U.S. Securities and Exchange Commission
Washington, D.C. 20549
____________________
Form 10-QSB
____________________
(Mark One)
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2006
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act |
For the transition period from _____________ to _______________
____________________
Commission File Number: 000-29780
____________________
Solpower Corporation
(Exact name of Registrant as specified in its charter)
Nevada | 87-0384678 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
307 East 22nd Street
San Pedro, CA 90731
(Address of principal executive offices)
(310) 940-6408
(Issuer’s telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X | No _ |
The number of shares outstanding of each of the issuer’s classes of common equity was 72,259,727 shares of common stock, par value $0.01, as of June 19, 2007.
Transitional Small Business Disclosure Format (check one):
Yes _ | No X |
Solpower Corporation
Index to Form 10-QSB Filing
For the Quarter Ended June 30, 2006
Table of Contents
PART I Financial Information | |||
Page | |||
Item 1. | Financial Statements | 2 | |
Balance Sheet | |||
June 30, 2006 (Unaudited) | 3 | ||
Statements of Operations and Comprehensive Income (Loss) | |||
For the Three Months Ended June 30, 2006 (Unaudited) and 2005 (Unaudited) | 4 | ||
Statements of Cash Flows | |||
For the Three Months Ended June 30, 2006 (Unaudited) and 2005 (Unaudited) | 5 | ||
Notes to the Unaudited Financial Statements | 6 | ||
Item 2 | Management’s Discussion and Analysis and Plan of Operations | 9 | |
Item 3. | Controls and Procedures | 12 | |
PART II OTHER INFORMATION | |||
Item 2. | Changes in Securities and Use of Proceeds | 13 | |
Item 4. | Submission of Matters to a Vote of Security Holders | 13 | |
Item 6. | Exhibits | 13 | |
SIGNATURES | 13 | ||
CERTIFICATIONS | 14 |
2
Part I
Financial Information
Item 1. Financial Statements
SOLPOWER CORPORATION | ||||||||||
BALANCE SHEET | ||||||||||
June 30, 2006 | ||||||||||
(Unaudited) | ||||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 1,885 | ||||||||
Accounts receivable, net of allowance for uncollectible accounts of $5,819 | 2,995 | |||||||||
Royalties receivable | 14,346 | |||||||||
Prepaid expenses | 6,025 | |||||||||
Inventory | 145,679 | |||||||||
Total Current Assets | 170,930 | |||||||||
OTHER ASSETS: | ||||||||||
Intangible royalty agreement, net of amortization of $4,500 | 115,500 | |||||||||
TOTAL ASSETS | $ | 286,430 | ||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Customer advances | $ | 247,752 | ||||||||
Accounts payable - trade | 255,573 | |||||||||
- related parties | 256,745 | |||||||||
Accrued expenses | 126,112 | |||||||||
Total Current Liabilities | 886,182 | |||||||||
Commitments and Contingencies | ||||||||||
STOCKHOLDERS' (DEFICIT): | ||||||||||
Preferred stock, $0.001 par value - 5,000,000 shares | ||||||||||
authorized; issued and outstanding, none | - | |||||||||
Common stock, $.001 par value - 100,000,000 shares | ||||||||||
authorized; 70,559,727 shares issued and outstanding | 705,597 | |||||||||
Additional paid in capital | 12,455,625 | |||||||||
Accumulated (deficit) | (13,760,974 | ) | ||||||||
Total Stockholder's (Deficit) | (599,752 | ) | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) | $ | 286,430 | ||||||||
The accompanying notes are an integral part of these financial statements. | ||||||||||
3
SOLPOWER CORPORATION | ||||||||
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||||||||
(Unaudited) |
For the Three Months Ended June 30, | |||||||
2006 | 2005 | ||||||
NET REVENUES | $ | 162,597 | $ | 43,702 | |||
COST OF REVENUES | 74,979 | 22,378 | |||||
GROSS PROFIT | 87,618 | 21,324 | |||||
OPERATING COSTS AND EXPENSES: | |||||||
Selling, general and administrative expenses | 79,601 | 103,841 | |||||
PROFIT (LOSS) FROM OPERATIONS | 8,017 | (82,517 | ) | ||||
OTHER INCOME (EXPENSE): | |||||||
Exchange rate differential | 395 | - | |||||
Interest income | - | 12 | |||||
Royalty income | 2,555 | - | |||||
Interest expense | - | - | |||||
2,950 | 12 | ||||||
PROFIT (LOSS) BEFORE PROVISION FOR INCOME TAXES | |||||||
