
	Shares issued for services		50,000			5			16,995												17,000
	Shares issued for services		200,000			20			67,980												68,000
	Shares issued for services		50,000			5			16,995												17,000
	Shares issued for services		50,000			5			16,995												17,000
	Shares issued for services		35,000			4			11,897												11,901
	Shares issued for services		100,000			10			33,990												34,000
	Shares issued for services		35,000			4			11,896												11,900
	Certificate #4339 reissued		1,479,963			148			324,852												325,000
	Shares issued to repay loan		151,515			15			19,985												20,000
	Development stage net (loss)																(2,244,830)				(2,244,830)
	Miscellaneous adjustment					(1)			(1)												(2)
Balances August 31, 2013 (Restated)		93,742,564			$ 9,374			$ 6,329,521				$ -				$ (5,597,771)				$ 741,124
	Shares issued to repay loan, interest and fees		110,375			11			9,989												10,000
	Shares issued to repay loan, interest and fees		200,000			20			13,580												13,600
	Shares issued to repay loan, interest and fees		500,000			50			27,950												28,000
	Shares issued for cash pursuant to equity line of credit (LOC)		555,720			56			74,944												75,000
	Shares issued to repay loan, interest and fees		300,000			30			20,130												20,160
	Shares issued for cash per LOC		250,000			25			26,375												26,400
	Shares issued for cash per LOC		300,000			30			30,834												30,864
	Shares issued for cash per LOC		300,000			30			32,106												32,136
	Outstanding warrant expense								18,094												18,094
	Shares issued to repay loan		290,000			29			19,285												19,314
	Shares issued for cash per LOC		300,000			30			29,634												29,664
	Shares issued for cash per LOC		300,000			30			28,722												28,752
	Shares issued to repay loan, interest and fees		300,000			30			18,150												18,180
	Shares issued for cash per LOC		332,742			33			29,967												30,000
	Shares returned to Treasury pursuant to settlement with Eclipse Advisors, LLC		(700,000)			(70)			(196,805)												(196,875)
	Shares issued to repay loan, interest and fees		349,097			35			29,965												30,000
	Shares issued to repay loan, interest and fees		310,000			31			15,035												15,066
	Shares issued for cash per LOC		500,000			50			41,462												41,512
	Shares issued to repay loan, interest and fees		500,741			50			24,286												24,336
	Shares issued for cash per LOC		330,235			33			26,967												27,000
	Shares issued for cash per LOC		312,500			31			24,969												25,000
	Shares issued for cash per LOC		577,741			58			49,942												50,000
	Shares issued for cash per LOC		371,645			37			34,963												35,000
	Shares issued for cash per LOC		400,000			40			37,976												38,016
	Shares issued for cash per LOC		352,936			35			34,965												35,000
	Shares issued for cash per settlement		2,000,000			200			299,800												300,000
	Shares issued per mediation settlement with St. George Investments		5,000,000			500			649,500												650,000
	Shares issued for cash per LOC		320,000			32			32,301												32,333
	Shares issued for cash per LOC		310,000			31			27,294												27,325
	Shares issued for cash per LOC		310,000			31			25,582												25,613
	Shares issued for services		500,000			50			24,950												25,000
	Shares issued for cash per LOC		300,000			30			20,245												20,275
	Share subscriptions		3,000,000			300			149,700												150,000
	Share subscriptions		1,000,000			100			49,900												50,000
	Shares issued for cash per LOC		323,950			32			19,970												20,002
	Share subscriptions		500,000			50			24,950												25,000
	Share subscriptions		500,000			50			24,950												25,000
	Outstanding warrant expense		-			-			9,355												9,355
	Miscellaneous adjustment		-			1			-												1
	Development stage net (loss)		-			-			-								(2,218,630)				(2,218,630)
Balances August 31, 2014		115,150,246			$ 11,515			$ 8,191,503				$ -				$ (7,816,401)				$ 386,617
	Development stage net profit		-			-			-								43,107				43,107
Balances November 30, 2014(Unaudited)		115,150,246			$ 11,515			$ 8,191,503				$ -				$ (7,773,294)				$ 429,724

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

SAUER ENERGY, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
(Unaudited)
			Inception
			(August 7 2008)
	For the Quarter Ended		through
	November 30,	November 30,	November 30,
	2014	2013        (Restated)	2014
Cash flows from operating activities:
Net Income (loss)	$       43,107	$   (180,536)	$(7,773,294)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Security Deposit	-	-	(14,000)
Amortization	18,490	18,490	621,610
Depreciation	14,502	5,638	121,078
Director fees issued by shares	-	-	48,000
Change in derivative liability	(250,000)	(8,336)	775,000
Investor relation fees issued by shares	-	-	180,000
Issuance of stock for services or claims	-	-	2,672,140
Allocated share based compensation expense	-	-	29,890
Adjustment of Warrants	-	18,094	27,449
Terms of Mediation Settlement	-	-	778,125
Interest paid by shares and debt	-	-	73,324
Changes in operating assets and liabilities:
Inventory	-	-	-
Prepaid Expenses	161	-	(431)
Accounts payable and accrued expenses	(9,597)	2,189	11,918
Net cash flows (used by) operating activities	(183,337)	(144,461)	(2,449,191)
Cash flows from investing activities:
Purchase of furniture and equipment	-	-	(147,785)
Purchase of intangible assets	-	-	(539,092)
Net cash (used by) investing activities	-	-	(686,877)
Cash flows from financing activities:
Proceeds from loans	-	-	830,022
Repayment on loans	-	(60,130)	(230,022)
Proceeds from shareholders' loan	-	-	82,256
Payment on shareholders' loan	-	-	(82,256)
Proceeds from issuance of common stock, net of costs	-	224,530	2,563,594
Subscriptions received	-	-	250,000
Net cash (used by) provided by financing activities	-	164,400	3,413,594
Net increase (decrease) in cash	(183,337)	19,939	277,526
Cash, beginning of the period	460,863	19,178	-
Cash, end of the period	$      277,526	$       39,117	$                 277,526
Supplemental cash flow disclosure:
Interest paid	$       -	$    1,667
Taxes paid	$       -	$          -
Non Cash Investing and Financing Activities
Acquisition of intangible assets by shares	$              -	$            -
Acquisition of equipment by shares	-	-
	$             -	$         -

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

Page 11 of 30

Sauer Energy, Inc.

