ITEM 1. DESCRIPTION OF BUSINESS
Corporate Information
We were incorporated in the State of Nevada on December 18, 2002, as ATM Financial Corp.
On May 13, 2011 the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Seawind Energy Limited (“Seawind Energy”) and its subsidiary Seawind Services Limited (“Seawind services”), pursuant to which the Company acquired 100% of the issued and outstanding common stock of Seawind Energy, in exchange for the issuance of 40,000,000 restricted shares of the Company’s common stock (such transaction as “Seawind Acquisition”). The acquisition was accounted for as a reverse merger and, accordingly, the Company is the legal survivor and Seawind Energy is the accounting survivor.
For accounting purposes, Seawind Energy was the surviving entity. The transaction was accounted for as a recapitalization of Seawind Energy pursuant to which Seawind Energy was treated as the surviving and continuing entity. The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of Seawind Energy immediately following the consummation of the reverse merger.
In anticipation of the closing of the Stock Purchase Agreement, on March 30, 2011 the Company changed its name to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000 shares. On July 4, 2011, Seawind Energy and Seawind Service changed their name to 3Power Energy Limited (“3Power Energy”) and 3Power Project Service Limited (“3Power Service”), respectively.
The Company address is PO Box 50006, Sh. Rashid Building, Sh. Zayed Road, Dubai, United Arab Emirates.
The Business
The principle planned business of Company is to sell electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate power plants based on these technologies. The core approach of the Company’s planned business is to deliver energy in markets where there is an inherent energy gap between supply and demand or where there exists long term, stable, government backed financial support for the development of renewable energy. The strategic plan of the Company is to develop power plants and sell electricity in mature and emerging international energy markets at secure rates with the highest potential margins for return on investment.
Acquisition of Shala Energy sh .p .k:
On June 5, 2012, the Company and Shala Energy sh.p.k ("Shala") executed a master acquisition agreement (the “Acquisition Agreement”) where Shala agreed to transfer and the Company agreed to acquire 75% of the equity of Shala. Under the Acquisition Agreement (the “Acquisition”), the closing of the acquisition was subject to the Company’s completion and satisfaction of the due diligence on Shala and Shala’s partners with respect to their shares in Shala and upon the Company’s payment of the first year premium for the insurance bond premium issued in favor of the Ministry of Economy, Trade and Energy of Republic of Albania in replacement of the then existing bank guarantee issued in favor of Ministry of Economy, Trade and Energy of Republic of Albania for the Shala River Concession Agreement, in the amount of 7,230,315 Euro (the “Required Insurance Bond Premium”). Shala is a firm specializing in developing hydro-electric projects, owning and operating sustainable energy projects in the hydro, wind and solar power sectors in Albania.
On August 10, 2012, after the conclusion of the due diligence efforts, the Company made the first year payment of required Insurance Bond Premium in the amount of 164,851 Euro ($211,972), and as such the Acquisition closed. The acquisition resulted in the Company acquiring 75% of the interest in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania. The Shala River project finalization is in process with the Ministry of Albania.
In connection the acquisition of Shala, the Company is obligated for an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's common stock to Capital Trust Holding AG, as advisor for the Shala acquisition transaction. During the year ended March 31, 2013, the Company accrued $600,000 due to the facilitator fees for feasibility studies in process and recorded as expenses. In December 2013, the Company issued to Capital Trust Holding AG and its affiliates, 15,000,000 shares of its common stock, valued at $0.04 per share in settlement of the facilitator fees for feasibility studies. Shala currently is not operational and has no material assets or liabilities as of March 31, 2015 and we are not certain when it will become operational.
Previous Business Seawind Acquisition
Prior to the Seawind Acquisition, 3Power Energy Group planned to provide solar power and other renewable energies in different parts of the world.
At the time of the closing of the Seawind Acquisition, Seawind Services had three customers and was project managing the design and prototype procurement process for a new 2MW wind turbine to be manufactured in China by a sino-western joint venture which includes a state owned enterprise. This project was subsequently discontinued due to insufficient funding. Prior to the closing of the Stock Purchase Agreement, Seawind Services entered into an agreement to provide project management and engineering services to 3Power Energy Group for the development of two wind farm projects in Chile. However, during the year 2012 and 2013, we ceased the 19.5 megawatt Chilean wind farm project on basis that the project is proven to be economically unviable. We also ceased the 9 megawatt solar power plant in Italy around the end of 2012.
On October 8, 2012, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of 3Power Project Services Limited, a wholly owned subsidiary of the Company’s Subsidiary, 3Power Energy Limited. On January 17, 2013, the Company filed a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy Limited, a wholly owned subsidiary of the Company. Such Strike off application has yet to be approved as of this Report.
As described above, 3Power Services (formerly known as Seawind Service) is now in the process of liquidation and its subsidiary 3Power Energy (formerly known as Seawind Energy) is under dissolution application.
Current Focus
We currently have only one project, a hydro-electrical project of which, when completed, will have a sustained output of a total installed power of 127.6 MW of Shala River in Albania, and the commercialization of this project is in its infancy. Our intended markets may not utilize our producible products, and it may not be commercially successful.
We intend to develop additional projects but none have proven to be commercially viable or successful.
Customers
We do not currently have any customer. Future customers are anticipated to be derived through renewable energy projects in Europe and South America, commencing with the prospective projects in Albania
Sales and Marketing
Since the Shala project is in its infancy, the Company has not have any substantial sales or marketing activities.
Employees
As of July 14, 2015, the Company has two employees.
Intellectual Property
The Company has no intellectual property at the present time, other than the proprietary know-how of management.
Government Regulation
The Shala project is and will be subject to extensive Albania national and local regulation both prior to and after commencing operations.
Financing Agreement with CRG Finance AG
On March 2, 2010, the Company entered into a Financing Agreement (the “Financing Agreement”) with CRG Finance AG (“CRG Finance”).
Pursuant to the Financing Agreement, CRG Finance loaned the Company a total of 470,000 Euros ($639,059 as of March 31, 2012) (the “CRG Finance Loan”). The Company has utilized these 470,000 Euros in the identification of potential locations for the development of solar facilities. The Company identified locations which the Company believes are commercially viable for the operation of solar power projects. The locations the Company identified are in Southern Italy in the Puglia Region, including the provinces of Lecce, Foggia, Taranto and Brindisi. The rights to utilize these lands were secured by the Company’s local partners through land options. The Company applied for the grant of permits for these properties with the relevant local authorities; however the Company was not able to obtain such permits.
In connection with the CRG Finance Loan, the Company issued a senior promissory note to CRG Finance in the amount of 470,000 Euros ($639,059) as on March 2, 2010. The principal of the note, along with interest at an annual rate of 7.5%, was due on December 31, 2010.
On November 14, 2012, CRG Finance AG (“CRG”) filed a complaint in the District Court for Southern District of New York for allegedly beaching a promissory note.
On January 17, 2013, the Company filed a motion to compel arbitration and on May 23, 2013, the Court granted the Company’s Motion to Compel and ordered that CRG file its claims as a AAA arbitration
The Final Hearing in the AAA arbitration took place on February 27, 2014, wherein the Company was not able to establish its defense due to the lack of evidence from Rudana. The AAA Arbitrator entered an award of Euro 470,000 plus interest at the annual rate of 7.5% against the Company. As of March 31, 2014, the total award against the Company is Euro 728,241 ($1,012,401). On or about April 4, 2014, in an effort to perfect this award against the Company, CRG filed a petition with the Southern District of New York seeking to confirm the award. In addition, the Company accrued total of $56,835 as reimbursement of attorney fees and cost incurred by CRG and $15,500 as administrative fees and compensation to the Arbitrator. On July 8, 2014, a judgment has been entered against 3Power in the Southern District of New York in the amount of $1,086,186.27. That judgment remains unpaid.
Settlement Agreements
Falak Settlement
On December 31, 2011, we entered into a Settlement Agreement (the “Falak Agreement”) with Falak Holding Group (“Falak”). The Falak Agreement provides that Falak will accept 4,148,840 shares of our common stock as full satisfaction of our debt obligations to Falak of $2,074,420. In 2012, the Company issued 4,148,840 shares of common stock to Falak Holding, LLC as per a settlement agreement.
Wuersch Settlement
In November 2011, we entered into a Settlement Agreement (the “Wuersch Agreement”) with Wuersch & Gering LLP (“Wuersch”). The Wuersch Agreement provided that Wuersch would accept a cash payment of $50,000, payable in five equal installments, and 2,000,000 options to purchase shares of our common stock at $0.54 per share as full satisfaction of our debt obligations to Wuersch of $518,359. The five cash payment installments of $10,000 were due on the 15th calendar day of each month beginning November 15, 2011 and ending on March 15, 2012. Two installment payments has been made to Wuersch and as such we are in default of the Wuersch Agreement. The total outstanding balance due as of March 31, 2015 was $504,518.
Hellenic Settlement
In connection with a 2011 settlement which we made with Hellenic Technologies, which settlement has been satisfied, as of March 31, 2015, we still owed Hellenic the sum of $28,000.
ITEM 1A.
ITEM 1A. RISK FACTORS
An investment in our Company involves a high degree of risk. You should carefully consider the risks described below, before you make any investment decision regarding our Company. Additional risks and uncertainties, including those generally affecting the market in which we operate or those we currently deem immaterial, may also impair our business. If any such risks actually materialize, our business, financial condition and operating results could be adversely affected. In such case, the trading price of our common stock could decline.
The following risk factors are not exhaustive and the risks discussed herein do not purport to be inclusive of all possible risks but are intended only as examples of possible investment risks.
Risks Related to Our Financial Position and Capital Requirements
We have a history of losses, and we anticipate that we will incur continued losses for the foreseeable future.
We reported net losses of approximately $1.1 million and $1.0 million in 2015 and 2014, respectively. As of March 31, 2015, we had an accumulated deficit of approximately $17.8 million. These losses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity.
