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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

  Amendment No. 1

 

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

 

For the quarterly period ended September 30, 2014

 

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

 

For the transition period from __________ to __________

 

SUNVAULT ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

333-181040

 

27-4198202

(State or other jurisdiction

of incorporation or organization)

 

(Commission
File Number)

 

(I.R.S. Employer

Identification No.)

 

107 Portside Court Kelowna, BC

 

V1V1T2

(Address of principal executive offices)

 

(Zip Code)

 

778-478-9530

Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

   

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨ No  x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date 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  ¨

 

As of March 20, 2015, there were 106,878,613 shares of company common stock issued and outstanding

 

 

 

Explanatory Note

 

Our company is filing this Form 10-Q/A for the period ended September 30, 2014 to correct clerical errors to the cover page, to indicate that:

 

 

(A)

our company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that our company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days; and

 

 

 
 

(B)

to also indicate that our company has submitted electronically and posted on our corporate Website, 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 our company was required to submit and post such files). The above described changes had no effect on our company’s financial position or results of operations.

 

This amended report does not reflect events occurring after the filing of the Form 10-Q on March 20 , 2015, nor does it modify or update those disclosures presented therein, expect with regard to the modification described in this Explanatory Note. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as a result of this amended report, the certifications filed and furnished as exhibits to the Form 10-Q pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 have been re-executed and re-filed as of the date of this amended report and are included as exhibits hereto.

 

 

 
2

 

SUNVAULT ENERGY, INC.

Quarterly Report on Form 10-Q

For The Quarterly Period Ended

September 30, 2014

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

   
     

Cautionary Note Regarding Forward-Looking Statements

   

4

 
         

Item 1.

Financial Statements

   

5

 
           
 

Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013 (unaudited)

   

6

 
           
 

Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013 (unaudited)

   

7

 
           
 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (unaudited)

   

8

 
           
 

Notes to the Consolidated Financial Statements (unaudited)

   

9

 
           

Item 2.

Management’s Discussion and Analysis of Financial Condition of and Results of Operations

   

24

 
           

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

   

32

 
           

Item 4.

Controls and Procedures

   

32

 

 

PART II – OTHER INFORMATION

   
     

Item 1.

Legal Proceedings

   

33

 
           

Item 1A.

Risk Factors

   

35

 
           

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

   

38

 
           

Item 3.

Defaults Upon Senior Securities

   

40

 
           

Item 4.

Mine Safety Disclosures

   

40

 
           

Item 5.

Other Information

   

40

 
           

Item 6.

Exhibits

   

41

 
           

SIGNATURES

   

42

 

 

 
3

 

PART I – FINANCIAL INFORMATION

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States; we do not intend to update any of the forward-looking statements to conform these statements to actual results. Risk Factors may include: 

 

 

·

anticipated growth strategies and our ability to manage the expansion of our business operations effectively;

 

·

our ability to keep up with rapidly changing technologies and evolving industry standards;

 

·

our ability to source our needs for skilled employees;

 

·

the loss of key members of our senior management; and

 

·

uncertainties with respect to the legal and regulatory environment surrounding our technologies.

 

·

Ability to finance for projects and the company.

 

Our consolidated financial statements are stated in United States dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

 

As used in this current report and unless otherwise indicated, the terms "we", "us", "our" and “Sunvault” mean Sunvault Energy, Inc. and our wholly-owned subsidiaries unless otherwise indicated:

 

 

1.

1454004 Alberta Ltd., an Alberta, Canada corporation;

 

2.

CleanGen Inc., an Alberta, Canada corporation;

 

3.

CleanGen Power Corp., the wholly-owned subsidiary of 1454004 Alberta Ltd.;

 

4.

CleanGen Aboriginal HR Services Ltd., the wholly-owned subsidiary of CleanGen Inc.;

 

5.

1098541 Alberta Ltd., the wholly-owned subsidiary of CleanGen Inc. and the general partner of

CuttingEdge Tire Recycling Limited Partnership; and

 

6.

Coole Immersive Inc., the 75.5% owned subsidiary of CleanGen Inc.;

 

7.

Werkman Transport Inc., an Alberta, Canada corporation.

 

Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

 

As used in this quarterly report, the terms the “Company”, “Sunvault”, “we”, “us” and “our” refer to Sunvault Energy Inc., a Nevada company.

 

 
4

 

Item 1. Financial Statements

 

SUNVAULT ENERGY, INC.

Consolidated Financial Statements

September 30, 2014

(Expressed in U.S. dollars)

(unaudited)

 

  Index  
     

Consolidated Balance Sheets

 

5

 
     

Consolidated Statements of Operations

   

6

 
     

Consolidated Statements of Cash Flows

   

7

 
     

Notes to the Consolidated Financial Statements

   

8

 

 

 
5

 

Sunvault Energy, Inc. 

Consolidated Balance Sheets 

(Expressed in U.S. dollars) 

(unaudited)

 

    September30,
2014
$
    December 31,
2013
$
 

ASSETS

 
         

Current assets

       

Cash

 

223,631

   

547,288

 

Accounts receivable, net of allowance for doubtful accounts of $nil (December 31, 2013 – $nil) (Note 6)

   

1,470,902

     

987,267

 

Inventory (Note 7)

   

1,039,716

     

589,320

 

Due from related parties (Note 15)

   

123,424

     

22,815

 

Prepaid expenses and deposits

   

120,824

     

76,681

 

Total current assets

   

2,978,497

     

2,223,371

 
               

Restricted cash (Note 8)

   

13,384

     

14,102

 

Deferred financing costs (Note 10)

   

18,253

     

 

License

   

51,690

     

 

Property and equipment (Note 9)

   

2,626,295

     

1,546,005

 

Goodwill

   

515,169

     

145,183

 

Total assets

   

6,203,288

     

3,928,661

 
               

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 
               

Current liabilities

               

Bank indebtedness

   

233,574

     

 

Accounts payable and accrued liabilities (Note 15)

   

1,209,976

     

471,855

 

Current portion of long-term debt (Note 13)

   

148,001

     

155,932

 

Current portion of capital lease obligations (Note 14)

   

121,428

     

70,032

 

Deferred revenue

   

2,000,887

     

1,855,097

 

Loans payable (Note 11)

   

123,312

     

1,194,886

 

Due to related parties (Note 15)

   

641,537

     

329,195

 

Total current liabilities

   

4,478,715

     

4,076,997

 
               

Site retirement obligation (Note 12)

   

68,038

     

71,684

 

Convertible debt (Note 10)

   

229,772

     

 

Long-term debt (Note 13)

   

394,362

     

532,160

 

Capital lease obligations (Note 14)

   

241,935

     

38,749

 

Total liabilities

   

5,412,822

     

4,719,590

 
               

Nature of operations and continuance of business (Note 1)

               

Commitments and contingencies (Note 19)

               

Subsequent events (Note 20)

               
               

Stockholders’ equity (deficit)

               

Common stock, 500,000,000 shares authorized, $0.001 par value 102,878,613 and 19,500,000 shares issued and outstanding, respectively

   

102,878

     

19,500

 

Additional paid-in capital

   

2,756,873

   

(19,500

)

Deferred compensation (Note 16)

 

(34,464

)

   

 

Accumulated other comprehensive income

   

73,140

     

75,791

 

Deficit

 

(2,415,507

)

 

(1,321,331

)

Total Sunvault Energy, Inc. stockholders’ equity (deficit)

   

482,920

   

(1,245,540

)

               

Non-controlling interest

   

307,546

     

454,611

 

Total stockholders’ equity (deficit)

   

790,466

   

(790,929

)

Total liabilities and stockholders’ equity (deficit)

   

6,203,288

     

3,928,661

 

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 
6

 

Sunvault Energy, Inc. 

Consolidated Statements of Operations and Comprehensive Loss 

(Expressed in U.S. dollars) 

(unaudited)

 

    Three Months Ended
September 30,
2014
$
    Three Months Ended
September 30,
2013
$
    Nine Months
Ended
September 30,
2014
$
    Nine Months
Ended
September 30,
2013
$
 

Revenues

                               

Non-program service revenue

   

256,953

     

295,525

     

720,249

     

933,931

 

Recycling revenue

   

467,257

     

292,747

     

971,703

     

408,248

 

Scrap metal revenue

   

32,073

     

9,983

     

55,282

     

44,965

 

Services rig and software revenue

   

159,333

     

37,409

     

243,180

     

114,321

 

Tire collections

   

333,558

     

469,997

     

856,556

     

1,283,131

 

Tire shred revenue

   

629,977

     

1,007,886

     

1,233,138

     

2,415,583

 

Transportation revenue

   

524,592

     

     

1,233,949

     

 

Total revenues

   

2,403,743

     

2,113,547

     

5,314,057

     

5,200,179

 
                               

Direct costs

                               

Amortization

   

66,397

     

75,480

     

176,690

     

230,052

 

Equipment rental and maintenance

   

174,991

     

110,850

     

504,670

     

319,045

 

Freight and transportation (Note 15)

   

271,032

     

619,691

     

796,569

     

1,576,859

 

Labour (Note 15)

   

891,124

     

182,583

     

1,763,798

     

476,464

 

Materials

   

215,295

     

316,801

     

127,250

     

782,801

 

Provision for costs to complete tire processing

   

88,842

     

154,161

     

274,463

     

495,813

 

Sales and marketing (Note 15)

   

2,004

     

16,532

     

5,046

     

48,607

 

Site operating costs

   

49,097

     

96,841

     

160,040

     

266,160

 

Total direct costs

   

1,758,782

     

1,572,939

     

3,808,526

     

4,195,801

 

Gross profit

   

644,961

     

540,608

     

1,505,531

     

1,004,378

 
                               

Operating expenses

                               

Administrative fees

   

36,173

     

35,121

     

107,209

     

105,168

 

Amortization

   

18,419

     

6,902

     

33,428

     

21,209

 

Bad debts

   

58,537

     

     

80,195

     

 

Consulting fees (Note 15)

   

154,700

     

38,682

     

645,521

     

181,576

 

Equipment rental and maintenance

   

86,682

     

2,710

     

134,403

     

24,233

 

Foreign exchange gain

   

20,920

     

     

8,240

     

 

Interest

   

25,021

     

19,659

     

59,550

     

42,631

 

Management fees (Note 15)

   

190,313

     

124,644

     

518,211

     

409,116

 

Office and miscellaneous

   

122,862

     

36,883

     

230,525

     

123,169

 

Professional fees

   

119,155

     

32,333

     

341,587

     

172,501

 

Rent (Note 15)

   

36,961

     

19,405

     

128,330

     

56,435

 

Salaries and subcontracting fees (Note 15)

   

79,947

     

28,588

     

175,230

     

77,891

 

Travel and entertainment

   

27,707

     

25,213

     

100,850

     

59,523

 

Total operating expenses

   

977,397

     

370,140

     

2,563,279

     

1,273,452

 

Net income (loss) before other income

 

(332,436

)

   

170,468

   

(1,057,748

)

 

(269,074

)

                               

Other income

                               

Gain on settlement of debt

   

     

     

20,400

     

 

Net income (loss)

 

(332,436

)

   

170,468

   

(1,037,348

)

 

(269,074

)

Less: net loss (income) attributable to non-controlling interest

 

(178,691

)

   

17,331

   

(56,828

)

   

174,417

 

Net income (loss) attributable to Sunvault Energy, Inc.

 

(511,127

)

   

187,799

   

(1,094,176

)

 

(94,657

)

                               

Comprehensive income (loss)

                               

Foreign currency translation gain (loss)

 

(22,896

)

 

(35,345

)

 

(2,651

)

   

47,326

 

Comprehensive income (loss) attributable to Sunvault Energy, Inc.

 

(534,023

)

   

152,454

   

(1,096,827

)

 

(47,331

)

Income (loss) per share attributable to Sunvault Energy, Inc. shareholders, basic and diluted

 

(0.01

)

   

0.01

   

(0.01

)

   

 

Weighted average shares outstanding used in the calculation of net income (loss) attributable to Sunvault Energy, Inc. per common share

   

99,746,983

     

19,500,000

     

79,572,814

     

19,500,000

 

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 
7

 

Sunvault Energy, Inc. 

Consolidated Statements of Cash Flows 

(Expressed in U.S. dollars) 

(unaudited)

 

    Nine Months Ended     Nine Months Ended  
    September 30,
2014
$
    September 30,
2013
$
 
Operating activities        

Net loss

 

(1,037,348

)

 

(269,074

)

Adjustments to reconcile net loss to net cash provided by operating activities:

               

Amortization

   

204,921

     

251,261

 

Amortization of deferred financing costs

   

5,197

     

 

Gain on settlement of debt

 

(20,400

)

   

 

Stock-based compensation

   

422,963

     

 

Changes in operating assets and liabilities:

               

Accounts receivable

 

(483,635

)

 

(1,060,151

)

Inventory

   

49,604

     

782,801

 

Due from related parties

 

(100,609

)

 

(49,032

)

Prepaid expenses and deposits

 

(27,791

)

   

59,378

 

Accounts payable and accrued liabilities

   

590,645

     

185,460

 

Deferred revenue

   

145,790

     

495,814

 

Due to related parties

   

356,046

     

480,188

 

Net cash provided by operating activities

   

105,383

     

876,645

 

Investing activities

               

Cash acquired on recapitalization

   

562

     

 

Cash acquired on acquisition of 1098541 Alberta Ltd.

