Notes to Financial Statements
(Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
SavWatt USA, Inc. (“SavWatt”) (hereinafter "the Company") was incorporated on October 20, 2006 under the laws of the State of Delaware under the name Ludvik Capital, Inc. for the purpose of becoming a successor corporation by way of merger with Patriot Advisors, Inc. (“Patriot”) and Templar Corporation (“Templar”), pursuant to a plan of reorganization and merger approved by the United States Bankruptcy Court, District of Maine in Case No. 04-20328 whereby Ludvik Capital is the continuing entity.
Following approval of the plan of reorganization and merger, the Company's business plan consisted of investing in public and private companies, providing long term equity and debt investment capital to fund growth and acquisitions and recapitalizations of small and middle market companies in a variety of industries primarily located in the United States.
Since inception, the Company has had minimal operations and minimal revenues earned. On April 5, 2010, the Company amended its articles of incorporation and changed its name to SavWatt USA, Inc.
The Company plans to capitalize on the largely unaddressed commercial and consumer market for energy-efficient LED lighting by investing in product and corporate marketing. With public relations and advertising throughout the media, the Company’s goal is to establish a recognized, popular consumer LED brand, spearheading and establishing a leading market share in the growing energy-efficient bulb sector during the next three to five years.
The Company's year end is December 31st
.
The Company's corporate headquarters were originally located in Virginia but are currently located in Baltimore MD
GOING CONCERN AND BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company incurred net losses of $1,505,452 for the three months ended March 31, 2012. In addition, the Company has incurred an accumulated deficit amounting to $49,009,769. The Company has generated minimal revenues and has minimal cash resources.
These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's efforts have been directed towards the development and implementation of a plan to generate sufficient revenues to cover all of its present and future costs and expenses.
Management is taking steps to address this situation. The Company has determined that it cannot continue with its business operations as outlined in its original business plan because of a lack of financial resources; therefore, management has redirected their focus towards identifying and pursuing options regarding the development of a new business plan and direction. The Company intends to explore various business opportunities that have the potential to generate positive revenue, profits and cash flow in order to financially accommodate the costs of being a publicly held company. The Company is in the process of raising capital by implementing its business plan in LED lighting and expects to generate
sufficient revenue by the 3rd quarter of 2012 with a positive cash flow. Until then, the Company will not have the required capital resources or credit lines available that are sufficient to fund operations.
The Company has operating costs and expenses at the present time for development of its business activities. The Company, however, will be required to raise additional capital over the next twelve months to meet its current administrative expenses, and it may do so in connection with or in anticipation of possible acquisition transactions. This financing may take the form of additional sales of its equity securities and/or loans from its directors. There is no assurance that additional financing will be available, if required, or on terms favorable to the Company.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
The foregoing unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2011. In the opinion of management, the unaudited interim financial statements furnished herein include adjustments, all of which are of a normal recuing nature, necessary for a fair statement of the results for
all the interim periods presented. Operating results for the three month period ending March 31, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the accompanying financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
DEVELOPMENT STAGE ACTIVITIES
For all periods prior to December 31, 2011, the Company considered itself a development stage enterprise. During the year ended December 31, 2011, the Company has generated approximately $61,000 in revenue and made significant progress toward achieving its intended business plan of producing, marketing and selling Light Emitting Diode ("LED") lighting. As a result of the generation of revenue as well as a result of the Company development the Company no longer consider itself a development stage enterprise.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all short-term debt with original maturities of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments may include cash, accounts receivable, inventory, other assets, loans payable and related accrued interest, and accounts payable. All such instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at March 31, 2012 and December 31, 2011.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at the amount the Company expects to collect. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company's estimate of the allowance for doubtful accounts will change.
As of March 31, 2012 accounts receivable are presented net of an allowance for doubtful accounts of $15,244.
As of December 31, 2011 accounts receivable are presented net of an allowance for doubtful accounts of $14,194.
PROPERTY AND EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
Depreciation is provided for over the estimated useful lives of the related asset using the straight-line method. As of March 31, 2012 property and equipment consists of primarily computer equipment.
Included in leasehold improvements are costs related to the construction of the manufacturing facility in Baltimore Maryland. The leasehold improvements are being amortized using the straight-line method.