The report of our independent registered public accounting firm expresses substantial doubt about our ability to continue as a going concern.
Our independent auditors have indicated in their reports on our consolidated financial statements for the fiscal years ended March 31, 2015 and 2014 that conditions exist that raise substantial doubt about our ability to continue as a going concern due to our recurring losses from operations, deficit in equity, and the need to raise additional capital to fund operations. A “going concern” opinion could impair our ability to finance our operations through the sale of debt or equity securities. Our ability to continue as a going concern will depend on our ability to obtain additional financing when necessary, which is not certain. If we are unable to achieve these goals, our business would be jeopardized and we may not be able to continue. If we ceased operations, it is likely that all of our investors would lose their investment.
We need to raise significant additional capital to implement our business plan.
We will need additional funds to implement our business plan as our business model requires significant capital expenditures. We will need substantially more capital to execute our business plan. Our future capital requirements will depend on a number of factors, including our ability to grow our revenues and manage our business. Our growth will depend upon our ability to raise additional capital, possibly through the issuance of long-term or short-term indebtedness or the issuance of our equity securities in private or public transactions.
To implement our Shala River hydropower projects, the Company requires capital to finance construction. The Company will enter into land lease agreements that will bind it to make payments irrespective of whether projects are realized and until such arrangements can be legitimately broken. Furthermore, the Company may be required to make compensatory payments or provide local amenities under its licensing to local communities which will also occur as liabilities irrespective of project realization. To construct the projects, it is necessary for the Company to secure commercial debt finance at normal market rates. Achieving this requires the Company to secure firm sales agreements for its power production. Failure to do so may result in the company achieving lower than anticipated levels of debt and therefore a requirement for additional capital or substantially reduce the predicted investment returns. In the normal conduct of its wind business, the Company will be exposed to currency risk. Project acquisitions, leases and local operating costs may all have a negative effect on the project economics increasing capital requirements but local power sales may mitigate this.
If we are successful in raising equity capital, because of the number and variability of factors that will determine our use of the capital, our ultimate use of the proceeds may vary substantially from our current plans. We expect that our management will have considerable discretion over the use of equity proceeds.
If we are unable to obtain the necessary capital or financing to fund our cash needs it will adversely affect our ability to fund operations and continue as a going concern.
Additional capital may not be available to us or might not be available on favorable terms.
Additional financing may not be available when needed or may not be available on terms acceptable to us. If adequate funds are not available, we may be required to delay, scale back or eliminate one or more of our business strategies, which may affect our overall business results of operations and financial condition. In such event, we will go out of business.
Failure to make payments to stratify certain judgments may cause our assets be foreclosed and such judgments will make it substantially difficult for us to raise capital.
We are obligated to make significant payments to satisfy certain judgments entered against us, including payment of $1,086,186.27 to CRG Finance AG. In the event we are not able to make these payments, the court may foreclose our assets at the request of the prevailing parties. We may not have sufficient assets to pay off the judgments and therefore forced to go bankruptcy. In addition, it will be very difficult to obtain financing with these outstanding judgments.
Any additional capital raising will likely cause dilution to existing stockholders and, if capital raising is a secured raise, it may restrict our operations or adversely affect our ability to operate our business.
The sale of equity or issuance of debt to raise capital could result in dilution to our stockholders. The incurrence of indebtedness, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, expending capital, or declaring dividends, or which impose financial covenants on us that impede our ability to manage our operations.
Indebtedness may burden us with high interest payments and highly restrictive terms which could adversely affect our business.
As a matter of Company policy, our financial plans will limit our debt exposure to a reasonable level. However, a significant amount of indebtedness could increase the possibility that we may be unable to generate sufficient revenues to service the payments on indebtedness, when due, including principal, interest and other amounts.
The current global financial market conditions will be relevant to the Company’s ability to raise funds and make sales in the particular markets in which we will be active. While the Company believes that the opportunity exists to proceed in spite of these factors, major market disruptions, recent adverse changes in global market conditions, and the regulatory climate may affect our business.
Currency conversion and exchange rate volatility could adversely affect our financial condition.
To the extent that we need to convert United States dollars into foreign currencies for our operations, appreciation of the foreign currency against the United States dollar could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Business
It will take us a long time to develop the Shala project.
We are at the early stage of developing the Shala project. It may take indefinite period for us to obtain all the technologies, resources and capital to put the project in operation. Management is unable to give any assurance that the project will be in operation or profitable in the foreseeable future.
Our strategy for growth may include joint ventures, strategic alliances and mergers and acquisitions, which could be difficult to manage.
The successful execution of the our growth strategy may depend on many factors, including identifying suitable companies, negotiating acceptable terms, successfully consummating the corporate relationships and obtaining the required financing on acceptable terms. We may be exposed to risks that we may incorrectly assess new businesses and technologies. We could face difficulties and unexpected costs during and after the establishment of corporate relationships.
Acquisitions may be foreign acquisitions which would add additional risks including political, regulatory and economic risks related to specific countries as well as currency risks.
We may be exposed to tax audits.
Our U.S. federal and state tax returns may be audited by the U.S. Internal Revenue Service (the “IRS”). An audit may result in the challenge and disallowance of deductions claimed by us. Further, an audit could lead to an audit of one or more of our investors and ultimately result in attempts to adjust investors’ tax returns with respect to items unrelated to us. We are unable to guarantee the deductibility of any item that we acquire. We will claim all deductions for federal and state income tax purposes which we reasonably believe that we are entitled to claim. In particular, we will elect to treat as an expense for tax purposes all interest, management fees, taxes and insurance. The IRS may disallow any of the various elements used in calculating our expenses, thereby reducing federal income tax benefits of an investment. To the extent that any challenge or disallowance is raised in connection with a tax return filed by an individual shareholder, the cost of any audit and/or litigation resulting there from would be born solely by the affected shareholder. In the event the IRS should disallow any of our deductions, the directors, in their sole discretion, will decide whether to contest such disallowance. No assurance can be given that in the event of such a contest the deductions would be sustained by the courts. If the disallowance of any deductions results in an underpayment of tax, investors could also be responsible for interest on the underpayments.
Because of the nature of our business and the areas in which we operate, we will require approval from foreign governments.
We will require local regulatory approval from the governments in the countries in which we operate. If we are not successful in obtaining the necessary approvals, we will not be able to distribute electricity in those regions. Local and in some cases central governmental approval for the installation and the connection of power plants is a fundamental pre-condition for us to commence generating revenues. Any delay or failure of such approval may (i) result in a substantial delay for generating revenues or (ii) block us entirely from generating revenues.
We operate in different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws.
The U.S. Foreign Corrupt Practices Act (FCPA) and similar worldwide anti-corruption laws, including the U.K. Bribery Act of 2010, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances; strict compliance with anti-corruption laws may conflict with local customs and practices. We cannot assure that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents. Our continued expansion outside the U.S., including in developing countries, could increase the risk of such violations in the future. In addition, from time to time, government investigations of corruption in construction-related industries affect us and our peers. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations or financial condition.
Risks Related to our Industry
Factors contributing to lower hydroelectric generation can negatively impact our results of operations and financial condition.
Our Shala River hydropower project in Albania, once commenced, will heavily rely on the availability of water in the Shala River. The combination of declining Shala River base flows, over-appropriation of water, and periods of drought could lead to reduced hydroelectric generation. When hydroelectric generation is reduced, our production and opportunities for sales will be directly undermined, and therefore, our results of operations and financial condition will be negatively impacted.
Existing regulations, and changes to such regulations, may present technical, regulatory and economic barriers to the purchase and use of solar power products.
Installation of solar power systems are subject to oversight and regulation in accordance with national and local ordinances, building codes, zoning, environmental protection regulation, utility interconnection requirements for metering and other rules and regulations. We must insure that systems comply with varying standards.
In Italy, for example, the Company will require approval from certain government authorities in order to connect to Italy’s National Electricity Transmission Grid. The generation of electricity in Italy is regulated by the Autorità per l'energia elettrica e il gas (the Italian Regulatory Authority for Electricity and Gas). Changes in government regulations could reduce or eliminate our ability to profitably operate.
In relation to the development of wind parks, it is not unusual for countries to try and support the development of a domestic equipment supply industry by regulating that equipment must have a certain element of locally supplied content or applying higher importation duties. If such regulations are adopted, this severely limits the choice of generating plant and the lack of market competition results in higher pricing. Both these factors adversely affect project economics.
The price and availability of land on which to construct solar, wind or biomass power plants will impact our ability to commence operations.
In order to commence operations of a facility producing energy, the Company will need to acquire or lease suitable land. The Company may have to pay significant premiums in order to persuade land owners or landlords to permit the Company to utilize suitable land for purposes of solar, wind or biomass energy production. There is inherent uncertainty whether sufficient suitable land will be available to the Company at reasonable prices to acquire or lease. If the Company cannot acquire or lease land which is suitable for solar or wind energy production, the Company’s business model could be significantly impaired.
Wind energy project revenues are dependent on suitable meteorological and atmospheric conditions.
The energy and revenues generated at a wind energy project are dependent on meteorological and atmospheric conditions which are variable and difficult to predict. Wind energy turbines will operate efficiently within certain dynamic ranges with high variance. There is no assurance that the potential wind energy can be captured by the turbines. Even after wind feasibility assessments, actual conditions at a project location may not perform sufficiently to meet projected energy generation levels, which could adversely affect the Company.
Natural disasters may disrupt the production of power.
Natural disasters, including but not limited to earthquakes and tsunamis are sources of potential damage to installed wind turbines. Earthquakes cause general infrastructure damage which can result in loss of grid connection and also impairs the logistical support for construction, operation and maintenance of wind parks. Lightning strikes can damage blades. In addition, volcanic eruptions and ash clouds can affect performance.
The availability of suitable construction equipment could adversely impact operations.
The construction and operation of wind farms requires the use of large cranes which are not always generally available in the market. If such equipment is required and not available, this may delay repair or replacement and lead to loss of energy production and revenues.