   

     

322,973

 

License costs

 

(21,690

)

   

 

Purchase of property and equipment

 

(440,276

)

 

(225,364

)

Redemption of term deposit

   

     

635,020

 

Net cash provided by (used in) investing activities

 

(461,404

)

   

732,629

 

Financing activities

               

Bank indebtedness

   

105,573

     

 

Deferred financing costs

 

(23,450

)

   

 

Proceeds from convertible debt

   

229,772

     

 

Proceeds from related parties

   

26,769

     

 

Repayment of loans payable

 

(24,676

)

 

(893,235

)

Repayment of long-term debt

 

(114,571

)

 

(98,486

)

Repayment of capital lease obligations

 

(78,114

)

 

(58,533

)

Repayments to related parties

   

   

(29,307

)

Net cash provided by (used in) financing activities

   

121,303

   

(1,079,561

)

Effect of foreign exchange rate changes on cash

 

(88,939

)

 

(10,221

)

Increase (decrease) in cash

 

(323,657

)

   

519,492

 

Cash, beginning of period

   

547,288

     

39,528

 

Cash, end of period

   

223,631

     

559,020

 

Non-cash investing and financing activities:

               

Shares issued to acquire property and equipment

   

350,000

     

 

Shares issued to settle convertible debt

   

22,167

     

 

Shares issued to settle related party debt

   

31,100

     

 

Shares issued to settle accounts payable and accrued liabilities

   

15,666

         

Supplemental disclosures:

               

Interest paid

   

50,113

     

48,234

 

Income taxes paid

   

     

 

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 
8

 

Sunvault Energy, Inc.

Notes to the Consolidated Financial Statements 

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited)

 

1. Nature of Operations and Continuance of Business

 

Sunvault Energy, Inc. (the “Company) was incorporated in the State of Nevada on December 8, 2010 under the name China Green Clothing Inc. The Company changed its name on April 29, 2011 to My Natural Baby Boutique Inc. then to Organic Treehouse Ltd. on January 5, 2012 then to Sunvault Energy, Inc. on May 24, 2013. The Company’s previous business was in the wholesale and distribution of organic infant and toddler products which was discontinued on May 8, 2013. On February 19, 2014, the Company entered into a share purchase agreement to acquire 100% of the shares of 1454004 Alberta Ltd., which holds 100% of the issued and outstanding shares of CleanGen Power Corp. and 50% of the issued and outstanding shares of CleanGen Inc. CleanGen Inc. is a company based in Alberta, Canada that operates Cutting Edge Tire Recycling LP, CleanGen Aboriginal HR Services Ltd., and Coole Immersive Inc. (refer to Note 3). On April 11, 2014, the Company entered into a purchase agreement with 1301540 Alberta Ltd., an Alberta, Canada corporation, operating under the name Werkman Transport, (refer to Note 4) to acquire its business operations. On July 15, 2014, the Company entered into a purchase agreement with Kanata Metis Cultural Enterprises Ltd., an Alberta, Canada corporation and Elizabeth Metis Settlement, an Alberta, Canada statutory corporation, to acquire the remaining non-controlling interest of CleanGen Inc. (refer to Note 5). The Company’s current business is to provide renewables integration into energy production, energy delivery, and energy consumption as well as transport services.

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues since inception and is unlikely generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at September 30, 2014, the Company has a working capital deficiency of $1,500,218 and has accumulated losses of $2,415,507 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

2. Significant Accounting Policies

 

(a) Basis of Presentation

 

These consolidated financial statements and related notes are prepared in conformity with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Werkman Transport Inc. and 1454004 Alberta Ltd., including 1454004 Alberta Ltd.’s wholly-owned subsidiaries, CleanGen Power Corp., and CleanGen Inc., including CleanGen Inc.’s wholly-owned subsidiaries, CleanGen Aboriginal HR Services Ltd. and 1098541 Alberta Ltd. (which is the general partner for CuttingEdge Tire Recycling Limited Partnership), and its 75.5% owned subsidiary Coole Immersive Inc. All inter-company balances and transactions have been eliminated.

 

(b) Interim Financial Statements

 

These interim consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

 

(c) Use of Estimates

 

The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of property and equipment, valuation of inventory, impairment of goodwill and licenses, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

 
9

 

Sunvault Energy, Inc.

Notes to the Consolidated Financial Statements  

September 30, 2014  

(Expressed in U.S. dollars)  

(unaudited)

 

2. Significant Accounting Policies (continued)

 

(d) Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

 

(e) Accounts Receivable

 

The Company recognizes allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to make required payments. The allowance is based on the business environment, historical bad debt expense, the age of receivable and the specific identification of receivables the Company considers at risk.

 

(f) Inventory

 

Inventory consists of shredded tire inventory, mulch inventory, and solar panels, and is comprised entirely of finished products. Inventory is valued at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling costs.

 

(g) License

 

License consists of a royalty-bearing, exclusive license to certain patented inventions in the area of electrochemical based solar cells with energy storage capacity. License is recognized and measured at cost. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying value over the fair value of the asset.

 

(h) Equipment

 

Equipment is initially recorded at cost. Amortization is provided using the following rates:

 

Building

   

20 years straight-line

 

Computer equipment

   

3 years straight-line

 

Field and production equipment

   

5 to 15 years straight-line

 

Furniture

   

20% declining balance

 

Transportation equipment

   

10 to 20 years straight-line

 

Truck

   

25% declining balance

 

 

(i) Goodwill

 

Goodwill represents the excess of the acquisition price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business combination. Goodwill is not amortized, but is tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.

 

The Company consists of a single reporting unit. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit including goodwill is compared with its fair value. The estimated fair value is determined utilizing a market-based approach, based on the quoted market price of the Company’s stock in an active market, adjusted by an appropriate control premium. When the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and the second step is necessary.

 

In the second step of the goodwill impairment test, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure the amount of the impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the value of goodwill is determined in a business combination using the fair value of the reporting unit as if it were the acquisition price. When the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess and is presented as a separate line item in the consolidated statements of operations. Establishing an implied fair value of goodwill requires the Company to make estimates for key inputs into complex valuation models and to apply significant judgment in the selection of estimates, assumptions and methodologies required to complete the analysis. Areas of judgment include, but are not limited to, development of multi-year business cash flow forecasts, the selection of discount rates and the identification and valuation of unrecorded assets.

 

 
10

  

Sunvault Energy, Inc.

Notes to the Consolidated Financial Statements

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited)

 

2. Significant Accounting Policies (continued)

 

(j) Impairment of Long-lived Assets

 

In accordance with ASC 360, “Property, Plant, and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

 

(k) Site Retirement Obligations

 

A site retirement obligation is recognized at the best estimate of the expenditure required to settle the present obligation at the balance sheet date when the liability for a site retirement obligation is incurred and a reasonable estimate of the obligation is determinable. The best estimate of the site retirement obligation is the present value of the amount the Company would rationally pay to settle the obligation, or transfer it to a third party, at the balance sheet date.

 

When a liability is recognized, a corresponding site retirement cost is capitalized to the carrying amount of the related asset. The site retirement cost is amortized over the estimated useful life of the related asset or over the lease term.

 

The Company recognizes changes to the liability due to the passage of time in operating expenses, as accretion. Changes due to passage of time are calculated by applying an interest method of allocation using the discount rate used in the original calculation of the site retirement obligation. The Company recognizes changes to the liability arising from revisions to the timing, amount of expected undiscounted cash flows or discount rate as an increase or decrease to the carrying amounts of the site retirement obligation and the related site retirement capitalized cost.

 

(l) Leases

 

A lease that transfers substantially all of the benefits and risks of ownership is classified as a capital lease. At the inception of a capital lease, an asset and a payment obligation are recorded at an amount equal to the lesser of the present value of the minimum lease payments and the property’s fair market value. Assets classified as capital leases are amortized using the declining balance method, over their estimated useful lives. All other leases are accounted for as operating leases and rental payments are expensed as incurred.

 

(m)  Revenue Recognition

 

For tires qualifying under Alberta Recycling Management Authority (“ARMA”) programs, tire collections revenue from ARMA is recognized when tires are picked up from clients. Revenue from ARMA for processing these tires is recognized when the tire shred is delivered to an approved location. Costs incurred to process these tires are recorded as inventory until delivery occurs.

 

For tires that do not qualify under ARMA programs (“non-program” tires), tire collections revenue is recognized when tires are received at the Company’s premises and collectability is reasonable assured. Customers also pay a recycling fee for tires delivered to the Company’s premises, which is recorded as deferred revenue. The Company recognizes the recycling fee revenue once the tires have been processed.

 

Revenue on sales of processed tires is recognized when a price is agreed, tire shred is delivered to customers, and collectability is reasonably assured.

 

The Company derives further revenue from wood recycling, equipment rentals, sand sales, tipping fees, service rig training, transportation, and software service. In accordance with ASC 605, “Revenue Recognition”, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the amount is fixed and determinable, and collectability is reasonably assured.

 

Management assesses the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability is reasonable assured. If collectability is not considered reasonably assured at the time of sale, the Company does not recognize revenue until collection occurs.

 

 
11

 

Sunvault Energy, Inc.

Notes to the Consolidated Financial Statements 

September 30, 2014

(Expressed in U.S. dollars) 

(unaudited)

 

2. Significant Accounting Policies (continued)

 

(n) Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

(o) Foreign Currency Translation

 

The Company’s functional currency is the Canadian dollar and its reporting currency is the U.S. dollar. Management has adopted ASC 830, “Foreign Currency Translation Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation of foreign currency denominated transactions or balances are included in the determination of income.

 

The Company follows the current rate method to translate its consolidated financial statements to its reporting currency. Accordingly, assets and liabilities are translated into US dollars at the period end exchange rate while revenue and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income.

 

(p) Financial Instruments and Fair Value Measures

 

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, accounts receivable, restricted cash, accounts payable and accrued liabilities, amounts due to/from related parties, loans payable, convertible debt, long-term debt, and capital lease obligations. Pursuant to ASC 820, the fair values of cash and restricted cash are determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

(q) Comprehensive Income

 

ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. During the nine months ended September 30, 2014, and 2013, the Company recognized foreign currency translation gain (loss) of $(2,651) and $47,326, respectively, in comprehensive income.

 

 
12

 

Sunvault Energy, Inc.

Notes to the Consolidated Financial Statements 

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited) 

 

2. Significant Accounting Policies (continued)

 

(r) Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

3. Acquisition of 1454004 Alberta Ltd.

 

On February 19, 2014, the Company entered into a share purchase agreement to acquire 100% of the shares of 1454004 Alberta Ltd. (“1454004”), which holds 100% of the issued and outstanding shares of CleanGen Power Corp. and 50% of the issued and outstanding shares of CleanGen Inc., in exchange for 19,500,000 shares of common stock of the Company. CleanGen Inc. is a company based in Alberta, Canada that operates Cutting Edge Tire Recycling LP, CleanGen Aboriginal HR Services Ltd., and Coole Immersive Inc.

 

The share purchase agreement was a capital transaction in substance and therefore has been accounted for as a reverse capitalization. Under reverse capitalization accounting, 1454004 was considered the acquirer for accounting and financial reporting purposes, and acquired the assets and assumed the liabilities of the Company. Assets acquired and liabilities assumed are reported at their historical amounts. These consolidated financial statements include the accounts of the Company since the effective date of the recapitalization and the historical accounts of 1454004 since inception.

 

The comparative figures as of December 31, 2013, and for the nine months ended September 30, 2013, are those of 1454004 and 1454004 is deemed to be the continuing entity for accounting purposes.

 

The assets acquired and liabilities assumed from Sunvault Energy, Inc. are as follows:

 

$    
   

Cash

   

562

 

Assets held for sale

     

500,000

 

Licenses

     

30,000

 

Accounts payable and accrued liabilities

   

(152,064

)

Convertible debt

   

(22,167

)

Loan payable

   

(115,281

)

Due to related parties

   

(77,110

)

         

Total purchase price

     

163,940

 

  

4. Acquisition of 1301540 Alberta Ltd.

 

On April 11, 2014, the Company entered into a purchase agreement with 1301540 Alberta Ltd. (“1301540”), an Alberta, Canada corporation, operating under the name Werkman Transport. Pursuant to the agreement, the Company agreed to purchase all of the transportation assets and other assets of 1301540, excluding all land and buildings, but including the right to use the name Werkman Transport at a purchase price of Cdn$3,000,000, payable in shares of common stock. Cdn$1,000,0000 or 5,000,000 shares of common stock are to be issued upon closing with the remaining shares of common stock to be issued after six months have elapsed from the closing date. Pursuant to the agreement, the Company created a new, wholly-owned subsidiary, named Werkman Transport Inc. (“WTI”), under which the purchased assets and assumed liabilities of 1301540 were transferred upon receipt by 1301540 of the 5,000,000 shares of common stock of the Company. In addition, WTI entered into a five year contract with 1301540 to supply management services of Jason Werkman at a rate of Cdn$10,000 per month. On April 15, 2014 (the “Closing Date”), the Company issued 5,000,000 shares of common stock pursuant to the purchase agreement.

 

In accordance with ASC 805, Business Combinations, the purchase agreement was deemed a business combination for accounting purposes. Assets acquired and liabilities assumed are reported at their fair values as at the Closing Date. The purchase price was determined to be $534,549 based on an independent valuation of WTI’s business.

 

 
13

 

Sunvault Energy, Inc. 