AND DISCONTINUED OPERATIONS | 10,967 | (82,505 | ) | ||||
PROVISION FOR INCOME TAXES | - | - | |||||
PROFIT (LOSS) FROM CONTINUING OPERATIONS | 10,967 | (82,505 | ) | ||||
DISCONTINUED OPERATIONS: | |||||||
(Loss) from discontinued operations | - | (16,328 | ) | ||||
NET PROFIT (LOSS) | $ | 10,967 | $ | (98,833 | ) | ||
Basic and Diluted Profit (Loss) Per Common Share | |||||||
Continuing operations | $ | - | $ | - | |||
Discontinued operations | - | - | |||||
Total | $ | - | $ | - | |||
Weighted Average Number of Common Shares Outsatnding | |||||||
Basic | 70,559,727 | 69,309,727 | |||||
A summary of comprehensive income (loss) for the three months ended June 30, 2006 and 2005 are: | |||||||
Net Income (Loss) | $ | 10,967 | $ | (98,833 | ) | ||
Foreign Currency Translation (Loss) | - | 119 | |||||
Comprehensive Income (Loss) | $ | 10,967 | $ | (98,714 | ) | ||
The accompanying notes are an integral part of these financial statements. | |||||||
4
SOLPOWER CORPORATION | ||||||||||
STATEMENTS OF CASH FLOWS | ||||||||||
For the Three Months Ended June 30, 2006 and 2005 | ||||||||||
(Unaudited) | ||||||||||
2006 | 2005 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net earnings (loss) | $ | 10,967 | $ | (98,833 | ) | |||||
Gain (loss) from discontinued operations | - | (16,328 | ) | |||||||
Net (loss) attributable to continuing operations | 10,967 | (82,505 | ) | |||||||
Adjustments to reconcile net earnings (loss) to | ||||||||||
net cash (used in) operating activities: | ||||||||||
Depreciation and amortization | 1,500 | 320 | ||||||||
Net change in current assets and liabilities: | ||||||||||
Accounts receivable | 29,999 | 53,037 | ||||||||
Royalties receivable | (2,949 | ) | - | |||||||
Prepaid expense | 6,035 | 17,069 | ||||||||
Inventory | 32,465 | 11,199 | ||||||||
Deposits | 350 | 400 | ||||||||
Accounts payable - trade | 7,698 | (8,764 | ) | |||||||
- related parties | (865 | ) | (1,632 | ) | ||||||
Accrued expenses | 17,483 | (73,742 | ) | |||||||
Net Cash Provided by (Used in) Continuing Operating Activities | 102,683 | (84,618 | ) | |||||||
Net (loss) from discontinued operations | - | (16,328 | ) | |||||||
Net Cash Provided by (Used in) Operating Activities | 102,683 | (100,946 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Net change in investment of discontinued operations | - | 16,328 | ||||||||
Purchase of equipment | - | (1,212 | ) | |||||||
Net Cash Provided by Investing Activities | - | 15,116 | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Bank overdraft | (587 | ) | - | |||||||
Proceeds from the sale of common stock and call options | - | 5,500 | ||||||||
Net customer advances | (100,211 | ) | 117,325 | |||||||
Net cash (Used in) Provided by Financing Activities | (100,798 | ) | 122,825 | |||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 1,885 | 36,995 | ||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | - | 62,396 | ||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 1,885 | $ | 99,391 | ||||||
The accompanying notes are an integral part of these financial statements. |
5
SOLPOWER CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 1 - ORGANIZATION AND OPERATIONS
Organization
Solpower Corporation (the “Company”), formerly known as Virtual Technologies, Inc. and Dynafuel Corporation, was incorporated under the laws of the State of Utah on June 7, 1982.
The Company was originally incorporated with an authorized capital of 30,000,000 shares of common stock with a par value of one cent ($0.01) per share. On December 12, 1995, the Company amended its articles of incorporation, changing its name to Virtual Technologies, Inc. and authorizing preferred stock of 5,000,000 shares at $.25 par value. On July 22, 1996, the Company changed its legal domicile to the State of Nevada. On November 22, 1997, the Company restated the articles of incorporation, changing its name to Solpower Corporation and changing its preferred stock par value to one-tenth of one cent ($.001) per share. On December 11, 2000, at the Annual Shareholders’ Meeting, shareholders approved an amendment to the Company’s articles of incorporation to increase the authorized shares of common stock to 100,000,000.