The wind power energy industry regulatory environment could be adverse to the business of the Company.
Wind energy projects are subject to extensive regulation by governmental authorities. Failure to comply with environmental standards and requirements or with other regulatory standards may result in the denial of licenses or may subject the Company to regulatory enforcement actions. Legal challenges or enforcement actions, even if successfully defended, can be expensive to defend and may result in substantial delays in the completion of a power plant projects. Delays in obtaining, or failure to obtain and maintain in full force and effect, any and all applicable regulatory approvals or failure to satisfy ongoing regulatory requirements may have a material adverse effect on the Company’s business, results of operations and financial condition.
Many operational factors could adversely affect wind power energy production and impair revenue generation.
The quantity of electricity generated by a wind turbine depends upon many factors in addition to the availability of sufficient quality wind. Ancillary factors include turbine durability, reduction of aerodynamic efficiency over time due to wear and tear on the wind turbine, corruption of turbine blades due to icing, insect and bird contact, particulates. In addition, the Company may have to shut down turbines for ordinary course of business maintenance and for purposes of protection from severe weather conditions. Unscheduled maintenance may require spare parts not immediately available in the country of operation. General electrical grid and transmission network interruptions can also adversely affect the amount of electricity a wind turbine can deliver. Any and all of these factors could have a material adverse effect on the Company’s business, results of operations and financial condition.
Reliance on third parties may adversely affect the business of the Company.
The business of wind energy projects requires substantial reliance on third parties which cannot be predicted with certainty which may adversely affect the business of the Company. The Company’s business model requires management to continuously identify and close new customer wind energy projects on an ongoing basis. Wind power development projects dependent upon multiple third parties, including acquisition of rights to utilize property and receipt of all required licenses and permits. Development activity will require additional investment and/or financing in order to grow the Company’s market position. The Company may experience unforeseen problems in development of projects. Significant expense may be incurred by the Company with respect to obtaining permits as well as legal and other services, before the Company can determine whether a site is environmentally or economically feasible. Additional significant expenses, such as environmental impact studies, may also be incurred by the Company prior to generation of any revenues. Changes in regulation, changes in energy prices, local opposition to projects, or failure to obtain regulatory and transmission approvals and permits could all have a material adverse effect on the business of the Company.
The availability of economically viable conditions for wind power projects may be limited and inability of the Company to identify or acquire qualified projects may impair growth.
Wind energy projects can be constructed only in locations with suitable commercial conditions as well as sufficient wind conditions. Appropriate commercial conditions include access to land, connection capability to the local grid and transmission network, and a reasonable regulatory regime with respect to economically viable provision of wind power energy to end-users. If the Company is unable to identify or obtain economically viable projects with satisfactory underlying commercial conditions for the generation of wind power, it could have a material adverse effect on the business, results of operations, and financial condition of the Company.
The Company is operating in a highly competitive environment
Conventional utility companies dominate energy production. Coal remains the dominant industry resource for generation of electricity followed by nuclear, oil and natural gas. The Company expects that competition for wind power energy segment will soon arise from conventional utility producers of electricity.
There is also intense competition within the wind power generation market which is attracting new entrants. Competitors may be able to respond more quickly with new and emerging technologies and be more responsive to dynamically evolving customer requirements. Competitors may also be able to devote greater resources to the acquisition and disposition of wind energy projects than the Company can. Current and potential competitors may make strategic acquisitions or establish alliances to enhance their competitive capability. It is possible that new competitors or alliances among competitors may arise and dilute market share available to the Company which would adversely affect the Company’s business, results of operations and financial condition.
Public opposition toward wind power may make it more difficult to obtain and maintain necessary permits which could adversely affect Company business plans.
Public opposition toward wind power may make it more difficult to obtain and maintain necessary permits and authorizations required to develop or maintain a wind power generation facilities. Public opposition to wind power generation facilities has been increasing. Public opposition may lead to legal challenges that may result in the invalidation of a permit or, in certain cases, the dismantling of an existing wind power facility as well as increased cost and delays. Reduced acceptance of wind power facilities by local communities, an increase in the number of legal challenges or an unfavorable trend in the outcome of these challenges could prevent the Company from initiating or implementing its business plans, which would have a material adverse effect on the Company’s business, results of operations and financial condition.
Unavailability of grid connections and transmission networks could cause loss of revenues.
Wind power facility connections to grids and transmission networks may fail or experience downtime, which could cause loss of revenues. Transmission networks may experience congestion, outages or technical incidents, and operators of these networks may fail to meet their contractual transmission obligations or terminate contracts. If the interconnection or transmission agreements are terminated, the Company may not be able to replace such agreement on terms as favorable as the prior arrangement or at all, or the Company may experience significant delays or costs in connection with securing a replacement agreement. If an electrical grid or network to which one or more of wind power facility is connected experiences “down time,” the affected wind power facility may lose revenue and be exposed to non-performance penalties and claims from its customers. Such actions may include claims for damages incurred by customers, such as the additional cost of acquiring alternative electricity supply at then-current spot market rates. The owners of the grid or network will not usually compensate electricity generators, including wind power facilities, for lost income due to down time.
Geopolitical conditions and global economic factors may adversely affect the Company.
Company operating results may be adversely affected by the uncertain geopolitical conditions and global economic factors. Adverse factors affecting economic conditions worldwide have contributed to a general inconsistency in the power industry and may continue to adversely impact the Company business, resulting in reduced demand for electricity as a result of a decrease in spending by customers and potential customers; increased price competition for electricity, and higher overhead costs as a percentage of revenues. The uncertainty of the international economic situation, civil unrest, terrorist activity and military actions may continue to adversely affect global economic conditions. Economic and market conditions could deteriorate as a result of any of the foregoing reasons. The Company may experience material adverse effects upon its business, operating results, and financial condition as a consequence of the above factors or otherwise.
In Chile specifically, there is always the potential that the Company could be denied natural fossil fuels which would instead be used to feed existing thermal power plants. In this case power outages would cause wind projects to shut down due to grid instability.
Failure to obtain sufficient grid and network connections would adversely affect the Company.
Grid connections and access to transmission networks will be critical to development of wind power projects; failure to obtain sufficient grid and network connections would adversely affect Company operations and financial performance. Wind power facility operators will be dependent on grid connections and electric transmission networks owned and operated by third parties. If such connections and networks are not available or reliable, the value of Company wind power projects may be adversely affected. The capacity of the local transmission networks may be subject to limitations. Owners of network may require expensive and time consuming special interconnection standards. The Company may be required to pay some or all of the costs of improving existing transmission facilities to support the additional electricity that a wind power facility will deliver into the network. The economic viability of certain wind power projects will depend on whether it is possible to interconnect with transmission networks at reasonable cost. Some wind power facilities may be located in remote areas with limited transmission networks where intense competition may exists for access and carrying capacity on existing transmission facilities.
Wind power facilities will be required to meet technical specifications in order to be connected to the transmission network. If any wind power facility does not meet, or ceases to comply with, such specifications, the Company may not be able to connect, to or remain connected, to the transmission network. The Company may also incur liabilities and penalties, including disconnection from the network, if the transmission of electricity by one or more of wind power facilities does not comply with applicable technical requirements. In the agreements with respect to connecting to the existing electricity transmission network between wind power facilities and the applicable transmission owner or operator, the transmission owner or operator generally retains the right to interrupt or curtail transmission deliveries if required to maintain the reliability of the transmission network, which could adversely affect the Company’s business, results of operations and financial condition.
Agreements with affiliated entities present conflicts of interests.
The Company may enter into agreements with strategic alliance entities in which Company officers or directors will render services and have a direct or indirect financial interest. The Company expects to enter into transactions involving significant amounts of capital with these affiliated entities. Prior to the execution of agreements, the Company’s Board of Directors must determine that the terms and conditions of these agreements are no less favorable to the Company than what would be negotiated in an arm’s length transaction. The Company officers and directors owe the Company a fiduciary responsibility. If it is determined that Company officers and directors breached their fiduciary obligation, these officers may be required to resign in which case, Company operations will be significantly impaired. The Company may also face shareholder derivative actions in connection with these activities.
Conflicts of interests may develop between Company officers, directors and affiliates.
Subject to compliance with applicable laws and legal doctrines of corporate loyalty, officers and directors of the Company may identify new wind projects or choose to otherwise develop wind projects outside of the Company. Members of the Board or officers who may be subject to conflicts shall not be involved in deliberation or voting by the Board with respect to such projects.
Risks Related To Investing In Our Common Shares
We do not anticipate paying cash dividends.
We do not anticipate paying cash dividends in the foreseeable future. We intend to retain any cash flow we generate for investment in our business. Accordingly, our common stock may not be suitable for investors who are seeking current income from dividends. Any determination to pay dividends on our common stock in the future will be at the discretion of our board of directors.
Because the market for our common shares is limited, investors may not be able to resell their common shares.
Our common shares trade on the Over-the-Counter-Bulletin-Board quotation system. Trading in our shares has historically been subject to very low volumes and wide disparity in pricing. Investors may not be able to sell or trade their common shares because of thin volume and volatile pricing with the consequence that they may have to hold your shares for an indefinite period of time.
There are legal restrictions on the resale of the common shares offered, including penny stock regulations under the U.S. Federal Securities Laws.
We anticipate that our common stock will continue to be subject to the penny stock rules under the Securities Exchange Act of 1934, as amended. 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. The penny stock rules require broker/dealers 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. 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 of the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, our shareholders may find it more difficult to sell their shares.
If we raise additional funds through the issuance of equity or convertible debt securities, your ownership will be diluted.
If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership held by existing shareholders will be reduced, new securities may contain certain rights, preferences or privileges that are senior to those of our common shares. Furthermore, any additional equity financing may be dilutive to shareholders, and debt financing, if available, may involve restrictive covenants, which may limit our operating flexibility with respect to certain business matters.
Grants of stock options and other rights to our employees may dilute your stock ownership.