Notes to the Consolidated Financial Statements  

September 30, 2014  

(Expressed in U.S. dollars)  

(unaudited)  

 

4. Acquisition of 1301540 Alberta Ltd. (continued)

 

The fair value of the assets acquired and liabilities assumed from 1301540 are as follows:

 

 

$

 
     

Accounts receivable

 

278,946

 

Prepaid expenses

   

4,554

 

Transportation equipment

   

498,179

 

Goodwill

   

273,224

 

Accounts payable and accrued liabilities

 

(159,837

)

Loan payable

 

(102,056

)

Capital lease obligations

 

(258,461

)

       

Total purchase price

   

534,549

 

 

5. Acquisition of CleanGen Inc.

 

On July 15, 2014, the Company entered into a purchase agreement with Kanata Metis Cultural Enterprises Ltd. (“Kanata”), an Alberta, Canada corporation and Elizabeth Metis Settlement (“EMS”), an Alberta, Canada statutory corporation. Pursuant to the agreement, the Company agreed to purchase 500,000 Class A shares of common stock of CleanGen Inc., in exchange for 8,000,000 shares of common stock of the Company. On July 23, 2014, the Company issued 8,000,000 shares of common stock pursuant to the purchase agreement and now has 100% of the issued and outstanding shares of CleanGen Inc.

 

In accordance with ASC 810, Consolidation, the purchase agreement was deemed an equity transaction for accounting purposes. A summary of the change in the Company’s ownership interest in CleanGen Inc. is as follows:

 

 

$

 
     

Net loss attributable to Sunvault Energy Inc.

 

(1,094,176

)

       

Increase in the Company’s paid-up capital for purchase of 500,000 Class A shares of common stock of CleanGen Inc.

   

269,558

 
       

Change from net loss attributable to Sunvault Energy Inc. and transfers from the non-controlling interest

 

(824,618

)

 

6. Accounts Receivable

 

    September 30,
2014
$
    December 31,
2013
$
 
         

Trade accounts receivable

 

1,433,156

   

952,575

 

GST receivable

   

31,591

     

30,088

 

Other

   

6,155

     

4,604

 
               
   

1,470,902

     

987,267

 

 

7. Inventory

 

    September 30,
2014
$
    December 31,
2013
$
 
         

Mulch inventory

 

17,596

     

 

Solar panels

   

490,443

     

 

Tire shred inventory

   

531,677

   

589,320

 
               
   

1,039,716

     

589,320

 

 

 
14

 

Sunvault Energy, Inc.  

Notes to the Consolidated Financial Statements 

September 30, 2014

(Expressed in U.S. dollars) 

(unaudited) 

 

8. Restricted Cash

 

As at September 30, 2014, the Company had restricted cash of $13,384 (Cdn$15,000) (December 31, 2013 - $14,102 (Cdn$15,000)), which represents cash pledged as security for the Company’s credit cards. The amount bears interest at 0.85% per annum.

 

9. Property and Equipment

 

    Cost
$
    Accumulated amortization
$
    Net book value as at September 30,
2014
$
    Net book value as at December 31,
2013
$
 
                 

Building

 

98,099

     

   

98,099

     

 

Computer equipment

   

32,188

   

12,326

     

19,862

   

22,395

 

Field and production equipment

   

1,893,880

     

361,173

     

1,532,707

     

1,505,806

 

Furniture

   

21,558

     

7,899

     

13,659

     

5,390

 

Land

   

76,583

     

     

76,583

     

12,414

 

Transportation equipment

   

818,926

     

29,377

     

789,549

     

 

Truck

   

100,000

     

4,164

     

95,836

     

 
                               
   

3,041,234

     

414,939

     

2,626,295

     

1,546,005

 

 

Included in field equipment are assets under capital lease with an original cost of $242,833 (December 31, 2013 - $255,846) and accumulated amortization of $69,512 (December 31, 2013 - $45,831). Included in production equipment are assets under capital lease with an original cost of $44,802 (December 31, 2013 - $47,203) and accumulated amortization of $4,748 (December 31, 2013 - $1,574). Included in transportation equipment are assets under capital lease with an original cost of $393,143 (December 31, 2013 - $nil) and accumulated amortization of $17,561 (December 31, 2013 - $nil). During the nine months ended September 30, 2014, amortization expense includes $46,827 (2013 - $24,171) related to assets under capital leases.

 

Field equipment includes machinery with a carrying value of $nil (December 31, 2013 - $214,484) which was not available for use as at September 30, 2014. As a result, no amortization of these assets has been recorded.

 

10. Convertible Debt

 

 

(a)

On October 31, 2013, the Company issued a convertible promissory note in exchange for accounts payable of $15,000. The note bears interest at 8% per annum, is unsecured, and was due on April 30, 2014. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option at a price of $0.50 per share of the Company’s common stock. During the three months ended March 31, 2014, the Company issued additional amount under this convertible promissory note totalling $7,167 under the same terms. The maturity date will be accelerated to the closing date of any financing transaction in which the Company raises at least $250,000 in gross proceeds. On April 10, 2014, the Company issued 110,835 shares of common stock to settle the convertible debt of $22,167. Refer to Note 16(g).

 

 

 
 

(b)

On November 1, 2013, the Company issued a convertible promissory note in exchange for accounts payable of $25,000. The note bears interest at 8% per annum, is unsecured, and was due on April 30, 2014. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option at a price of $0.50 per share of the Company’s common stock. In December 2013, the Company issued additional amount under this convertible promissory note totalling $10,000 under the same terms. The Company is to issue the holder 45,000 shares of common stock upon the initial conversion of this promissory note. The maturity date will be accelerated to the closing date of any financing transaction in which the Company raises at least $250,000 in gross proceeds. On February 18, 2014, the Company issued 350,000 shares of common stock to settle the convertible debt of $35,000. Refer to Note 16(a).

 

 

 
 

(c)

Effective April 22, 2014, the Company entered into private placement subscription agreements with several investors pursuant to which the Company issued convertible debentures in the aggregate amount of $229,772. The convertible debentures carry interest at the rate of 8% calculated annually and paid quarterly and may be converted into shares of the Company’s common stock at any time at the conversion price of $0.30 per share. The Company must pay back the principal amount outstanding and accrued and unpaid interest any time before or at the maturity date of April 22, 2016. The Company incurred financing costs of $23,450 in connection with the financing, which was deferred and will be amortized over the term of the debt. During the nine months ended September 30, 2014, the Company amortized $5,197 of the deferred financing costs.

 

 
15

 

Sunvault Energy, Inc.  

Notes to the Consolidated Financial Statements 

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited) 

 

10. Convertible Debt (continued)

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company determined that the convertible promissory note contained no embedded beneficial conversion feature as the convertible promissory note was issued with a conversion price higher than the fair market value of the Company’s shares of common stock at the time of issuance.

 

11. Loans Payable

 

 

(a)

As at September 30, 2014, the Company owed $nil (Cdn$nil) (December 31, 2013 - $361,944 (Cdn$385,000)) to Kanata. The amount is non-interest-bearing, unsecured, and due on demand. The loan was forgiven by Kanata and recorded as additional paid-in capital.

 

 

 
 

(b)

As at September 30, 2014, the Company owed $nil (Cdn$nil) (December 31, 2013 - $376,046 (Cdn$400,000)) to Kanata. The amount is non-interest-bearing, unsecured, and due on demand. The loan was forgiven by Kanata and recorded as additional paid-in capital.

 

 

 
 

(c)

As at September 30, 2014, the Company owed $nil (Cdn$nil) (December 31, 2013 - $423,052 (Cdn$450,000)) to Kanata. The amount is non-interest-bearing, unsecured, and due on demand. The loan was forgiven by Kanata and recorded as additional paid-in capital.

 

 

 
 

(d)

As at September 30, 2014, the Company owed $8,031 (Cdn$9,000) (December 31, 2013 – $33,844 (Cdn$36,000)) to Terrence Smith for the acquisition of Coole on July 19, 2012. The amount is secured by Coole, non-interest bearing, and is due on December 31, 2014, with monthly payments of $2,677 (Cdn$3,000).

 

 

 
 

(e)

As at September 30, 2014, the Company owed $115,281 (December 31, 2013 – $nil) to a non-related party for expenses paid on behalf of the Company. The amount due is non-interest bearing, unsecured, and due on demand.

 

12. Site Retirement Obligation

 

The Company operates on aboriginal land and is legally required to dismantle and remove equipment and debris when the land is disposed of. A site retirement obligation has been accrued and a corresponding amount has been capitalized as a site retirement cost, which has been fully amortized to site and operating expenses. The Company estimated the initial fair value of the site retirement obligation using discounted future cash flows. The significant assumptions used to determine fair value include the cost of removal of equipment, debris and soil. Costs have been estimated using current market rates for such services commencing in the year 2015.

 

13. Long-term Debt

 

    September 30,
2014
$
    December 31,
2013
$
 
         

Business Development Bank of Canada, repayable in monthly instalments of Cdn$6,000 plus interest at 7%, maturing May 17, 2018, secured by a general interest in all present and after acquired property.

 

235,567

   

298,956

 
               

Business Development Bank of Canada, repayable in monthly instalments of Cdn$6,667 plus interest at 8%, maturing May 17, 2018, secured by a general interest in all present and after acquired property.

   

261,754

     

332,190

 
               

John Deere Finance, repayable in monthly installments of Cdn$1,262 including interest at 0%, maturing on January 1, 2018, secured by specific equipment.

   

45,042

     

56,946

 
               
   

542,363

     

688,092

 
               

Less: current portion

 

(148,001

)

 

(155,932

)

               

Long-term portion

   

394,362

     

532,160

 

 

 
16

 

Sunvault Energy, Inc. 

Notes to the Consolidated Financial Statements 

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited)

 

13. Long-term Debt (continued)

 

Principal repayments on long-term debt in each of the next five years are as follows:

 

Year

 

$

 
     

2014

 

(Cdn$41,767

37,267

 

2015

 

(Cdn$167,147

)  

149,146

 

2016

 

(Cdn$167,147)

)  

149,146

 

2017

 

(Cdn$167,147

)  

149,146

 

2018

 

(Cdn$64,617

)  

57,658

 
       
   

542,363

 

 

14. Capital Lease Obligations

 

    September 30,
2014
$
    December 31,
2013
$
 
         

Treadco Inc., equipment lease repayable in monthly installments of $4,460 including interest at 12% per annum, due in February 2015, secured by specific field equipment.

 

32,483

   

57,224

 
               

Coast Capital, equipment lease repayable in monthly instalments of $1,111 including interest at 8.23% per annum, due in July 2017, secured by production equipment.

   

31,989

     

41,390

 
               

John Deere, equipment lease repayable in monthly installments of $2,461, due in May 2014, secured by field equipment.

   

     

10,167

 
               

Travelers Financial Corporation, equipment lease repayable in monthly installments of $1,961, due in June 2016, secured by transportation equipment.

   

36,511

     

 
               

Travelers Financial Corporation, equipment lease repayable in monthly installments of $1,989, due in September 2016, secured by transportation equipment.

   

43,502

     

 
               

Travelers Financial Corporation, equipment lease repayable in monthly installments of $3,923, due in June 2018, secured by transportation equipment.

   

145,214

     

 
               

Mercado Capital Corporation, equipment lease repayable in monthly installments of $1,635, due in June 2019, secured by transportation equipment.

   

73,664

     

 
               
   

363,363

     

108,781

 
               

Less: current portion

 

(121,428

)

 

(70,032

)

               

Long-term portion

   

241,935

     

38,749

 

 

Future minimum lease payments related to capital lease obligations are as follows:

 

 

$

 
     

2014

 

47,465

 

2015

   

139,219

 

2016

   

106,379

 

2017

   

70,936

 

2018

   

41,333

 

2019

   

8,010

 
   

413,342

 

Less: imputed interest

 

(49,979

)

   

363,363

 

Less: current portion

 

(121,428

)

Long-term portion

   

241,935

 

 

 
17

 

Sunvault Energy, Inc.  

Notes to the Consolidated Financial Statements 

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited)

 

15. Related Party Transactions

 

 

(a)

As at September 30, 2014, the Company owed $13,740 (December 31, 2013 - $nil) to a company controlled by the President of the Company, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(b)

As at September 30, 2014, the Company owed $4,000 (December 31, 2013 - $nil) to the Chief Technology Officer of the Company, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(c)

As at September 30, 2014, the Company owed $14,980 (December 31, 2013 - $nil) to the Treasurer and Secretary of the Company, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(d)

As at September 30, 2014, the Company advanced $50,449 (December 31, 2013 – $nil) to a company controlled by a significant shareholder, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(e)

As at September 30, 2014, the Company owed $31,420 (December 31, 2013 - $nil) to a director of the Company, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(f)

As at September 30, 2014, the Company owed $23,766 (Cdn$26,634) (December 31, 2013 - $18,929 (Cdn$20,134)) to the President and companies controlled by the President of 1454004, which is unsecured, non-interest bearing, and due on demand. Of this amount, $2,229 (Cdn$2,500) is included in accounts payable and accrued liabilities.

 

 

 
 

(g)

As at September 30, 2014, the Company owed $nil (December 31, 2013 - $310,266 (Cdn$330,031)) to Elizabeth Metis Society, an entity under common control, related to the acquisition of 1098541 Alberta Ltd. The amount was unsecured, non-interest bearing, and due on demand.