The estimated useful lives for significant equipment categories are from 3 to 5 years and for leasehold improvements the useful life is 10 years.
INVENTORY
The Company's inventory consists of entirely of finished goods, and is valued at lower of cost or market price. Cost is determined on a first-in, first-out ("FIFO") basis. To ensure inventory is carried at the lower of cost or market, the Company periodically evaluates the carrying value and also periodically performs an evaluation of inventory for excess and obsolete items. Such evaluations are based on management's judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.
REVENUE RECOGNITION
Revenue is recognized when all of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller's price to the buyer is fixed and determinable; and, (4) collectability is reasonably assured. The Company has earned minimal revenue since inception.
USE OF ESTIMATES
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
PROVISION FOR TAXES
Income taxes are provided based upon the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the "more likely than not" standard to allow recognition of such an asset.
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
The Company utilizes the guidance per FASB Codification “ASC 260 "Earnings Per Share". Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive.
Such securities, shown below, presented on a common share equivalent basis and outstanding as of March 31, 2012 has been excluded from the per share computations as their effect would be anti-dilutive:
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|
|
March 31, 2012
|
|
|
Convertible Preferred Stock
|
|
|
25,000,000
|
|
|
Convertible Bridge Notes and Notes Payable
|
|
|
4,801,673
|
|
The average number of common shares outstanding through March 31, 2012 has been retroactively adjusted for the 1 for 1,918 reverse stock split effective May 14, 2012.
AS OF THE DATE OF THIS FILING, THE COMPANY HAS EFFECTED THE SCHEDULED MAY 14, 2012 REVERSE SPLIT OF 1 FOR 1918 COMMON SHARES INCLUDING FILING AN AMENDMENT WITH THE STATE OF DELAWARE AND THE NOTIFICATION OF FINRA. THE COMPANY HAS NOT YET RECEIVED FINRA APPROVAL OF THE REVERSE.
STOCK BASED COMPENSATION
The Company accounts for stock based compensation transactions with employees under the provisions of ASC Topic No. 718, "Compensation, Stock Compensation" ("Topic No. 718"). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of the Company's equity instruments are estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The
fair value of equity-based awards granted to employees is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of Topic No. 718.
The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, "Equity-Based Payments to Non-Employees" ("Topic No. 505-50"). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of the equity instrument is estimated using the Black- Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to receive cash for the goods or services instead
of paying with or using the equity instrument.
REVERSE STOCK SPLIT
All references to the Company's outstanding shares, and options, have been adjusted to give effect to the 1 for 1,918 reverse stock split effective May 14, 2012. On May 10, 2012, the Company filed an amendment to its certificate of incorporation with the Secretary of State of Delaware to effect a 1 for 1,918 reverse split of its common stock effective May 14, 2012. The Company has submitted notification of the reverse split to FINRA. The reverse split notification is under review by FINRA, which has not yet announced the reverse split.
Derivative Liabilities
The Company assessed the classification of its derivative financial instruments as of March 31, 2012 and December 31, 2011, which consist of convertible instruments and rights to shares of the Company’s common stock, and determined that such derivatives meet the criteria for liability classification under ASC 815.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a
separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
The Company believes that certain conversion features embedded in its convertible notes payable and rights to the Company’s common stock are not clearly and closely related to the economic characteristics of the Company’s stock price. The Company does not have a sufficient amount of authorized shares to satisfy its obligations under the convertible notes payable and rights to the shares of common stock. Accordingly, the Company has recognized derivative liabilities in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter. The Company uses judgment in determining which valuation
is most appropriate for the instrument (e.g., Black Scholes), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate. Upon issuance the fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions, and methodologies:
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March 31,
2012
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Fair value of Company’s common stock
|
|
$
|
0.3836
|
|
|
$
|
0.959
|
|
|
Volatility
|
|
|
150%-245
|
%
|
|
|
171%-250
|
%
|
|
Exercise price
|
|
$
|
0.1918-0.3452
|
|
|
$
|
0.5754-0.959
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|
|
Estimated life
|
|
1 year
|
|
|
1 year
|
|
|
Risk free interest rate (based on 1-year treasury rate)
|
|
|
.19
|
%
|
|
|
.15
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%
|
The fair value of our financial instruments at March 31, 2012 and December 31, 2011 are as follows:
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Fair Value Measurements at Reporting Date Using
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|
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
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|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
December 31, 2011:
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|
|
|
|
|
|
|
|
|
|
Derivative Liabilty
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
273,851
|
|
Fair Value of Financial Instruments
Effective January 1, 2008, the Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, or ASC 820, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
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Level 1:
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Observable inputs such as quoted market prices in active markets for identical assets or liabilities
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|
Level 2:
|
Observable market-based inputs or unobservable inputs that are corroborated by market data
|
|
Level 3:
|
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The Company did not have any Level 2 or Level 3 assets or liabilities as of March 31, 2012 and December 31, 2011, with the exception of its convertible notes payable and derivative liability. The carrying amounts of these liabilities at March 31, 2012 and December 31, 2011, approximate their respective fair value based on the Company’s incremental borrowing rate.