 (A Development Stage Enterprise)

Notes to the Financial Statements

November 30, 2014

Note 1 - Organization and summary of significant accounting policies:

These unaudited interim financial statements as of and for the three months ended November 30, 2014 reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.

These unaudited interim financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal year end August 31, 2014, report. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the threemonth period ended November 30, 2014 are not necessarily indicative of results for the entire year ending August 31, 2015.

Following is a summary of our organization and significant accounting policies:

Organization and nature of business – Sauer Energy, Inc. (formerly: BCO Hydrocarbon Ltd.) (identified in these footnotes as “we” or the “Company”) was incorporated in the State of Nevada, United States of America on August 19, 2008. It was a natural resource exploration stage company and anticipated acquiring, exploring, and if warranted and feasible, developing natural resource assets. BCO had the right to acquire a 50% working interest in an oil and gas lease in Alberta, Canada.

Sauer Energy, Inc. (the “Old Sauer”) was incorporated in California on August 7, 2008. The Company is a development stage company engaged in the design and manufacture of vertical axis wind turbine (VAWT) systems.

On July 25, 2010, the Company, the president and sole director Malcolm Albery (“MA”) and Dieter Sauer, Jr. (“DS”) completed a closing (the “Closing”) under an Agreement and Plan of Reorganization, dated as of June 23, 2010 (the “Agreement”).  The Agreement provided: (a) for the purchase by DS of all of the 39,812,500 shares of the Company owned by MA for $55,200; (b) the contribution by DS of all of the shares of Old Sauer, a California corporation (“SEI”) to the Company; (c) the assignment of certain patent rights related to wind turbine technology held by DS to the Company; and (d) the election of DS to the Company’s board of directors.  In connection with the Closing, Mr. Sauer was elected President and CEO of the Company and two former shareholders of the Company agreed to (i) indemnify the Company against any claims resulting from breaches of representations and warranties by the Company in the Agreement; (ii) to acquire and cause to be returned for cancellation an aggregate of 67,437,500 shares of the Company’s common Stock, including all of the shares owned by former officer and director Daniel Brooks and; (3) assume all of the Company’s obligations in connection with certain oil and gas leases in Canada.

The agreement was executed on July 25, 2010. Sauer Energy, Inc. became a wholly-owned subsidiary of the Company. On August 29, Malcolm Albery resigned as President and was replaced by Dieter Sauer.  In the following month, the Company changed its name from BCO Hydrocarbon Ltd. to Sauer Energy, Inc.

The Company’s fiscal year-end is August 31.

Basis of presentation – Our accounting and reporting policies conform to U.S. generally accepted accounting principles applicable to development stage enterprises.

Page 12 of 30

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

Cash and cash equivalents - For purposes of the statement of cash flows, we consider all cash in banks, money market funds, and certificates of deposit with a maturity of less than three months to be cash equivalents.

  

Fixed assets - Property, plant and equipment is valued at cost less accumulated depreciation and impairment losses. If the costs of certain components of an item of property, plant and equipment are significant in relation to the total cost of the item, they are accounted for and depreciated separately.   Depreciation expense is recognized using the straight-line method for the vehicle and the double declining method for all remaining assets and is amortized over the estimated useful life of the related asset. The following useful lives are assumed:

 Vehicle & Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years

Furniture & Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Years

Fair Value of Financial Instruments - The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures" for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820- 10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:

- Level 1: Quoted prices in active markets for identical assets or liabilities.

- Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

- Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of the Company’s financial instruments as of November 30, 2014 reflect:

- Cash: Level One measurement based on bank reporting.

- Loan receivable and loans from Officers and related parties: Level 2 based on promissory notes. - Derivative liability: Level two measurement based upon the relative fair market value of the Company’s free trading common stock.

Federal income taxes -The Company utilizes FASB ACS 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when, in the opinion of management, it is “more likely-than-not” that a deferred tax asset will not be realized. The Company generated a deferred tax credit through net operating loss carry-forward.  A valuation allowance of 100% has been established.

Page 13 of 30

Interest and penalties on tax deficiencies recognized in accordance with ASC accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.

Research and development costs - The Company expenses costs of research and development cost as incurred. Research and development costs for the three months ended November 30, 2014and November 30, 2013, was  $39,614 and $23,705  respectively.  

Advertising - Advertising and marketing expenses for the three months ended November 30, 2014 and November 30, 2013 was $4,433 and $1,488 respectively.

Basic and Diluted Earnings (Loss) Per Share - Net loss per share is calculated in accordance with FASB ASC 260, Earnings Per Share, for the period presented. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The Company has potentially dilutive securities outstanding consisting of warrants to purchase common stock, (see Note 10) and the conversion of convertible loans (see Note 7).  For the three months ended November 30, 2014, the warrants would not have been exercised since they are priced significantly higher than the market value of the Company’s trading common stock, while the convertible loans would likely be converted due to the discount that would be applied to the market price. As of November 30, 2014, the 12,500,000possible shares under the convertible loan would be considered dilutive.  Alternatively, for the three months ended November 30, 2013, the exercise of warrants or conversions would be anti-dilutive since the Company was in a loss position, and they are not counted in the calculation of loss per share. The total common stock equivalents on a fully diluted basis if all outstanding agreements were exercised at November 30, 2014 and 2013 were 19,300,000 and 7,175,879 shares, respectively.

