Item 1. Description of Business.
(a) Business Development.
Salamon Group Inc. (the “Company”, “SGI”, or the “Registrant”), incorporated in the state of Nevada on April 27, 2001, is a publicly traded independent "green" energy company with headquarters in Kelowna, BC, Canada. The Company’s business model includes the development, acquisition and funding of roof top and ground mount solar power electricity generating systems, with initial emphasis on the General Motors solar energy projects to be constructed by Sunlogics Inc., in addition to Sunlogics Inc. future solar rooftop and ground mount installations in Ontario, Canada and throughout the United States.
On May 13, 2011 (“the Closing Date”) Salamon Group Inc, completed the acquisition of Sunlogics Power Fund, a corporation formed pursuant to the laws of the Province of Ontario, whereby it acquired all of the issued and outstanding shares of capital stock of Sunlogics Power Fund (the “Sunlogics Power Fund Shares”) all of which were held by Michael Matvieshen (the “Seller”) (the “Acquisition”).
The purchase price for the Acquisition consisted of 40,000,000 shares of common stock, $0.001 par value per share of the Registrant, issued to the Seller. On May 12, 2011 the parties amended the Stock Purchase Agreement (the “SPA”), more specifically the purchase price as follows: SGI purchased and the Seller desired to sell the Sunlogics Power Fund Shares to SGI in exchange for 20,000,000 shares of common stock of SGI (the “SGI Shares”) and 20,000,000 stock purchase warrants to be issued to the Seller and/or Seller’s assignee(s) (the “SGU Warrants”). The SGI Warrants shall be exercisable at a price of $0.001 per share and expiring five years from the date of issuance (the ‘Amended SPA”).
Immediately upon closing of the Acquisition, the Registrant increased its authorized share capital so as to allow for the exercise of the SGI Warrants.
The terms and conditions of the Acquisition were set forth in the Amended SPA, dated as of May 12, 2011, by and among the Registrant, Michael Matvieshen and Sunlogics Power Fund (the “Parties”) disclosed by the Registrant in a Current Report on Form 8-K A filed with the Securities and Exchange Commission (“SEC”) on May 13, 2011.
The foregoing summary of the terms of the Acquisition in its entirety to the disclosure of the Current Report on Form 8-K A filed by the Registrant with the SEC on May 13, 2011, which disclosure is incorporated herein by reference, as well as by the full text of the Amended SPA attached as an exhibit thereto.
Sunlogics Power Fund is a wholly-owned subsidiary of SGI. As a result of such acquisition, our operations will now be focused on the solar power market by way of development and acquisitions of solar powered electricity generating facilities which have long term power purchasing agreements in place with local power utilities. We intend to finance our operations through a combination of debt and equity funding.
For the year ended December 31, 2011 we had revenues of $3,126.
As reported in the Report of Independent Registered Public Accounting Firm on our December 31, 2011 financial statements, we have suffered recurring losses from operations, we have a working capital deficit and a deficit accumulated during the development stage. These items raise substantial doubt about our ability to continue as a going concern.
If we are unable to generate sufficient revenue from operations to implement our plans, we intend to explore all available alternatives for debt and/or equity financing, including but not limited to private and public securities offerings. Accordingly, we expect that it will be necessary for us to raise additional funds in the event that we are unable to generate any revenue from operations and if only a minimal level of revenue is generated in accordance with our expectations.
We intend to offer additional securities under Rule 506 and Regulation D to fund our short-term and medium-term expansion plans.
(b) Business of Registrant. General
Salamon Group Inc. (the “Company”, “SGI”, or the “Registrant”), incorporated in the state of Nevada on April 27, 2001, is a publicly traded independent "green" energy company with headquarters in Kelowna, BC, Canada. The Company’s business model includes the development, acquisition and funding of roof top and ground mount solar power electricity generating systems, with initial emphasis on the General Motors solar energy projects to be constructed by Sunlogics Inc., in addition to Sunlogics Inc. future solar rooftop and ground mount installations in Ontario, Canada and throughout the United States.