Cash is considered to be highly liquid and easily tradable as of March 31, 2012 and December 31, 2011, and therefore classified as Level 1 within our fair value hierarchy.
In addition, FASB ASC 825-10-25 Fair Value Option, or ASC 825-10-25, was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior periods’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or the sum of stockholders’ deficit.
INTANGIBLE ASSETS
License Agreements
License agreements acquired by the Company are reported at acquisition value less accumulated amortization and impairments.
Amortization
Amortization is reported in the income statement straight-line over the estimated useful life of the intangible assets, unless the useful life is indefinite. Amortizable intangible assets are amortized from the date that they are available for use. The estimated useful life of the license agreement is five years which is the term of the underlying license agreement. The license is not yet in use as such the Company has not yet begun amortizing the asset.
Assessment of an intangible asset’s residual value and useful life is performed annually.
As stated in FASB 142 paragraph 11, the accounting for a recognized intangible asset is based on its useful life to the reporting entity. The Company has yet to use the license and as such has not begun amortizing the asset. When the Company does begin the amortization it will be over a 5 year period at $220,000 per year.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company has evaluated recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC and we have not identified any that would have a material impact on the Company’s financial position, or statements.
NOTE 3 – PROPERTY AND EQUIPMENT
|
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March 31,
|
|
|
December 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Computer Equipment
|
|
$
|
19,305
|
|
|
$
|
12,985
|
|
|
Leasehold Improvements
|
|
|
459,722
|
|
|
|
459,722
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|
|
Machinery
|
|
|
151,593
|
|
|
|
151,593
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|
|
Accumulated depreciation
|
|
|
(43,128
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)
|
|
|
(30,703
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)
|
|
Total
|
|
$
|
587,492
|
|
|
$
|
593,598
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|
In 2011 the Company purchased machinery for $151,593 which is not yet in use. Therefore the Company has yet to depreciate the machine.
Depreciation expense amounted to $12,425 and $0 for the three months ended March 31, 2012 and 2011 respectively.
NOTE 4 - RELATED PARTY TRANSACTIONS
Due to Sutton Global Associates:
During the year ending December 31, 2011, the Company received approximately $953,860 in short term net funding from Sutton Global Associates, Inc, a Company 100% owned by Ike Sutton, the Company’s President. Additionally, $300,000 of the loan balance was assigned to a stockholder, $600,000 was rolled over into convertible debt instruments and $500,000 was converted into 10 million shares of Preferred A shares.
During the three months ending March 31, 2012 the Company made net payments of approximately $22,000 to Sutton Global. Additionally the Company has accrued $60,000 related to consulting fees in accordance with Mr. Suttons employment agreement dated december 1, 2011.
As of March 31, 2012 and December 31, 2011, the balance due to Sutton Global Associates amounted to $96,327 and $59,039, respectively.
Convertible debenture Sutton Global Associates:
As mentioned above, in 2011, Sutton Global Associates converted $600,000 of its short term funding into two Notes. The Notes bear interest at a rate of 6 % per annum and are convertible into common stock of the Company at the discretion of the holder. The notes are due in April and June of 2012. The Company recorded a $600,000 discount on these convertible notes, related to their beneficial conversion features, and amortized $463,798 for the year ended December 31, 2011. The net note payable, inclusive of unamortized discount was $363,798 as of December 31, 2011. The note has accrued interest of $24,247 and $21,107 included in accrued expenses, at March 31, 2012 and December 31, 2011 respectively.