Development Stage Company - The Company is considered a development stage company, with no operating revenues during the periods presented, as defined by FASB Accounting Standards Codification ASC 915. ACS 915 requires companies to report their operations, shareholders’ deficit and cash flows since inception through the date that revenues are generated from management’s intended operations, among other things. Management has defined inception as August 7, 2008. Since inception, the Company has incurred an operating loss of $7,773,294. The Company’s working capital has been generated through advances from the principal of the Company and solicitation of subscriptions. Management has provided financial data since August 7, 2008 in the financial statements, as a means to provide readers of the Company’s financial information to be able to make informed investment decisions.

Recent Accounting Pronouncements—Management has considered all recent accounting pronouncements.  The following pronouncement was deemed applicable to our financial statements.

In July of 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-13,"Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's Financial Statements until the Company can reasonably project future income. As such, the Company will disclose the Reserve pertaining to the NOL Carryforward in the Notes to the Financial Statements until such time as the Company is able to present the unrecognized NOL in the statement of financial position.

In April of 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements and Property Plant, and Equipment Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update affect an entity that has a component that is disposed of or held for sale. We are evaluating the inclusion of this information should it apply in the future. This pronouncement will be adopted should it become relevant.

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In June of 2014, the FASB issued ASU 2014-10, “Development State Entities Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, the amendments in this Update affect entities that are development stage entities under U.S. GAAP. A development stage entity is defined in the Master Glossary of the Accounting Standards Codification as follows: An entity devoting substantially all of its efforts to establishing anew business and for which either of the following conditions exists:

a. Planned principal operations have not commenced.

b. Planned principal operations have commenced, but there has been no significant revenue therefrom.

This update applies to the Company as no significant revenue has been received, although there will be no significant impact on the financial statements since the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. This amendment will become effective as of December 15, 2014 for the Company, after which the presentation of the financial statements will be revised as noted above.

In August of 2014, the FASB issued ASU 2014-15,”Presentation of Financial Statements—Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in this Update apply to all entities and will become effective as of the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will implement this Update if substantial doubt is ever raised about the Company’s ability to continue as a going concern within one year after the financial statements are issued or at the date the financial statements are available to be issue when applicable.

Share based payments and awards

The company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R) (now contained in FASB Codification Topic 718, Compensation-Stock Compensation, or Topic 718), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related implementation guidance and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date, (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black- Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of Topic 718; however the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility; however, due to the thinly traded nature of our stock, we have chosen to use an average of the annual volatility of like companies in our industry. For the “risk-free interest rate”, we use the Constant Maturity Treasury rate on 90 day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20 trading day average. At the time of grant, the share based-compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly. For the three months ended November 30, 2014, we recognized $0 in share based expense due to the issuance of common stock warrants.

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Note 2 – Going Concern

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has accumulated a deficit of $7,773,294as of November 30, 2014, and has no revenues.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management plans to raise additional capital through the sale of stock to pursue business development activities.

Note 3 – Property and Equipment

Property and Equipment consisted of the following at November 30, 2014 and August 31, 2014	November 30, 2014	August 31, 2014
Computer and equipment & truck	$              253,280	$           253,280
Less: Accumulated depreciation/amortization	(121,078)	(106,576)
Property and equipment, net	$              132,202	$           146,704

Note 4 – Asset Purchase

On May 11, 2012, the Company entered into an Asset Purchase Agreement with St. George Investments LLC, an Illinois limited liability company, to acquire certain assets in foreclosure for 6,000,000 common shares.  The assets were formerly owned by Helix Wind, Inc., a Nevada corporation in the same business as the Company.  The assets and agreed prices were:

Asset Purchase	May 11, 2012
Tangible Assets
Equipment	$               23,000
Supplies	1,000
Inventory	1,000
Total Tangible Assets	$               25,000
Intangible Assets
Goodwill	$                5,000
Intellectual Property (10 patents, 2 trademarks, network system, wind turbine monitoring system, URL	1,467,500
Restrictive Covenant	$                2,500
Total intangible assets acquired	$          1,475,000
Total Assets acquired	$          1,500,000

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Note 5 – Intangible Property

The Company has acquired intangible property in patents, patents pending and goodwill.  The patents are being amortized over their expected lives of not more than seventeen years.  The restrictive covenants were fully amortized as of August 31, 2013.  Those patent costs allocated to pending patents do not begin amortizing until the underlying patent is issued.  If for some reason a patent is not issued the costs associated with the acquisition and the continuation of the application are fully amortized in the year of the denial.  The balances as of  November 30, 2014 and  August 31, 2014 are as follows:

	November 30, 2014	August 31,2014
Patents	$                              109,092	$                              109,092
Purchased Patents	1,467,500	1,467,500
Goodwill	5,000	5,000
Less Amortization	(189,109)	(170,619)
	$                           1,392,483	$                           1,410,973

Note 6 – Convertible Loans and Interest Payable

The Company entered into note agreements and subsequent modifications and settlements on convertible notes.  These notes are convertible into the Company’s common stock and are due usually within one year.  The notes were issued with original issuance discounts of twelve percent which as immediately convertible into common stock and if the note was not repaid in ninety days the zero percent interest rate was replaced with an immediate prepaid interest charge at ten percent with was subject to conversion.  The Conversion terms were both fixed and variable if the trading prices did not meet the fix conversion price.  See the derivative discussion in Note 7 concerning these loans.