 

 

 
 

(h)

As at September 30, 2014, the Company was owed $72,975 (Cdn$81,782) (December 31, 2013 - $22,815 (Cdn$24,268)) from a shareholder of Coole, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(i)

As at September 30, 2014, the Company owed $49,076 (Cdn$55,000) (December 31, 2013 – $nil) to the President of WTI, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(j)

As at September 30, 2014, the Company owed $453,959 (Cdn$508,752) (December 31, 2013 – $nil) to a company controlled by the President of WTI. Of this amount, $349,148 (Cdn$391,290) was for the acquisition of certain assets and assumption of certain liabilities of 1301540 on April 15, 2014, which is non-interest bearing, secured by WTI, and is due on October 15, 2014. Refer to Note 20(b). The remaining amount of $104,811 (Cdn$117,462) is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(k)

As at September 30, 2014, the Company owed $26,056 (Cdn$29,200) (December 31, 2013 – $nil) to the spouse of the President of WTI, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(l)

As at September 30, 2014, the Company owed $26,769 (Cdn$30,000) (December 31, 2013 – $nil) to the brother-in-law of the President of WTI, which is unsecured, non-interest bearing, and due on demand.

 

 

 
 

(m)

For the nine months ended September 30, 2014, the Company incurred management fees of $102,567 (2013 - $136,933), consulting fees of $25,984 (2013 - $nil) and rent expense of $nil (2013 - $9,350) to the President and companies controlled by the President of 1454004.

 

 

 
 

(n)

For the nine months ended September 30, 2014, the Company incurred freight and transportation expenses of $63,378 (2013 - $301,321) and sales and marketing expenses of $nil (2013 - $44,537) to a company owned by the spouse of a member of management of the Company. As at September 30, 2014, $nil (December 31, 2013 - $40,076 (Cdn$42,629)) of these charges was included in accounts payable and accrued liabilities.

 

 

 
 

(o)

For the nine months ended September 30, 2014, the Company incurred labour of $214,585 (2013 - $nil) to a company controlled by the brother of the President of WTI. As at September 30, 2014, $25,859 (Cdn$28,980) (December 31, 2013 - $nil) of these charges was included in accounts payable and accrued liabilities.

 

 

 
 

(p)

For the nine months ended September 30, 2014, the Company incurred consulting fees of $36,468 (2013 - $nil) to a company controlled by a significant shareholder.

 

 

 
 

(q)

For the nine months ended September 30, 2014, included in labour are the following amounts:

 

 

 

·

$3,574 (2013 - $9,842) paid to the daughter of the President of 1454004; and

     
 

 

·

$30,076 (2013 - $45,078) paid to the son of the President of 1454004.

 

 

(r)

For the nine months ended September 30, 2014, included in salaries and subcontracting fees are the following amounts:

 

 

 

·

$2,598 (2013 - $nil) paid to the son of the President of 1454004; and

     
 

 

·

$9,508 (2013 - $nil) paid to a director of 1454004.

 

 
18

 

Sunvault Energy, Inc.  

Notes to the Consolidated Financial Statements 

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited)

 

15. Related Party Transactions (continued)

 

 

(s)

For the nine months ended September 30, 2014, included in management fees are the following amounts:

 

 

 

·

$85,000 (2013 - $nil) paid to the President of the Company;

     
 

 

·

$25,500 (2013 - $nil) paid to the Chief Technology Officer of the Company;

     
 

 

·

$20,000 (2013 - $nil) paid to a director of the Company;

     
 

 

·

$50,144 (2013 - $nil) paid to the President of WTI;

     
 

 

·

$59,569 (2013 - $47,882) paid to the daughter of the President of 1454004;

     
 

 

·

$34,873 (2013 - $28,235) paid to the son of the President of 1454004; and

     
 

 

·

$119,824 (2013 - $91,262) paid to a director of 1454004.

 

16. Common Stock

 

 

(a)

On February 18, 2014, the Company issued 350,000 shares of common stock to settle convertible debt of $35,000. Refer to Note 10(b). These shares of common stock were included in the accounts of the Company as at the effective date of the recapitalization. Refer to Note 3.

 

 

 
 

(b)

On February 18, 2014, the Company issued 300,000 shares of common stock pursuant to a licensing agreement. Refer to Note 19(c). These shares of common stock were included in the accounts of the Company as at the effective date of recapitalization. Refer to Note 3.

 

 

 
 

(c)

On March 7, 2014, the Company issued 19,500,000 shares of common stock pursuant to the share purchase agreement with 1454004 to effect the acquisition and reverse capitalization. Refer to Note 3.

 

 

 
 

(d)

Upon acquisition and reverse capitalization, 65,827,333 shares of common stock issued by the Company prior to the acquisition were considered as a recapitalization to 1454004.

 

 

 
 

(e)

On April 4, 2014, the Company issued 120,000 shares of common stock with a fair value of $15,600 to a company controlled by the President of the Company to settle debt of $30,000. The Company recorded a gain on settlement of debt of $14,400.

 

 

 
 

(f)

On April 4, 2014, the Company issued 50,000 shares of common stock with a fair value of $6,500 to the Chief Technology Officer of the Company to settle debt of $12,500. The Company recorded a gain on settlement of debt of $6,000.

 

 

 
 

(g)

On April 10, 2014, the Company issued 191,130 shares of common stock with a fair value of $37,833 to settle the convertible debt of $22,167, accounts payable of $15,000 and accrued interest of $666. Refer to Note 10(a).

 

 

 
 

(h)

On April 14, 2014, the Company issued 3,333,334 shares of common stock to acquire 100% of the shares of Eco-West Transport Inc., a company based in Alberta, Canada, which is in the business of providing trucking transportation services. On September 9, 2014, the agreement was mutually rescinded. As a result, the Company cancelled the 3,333,334 shares of common stock issued to Eco-West Transport Inc.

 

 

 
 

(i)

On April 28, 2014, the Company issued 5,000,000 shares of common stock with a fair value of $178,183 pursuant to the purchase agreement with 1301540. Refer to Note 4.

 

 

 
 

(j)

On June 5, 2014, the Company issued 100,000 shares of common stock with a fair value of $19,000 to a consultant pursuant to a consulting agreement dated April 15, 2014, of which $14,536 was expensed as consulting fees, which reflects the pro-rata portion of the services provided to September 30, 2014. As of September 30, 2014, the remaining amount of $4,464 was recorded as deferred compensation and will be expensed as consulting fees pro-rata over the term of the agreement which ends on October 14, 2014. The fair value of the shares was determined based on the closing price of the Company’s common stock at $0.19 per share on April 15, 2014.

 

 

 
 

(k)

On June 5, 2014, the Company issued 300,000 shares of common stock with a fair value of $30,000 to a consultant pursuant to a consulting agreement dated March 1, 2014, of which $nil was expensed as consulting fees which reflects the pro-rata portion of the services provided to September 30, 2014. As of September 30, 2014, the remaining amount of $30,000 was recorded as deferred compensation and will be expensed as consulting fees pro-rata over the term of the agreement which will commence in March 2015. The fair value of the shares was determined based on the closing price of the Company’s common stock at $0.10 per share on March 1, 2014.

 

 

 
 

(l)

On June 5, 2014, the Company issued 500,000 shares of common stock with a fair value of $60,000 to a consultant pursuant to an agreement dated March 15, 2014.

 

 
19

 

Sunvault Energy, Inc. 

Notes to the Consolidated Financial Statements 

September 30, 2014 

(Expressed in U.S. dollars) 

(unaudited) 

 

16. Common Stock (continued)

 

 

(m)

On June 6, 2014, the Company issued 600,000 shares of common stock with a fair value of $114,000 to a consultant pursuant to an agreement dated April 15, 2014.

 

 

 
 

(n)

On June 6, 2014, the Company issued 40,150 shares of common stock with a fair value of $7,628 to a consultant pursuant to an agreement dated May 28, 2014.

 

 

 
 

(o)

On June 11, 2014, the Company issued 60,000 shares of common stock with a fair value of $9,000 to the Chief Technology Officer of the Company to settle debt of $9,000.

 

 

 
 

(p)

On June 11, 2014, the Company issued 500,000 shares of common stock with a fair value of $95,000 to a consultant pursuant to an agreement dated April 15, 2014.

 

 

 
 

(q)

On July 23, 2014, the Company issued 8,000,000 shares of common stock to acquire 500,000 Class A shares of common stock of CleanGen Inc., upon which the Company secured a 100% interest of CleanGen Inc. Refer to Note 5.

 

 

 
 

(r)

On July 29, 2014, the Company issued an additional 190,000 shares of common stock to re-price the subscription price for a private placement of shares of common stock issued on September 16, 2013.

 

 

 
 

(s)

On August 8, 2014, the Company issued 1,000,000 shares of common stock with a fair value of $250,000 to two vendors to purchase trailer units pursuant to equipment purchase agreements dated July 25, 2014.

 

 

 
 

(t)

On August 8, 2014, the Company issued 400,000 shares of common stock with a fair value of $100,000 to a vendor to purchase an oil service truck pursuant to an equipment purchase agreement dated July 29, 2014.

 

 

 
 

(u)

On September 26, 2014, pursuant to an addendum to the Services and Commission Agreement with Aboriginal Financial Services Corporation (“AFSC”), the Company issued 500,000 shares of common stock with a fair value of $130,000 to AFSC as additional consideration for AFSC’s performance of services rendered in identifying and introducing other business opportunities to the Company. Refer to Note 19(f).

 

17. Stock Options

 

On February 6, 2014, the Company adopted the 2014 Stock Option Plan which permits the Company to grant stock options for up to 12,968,800 shares of common stock to officers, directors, employees, and consultants. The Board of Directors will determine the exercise price and vesting schedule for stock options granted. The maximum term of stock options granted is five years.

 

A summary of the Company’s stock option activity is as follows:

 

    Number of
options
    Weighted average exercise price
$
    Aggregate
intrinsic value
$
 
             

Outstanding, December 31, 2013

           
             

Issued as part of the recapitalization

 

3,100,000

   

0.10

         
                       

Outstanding, September 30, 2014

   

3,100,000

     

0.10

   

465,000

 

 

Additional information regarding stock options outstanding as at September 30, 2014, is as follows:

 

    Outstanding and exercisable  

Range of exercise prices $

  Number of
shares
    Weighted average remaining contractual life (years)     Weighted average exercise
price
$
 
             

0.10

 

3,100,000

   

4.4

   

0.10

 

 

18. Share Purchase Warrants

 

Pursuant to a consulting agreement dated April 15, 2014, the Company issued 100,000 share purchase warrants exercisable at a price of $2 per share for a term of three years. The fair value of the warrants of $1,800 was estimated using the Black-scholes option pricing model with the following weighted average market assumptions: expected life – 3 years; volatility – 100%; dividend rate – 0%; and risk free rate – 0.84%.

 

 
20

 

Sunvault Energy, Inc.  

Notes to the Consolidated Financial Statements  

September 30, 2014  

(Expressed in U.S. dollars)  

(unaudited) 

 

18. Share Purchase Warrants (continued)

 

The following table summarizes the continuity of share purchase warrants:

 

    Number of
warrants
    Weighted average exercise
price
$
 
         

Balance, December 31, 2013

       
         

Issued as part of the recapitalization

 

20,427,333

   

2.00

 

Issued to a consultant

   

100,000

     

2.00

 
               

Balance, September 30, 2014

   

20,527,333

     

2.00

 

 

As at September 30, 2014, the following share purchase warrants were outstanding:

 

Number of warrants

  Exercise price
$
 

Expiry
date

 

       

60,000

 

2.00

 

September 16, 2015

 

34,000

   

2.00

 

September 17, 2015

 

333,333

   

2.00

 

November 15, 2015

 

100,000

   

2.00

 

April 15, 2017

 

20,000,000

   

2.00

 

August 6, 2023

 

         

20,527,333

         

 

19. Commitments and Contingencies

 

 

(a)

On August 10, 2010, CleanGen Power Corp. (“CleanGen Power”) entered into a lease agreement for land and a building in consideration for base rent of $2,335 (Cdn$2,617) per month, expiring on March 31, 2015. The minimum lease payments over the remaining term of the lease are as follows:

 

Year

 

$

 
   

2014

 

7,005

 

2015

   

7,005

 
       
   

14,010

 

 

 

(b)

On September 14, 2011, CleanGen Power received notice that The Groundworx Co. (“Groundworx") was seeking damages of Cdn$41,648 for repair services provided for a Doppstadt Shredder (the “Shredder”). Management of CleanGen Power asserts that any repair services provided for the Shredder was done without the agreement and the knowledge of CleanGen Power. On October 5, 2012, CleanGen Power has filed a Statement of Defense and Counterclaim, seeking damages of Cdn$6,480,000 from Groundworx for the following: (i) trespassing, including physical damage to the gates and structures located on land that CleanGen Power was entitled to possession of; (ii) removal and conversion of the Shredder without permission; (iii) consequential losses arising from, but not limited to, CleanGen Power’s inability to perform its obligations under agreements with third parties as a direct result of the loss of the Shredder; (iv) damages arising from the disruption of CleanGen Power’s business, causing CleanGen Power to be unable to honour all of its financial obligations to third parties; and (v) administrative time and resources spent by CleanGen Power to locate the Shredder and to deal with the abovementioned acts of Groundworx. On November 16, 2012, CleanGen Power received a Statement of Defense to Counterclaim from Groundworx, who denied all of the allegations in the Counterclaim.

 

 
21

 

Sunvault Energy, Inc.  

