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EX-32 - CERTIFICATION - SunVault Energy, Inc.svlt_ex32.htm
EX-31 - CERTIFICATION - SunVault Energy, Inc.svlt_ex31.htm

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q/A

 

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

 

For the quarterly period ended March 31, 2015

 

o 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.)

 

Suite 200 – 10703 – 181 Street NW , Edmonton, Alberta

T5S 1N3

(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 o No x

 

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

o

Accelerated filer

o

Non-accelerated filer

o

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 o 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 o No x

 

As of July 29, 2015, there were 106,878,613 shares of company common stock issued and outstanding.

 

 

 

Explanatory Note

 

The Company  i s filing this Amendment No. 1 on Form 10-Q (this “Amendment”) to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2015 (the “Form 10-Q”), filed with the Securities and Exchange Commission on July 31, 2015 (the “Original Filing Date”) to restate the interim undaudited consolidated financial statements for the quarter ended March 31, 201 5 .

 

On August 14, 2015, our auditors, Saturna Group Chartered Accountants LLP, notified us that it believed there were errors in our consolidated financial statements relating to the accounting for convertible debt, deferred revenue, and non-controlling interest. Management further discussed the matter with Saturna Group Chartered Accountants LLP and both parties agreed that certain transactions relating to the above were not appropriately accounted for and we determined that the effect of such misstatements was material.

 

This Amendment speaks as of the Original Filing Date, does not reflect events that may have occurred subsequent to the Original Filing Date, and does not modify or update in any way any other disclosures made in the Form 10-Q, as amended.

 

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the certifications required pursuant to the rules promulgated under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which were included as exhibits to the Original Report, have been amended, restated and re-executed as of the date of this Amendment (No. 1 ) and are included as Exhibits 31.1 and 32.1 hereto.

 

 
2
 

 

SUNVAULT ENERGY, INC.

Quarterly Report on Form 10-Q

For The Quarterly Period Ended

March 31 2015

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements

4

Item 1.

Financial Statements

F-1

Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014

F-2

Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (unaudited)

F-3

Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (unaudited)

F-4

Notes to the Consolidated Financial Statements (unaudited)

F-5

Item 2.

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

5

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

11

Item 4.

Controls and Procedures

11

 

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

12

Item 1A.

Risk Factors

13

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

18

Item 3.

Defaults Upon Senior Securities

19

Item 4.

Mine Safety Disclosures

19

Item 5.

Other Information

19

Item 6.

Exhibits

20

SIGNATURES

21

 

 
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 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, the 69.6% owned subsidiary of the Company;

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.

Condensed Consolidated Financial Statements

March 31, 2015

(Expressed in U.S. dollars)

(unaudited)

 

 

Index

Condensed Consolidated Balance Sheets

F-2

 

 

Condensed Consolidated Statements of Operations

F-3

 

 

Condensed Consolidated Statements of Cash Flows

F-4

 

 

Notes to the Condensed Consolidated Financial Statements

F-5

 

 
F-1
 

 

Sunvault Energy, Inc. 

Condensed Consolidated Balance Sheets 

(Expressed in U.S. dollars)

 

 

 

March 31,

2015

$

 

 

December 31,

2014

$

 

 

 

(Restated - 

Note 20)
(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

 

277,462

 

 

 

547,936

 

Accounts receivable, net of allowance for doubtful accounts of $82,431 (2014 – $90,864) (Note 3)

 

 

763,811

 

 

 

910,074

 

Inventory (Note 4)

 

 

384,126

 

 

 

528,727

 

Due from related parties (Note 14)

 

 

406,868

 

 

 

219,707

 

Prepaid expenses and deposits

 

 

72,759

 

 

 

69,060

 

Total current assets

 

 

1,905,026

 

 

2,275,504

 

 

 

 

 

 

 

 

 

 

Restricted cash

 

 

11,829

 

 

 

12,930

 

Deferred financing costs

 

 

70,200

 

 

 

34,024

 

Property and equipment (Note 5)

 

 

2,583,833

 

 

 

2,372,021

 

Assets held for sale (Note 6)

 

 

482,044

 

 

 

482,044

 

Investment (Note 7)

 

 

170,576

 

 

 

 

Goodwill (Note 8)

 

 

383,179

 

 

 

418,851

 

Total assets

 

 

5,606,687

 

 

 

5,595,374

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Line of credit

 

 

142,339

 

 

 

151,141

 

Accounts payable and accrued liabilities (Note 9)

 

 

1,415,947

 

 

 

1,394,543

 

Current portion of capital lease obligations (Note 12)

 

 

232,931

 

 

 

163,373

 

Current portion of long-term debt (Note 10)

 

 

131,809

 

 

 

144,080

 

Loan payable (Note 11)

 

 

115,281

 

 

 

115,281

 

Due to related parties (Note 14)

 

 

316,690

 

 

 

327,080

 

Deferred revenue

 

 

1,246,334

 

 

 

1,277,787

 

Total current liabilities

 

 

3,601,331

 

 

 

3,573,285

 

 

 

 

 

 

 

 

 

 

Site retirement obligation

 

 

60,129

 

 

 

65,727

 

Capital lease obligations (Note 12)

 

 

665,821

 

 

 

377,094

 

Long-term debt (Note 10)

 

 

281,606

 

 

 

343,843

 

Convertible debt  less unamortized discount of $252,796 (December 31, 2014 - $156,692) (Note 13)

 

 

812,548

 

 

 

371,503

 

Total liabilities

 

 

5,421,435

 

 

 

4,731,452

 

 

 

 

 

 

 

 

 

 

Going concern (Note 1)

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

 

 

Subsequent events (Note 21)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, 500,000,000 shares authorized, $0.001 par value 106,878,613 shares issued and outstanding

 

 

106,879

 

 

 

106,879

 

Additional paid-in capital

 

 

3,096,675

 

 

 

2,799,159

 

Common stock issuable (Note 15)

 

 

621,583

 

 

 

134,916

 

Deferred compensation (Note 15)

 

 

(27,452 )

 

 

(30,000 )

Accumulated other comprehensive income

 

 

13,313

 

 

21,623

 

Deficit

 

 

(3,983,844 )

 

 

(2,662,441 )

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

 

 

(172,846

 

 

370,136

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

358,098

 

 

493,786

Total stockholders’ equity

 

 

185,252

 

 

863,922

 

Total liabilities and stockholders’ equity

 

 

5,606,687

 

 

 

5,595,374

 

 

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

  

 
F-2
 

 

Sunvault Energy, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars)

(unaudited)

 

 

 

Three Months
Ended

March 31,

2015

$

 

 

Three Months
Ended

March 31,

2014

$

 

 

 

(Restated -

Note 20)

 

 

 

 

Revenues

 

 

 

 

 

 

Non-program service revenue

 

 

225,186

 

 

 

222,706

 

Recycling fee revenue

 

 

167,482

 

 

 

150,332

 

Scrap metal revenue

 

 

2,938

 

 

 

5,845

 

Services rig and software revenue

 

 

47,105

 

 

 

47,131

 

Tire collections revenue

 

 

67,628

 

 

 

250,586

 

Tire shred revenue

 

 

203,194

 

 

 

425,540

 

Transportation revenue

 

 

572,536

 

 

 

 

Total revenues

 

 

1,286,069

 

 

 

1,102,140

 

Direct costs

 

 

 

 

 

 

 

 

Amortization

 

 

76,715

 

 

 

48,930

 

Equipment rental and maintenance

 

 

192,550

 

 

 

104,195

 

Freight and transportation

 

 

130,981

 

 

 

307,466

 

Labour and subcontractors (Note 14)

 

 

639,234

 

 

 

159,070

 

Materials

 

 

101,677

 