	November 30, 2014	August 31,2014
Convertible Loans and Accrued Interest:
St. George Investments, 10% interest prepaid	$ 600,000	$ 275,800
JMJ Investments,  10% interest prepaid	-	76,896
	$ 600,000	$ 352,696

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Note 7 – Derivative Liabilities

The Company entered into certain convertible loan agreements during 2012 and 2013.  These agreements contained terms that allowed for the conversion of the debt into common stock.  The basic agreement was originally with $0.25 conversion prices unless the stock sold at less than $0.25.  If the trades were at less than original term, the debt holders could elect to convert their debt at sixty percent of the lowest trading price in the 25 trading days prior to the conversion notice.  Because of these terms, the debt conversion clause requires that the Company account for these note balances as derivatives valued at the fair market value of the Company’s common stock on the day of any financial reporting period.   At November 30, 2014 and 2013, the fully convertible shares would be 12,500,000 and 5,343,879 common shares, respectively.

	November 30, 2014	August 31,2014
Derivative Liabilities on Convertible Loans:
St. George Investments	$ 775,000	$ 267,442
JMJ Investments	-	74,566
	$ 775,000	$ 342,008

Note 8 – Commitments and Contingencies

Rental Agreement:

On August 17, 2012, the Company leased a 10,410 square foot “industrial condominium” in Camarillo, California, for three years for monthly lease payments of $7,000 per month. There are no common area costs. All company operations are concentrated at the site.

Lease Commitments – as of November 30, 2014 for the following five fiscal years:

Fiscal year ended August 31, 2015                             $  63,000

Note 9– Federal Income Taxes

No provision was made for federal income tax, since the Company has had significant net operating losses. Net operating loss carryforwards may be used to reduce taxable income through the year 2034. The availability of the Company’s net operating loss carryforwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock,unless the same or similar business is carried on. The net operating loss carryforward for federal and state income tax purposes was approximately $7,773,000, which will expire in 2028 through 2034 if not utilized.  The Company uses 35% for a composite tax rate to estimate the value of net operating losses for deferred taxes.

The Company incurred net income of $43,107 for the three months ended November 30, 2014. Although the company has no revenue, the net income was the result of the change in the derivative liability on convertible loans. The Company has net operating losses carried forward of approximately $7,773,000 for tax purposes which will expire in 2028 through 2034if not utilized.

No provision was made for federal income tax, since the Company had an overall net operating loss and has accumulated net operating loss carryforwards.

Although Management believes that its estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our tax provisions. Ultimately, the actual tax

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benefits to be realized will be based upon future taxable earnings levels, which are very difficult to predict. The Company may be assessed penalties and interest related to the underpayment of income taxes.  Such assessments would be treated as a provision of income tax expense on the financial statements.  For the year ended August 31, 2014 and 2013, no income tax expense has been realized as a result of operations and no income tax penalties and interest have been accrued related to uncertain tax positions.  The Company files income tax returns in the U.S. federal jurisdiction and in the State of California.  These filings are subject to a three year statute of limitations.  The Company’s evaluation of income tax positions included the years ended August 31, 2014, and 2013, could be subject to agency examinations.  No filings are currently under examination.  No adjustments have been made to reduce the estimated income tax benefit at fiscal yearend or at the quarterly reporting dates.  Any valuations relating to these income tax provisions will comply with U.S. generally accepted accounting principles.

Note 10 – Capital Stock

Starting on July 25, 2010, the Company entered into a series of private placement agreements with various investors. The arrangement involved issuing 800,000 units of securities at $0.25 per unit for a total amount of $200,000. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant expiring July 31, 2012 with an exercise price of $0.50 each. The private placement was oversubscribed and the Company accepted additional private placement funds. As of August 31, 2011, the Company issued 938,000 units of the securities in consideration of funds received of $234,500.

Starting on January 1, 2011, the Company entered into a series of private placement agreements with various investors. The arrangement involved issuing 666,667 units of securities at $0.30 per unit for a total amount of $200,000. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant expiring July 31, 2013 with an exercise price of $0.60 each. The private placement was oversubscribed and the Company accepted additional private placement funds. As of August 31, 2011, the Company issued 2,599,849 units of the securities in consideration of funds received of $779,955.

During the fiscal year ended August 31, 2011, the Company issued a total of 362,900 shares of common stock to certain consultants as compensation for services. The range of fair value of the stock was $0.75 ~ $1.55. Based on the fair value of the common stock on the day of issuance, $436,730 was charged to consulting expenses.

During the fiscal year ended August 31, 2011, the Company issued 150,000 shares of common stock to an investor relations firm for services to be provided. The fair value of the common stock on the day it was issued was $1.20 per share. Based on the fair value of the stock on the day of issuance, $180,000 was charged to investor relations expenses. A further 1,000,000 shares were issued to the firm in the fiscal year ended August 31, 2012. The fair value of the common stock on the day it was issued was $0.12 per share. Based on the fair value of the stock on the day of issuance, $120,000 was charged to investor relations expenses.  The contract with the firm was cancelled in August, 2012.

During the fiscal year ended August 31, 2011, the Company issued 40,000 shares of common stock as directors’ fees to certain directors of the Company. The fair value of the common stock on the day it was issued was $1.20 per share. Based on the fair value of the common stock on the date of issuance, $48,000 was charged to director fees.

During the period September 1 to October 17, 2011, the Company entered into a series of private placement agreements with various investors involving issuing units of securities at $0.30 per unit. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant with an exercise price of $0.60 each, expiring July 31, 2013. The private placement was oversubscribed and the Company accepted additional private placement funds. On October 17, 2011 the Company issued 1,275,337 units of the securities in consideration of funds received of $382,601.

