Conservative Broadcast Media & Journalism (CBMJ) 10-Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2010

OR

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

For the transition period from __________ to __________

Commission File Number:  333-156467

Crownbutte Wind Power, Inc.

(Exact name of registrant as specified in its charter)

Nevada	20-0844584
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

111 5th Avenue NE
Mandan, ND	58554
(Address of principal executive offices)	(Zip Code)

(701) 667-2073

(Registrant’s telephone number, including area code)

N.A.

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yesx  No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes¨  No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer¨	Accelerated filer¨
Non-accelerated filer (Do not check if a smaller reporting company)¨	Smaller reporting companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨  Nox

As of August 23, 2010, there were 34,660,805 shares of the registrant’s common stock outstanding.

CROWNBUTTE WIND POWER, INC.

TABLE OF CONTENTS

			Page
Part I – Financial Information
	Item 1	Consolidated Financial Statements (Unaudited)	4
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3	Qualitative and Quantitative Disclosure About Market Risk	21
	Item 4	Controls and Procedures	22
Part II – Other Information
	Item 1	Legal Proceedings	23
	Item 1A	Risk Factors	24
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	24
	Item 3	Defaults Upon Senior Securities	24
	Item 4	Removed and Reserved	25
	Item 5	Other Information	25
	Item 6	Exhibits	25
Signatures			26

2

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, including, without limitation, in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility in energy prices, increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies.

Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

3

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements.

Crownbutte Wind Power, Inc.

Consolidated Balance Sheets

	June 30, 2010			December 31, 2009
	(Unaudited)			(Audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	820		$	17,322
Other current assets		11,061			3,949
Total current assets		11,881			21,271
Other assets:
Interconnect application deposits		230,325			91,638
Property and equipment, net		129,420			166,088
Total other assets		359,745			257,726
	$	371,626		$	278,997
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	435,069		$	371,297
Accrued expenses		388,384			239,886
Stockholder loans payable		205,000			20,000
Due to officer		29,380			42,380
Total current liabilities		1,057,833			673,563
Total liabilities		1,057,833			673,563
Stockholders' deficit:
Preferred stock, $0.001 par value, 25,000,000 shares authorized none issued and outstanding		-			-
Common stock, $0.001 par value, 300,000,000 shares authorized 32,640,805 and 31,300,331 issued and outstanding at June 30, 2010 and December 31, 2010 and December 31, 2009, respectively		32,640			31,300
Additional paid-in capital		6,699,158			5,113,209
Retained earnings deficit		(7,418,005	)		(5,539,075	)
Total stockholders' deficit		(686,207	)		(394,566	)
Total liabilities and stockholders' deficit	$	371,626		$	278,997

See accompanying notes to unaudited consolidated financial statements.

4

Crownbutte Wind Power, Inc.

Consolidated Statements of Operations

	For the three months ended June 30,						For the six months ended June 30,
	2010			2009			2010			2009
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Sale of project development rights	$	-		$	-		$	-		$	-
Consulting revenues		-			-			-			-
Total revenues		-			-			-			-
Cost of revenues:
Project development rights		-			-			-			-
Consulting revenues		-			-			-			-
Total cost of revenues		-			-			-			-
Gross profit		-			-			-			-
Operating expenses:
General and administrative (includes stock based compensation of $992,001 and $494,899 in 2010 and 2009)		1,189,594			539,037			1,493,503			1,205,207
Depreciation expense		6,257			8,837			13,262			18,113
Total operating expenses		1,195,851			547,874			1,506,765			1,223,320
Net operating loss		(1,195,851	)		(547,874	)		(1,506,765	)		(1,223,320	)
Other income (expenses):
Interest income		—			180			—			931
Other income		500			1,722			500			1,824
Interest expense		(184,931	)		(649	)		(276,469	)		(768	)
Modification expense		(105,077	)		—			(105,077	)		—
Gain (loss) on sale of fixed assets		—			(14,362	)		8,882			(14,362	)
Total other expenses		(289,508	)		(13,109	)		(372,164	)		(12,375	)
Net loss	$	(1,485,359	)	$	(560,983	)	$	(1,878,929	)	$	(1,235,695	)
Basic and diluted - net loss per common share	$	(0.05	)	$	(0.02	)	$	(0.06	)	$	(0.05	)
Basic and diluted - weighted average common shares outstanding		32,434,761			26,200,331			32,032,953			26,200,331

See accompanying notes to unaudited consolidated financial statements.