In January 2012 Sutton Global Associates converted $300,000 of amounts owed to them into 6,000,000 shares of Preferred A shares. In addition the Company has recognized amortization expense amounting to $132,202. As of March 31, 2012, the convertible loan balance amounted to $200,000.
NOTE 5 – DEBT
Short term Convertible Debt
In 2011, entities related to the Company’s current President and sole director assigned $300,000 in payables to a shareholder in the form of convertible debt.
In 2011, this stockholder assigned $1,759,893 of the convertible loan payable to investors and converted $66,927 into 15,481 shares of common stock.
In 2011 the Company converted $251,971 in accrued expenses and accounts payable into debt. During this period this liability was assigned to other debt holders
With respect to some of these assigned convertible notes, some of the terms conversion were modified thereby resulting in the Company recording a beneficial conversion with respect to the modifications.
During the year ended December 31, 2011, the Company entered into several short-term convertible notes with a total face amount of $1,755,500. These notes bear interest rates ranging from 5% to 18% payable in full in twelve months or less and which were convertible into shares of Company's common stock at discounts to market on their dates of conversion ranging from 30% to 70% from the market price. These notes have minimum conversion floors ranging from $19.18 to $0.1918 per share.
With respect to the convertibility feature of the assigned convertible notes and the convertible notes entered into during the year ended December 31, 2011 the Company recorded a total beneficial conversion of $2,784,162 (which includes $213,913 resulting from transactions that required derivative accounting). Total amortization amounted to $2,436,190, recorded as other expense during the year ended December 31, 2011.
During the year ended December 31, 2011 the Company has converted a total of $2,395,865 of debt and $13,647 in accrued interest into 1,401,679 shares of common stock. In addition to debt the Company has recorded $1,707,573 of modification expense with respect to the conversion.
As of December 31, 2011 the balance of the Company’s short term convertible notes amounted to $1,110,449. The interest on these debentures is accrued and due at the end of the notes term. As of December 31, 2011 the accrued interest amounted to approximately $95,886 and is included in accounts payable and accrued expenses.
During the three months ended March 31, 2012, the Company entered into several short-term convertible notes with a total face amount of $146,000. These notes bear interest rates ranging from 8% to 12% payable in full in twelve months or less and which were convertible into shares of Company's common stock at discounts to market on their dates of conversion ranging from 30% to 70% from the market price. These notes have a minimum conversion floors ranging from $0.04795 to $0.1918 per share.
With respect to the convertibility feature of the assigned convertible notes and the convertible notes entered into during the period ended March 31, 2012 the Company recorded a total beneficial conversion of $419,500 (which includes $90,000 resulting from transactions that required derivative accounting). Total amortization amounted to $369,979, recorded as other expense during the period ended March 31, 2012.
During the period ended March 31, 2012 the Company has converted a total of $309,050 of debt and $4,023 in accrued interest into 1,979,329 shares of common stock. In addition to debt the Company has recorded $208,070 of modification expense with respect to the conversion.
As of March 31, 2012 the balance of the Company’s short term convertible notes amounted to $876,630. The interest on these debentures is accrued and due at the end of the notes term. As of March 31, 2012 the accrued interest amounted to approximately $127,496 and is included in accounts payable and accrued expenses.
Other Debt
In October 2010, the Company entered into a secured promissory note for $50,000. The note was payable within 90 days and bears an interest rate of 5%. In connection with this note the Company issued 500,000 shares of its common stock as additional consideration valued at $21,249, and accounted for as interest expense during the year ended December 31, 2010. This note was fully satisfied as of December 31, 2011.
NOTE 6 - EQUITY TRANSACTIONS
In Apri1 2010, the Company amended its Articles of Incorporation changing the name of the Company to SavWatt USA, Inc. and increasing their authorized capital shares from 100,000,000 shares to 2,200,000,000 shares designating 2,000,000,000 as common stock and 200,000,000 shares as preferred stock. In September 2011 the Company increased the total capital to 5,000,000,000 shares authorized designating 4,800,000,000 as common stock and 200,000,000 shares as preferred stock. In 2011 the Company designated 25,000,000 shares of the preferred shares to be Series A Cumulative Preferred Stock ("Preferred Series A"). Each share of Preferred
Series A is convertible into ten shares of common stock. The Preferred Series A shares vote a single class with the common stock and are entitled to two hundred votes for each share of Preferred Series A.