On October 17, 2011, the Company issued a total of 522,000 shares of restricted common stock to certain consultants as compensation for services. The fair value of the stock was $0.51.  Based on the fair value of the common stock on the day of issuance, $266,220 was charged to consulting expense.

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On October 17, 2011, the Company issued 200,000 shares of common stock to a consulting firm for services to be provided. The fair value of the common stock on the day it was issued was $0.51 per share. Based on the fair value of the stock on the day of issuance, $102,000 less $200 contributed was charged to consulting expense.

On October 17, 2011, the Company issued a total of 535,000 shares of restricted common stock to certain consultants as compensation for services. The fair value of the stock was $0.51.  Based on the fair value of the common stock on the day of issuance, $272,850 was charged to consulting expense.

On December 1, 2011, the Company issued 650,000 units of securities to seven investors at $0.30 per unit for $195,000 cash, pursuant to a private placement agreement. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant with an exercise price of $0.60 each, expiring July 31, 2013.

On December 1, 2011, the Company issued 24,000 units of securities to an investor at $0.25 per unit for $6,000 cash pursuant to a private placement agreement. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant with an exercise price of $0.60 each, expiring July 31, 2014.

On January 24, 2012, the Company issued 125,000 shares of common stock at the closing price of $0.60 per share for legal fees of $75,000.

On January 26, 2012, the Company issued 25,000 shares of common stock at the closing price of $0.60 per share for legal fees of $15,000.

On April 30, 2012, the Company issued 363,000 shares of common stock at the closing price of $0.34 per share for services by six providers.  An expense of $123,420 was recorded.

On May 11, 2012, the Company issued 6,000,000 shares of common stock pursuant to an Asset Purchase Agreement for certain wind turbine assets at the agreed price of $0.25 per share, including intangible assets. The fair market value of the assets was recorded, $1,500,000.

On July 31, 3012, the Company issued 808,000 units of securities at $0.25 per unit for $202,000 cash pursuant to a private placement agreement. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant with an exercise price of $0.50 each, expiring July 31, 2014.

On July 31, 2012, the Company issued 100,000 shares of common stock at $0.12 per share for legal fees of $12,000.

On July 31, 2012, the Company issued 1,000,000 shares of common stock at $0.12 per share for contract services of $120,000.

On September 18, 2012, the Company issued 200,000 units of securities at $0.25 per unit for $50,000 cash pursuant to a private placement agreement. Each unit consisted on one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant with an exercise price of $0.50 each, expiring March 31, 2014.

On October 10, 2012 the Company issued 950,980shares of common stock at $0.12 per share for cash of $120,000 pursuant to an investment agreement as the commitment fee for an equity line.

On October 10, 2012, the Company entered into a private placement agreement that involved issuing 200,000 units of securities at $0.25 per unit for a total amount of $50,000. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant expiring March 31, 2014, with an exercise price of $0.50 each.

On December 14, 2012, the Company issued 100,000 shares of common stock for $0.21 per share for consulting services of $21,000.

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On December 14, 2012, the Company issued 1,479,963 shares of common stock at $0.22 per share as a commitment fee. The shares were subsequently canceled and have been reissued to the escrow agent until the transaction is quantifiable and completely resolved.

On December 14, 2012, the Company issued 12,000 shares of common stock for $0.21 per share for consulting services of $2,520.

On January 7, 2013, the Company issued 2,000,000 shares of common stock for $0.215 per share pursuant to a restrictive covenant.

On March 12, 2013, the Company issued 240,000 shares of common stock for $0.12 per share for consulting services of $28,800.

On April 5, 2013, the Company issued 250,000 shares of common stock for $0.10 per share for consulting services of $25,000.

On July 12, 2013 the Company issued 220,000 shares of common stock for $0.34 per share for consulting services of $74,800.

On July 12, 2013, the Company issued 50,000 shares of common stock for $0.34 per share for consulting services of $17,000.

On July 12, 2013, the Company issued 200,000 shares of common stock for $0.34 per share for consulting services of $68,000.

On July 12, 2013, the Company issued 50,000 shares of common stock for $0.34 per share for a bonus for consulting services of $17,000.

On July 12, 2013, the Company issued 50,000 shares of common stock for $0.34 per share for a bonus for consulting services of $17,000.

On July 12, 2013, the Company issued 35,000 shares of common stock for $0.34 per share for a bonus for consulting services of $11,900.

On July 12, 2013, the Company issued 100,000 shares of common stock for $0.34 per share for consulting services of $34,000.

On July 12, 2013, the Company issued 35,000 shares of common stock for $0.34 per share for consulting services of $11,900.

On June 4, 2013, the Company entered into a private placement agreement that involved issuing 400,000 units of securities at $0.25 per unit for $100,000 cash pursuant to a private placement agreement. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and two (2) common stock purchase warrants for a total of 800,000 warrants with an exercise price of $0.40 each, expiring July 31, 2015.

On August 16, 2013, the Company issued 151,515 shares of common stock for $19,956 at $0.132 per share pursuant to a convertible note.

On September 16, 2013, the Company issued 110,375 shares of common stock for $10,000 at $0.0906 per share pursuant to a convertible note.

On October 1, 2013, the Company issued 200,000 shares of common stock for $13,600 at $0.06800 per share pursuant to a convertible note.

On October 9, 2013, the Company issued 500,000 shares of common stock for $28,000 at $0.0560 per share pursuant to a convertible note.

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Some of the following disclosures are net of wire fees and expenses.

On October 16, 2013, the Company issued 555,720 shares of common stock for $74,915 at $0.16870 per share pursuant to an Equity Purchase Agreement to repay loan, interest and fees.