5

Crownbutte Wind Power, Inc.

Consolidated Statements of Cash Flows

	For the six months ended June 30,
	2010			2009
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(1,878,929	)	$	(1,235,695	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		13,262			18,113
Stock-based compensation		992,001			494,899
Stock-based interest payment		124,712			-
Debt discount amortization		148,000			-
Modification expense		105,077			-
Stock-based consultant fees		22,000			-
Stock-based director fees		500			-
(Gain) loss on disposal of fixed assets		(8,882	)		14,362
Changes in operating assets and liabilities:
Increase in:
Other assets		(145,800	)		(4,447	)
Increase in:
Accounts payable		63,772			209,209
Accrued expenses		148,497			60,897
Total adjustments		1,463,139			793,033
Net cash used in operating activities		(415,790	)		(442,662	)
Cash flows from investing activities:
Certificates of deposit redeemed		-			152,029
Purchase of fixed assets		-			(5,259	)
Proceeds from disposal of fixed assets		32,288			16,600
Net cash provided by investing activities		32,288			163,370
Cash flows from financing activities:
Proceeds from stockholder loans		230,000			-
Payments on stockholder loans		(25,000	)		-
Net proceeds of private placement		175,000			-
Payments on officer loan		(13,000	)		-
Net cash provided by financing activities		367,000			-
Net decrease in cash and cash equivalents		(16,502	)		(279,292	)
Cash and cash equivalents, beginning of period		17,322			304,703
Cash and cash equivalents, end of period	$	820		$	25,411
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest paid	$	3,757		$	768
Taxes paid	$	-		$	119
Noncash transactions:
Stockholder loan payable converted to common stock	$	20,000		$	-

See accompanying notes to unaudited consolidated financial statements.

6

CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS AND MERGER

Crownbutte Wind Power LLC (“Crownbutte ND”) was founded on May 11, 1999 with the strategy of addressing the requirements of regional utility companies to satisfy increasing renewable energy demands. Crownbutte ND was “formed as a limited liability company (LLC) in the State of North Dakota and elected to be taxed as an S corporation effective January 1, 2001. On March 11, 2008, Crownbutte ND no longer met the requirements to be treated as an S corporation.  As a result, effective March 11, 2008, Crownbutte ND has been taxed like a C corporation.  On May 19, 2008, Crownbutte ND filed with the Secretary of State of North Dakota to convert from an LLC to a C corporation becoming “Crownbutte Wind Power, Inc.”  On July 2, 2008, Crownbutte ND became a wholly owned subsidiary of Crownbutte Wind Power, Inc., a Nevada corporation, formerly ProMana Solutions, Inc. as described below.

In cooperation with a local utility, Crownbutte developed and constructed the first utility-scale wind facility in either of the Dakotas in 2001, consisting of two turbines near Chamberlain, South Dakota.

The Company currently functions as a wind park developer as well as a consulting and advisory service to power utilities.

ProMana Solutions, Inc. (or “ProMana”)

ProMana was incorporated in the State of Nevada on March 9, 2004, under the name ProMana Solutions, Inc. ProMana’s business was to provide web-based, fully integrated solutions for managing payroll, benefits, human resource management and business processing outsourcing to small and medium sized businesses. Following the merger described below, ProMana is no longer in that web services business. On July 2, 2008, ProMana amended its Articles of Incorporation to change its name to Crownbutte Wind Power, Inc.

Merger

On July 2, 2008, pursuant to a Merger Agreement entered into on the same date, Crownbutte Acquisition Sub Inc., a North Dakota corporation formed on June 6, 2008, and a wholly owned subsidiary (“Acquisition Sub”), merged with and into Crownbutte ND, with Crownbutte ND being the surviving corporation (the “Merger”). As a result of the Merger, Crownbutte ND became a wholly-owned subsidiary of the Company.

Pursuant to the Merger, ProMana ceased operating as a provider of web-based, fully integrated solutions for managing payroll, benefits, human resource management and business processing outsourcing, and acquired the business of Crownbutte ND to develop wind parks from green field to operation and has continued Crownbutte ND’s business operations as a publicly-traded company.  See “Split-Off Agreement” below.