Nature of Operations
The principal business purpose of the Company is the sales and distribution of Soltron®, a fuel-enhancing product. The Company has the exclusive worldwide sales, distribution, marketing and manufacturing rights to the product, Soltron®, a fuel enhancing product and until September 30, 2005, SP34ETM, a replacement refrigerant, throughout the world.
Discontinued Operations - Sale of Virtual Technologies Pty. Ltd. (Australia)
On September 30, 2005, the Company signed an agreement for the sale of 100% of the outstanding common stock of Virtual Technologies Pty Ltd (VT) for assumption of all the assets and liabilities of VT and a royalty payment. The royalty payment is for a period of twenty (20) years and is equal to four percent (4%) of gross sales excluding taxes and freight. The royalty is due and payable within forty-five (45) days at the end each calendar quarter, beginning with the quarter ending December 31, 2005. As part of the sale, the Company agreed that it would not enter into any sales, distribution, licensing, manufacturing or any other commercial application of the PRODUCTS (SP34E, SP22E-A, SP22E-B and SB22E-C) for a period of five (5) years and to maintain all information concerning the PRODUCTS as confidential.
This sale has been accounted for as a discontinued operation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-lived Assets. The Company has determined that the fair value of the royalty agreement is $120,000. A gain on the disposal of $93,240 has been recognized on the sale and represents the excess of the fair value of the royalty agreement less the book value of VT. The results of operations of VT for the current and prior periods have therefore been reported as discontinued operations. Operating results for VT are summarized as follows:
6
Three Months Ended June 30, | |||||||
2006 | 2005 | ||||||
Revenues | $ | $ 73,668 | |||||
Cost of Revenues | - | 38,764 | |||||
Gross Profit | - | 34,904 | |||||
Expenses: | |||||||
General and administrative | - | 50,864 | |||||
Operating Income (Loss) from Continuing Operations | - | (15,960 | ) | ||||
Other Income (Expense): | |||||||
Interest income | - | 153 | |||||
Interest expense | - | (521 | ) | ||||
Total Other Income (Expense) | - | (368 | ) | ||||
Income (Loss) Before Provision for Income Taxes | - | (16,328 | ) | ||||
Provision for Income Taxes | - | - | |||||
Net Loss from Discontinued Operations | $ | - | $ | (16,328 | ) |
Although the Company is receiving continuing cash flows from the royalty agreement, the Company determined that the continuing cash flows do not result from a migration or continuance of activities and the Company has no significant continued involvement in the operations of VT. The royalty agreement represents a passive royalty interest and the Company does not exert any control over the operations of VT. In accordance with EITF 03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations, the Company therefore concluded that the disposal of VT is classified as discontinued operations.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Solpower Corporation. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report for the fiscal year ended March 31, 2006 on Form 10-KSB filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Notes to the financial statements, which would, substantially duplicate the disclosure contained in the audited financial statements for fiscal 2006 as reported in the Form 10−KSB have been omitted.
7
NOTE 3 - GOING CONCERN
The accompanying unaudited financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company historically has experienced significant losses and negative cash flows from operations. As of June 30, 2006, the Company has a deficiency in working capital of $715,252, accumulated deficit of $(13,760,974) and a net profit for the three months ended June 30, 2006, of $10,967. In addition, the Company does not have a revolving credit facility with any financial institution. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising additional capital, negotiating adequate financing arrangements and on achieving sufficiently profitable operations. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Comprehensive Income (Loss)
Statement of Financial Accounting Standards (“SFAS”) No. 130, Reporting Comprehensive Income, establishes requirements for disclosure of comprehensive income and its components, which include, among other items, unrealized gains or losses from marketable securities and foreign currency translation adjustments that previously were only reported as a component of stockholders’ equity. The Company had components of comprehensive (loss) during the three months ended June 30, 2005.
Loss per Common Share
Basic loss per common share is computed based on weighted average shares outstanding and excludes any potential dilution from stock options, warrants and other common stock equivalents. Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net loss per common share reflects potential dilution from the exercise or conversion of securities into common stock or from other contracts to issue common stock. As of June 30, 2005, diluted net loss per common share is not included, as the effect of including these shares is anti-dilutive.
At June 30, 2006, stock options representing 1,000,000 common shares were outstanding with an exercise price of $0.15.
Foreign Currency Translation
Account balances and transactions denominated in foreign currencies and the accounts of the Corporation’s foreign operations have been translated into United States funds, as follows: (i) assets and liabilities, if any, at the rates of exchange prevailing at the balance sheet date; (ii) revenue and expenses at average exchange rates for the period in which the transactions occurred; (iii) exchange gains and losses arising from foreign currency transactions are included in the determination of net earnings for the period; and (iv) exchange gains and losses arising from the translation of the Corporation’s foreign operations are deferred and were included as a separate component of stockholders’ equity.