 

 

59,729

 

Site operating costs

 

 

47,557

 

 

 

57,651

 

Tire processing costs

 

 

88,376

 

 

 

83,405

 

Total direct costs

 

 

1,277,090

 

 

 

820,446

 

Gross profit

 

 

8,979

 

 

 

281,694

 

Operating expenses

 

 

 

 

 

 

 

 

Amortization

 

 

15,449

 

 

 

6,272

 

Bad debts

 

 

12,272

 

 

 

 

Consulting fees (Note 14)

 

 

82,899

 

 

 

59,060

 

Equipment rental and maintenance

 

 

16,887

 

 

 

11,141

 

General and administrative

 

 

213,167

 

 

 

46,971

 

Management fees (Note 14)

 

 

596,543

 

 

 

126,843

 

Professional fees

 

 

66,981

 

 

 

32,714

 

Rent

 

 

24,027

 

 

 

27,979

 

Salaries and subcontracting fees

 

 

129,011

 

 

 

71,542

 

Travel and promotion

 

 

47,491

 

 

 

22,967

 

Total operating expenses

 

 

1,204,727

 

 

 

405,489

 

Net loss before other expense

 

 

(1,195,748 )

 

 

(123,795 )

Other expense

 

 

 

 

 

 

 

 

Interest expense

 

 

(261,343 )

 

 

 

Net loss

 

 

(1,457,091 )

 

 

(123,795 )

Less: net loss attributable to non-controlling interest

 

 

135,688

 

 

 

54,045

 

Net loss attributable to Sunvault Energy, Inc.

 

 

(1,321,403 )

 

 

(69,750 )

Comprehensive income (loss)

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

(8,310 )

 

 

31,084

 

Comprehensive loss attributable to Sunvault Energy, Inc.

 

 

(1,329,713 )

 

 

(38,666 )

Loss per share attributable to Sunvault Energy, Inc. shareholders, basic and diluted

 

 

(0.01 )

 

 

 

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

 

 

106,878,613

 

 

 

19,500,000

 

 

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

 

 
F-3
 

 

Sunvault Energy, Inc. 

Consolidated Statements of Cash Flows 

(Expressed in U.S. dollars) 

(unaudited)

 

 

 

Three Months

Ended

March 31,

2015

$

 

 

Three Months

Ended

March 31,

2014

$

 

 

(Restated -
Note 20)

 

 

 

 

Operating activities

 

 

 

 

 

 

Net loss

 

 

(1,457,091 )

 

 

(123,795 )
 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Accretion of discounts on convertible debt

 

 

297,516

 

 

 

 

Amortization of property and equipment

 

 

92,164

 

 

 

55,202

 

Amortization of deferred financing costs

 

 

7,144

 

 

 

 

Stock-based compensation

 

 

489,215

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

146,263

 

 

 

103,745

 

Inventory

 

 

144,601

 

 

 

58,030

 

Due from related parties

 

 

3,485

 

 

 

(16,953 )

Prepaid expenses and deposits

 

 

(3,699 )

 

 

(88,283 )

Accounts payable and accrued liabilities

 

 

21,404

 

 

 

24,008

 

Deferred revenue

 

 

(31,453 )

 

 

83,405

 

Due to related parties

 

 

(23,007 )

 

 

19,500

 

Net cash provided by (used in) operating activities

 

 

(313,458 )

 

 

114,859

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Advances to related parties

 

 

(229,646 )

 

 

 

Purchase of investment

 

 

(170,576 )

 

 

 

Cash acquired on recapitalization

 

 

 

 

 

562

 

Proceeds from related parties

 

 

39,000

 

 

 

 

Purchase of property and equipment

 

 

(8,039 )

 

 

(67,001 )

Net cash used in investing activities

 

 

(369,261 )

 

 

(66,439 )
 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Line of credit

 

 

(8,802 )

 

 

 

Deferred financing costs

 

 

(43,320 )

 

 

 

Proceeds from convertible debt

 

 

536,327

 

 

 

 

Proceeds from related parties

 

 

12,617

 

 

 

 

Repayment of loans payable

 

 

 

 

 

(2,715 )

Repayment of long-term debt

 

 

(33,650 )

 

 

(36,731 )

Repayment of capital lease obligations

 

 

(114,262 )

 

 

(21,144 )

Net cash provided by (used in) financing activities

 

 

348,910

 

 

 

(60,590 )
 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

 

63,335

 

 

 

(20,575 )
 

 

 

 

 

 

 

 

 

Decrease in cash

 

 

(270,474 )

 

 

(32,745 )
 

 

 

 

 

 

 

 

 

Cash, beginning of period

 

 

547,936

 

 

 

547,288

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

 

277,462

 

 

 

514,543

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Property and equipment financed under capital lease

 

 

491,411

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Interest paid

 

 

22,543

 

 

 

13,645

 

Income taxes paid

 

 

9,164

 

 

 

 

 

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

 

 
F-4
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited) 

 

1. Basis of Presentation

 

The accompanying consolidated interim financial statements of Sunvault Energy, Inc. (the “Company”) should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

 

The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

 

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 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 March 31, 2015, the Company has a working capital deficiency of $1, 696 , 305 and has accumulated losses of $3,983 , 844 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)

Principles of Consolidation

 

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 the following entities:

 

Werkman Transport Inc. (“WTI”)

Wholly-owned subsidiary of the Company

1454004 Alberta Ltd. (“1454004”)

Wholly-owned subsidiary of the Company

CleanGen Inc.

69.6% owned subsidiary of the Company

CleanGen Power Corp.

Wholly-owned subsidiary of 1454004 Alberta Ltd.

CleanGen Aboriginal HR Services Ltd.

Wholly-owned subsidiary of CleanGen Inc.

1098541 Alberta Ltd.

Wholly-owned subsidiary of CleanGen Inc.

Cutting Edge Tire Recycling Limited Partnership

Wholly-owned subsidiary of 1098541 Alberta Ltd.

Coole Immersive Inc.

75.5% owned subsidiary of CleanGen Inc.

 

All inter-company balances and transactions have been eliminated.

 

(b)

Comprehensive Income

 

ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. For the three months ended March 31, 2015 and 2014, comprehensive income (loss) consists of foreign currency translation gains and losses.

 

(c)

Recent Accounting Pronouncements

 

In 2014, the Financial Accounting Standards Board issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition guidance provides a unified model to determine when and how revenue is recognized. The core principal is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2017 and can be applied either retrospectively for each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the impact and approach to adopting this accounting guidance on the consolidated financial statements.

 

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.

 

 
F-5
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

2. Significant Accounting Policies (continued)

 

(d)

Reclassifications

 

Certain of the prior year figures have been reclassified to conform to the current year’s presentation.