On November 6, 2013, the Company issued 250,000 shares of common stock for $26,355 at $0.1056 per share pursuant to an Equity Purchase Agreement.

On November 11, 2013, the Company issued 300,000 shares of common stock for $30,819 at $0.10288 per share pursuant to an Equity Purchase Agreement.

On November 14, 2013, the Company issued 300,000 shares of common stock for $20,160 at $0.0672 per share pursuant to a convertible note.

On November 18, 2013, the Company issued 300,000 shares of common stock for $32,091 at $0.1071 per share pursuant to an Equity Purchase Agreement.

On December 2, 2013, the Company issued 290,000 shares of common stock for $19,314 at $0.06660 per share pursuant to a convertible note.

On December 2, 2013, the Company issued 300,000 shares of common stock for $29,619 at $0.09888 per share pursuant to an Equity Purchase Agreement.

On December 9, 2013, the Company issued 300,000 shares of common stock for $28,707 at $0.09584 per share pursuant to an Equity Purchase Agreement.

On January 6, 2014, the Company issued 300,000 shares of common stock for $18,180 at $0.06060 per share pursuant to a convertible note.

On January 9, 2014, the Company issued 332,742 shares of common stock for $29,955 at $0.0902 per share pursuant to an Equity Purchase Agreement.

On January 21, 2014, the Company issued 349,097 shares of common stock for $29,955 at $0.0857 per share pursuant to an Equity Purchase Agreement.

On January 29, 2014, the Company issued 310,000 shares of common stock for $15,066 at $0.0486 per share pursuant to a convertible note.

On February 14, 2014, the Company issued 500,741 shares of common stock for $24,336 at $0.0486 per share pursuant to a convertible note.

On March 3, 2014, the Company issued 330,235 shares of common stock for $26,980 at $0.08176 per share pursuant to an Equity Purchase Agreement.

On March 28, 2014, the Company issued 577,741 shares of common stock for $49,980 at $0.0900 per share pursuant to an Equity Purchase Agreement.

On April 1, 2014, the Company issued 371,645 shares of common stock for $34,980 at $0.0942 per share pursuant to an Equity Purchase Agreement.

On April 9, 2014, the Company issued 400,000 shares of common stock for $37,996 at $0.0950 per share pursuant to an Equity Purchase Agreement.

On April 15, 2014, the Company issued 352,936 shares of common stock for $34,954 at $0.0992 per share pursuant to an Equity Purchase Agreement.

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On April 24, 2014, the Company issued 320,000 shares of common stock for $32,277 at $0.1010 per share pursuant to an Equity Purchase Agreement.

On May 7, 2014, the Company issued 310,000 shares of common stock for $27,280 at $0.0880 per share pursuant to an Equity Purchase Agreement.

On May 23, 2014, the Company issued 310,000 shares of common stock for $25,567 at $0.0826 per share pursuant to an Equity Purchase Agreement.

On June 9, 2014, the Company issued 300,000 shares of common stock for $20,229 at $0.06758 per share pursuant to an Equity Purchase Agreement.

On June 23, 2014, the Company issued 323,950 shares of common stock for $19,956 at $0.06174 per share pursuant to an Equity Purchase Agreement.

On May 30, 2014, the Company issued 500,000 shares of common stock for $0.05 per share for consulting services of $25,000.

On July 7, 2014, the Company entered into a private placement agreement that involved issuing 5,000,000 units of securities at $0.05 per unit for a total amount of cash of $250,000. Each unit consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrants for a total of 5,000,000 warrants with an exercise price of $0.30 each expiring January 31, 2016.

For the year ended August 31, 2014, the Company recognized two equity transactions in warrants which hada totalBlack-Scholes value of $27,449.

Note 11 – Warrants

During the fiscal year ended August 31, 2013, the Company entered two private placement agreements with various investors. (Refer to Note 10–Capital Stock).

Under the private placements, the Company issued 600,000 units of securities for total cash proceeds of $150,000. One private placement of 200,000 units of securities consisted of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant with an exercise price of $0.50 and expires on March 31, 2014. The other private placement of 400,000 units of securities consisted of one (1) share of common stock, par value $0.0001 per share and two (2) common stock purchase warrants with an exercise price of $0.40 and expiring July 31, 2015.

During the fiscal year ended August 31, 2014, the Company entered into four private placement agreements for total cash proceeds of $250,000.  The private placements of 5,000,000 units consist of one (1) share of common stock, par value $0.0001 per share and one (1) common stock purchase warrant with an exercise price of $0.30 and expiring January 31, 2016.  The Company also issued 1,000,000 warrants to an investor in consideration of a loan for $50,000.  These warrants had an exercise price of $0.18 and exercise period of one and a half years.

During the three months ended November 30, 2014, the Company did not issue any additional warrants or other convertible securities.

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The following table is a summary of information about the outstanding stock warrants as ofNovember 30, 2014:

Shares Underlying \Warrants Outstanding	Weighted Average Remaining Contractual Life		Weighted Average	Exercise Price
$0.40 $0.18 - $0.30	800,000 Shares \ 800,000 Warrants 6,000,000 Shares \ 6,000,000 Warrants		0.53 years 1.02 years	$0.32 $0.28

The following table is a summary of activity of outstanding stock warrants for the three months ended November 30, 2014:Activity	Number of Warrants	Weighted Average Exercise Price
Balance, August 31, 2014	6,800,000	$0.29
Warrants expired	-	-
Warrants cancelled	-	-
Warrants Granted	-	-
Warrants exercised	-	-
Balance, November 30, 2014	6,800,000	$0.29

NOTE 12 - Contingencies, Litigation

There were no loss contingencies or legal proceedings against the Company with respect to matters arising in the ordinary course of business.