We plan to attract and retain employees in part by offering stock options and other purchase rights for a significant number of common shares. We have granted stock options to certain officers and directors. The issuance of common shares pursuant to these options, and options issued in the future, will have the effect of reducing the percentage of ownership in our existing shareholders.
Our stock price may be volatile and market movements may adversely affect your investment.
The market price of our stock may fluctuate substantially due to a variety of factors, many of which are beyond our control. The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our stock. Future sales of our common shares by our shareholders could depress the price of our stock.
The Company is not required to file Current and Periodic Reports with the U.S. Securities and Exchange Commission and the Company’s status as a voluntary filer may have consequences for investors’ ability to access relevant and timely information about the Company.
The Company is a “voluntary filer” with the U.S. Securities and Exchange Commission. This means that the Company is not required to file Current and Periodic Reports with the U.S. Securities and Exchange Commission. The Company is not a fully reporting company that is subject to review under Section 408 of the Sarbanes-Oxley Act of 2002. Furthermore, the Company is not subject to the going private rules and certain tender offer regulations, and the beneficial holders of the Company’s securities do not need to report on acquisitions or depositions of the Company’s securities or their plans regarding their influence and control over the Company. Therefore the Company’s status a voluntary filer reduces investors’ rights to access significant information regarding the Company and its controlling shareholders.
The Company’s status as a voluntary filer could lead to its removal from the over the counter bulletin board.
The Company’s voluntary filer status may lead to its removal from the over the counter bulletin board, as Rule 6530 of the Financial Industry Regulatory Authority provides that issuers must be required to file reports pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 in order to remain listed.
ITEM 1B:
ITEM 1B: UNRESOLVED STAFF COMMENTS
We are not required to provide the information required by this Item because we are a smaller reporting company.
ITEM 2:
ITEM 2: PROPERTIES
The Company does not own any real estate or other property. The Company does not plan on investing directly or indirectly in real estate in the near future. As of the date of this Report, the Company is currently utilizing office space at 100 Wall Street, New York, NY 10005. We do not intend to move to new offices for our corporate headquarters in the foreseeable future.
ITEM 3:
ITEM 3: LEGAL PROCEEDINGS
CRG Finance
In connection with the CRG Finance Loan, the Company issued a senior promissory note to CRG Finance in the amount of 470,000 Euros ($509,950 as of March 31, 2015) as on March 2, 2010. The principal of the note, along with interest at an annual rate of 7.5%, was due on December 31, 2010.
On November 14, 2012, CRG Finance AG (“CRG”) filed a complaint in the District Court for Southern District of New York for allegedly beaching a promissory note (See Note 4).
On January 17, 2013, the Company filed a motion to compel arbitration and on May 23, 2013, the Court granted the Company’s Motion to Compel and ordered that CRG file its claims as a AAA arbitration.
The Final Hearing in the AAA arbitration took place on February 27, 2014, wherein the Company was not able to establish its defense due to the lack of evidence from Rudana. The AAA Arbitrator entered an award of Euro 470,000 plus interest at the annual rate of 7.5% against the Company. On July 8, 2014, a judgment was been entered against 3Power in the Southern District of New York in the amount of $1,086,186.27. In addition, the Company accrued total of $56,835 as reimbursement of attorney fees and cost incurred by CRG and $15,500 as administrative fees and compensation to the Arbitrator. That judgement remains unsatisfied.
ITEM 4:
ITEM 4: MINE SAFETY MEASURES
Not Applicable.
PART II
ITEM 5:
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information.
Our shares are traded on the over-the-counter bulletin board operated by the National Association of Securities Dealers, Inc. under the symbol “PSPW”. Prior to April 15, 2008 our common stock traded on the over-the-counter bulletin board under the symbol “AFIC”. The following table sets forth for the periods indicated the high and low bid information for the Company’s common stock in U.S. Dollars. These quotations reflect only inter dealer prices, without retail mark up, mark down or commissions and may not represent actual transactions.
(b) Holders.
As of July 14, 2015, there were approximately 28 stockholders of record of the Company’s common stock.
(c) Dividends.
During the most recent fiscal year, we have not declared or paid cash dividends. The Company does not intend to pay cash dividends on its common stock in the foreseeable future. We anticipate retaining any earning for use in our continued development. We are not subject to any restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent.
(d) Securities authorized for issuance under equity compensation plans
We do not have any equity compensation plans and accordingly we have no securities authorized for issuance there under as of now.
ITEM 6:
ITEM 6: SELECTED FINANCIAL DATA
We are not required to provide the information required by this Item because we are a smaller reporting company.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
The Business
We currently have only one project, a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania, and the commercialization of this project is in its infancy and it is not expected to be in operation in the foreseeable future. Our intended markets may not utilize our producible products, and it may not be commercially successful. We intend to develop additional projects but none have proven to be commercially viable or successful.
•ALBANIA HYDRO POWER CONCESSION:
On June 5, 2012, the Company and Shala Energy executed a master acquisition agreement (the “Acquisition Agreement”) where Shala Energy agreed to transfer and the Company agreed to acquire 75% of the equity of Shala Energy. Under the Acquisition Agreement (the “Acquisiton”), the closing of the acquisition was subject to the Company’s completion and satisfaction of the due diligence on Shala Energy and Shala Energy’s partners with respect to their shares in Shala Energy and upon the Company’s payment of the first year premium for the insurance bond premium issued in favor of the Ministry of Economy, Trade and Energy of Republic of Albania in replacement of then existing bank guarantee issued in favor of Ministry of Economy, Trade and Energy of Republic of Albania for the Shala River Concession Agreement, in amount of 7,230,315 Euro (the “Required Insurance Bond Premium”). The Acquisition Agreement provided that the closing of the acquisition would occur no later than June 15, 2012.
In late July 2012, the Company and Shala verbally agreed to extend the closing deadline for the acquisition under the Acquisition Agreement to August 10, 2012.
On August 10, 2012, after the conclusion of the due diligence efforts, the Company made the first year payment of Required Insurance Bond Premium in amount of 164,851 Euro, and as such the Acquisition closed. As a result of such closing, we acquired 75% of the equity of Shala Energy sh.p.k (“Shala Energy”). Shala Energy possesses the concession right in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania. After closing and through March 2013, the Company refined and updated its feasibility study initially completed in 2009.
Starting February 2013, the Company began the preliminary project design and we continue to seek capital to fund the project.
To get the project operational, we engaged a consortium of Indian industrial companies with expertise globally in hydro power projects engineering, financing, construction and operation. The consortium undertook to cover the cost of the development work and produce the bankable study in cooperation and with 3power control. In return, the consortium was granted the exclusive first right on the project construction as a general contractor.
The power plant is expected to be completed and connected to the national grid in 2017 and total construction cost is estimated to be USD 250M.
The company’s focus is in the Balkan Countries (Turkey, Albania, Bulgaria, Romania and Italy). The Company also plans to expand into the US market.
The Company presently faces a number of challenges, including raising additional capital, identifying commercially
viable qualified projects, obtaining rights and licenses for development, interacting with local governments, identifying and entering into agreements with appropriate subcontractors for the development and operation of our energy production facilities, and hiring and retaining qualified staff.
Results of Operations for the Years Ended March 31, 2015 Compared to Year Ended March 31, 2014
Income
We have not generated any income since our inception.
Expenses
During the fiscal years ended March 31, 2015 and 2014, selling, general, administrative and project development expenses were $1,093,937 in 2015 as compared to $953,572 in 2014. The increase in selling, general and administrative expenses of $140,365 was primarily due to an increase in travel and other operating expenses as compared to 2014. Our interest expense was $160,618 in 2015 as compared to $70,412 in 2014, as we adjusted to court determination the outstanding debt of CRG Financing in 2014. Additionally, we recognized a gain of foreign currency exchange of $143,444 during the year ended March 31, 2015 as compared to $-0- last year. The net resulting net loss for 2015 was $1,111,111 as compared to a net loss of $1,023,984 in 2014.
Liquidity and Capital Resources
Our total cash and cash equivalents as of March 31, 2015 was $1,585 compared to the total cash and cash equivalents of $1,725 as of March 31, 2014.
As of March 31, 2015, our total assets were $9,757 compared to total assets $9,481 as of March 31, 2014 and the total current liabilities were $6,446,860 as of March 31, 2015 compared to $6,629,023 as of March 31, 2014. The decrease in current liabilities was primarily due to issuance of our common stock in settlement of $1,073,792 related party advances along with a net decrease in other accounts payable, accrued expense, accrued interest and notes payable of $38,643 offset with operating expenses incurred by related party on Company’s behalf.
Net cash used in operating activities was $140 for the year ended March 31, 2015 compared to net cash used in operating activities of $-0- for the year ended March 31, 2014. The negative cash flow from operating activities for the year ended March 31, 2015 consists of $1,111,111 net loss, gain on foreign currency exchange of $143,444 and an increase in prepaid and other assets of $416, offset with an increase in accounts payable and accrued expenses of $20,498, accrued interest of $160,618 and related party advances of $1,073,715. The negative cash flow from operating activities for the year ended March 31, 2014 consists of $1,023,984 net loss, offset with related party advances of $508,086, a decrease in prepaid and other assets of $7,664, increase in accounts payable and accrued expenses of $437,821 and in accrued interest of $70,413.
Net cash used in investing activities was $Nil for the years ended March 31, 2015 and 2014.
Net cash provided in financing activities was $Nil for the years ended March 31, 2015 and 2014.
Our pre-operational activities to date have consumed substantial amounts of cash. Our negative cash flow from operations is expected to continue and to accelerate in the foreseeable future as the Company invests in capital expenditures to commence operations.
We will need to raise additional capital in the minimum amount of $250 million to implement our new business plan and continue operations for any length of time. We are seeking alternative sources of financing, through private placement of securities and loans from our shareholders in order for us to maintain our operations. We cannot guarantee that we will be successful in raising additional cash resources for our operations.