At the closing of the Merger, each share of Crownbutte ND’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into one share of the Company’s common stock. As a result, an aggregate of 18,100,000 shares of common stock were issued to the holders of Crownbutte ND’s common stock, 17,000,000 of which were issued to the original members of Crownbutte Wind Power LLC and 1,100,000 to investors in Crownbutte ND who purchased shares in a private placement prior to the merger. In addition, warrants to purchase an aggregate of 10,600,000 shares of Crownbutte ND’s outstanding at the time of the Merger became warrants to purchase an equivalent number of shares of the Company’s common stock.

Split-Off Agreement

Upon the closing of the Merger, under the terms of a Split-Off Agreement, ProMana transferred all of its pre-Merger operating assets and liabilities to its wholly-owned subsidiary, ProMana Technologies, Inc., a New Jersey corporation (“ProMana NJ”). Simultaneously, pursuant to the Split-Off Agreement, ProMana transferred all of the outstanding shares of capital stock of ProMana NJ to two stockholders prior to the Merger (the “Split-Off”), in consideration of and in exchange for (i) the surrender and cancellation of an aggregate of 144,702 shares of the common stock and warrants to purchase 19,062 shares of common stock held by those stockholders and (ii) certain representations, covenants and indemnities.

7

CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

Stock Split

The Board of Directors authorized a one-for-65.723 reverse split of the Company’s common stock (the “Stock Split”), which was effective on July 31, 2008, for holders of record on July 14, 2008.  After giving effect to the Stock Split, there were outstanding 19,582,249 shares of common stock.  All share and per share numbers in this Report relating to the Common Stock prior to the Stock Split have been adjusted to give effect to the Stock Split retroactively unless otherwise stated.

For accounting purposes, the Merger was treated as a recapitalization of the Company. Crownbutte ND formerly Crownbutte Wind Power LLC is considered the acquirer for accounting purposes, and the Company’s historical financial statements before the Merger have been replaced with the historical financial statements of Crownbutte ND before the Merger in all subsequent filings with the Securities and Exchange Commission (the “SEC”).

As used herein, unless the context otherwise requires, the “Company” and “Crownbutte” refer to Crownbutte ND for periods prior to the merger and to Crownbutte Wind Power, Inc., a Nevada corporation, formerly ProMana Solutions, Inc., and its wholly-owned subsidiary, Crownbutte ND, for periods after the Merger.

NOTE 2 – BASIS OF PRESENTATION, CONSOLIDATION AND GOING CONCERN

In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated balance sheets as of June 30, 2010 and December 31, 2009, (b) the consolidated statements of operations for the six months ended June 30, 2010 and 2009, (c) the consolidated statements of cash flows for the six months ended June 30, 2010 and 2009.

Interim results are not necessarily indicative of results for a full year.  The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009.

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

The accompanying unaudited consolidated financial statements include the results of operations of the Company and its subsidiary for the six months ended June 30, 2010 and 2009.  All material intercompany accounts and transactions between the Company and its subsidiary have been eliminated in consolidation.

Going Concern

These consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States on a “going concern” basis, which presumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

The Company has incurred operating losses and negative cash flows from its operating activities for the six months ended June 30, 2010, as well as an accumulated deficit of approximately $7,418,005 as of June 30, 2010 and a working capital deficit of $1,045,952.

As of June 30, 2010, the Company has only $820 in cash.  The Company’s ability to pay its obligations as they become due is in danger as it is in need of immediate financing.  The Company’s continued existence is dependent upon its ability to resolve its liquidity problems, principally by obtaining equity and or debt financing.  The Company’s current operations are not an adequate source of cash to fund future operations.  In the event that it is unable to obtain debt or equity financing, it may have to cease or curtail operations.

The Company’s management continues to focus on procurement of financing for its Gascoyne I, Wibaux, and Elgin projects and is actively engaged in discussion with parties who may be interested in purchasing development rights of some of the Company’s other greenfield projects.  The Company would consider sale of either of its shovel-ready projects (Gascoyne I, Wibaux, Elgin) if an opportunity arises before financing can be procured.