In January 2012, the Company increased the authorized capital stock to 9,800,000,000 of common stock.
In May 2012, the Company's outstanding shares, and options, have been adjusted to give effect to the 1 for 1,918 reverse stock split.
In January 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.
In July 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.
In January 2012, Sutton Global converted $300,000 of debt into 6,000,000 shares of Preferred Series A stock.
The issuance of common stock from January 1, 2011 through December 31, 2011 is summarized in the table below:
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|
|
Number of shares of common stock
|
|
|
Fair Value
at Issuance
|
|
|
Per Share Value at Issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for related party debt settlement
|
|
|
1,303
|
|
|
$
|
35,000
|
|
|
$
|
26.85
|
|
|
Stock issued for services
|
|
|
104,921
|
|
|
|
306,671
|
|
|
|
0.959 -26.85
|
|
|
Fair value of common stock issued for interest
|
|
|
521
|
|
|
|
14,000
|
|
|
|
26.85
|
|
|
Common stock issued pursuant to note holder debt conversion – principal
|
|
|
1,417,160
|
|
|
|
2,462,792
|
|
|
|
0.1918 - 19.18
|
|
|
Common stock issued pursuant to note holder debt conversion – interest
|
|
|
9,747
|
|
|
|
13,647
|
|
|
|
.1918-19.18
|
|
|
|
|
|
1,533,653
|
|
|
|
2,832,110
|
|
|
|
|
|
The issuance of common stock from January 1, 2012 through March 31, 2012 is summarized in the table below:
|
|
|
Number of shares of common stock
|
|
|
Fair Value
at Issuance
|
|
|
Per Share Value at Issuance
|
|
|
Stock issued for services
|
|
|
261
|
|
|
$
|
100
|
|
|
$
|
0.5754
|
|
|
Cancellation of shares
|
|
|
(13,034
|
)
|
|
|
-
|
|
|
|
0.1918
|
|
|
Fair value of common stock issued for interest
|
|
|
5,214
|
|
|
|
2,000
|
|
|
|
0.3836
|
|
|
Common stock issued pursuant to note holder debt conversion – principal
|
|
|
1,956,809
|
|
|
|
309,050
|
|
|
|
0.0959-0.3165
|
|
|
Common stock issued pursuant to note holder debt conversion – interest
|
|
|
22,520
|
|
|
|
4,023
|
|
|
|
0.1343-0.2244
|
|
|
|
|
|
1,971,769
|
|
|
|
315,173
|
|
|
|
|
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NOTE 7 - COMMITMENTS AND CONTINGENCIES
On July 1, 2010, the Company entered into an employment agreement with Michael Haug, as the Company's CEO, which responsibilities include running the daily operations of SavWatt USA, Inc. The term of the agreement is for one year at a salary of $84,000, and may be renewed upon mutual agreement by the Company and the employee.
The employment agreement with Michael Haug was not renewed and in October 2011, Mr. Haug was appointed Executive Vice President of Sale. Mr. Haug tendered his resignation in March 2012.
On February 11, 2011, the Company entered into a lease for approximately 24,561 square feet at 1100 Wicomico Street, Suite 700, Baltimore, Maryland, under a written lease for a term of ten years. This new facility will be the Company's new principal executive offices, as well as a manufacturing and assembly facility. The Company will not have to pay rent on this facility until February 1, 2012. In accordance with ASC 840 Leases, the Company has recorded a $74,280 liability in recognition of this rent holiday as of September 30, 2011. Thereafter, the Company will pay rent as follows:
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February 1, 2012 - January 31, 2013
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$ 9,926.74 per month
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February 1, 2013 - January 31, 2016
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$ 11,564.14 per month
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February 1, 2016 - January 31, 2019
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$ 12,526.11 per month
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February 1, 2019 - January 31, 2021
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$ 13,549.49 per month
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In December 2011, The Company entered in to a new lease for approximately 2,886 square feet at 7927 Jonas Brench Drive, Suite 3300, McClean, VA, under a written lease for a term of 2 years. Under the terms of the lease the annual base rent is approximately $ 58,000. This new facility will be used by the Company for sales.