Our future capital requirements will depend on a number of factors, including our ability to grow our revenues and manage our business. Our growth will depend upon our ability to raise additional capital, possibly through the issuance of long-term or short-term indebtedness or the issuance of our equity securities in private or public transactions. If we are successful in raising equity capital, because of the number and variability of factors that will determine our use of the capital, our ultimate use of the proceeds may vary substantially from our current plans. Global financial market conditions will be relevant to the Company’s ability to raise funds and make sales in the particular markets in which we will be active. While the Company believes that the opportunity exists to proceed in spite of these factors, major market disruptions, recent adverse changes in global market conditions, and the regulatory climate may affect our business.
The Company will require additional funding in order to conduct proposed operations for the next year. Should we fail to raise such fund, the Company will not be able to commence construction of the solar power plants.
Additional financing is required in order to meet our current and projected cash flow requirements from operations. We cannot predict whether this new financing will be in the form of equity or debt. We may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments.
Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and the downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.
The independent registered public accounting firm’s report on our March 31, 2015 consolidated financial statements included in our Form 10-K states that our difficulty in generating sufficient cash flow to meet our obligations and sustain operations raise substantial doubts about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
Critical Accounting Policies
Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.
We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our results of operations, financial position or liquidity for the periods presented in this report.
Basis of presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
Use of estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Comprehensive Income (Loss)
The Company applies Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
Fair Values
The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.
The carrying value of the Company’s cash and cash equivalents, accounts payable, short-term borrowings (including notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.
As of March 31, 2015, the Company did not have items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements.
Functional currency
The accompanying consolidated financial statements are presented in U.S. dollars ("USD"). The Company's subsidiary’s functional currency is British pounds ("GBP"). The consolidated financial statements are translated into USD in accordance with Codification ASC 830, Foreign Currency Matters. All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, shareholders' equity is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting periods. The resulting translation adjustments are reported as other comprehensive income and accumulated other comprehensive income in the shareholders' equity in accordance with Codification ASC 220, Comprehensive Income.
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into GBP at the rate on the date of the transaction and included in the results of operations as incurred. There were no material transaction gains or losses in the periods presented.
The exchange rates used to translate amounts in GBP into USD for the purposes of preparing the consolidated financial statements were as follows:
Income taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of March 31, 2015 and 2014, the Company has not recorded any unrecognized tax benefits.
Stock-Based Compensation
The Company accounts for stock, stock options and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Therefore, results include non-cash compensation expense as a result of the issuance of stock, stock options and warrants and we expect to record additional non-cash compensation expense in the future.
The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.
Per share data
The Company accounts for net loss per share in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic and diluted net loss per common share is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect to the exchange ratio in the Share Exchange in May 2011 (see Note 1), which was accounted for as recapitalization of the Company. The Company had no common stock equivalents as of March 31, 2015 and 2014.
Non-controlling Interests
The Company adopted the accounting standard for non-controlling interests in the consolidated financial statements as of January 1, 2009. This standard establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. This standard also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interests of the non-controlling owner.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies relating to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of the contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company's financial statements.
Cash
The Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.
Recent Accounting Pronouncements
ASU 2015-03
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-02
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The ASU focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current U.S. GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (“VIE”), and changing consolidation conclusions for companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-01
In January 2015, the FASB issued ASU No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from U.S. GAAP the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. We do not expect the adoption of ASU 2015-01 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-17
In November 2014, the FASB issued ASU No. 2014-17, “Business Combinations (Topic 805): Pushdown Accounting.” This ASU provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable. ASU 2014-17 was effective on November 18, 2014. The adoption of ASU 2014-17 did not have any effect on our financial position, results of operations or cash flows.
ASU 2014-16
In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial position, results of operations or cash flows.
ASU 2014-15
In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)". ASU 2014-15 provides guidance related to management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-12
In June 2014, the FASB issued ASU No. 2014-12, “Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-09
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are still evaluating the effect of the adoption of ASU 2014-09. On April 1, 2015, the FASB voted to propose to defer the effective date of the new revenue recognition standard by one year.
ASU 2014-08
In April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) and Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 amends the definition for what types of asset disposals are to be considered discontinued operations, as well as amending the required disclosures for discontinued operations and assets held for sale. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. The adoption of ASU 2014-08 did not have any effect on our financial position, results of operations or cash flows.
There were various updates recently issued by the Financial Accounting Standards Board, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Off Balance Sheet Arrangements
As of March 31, 2015, we did not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
Disclosure of Contractual Obligations
The Company does not have any significant contractual obligations which could negatively impact our results of operations and financial condition.
Inflation
The effect of inflation on our revenue and operating results was not significant.
ITEM 7A:
ITEM 7A: QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are not required to provide the information required by this Item because we are a smaller reporting company.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
3POWER ENERGY GROUP, INC.
MARCH 31, 2015 AND 2014
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders of
3Power Energy Group, Inc.
Dubai, United Arab Emirates
We have audited the accompanying consolidated balance sheets of 3Power Energy Group, Inc. (the “Company”) as of March 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, changes in deficit and cash flows for each of the two years in the period ended March 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to the above present fairly, in all material respects, the financial position of 3Power Energy Group, Inc. as of March 31, 2015 and 2014, and the consolidated results of operations and comprehensive loss, and cash flows for each of the two years in the period ended March 31, 2015 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying consolidated financial statements, the Company has experienced significant losses from operations and has negative working capital which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RBSM LLP
New York, New York
July 14, 2015
3POWER ENERGY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2015 AND 2014
See the accompanying notes to these consolidated financial statements
3POWER ENERGY GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
See the accompanying notes to these consolidated financial statements
3POWER ENERGY GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
TWO YEARS ENDED MARCH 31, 2015
See the accompanying notes to these consolidated financial statements
3POWER ENERGY GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
See the accompanying notes to these consolidated financial statements
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
NOTE 1 - ORGANIZATION AND BUSINESS
3Power Energy Group, Inc. (the “Company”) was incorporated in the State of Nevada on December 18, 2002 under the name ATM Financial Corp. On April 1, 2008, the Company changed its name from ATM Financial Corp. to Prime Sun Power Inc. On March 30, 2011, the Company changed its name from Prime Sun Power Inc. to 3Power Energy Group, Inc. and increased its authorized share capital to 300,000,000 shares. The Company plans to pursue a business model producing renewable generated electrical power and other alternative energies.
The Company's primary efforts is to sell electricity generated by solar, wind, hydro, biomass and other renewable energy resources and to develop, build and operate power plants based on these technologies. The core approach of the Company's business is to deliver energy in markets where there is an inherent energy gap between supply and demand or where there exists long term, stable, government back by financial support for development of renewable energy.
On May 13, 2011, pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), the Company consummated a reverse merger (“Merger”) with Seawind Energy Limited (“Seawind Energy”), Seawind Services Limited (“Seawind Services”, and together with Seawind Energy, the “Seawind”) and the shareholders of Seawind Energy (the “Seawind Group Shareholders” and together with the Company, and the Seawind Companies, the “Parties”). The Seawind Companies were formed under the laws of the United Kingdom.
In connection with the Merger, the Company issued 40,000,000 restricted shares of the Company’s common stock to the Seawind Group Shareholders (such acquisition is referred to herein as the “Seawind Acquisition”).
Upon completion of the Stock Purchase Agreement, Seawind became 3Power Group, Inc.'s wholly-owned subsidiary. For accounting purposes, the acquisition has been treated as a recapitalization of Seawind with Seawind as the acquirer (reverse acquisition). The historical financial statements prior to May 13, 2011 are those of Seawind Energy. The Merger was accounted for as a “reverse merger”, since the stockholders of Seawind owned a majority of the Company’s common stock immediately following the transaction and their management has assumed operational, management and governance control.
The transaction was accounted for as a recapitalization of Seawind pursuant to which Seawind was treated as the surviving and continuing entity. The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of Seawind immediately following the consummation of the reverse merger. The accompanying consolidated financial statements give retroactive effect to the recapitalization.
In anticipation of the closing of the Stock Purchase Agreement, the Company changed its name to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000 shares.
On July 4, 2011, the Seawind Energy Limited and Seawind Service Limited changed their name to 3Power Energy Limited and 3Power Project Service Limited, respectively.
Acquisition of Shala Energy sh .p .k:
On June 5, 2012, the Company and Shala Energy sh.p.k ("Shala") executed a master acquisition agreement (the “Acquisition Agreement”) where Shala agreed to transfer and the Company agreed to acquire 75% of the equity of Shala. Under the Acquisition Agreement (the “Acquisition”), the closing of the acquisition is subject to the Company’s completion and satisfaction of the due diligence on Shala and Shala’s partners with respect to their shares in Shala and upon the Company’s payment of the first year premium for the insurance bond premium issued in favor of the Ministry of Economy, Trade and Energy of Republic of Albania in replacement of the then existing bank guarantee issued in favor of Ministry of Economy, Trade and Energy of Republic of Albania for the Shala River Concession Agreement, in the amount of 7,230,315 Euro (the “Required Insurance Bond Premium”). Shala is a firm specializing in developing hydro-electric projects, owning and operating sustainable energy projects in the hydro, wind and solar power sectors in Albania.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
On August 10, 2012, after the conclusion of the due diligence efforts, the Company made the first year payment of required Insurance Bond Premium in the amount of 164,851 Euro ($211,972), and as such the Acquisition closed. The acquisition resulted in the Company acquiring 75% of the interest in a hydro-electrical project of a total installed power of 127.6 MW of Shala River in Albania. The Shala River project finalization is in process with the Ministry of Albania.
In connection the acquisition of Shala, the Company is obligated for an aggregate of 4% of the total project costs as facilitator fees in either cash or the Company's common stock to Capital Trust Holding AG, as advisor for the Shala acquisition transaction. During the year ended March 31, 2013, the Company accrued $600,000 due to the facilitator fees for feasibility studies in process and recorded as expenses. In December 2013, the Company issued to Capital Trust Holding AG and its affiliates, 15,000,000 shares of its common stock, valued at $0.04 per share in settlement of the facilitator fees for feasibility studies. Shala currently is not operational and has no material assets or liabilities as of March 31, 2015 and we are not certain when it will become operational.