 

3. Accounts Receivable

 

 

 

March 31,
2015

$

 

 

December 31,

2014

$

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

754,138

 

 

 

898,141

 

GST receivable

 

 

7,938

 

 

 

9,411

 

Other receivable

 

 

1,735

 

 

 

2,522

 

 

 

 

763,811

 

 

 

910,074

 

 

4. Inventory

 

 

 

March 31,
2015

$

 

 

December 31,

2014

$

 

 

 

 

 

 

 

 

Tire mulch and other

 

 

17,743

 

 

 

15,727

 

Tire shred

 

 

366,383

 

 

 

513,000

 

 

 

 

384,126

 

 

 

528,727

 

 

5. Property and Equipment

 

 

 

Cost

$

 

 

Accumulated amortization

$

 

 

Net book

value as at

March 31,

2015

$

 

 

Net book

value as at

December 31,

2014

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building

 

 

86,697

 

 

 

865

 

 

 

85,832

 

 

 

94,768

 

Computer equipment

 

 

33,752

 

 

 

15,889

 

 

 

17,863

 

 

 

21,168

 

Field and production equipment

 

 

1,685,704

 

 

 

438,061

 

 

 

1,247,643

 

 

 

1,427,784

 

Furniture

 

 

23,164

 

 

 

8,118

 

 

 

15,046

 

 

 

12,781

 

Land

 

 

67,682

 

 

 

 

 

 

67,682

 

 

 

73,982

 

Transportation equipment

 

 

1,183,466

 

 

 

84,075

 

 

 

1,099,391

 

 

 

685,737

 

Truck

 

 

64,000

 

 

 

13,624

 

 

 

50,376

 

 

 

55,801

 

 

 

 

3,144,465

 

 

 

560,632

 

 

 

2,583,833

 

 

 

2,372,021

 

 

As at March 31, 2015, included in field and production equipment are assets under capital lease with an original cost of $99 ,448 (December 31, 2014 - $224,515) and accumulated amortization of $7 ,587 (December 31, 2014 - $35,898). Included in transportation equipment are assets under capital lease with an original cost of $1,093,568 (December 31, 2014 - $586,669) and accumulated amortization of $72,229 (December 31, 2014 - $51,727). During the three months ended March 31, 2015, amortization expense includes $18 ,498 (2014 - $2,728) related to assets under capital leases.

 

6. Assets Held For Sale

 

Assets held for sale consists of solar panels which the Company acquired by issuing 333,333 units in 2013.

 

7. Investment

 

On January 5, 2015, the Company paid $170,576 pursuant to an assignment agreement dated December 27, 2014, whereby the Company acquired a 13% interest in a joint venture.

 

 
F-6
 

 

Sunvault Energy, Inc. 

Notes to the Condensed  Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

8. Goodwill

 

 

 

Cost

$

 

 

Foreign currency

translation adjustment

$

 

 

Impairment

$

 

 

Net carrying

value as at

March 31, 2015

$

 

 

Net carrying

value as at

December 31,

2014

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coole Immersive Inc.

 

 

137,095

 

 

 

(28,163 )

 

 

 

 

 

108,932

 

 

 

119,073

 

Werkman Transport Inc.

 

 

273,224

 

 

 

69,028

 

 

 

(68,005 )

 

 

274,247

 

 

 

299,778

 

 

 

 

410,319

 

 

 

40,865

 

 

 

(68,005 )

 

 

383,179

 

 

 

418,851

 

 

9. Accounts Payable and Accrued Liabilities

 

 

 

March 31,
2015

$

 

 

December 31,

2014

$

 

 

 

 

 

 

 

 

Trade accounts payable

 

 

1,237,605

 

 

 

1,202,012

 

Accrued liabilities

 

 

26,950

 

 

 

63,095

 

GST payable

 

 

39,068

 

 

 

61,165

 

Income taxes payable

 

 

6,484

 

 

 

16,896

 

Payroll payable

 

 

99,926

 

 

 

44,910

 

Other payable

 

 

5,914

 

 

 

6,465

 

 

 

 

1,415,947

 

 

 

1,394,543

 

 

 

10. Long-term Debt

 

 

 

March 31,
2015

$

 

 

December 31,

2014

$

 

 

 

 

 

 

 

 

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.

 

 

179,797

 

 

 

212,051

 

 

 

 

 

 

 

 

 

 

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.

 

 

199,784

 

 

 

235,624

 

 

 

 

 

 

 

 

 

 

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

 

 

33,834

 

 

 

40,248

 

 

 

 

 

 

 

 

 

 

 

 

 

413,415

 

 

 

487,923

 

 

 

 

 

 

 

 

 

 

Less: current portion

 

 

(131,809 )

 

 

(144,080 )

Long-term portion

 

 

281,606

 

 

 

343,843

 

 

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

 

Year

 

Cdn$

 

 

$

 

 

 

 

 

 

 

 

2015

 

 

125,361

 

 

 

98,857

 

2016

 

 

167,147

 

 

 

131,809

 

2017

 

 

167,147

 

 

 

131,809

 

2018

 

 

64,597

 

 

 

50,940

 

 

 

 

524,252

 

 

 

413,415

 

 

11. Loan Payable

 

As at March 31, 2015, the Company owed $115,281 (December 31, 2014 – $115,281) 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.

 

 
F-7
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

12. Capital Lease Obligations

 

 

 

March 31,
2015

$

 

 

December 31,

2014

$

 

 

 

 

 

 

 

 

Treadco Inc., equipment lease repayable in monthly installments of Cdn$5,000 including interest at 12% per annum, due in February 2015, secured by specific field equipment.

 

 

 

 

 

23,707

 

 

 

 

 

 

 

 

 

 

Coast Capital, equipment lease repayable in monthly instalments of Cdn$1,186 including interest at 8.23% per annum, due in July 2017, secured by production equipment.

 

 

23,747

 

 

 

28,456

 

 

 

 

 

 

 

 

 

 

Coast Capital, equipment lease repayable in monthly instalments of Cdn$1,067 including interest at 8.23% per annum, due in July 2017, secured by production equipment.

 

 

30,274

 

 

 

34,988

 

 

 

 

 

 

 

 

 

 

National Leasing Group Inc., equipment lease repayable in monthly installments of Cdn$823, due in June 2019, secured by transportation equipment.

 

 

21,794

 

 

 

25,060

 

 

 

 

 

 

 

 

 

 

Travelers Financial Corporation, equipment lease repayable in monthly installments of Cdn$2,093, due in June 2016, secured by transportation equipment.

 

 

23,375

 

 

 

30,335

 

 

 

 

 

 

 

 

 

 

Travelers Financial Corporation, equipment lease repayable in monthly installments of Cdn$2,123, due in September 2016, secured by transportation equipment.

 

 

29,625

 

 

 

37,104

 

 

 

 

 

 

 

 

 

 

Travelers Financial Corporation, equipment lease repayable in monthly installments of Cdn$4,188, due in June 2018, secured by transportation equipment.

 

 

113,005

 

 

 

131,733

 

 

 

 

 

 

 

 

 

 

Mercado Capital Corporation, equipment lease repayable in monthly installments of Cdn $1,745, due in June 2019, secured by transportation equipment.

 

 

58,993

 

 

 

66,649

 

 

 

 

 

 

 

 

 

 

Blue Chip Leasing Corporation, equipment lease repayable in monthly installments of Cdn$819, due in June 2019, secured by transportation equipment.

 

 

21,367

 

 

 

24,630

 

 

 

 

 

 

 

 

 

 

National Leasing Group Inc., equipment lease repayable in monthly installments of Cdn$783, due in June 2019, secured by transportation equipment.

 

 

19,875

 

 

 

22,871

 

 

 

 

 

 

 

 

 

 

Westana Equipment Leasing Inc., equipment lease repayable in monthly installments of Cdn$2,190, due in June 2019, secured by transportation equipment.

 

 

50,519

 

 

 

57,467

 

 

 

 

 

 

 

 

 

 

Westana Equipment Leasing Inc., equipment lease repayable in monthly installments of Cdn$2,190, due in June 2019, secured by transportation equipment.

 

 

50,519

 

 

 

57,467

 

 

 

 

 

 

 

 

 

 

Travelers Financial Corporation, equipment lease repayable in monthly installments of Cdn$3,674, due in February 2020, secured by transportation equipment.

 

 

134,417

 

 

 

 

 

 

 

 

 

 

 

 

 

Travelers Financial Corporation, equipment lease repayable in monthly installments of Cdn$4,070, due in March 2020, secured by transportation equipment.