Management
Michael Matvieshen is the President and Chief Executive Officer of the Corporation.
As at March 27, 2012, the Board of Directors consisted of Michael Matvieshen, Larry F aulk and Stephane Bertrand.
As of the date of this annual report, we have no other employees. The Company engages consultants for certain administrative and management services.
Funding
We plan to raise funds by way of private placements or public offerings of share or debt instruments. The funds will be used to acquire solar powered electricity generating facilities which have long term power purchasing agreements in place with local power utilities and for general working capital in the event that the RTO is completed.
There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs. There are no arrangements, agreements or understandings under which non-management shareholders will exercise their voting rights to continue to elect the current directors to our Board of Directors.
Item 1A.
Item 1A. Risk Factors.
Not applicable.
Item 2.
Item 2. Description of Property.
The Company’s head office is located at 215 Neave Road, Suite 5, Kelowna, BC, Canada.
Item 3.
Item 3. Legal Proceedings.
We know of no legal proceedings to which we are a party or to which any of our property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against us.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of our stockholders during the fiscal year ended December 31, 2011.
PART II
Item 5.
Item 5. Market for Equity Securities and Other Shareholder Matters.
Market Information
On October 5, 2007, our shares began trading on FINRA’s Over-The-Counter Bulletin Board (the “OTC Bulletin Board”) under the symbol “SLMU.”. As of August 12, 2010, our shares ceased trading on the OTC Bulletin Board and have since traded on the OTCQB. The following table sets forth the high and low bid prices for our common stock as reported by the OTC Bulletin Board and OTCQB for 2010 and 2011 in which our shares traded.
(1) These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
Our common stock is classified as a penny stock and as such, broker dealers dealing in our common stock will be subject to the disclosure rules for transactions involving penny stocks, which require the broker dealer to determine if purchasing our common stock is suitable for a particular investor. The broker dealer must also obtain the written consent of purchasers to purchase our common stock. The broker dealer must also disclose the best bid and offer prices available for our stock and the price at which the broker dealer last purchased or sold our common stock. These additional burdens imposed on broker dealers may discourage them from effecting transactions in our common stock, which could make it difficult for an investor to sell their shares.
Holders
As of December 31, 2011, we had 40 shareholders of record and 40,000,000 outstanding shares of common stock.
Dividends
We have never paid or declared any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.
Transfer Agent
The transfer agent for the Common Stock is Signature Stock Transfer, Inc., PMB 317, 2220 Coit Road, Suite #480, Plano, Texas 75075. Tel: 972-612-4120, Fax: 972-612-4122.
Recent Sales of Unregistered Securities
None.
Item 7.
Item 7. Management's Discussion and Analysis or Plan of Operation.
As reported in the Report of Independent Registered Public Accounting Firm on our December 31, 2011 financial statements, we have suffered recurring losses from operations, we have a working capital deficit and a deficit accumulated during the development stage. These items raise substantial doubt about our ability to continue as a going concern.
The Company plans to generate revenues through: i) the sale of solar powered electricity to local power utilities and end users through long term power purchase agreements; and ii) by funding solar power generating plants which the Company is currently identifying with potential customers in the United States and Canada. If the Company is successful in acquiring revenue producing renewable energy projects, we intend to finance our operations through a combination of debt and equity financing.
If we are unable to generate sufficient revenue from operations to implement our plans, we intend to explore all available alternatives for debt and/or equity financing, including but not limited to private and public securities offerings. Accordingly, we expect that it will be necessary for us to raise additional funds in the event that we are unable to generate any revenue from operations and if only a minimal level of revenue is generated in accordance with our expectations.
As at December 31, 2011, the Company had advanced loan proceeds of $785,000 to Arise Technologies Corporation. The Company also issued $425,000 in convertible notes.
Results of Operations
The operating results and cash flows are presented for the years ended December 31, 2011 and 2010.
Summary of Year End Results
Revenues
For the year ended December 31, 2011, we had total revenue of $3,126, compared to Nil for the year ended December 31, 2010, an increase of $3,126 from revenues for usage of the Company’s solar powered charging station.