Notes to the Consolidated Financial Statements  

September 30, 2014  

(Expressed in U.S. dollars)  

(unaudited)  

 

19. Commitments and Contingencies (continued)

 

 

(c)

On December 9, 2013, the Company entered into a licensing agreement pursuant to which the Company has been granted a royalty-bearing, exclusive license to certain patented inventions. The Company has agreed to pay the licensor $3,000 and issue shares of common stock equal to a fair value of $30,000 on or before January 8, 2014. Refer to Note 16(b). The Company will pay royalties to the licensor calculated based on 4% of net sales for licensed products and processes. The minimum royalty payments are to be paid in advance on a quarterly basis as follows: December 3, 2018: - $500; year 2019 - $2,000; year 2020 - $4,000; year 2021 - $6,000; year 2022 - $8,000; and $10,000 for 2023 and every year thereafter for the life of the agreement. If the first sale of a licensed product occurs before 2019, the first minimum royalty payment will be due on December 31 of the year in which the first sale occurred and the due dates for the subsequent minimum royalty payments will be adjusted accordingly. The Company must provide funding of at least $50,000 by January 6, 2014 for research by the licensor in the area of electrochemical based solar cells with energy storage capacity. In addition, the Company must pay the licensor milestone payments as follows: $5,000 upon completion of a working prototype due on March 31, 2018 and $10,000 upon its first commercial sale due on March 31, 2019. The Company must execute the first commercial sales of products to a retail customer on or before March 31, 2019 or the licensor has the right to terminate the agreement. The term of this license will continue until the latter of the date that no licensed patent remains a pending application or an unforceable patent, or the date on which the licensee’s obligation to pay royalties expires.

 

 

 
 

(d)

On January 16, 2014, the Company entered into an agreement with a company controlled by the President of the Company whereby the Company is to pay $10,000 per month which is to be paid with shares of common stock of the Company until the Company has adequate funding. If the agreement is terminated by the Company without cause or as a result of a change in control, this Company will be entitled to termination pay of $240,000. Refer to Note 16(e).

 

 

 
 

(e)

On March 31, 2014, CleanGen Power, received a demand for payment of Cdn$1,045,627 from the Province of Alberta pursuant to the biorefining commercialization and market development program grant agreement (the “Grant Agreement”). The amount consists of Cdn$969,157 of grant funds disallowed under the Grant Agreement and Cdn$76,471 of interest earned on the grant funds. While CleanGen Power acknowledges that it was in default of the Grant Agreement, the breach was brought about in part by circumstances beyond CleanGen Power’s control. In particular, a sawdust pile fire incident occurred from December 2 to December 21, 2011, which consumed 250,000 tonnes of wood material to be used for the biomass project worth Cdn$1,500,000 to Cdn$2,000,000 and cost approximately Cdn$500,000 to put out. This greatly affected CleanGen Power’s ability to progress with the project under the Grant Agreement. As such, CleanGen Power is in discussions with the Province of Alberta to reduce or settle the amount owed.

 

 

 
 

(f)

On April 24, 2014, the Company entered into a Services and Commission Agreement with AFSC pursuant to which AFSC will provide the Company with knowledge regarding various Aboriginal peoples, groups, organizations and First Nations, Metis and Inuit communities (“Aboriginal Stakeholders”) and their business practices to assist the Company in identifying utility resource development and associated services to assist the Company with contractual arrangements for the development of resource opportunities on Aboriginal lands.

 

 

 

 

 

Under the terms of the agreement, the Company agreed to pay AFSC a one-time Cdn$3,000 retainer upon execution of the agreement and reimburse AFSC on a monthly basis for pre-approved out-of-pocket expenses. The Company has also agreed to issue the following shares based on various target contracts, as more particularly described in the agreement:

 

 

 

i)

500,000 shares of common stock at the then prevailing market rate for any and all target contracts having a total capital investment value of up to Cdn$4,999,999 issuable as of the date of signing of target contracts with Aboriginal Stakeholders.

 

 

 

 
 

 

ii)

An additional 500,000 shares of common stock at the then prevailing market rate will be deemed earned and issuable as of the date of completion of the target contracts.

 

 

 

 
 

 

iii)

A further 500,000 shares of common stock at the prevailing market rate for any and all target contracts having a cumulative total capital investment of Cdn$5,000,000 or more upon completion of the target contracts. Such shares will be deemed earned and issuable upon the target contracts being completed.

 

 
22

 

Sunvault Energy, Inc. 

Notes to the Consolidated Financial Statements  

September 30, 2014  

(Expressed in U.S. dollars)  

(unaudited)  

 

19. Commitments and Contingencies (continued)

 

The Company also agreed to pay AFSC a commission for any and all third party financing introduced to the Company by AFSC as follows:

 

 

i)

10% of the first Cdn$1,000,000, plus;

 

 

 
 

ii)

8% of the second Cdn$1,000,000, plus;

 

 

 
 

iii)

6% of the third Cdn$1,000,000, plus;

 

 

 
 

iv)

4% of the fourth Cdn$1,000,000, plus;

 

 

 
 

v)

2% of everything above Cdn$4,000,000.

 

The agreement may be terminated by either party with 90 days written notice.

 

On September 26, 2014, pursuant to an addendum to the Services and Commission Agreement with AFSC, the Company issued 500,000 shares of common stock to AFSC as additional consideration for AFSC’s performance of services rendered in identifying and introducing other business opportunities to the Company. Refer to Note 16(u).

 

20. Subsequent Events

 

 

(a)

On June 30, 2014, the Company’s subsidiary, CleanGen Inc., entered into an agreement to sell its 75.5% interest in Coole Immersive Inc. for consideration of Cdn$302,000, of which Cdn$200,000 is due upon closing and the remainder is due in monthly payments of Cdn$17,000 per month for six months after closing. The agreement was terminated on November 15, 2014.

 

 

 
 

(b)

On October 10, 2014, the Company issued 4,000,000 shares of common stock pursuant to the purchase agreement with 1301540 Alberta Ltd. as payment towards the purchase price. Refer to Note 4.

 

 
23

 

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

 

The following discussion should be read in conjunction with the unaudited consolidated financial statements and the related notes for Sunvault Energy, Inc. (“Sunvault”) for the quarter ended September 30, 2014 that appear elsewhere in this Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Form 10-Q, particularly in the section entitled "Risk Factors" beginning on page 15.

 

Our Business Developments

 

On January 3, 2014, Allen Crowley resigned from his position as a director of the Company. To the knowledge of the executive officers of the Company, Mr. Crowley’s resignation was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

On January 9, 2014, Governor Bill Richardson resigned from his position as a director of the Company. To the knowledge of the Company, Governor Bill Richardson’s resignation was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

In addition, on January 11, 2014, John Crawford, then Chief Executive Officer and a director of the Company, received a copy of an executed written consent of shareholders that hold a majority of the outstanding shares of common stock of the Company (the “Shareholder Action”). The Shareholder Action, removed Mr. Crawford from his positions as Chief Executive Officer and director of the Company. Due to this action, Mr. Crawford felt compelled to relinquish his position as an officer and director of the Company on January 11, 2014 through the filing of a current report on a Form 8-K, which he initiated. The company direction and Mr. Crawford were not in alignment with each other was Mr. Crawford’s personal assessment of the situation as described in the filed Form 8-K.

 

On January 14, 2014, Gary Monaghan was appointed as a director, president and chief executive officer of Sunvault. Also on January 14, 2014, after a conversation with the company, former-governor William Richardson rescinded his resignation of January 9, 2014 and resumed his position as a director of the Company.

 

Effective January 15, 2014, Gov. Bill Richardson, Larry Faulk, Lorne Roseborough and Paul Bercier were appointed directors of Sunvault and Rory Husch, as secretary, was also appointed treasurer. Derek Bannister, a director of the company previous to the management change, remained as a director.

 

Management recognizes that a change in direction sometimes comes with disagreement. The Company believes its best course of action is to continue to improve its revenue generating capabilities while it pursues its technology platforms. This approach will prove to be less dilutive to shareholders and more advantageous to company goals as they relate to seeking future funding. We also started negotiations with new officers of the company, Gary Monaghan and Franzi Tschurtschenthaler for management contracts that the Company could afford for this stage of its development.

 

On February 6, 2014, the Board of directors approved the adoption of the 2014 Stock Option Plan (the “2014 Plan”) which permits our company to issue up to 12,968,800 shares of our common stock to directors, officers, employees and consultants of our company upon the exercise of stock options granted under the 2014 Plan. On February 17, 2014, 3,100,000 stock options were granted to directors, officers and consultants.

 

Effective February 19, 2014, the Company entered into a share purchase agreement, with Mr. Klyne and 1454004 Alberta Ltd., an Alberta, Canada corporation. Mr. Klyne is the sole shareholder of 1454004 Alberta. Pursuant to the agreement, 100% of the issued and outstanding shares of 1454004 Alberta was acquired from Mr. Klyne for 19,500,000 shares of our common stock. The share purchase agreement was approved by a meeting of the board of directors on March 1, 2014. As a result, 1454004 Alberta Ltd. became our wholly-owned subsidiary. 1454004 Alberta holds 100% of the issued and outstanding shares of CleanGen Power Corp. and 50% of the issued and outstanding shares of CleanGen Inc., an Alberta, Canada Corporation that operates Cutting Edge Tire Recycling LP.

  

On or about February 15, 2014, the Company became aware of an executed agreement signed by Mr. Derek Bannister between Millennium and Westpoint and John Crawford and received confirmation from the major shareholder groups Millennium and Westpoint that they planned to move ahead to cancel share certificates equaling 35,000,000 shares of common stock. The company has exercised the agreement to cancel these shares. The company was then made aware by an email copy – from a Bahamian Court that a disagreement within the shareholder group has arisen due to this decision, The Company is awaiting the results of that dispute and may have to retract or modify the statement made in a press release depending on the updates we receive from the shareholder groups authorized management. It is the Company’s position that the shares are cancelled.

 

 
24

 

As above, on January 7, 2014, Sunvault Energy Inc. entered into an agreement with its largest shareholder group Millennium Trends International Inc. and West Point International Inc., who negotiated the transaction with the previous CEO John Crawford, while he was still in office. This transaction gave the direction to return 35 million common shares of our company to treasury. The shares returned under the agreement were owned by Millennium Trends International Inc. and West Point International Inc. both of which are Bahamian Companies.

 

Effective March 1, 2014, we entered into a collaborative agreement with Massachusetts Institute of Technology, wherein they have agreed to conduct a research program on behalf of our company for our Sunvault 3D PV (Photovoltaics) appliance. The company has payment terms within the agreement of $42,500 at signing and $42,500 effective May 1, 2014. On April 29, 2014 the Company received a termination letter from the Massachusetts Institute of Technology, due to Professor Jeffrey Grossman having conflicting commitments. The Company has since moved on to an agreement with the University of British Columbia.

 

On March 1, 2014, Premier Global through a bill of sale agreement agreed to transfer 433KW of solar panels to Sunvault.

 

Effective March 5, 2014, Sunvault transferred 900 KW - $900,000 ( $1,000 per KW) of panels to CleanGen in exchange for two items: 1) the purchase of 21,000 Preferred shares of CleanGen for $525,000 , the shortfall from the 729 Solar panels now owned by Sunvault was made up from 171 of the 433KW of panels received from Premier Global. The remaining 262KW of panels are part of a collateral agreement between John Crawford and an investment he made into Sunvault Energy through Westpoint International. Mr. Crawford has ownership of 262KW.2) CleanGen Inc. owes Sunvault $375,000. After these transactions, Sunvault does not have any panels remaining.

 

The Company was issued 21,000 preferred shares from CleanGen on March 20, 2014. At this date the company moved into a position of control at CleanGen with 51% of the voting shares.

 

On April 4, 2014, the Company issued 120,000 shares of common stock to a company controlled by the President of the Company to settle management services of $30,000 provided subsequent to December 31, 2013.

  

On April 4, 2014, the Company issued 50,000 shares of common stock to the Chief Technology Officer of the Company to settle management services of $12,500 provided subsequent to December 31, 2013.

 

On April 10, 2014, the Company issued 191,130 shares at a price of $0.20 to Louis A. Bevilacqua and Joseph Kaufman to settle a debt of $38,226 and discharge the company from a convertible note signed for past legal services.

 

On April 14, 2014, Sunvault acquired 100% of Eco-West Transport through the issue of 3,333,334 shares at $0.15 per share. On September 9, 2014, the transaction was mutually rescinded. As a result, the Company cancelled the 3,333,334 shares of common stock issued to Eco-West Transport.

 

On April 24, 2014, we entered into a Services and Commission Agreement with Aboriginal Financial Services Corporation (“AFSC”) pursuant to which AFSC will provide our company with knowledge regarding various Aboriginal peoples, groups, organizations and First Nations, Metis and Inuit communities (“Aboriginal Stakeholders”) and their business practices to assist our company in identifying utility resource development and associated services to assist our company with contractual arrangements for the development of resource opportunities on Aboriginal lands.

 

Under the terms of the agreement, our company agreed to pay AFSC a one-time Cdn$3,000 retainer upon execution of the agreement and reimburse AFSC on a monthly basis for pre-approved out-of-pocket expenses. Our company has also agreed to issue the following shares based on various target contracts, as more particularly described in the agreement: Our company also agreed to pay AFSC a commission for any and all third party financing introduced to our company by AFSC as follows:

 

The agreement may be terminated by either party with 90 days written notice.