 

 

154,412

 

 

 

 

 

 

 

 

 

 

 

 

 

Travelers Financial Corporation, equipment lease repayable in monthly installments of Cdn$6,109 for the first six payments and thereafter to decrease to Cdn$4,345, due in March 2019, secured by transportation equipment.

 

 

144,312

 

 

 

 

 

 

 

 

 

 

 

 

 

Travelers Financial Corporation, equipment lease repayable in monthly installments of Cdn$1,943, due in August 2016, secured by transportation equipment.

 

 

22,518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

898,752

 

 

 

540,467

 

 

 

 

 

 

 

 

 

 

Less: current portion

 

 

(232,931 )

 

 

(163,373 )
 

 

 

 

 

 

 

 

 

Long-term portion

 

 

665,821

 

 

 

377,094

 

 

 
F-8
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

12. Capital Lease Obligations (continued)

 

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

 

 

 

$

 

 

 

 

 

2015

 

 

239,963

 

2016

 

 

295,159

 

2017

 

 

251,579

 

2018

 

 

215,191

 

2019

 

 

87,401

 

2020

 

 

12,409

 

 

 

 

 

 

 

 

 

1,101,702

 

 

 

 

 

 

Less: imputed interest

 

 

(202,950 )
 

 

 

 

 

 

 

 

898,752

 

 

 

 

 

 

Less: current portion

 

 

(232,931 )
 

 

 

 

 

Long-term portion

 

 

665,821

 

 

13. Convertible Debt

 

(a)

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 $180,200 and $41,401 (Cdn$52,500). The convertible debentures are unsecured, bear interest at 8% per annum and paid quarterly , due on April 22, 2016, 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 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 three months ended March 31, 2015, the Company amortized $2,887 (2014 - $nil) of the deferred financing costs.

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.

(b)

Effective December 15, 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 $725,990 and $45,513 (Cdn$52,800). Of these amounts, $302,740 was received as at December 31, 2014. During the three months ended March 31, 2015, the Company received additional proceeds in the amount of $423,250 and $45,513 (Cdn$52,800) . The convertible debentures are unsecured, bear interest at 10% per annum which is paid quarterly , due on December 15, 2016, and may be converted into shares of the Company’s common stock, after six months from issuance, at a conversion price of $0.20 per share. If converted into shares of common stock, the holder is entitled to one share purchase warrant with an exercise price of $0.50 for a period of two years. The Company incurred financing costs of $63,042 in connection with the financing, which was deferred and will be amortized over the term of the debt. During the three months ended March 31, 2015, the Company amortized $4,257 (2014 - $nil) of the deferred financing costs.

 

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $424,267 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible debentures from the effective date to the first convertible date. Of this amount, $166,507 was recorded to additional paid-in capital as at December 31, 2014. During the three months ended March 31, 2015, the Company recorded an additional $257,760 for the intrinsic value of the embedded beneficial conversion feature on the proceeds received during the quarter. During the three months ended March 31, 2015 , the Company had a ccret ed $ 191,128 ( period ended December 31, 2014 - $ 9,815 ) of the debt discount which was recorded as interest expense. As at March 31, 2015 , the carrying values of the convertible debentures were $ 516,521 (December 31, 2014 - $146,048) and $ 33,499 (Cdn$37,565) (December 31, 2014 - $nil) .

 

 
F-9
 

 

13. Convertible Debt (continued)

 

(c)

Effective March 1, 2015, the Company entered into private placement subscription agreements with several investors pursuant to which the Company issued convertible debentures in the aggregate amount of $55,000 and $17,240 (Cdn$20,000). The convertible debentures are unsecured, bear interest at 8.5% per annum which is paid quarterly, due on March 1, 2017, and may be converted into shares of the Company’s common stock, after six months from issuance or if the stock trades above $0.75 for a 14 calendar day period, at a conversion price of $0.25 per share. If converted into shares of common stock, the holder is entitled to one share purchase warrant with an exercise price of $1.00 for a period of two years.

 

 

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $ 3 9 , 7 56 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible deb entures from the effective date to the first convertible date . During the three months ended March 31 , 2015, the Company a c cret e d $ 8,329 (2014 - $nil) of the debt discount which was recorded as interest expense. As at March 31 , 2015, the carrying value s of the convertible debentures w ere $ 30,665 (December 31, 2014 - $nil) and $ 10,262 (Cdn$ 11,151 ) (December 31, 2014 - $nil).

 

 
F-10
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

14. Related Party Transactions

 

(a)

As at March 31, 2015, the Company owed $17,831 (December 31, 2014 - $10,286) to a company controlled by the President of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(b)

As at March 31, 2015, the Company was owed $66,087 (December 31, 2014 - $56,511) from a company controlled by the President of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(c)

As at March 31, 2015, the Company owed $28,500 (December 31, 2014 - $19,500) to the Chief Technology Officer of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(d)

As at March 31, 2015, the Company owed $14,980 (December 31, 2014 - $14,980) to the Treasurer and Secretary of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(e)

As at March 31, 2015, the Company owed $123,673 (December 31, 2014 - $107,232) to a company controlled by a director of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(f)

As at March 31, 2015, the Company owed $2,169 (December 31, 2014 - $nil) to a company controlled by a director of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(g)

As at March 31, 2015, the Company was owed $208,571 (December 31, 2014 - $158,886) from a company controlled by a significant shareholder of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(h)

As at March 31, 2015, the Company was owed $111,000 (December 31, 2014 - $nil) from a company under common control, which is unsecured, non-interest bearing, and due on demand.

 
(i)

As at March 31, 2015, the Company was owed $3,943 (Cdn$5,000) (December 31, 2014 - $4,310 (Cdn$5,000)) from a director of the Company, which is unsecured, non-interest bearing, and due on demand.

 
(j)

As at March 31, 2015, the Company owed $19,032 (Cdn$24,134) (December 31, 2014 - $20,804 (Cdn$24,134)) to the President and companies controlled by the President of 1454004, which is unsecured, non-interest bearing, and due on demand.

 
(k)

As at March 31, 2015, the Company was owed $17,267 (Cdn$21,896) from (December 31, 2014 – owed $69 (Cdn$80) to) a shareholder of Coole, which is unsecured, non-interest bearing, and due on demand.

 
(l)

As at March 31, 2015, the Company owed $110,505 (Cdn$140,131) (December 31, 2014 – $154,209 (Cdn$178,898)) to the President of WTI, which is unsecured, non-interest bearing, and due on demand.

 
(m)

For the three months ended March 31, 2015, the Company incurred management fees of $13,085 (2014 - $33,989) to the President and companies controlled by the President of 1454004.

 
(n)

For the three months ended March 31, 2015, the Company incurred labour costs of $56,718 (2014 - $nil) to a company controlled by the brother of the President of WTI.

 
(o)

For the three months ended March 31, 2015, the Company incurred consulting fees of $9,000 (2014 - $nil) and management fees of $nil (2014 - $7,500) to the Chief Technology Officer of the Company.

 

 
F-11
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

14. Related Party Transactions (continued)

 

(p)

For the three months ended March 31, 2015, included in labour costs is $19,687 (2014 - $11,556) incurred to the son of the former President of 1454004.

 

(q)

For the three months ended March 31, 2015, included in management fees are the following amounts:

 

·

$30,000 (2014 - $25,000) incurred to the President of the Company;

 

·

$46,612 (2014 - $nil) incurred to a director of the Company;

 

·

$24,158 (2014 - $nil) incurred to the President of WTI;

 

·

$492,917 (2014 - $nil) incurred to a company controlled by the Chief Executive Officer of the Company;

 

·

$nil (2014 - $20,167) incurred to the daughter of the former President of 1454004;

 

·

$nil (2014 - $11,556) incurred to the son of the former President of 1454004; and

 

·

$nil (2014 - $40,787) incurred to a former director of 1454004.