St. George Investment Settlement:

On October 23, 2013, the Company filed a complaint against St George Investments, LLC (“St. George") in Superior Court, Ventura County California seeking declaratory relief as to contracts relating to the Company’s May, 2012 purchase of the assets of Helix Wind from St. George for treasury stock then valued in excess of $1.8 Million and a subsequent February 2013 promissory note for $275,000 executed under the terms of an amendment to the May, 2012 asset purchase agreement.  The Company alleged that the Helix Wind asset purchase price had been substantially paid and, in fact, may have been overpaid in light of St. George’s failure to deliver all of the intellectual property of Helix Wind.

On February 3, 2014, the parties participated in a mediation session at the Federal Court and executed an agreement reflecting a settlement in principal (the “Settlement”) which becomes binding only if the parties are unable to come to terms on more formal settlement agreements.  The parties have since executed more formal settlement agreements which are included as an exhibit hereto.  The basic terms of the Settlement required the issuance of an additional 5,000,000 shares of our common stock to St George under the Helix APA; required St. George to purchase additional shares of our common stock for $300,000 ($0.15 per share) which is a price above the market price at the time of the Settlement; fixed the amount due on the note issued to St George in connection with the Helix APA at $600,000 and granted the Company certain prepayment rights.  The Settlement provides for limitations on the amounts of our common stock that St. George may sell into the market.

As of November 30, 2014, the Company still owed St. George $600,000. See Note 14.

NOTE 13 – Correction of an Error

The Company acquired patents and other intangible property in 2012.  The originally acquired patents were not given lives nor did they begin their amortization.   Also the Company had expensed certain legal costs on patents

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which should have been capitalized into the patents.  The Company had also acquired restrictive covenants of $432,500 which should have been fully amortized in 2013. The unrecognized amortization for the intangible assets for the three months ending November 30, 2013 was $18,491.  

The Company also had entered into debt agreements which included original issuance discounts on the loans and a delayed prepaid interest charge.  The Company was recognizing these amounts as the underlying debt was converted.  Since the full amount owed of interest and discounts were convertible to shares, the expense should have been recognized in the period it was initially convertible.  Accordingly, interest was overstated by $12,864 for the three months ending November 30, 2013.

Also the debt agreements included preferential conversion terms which were not identified as possible derivatives.  It was determined that the agreements were both under the preferential discount on the conversion of the loan balances to common stock.  The fair market value of the possible share conversion terms for the three months ending November 30, 2013 was $342,008, for an increase in other income of $8.337.

For the three months ending November 30, 2013, these corrections resulted in an increase of $2,710to the net loss of $180,535 for a restated net loss of $183,245 and the same increase to the accumulated deficit, and no effect upon the loss per share for the quarter.

NOTE 14 – Subsequent Events

Management has reviewed and evaluated subsequent events and transactions occurring after the balance sheet date, November 30th, 2014, through the filing of this Quarterly Report on Form 10-Q on January 15^th, 2015 and determined that only the following additional subsequent event has occurred:

Conversion of Settlement Debt—In early January 2015, St. Georges Investments elected to convert $30,000 of the loan balance in to the Company’s common stock.  On January 5^th, the Company authorized 698,324 shares of common stock to be issued in exchange for cancellation of $30,000 of the convertible loan.

Item 2 – Management’s Discussion and Analysis or Plan of Operation

Overview

We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions could be incorrect.  In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements.  We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.  Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements include the following:

RESULTS OF OPERATIONS

Three months ended November 30, 2014 v. three months ended November 30, 2013

We have not realized any revenue through November 30, 2014, however the net income reported for the three months ended November 30, 2014 pertains to Other Income and is the result of the change of Derivative Liabilities on Convertible Loans.  Our operating expenses increased to $206,893 for the three months ending November 30, 2014 from $187,205 for the three months ending November 30, 2013due to having proved our concept and devoting resources to calibrating our turbines to harmonize with peripheral components. Consulting expenses increased to $43,814for the three months ended November 30, 2014from $24,131for the three months ended November 30,

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2013.These overall increases in expenses were offset by decreases in financing costs and other non-operating expenses resulted in our net income of  $43,107 for the three months ended November 30, 2014 as compared to the net loss of $180,536 or the three months ended November 30, 2013.We anticipate continued increased costs associated with increased levels of operation and our manufacturing and marketing processes which will begin in the current fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows used in operating activities for the three months ended November 30, 2014, was $183,337. There were no net cash flows used in investing or financing activities for the three months ended November 30, 2014. We had cash resources of $277,526 at November 30, 2014, and we intend to rely on the sale of stock in private placements to increase liquidity to enable us to execute on our plan to manufacture and market vertical axis wind turbines.  As reported on a Current Report on Form 8-K filed on May 7, 2013, we have entered into an Equity Purchase Agreement from which we anticipate raising substantial additional cash resources, but there can be no assurance that this will occur.

As of May 7, 2013, the Registrant entered into two agreements with Beaufort Ventures PLC, a United Kingdom company (“BVPLC”), an Equity Purchase Agreement (the “EPA”) and a Registration Rights Agreement (the “RRA”).  The two agreements we filed as exhibits to the Registrant’s Current Report on Form 8-K dated May 28, 2013 and the Registrant’s Registration Statement on Form S-1 Number 333-189275 ordered effective September 23, 2013, and the following summary is qualified in its entirety by reference to such exhibits.