 

On September 14, 2014, we signed an addendum to the agreement for additional consideration for AFSC’s performance of services rendered in identifying and introducing other business opportunities to our company. As consideration under this addendum we have issued 500,000 restricted shares of our common stock to AFSC at a deemed price of $0.30 per share on September 26, 2014.

 

On July 29, 2014, the Company issued 190,000 shares of common stock to re-price the subscription price for the private placement that closed on September 16, 2013.

 

 
25

 

COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

 

Effective February 19, 2014, we entered into a share purchase agreement, with Mr. Klyne and 1454004 Alberta Ltd., an Alberta, Canada Corporation. Mr. Klyne is the sole shareholder of 1454004 Alberta. Pursuant to the agreement, 100% of the issued and outstanding common shares of 1454004 Alberta were acquired from Mr. Klyne for 19,500,000 common shares of our common stock. The share purchase agreement was approved by a meeting of the board of directors on March 1, 2014. As a result, 1454004 Alberta Ltd. became our wholly-owned subsidiary. 1454004 Alberta holds 100% of the issued and outstanding shares of CleanGen Power Corp. and 50% of the issued and outstanding shares of CleanGen Inc. (“CleanGen”), an Alberta, Canada Corporation that operates CuttingEdge Tire Recycling LP (“CuttingEdge”) as 1098541 Alberta Ltd. is the general partner of CuttingEdge and the wholly-owned subsidiary of CleanGen.

 

Effective March 5, 2014, we transferred 900 KW panels (valued Cdn$900,000 at $1,000 per KW) to CleanGen in exchange for two items:

 

 

1)

our purchase of 21,000 preferred shares of CleanGen for Cdn$525,000.

   

 

2)

CleanGen Inc. owes Sunvault $375,000. After these transactions, Sunvault does not have any panels remaining.

The preferred share purchase resulted in moving Sunvault to a control ownership position of 51% of the CleanGen group of companies.

 

On March 14, 2014, we, through its subsidiary, purchased land to increase the size of the site of CuttingEdge Tire Recycling to 30 acres from 12 acres. Subsequent to the purchase, we constructed a building with dimensions of 68’L x 40’Wx20”H to house the new mulching plant for our company.

 

On April 1, 2014, we acquired 100% of Eco-West Transport through the issue of 3,333,334 shares at $0.15 per share. This was approved by a meeting of the board on March 29, 2014. This agreement was rescinded by agreement by all parties on October 27, 2014 after receiving a collection of information and conditions surfaced that within the context of the agreement did not match the original agreement. All parties rescinded and the purchase of Eco-West Transport was reversed. There may be a move in the future to acquire some assets that exists at Eco-West Transport for specified secured debt. We have the intention to acquire specific assets once secured liabilities are clearly defined.

 

On April 11, 2014, we acquired the assets of 1305140 Alberta Ltd., doing business as “Werkman Transport”. The purchase price was Cdn$3,000,000. This asset purchase is to be completed through the issuance of our common shares. On April 11, 2014, we issued 5,000,000 common shares of our company with a deemed value of Cdn$0.20 per share for aggregate consideration of Cdn$1,000,000.

 

Subsequently on October 10, 2014, we issued a second tranche of 4,000,000 common shares of our company with a deemed value of Cdn$0.30 as payment of Cdn$1,200,000 towards the purchase price and leaving a balance owing by our company of Cdn$800,000 worth of common shares of our common stock.

 

On June 9, 2014, we added Mr. James Malcolm Ross to our Board of Directors. When Mr. Ross was in his twenties he began four terms as Chief of the Teet'lit Gwich'in Council, where he spearheaded initiatives that created jobs in the heady days of the Mackenzie Valley pipeline's promotion, and the early development of the hydrocarbon resources of the Mackenzie Delta and Beaufort Offshore. Mr. Ross was a founding director of the Denendeh Development Corporation, Shehtah Drilling Ltd., and the Gwich'in Development Corporation.

  

On July 15, 2014, the Company entered into an agreement to acquire the remaining 49% (valued at Cdn$2,000,000) of CleanGen Inc. and the associated companies of Cutting Edge Tire Recycling LP, Coole Immersive and CleanGen Aboriginal HR Services through the acquisition of the CleanGen shares by agreement with the Elizabeth Metis Settlement and Kanata Metis Cultural Enterprises Ltd. The Sunvault board of directors approved the transaction by board meeting held on July 24, 2014. The Company issued shares of 8,000,000 Sunvault shares with a deemed value of .25 cents per share. Sunvault Energy now owns 100% of the above aforementioned companies.

 

August 1, 2014, the Company entered into business development relationship with Aboriginal Power Corporation to act in the area of business development for the Company specifically when it comes to Aboriginal relationships and business opportunities.

 

It has been agreed that Aboriginal Power Corp (“APC”) will act as an incubation company for opportunities that can be developed into a state of readiness for Sunvault to accept into the company. We have the exclusive right to acquire APC and will proceed with a planned acquisition of Aboriginal Power Corp through a normal definitive agreement and subject to approval by the Company’s board of directors. The Company signed a binding letter of intent on August 5, 2014 to establish a price agreeable between both parties before final definitive agreement.

 

 
26

 

The Company has set up a preferred share arrangement whereby finder’s fees can be issued at a rate up to 15% If financing is consummated, then Finder shall be entitled to a cash fee of 15% of the funds received pursuant to the financing. This fee will be paid through the issue of securities to a formula based on 15% of the cash value to be determined or 15% of the securities issued to realize the cash value. Securities to be issued will be preferred shares with a 5-1 voting privilege in lieu of the previously approved share issuances for commissions on asset and share purchases. These shares would be convertible to common shares at any time, however, once converted, would have normal common share voting privileges. This arrangement was approved by board meetings of March 29, 2014 and July 24, 2014.

 

On July 31, 2014, Sunvault announced that Mr. Trent Blind joined the Sunvault Energy Board of Directors. Trent is currently the Chairman of the Ermineskin Cree Nation group of companies and Senior Advisor and Executive Management Consultant to ATCO Structures & Logistics Ltd., ATCO Sustainable Communities Inc. and Simplex Grinnell. Mr. Blind served Aboriginal communities throughout the Province of Alberta and the Northwest Territories in his role as one of the founding Senior Managers of Aboriginal Banking with the Bank of Montreal. He played a strategic role in guiding the Bank of Montreal in establishing a billion dollar portfolio with various Aboriginal communities throughout Canada.

 

Trent is also the founding President and CEO of George Gordon First Nation Holdings Inc. the former parent business development company for the George Gordon First Nation. In past years, Trent completed a four-year contract as the Chief Financial Officer for the Siksika Nation's economic and business development arm. During his appointment as Chief Financial Officer, the group of companies' assets grew from $14 million in market value to in excess of $100 million.

 

Trent has served as a Senior Advisor to the Western Cree Tribal Council in representing their socio-economic and business development interests in the proposed $6 billion Enbridge Gateway Pipeline Project. He has in past years also served as the Chief Negotiator and Senior Advisor to the Akaitcho Treaty 8 Chiefs in representing their socio-economic and business development interests in the Ekatai Diamond Mine owned and operated by BHP Billiton - the largest resource and mining company in the world.

 

Trent has also held positions with a few federal government departments including Immigration Canada, Revenue Canada and Indian & Northern Affairs Canada.

 

Over the years Trent has participated in a number of community events and has made several presentations to numerous organizations in raising the public's awareness of Aboriginal issues. He has been a director with a number of local, regional and national Aboriginal organizations including the Canadian Aboriginal Science and Technology Society, the Calgary Chamber of Commerce's Aboriginal Opportunities Committee, the Canadian Council for Aboriginal Business (Alberta Chapter), Petromin Resources Ltd., a public company listed on the TSE Venture Exchange and was past chairman of the Metis Economic Development Corporation. He is currently the chairman of Treaty 7 Economic Development Corporation's Investment Committee. Trent is the President and Principal owner of Aboriginal Financial Services Corporation, a senior advisory and executive management consulting services firm.

 

Trent is a Treaty Indian from the Gordon's First Nation in the Treaty 4 area of southern Saskatchewan. He attended the University of Alberta and the University of Regina and has earned two degrees: a Bachelor of Arts, Economics (Special) from the University of Alberta and a Bachelor of Administration from the University of Regina. He majored in economics and finance and is a CMA Associate.

 

On August 7, 2014, Sunvault Energy announced that Aboriginal Power Corp has created a Limited Partnership ("LP") with Northern Lights Energy and Power Ltd. named Northern Lights Aboriginal Power Corp LP (“NLAPC”).

 

Under the agreement Aboriginal Power Corp will own 51% of the Limited Partnership, while Northern Lights Energy and Power Ltd. will own 49% of the LP.

 

The newly formed Northern Lights Aboriginal Power Corp LP mandate is to provide electricity and choices to Aboriginal Groups (First Nations) including businesses within their various territories across the country. This service will reduce power pricing and increase the value proposition for Aboriginal Groups (First Nations) and their business partners. Northern Lights Aboriginal Power Corp LP has expansion plans that will see it move beyond Aboriginal (First Nation's) lands to other areas such as municipal and county as well as commercial and industrial users in urban centers.

 

Sunvault Energy is dedicated to working with First Nations. This market segment will create additional long term Partnerships for NLAPC and can be expanded to include modern infrastructure and services at cost effect rates for First Nations.

 

On October 6, 2014, our company sold nine mobile office trailers to three purchasers for an aggregate amount of Cdn$270,000 or Cdn$30,000 per trailer.

 

 
27

 

On November 28, 2014, Mr. Bannister resigned as a director for Sunvault Energy Inc.

 

On January 13, 2015, James Ross resigned as a director for Sunvault Energy Inc.

 

In March 2015, a newly formed joint venture company, Supervault Energy Inc. was created of which Sunvault will be 50% owner. SuperVault Energy Inc. has signed a license and development agreement to use certain UCLA developed patented Graphene technology for use in the area of electricity storage such as battery alternatives. The Sunvault Energy solar technology chipset allows for the generation, transfer and storage of energy within the same unit. The UCLA created patented process is useable in the manufacturing of a Super – Super Capacitor that is a bolt on technology for Sunvault’s technology, as well as anywhere batteries of any type are used. The combination of these two technologies gives SuperVault the ability to create, transfer and store large amounts of energy within the same unit.

 

Results of Operations for the Quarters Ended September 30, 2014 and 2013

 

Our operating results for the quarters ended September 30, 2014 and 2013 are summarized as follows:

 

For the quarter ended September 30, 2014, Sunvault incurred a net loss of $511,127 compared to a net income of $187,799 in September 30, 2013. The worsened results for the quarter ended September 30, 2014 is mainly attributable to an increase in operating expenses.

 

    Three months ended September 30, 2014     Three months ended September 30, 2013  
    $     $  

Total revenue

   

2,403,743

     

2,113,547

 

Direct costs

   

(1,758,782

)

   

(1,572,939

Operating expense

   

(977,397

)

   

(370,140

)

Net income (loss)

   

(332,436

   

170,468

 

Net loss (income) attributable to non-controlling interest

   

(178,691

)

   

17,331

 

Net loss (income) attributable to the Company

   

(511,127

   

187,799

 

 

Liquidity and Financial Condition

 

Working Capital

 

    September 30,
2014
    December 31,
2013
 
    $     $  

Current Assets

   

2,978,497

     

2,223,371

 

Current Liabilities

   

4,478,715

     

4,076,997

 

Working Capital (Deficit)

   

(1,500,218

)

   

(1,853,626

)

 

As of September 30, 2014, Sunvault had current assets of $2,978,497 (consisting of cash, accounts receivable, inventory, prepaid expenses and deposits, and amounts due from related parties) and current liabilities of $4,478,715 resulting in a working capital deficit of $1,500,218 compared to a working capital deficit of $1,853,626 as of December 31, 2013.

 

Cash Flows

 

    Nine months ended September 30,
2014
    Nine months ended September 30,
2013
 
    $     $  

Net Cash Provided by Operating Activities

   

105,383

     

876,645

 

Net Cash Provided by (Used in) Investing Activities

   

(461,404

   

732,629

 

Net Cash Provided by (Used in) Financing Activities

   

121,303

     

(1,079,561

Effect of Exchange Rate Changes on Cash

 

(88,939

)

   

(10,221

)

Increase (Decrease) in Cash

   

(323,657

)

   

519,492

 

 

 
28

 

Operating Activities

 

Net cash provided by operating activities for the nine months ended September 30, 2014 was $105,383, which includes the net loss of $1,037,348 (before non-controlling interest attribution), compared to $876,645 for the nine months ended September 30, 2013.

 

Investing Activities

 

 During the nine months ended September 30, 2014, Sunvault had net cash used in investing activities of $461,404 which includes $440,276 for the purchase of property and equipment and $21,690 for license costs offset by $562 in cash acquired on the acquisition of a subsidiary. For the nine months ended September 30, 2013, net cash provided by investing activities was $732,629 which consisted of cash acquired on the acquisition of 1098541 Alberta Ltd. of $322,973 and $635,020 on the redemption of term deposit, offset by the purchase of property and equipment of $225,364.