 

15. Common Stock

 

(a)

As at March 31, 2015, the Company had $134,916 (Cdn$156,516) (December 31, 2014 – $134,916 (Cdn$156,516)) in common stock issuable to a company controlled by the President of WTI for the acquisition of certain assets and assumption of certain liabilities of 1301540 Alberta Ltd. on April 15, 2014.

(b)

As at March 31, 2015, the Company had $486,667 (December 31, 2014 – $nil) in common stock issuable to a company controlled by a director of the Company for management fees incurred. Refer to Note 18(h).

(c)

On March 1, 2014, the Company entered into a consulting agreement with a non-related party for a period of one year commencing March 1, 2015. As consideration for these services, the Company issued 300,000 shares of common stock with a fair value of $30,000 which was recorded as deferred compensation. During the three months ended March 31, 2015, the Company expensed $2,548 of the deferred compensation as consulting fees which reflects the pro-rata portion of the services provided to March 31, 2015.

 

16. 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.

 

 
F-12
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

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, 2014 and March 31, 2015

 

 

3,100,000

 

 

 

0.10

 

 

 

1,643,000

 

 

Additional information regarding stock options outstanding as at March 31, 2015, 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

 

 

 

3.9

 

 

 

0.10

 

 

17. Share Purchase Warrants

 

The following table summarizes the continuity of share purchase warrants:

 

 

 

Number of

warrants

 

 

Weighted average exercise price

$

 

 

 

 

 

 

 

 

Balance, December 31, 2014 and March 31, 2015

 

 

527,333

 

 

 

2.00

 

 

 
F-13
 

 

17. Share Purchase Warrants (continued)

 

As at March 31, 2015, 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

527,333

 

 

 

 

 

 

 

 

 
F-14
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

18 Commitments and Contingencies

 

(a)

On September 14, 2011, CleanGen Power received notice that The Groundworx Co. (“Groundworx") was seeking damages of Cdn$33,678 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 filed a Statement of Defense and Counterclaim, seeking damages of Cdn$6,000,000 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. CleanGen Power has until April 30, 2016 to advance the action or it risks automatic dismissal for delay by the Court.

(b)

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. 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 year 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: (i) the date that no licensed patent remains a pending application or an unforceable patent, or (ii) the date on which the licensee’s obligation to pay royalties expires.

(c)

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, the company controlled by the President of the Company will be entitled to termination pay of $240,000.

 

 

 

 

(d)

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. As the Company have not received further communications from the Province of Alberta, there is uncertainty as the the estimated amount owed and the probability of the payout. As such, the Company did not record an accrual for the contingent liability.

 

 

 

 

(e)

 

On April 15, 2014, the Company entered into a management agreement with the President of WTI whereby the Company is to pay Cdn$10,000 per month for the management services for a term of five years.

 

 
F-15
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

18. Commitments and Contingencies (continued)

 

(f)

(a)   On April 24, 2014, the Company entered into a Services and Commission Agreement with Aboriginal Financial Services Corporation (“AFSC”), a company controlled by a director of the Company, 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 retainer of Cdn$3,000 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.

 

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.

 

(g)

On December 15, 2014, the Company entered into a license and development agreement with a non-related party to develop the nanotech energy graphine energy storage device. Pursuant to the agreement, the Company shall provide all funding in a sufficient amount to: (i) develop and equip a factory to manufacture the products; and (ii) provide the proposed funding of $10,000,000 within 75 days of December 15, 2014. On June 3, 2015, the agreement was mutually terminated.

 

 
F-16
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

18. Commitments and Contingencies (continued)

 

(h)

On March 18, 2015, the Company entered into a management agreement with AFSC for services to be rendered by its President as an officer and director of the Company. In consideration for the management services rendered, the Company agrees to pay AFSC the following fees and expenses:

 

 

i)

Upon execution of this agreement, the Company agrees to issue to AFSC 666,667 unrestricted common voting shares of the Company at the then prevailing market price and stock options as determined by the Board of Directors (refer to Note 15(b));

 

 

ii)

The Company agrees to pay to AFSC a monthly fee of $12,500, plus applicable taxes, in equal semi-monthly installments which is to be paid with shares of common stock of the Company until the Company has adequate funding;

 

 

iii)

The Company agrees to pay AFSC for all reasonable and necessary travel and out of pocket expenses incurred in fulfilling its obligations under this agreement upon verification of all related receipts; and

 

 

iv)

The Company agrees to issue common stock and stock options to AFSC, at its discretion at such times and in such amounts as it determines from time to time. AFSC shall be entitled to participate in other incentive plans or employee incentive stock options. Such stock options are to be exercisable for a minimum period of five years from the date of grant, considered earned and fully vested at the time of issue regardless of whether AFSC exercises its right, and the Company shall have no right to cancel or rescind such stock options granted thereafter.

 

 
F-17
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

19. Segmented Information

 

The Company has three reportable segments: (i) recycling services, (ii) services rig and software revenue, and (iii) transportation services. The Company allocates resources to and assess the performance of each reportable segment using information about its revenue and operating income (loss). The Company does not evaluate operating segments using discrete asset information.

 

The “Corporate and other” category includes income, expenses and charges such as:

 

 

·

results of operations of various initiatives which support all of the Company’s reportable segments;

 

 

·

corporate management costs, such as human resources, finance and legal, not allocated to the Company’s reportable segments; and

 

 

·

stock-based compensation.

  

The following table summarizes the financial performance of the Company’s reportable segments:

 

 

 

2015

$

 

 

2014

$

 

 

 

 

 

 

 

 

Recycling services

 

 

666,428

 

 

 

1,055,009

 

Services rig and software revenue

 

 

47,105

 

 

 

47,131

 

Transportation services

 

 

591,275

 

 

 

 

Elimination of inter-segment net revenue

 

 

(18,739 )

 

 

 

 

 

 

 

 

 

 

 

 

Total consolidated net revenue

 

 

1,286,069

 

 

 

1,102,140

 

 

The following table provides a reconciliation to the Company’s consolidated operating results:

 

 

 

2015

$

 

 

2014

$

 

 

 

 

 

 

 

 

Recycling services

 

 

(415,719 )

 

 

(81,274 )

Services rig and software revenue

 

 

7,215

 

 

 

26,047

 

Transportation services

 

 

34,275

 

 

 

 

Corporate and other

 

 

(821,519 )

 

 

(68,568 )
 

 

 

 

 

 

 

 

 

Total consolidated operating loss

 

 

(1,195,748 )

 

 

(123,795 )

 

Segmentation by geographical location is not presented as all revenues are earned in Canada and all long-lived assets are located in Canada. Total assets by segment are not presented as that information is not used to allocate resources or assess performance at the segment level and is not reviewed by the Chief Operating Decision Maker of the Company.

 

 
F-18
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

2 0 . Restatement

 

The Company has restated its consolidated financial statements as at March 31, 2015 and for the three months then ended to reflect impact of the December 31, 2014 restatement of the consolidated financial statements , recording of the discount and accretion relating to the beneficial conversion feature for its December 31, 2014 and March 31 , 2015 convertible debentures . This restatement resulted in an increase to net loss of $ 196,448 with no change in net loss per share.