As of December 31, 2011 and December 31, 2010, deferred revenue totaled $44,374 and $Nil, respectively.
Expenses
The major components of our expenses for the year are outlined below:
For the year ended December 31, 2011, we had total operating expenses of $461,307, compared to $121,363 for the year ended December 31, 2010, an increase of $339,944.
For the year ended December 31, 2011, we had management fees of $224,675, compared to $10,000 for the year ended December 31, 2010, an increase of $214,675. The increase in management fees is attributed to the services rendered by the President of the Company.
For the year ended December 31, 2011, we had professional and consulting fees of $157,350 compared to $79,428 for the year ended December 31, 2010, an increase of $77,922. The increase in professional and consulting fees is attributed to higher volume of activities during the year.
For the year ended December 31, 2011, we had impairment of an intangible asset of $1,299,595 compared to Nil for the year ended December 31, 2010, an increase of $1,299,595.
For the year ended December 31, 2011, we had impairment of an equipment of $74,305 compared to Nil for the year ended December 31, 2010, an increase of $74,305.
The net loss for the year ended December 31, 2011 was $1,496,185 compared to $121,363 for the year ended December 31, 2010, an increase of $1,374,822.
Liquidity and Capital Resources
Working Capital
Cash Flows
Financing Requirements
From inception to December 31, 2011, we have suffered cumulative losses in the amount of $2,665,806. Since our inception, we have funded operations through common stock issuances, related party loans, and the support of creditors in order to meet our strategic objectives. Our management believes that sufficient funding will be available to meet our business objectives, including anticipated cash needs for working capital, and are currently evaluating several financing options, including a public offering of securities. However, there can be no assurance that we will be able to obtain sufficient funds to continue our operations. As a result of the foregoing, our independent auditors believe there exists substantial doubt about our ability to continue as a going concern. There is no assurance that we will be able to obtain additional financing if and when required. We anticipate that additional financing may come in the form of sales of additional shares of our common stock which may result in dilution to our current shareholders.
Financial Condition, Capital Resources and Liquidity
As of December 31, 2011, we have a deficit accumulated during the development stage of $2,665,806. At December 31, 2011, we had assets totaling $830,363 and liabilities of $1,448,712 attributable to accounts payable, convertible debt, loans payable, advances from directors and deferred revenues.
We currently have a working capital deficit and there can be no assurance that our financial condition will improve.
Even though we believe, without assurance, that we will obtain sufficient capital with which to implement our business plan on a limited scale, we are not expected to continue in operation without an infusion of capital. In order to obtain additional equity financing, we may be required to dilute the interest of existing shareholders.
Net Operating Losses
As of December 31, 2011, we have accumulated a net loss of $2,665,806.
Research and Development
Not Applicable.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Material Commitments for Capital Expenditures
We had no contingencies or long-term commitments at December 31, 2011.
Critical Accounting Policies
There were no changes to the critical accounting policies as discussed in our 2010 Form 10-K.
Item 8.
Item 8. Financial Statements.
Exhibit 99.1, “Salamon Group Inc. Financial Statements” are incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There were no changes in or disagreements with our accountants on accounting and financial disclosure matters.
Item 9A(T).
Item 9A(T). Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2011 (the “Evaluation Date”).
Based upon the evaluation of our disclosure controls and procedures as of the Evaluation Date, the Chief Executive Officer concluded that our disclosure controls and procedures are ineffective.
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 Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its evaluation, our management concluded that there are material weaknesses in our internal control over financial reporting and Management has concluded that the Company’s internal controls over financial reporting are ineffective as of December 31, 2011. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness relates to the lack of segregation of duties in financial reporting, as our financial reporting and all accounting functions are performed by an external consultant with no oversight by a professional with accounting expertise. Our Chief Executive Officer does not possess accounting expertise and we do not have a separately designated audit committee. These weaknesses are due to our lack of excess working capital to hire additional staff. To remedy these material weaknesses, we intend to engage another qualified accountant to assist with financial reporting as soon as our finances will allow.