Liquidation/winding up of international subsidiaries:
On October 8, 2012, the High Court of Justice in the United Kingdom issued a winding-up order for the liquidation and winding up of the affairs of 3Power Project Services Limited, a wholly owned subsidiary of the Company’s Subsidiary, 3Power Energy Limited.
By the letter of The Insolvency Service dated October 12, 2012, the Company was required to provide information relating to 3Power Project Services Limited to the Official Receiver’s Office (a government body of Plymouth, the United Kingdom) and attend an interview with staff of the Official Receiver’s Office to review the prospect of recovering the assets of 3Power Project Services Limited for the benefit of creditors.
The Company was also required to deliver to the Official Receiver’s Office certain assets (cash or cheques) and accounting records that are still in its possession or control. The Company has attended the interview and delivered all the available accounting records to the Officer Receiver’s Office. No order confirming a plan of reorganization, arrangement or liquidation has been entered as of this filing.
The major classes of liabilities of 3Power Project Services Limited as of March 31, 2015 are as follows:
On January 17, 2013, the Company filed a Strike off application with the Registrar of Companies in the United Kingdom to dissolve 3Power Energy Limited, a wholly owned subsidiary of the Company. Such strike-off application has yet to be approved as of the date of this report. 3Power Energy Limited had liabilities as of March 31, 2015 as below:
During the year ended March 31, 2013, the Company charged to operations £11,085 ($16,443) as loss on write-off of assets of its international subsidiaries.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
Use of estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Comprehensive Income (Loss)
The Company applies Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
Fair Values
The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.
The carrying value of the Company’s cash and cash equivalents, accounts payable, short-term borrowings (including notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.
As of March 31, 2015, the Company did not have items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements.
Functional currency
The accompanying consolidated financial statements are presented in U.S. dollars ("USD"). The Company's subsidiary’s functional currency is British pounds ("GBP"). The consolidated financial statements are translated into USD in accordance with Codification ASC 830, Foreign Currency Matters. All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, shareholders' equity is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting periods. The resulting translation adjustments are reported as other comprehensive income and accumulated other comprehensive income in the shareholders' equity in accordance with Codification ASC 220, Comprehensive Income.
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into GBP at the rate on the date of the transaction and included in the results of operations as incurred. There were no material transaction gains or losses in the periods presented.
The exchange rates used to translate amounts in GBP into USD for the purposes of preparing the consolidated financial statements were as follows:
Income taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of March 31, 2015 and 2014, the Company has not recorded any unrecognized tax benefits.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
Stock-Based Compensation
The Company accounts for stock, stock options and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Therefore, results include non-cash compensation expense as a result of the issuance of stock, stock options and warrants and we expect to record additional non-cash compensation expense in the future.
The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.
Per share data
The Company accounts for net loss per share in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic and diluted net loss per common share is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect to the exchange ratio in the Share Exchange in May 2011 (see Note 1), which was accounted for as recapitalization of the Company. The Company had no common stock equivalents as of March 31, 2015 and 2014.
Non-controlling Interests
The Company adopted the accounting standard for non-controlling interests in the consolidated financial statements as of January 1, 2009. This standard establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. This standard also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interests of the non-controlling owner.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies relating to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of the contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company's financial statements.
Cash
The Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
Recent Accounting Pronouncements
ASU 2015-03
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-02
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The ASU focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current U.S. GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (“VIE”), and changing consolidation conclusions for companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-01
In January 2015, the FASB issued ASU No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from U.S. GAAP the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. We do not expect the adoption of ASU 2015-01 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-17
In November 2014, the FASB issued ASU No. 2014-17, “Business Combinations (Topic 805): Pushdown Accounting.” This ASU provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable. ASU 2014-17 was effective on November 18, 2014. The adoption of ASU 2014-17 did not have any effect on our financial position, results of operations or cash flows.
ASU 2014-16
In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial position, results of operations or cash flows.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
ASU 2014-15
In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)". ASU 2014-15 provides guidance related to management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-12
In June 2014, the FASB issued ASU No. 2014-12, “Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-09
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are still evaluating the effect of the adoption of ASU 2014-09. On April 1, 2015, the FASB voted to propose to defer the effective date of the new revenue recognition standard by one year.
ASU 2014-08
In April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) and Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 amends the definition for what types of asset disposals are to be considered discontinued operations, as well as amending the required disclosures for discontinued operations and assets held for sale. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. The adoption of ASU 2014-08 did not have any effect on our financial position, results of operations or cash flows.
There were various updates recently issued by the Financial Accounting Standards Board, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
NOTE 3 - GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern. As of March 31, 2015, the Company has a deficit of $17,774,305 applicable to controlling interest compared with deficit of $16,663,194 applicable to controlling interest for the year ended March 31, 2014, and has incurred significant operating losses and negative cash flows. For the year ended March 31, 2015, the Company sustained a net loss attributable to the Company of $1,111,111 compared to a net loss of $1,023,984 for the year ended March 31, 2014. The Company will need additional financing which may take the form of equity or debt and the Company has converted certain liabilities into equity. In the event the Company are not able to increase its working capital, the Company will not be able to implement or may be required to delay all or part of its business plan, and their ability to attain profitable operations, generate positive cash flows from operating and investing activities and materially expand the business will be materially adversely affected.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
The accompanying consolidated financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the company be unable to continue in existence.
NOTE 4 - NOTES PAYABLE
On March 2, 2010, the Company issued an unsecured Senior Promissory Note ("Note") for 470,000 Euros ($509,950 at March 31, 2015) initially due on December 31, 2010 including interest at 7.5% per annum. Upon default by the Company on January 1, 2011, the interest rate of 15% per annum applies. The Note has not been paid by the Company. As of March 31, 2015, accrued interest on this note was $519,625. During the year ended March 31, 2015, the Company recognized a gain on foreign currency translation of $143,444 due to the change in exchange rates between the Euro and the USD.
On November 14, 2012, CRG Finance AG (“CRG”) filed a complaint in the District Court for Southern District of New York for allegedly beaching a promissory note. However, the Company’s contention is that the promissory note was satisfied by a third party, Rudana Investment Group AG.
On January 17, 2013, the Company filed a motion to compel arbitration and on May 23, 2013, the Court granted the Company’s Motion to Compel and ordered that CRG file its claims as a AAA arbitration. On June 5, 2013, CRG filed its statement of claim with the AAA in the International Center for Disputed Resolution division. The Company filed its statement answer on July 8, 2013. The Company denies the allegations in the complaint and claims it is without merit. In defense of the action, the Company’s counsel vigorously sought documents from Rudana in an effort to establish the Company’s defense. However, due to the fact that Rudana was in the midst of a bankruptcy action in the Swiss Bankruptcy Court, the Company’s counsel sought an order from the AAA Arbitrator authorizing the Swiss Bankruptcy Court to provide documents establishing Rudana’s satisfaction of the debt. On or about December 13, 2013, the AAA Arbitrator entered such an order and the Company’s counsel requested the documents. However, after the Company’s counsel made several requests to postpone the arbitration to allow time to receive the requested documents, the Company was not able to obtain the necessary documents from the Swiss Bankruptcy Court.
The Final Hearing in the AAA arbitration took place on February 27, 2014, wherein the Company was not able to establish its defense due to the lack of evidence from Rudana. The AAA Arbitrator entered an award of Euro 470,000 plus interest at the annual rate of 7.5% against the Company. As of March 31, 2014, the total award against the Company is Euro 728,241 ($1,012,401). On or about April 4, 2014, in an effort to perfect this award against the Company, CRG filed a petition with the Southern District of New York seeking to confirm the award. In addition, the Company accrued total of $56,835 as reimbursement of attorney fees and cost incurred by CRG and $15,500 as administrative fees and compensation to the Arbitrator. On July 8, 2014, a judgment has been entered against 3Power in the Southern District of New York in the amount of $1,086,186. That judgment remains unpaid.
During the year ended March 31, 2014, the Company executed a promissory note for $179,129 to a significant shareholder for services previously rendered. The note is payable on demand, non-interest bearing and unsecured. In March 2014, the Company issued an aggregate of 6,513,782 shares valued at $0.03 per share in full satisfaction of promissory note.
NOTE 5 - COMMON STOCK
The Company is authorized to issue 300,000,000 shares of $0.0001 par value common stock. As of March 31, 2015 and 2014, 249,949,923 and 203,561,951 shares were issued and outstanding, respectively.
On August 15, 2013, the Company issued an aggregate of 34,288,606 shares in settlement of outstanding related party advances of $1,371,544.
In December 2013, the Company issued an aggregate of 15,000,000 shares valued at $0.04 per share in settlement of outstanding facilitator fees dues of $600,000 (Note 1).
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
In March 2014, the Company issued an aggregate of 7,968,328 shares valued at $0.0275 per share in settlement of outstanding note payable of $179,129 and related accrued fees of $40,000.
In March 2014, the Company issued an aggregate of 22,249,546 shares valued at $0.0275 per shares is settlement of outstanding related party advances of $611,862.
In March 2014, the Company issued 10,909,091 shares valued at $0.0275 per shares is settlement of outstanding accrued salaries of $300,000.
In June 2014, the Company issued 20,330,996 shares of its common stock in settlement of $357,825 loan from a related party.
In September 2014, the Company issued 10,977,908 shares of its common stock in settlement of $384,227 loan from a related party.
In December 2014, the Company issued 15,079,068 shares of its common stock in settlement of $331,739 loan from a related party.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company’s current and former officers and stockholders have advanced funds on a non-interest bearing basis to the Company for travel related and working capital purposes. The Company has not entered into any agreement on the repayment terms for these advances. As of March 31, 2015 and 2014, there were $168,404 and $168,480 advances outstanding, respectively.