The Company has entered into an exclusive worldwide license for LED lights with P2i Limited (“P2i”), a company incorporated in England, utilizing P2i's liquid repellent nano-coating technology.
Under the terms of The Technology Exclusivity Agreement (“P2i Agreement”) with P2i, the Company is granted an exclusive worldwide license to P2i patents for liquid repellent nano-coating technology (“repellent technology”) with respect to its application for LED lighting. The term of the P2i Agreement is for five years commencing July 14, 2011. The payment due under the agreement is $1,100,000 within an initial payment and additional payments on each of the four subsequent anniversary dates of the agreement. The P2i Agreement will be amortized over the life of the agreement.
In addition to the P2i Agreement, the Company also entered into an Equipment Purchase and Technology License Agreement (“P2i Equipment Agreement”) with P2i. This agreement runs a concurrent term with that of the p2i Agreement. Under the P2i Equipment Agreement, the Company is obligated to purchase an initial machine, during the first year, from P2i, that applies their repellent technology. The Company is also required to pay P2i a royalty for product made using their technology under the P2i Equipment Agreement.
The Company plans to initially perform this process in its Baltimore facility with future facilities to be established worldwide. In addition, the Company has the right to sub-license this technology to its worldwide partners.
NOTE 8 – SUBSEQUENT EVENTS
Since March 31, 2012, the Company recorded the following transactions:
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Issued 549,680 shares of common stock pursuant to the conversion of $56,650 in short term loans
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Issued 1,199,166 shares of common stock pursuant to the conversion of $115,000 in short term loans from a related party.
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Issued 9,000,000 shares of preferred stock pursuant to the conversion of $90,000 in short term loans from a related party.
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Received proceeds amounting to $27,500 related to the issuance of short term loans.
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On April 11, 2012, the Company entered into a consulting agreement (the “Consulting Agreement”) with C&S Solar Holdings, LLC (the “Consultant”). Pursuant to the Consulting Agreement, for a term of three years, the Consultant was engaged by the Company to develop, manage and supervise the Company’s new renewable energy department, renewable energy projects, and provide related services. The Company agreed to pay Consultant (i) base compensation of $900,000, payable in the amount of $25,000 per month over 36 months, (ii) a commission fee equal to 2% of the gross contract price for each contract executed during the term of the Consulting Agreement in the renewable energy
department, (iii) a sales commission equal to 3% of the contract price on all sales originated and consummated by Consultant or its representatives, and (iv) a sales commission equal to 1% of the contract price on all sales originated to the renewable energy department by any person or entity other than Consultant or its representatives. The Company further agreed to issue to Consultant 1% of the Company’s authorized shares of common stock annually for every $10,000,000 in sales contracted in the renewable energy department, up to an aggregate of 10% of the Company’s authorized shares of common stock, and an additional 400,000,000 shares of common stock upon the assignment of the Blue Energy & Solar NJ and Waldwick Solar, LLC contract, for the purchase and installation of a solar photovoltaic energy system at certain real property and premises in Waldwick, Bergen County,
New Jersey. The Company also granted to Consultant the right to appoint one member of the Company’s board of directors, and Consultant appointed its chief executive officer, Chris Paphites, to the Company’s board of directors. The Company shall pay Mr. Paphites $1,000 per month for serving on the Company’s board of directors. The Company may terminate the Consulting Agreement in the event Consultant fails to book a minimum of $5,000,000 in renewable energy project revenue prior to December 31, 2012.
On April 23, 2012 the Company filed a Schedule 14C giving notice that the holders of more than a majority of the voting power of the shareholders of the “Company, have approved an amendment to the certificate of incorporation to effect a 1,918-to-1 reverse split of the common stock, par value $0.0001 (“Common Stock”). The Company filed the certificate of amendment with the Secretary of Delaware on May 10, 2012 with an effective date for the reverse split of May 14, 2012. The Company has submitted notification of the reverse split to FINRA. The reverse split notification is under review by FINRA, which has not yet announced the reverse split.