 

The impact of the restatement as at March 31, 2015 , and for the three months then ended are summarized below:

 

Consolidated Balance Sheet

 

 

As At March 31, 2015

 

 

As Reported

$

 

 

Adjustments

$

 

 

As Restated

$

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Asset held for sale

 

 

418,345

 

 

 

63,699

 

 

 

482,044

 

Total assets

 

 

5,542,988

 

 

 

63,699

 

 

 

5,606,687

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

1,424,956

 

 

 

(9,009 )

 

 

1,415,947

 

Deferred revenue

 

 

1,159,211

 

 

 

87,123

 

 

 

1,246,334

 

Total current liabilities

 

 

3,523,217

 

 

 

78,114

 

 

 

3,601,331

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Convertible debt

 

 

1,065,344

 

 

 

(252,796 )

 

 

812,548

 

Total liabilities

 

 

5,596,117

 

 

 

(174,682 )

 

 

5,421,435

 

Stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

3,133,549

 

 

 

(36,874 )

 

 

3,096,675

 

Accumulated other comprehensive income

 

 

(59,235 )

 

 

72,548

 

 

 

13,313

 

Deficit

 

 

(3,758,807 )

 

 

(225,037 )

 

 

(3,983,844 )

Total Sunvault Energy, Inc. stockholders’ equity

 

 

16,517

 

 

 

(189,363 )

 

 

(172,846 )

Non-controlling interest

 

 

(69,646 )

 

 

427,744

 

 

 

358,098

 

Total stockholders’ equity (deficit)

 

 

(53,129 )

 

 

238,381

 

 

 

185,252

 

Total liabilities and stockholders' equity (deficit)

 

 

5,542,988

 

 

 

63,699

 

 

 

5,606,687

 

 

 
F-19
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

20. Restatement (continued)

 

Consolidated Statement of Operations

 

 

Three Months Ended March 31, 2015

 

 

As Reported

$

 

 

Adjustment

$

 

 

As Restated

$

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

Services rig and software revenue

 

 

42,141

 

 

 

4,964

 

 

 

47,105

 

Total revenues

 

 

1,281,105

 

 

 

4,964

 

 

 

1,286,069

 

Gross profit

 

 

4,015

 

 

 

4,964

 

 

 

8,979

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

211,212

 

 

 

1,955

 

 

 

213,167

 

Total operating expenses

 

 

1,202,772

 

 

 

1,955

 

 

 

1,204,727

 

Net loss before other expense

 

 

(1,198,757 )

 

 

3,009

 

 

 

(1,195,748 )

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(61,886 )

 

 

(199,457 )

 

 

(261,343 )

Total other expense

 

 

(61,886 )

 

 

(199,457 )

 

 

(261,343 )

Net loss

 

 

(1,260,643 )

 

 

(196,448 )

 

 

(1,457,091 )

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

 

 

(551 )

 

 

136,239

 

 

 

135,688

 

Net loss attributable to Sunvault Energy, Inc.

 

 

(1,261,194 )

 

 

(60,209 )

 

 

(1,321,403 )

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(79,628 )

 

 

71,318

 

 

 

(8,310 )

Comprehensive loss attributable to Sunvault Energy, Inc.

 

 

(1,340,822 )

 

 

11,109

 

 

 

(1,329,713 )

 

Consolidated Statement of Cash Flows

 

 

Three Months Ended March 31, 2015

 

 

As Reported

$

 

 

Adjustment

$

 

 

As Restated

$

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(1,260,643 )

 

 

(196,448 )

 

 

(1,457,091 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of discounts on convertible debt

 

 

 

 

 

297,516

 

 

 

297,516

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

20,564

 

 

 

840

 

 

 

21,404

 

Deferred revenue

 

 

(18,030 )

 

 

(13,423 )

 

 

(31,453 )

Net cash used in operating activities

 

 

(401,943 )

 

 

88,485

 

 

 

(313,458 )

Effect of foreign exchange rate changes on cash

 

 

151,820

 

 

 

(88,485 )

 

 

63,335

 

 

 
F-20
 

 

Sunvault Energy, Inc. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2015 

(Expressed in U.S. dollars) 

(unaudited)

 

21. Subsequent Events

 

(a)

Subsequent to March 31, 2015, the Company entered into private placement subscription agreements with several investors pursuant to which the Company issued convertible debentures in the aggregate amounts of $341,800 and $49,547 (Cdn$62,830). The convertible debentures are unsecured, due two years from the date of issuance, bear interest at the rate of 8.5% per annum, calculated annually and paid quarterly, and may be converted into units after six months from the date of issuance or if the shares trade above $0.75 for a 14 day period at a conversion price of $0.25 per unit. Each unit is to consist of one share of common stock and one share purchase warrant exercisable at a price of $1.00 for a period of two years from the date of conversion.

(b)

On April 16, 2015, CETR entered into a lease agreement for field and production equipment. The lease is repayable in monthly installments of Cdn$1,464, due in March 2020, and secured by field and production equipment.

(c)

On May 15, 2015, the Company issued 2,050,000 share purchase warrants exercisable at a price of $0.50 per share of common stock for a period of 90 days from when the Company’s shares resume trading. To exercise the share purchase warrants, each holder must first exercise a minimum of 25% of the respective share purchase warrants issued. Through to the date of these financial statements, the Company has received proceeds in the amount of $157,700 pursuant to the future exercise of share purchase warrants.

(d)

On June 25, 2015, WTI entered into a lease agreement for transportation equipment. The lease is repayable in monthly installments of Cdn$2,875, due in January 2018, and secured by transportation equipment.

 

 
F-21
 

 

Item 2. Financial Information – Management’s Discussion and Analysis

 

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 March 31, 2015 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 1, 2015 – Lorne Mark Roseborough resigned as director of CleanGen Power Corp, On January 15, 2015, Margaret Ward resigned as Director of CleanGen Power Corp. On January 30, 2015, Albert Klyne attempted to resign as Director – but as last remaining director his resignation is invalid. Then on February 1, 2015, a suspicious fire was lit on a leased piece of equipment we were using to turn a large woodpile into approximately $300,000 worth of sawdust. We reported the incident to the RCMP. There was an accelerant used to start the fire. This is the third documented fire on the property, each time resulting in a change of managed operations. Two days later we received a threatening call to not try to process that wood pile or face similar consequences. Then approximately a week later we were asked to leave the leased area by the landlord Margaret Ward because of the fire. It is our understanding that the same cast of characters. Klyne, Ward and others are again operating as a landfill under a new name. There are a number of outstanding issues that are facing Mr. Klyne regarding the conduct we in our opinion believe he undertook. There is a suit being prepared against him and Ward for their conduct. All former management of CleanGen have been removed. The company will look to start new landfill operations in Northern Alberta.

 

Effective January 13, 2015, James Malcolm Ross resigned as a director of our company. The resignation of Mr. Ross was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.

 

On January 20, 2015, we entered into a Limited Partnership Agreement with Halalt Transportation General Partner Ltd., a British Columbia, Canada corporation (the “General Partner Company”) and Chief James Robert Thomas, in trust for the Halalt First Nation of Chemainus, British Columbia Canada (“Halalt LP”). Under the Limited Partnership Agreement, the parties formed a limited partnership under the name of “Halalt Transportation Limited Partnership” for the purpose of providing transportation services and such other businesses as approved in accordance with the Limited Partnership Agreement, in British Columbia. The primary objective of the business is to gain income and profit based on the objectives of encouraging and promoting the participation of members of the Halalt First Nation by providing preferential employment and contracting opportunities; conducting business to reflect respect and concern for the environment and Halalt laws and culture; and to ensure the business is implemented in accordance with long-term and annual business plans, budgets and reporting approved by the board and which must contemplate a reasonable net profit to the Limited Partnership.

 

Interests of the partners in the Limited Partnership consist of the following classes of Units:

 

(a)

GP Units – issued to the General Partner Company; and

(b)

LP Units – issued to the Limited Partners.

 

The Limited Partnership may issue a maximum of 100 GP Units and 900 LP Units.