 

Financing Activities

 

During the nine months ended September 30, 2014, Sunvault had net cash provided by financing activities of $121,303 which includes a $105,573 increase in bank indebtedness, proceeds from convertible debt of $229,772, and proceeds from related parties of $26,769. This was offset by $114,571 for the repayment of long-term debt, $78,114 for the repayment of capital lease obligations, $23,450 in deferred financing costs, and $24,676 for the repayment of loans payable. For the nine months ended September 30, 2013, net cash used in financing activities was $1,079,561 consisting of $893,235 for the repayment of loans payable, $98,486 for the repayment of long-term debt, $58,533 for the repayment of capital lease obligations, and $29,307 for the repayments to related parties.

 

Liquidity and Capital Resources Available to Us

 

As at September 30, 2014 and the date of this filing, we do not have enough cash on hand to pay our current operating expenses and to execute our current business plan and if we do not raise the necessary equity capital in the next three months from the date of this filing, we will not be able to execute our current business plan. Our total cash requirements may also exceed the future financing we are able to obtain. Currently, we do not have sufficient cash in our bank accounts to cover our current expenses and estimated future expenses. We do not have any formal agreements with management for advancing funds to our company and we do not have any other external sources of financing available to us at the present time.

 

We intend to meet our cash requirements for the next 12 months through equity financing, if such equity financing becomes available to us. There is no assurance that we will be successful in obtaining any such affiliate loans or in completing any private placement financings to continue our current operations.

 

We estimate that our expenses over the next 12 months will be approximately $2,070,000 as described in the table below. These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.

 

Description

  Expenses  
    $  

Legal and accounting fees

   

150,000

 

Product development

   

300,000

 

Marketing and advertising

   

244,000

 

Business development

   

613,000

 

Salaries and consulting fees

   

350,000

 

General and administrative

   

413,000

 

Total

   

2,070,000

 

 

The company will be able to self fund through acquisitions while the company seeks out additional financing. We currently do not have any arrangements in place to receive loans or other financing from our president or any other officer or for the completion of any further private placement financings and there is no assurance that we will be successful obtaining any such affiliate loans or in completing any further private placement financings. There is also no assurance that our president will provide financing on terms that will be acceptable to us. We may not raise sufficient funds to fully carry out our business plan.

 

 
29

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

 

Inflation

 

The effect of inflation on our revenues and operating results has not been significant.

 

Critical Accounting Policies

 

Our consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete listing of these policies is included in Note 2 of the notes to our consolidated financial statements for the quarter ended September 30, 2014. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of property and equipment, valuation of inventory, impairment of goodwill and licenses, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected..

 

Goodwill

 

Goodwill represents the excess of the acquisition price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business combination. Goodwill is not amortized, but is tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.

 

The Company consists of a single reporting unit. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit including goodwill is compared with its fair value. The estimated fair value is determined utilizing a market-based approach, based on the quoted market price of the Company’s stock in an active market, adjusted by an appropriate control premium. When the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and the second step is necessary.

 

In the second step of the goodwill impairment test, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure the amount of the impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the value of goodwill is determined in a business combination using the fair value of the reporting unit as if it were the acquisition price. When the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess and is presented as a separate line item in the consolidated statements of operations. Establishing an implied fair value of goodwill requires the Company to make estimates for key inputs into complex valuation models and to apply significant judgment in the selection of estimates, assumptions and methodologies required to complete the analysis. Areas of judgment include, but are not limited to, development of multi-year business cash flow forecasts, the selection of discount rates and the identification and valuation of unrecorded assets.

 

 
30

 

Impairment of Long-lived Assets

 

In accordance with ASC 360, “Property, Plant, and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

  

Revenue Recognition

 

For tires qualifying under Alberta Recycling Management Authority (“ARMA”) programs, tire collections revenue from ARMA is recognized when tires are picked up from clients. Revenue from ARMA for processing these tires is recognized when the tire shred is delivered to an approved location. Costs incurred to process these tires are recorded as inventory until delivery occurs.

 

For tires that do not qualify under ARMA programs (“non-program” tires), tire collections revenue is recognized when tires are received at the Company’s premises and collectability is reasonable assured. Customers also pay a recycling fee for tires delivered to the Company’s premises, which is recorded as deferred revenue. The Company recognizes the recycling fee revenue once the tires have been processed.

 

Revenue on sales of processed tires is recognized when a price is agreed, tire shred is delivered to customers, and collectability is reasonably assured.

 

The Company derives further revenue from wood recycling, equipment rentals, sand sales, tipping fees, service rig training, transportation, and software service. In accordance with ASC 605, Revenue Recognition, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the amount is fixed and determinable, and collectability is reasonably assured.

 

Management assesses the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability is reasonable assured. If collectability is not considered reasonably assured at the time of sale, the Company does not recognize revenue until collection occurs.

 

Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

 
31

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

 

Pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item as we are a “smaller reporting company.”

  

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, or the Act, as of September 30, 2014. 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. Based on this evaluation, our chief executive officer and chief financial officer have concluded such controls and procedures to be not effective as of September 30, 2014 to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the 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 will recruit experienced professionals to ensure that we include all necessary disclosures in our filings with the Securities and Exchange Commission. Although we believe that this corrective step will enable management to conclude that the disclosure controls over our financial reporting are effective when the staff is trained, we cannot assure you these steps will be sufficient. We may be required to expend additional resources to identify, assess and correct any additional weaknesses in internal control.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
32

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Sunvault Energy Inc. has made a claim against Derek Bannister, a former director of our company, and Dan Giesbrecht. The claim is as follows:

 

Sunvault – Civil Claim – Sunvault Alleges as follows:

 

PART 1: STATEMENT OF FACT

 

The Defendant, Derek Bannister (“Bannister”), is a resident of Vernon, B.C., and the operator of Bannister Recreation and Marine located at 819 McCurdy Place, Kelowna, V1X 8C8.

 

The Defendant, Dan Giesbrecht (“Giesbrecht”), is a businessman residing in Kelowna at 415 Wardlaw Ave., Kelowna, V1Y 5B5.

 

Bannister was at all material times a Director of the Plaintiff.

 

The Defendants are Directors of two companies known as Westpoint International Inc. (“Westpoint”) and Millennium Trends International Inc. (“Millennium”) both of which are Bahamian companies. Westpoint and Millennium are stockholders of the Plaintiff.

 

The Defendants were appointed Directors of Westpoint and Millennium in April 2012 and remain Directors thereof.

 

In early January 2014, the Plaintiff was considering its options for raising capital. On the advice of consultants, it was determined that in order to raise capital, inter alia, Westpoint and Millennium would need to agree to give up warrants and rights and cancel 35 million shares of outstanding common shares which they owned.

 

Bannister had discussions or meetings with the CEO of the Plaintiff and as a result a Recapitalization Agreement dated January 7, 2014 (“the Agreement”) was entered into between the Plaintiff, on the one hand, and Westpoint and Millennium, on the other hand. Bannister executed the Agreement on behalf of Westpoint and Millennium. The Plaintiff’s Board of Directors approved the transaction.

 

The Agreement provided, inter alia, as follows:

 

Westpoint and Millennium agreed to surrender warrants and any rights to warrants;

 

Westpoint and Millennium agreed to deliver up specified share certificates to the Plaintiff for cancellation, which shares and attendant voting rights would be re-issued by the Plaintiff if certain milestones were not met; and the Agreement declared Nevada to be the venue for disputes and Nevada law to govern it.

 

Westpoint and Millennium failed to deliver their warrants and shares. They breached the agreement. The Defendants took active steps to prevent Westpoint and Millennium from fulfilling the Agreement.

 

 
33

 

The Plaintiff has learned that Bannister misrepresented his authority to bind Westpoint and Millennium to the Agreement. There were no Board of Director Resolutions of Westpoint and Millennium sanctioning the Agreement or authorizing Bannister to enter into the Agreement. To the best of the Plaintiff’s knowledge, the Defendants caused the share cancellation process to begin, but then interfered with same so as to thwart it.

 

As a result of Bannister’s misrepresentations and conduct, upon which the Plaintiff relied, the Plaintiff has suffered damages as it was unable to raise capital in a relatively strong capital market. Further, the market capital of the Plaintiff has steadily eroded as the Plaintiff could not pursue all the corporate opportunities available and demonstrate forward progress and solvency in a timely fashion.

  

Bannister owed the Plaintiff a duty of good faith which he breached by entering into the negotiations with the Plaintiff’s CEO and the Agreement without authority. Bannister was either negligent in doing so or did so deliberately, recklessly and without caring.

 

Bannister breached his fiduciary duty to the Plaintiff qua Director. Bannister induced Westpoint and Millennium to breach the Agreement. Giesbrecht unlawfully interfered with the Plaintiff’s legitimate economic interests.

 

PART 2: RELIEF SOUGHT

 

Damages for negligent or fraudulent misrepresentation in an amount to be determined.

 

Damages for breach of fiduciary duty including disgorgement of any fees or profits earned as a result thereof.

 

Damages for inducing breach of contract and unlawful interference with economic interests.

 

Costs of the action.

 

Interest pursuant to the Court Order Interest Act.

 

Such further and other relief as the Honourable Court deems just and necessary.

 

PART 3: LEGAL BASIS

 

Negligent or fraudulent misrepresentation

 

Breach of fiduciary duty.

 

Inducing breach of contract/unlawful interference with economic interests

 

Sunvault Energy is also providing its support to one of our major shareholder group for a duplicate action with similar merits against Bannister and Giesbrecht in the Supreme Court of the Commonwealth of the Bahamas.

 

There are no guarantees that the Company will prevail and be successful in its bid to have the 35 million shares cancelled as a result of these legal actions and to ensure that Bannister and Giesbrecht maintain the obligation to cancel the 35 million shares as agreed within the Recapitalization agreement signed on January 7, 2014 by Derek Bannister and former Sunvault CEO John Crawford.

 

We await the decision of the courts and results of the trials in this regard as this matter proceeds through the legal system for relief to the Company. On November 28, 2014, Mr. Bannister resigned as a director for Sunvault Energy Inc.

 

 
34

 

Item 1A. Risk Factors

 

Risk Associated with our Current Financial Resources and Capital Resources that are Available to Us

 

We may not have sufficient cash to meet our planned and current financial obligations and our cash requirements for the next 12 months and we are not certain that we will be able to secure the financing we need to meet those requirements. We do not have any current financing arrangements in place and if we do not obtain the necessary financing we need to satisfy our current financial requirements to execute our business plan, we may have to abandon our current business strategy sometime in 2015.

 

We intend to meet our ongoing cash requirements of approximately $3,600,000 for the next 12 months by raising the shortfall through a combination of equity financing from investors if we are able to identify other investors willing to purchase our securities or loan funds to us. We also will self fund Sunvault’s growth to a minor degree through some of the acquisitions we have completed and will complete this upcoming year. We may not be able to secure financing from other investors who can provide additional financing to us. If financing is available, it may involve issuing securities which could be dilutive to holders of our capital stock. If we do not raise additional capital from conventional sources, such as our existing or new investors or commercial banks, it is likely that our growth will be restricted and we may be forced to scale back or curtail implementing our business plan and our business may fail.

   

Risks Associated with our Technology

 

Our technology has not been tested on the scale necessary for large customers to adopt and the willingness of renewable energy operators and other customers to use our technology and our products are uncertain.

 

Our renewable energy development and research activities entail risks. New designs must be fabricated, tested and licensed before they can be offered for sale in commercial markets. Our technology is still in the research and development stage and while certain testing on our technologies has been completed, further testing and experiments will be required in test facilities to bring our products to a commercial stage. Furthermore, the technology has yet to be demonstrated in existing commercial applications. Until we are able to successfully demonstrate operation of our technology in actual commercial applications, we will not be certain about the ability of the products we design, to perform as expected. In addition, there is also a risk that suitable testing facilities may not be available to us on a timely basis, which could cause development program schedule delays.

 

If our product designs do not perform as anticipated in commercial use, we will not realize revenues from licensing or other use of our product designs.

 

We serve the renewable energy market and other industries, some which are regulated. Our designs differ, and if more costly, acceptance of our designs may be hampered.

 

Our designs differ significantly in some aspects from other products used today. These differences will likely result in a more prolonged and extensive review by our future customers around the world that could cause development program schedule delays. Customers may be hesitant to be the first to use our designs, which has little or no history of successful commercial use. Furthermore, our research and development program schedule relies on the transferability and applicability of the operating experiences of the prior tests of our products. There is a risk that if this operating experience is found to be non-transferable, more extensive experiments will be required which could cause program schedule delays and require more research and development funding.

 

Applicable intellectual property laws may be inadequate to protect our intellectual property, which could have a material adverse effect on our business.

 

While we are continuing to diversify our research and development activities with associated intellectual property, our rights in our intellectual property, therefore, derive, or are affected by, intellectual property laws. If the application of these laws to our intellectual property rights proves inadequate, then we may not be able to fully avail ourselves of our intellectual property and our business model may fail or be significantly impeded.

 

If we are unable to obtain or maintain intellectual property rights relating to our technology, the commercial value of our technology may be adversely affected, which could in turn adversely affect our business, financial condition and results of operations.

 

Our success and ability to compete depends in part upon our ability to obtain protection in the United States and other countries for our designs by establishing and maintaining intellectual property rights relating to or incorporated into our products. We own a variety of patent pending applications in the United States. We have not obtained patent protection yet. We do not know how successful we would be should we choose to assert our patents against suspected infringers. Our pending and future patent applications may not be issued or approved as patents or, if issued, may not issue in a form that will be advantageous to us. Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection, which could in turn adversely affect our business, financial condition and results of operations.

 

 
35

 

If we infringe or are alleged to infringe on intellectual property rights of third parties, our business, financial condition and results of operations could be adversely affected.