The Company purchased its wholly owned Australian subsidiary on January 31, 2003, and the foreign currency translation adjustment account was presented in the stockholders’ equity section. On September 30, 2005, the Company signed an agreement for the sale of its wholly owned Australian subsidiary.
NOTE 5 - STOCKHOLDER’S (DEFICIT)
Warrants
At June 30, 2006, the Company had no outstanding warrants.
8
Options
The following table summarizes the option activity for the three months ended June 30, 2006:
Options Outstanding | Options Exercisable | ||||||||||||
Number of Shares | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | ||||||||||
Balance, March 31, 2006 | 1,000,000 | $ | 0.15 | 1,000,000 | $ | 0.15 | |||||||
Vested | -- | -- | -- | ||||||||||
Granted | -- | -- | -- | -- | |||||||||
Exercised | -- | -- | -- | -- | |||||||||
Balance, June 30, 2006 | 1,000,000 | $ | 0.15 | 1,000,000 | $ | 0.15 | |||||||
Weighted average contractual | |||||||||||||
Life in years | .95 | .95 | |||||||||||
Aggregate intrinsic value | $ | -0- | $ | -0- |
The aggregate intrinsic value in the option table above represents total pretax intrinsic value (the difference between the Company’s closing stock price on June 30, 2006, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2006. These amounts change based the fair market value of the Company’s stock. There was intrinsic value of options exercised for the three months ended June 30, 2006.
NOTE 6 - CHANGE IN MANAGEMENT
On May 1, 2006, the Board of Directors of the Company accepted the resignation of Mr. Robert Kohn and appointed Mr. James Hirst as President, Chief Executive and Principal Accounting Officer.
NOTE 7 - SUBSEQUENT EVENTS
On February 23, 2007, the Company issued 1,100,000 restricted shares of stock to settle outstanding legal fees of $55,000
On March 2, 2007, the Company issued 600,000 shares of restricted shares of stock for proceeds of $30,000 in a private placement.
On June 8, 2007, the Board of Directors of Solpower Corporation appointed Mr. Gary Raymond Stewart to the Board of Directors, effective immediately.
9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
THIS FORM 10-QSB MAY CONTAIN CERTAIN “FORWARD-LOOKING” STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE REGISTRANT’S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING THE REGISTRANT’S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS “MAY”, “WILL”, “EXPECT”, “BELIEVE”, “ANTICIPATE”, “INTENT”, “COULD”, “ESTIMATE”, “MIGHT”, “PLAN”, “PREDICT” OR “CONTINUE” OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE REGISTRANT’S CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS, GOVERNMENTAL REGULATION, MANAGING AND MAINTAINING GROWTH, THE OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS DISCUSSED IN THIS AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY DOES NOT INTEND TO UNDERTAKE TO UPDATE THE INFORMATION IN THIS FORM 10-QSB IF ANY FORWARD-LOOKING STATEMENT LATER TURNS OUT TO BE INACCURATE. THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION PRESENTED IN THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED MARCH 31, 2006.
Going Concern
The accompanying unaudited financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have historically experienced significant losses and negative cash flows from operations. For the three-month period ended June 30, 2006, we had net income of $10,967. Operations have resulted in a deficiency in working capital of $715,252, and an accumulated deficit of $(13,760,974) as of June 30, 2006.
There can be no assurance that the Company will be able to continue as a going concern in view of its financial condition. Our continued existence will depend upon its ability to obtain sufficient additional capital in a timely manner to fund its operations and to further develop its long-term business plan. Any inability to obtain additional financing will have a material adverse effect on us, including possibly requiring the Company to significantly reduce or cease its operations.
10
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Off-Balance Sheet Arrangements
During the quarter ended June 30, 2006, we did not engage in any off balance sheet arrangements as defined in item 303(c) of the SEC’s Regulation S-B.
Critical Accounting Policies
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and judgments that significantly affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. Note 2, “Significant Accounting Policies” in the Notes to the Financial Statements in our Annual Form 10-KSB at March 31, 2006, describes our significant accounting policies which are reviewed by management on a regular basis.
An accounting policy is deemed by us as critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonable likely to occur periodically, could materially impact the financial statements. The policies and estimates that we believe are most critical to the preparation of our consolidated financial statements and that require a higher degree of judgment are:
Stock-based compensation; and
Valuation of warrants and options under the Black-Scholes option pricing model.