 

The GP Units must be issued to the General Partner Company as follows:

 

-

General Partner Company 1 GP Unit as $1.00 per GP Unit;

 

and the LP Units must be issued to the Limited Partners as follows:

 

-

Halalt LP 51 LP Units at $1.00 per LP Unit; and

-

Sunvault LP 49 LP Units at $1.00 per LP Unit,

 

and the General Partner Company may determine the consideration for which each LP Unit must be issued.

 

 
5
 

  

The LP Units carry the right to one vote for each Unit and the GP Units do not carry a right to vote, as more particularly described in the Limited Partnership Agreement.

 

The net income of the Limited Partnership in each fiscal year must be allocated as follows:

 

(a)

0.01% of the net income among the GP Units as a group pro rata among the issued GP Units; and

(b)

99.99% of the net income among the LP Units as a group, pro rata, among the issued LP Units. This 99.99% will be allocated based on the ratio of 51:49 for Halalt LP:Sunvault LP, respectively.

 

Any net revenue available will be paid annually to each Limited Partner in proportion to its pro rata share of the capital of the Limited Partnership, as more particularly described in the Limited Partnership Agreement.

 

On January 20, 2015, we entered into a Shareholder Agreement with Halalt (Transport) GP Holdings Ltd., a British Columbia, Canada corporation (“Halalt”) and the General Partner Company. Under the Shareholder Agreement, our company and Halalt will vote their shares so that the board of the General Partner is comprised of five directors, which directors will include two nominees of each of our company and Halalt and those four nominees will appoint a fifth director who will conduct the business of the General Partner Company. Our company will hold 49 Class A common voting shares and Halalt will hold 51 Class A common voting shares of the General Partner Company. These shares may not be sold, transferred or disposed of unless agreed to in writing by all of the shareholders of the General Partner Company, pursuant to the terms of the Shareholder Agreement.

 

In March 2015, a newly formed joint venture company, SuperVault Energy Inc., was created of which our company will be 50% owner. SuperVault has signed a license and development agreement to use certain UCLA developed patented technology for use in the area of electricity storage such as battery alternatives. Our company’s 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 our company’s technology, as well as anywhere batteries of any type are used. The combination of these two technologies gives the ability to create, transfer and store large amounts of energy within the same unit.

 

With the ability to cost effectively size these units to any power size, this revolutionizes the world of energy management, generation and storage as we now see it.

 

This new energy storage device has a number of potential purposes, from the use by large utility operators for grid stabilization applications, right down to powering devices such as battery packs for Electric Cars and powering smart phones, which can then be fully charged to capacity within seconds to minutes. On May 27, 2015, Sunvault terminated the agreement by letter to SuperVault and Nanotech. The agreement between the parties was to see a development plan and budget submitted within 60 days of the original executed agreement This never materialized between the parties, Sunvault technical personnel discovered our own process and announced on May 6, 2015 that it had created its own 10,000 Farad super capacitor using its own process.

 

On March 17, 2015, Gary Monaghan resigned as president of our company. The resignation of Mr. Monaghan was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.

 

Concurrently, on March 17, 2015, Trent Blind, a director of our company, was appointed as president of our company.

 

Effective May 1, 2015, Aboriginal Power Corp entered into a retail marketing agreement with Utilitynet for the provision of power to Aboriginal Groups in Alberta. With the downward trend in the oil patch, the company determined to go to a direction which would supply the quickest and most effective entry point into the power sales market to contribute to company cash flow in the most narrowest of time frames. Aboriginal Power has been working as an incubation company on behalf of Sunvault Energy Inc. The company is private and independently owned outside of Sunvault, but there is a general understanding that the company is to become part of Sunvault for an agreed value once the business has been solidified from a revenue standpoint.

 

On the retail power sales side - there has been a company and domain launched – www.edisonpowercorp.com . Sunvault has been working in conjunction with Edison Power Company for the retail of power to Alberta residents outside of First Nations Lands.

 

On May 7th, Sunvault Energy accepted shares for debt owed by UC Resources to Sunvault. The amount was $80,000 CDN. Sunvault has been registered as a new “ control person” of \UC Resources.

 

On June 29, 2015 – Sunvault Energy announced its management team and Edison Power will attend the Battery Show in Novi Michigan this September.

 

 
6
 

 

On July 17, 2015 – The Company announced it had received a non-solicited letter of interest from the Edison Power Company, a private Delaware company, expressing an interest in acquiring the total issued and outstanding shares but no less than 50.1 % of the total issued and outstanding shares of Sunvault Energy Inc. The letter describes that there are potential synergies between the two companies that could make the acquisition advantageous to both sides.

 

The intention as described in the letter is to combine Sunvault Solar Power Generation Technology with Edison Energy Storage technology. The Sunvault Board of directors will begin the process of evaluating the letter of interest, potentially entering into negotiations and communicating with shareholders, regulators and stakeholders as warranted.

 

Before management of Sunvault can enter into negotiations or even evaluate if this is an area of interest, a number of points are being cleared with Edison Power before negotiations can transpire

 

1)

Sunvault will only entertain an offer that would result in a publicly traded company. The offer has to be in the company opinion and as approved by vote of the shareholders, to be of increased benefit and value. The potential acquisition must result in the company being continued to list on a stock exchange as an end result.

2)

There has to be an increased technological advantage and IP advantage that will see the combination company being recognized as one of the foremost industry leaders in the area of energy storage.

3)

That the Edison Power Company recent discovery with its new light bulb design and any other new technological developments, patents - will be included as part in parcel of the combination of the two entities.

4)

That the potential acquisition passes all the regulatory requirements as far as the company jurisdiction of Nevada dictates.

5)

That the management team including Gary Monaghan, Trent Blind, Lorne Mark Roseborough and others will remain in place. That the technical development team including Dr. Robert Murray – Smith also remain in place.

6)

That all branding and marketing, including domain names, all are included in the transaction.

 

Results of Operations for the Quarters Ended March 31, 2015 and 2014

 

Our operating results for the quarters ended March 31, 2015 and 2014 are summarized as follows:

 

For the quarter ended March 31, 2015, Sunvault incurred a net loss of $1 ,457,091 compared to a loss of $123,795 in the quarter ended March 31, 2014. The worsened results for the quarter ended March 31, 2015 is mainly attributable to an increase in direct costs and operating expenses.

 

Three months ended

March 31, 2015

Three months ended

March 31, 2014

$

$

Total revenue

1,286 ,069

1,102,140

Direct costs

(1,277,090

)

(820,446

Operating expense

(1,204,727

)

(405,489

)

Interest expense

(261,343

)

Net loss

(1, 457,091

)  

(123,795

)

Net loss attributable to non-controlling interest

135,688

54,045

Net loss attributable to the Company

(1, 321,403

(69,750

)

 

 
7
 

 

Liquidity and Financial Condition

 

Working Capital

 

 

 

March 31,

2015

 

 

December 31,
2014

 

 

 

$

 

 

$

 

Current Assets

 

 

1,905,026

 

 

 

2,275,504

 

Current Liabilities

 

 

3,601,331

 

 

 

3,573,285

 

Working Capital (Deficit)

 

 

(1,696,305 )

 

 

(1,297,781 )

 

As of March 31, 2015, Sunvault had current assets of $1,905,026 (consisting of cash, accounts receivable, inventory, prepaid expenses and deposits, and amounts due from related party) and current liabilities of $3,601 ,3 31 resulting in a working capital deficit of $1, 696,305 compared to a working capital deficit of $1,297,781 as of December 31, 2014.

 

The increase in working capital deficit for the period ended March 31, 2015 was mainly due a decrease in cash of $270,474 accounts receivable of 146,263, inventory of $144,601, and an increase in the current portion of capital lease obligations of $69,558, offset by an increase in amounts owing from related parties of $187,161.