 

The industry in which we compete is characterized by rapidly changing technology, a large number of patents, and frequent claims and related litigation regarding patent and other intellectual property rights. There can be no assurance that our patents and other proprietary rights will not be challenged or alleged to infringe on others, invalidated, or circumvented; that others will not assert intellectual property rights to technologies that are relevant to us; or that our rights will give us a competitive advantage. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as the laws of the United States.

 

General Business Risks and Risks Relating to our Business

 

We have turned our risk from a limited operating history as a company to a company with growing cash flow and are no longer considered to be a development stage company. We have operations, assets, potential growth, newly developed technology in prototype form and expect growth to be exponential.

 

There can be no assurance that our management will be successful in completing our business plan of selling our products or technology or implementing the corporate infrastructure to support operations at the levels called for by our business plan. We may not be able to generate sufficient revenues to meet our expenses or to achieve or maintain profitability in the future.

 

We are a cash flowing company with growing operations and to date, our development efforts have been focused primarily on the development of our relationship with the Alberta, Canada energy market and other markets for remote sensors and cell phones. Our business model is to develop or acquire existing renewable operating assets to enable a market for our products... Our technology platforms have produced a working prototype based on the technology, and we are starting to look to the commercialization of our products. We expect to have manufacturing processes approved on our products within the next year.

 

Our acquisition companies of CleanGen Inc. also have competitive, regulatory and other risks associated to them that could hinder the ability to earn revenues as projected as part of our foundational revenue strategy.

 

Because our auditors have issued a going concern opinion, there is substantial uncertainty we will continue operations in which case you could lose your investment.

 

Our auditors issued a going concern opinion in their report on our financial statements for the fiscal year ended December 31, 2013. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such we may have to cease operations and you could lose your entire investment.

 

Based upon current plans of developing a market for our products and to sell our products, we expect to incur operating profits in future periods. We have revenues that are non-cyclical in nature and we expect to run profitably in our operations this year.

 

We may be adversely affected by uncertainty in the global financial markets and worldwide economic downturn.

 

Our future results may be adversely affected by the worldwide economic downturn, continued volatility or further deterioration in the debt and equity capital markets, inflation, deflation, or other adverse economic conditions that may negatively affect us. At present, it is likely that we will require additional capital in the near future in order to fund our operations. Due to the above listed factors, we cannot be certain that additional funding will be available on terms that are acceptable to us, or at all.

 

Competition for highly skilled professionals could have a material adverse effect on our success.

 

We rely heavily on our staff and management team. Our success depends, in large part, on our ability to hire, retain, develop and motivate highly skilled professionals. Competition for these skilled professionals is intense and our inability to hire, retain and motivate adequate numbers of consultants and managers could adversely affect our ability to meet client needs and to continue the development of our product designs. Any significant volatility or sustained decline in the market price of our common stock could impair our ability to use equity-based compensation to attract, retain and motivate key employees and consultants.

 

 
36

 

Successful execution of our business model is dependent upon public support for renewable energy

 

Successful execution of our business model is dependent upon public support for renewable power in the United States and other countries.

 

We may not be able to receive or retain authorizations that may be required for us to license our technology internationally.

 

Governmental authorizations may be required before we can export our technology and products. If authorizations are required and not granted, our international business plans could be materially affected. This could limit our revenue growth opportunities and significantly hinder our attempts to expand our business internationally.

 

Risks Relating to the Ownership of Our Securities

 

Certain of our existing stockholders have substantial influence over our company, and their interests may not be aligned with the interests of our other stockholders.

 

Certain related entities own a majority of our common stock. As a result, they have significant influence over our business, including decisions regarding future fundraising, asset acquisitions, mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. This concentration of ownership may also have the effect of discouraging, delaying or preventing a future change of control, which could deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our shares.

 

There may be volatility in our stock price, which could negatively affect investments, and stockholders may not be able to resell their shares at or above the value they originally purchased such shares.

 

The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including:

 

 

quarterly variations in operating results;

 

changes in financial estimates by securities analysts;

 

changes in market valuations of other similar companies;

 

announcements by us or our competitors of new products or of significant technical innovations, contracts, receipt of (or failure to obtain) funding or support, acquisitions, strategic partnerships or joint ventures;

 

additions or departures of key personnel;

 

any deviations in net sales or in losses from levels expected by securities analysts, or any reduction in political support from levels expected by securities analysts;

 

future sales of common stock; and

 

The stock market may experience extreme volatility that is often unrelated to the performance of particular companies. These market fluctuations may cause our stock price to fall regardless of its performance.

 

The market price of our stock may be affected by low volume.

 

Although our common stock is traded on the over-the-counter bulletin board, the trading volume of our common stock has generally been very low. Limited trading volume will subject our shares of common stock to greater price volatility and may make it difficult for our stockholders to sell their shares of common stock at a price that is attractive to them.

 

We will likely conduct offerings of our equity securities in the future, in which case your proportionate shareholding interest in our company may become diluted.

 

Since our inception, we have relied on the proceeds of private equity sales to non-affiliates and to our principal stockholder and loans from our principal stockholder to fund our operations. We will likely be required to undertake additional equity offerings in the future to finance our current business. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, your percentage interest in us will be diluted.

 

 
37

 

Penny stock regulations under U.S. federal securities laws may adversely affect the ability of investors to resell their shares.

 

We anticipate that our common stock will be subject to the penny stock rules under the Securities Exchange Act of 1934. These rules regulate broker-dealer practices for transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00 per share. The penny stock rules require broker-dealers that derive more than five percent of their customer transaction revenues from transactions in penny stocks to deliver a standardized risk disclosure document that provides information about penny stocks, and the nature and level of risks in the penny stock market, to any non-institutional customer to whom the broker-dealer recommends a penny stock transaction. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our shares. These additional penny stock disclosure requirements are burdensome and may reduce all the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, holders of our common stock may find it more difficult to sell their shares.

 

Reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining acceptable internal controls over financial reporting, are costly.

 

We presently do not have a business that produces significant revenues, however, the rules and regulations pursuant to the Exchange Act require a public company to provide periodic reports which will require that we engage legal, accounting and auditing services. The engagement of such services can be costly and we are likely to incur losses which may adversely affect our ability to continue as a going concern. Additionally, the Sarbanes-Oxley Act of 2002 will require that our company establish and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act of 2002 and the limited time that management will devote to our company may make it difficult for us to establish and maintain adequate internal controls over financial reporting. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports or prevent fraud, which may harm our financial condition and result in loss of investor confidence and a decline in our share price.

 

We do not intend to pay dividends and there will be less ways in which you can make a gain on any investment in us.

 

We have never paid any cash or stock dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in us will need to come through appreciation of the stock’s price. There will be less ways in which you can make a gain on any investment in us.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On September 26, 2014, we issued 500,000 restricted shares of our common stock to one ( 1) non-US persons (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

 

1. 500,000 shares of our common stock at the then prevailing market rate for any and all target contracts having a total capital investment value of up to Cdn$4,999,999 issuable as of the date of signing of target contracts with Aboriginal Stakeholders.

 

2. An additional 500,000 shares of our common stock at the then prevailing market rate will be deemed earned and issuable as of the date of completion of the target contracts.

 

3. A further 500,000 shares of our common stock at the prevailing market rate for any and all target contracts having a cumulative total capital investment of Cdn$5,000,000 or more upon completion of the target contracts. Such shares will be deemed earned and issuable upon the target contracts being completed. 

 

 

1.

10% of the first Cdn$1,000,000, plus;

 

2.

8% of the second Cdn$1,000,000, plus;

 

3.

6% of the third Cdn$1,000,000, plus;

 

4.

4% of the fourth Cdn$1,000,000, plus

 

5.

2% of everything above Cdn$4,000,000.

 

 
38

 

Effective April 23, 2014, we entered into private placement subscription agreements with several investors pursuant to which the Company issued convertible debentures in the aggregate amount of $229,772. The convertible debentures carry interest at the rate of 8% calculated annually and paid quarterly and may be converted into shares of the Company’s common stock at any time at the conversion price of $0.30 per share. The Company must pay back the principal amount outstanding and accrued and unpaid interest any time before or at the maturity date of April 22, 2016.

 

The convertible debentures were issued to seven (7) non-US persons (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

 

On July 25, 2014, we entered into equipment purchase agreements with Fergus Edward Ismond and Steven Mark Hoof, wherein we agreed to purchase trailer units, of which Mr. Ismond and Mr. Hoof are 50% owners. As consideration for the purchase of the trailer units, we have agreed to issue to Mr. Ismond and Mr. Hoof $125,000 each by way of the issuance of shares of our common stock at a deemed price of $0.25 per share. On August 8, 2014, pursuant to the equipment purchase agreements, we issued an aggregate of 1,000,000 shares of our common stock to 2 non- US persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

 

On July 29, 2014, we entered into an equipment purchase agreement with Mr. Ismond wherein we agreed to purchase an oil field service truck. As consideration for the purchase of the oil field service truck, we have agreed to issue to Mr. Ismond $100,000, by way of the issuance of shares of our common stock at a deemed price of $0.25 per share. On August 8, 2014, pursuant to the equipment purchase agreement, we issued an aggregate of 1,400,000 shares of our common stock to 1 non- US person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

 

Effective July 15, 2014, we entered into a share purchase agreement with Kanata Metis Cultural Enterprises Ltd. and Elizabeth Metis Settlement ("EMS"), wherein we have agreed to purchase 500,000 Class "A" Common Shares in the capital stock of ClenGen Inc. registered in the name of Kanata. Pursuant to the share purchase agreement, we have issued 8,000,000 shares of our common stock to 1 non-US person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

 

On April 25, 2014, we filed a Current Report on Form 8-K announcing that, effective April 11, 2014, we had entered into an asset purchase agreement with 1301540 Alberta Ltd., an Alberta Canada corporation, operating under the name Werkman Transport pursuant which, we have agreed to purchase all of the transportation assets and other assets of 1301540 Alberta, at a purchase price of Cdn$3,000,000, payable in shares of common stock of our company. Cdn$1,000,0000 of which was paid by way of the issuance of 5,000,000 shares of common stock upon closing with the remaining shares of common stock to be issued after six months have elapsed from the closing date. On October 10, 2014, we issued 4,000,000 shares of our common stock at a deemed value of $0.30 per share as payment of Cdn$1,200,000 towards the purchase price and leaving a balance owing by our company of Cdn$800,000 worth of shares of our common stock. We have issued 4,000,000 restricted shares of our common stock to one (1) non-US persons (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

 

 
39

 

Effective March 1, 2014, April 15, 2014, and May 28, 2014, we entered into various consulting agreements with a number of consultants and we have issued an aggregate of 1,540,150 shares of our common stock for the consultant services. Pursuant to the consulting agreements, we have issued an aggregate of 900,000 shares of our common stock to 3 US persons, relying on Rule 506 under Regulation D and/or Section 4(2) of the Securities Act of 1933, and we have issued an aggregate of 640,150 shares of our common stock to 2 non-US persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures 

 

Not applicable.

 

Item 5. Other Information

 

On January 11, 2014, John Crawford, then Chief Executive Officer and a director of the Company, received a copy of an executed written consent of shareholders that hold a majority of the outstanding shares of common stock of the Company (the “Shareholder Action”). The Shareholder Action removed Mr. Crawford from his positions as Chief Executive Officer and director of the Company. Due to this action Mr. Crawford felt compelled to relinquish his position as an officer and director of the Company on January 11, 2014 through the filing of an 8K, which he initiated. The company direction and Mr. Crawford were not in alignment with each other was his personal assessment of the situation as described in the filed 8K.

 

Effective January 14, 2014, Gary Monaghan was appointed as president, chief executive officer and as a director of our company.

 

Also on January 14, 2014, Governor William Richardson rescinded his resignation of January 9, 2014 and resumed his position as a director of our company.

 

Effective January 15, 2014, Larry Faulk, Lorne Roseborough and Paul Bercier were appointed as directors of our company and Rory Husch, our secretary, was also appointed treasurer.

 

On November 28, 2014, Mr. Bannister resigned as a director for Sunvault Energy Inc.

 

James Ross was appointed as Director on June 2014 and resigned on January 13, 2015.

 

 
40

 

Item 6. Exhibits

 

Exhibit Number

 

Description

     

31

 

Rule 13a-14(a)/15d-14(a) Certification - Principal Executive and Principal Accounting Officer

32

 

Section 1350 Certification

101.INS *

 

XBRL Instance Document

101.SCH *

 

XBRL Taxonomy Extension Schema Document

101.CAL *

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF *

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB *

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE *

 

XBRL Taxonomy Extension Presentation Linkbase Document

______________

*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 
41

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. 

 

 

SUNVAULT ENERGY, INC.

 
 

(Registrant)

 
       

Dated: April 1, 2015

By:

/s/ Gary Monaghan

 
   

Gary Monaghan

 
   

President, Chief Executive Officer and Director

 
   

(Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer)

 

 

 
42

 

Exhibit Number

 

Description

     

31

 

Rule 13a-14(a)/15d-14(a) Certification - Principal Executive and Principal Accounting Officer

32

 

Section 1350 Certification

101.INS *

 

XBRL Instance Document

101.SCH *

 

XBRL Taxonomy Extension Schema Document

101.CAL *

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF *

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB *

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE *

 

XBRL Taxonomy Extension Presentation Linkbase Document

_______________

*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 

43