As of March 31, 2015 and 2014, the Company owed approximately £117,918 ($174,920) and £117,918 ($196,180), respectively, to Seawind Marine Limited, a company controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson.
As of March 31, 2015 and 2014, the Company owed approximately £177,548 ($263,375) and £177,548 ($295,387), respectively to Seawind International Limited, a company controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson.
As of March 31, 2015 and 2014, the Company owed approximately £88,753 ($131,656) and £88,753 ($147,658), respectively to Power Products Ltd (Enerserve Limited f/k/a), a company under the control of Mr. T P G Adams and Mr. J R Wilson, former directors of the Company.
As of March 31, 2015 and 2014, the company owed Mr. J R Wilson (ex-Director) £1,144 ($1,697) and £1,144 ($1,903), respectively.
During the year ended March 31, 2015 and 2014, the Company charged to operation $180,000 and $180,000 as salary to Board members, respectively.
During the year ended March 31, 2015 and 2014, the Company charged to operation $180,000 and $180,000 as consulting fees to a significant shareholder for services provided, respectively.
NOTE 7 - LOSS PER SHARE
The following table presents the computation of basic and diluted loss per share:
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
The Company had no common stock equivalents as of March 31, 2015 and 2014.
NOTE 8 - NON CONTROLLING INTEREST
The Company has a 50% interest in American Seawind Energy LLC, a company registered in the State of Texas, United States of America and as of March 31, 2015, 75% interest in Shala Energy sh pk, a Company registered in the Republic of Albania. Both companies were inactive as of March 31, 2015.
A reconciliation of the non-controlling loss attributable to the Company:
Net loss Attributable to the Company and transfers (to) from non-controlling interest for the year ended March 31, 2015:
Net loss Attributable to the Company and transfers (to) from non-controlling interest for the year ended March 31, 2014:
The following table summarizes the changes in Non-controlling Interest from April 1, 2013 through March 31, 2015:
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
NOTE 9 - INCOME TAXES
The Company utilizes ASC 740 “Income Taxes”, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
For the years ended March 31, 2015 and 2014, the Company had available for U.S federal income tax purposes net operating loss carryovers of approximately $4,005,000 and $2,893,000 respectively, which expire beginning in 2033. The net operating loss carryovers may be subject to limitations under Internal Revenue Code due to significant changes in the Company’s ownership. The Company has provided a full valuation allowance against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the earnings history of the Company it is more likely than not that the benefits will not be realized.
For the years ended March 31, 2015 and 2014, the Company had available for UK income tax purposes net operating loss carryovers of approximately $2,228,000 and $2,228,000, respectively, which can be carried forward indefinitely. The Company has provided a full valuation allowance against the amount of UK unused net operating loss benefit, since management believes that, based upon the earnings history of the Company, it is more likely than not that the benefits will not be realized.
The income tax provision (benefit) consists of the following:
Following tax rates were used to calculate deferred taxes for the years ended March 31, 2015 and 2014:
The Company has filed its tax returns through March 31, 2014.
3POWER ENERGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015 AND 2014
The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.
Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly, the adoption of these provisions of ASC 740 did not have a material effect on the Company’s financial statements. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
All tax years for the Company remain subject to future examinations by the applicable taxing authorities.
NOTE 10- COMMITMENTS AND CONTINGENCIES
Wuersch Settlement
In November 2011, the Company entered into a Settlement Agreement (the “Wuersch Agreement”) with Wuersch & Gering LLP (“Wuersch”). The Wuersch Agreement provided that Wuersch will accept a cash payment of $50,000, payable in five equal installments, and 2,000,000 options to purchase shares of our common stock at $0.54 per share as full satisfaction of debt obligations to Wuersch of $518,359. The five cash payment installments of $10,000 were due on the 15th calendar day of each month beginning November 15, 2011 and ending on March 15, 2012. Two installment payments were made to Wuersch. The total outstanding balance as of March 31, 2015 and 2014 is $504,518.
Hellenic Settlement
On November 15, 2011, the Company entered into a Settlement Agreement (the “Hellenic Agreement”) with Hellenic Technologies (“Hellenic”). The Hellenic Agreement provided that Hellenic will accept cash payments of $70,000, payable in five equal installments, and 1,260,000 shares of common stock as full satisfaction of debt obligations to Hellenic of $700,000. The five cash payment installments of $14,000 were due beginning November 14, 2011 and continuing on the 15th calendar day of each month thereafter until paid in full. Two installments were paid as of March 31, 2012. The Company has also issued 1,260,000 of Common stock valued at $630,000 during the year ended March 31, 2012. The outstanding balance as of March 31, 2015 and 2014 is $28,000.
Litigation
The Company is subject to certain legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.
NOTE 11 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through, the date the consolidated financial statements are available to be issued. There are no subsequent events.
ITEM 9:
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A:
ITEM 9A: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934 (the “Exchange Act”). In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our disclosure controls and procedures regarding a lack of segregation of duties and a limited corporate governance structure. Based on their evaluation of our disclosure controls and procedures as of March 31, 2015, our Chief Executive Officer and Chief Financial Officer has concluded that, as of March 31, 2015, our disclosure controls and procedures were not effective for the material weakness described above.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”).
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2015. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2015. Our Chief Executive Officer and Chief Financial Officer concluded that we have a material weakness due to lack of segregation of duties and a limited corporate governance structure.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. Therefore while there are some compensating controls in place, it is difficult to ensure effective segregation of accounting and financial reporting duties. Management reported a material weakness resulting from the combination of the following significant deficiencies:
• Lack of segregation of duties in certain accounting and financial reporting processes including the approval and execution of disbursements;
• The Company’s corporate governance responsibilities are performed by the Board of Directors; we do not have independent Board of Directors, we do not have an audit committee or compensation committee. Because our Board of Directors only meets periodically throughout the year, several of our corporate governance functions are not performed concurrent (or timely) with the underlying transaction, evaluation, or recordation of the transaction.
While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full time staff. We may not be able to fully remediate the material weakness until we increase operations at which time we would expect to hire more staff.
In light of the above material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the two years in the period ended March 31, 2015, included in this Annual Report on Form 10-K were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our consolidated financial statements for the two years in the period ended March 31, 2015 are fairly stated, in all material respects, in accordance with US GAAP.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.
Plan for Remediation of Material Weaknesses
To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees and engage outsourced accounting professionals, which will enable us to implement adequate segregation of duties within the internal control framework. We will continue to monitor and assess the costs and benefits of additional staffing.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Group have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the fourth quarter of the fiscal year ended March 31, 2015 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B:
ITEM 9B: OTHER INFORMATION
None.
PART III
ITEM 10:
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE
The following table presents information with respect to our current officers, directors and significant employees:
Name
Age
Position
Sharif Rahman
Chief Executive Officer, Chief Financial Officer and Director
Mohammed Falaknaz
Chairman of Board of Directors
Each director serves until the next annual meeting of shareholders and until his/her successor shall have been elected and qualified.
There are no family relationships between any director or executive officer.
Set forth below is biographical information regarding the current officers, directors and significant employees of the Company.
Sharif Rahman: Mr. Rahman is currently the CEO of the Falak Holding Group of companies, a Dubai based group involved in several diversified business sectors including as the initiator and a major shareholder of the $3.6 Billion Dubai sport city project - the world’s largest sports themed real estate project.
A graduate major in commerce from Kerala University in India, he joined the Falaknaz Holding Group at its inception 36 years ago and has been the driving force behind the group’s projects - from the startup stage through to full operation. He remains the personal investment and business advisor to Mr. Falaknaz and family, a prominent Dubai-based high net worth entrepreneur and the founder & owner of the Falak Holding Group.
Mr. Rahman brings to the company valuable expertise as an entrepreneur and senior executive with a history of involvement in multi-billion dollar projects. He also brings a well-established network of relationships in the affluent communities of the Arabian Gulf region and India.
In addition to his long-standing work with the Falak Holding Group, he is also the Founder and managing partner of International Expo Consults, one of the Middle East’s leading exhibition and trade show organizers established in 1994, as well as Chairman and owner of a $25 million turnover business in India which he founded 20 years ago. Mr. Rahman is also known as Shereef Mohammed Haneefa Rehuman.
The Company has determined that Mr. Rahman’s extensive business experience and his key relationships within the Middle East and India have provided him with the skills necessary to serve as an officer and director.
Mohammed Falaknaz: Mr. Falaknaz is currently the vice president and spokesperson of the Falak Holding Group (prominent Dubai based family investment company and major shareholder in the Dubai Sport City multi-billion dollar project) and the president of the UAE national Rugby Association. Mr. Falaknaz has initiated and led local and international events for the Falak Holding Group and the UAE rugby association. Mr. Falaknaz received a degree in computer science from the University of Nebraska. The Company has determined that it will benefit from Mr. Falaknaz’s expertise, knowledge and relationships in the Arabian Gulf and Middle East region as a member of the Board.
Involvement in Certain Legal Proceedings
To our knowledge, during the past five years, no director, person nominated to become a director, executive officer, promoter or control person of the company: (1) had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) was convicted in a criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type or business, securities or banking activities; or (4) was found by a court of competent jurisdiction in a civil action or by the U.S. Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Section 16 (a) Beneficial Ownership Reporting Compliance
Since the Company is a “voluntary reporting company,” its executive officers, directors, and persons who beneficially own more than 10% of the equity securities are therefore not subject to Section 16(a) reporting obligation.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To the knowledge of the Company, there have been no reported violations of the Code of Ethics. In the event of any future amendments to, or waivers from, the provisions of the Code of Ethics, we intend to describe on our Internet website, within four business days following the date of a waiver or a substantive amendment, the date of the waiver or amendment, the nature of the amendment or waiver, and the name of the person to whom the waiver was granted.