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 temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the year ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management does not expect that our Disclosure Controls and 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 Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a 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 or board 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.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Company.
Directors and Executive Officers
Set forth below are the names, ages, terms of office and positions of our executive officers and directors.
All directors hold office until the next annual meeting of our shareholders and until their successors have been elected and qualify. Officers serve at the pleasure of the Board of Directors. The directors will devote such time and effort to our business and affairs as may be necessary to perform their responsibilities.
Aside from the directors stated above, there are no other persons whose activities will be material to our operations at this time. However as finances allow, we will engage management and other personnel as required in such areas as finance, administration, sales and marketing, research and development, and overall management.
Significant Employees
We have no employees.
Family Relationships
There are no family relationships between or among our executive officer and directors.
Item 11.
Item 11. Executive Compensation.
All management fees are being accrued until we commence business operations. At such time as we commence operations, we expect that the Board of Directors will approve the payment of salaries in a reasonable amount to each of our officers for their services in the positions. At such time, the Board of Directors may, in its discretion, approve the payment of additional cash or non-cash compensation to our officers for their services to us.
We do not provide officers with pension, stock appreciation rights, long-term incentive or other plans but we may implement such plans in the future.
Compensation of Directors
We have no standard arrangements for compensating our directors for their attendance at meetings of the Board of Directors.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information as of December 31, 2011, regarding the ownership of our common stock by each shareholder known by us to be the beneficial owner of more than five per cent of our outstanding shares of common stock, each director and all executive officers and directors as a group. Except as otherwise indicated, each of the shareholders has sole voting and investment power with respect to the shares of common stock beneficially owned.
(1)
Director and CEO
(2)
Space Globe Technologies Ltd. is a Canadian corporation wholly owned by Mr. John Salamon.
(3)
Sunlogics Inc. shares are held in trust by Michael Matvieshen
Item 13.
Item 13. Certain Relationships and Related Transactions.
At December 31, 2011, a total of $393,592 was due to a director of the Company. The amount owing is unsecured, non-interest bearing and is due on demand.
Item 14.
Item 14. Principal Accountant Fees and Services
(1) Audit Fees.
The aggregate fees billed for professional services rendered by our principal accountants for the audit of the Registrant's annual financial statements and review of the financial statements included in the Registrant's Forms 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal years 2011 and 2010 were approximately $27,500 and $43,520 respectively each year.
(2) Audit Related Fees.
There were no audit related fees for professional services rendered for fiscal years 2011 and 2010.
(3) Tax Fees.
Tax fees for fiscal years 2011 and 2010 were $1,200 each year.
(4) All Other Fees.
Not applicable.
(5) Audit Committee Policies and Procedures.
The Registrant does not have an audit committee. The Board of Directors of the Registrant approved all of the services rendered to the Registrant by our principal accountants for fiscal years 2011 and 2010.
Item 15.
Item 15. Exhibits.
(1)
Incorporated by reference to the exhibits of the Registration Statement on Form 10-KSB filed with the Securities and Exchange Commission on August 6, 2004.
(2)
Filed herewith.
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.
SALAMON GROUP, INC.
Dated: April 13, 2012 /s/ Michael Matvieshen
Michael Matvieshen
Salamon Group, Inc.
(A Development Stage Company)
December 31, 2011
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Salamon Group, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Salamon Group, Inc. (A Development Stage Company) as of December 31, 2011 and 2010 and the related consolidated statements of operations, cash flows and stockholders’ deficit for the years then ended. In addition, we have audited the consolidated statements of operations, cash flows and stockholders’ deficit for the period from April 27, 2001 (Inception) to December 31, 2005 and from January 1, 2010 to December 31, 2011, which have been included in the Company’s cumulative balances. 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. Our opinion on the consolidated statements of operations, stockholders’ deficit and cash flows for the period from April 27, 2001 (inception) to December 31, 2011, insofar as it relates to the amounts included for the cumulative period from January 1, 2006 to December 31, 2009, is based on the reports of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes 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 internal control over financial reporting. 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 above present fairly, in all material respects, the financial position of Salamon Group, Inc. (A Development Stage Company) as of December 31, 2011 and 2010, and the results of its operations, cash flows and stockholders’ deficit for the years then ended and accumulated from April 27, 2001 (inception) to December 31, 2011 in conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a working capital deficit and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ “Manning Elliott LLP”
CHARTERED ACCOUNTANTS
Vancouver, Canada
April 12, 2012
Salamon Group, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US dollars)
See accompanying notes to the consolidated financial statements
Salamon Group, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US dollars)
See accompanying notes to the consolidated financial statements
Salamon Group, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US dollars)
See accompanying notes to the consolidated financial statements
Salamon Group, Inc.