Operating Results for the Three Months Ended June 30, 2006 and 2005
Revenues - Revenues for the three months ended June 30, 2006 were $162,597 as compared to $43,702 for the comparable three months ended June 30, 2005. The increase in revenues of $118,895 was attributable to increased bulk Soltron® sales to a major distributor.
Gross Profit - Gross profit increased from 48.8% for the three months ended June 30, 2006, to 53.9% for the three months ended June 30, 2006. The increased gross profit margin of. 5.1% is mainly a result of lower production costs attributable to sales of Soltron® product in 55 gallon drums and a greater gross profit margin on the Soltron® product as compared to margins on sales of the enzyme. We mainly had enzyme sales in the prior year period.
General and Administrative Costs - General and administrative costs for the three months ended June 30, 2006, were $79,601 as compared to $103,841 for the comparable period ended June 30, 2005, or a decrease of $24,240. The Decrease is primarily comprised of a decrease in consulting fees of $58,899, and sales costs of $2,391.These decreases were offset by increases in audit and SEC fees of $2,000 and liability insurance costs of $3,445.
Net Income - The Company’s net income for the three months ended June 30, 2006, was $10,967, as compared to a net loss of $(98,833) incurred for the comparable three-month period ended June 30, 2005. The increase of $109,800 in net income for the current period is mainly attributable to the increased gross profit earned, the decreased selling, general and administrative expenses, and no loss incurred from discontinued operations during the current three month period.
Plan of Operation
We continue to historically report significant losses. Nevertheless, we believe that we may be able to continue to reduce our operating losses based on the current trend of increasing Soltron® product sales, together with licensing fees from Virtual Technologies Pty Ltd. Because of discussions with new distributors we anticipate increased sales of the Soltron® during our fiscal year 2007.
11
During our fiscal years ended March 31, 2006 and 2005, and continuing during the current fiscal year, the Company has been in the middle stages as a development company seeking to find the complementary mix of products for future marketing and distribution. The Company continues to explore the total distribution and marketing for its products through established distributors, both wholesale and retail. The Company anticipates that this methodology will enable it to cut costs, increase the revenue stream and increase profits over the long range. Although gross profits may decrease initially with certain revenues going to the benefit of the distributors, we believe that the Company’s revenues, profits and cash flow will increase in the long term as a result of this methodology as more distributors penetrate and sell through to the end users of these products.
Part of the business plan is to arrange adequate financing to assist the Company to implement these business strategies. The Company anticipates exploring expansion of additional product lines with environmentally friendly products with established marketplaces and to accomplish these through acquisitions and exclusive licenses.
We intend to seek to have our securities quoted on the OTC Bulletin Board, which may provide a better ability to attract investors. We are in process of completing our Securities Act filings to facilitate this process. We intend to raise capital to provide working capital and to expand our present operations. We also have outstanding stock options that, if converted, will provide additional cash flow for working capital.
Liquidity and Capital Reserves
Product sales did provide sufficient working capital to fund our operations during the three months ended June 30, 2006. Operations provided $102,683 of cash during the period. Liquidity utilized by net payments on customer advances of $(100,211). During the comparative period for the previous year, $(100,946) was utilized by operations and was mainly offset by and net advances from a major customer of $117,325 and proceeds of $5,500 from the sale of call options and common stock.
The sale of our subsidiary, Virtual Technologies Pty. Ltd., will have no material effect on our future liquidity. Currently we project that we may recognize approximately $6,000 a quarter in royalties under the sales agreement. As of June 30, 2006, we had no commitments for capital expenditures.
Item 3 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Under the supervision of, and the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of our disclosure controls and procedures as of March 31, 2007. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in alerting them on a timely basis to material information required to be disclosed in our periodic reports and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
During the quarter ended March 31, 2007, there were no changes in the our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
12
Part II
Other Information
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits
(a) | The following exhibits are filed as part of this report: |
31.1 | Certification of Chief Executive Officer and Principal Accounting Officer of Periodic Report pursuant to Rule 13a-14a and Rule 15d-14(a). |
32.1 | Certification of Chief Executive Officer and Principal Accounting Officer pursuant to 18 U.S.C. - Section 1350. |
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SOLPOWER CORPORATION | ||
| | |
Date: June 28, 2007 | By: | /s/ James H. Hirst |
James H. Hirst | ||
Chief Executive Officer, President, Director and Principal Accounting Officer |
13