Under the Ethics Policy, no employee, or any member of employee's immediate family, is permitted to accept money, gifts of other than nominal value, unusual entertainment, loans, or any other preferential treatment from any customer or supplier of the Company where any obligation may be incurred or implied on the giver or the receiver or where the intent is to prejudice the recipient in favor of the provider. Likewise, no employee is permitted to give money, gifts of other than nominal value, unusual entertainment or preferential treatment to any customer or supplier of the Company, or any employee or family members thereof, where any obligation might be incurred or implied, or where the intent is to prejudice the recipient in favor of the Company.
No directors, officers or employees are permitted to solicit or accept kickbacks, whether in the form of money, goods, services or otherwise, as a means of influencing or rewarding any decision or action taken by a foreign or domestic vendor, customer, business partner, government employee or other person whose position may affect the Company's business. No employee is permitted to use Company property, services, equipment or business for personal gain or benefit. Employees may not act on behalf of, or own a substantial interest in, any company or firm that does business, or competes, with the Company, or conduct business on behalf of the Company with any company or firm in which the employee or a family member has a substantial interest or affiliation. Exceptions require advance written approval from the Chief Financial Officer. Employees must not personally benefit from outside endeavor as a result of their employment by the Company. Other than the provisions of our Ethics Policy governing conflicts of interest, we have not adopted a specific conflicts of interest policy.
Board Committees
Currently, we do not have any standing audit, compensation or nominating committees. Our entire board of directors perform the function of these committees.
Audit Committee Financial Expert
None of our directors or officers has the qualifications or experience to be considered a financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe the services of a financial expert are not yet warranted. We intend to appoint an audit committee financial expert during the foreseeable future.
Director Independence
None of the members of the Company’s Board may be deemed to be independent. The Company has adopted the standards for independence contained in the Nasdaq Marketplaces Rules, Rule 4350(d) and Rule 4200(a)(15).
Board Meetings and Committees; Annual Meeting Attendance
The Board had three members during the fiscal year ended March 31, 2015 and Board of the directors attended more than 75% of the board meetings. The Company did not hold an annual meeting of the Company’s security holders during the fiscal year ending March 31, 2015.
Shareholder Communications
Any shareholder may communicate directly to the Board by sending a letter to the Company’s address of record.
ITEM 11:
ITEM 11: EXECUTIVE COMPENSATION
Summary Compensation Table
(1) Effective as of October 19, 2011, Mr. Sharif Rahman has been appointed as the Company’s Chief Financial Officer. He has served as a member of the Company’s Board since September 12, 2011. Mr. Sharif Rahman was appointed as Chief Executive Officer of the Company on March 15, 2013.
Grants of Plan Based Awards in the Fiscal Year Ended March 31, 2015
No option grants were awarded to name executive officers for the fiscal year ended March 31, 2015.
Outstanding Equity Awards at Fiscal Year-End
No individual grants of stock options or other equity incentive awards have been made to our officers and directors since our inception; accordingly, none were outstanding as of March 31, 2015.
Compensation of Officers and Directors
Sharif Rahman, Chief Executive Officer, Chief Financial Officer and our director
The Board determined to remunerate our Chief Executive Officer and Chief Financial Officer for his services to the Company on a monthly sum of $15,000 and further reimburse all related expenses incurred by him. Mr. Sharif did not receive additional compensation in connection with being appointed as our director.
Mohammed Falaknaz, Director, Chairman of the Board
No decisions have been made regarding Mr. Falaknaz’ compensation at this time.
Equity Incentive Plan
The Company does not currently have an equity compensation plan.
ITEM 12:
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of Common Stock as of July 8, 2015 by (i) each director of the Company; (ii) each of the Company's officers named in the Summary Compensation Table and other key employees of our Company; (iii) each person who is known by the Company to be the beneficial owner of more than five percent of the Company's outstanding Common Stock; and (iv) all directors and named executive officers as a group. Except as otherwise indicated below, each person named has sole voting and investment power with respect to the shares indicated.
Amount and Nature of Beneficial Ownership
The mailing address for each of the listed individual is c/o 3Power Energy Group Inc., P.O. Box 50006, Sh. Rashid Building, Sh. Zayed Road, Dubai, United Arab Emirates.
(1) Based on 249,949,923 shares of common stock issued and outstanding as of July 8, 2015.
(2) Holds as custodian for several indirect shareholders of the Company, as to which the Company has been advised that none of such indirect holders individually have greater than 4.9% ownership of shares of Common Stock and none of whom are subject to common control or group control over decision-making with respect to voting or disposition of such interests.
(3) Mr. Knot Unger may be deemed as the beneficial owner of the shares owned by Ecoserve Limited.
(3) Includes 1,260,000 shares of common stock held by Hellenic Technologies Ltd.
ITEM 13:
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The Company’s current and former officers and stockholders have advanced funds on a non-interest bearing basis to the Company for travel related and working capital purposes. The Company has not entered into any agreement on the repayment terms for these advances. As of March 31, 2015 and 2014, there were $168,480 and $168,480 advances outstanding, respectively (See Note 5 in above for repayment by shares).
On August 15, 2013, the Company issued an aggregate of 34,288,606 shares in settlement of outstanding related party advances of $1,371,544.
In March 2014, the Company issued an aggregate of 22,249,546 shares valued at $0.0275 per shares is settlement of outstanding related party advances of $611,862.
In June 2014, the Company issued 20,330,996 shares of its common stock in settlement of $357,825 loan from a related party.
In September 2014, the Company issued 10,977,908 shares of its common stock in settlement of $384,227 loan from a related party.
In December 2014, the Company issued 15,079,068 shares of its common stock in settlement of $331,739 loan from a related party.
As of March 31, 2015 and 2014, the Company owed approximately £117,918 ($174,920) and £117,918 ($196,180), respectively, to Seawind Marine Limited, a company controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson.
As of March 31, 2015 and 2014, the Company owed approximately £177,548 ($263,375) and £177,548 ($295,387), respectively to Seawind International Limited, a company controlled by the former directors, Mr. T P G Adams and Mr. J R Wilson.
As of March 31, 2015 and 2014, the Company owed approximately £88,753 ($131,656) and £88,753 ($147,658), respectively to Power Products Ltd (Enerserve Limited f/k/a), a company under the control of Mr. T P G Adams and Mr. J R Wilson, former directors of the Company.
As of March 31, 2015 and 2014, the company owed Mr. J R Wilson (ex-Director) £1,144 ($1,697) and £1,144 ($1,903), respectively.
During the year ended March 31, 2015 and 2014, the Company charged to operation $180,000 and $ 360,000 respectively, respectively, as salary to Board members.
During the year ended March 31, 2015 and 2015, the Company charged to operation $180,000 and $180,000, respectively, as consulting fees to a significant shareholder for services provided.
On March 29, 2010 the Company entered into a Frame Agreement (the “Hellenic Frame Agreement”) with Hellenic Technologies. Pursuant to the Hellenic Frame Agreement, Hellenic Technologies will supply the Company with materials and services based on work orders delivered by the Company from time to time, in accordance with the terms and conditions of the Hellenic Frame Agreement. The companies affiliated with Mr. Kazantz may also enter into additional agreements with the Company to provide engineering, construction and procurement services for various projects.
ITEM 14:
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed by our registered public accountants for professional services rendered for the audit of the Company's annual financial statements for the fiscal year ended March 31, 2015 and 2014 totaled $ 40,000.
Audit-Related Fees
None
Tax Fees
None
All Other Fees
None
Audit Committee Pre-Approval Policies
Our Board of Directors reviewed the audit and non-audit services rendered by RBSM LLP during the periods set forth above and concluded that such services were compatible with maintaining the auditors’ independence. All audit and non-audit services performed by our independent accountants are pre-approved by our Board of Directors to assure that such services do not impair the auditors’ independence from us.
PART IV
ITEM 15:
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit
No.
Description of Exhibits
Exhibit 3.1
Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission on April 14, 2008.
Exhibit 3.2
Bylaws, as amended, incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission on April 14, 2008.
Exhibit 3.3
Certificate of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 29, 2011.
Exhibit 10.1
Financing Agreement, dated as of March 2, 2010, by and between the Company and CRG Finance AG, incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on April 15, 2010.
Exhibit 10.2
Senior Promissory Note, dated as of March 2, 2010, incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on April 15, 2010.
Exhibit 10.3
Master Acquisition Agreement, by and between the Company, DFD Select Group Ltd. and Enway SAS, dated as of July 2, 2010, incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 22, 2010.
Exhibit 10.4
Master Acquisition Agreement, by and between the Company and Superserve Ltd., dated as of August 20, 2010, incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 22, 2010.
Exhibit 10.5
Cooperation Agreement dated December 30, 2011, by and between the Company and Shala Energy sh.p.k. incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 20, 2012.
Exhibit 10.6
Extension Agreement dated April 5, 2012, by and between the Company and Shala Energy sh.p.k. incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 20, 2012.
Exhibit 10.7
Master Acquisition Agreement dated June 5, 2012, by and between the Company and Shala Energy sh.p.k. incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 20, 2012.
Exhibit 14.1
Code of Ethics for Senior Financial Officers, incorporated by reference from the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 1, 2005.
Exhibit 21
List of Subsidiaries, incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2012.
Exhibit 31.1
Certification of Principal Executive Officer, Principal Financial and Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Exhibit 32.1
Certification of the Principal Executive Officer, Principal Financial and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Exhibit 101.INS
XBRL Instance Document*
Exhibit 101.SCH
XBRL Taxonomy Extension Schema.*
Exhibit 101.CAL
XBRL Taxonomy Extension Calculation Linkbase*
Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase*
Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase. *
Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase*
* Filed herein.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
3POWER ENERGY GROUP INC.
By: /s/ Sharif Rahman
Name: Sharif Rahman
Title: Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer, Principal Financial and Chief Accounting Officer)
Date: July 14, 2015
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Sharif Rahman
Chief Executive Officer and Chief Financial
Officer
July 14, 2015
Sharif Rahman
Director (Principal Executive Officer,
Principal Financial and Chief Accounting
Officer)
/s/ Mohammed Falaknaz
Mohammed Falaknaz
Chairman of Board of Directors
July 14, 2015