 

Cash Flows

 

 

 

Three months

ended

March 31,
2015

 

 

Three months
ended

March 31,
2014

 

 

 

$

 

 

$

 

Net Cash Provided by (Used in) Operating Activities

 

 

(313,458 )

 

 

114,859

 

Net Cash Used in Investing Activities

 

 

(369,261 )

 

 

(66,439 )

Net Cash Provided by (Used in) Financing Activities

 

 

348,910

 

 

 

(60,590 )

Effect of Exchange Rate Changes on Cash

 

 

63,335

 

 

 

(20,575 )

Decrease in Cash

 

 

(270,474 )

 

 

(32,745 )

 

Operating Activities

 

Net cash used in operating activities for the three months ended March 31, 2015 was $313,458, which includes net loss of $1,457 ,091 (before non-controlling interest attribution), compared to $114,859 of net cash provided by operating activities for the three months ended March 31, 2014.

 

Investing Activities

 

During the three months ended March 31, 2015, Sunvault had net cash used in investing activities of $369,261 which includes $8,039 for the purchase of property and equipment, $170,576 for investments, and $229,646 from advances to related parties offset by $39,000 proceeds from related parties. For the three months ended March 31, 2014, net cash used in investing activities was $66,439, which consisted of cash acquired on the recapitalization of $562 offset by $67,001 used in the purchase of property and equipment.

 

 
8
 

 

Financing Activities

 

During the three months ended March 31, 2015, Sunvault had net cash provided by financing activities of $348,910 which includes $12,617 for proceeds from related parties and $536,327 of proceeds from convertible debt offset by a $8,802 increase in the line of credit, $33,650 repayment of long-term debt, $114,262 repayment of capital lease obligations and $43,320 of deferred financing costs. For the three months ended March 31, 2014, net cash used in financing activities was $60,590 consisting of $2,715 for the repayment of loans payable, $36,731 for the repayment of long-term debt, and $21,144 for the repayment of capital lease obligations.

 

Liquidity and Capital Resources Available to Us

 

As at March 31, 2015 and the date of this filing, we do not have sufficient cash in our bank accounts to cover our current expenses and estimated future expenses. 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 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 $ 4,607,000 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

 

 

300,000

 

Product development

 

 

2,500,000

 

Marketing and advertising

 

 

244,000

 

Business development

 

 

613,000

 

Salaries and consulting fees

 

 

400,000

 

General and administrative

 

 

550,000

 

Total

 

 

4,607,000

 

 

The company may 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.

 

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 March 31, 2015. 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.

 

 
9
 

 

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.

 

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.

 

 
10
 

 

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.

 

Recent Accounting Pronouncements

 

In 2014, the Financial Accounting Standards Board issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition guidance provides a unified model to determine when and how revenue is recognized. The core principal is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2017 and can be applied either retrospectively for each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the impact and approach to adopting this accounting guidance on the consolidated financial statements.

 

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

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief executive officer (our principal executive officer, principal financial officer and principal accounting officer), as appropriate, to allow timely decisions regarding required disclosure.

 

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31, 2014. Based upon, and as of the date of this evaluation, our chief executive officer (our principal executive officer, principal financial officer and principal accounting officer), and in light of the material weaknesses identified below, concluded that our disclosure controls and procedures were not effective.

 

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.

 

 
11
 

 

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.

 

On or about February 15, 2014, our company became aware of an executed agreement signed by Mr. Derek Bannister, who was at that time a director of our company, between Millennium Trends International Inc. “Millenninum” and West Point International Inc. (“West Point”) and John Crawford, who was at that time a director and chief executive officer of our company, and received confirmation from the major shareholder groups Millennium and West Point that they planned to move ahead to cancel share certificates equaling 35,000,000 shares of common stock. Our company has exercised the agreement to cancel these shares. Our 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, Our 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 our company’s position that the shares are cancelled.

 

As above, on January 7, 2014, we entered into an agreement with our largest shareholder group Millennium Inc. and West Point, who negotiated the transaction with our former chief executive officer and director, John Crawford, while he was still in office. This transaction gave the direction to return 35,000,000 shares of our common stock to treasury. The shares returned under the agreement were owned by Millennium and West Point both of which are Bahamian Companies.

 

Our company has made a claim against Derek Bannister, a former director of our company, and Dan Giesbrecht. The case is currently in the discovery phase and will proceed in due course.

 

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

 

There are no guarantees that our company will prevail and be successful in our bid to have the 35,000,000 shares cancelled as a result of these legal actions and to ensure that Messrs. Bannister and Giesbrecht maintain the obligation to cancel the 35,000,000 shares of our common stock as agreed within the recapitalization agreement signed on January 7, 2014 by Derek Bannister, the former director of our company, and John Crawford, the former chief executive officer of our company.

 

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 our company. On November 28, 2014, Mr. Bannister resigned as a director of our company.

 

On March 18, 2015, after discussion with Company advisors shareholders, stakeholders and the disclosure of certain facts and recent events, the company has decided to rescind the agreement with Albert Klyne which would return to Albert Klyne a minority interest in CleanGen. This is in response to a number of undisclosed issues that the company has become aware of. The Company has engaged legal council to enact the rescind clause in the agreement with 1454004 Alberta Ltd. The Company has started an action against Mr. Albert Klyne to rescind the agreement between the companies which would cancel the 19,500,000 shares issued. The Company is seeking damages for the conduct of Klyne and others as it relates to the ousting of Sunvault Energy off of the landfill site .

 

On or about June 25, 2015, the Company received a notice of civil claim from Shaw Production Way Holdings Inc. for one million common shares to be issued from a large shareholder in addition to a preferred share agreement where Sunvault Energy was to receive the secured debt held by Shawood Lumber over Stealth Ventures. The Claim is requesting the common shares be issued, pursuant to the agreement and damages for not releasing these common shares per the agreement

 

In the opinion of the Company the secured debt was never transferred and therefore the agreement is not valid. The end result is that the company was not able to put forward its business plan as it relates to Stealth. The company went to court to try to get control over the operations of Stealth Ventures and Shawood did not support the action. The secured note was not given to Sunvault as required. Due to the actions of Shawood in this manner the company has lost the opportunity to turn the Stealth Venture company around and lost an opportunity to utilize 95 million dollars in tax losses. The company will be seeking damages from Shawood for this loss and for the lost opportunity business plan of taking natural gas wells that were not profitable and turning them into power generating assets.

 

 
12
 

 

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. As the Company have not received further communications from the Province of Alberta, there is uncertainty as the estimated amount owed and the probability of the payout. As such, the Company did not record an accrual for the contingent liability.

 

On September 14, 2011, CleanGen Power received notice that The Groundworx Co. (“Groundworx") was seeking damages of Cdn$33,678 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 filed a Statement of Defense and Counterclaim, seeking damages of Cdn$6,000,000 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. CleanGen Power has until April 30, 2016 to advance the action or it risks automatic dismissal for delay by the Court.

 

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 $4,607,000 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.

 

 
13
 

 

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.

 

 
14
 

 

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, 2014. 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.

 

 
15
 

 

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.

 

 
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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.

 

 
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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.

 

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. Pursuant to the equipment purchase agreements, we have 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. Pursuant to the equipment purchase agreement, we have 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.

 

 
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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. In addition, we have agreed to acquire 100% of the shareholder loans by Kanata and EMS equaling approximately $1.25M 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.

 

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

 

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

 

Robert Murray Smith was appointed as A Director on June 1, 2015.

 

 
19
 

 

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.

 

 
20
 

 

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: August 19, 2015

By:

/s/ Gary Monaghan

Gary Monaghan

President, Chief Executive Officer and Director

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

 

 
21
 

 

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.

 

22