(A Development Stage Company)
Statement of Stockholders’ Deficit
(Expressed in US dollars)
See accompanying notes to the consolidated financial statements
Salamon Group, Inc.
(A Development Stage Company)
Statement of Stockholders’ Deficit
(Expressed in US dollars)
See accompanying notes to the consolidated financial statements
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
1.
Nature of Operations and Going Concern
Salamon Group, Inc. (the "Company") was incorporated in the state of Nevada on April 27, 2001 (“Inception”). The Company is a development stage company whose principal business plan is to acquire revenue producing assets in the industry of solar energy. The Company is a development stage company as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities.
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern. At December 31, 2011, the Company has accumulated losses of $2,665,806 since inception and a working capital deficit of $620,849 and expects to incur further losses in the development of its business, all of which cast substantial doubt about the Company’s ability to continue as a going concern.
Management plans to continue to provide for the Company’s capital needs by issuing debt and equity securities and by the continued support of its related parties (see Note 5). The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. There is no assurance that funding will be available to continue the Company’s business operations.
2.
Summary of Significant Accounting Policies
(a) 	
Basis of presentation and consolidation
The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in United States dollars. The Company’s fiscal year end is December 31. These consolidated financial statements include the accounts of its wholly-owned subsidiary Sunlogics Power Fund Management Inc. (“Sunlogics Power”) from the date control was acquired on May 12, 2011. All inter-company transactions and balances have been eliminated.
(b) 	
Use of estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances, stock-based payments, useful life and valuation of property and equipment, valuation of intangible assets and financial instrument valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses. The actual results experience by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies (continued)
(c) 	
Foreign currency translation
The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 830, Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
(d) 	
Basic and diluted net loss per share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share, which requires presentation of both basic and diluted loss per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, convertible preferred stock, and convertible debt, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all potentially dilutive common shares if their effect is antidilutive. At December 31, 2011 there were 35,666,667 potentially dilutive instruments outstanding.
(e) 	
Property and Equipment
The Company’s solar powered charging station is recorded at cost and is depreciated on a straight-line basis over its estimated useful life of 20 years.
(f) 	
Income taxes
The Company accounts for income tax using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
(g) 	
Financial instruments
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence when measuring fair value using a hierarch based on the level of independent, objective evidence surrounding the inputs used to measure fair value. The hierarchy prioritized the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies (continued)
(g) 	
Financial instruments (continued)
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, loans receivable, accounts payable, loans payable, convertible debt, and advances from directors. The fair value of the Company’s cash, when applicable, is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. At December 31, 2011, the Company estimates that the carrying values of all of its financial instruments approximate their fair values due to the nature or duration of these instruments.
As of December 31, 2011, there were no assets or liabilities measured at fair value on a recurring basis presented on the Company’s balance sheet other than cash with a fair value measurement of $783 using Level 1.
(h) 	
Stock-based compensation
In accordance with ASC 718, Compensation - Stock Based Compensation and ASC 505-50, Equity Based Payments to Non-Employees, the Company accounts for share-based payments using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
(i) 	
Comprehensive loss
ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2011, the Company has no items that represent other comprehensive loss and, therefore, has not included a schedule of other comprehensive loss in the financial statements.
(j) 	
Revenue and Deferred Revenue Recognition
The Company recognizes revenues from sales of goods and services only when a firm sales agreement is in place, delivery has occurred or services have been rendered and collectability of the fixed or determinable sales price is reasonably assured. The fees from the usage of its solar powered charging station are deferred and recognized as revenues over the term of the service agreement.