The agreements required the Registrant to file a registration statement for the common stock underlying the EPA. Subject to various limitations set forth in the EPA, BVPLC, after effectiveness of such registration statement, was required to purchase up to $1,500,000 worth of the Registrant’s common stock at a price equal to 80% of the market price as determined under the EPA (prior ten trading days).  The EPA provides for volume limitations on the amount of shares that BVPLC must purchase at any time and provides that the Registrant will be paid for the common stock upon electronic delivery of the shares to BVPLC.  BVPLC bore the attorney fees relating to the Registration Statement and is not charging the Registrant any additional fees. The Registration Statement was filed by the Registrant and was ordered effective on September 23, 2013.

Funds realized through the EPA are being used by the Registrant as working capital for its operations.  To date we have drawn down $335,199.  We cannot draw down further amounts under the EPA unless we are able to file a post-effective amendment to our registration statement and have it ordered effective.  There can be no assurance we will be able to accomplish these goals.

This is not sufficient to fund our operations and we intend to rely on the sale of stock in private placements to increase liquidity.  If we are unable to raise cash through the sale of our stock, we may be required to severely restrict our operations.  

Critical Accounting Policies

Financial Reporting Release No. 60 of the SEC encourages all companies to include a discussion of critical accounting policies or methods used in the preparation of the financial statements. There are no current revenue-generating activities that give rise to significant assumptions or estimates.  Our financial statements filed as part of our November 30, 2014 Quarterly Report on Form 10-Q includes a summary of the significant accounting policies and methods used in the preparation of our financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. - Quantitative and Qualitative Disclosures About Market Risk

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The Company is a smaller reporting company and is not required to provide this information.

Item 4T. - Controls and Procedures

Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.  Disclosure controls and procedures 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 Exchange Act 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.

We conducted an evaluation, with the participation of our Chief Executive Officer who is also our principal financial officer, of the effectiveness of our disclosure controls and procedures as of November 30, 2014.  Based on that evaluation, our Chief Executive Officer has concluded that as of November 30, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles.  Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  Management has identified the following two material weaknesses that have caused management to conclude that, as of November 30, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level:

1.           We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ending August 31, 2014, and the quarter ended November 30, 2014. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.           We do not have sufficient segregation of duties within accounting functions, which is a basic internal control.  Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.  Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial

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officers and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

·

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

·

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the issuer; and

·

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of the end of our most recent fiscal quarter, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.  Based on that evaluation, they concluded that, as of November 30, 2014, such internal control over financial reporting was not effective.  This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal control over financial reporting that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and (2) inadequate segregation of duties consistent with control objectives of having segregation of the initiation of transactions, the recording of transactions and the custody of assets.  The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of November 30, 2014.

Management believes that the material weaknesses set forth in items (1) and (2) above did not have an effect on our financial results.  However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only the management's report in this quarterly report.

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Management's Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

We will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. First, we will create a position to segregate duties consistent with control objectives of having separate individuals perform (i) the initiation of transactions, (ii) the recording of transactions and (iii) the custody of assets. Second, we will create a senior position to focus on financial reporting and standardizing and documenting our accounting procedures with the goal of increasing the effectiveness of the internal controls in preventing and detecting misstatements of accounting information. Third, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds areavailable to us. Although there is substantial uncertainty in any such estimate, we anticipate the costs of implementing these remediation initiatives will be approximately $50,000 to $100,000 a year in increased salaries, legal and accounting expenses.

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.

We anticipate that these initiatives will be at least partially, if not fully, implemented by August 31, 2015.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the quarter ended November 30, 2014 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

On October 23, 2013, the Company filed a complaint against St George Investments, LLC (“St. George") in Superior Court, Ventura County California seeking declaratory relief as to contracts relating to the Company’s May, 2012 purchase of the assets of Helix Wind from St. George for treasury stock then valued in excess of $1.8 Million and a subsequent February 2013 promissory note for $275,000 executed under the terms of an amendment to the May, 2012 asset purchase agreement.  The Company alleged that the Helix Wind asset purchase price had been substantially paid and, in fact, may have been overpaid in light of St. George’s failure to deliver all of the intellectual property of Helix Wind. St. George interpreted the contracts and promissory note as entitling it to a windfall recovery above and beyond the asset purchase price and promissory note amount. On November 21, 2013, St George exercised its right as a non-California based entity to remove the action from the Ventura state court to the federal court sitting in Los Angeles, the United States District Court for the Central District of California.  On November 26, 2013, St. George filed its answer and counterclaim seeking to enforce its interpretation of the contracts and to thereby collect approximately $440,000 above and beyond what is otherwise due, plus costs and attorney’s fees. On February 3, 2014, the parties participated in a mediation session at the Federal Court and executed an agreement reflecting a settlement in principal (the “Settlement”) which becomes binding only if the parties are unable to come to terms on more formal settlement agreements.  The parties have since executed more formal settlement agreements which are included as an exhibit hereto.  The basic terms of the Settlement required the issuance of an additional 5,000,000 shares of our common stock to St George under the Helix APA; required St. George to purchase an additional shares of our common stock for $300,000 ($0.15 per share) which is a price above the market price at the time of the Settlement; fixed the amount due on the note issued to St George in connection with the Helix APA at $600,000 and granted the Company certain prepayment rights.  The Settlement provides for limitations on the amounts of our common stock that St. George may sell into the market. The foregoing is a summary only and is qualified by reference to the settlement agreement included as an exhibit to the Company’s Form 10-K for the year ended August 31, 2014.

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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  

Not applicable

Item 5 – Other Information

None.

Item 6 – Exhibits

The following documents are filed as part of this Report.

31.1*  Certification of Chief Executive and Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

32.1*  Certification pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 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 herewith.

**Furnished herewith.

SIGNATURE

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

SAUER ENERGY, INC.

 

Date: January16, 2015

By:    /s/Dieter R. Sauer, Jr.

Name: Dieter R. Sauer, Jr., CEO

(Principal Executive, Accounting and Financial Officer)

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