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies (continued)
(k) 	
Recent accounting pronouncements
Comprehensive income
In June 2011, ASC guidance was issued related to comprehensive income. Under the updated guidance, an entity will have the option to present the total of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, the update requires certain disclosure requirements when reporting other comprehensive income. The update does not change the items reported in other comprehensive income or when an item of other comprehensive income must be reclassified to income. The update is effective for the Company’s fiscal year beginning January 1, 2012. The Company does not expect the updated guidance to have an impact on the consolidated balance sheets, results of operations or cash flows.
Fair Value Accounting
In May 2011, ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies different components of fair value accounting including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and disclosing quantitative information about the unobservable inputs used in fair value measurements that are categorized in Level 3 of the fair value hierarchy. The update is effective for the Company’s fiscal year beginning January 1, 2012. The Company does not expect the updated guidance to have a significant impact on the consolidated balance sheets, results of operations or cash flows.
3.
Loans Receivable
On October 28, 2011, the Company entered into agreement with Radiant Offshore Fund Ltd. (“Radiant Offshore”) whereby Radiant Offshore assigned secured obligations of $344,155 (CAN$350,000), a loan agreement (the “Original Loan Agreement”) and debentures due from ARISE Technologies Corporation (“ARISE”) and the security instruments and guarantees for the secured obligations for consideration of $344,155 (CAN$350,000). Under the terms of the Original Loan Agreement assigned from Radiant Offshore, the Company will advance a maximum amount of $1,474,950 (CAN$1,500,000) to ARISE, and any loans advanced have a maturity date of April 14, 2012 and bear interest at 12% per annum. During the year ended December 31, 2011, the Company advanced $782,706 (CAN$785,000) to ARISE.
Subsequent to year end, the Company entered into an agreement to purchase certain assets of ARISE (See Note 13(n)). The loans receivable were applied against the purchase price of the assets.
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
4.
Property and Equipment
During the year ended December 31, 2011, the Company acquired a solar powered charging station (see also Note 5(e)). Depreciation for the year ended December 31, 2011 was $5,821 (2010 - $nil). An impairment loss of $74,305 (2010 - $nil) was recorded for the year ended December 31, 2011 to write down the solar powered charging station to its expected recoverable amount.
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
8.
Common Stock (continued)
(j) 	
On November 30, 2010, the Company, pursuant to an agreement, agreed to issue shares to a third party to settle accounts payable related to services provided. According to the terms of the agreement, the Company will issue 1,500,000 shares of its common stock. The shares issuable were valued at $15,000 based their market price on the date of the agreement. These shares were issued on January 24, 2011.
9.
Share Purchase Warrants
On May 12, 2011, the Company issued 20,000,000 share purchase warrants upon the purchase of Sunlogics Power (Note 11). The share purchase warrants are exercisable at a price of $0.001 per share and expire on May 12, 2016.
10.
Commitments and Contingencies
(a) 	
Indemnities
During the normal course of business, the Company has made certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of Nevada. These indemnities include certain agreements with the Company’s officers under which the Company may be required to indemnify such person for liabilities arising out of their employment relationship. The duration of these indemnities and guarantees varies and, in certain cases, is indefinite. The majority of these indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make.
Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets.
(b) 	
Purchase commitments
On December 30, 2011 the Company entered into an agreement to purchase solar modules in the amount of $20,291,000.
11.
Acquisition of Sunlogics Power
On May 12, 2011, the Company entered into a stock purchase agreement with a director and officer of the Company to acquire all of the issued and outstanding shares of Sunlogics Power in exchange for 20,000,000 shares of the Company’s common stock and 20,000,000 stock purchase warrants. The warrants are exercisable at a price of $0.001 per share and expire on May 12, 2016. The acquisition of Sunlogics Power has been accounted for as an asset acquisition. The operations of Sunlogics Power have been included in these consolidated financial statements from the date of acquisition.
The following is a summary of the purchase price allocation at the date of acquisition based upon the estimated fair value of the assets acquired and liabilities assumed:
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
11.
Acquisition of Sunlogic Power (continued)
Consideration Given:
Subsequent to recording the asset acquisition, the intangible asset pertaining to the first right of refusal to acquire solar assets from Sunlogics Inc. was written down to its estimated fair value of $0 by an impairment charge of $1,299,595. As a result, a deferred income tax recovery of $324,899 was recorded.
12.
Income Taxes
The Company is subject to United States federal income taxes at an approximate rate of 35% (2010 - 35%). The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax recovery as reported is as follows:
Significant components of the Company’s deferred income tax assets as at December 31, 2011 and 2010, after applying enacted corporate income tax rates, are as follows:
The Company has net operating loss carryforwards of $1,221,126 which expire commencing in 2017.
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)
13.
Subsequent Events (continued)
(g) 	
On February 12, 2012, the Company issued a convertible redeemable note in the amount of CAN$444,747 with a maturity date of December 31, 2014 to Haverstock in consideration for the assignment of indebtedness agreement (See Note 13(f)). The Note bears interest at 5% per annum and shall increase to 10% upon default. So long as there is no event of default, the Company has sufficient number of authorized shares of Common Stock reserved for issuance upon full conversion and the Company’s stock is trading at or below $0.50 per share, the Company has the option to redeem this Note and pay the holder 100% of the unpaid principal and accrued interest at any time. In the event that the trading price of the Company’s common stock is below the $0.50 post reverse stock split, the Company has the option to prepay a portion of the outstanding principal equal to 100% of the unpaid principal divided by thirty-six plus one month’s interest. The Note is to be paid in full on the maturity date, unless previously paid or converted into the Company’s common stock. The Note holder has the right to convert any unpaid principal and accrued interest, at a conversion price per share equal to 70% of the average of the five lowest closing bid prices of the Company’s common stock for the 20 trading days preceding a conversion date. The Note is secured by assets purchased from ARISE in the form of a convertible debenture.
(h) 	
On February 14, 2012, the Company entered into an assignment of indebtedness agreement with Radiant Offshore and Radiant Performance. Pursuant to the terms of the agreement, Radiant Offshore and Radiant Performance assigned its secured obligations of CAN$5,066,746, credit agreements and security in ARISE to the Company for a purchase price of CAN$5,066,746.
(i) 	
On February 13, 2012, the Company issued a convertible redeemable note in the amount of $5,066,746 with a maturity date of February 13, 2015 to Radiant Offshore in consideration for the assignment of indebtedness agreement (See Note 13(h)). The Note bears interest at 5% per annum and shall increase to 10% upon default. So long as there is no event of default, the Company has sufficient number of authorized shares of Common Stock reserved for issuance upon full conversion and the Company’s stock is trading at or below $0.50 per share, the Company has the option to redeem this Note and pay the holder 100% of the unpaid principal and accrued interest at any time. In the event that the trading price of the Company’s common stock is below the $0.50 post reverse stock split, the Company has the option to prepay a portion of the outstanding principal equal to 100% of the unpaid principal divided by thirty-six plus one month’s interest. The Note is to be paid in full on the maturity date, unless previously paid or converted into the Company’s common stock. The Note holder has the right to convert any unpaid principal and accrued interest, at a conversion price per share equal to 70% of the average of the five lowest closing bid prices of the Company’s common stock for the 20 trading days preceding a conversion date. The Note is secured by assets purchased from ARISE.
(j) 	
On February 24, 2012, the Company entered into an agreement with ARISE to advance CAN$250,000 in loans (“Second DIP Loan”) to ARISE, under the Fourth Tranche, as defined in the DIP Loan Facility. CAN$242,500 of the Second DIP Loan was funded by Radiant Offshore and CAN$7,500 was funded by Radiant Performance on the Company’s behalf. See Maturity date on DIP Loan Facility (Note 13(d)).
Salamon Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements for the years ended December 31, 2011 and 2010
(Expressed in US dollars)