8

CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

The Company’s ability to continue as a going concern is dependent upon either the sale of one or more greenfield projects, obtaining additional financing to develop the properties and the ultimate realization of profits through future production or sale of properties, and the success of the Company’s business plan.  The outcome of these matters cannot be predicted at this time.  These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue its business. 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenue in accordance with guidance issued by the Financial Accounting Standards Board (“FASB”) on revenue recognition, which requires 1) evidence of an agreement, 2) delivery of the product or services has occurred 3) at a fixed or determinable price, and 4) assurance of collection within a reasonable period of time.

Further, some revenues are recognized using the percentage of completion method of accounting. The Company believes that the use of the percentage of completion method is appropriate as the Company has the ability to make reasonably dependable estimates of the extent of progress towards completion, contract revenues and contract costs. The percentage to completion is measured by monitoring progress using records of actual time, materials and other costs incurred to date on specific projects compared to the total estimated project requirements, which corresponds to the costs related to earned revenues. Estimates of total project requirements are based on prior experience of customization, delivery and acceptance of the same or similar technology and are reviewed and updated regularly by management. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are first determined, in the amount of the estimated loss on the entire contract.

The Company currently functions in two business areas: as a wind park developer and as a consulting and advisory service to power utilities. During 2009 the Company recognized no revenues from consulting and advising services to power utilities (Consulting revenues).  The Company made no sales and had no consulting revenues for the six months ended June 30, 2010.

Consulting services revenue is recognized under guidance that differs from contract services revenue. Consulting services revenue is recognized when delivery of the service has occurred; the customer has already received the service, and along with other revenue recognition criteria, qualifies the transaction as a sale. Whereas, contract services revenue is recognized when delivery of the product or service has yet to be completed yet the transaction still qualifies as a sale. When recognizing contract services revenue, prior to the project’s start, the Company estimates the cost at each stage of the project. As time passes and the stages are completed, the contractor recognizes an estimate of the revenue that has been earned based on the percentage of the estimated costs that have already been incurred. Using the percentage of completion method allows revenues and their associated expenses to be recognized in the same accounting period according to the matching principle, even if the customer has yet to receive delivery of the goods and services, or if the goods and services have not been completed by the Company.

Cost of Revenues

The Company includes all direct costs related to its contract and sale of development rights revenues in cost of revenues.  The types of costs include materials and supplies and subcontractor fees and expenses specific to the project or contract. Additionally, allocations of payroll, taxes, and benefits are added to cost of revenues based on time worked on each project.  Any project expenses not directly related to revenue-generating contracts or sales are expensed to research and development within general and administrative expenses.  

Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

9

CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

Cash and Cash Equivalents and Certificates of Deposit

For purpose of reporting cash flows, the Company considers all accounts with maturities of three months or less to be cash equivalents. Certificates of deposit with a maturity of more than three months when purchased are classified as current assets.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost. The Company records straight-line depreciation based on the estimated useful life of the individual units of property and equipment. Estimated useful lives are five to ten years for the property and equipment.  Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the terms of the leases.

Research and Development

The Company expenses research and development as incurred.

Income Taxes

Income taxes are accounted for in accordance with the provisions of FASB ASC 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

Customer Concentration

The Company had no revenues for the six months ended June 30, 2010 and 2009.

Concentration of Credit Risk

The Company maintains its cash deposits at various financial institutions. Bank balances periodically exceed the Federal Deposit Insurance Corporation limits at one bank.

Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted guidance issued by the Financial Accounting Standards Board (“FASB”) on “Fair Value Measurements” for assets and liabilities measured at fair value on a recurring basis. This guidance 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 this guidance did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.

The Financial Accounting Standards Board (“FASB”) 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, the “FASB” 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:

Level 1:     Observable inputs such as quoted market prices in active markets for identical assets or liabilities

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.

10

CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

The Company did not have any Level 2 or Level 3 assets or liabilities as of June 30, 2010 and December 31, 2009.  The Company discloses the estimated fair values for all financial instruments for which it is practicable to estimate fair value. As of June 30, 2010 and December 31, 2009, the fair value short-term financial instruments including cash, other current assets, accounts payable, accrued expenses and due to officer, approximates book value due to their short-term duration.

Cash and cash equivalents include money market securities and commercial paper that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.

In addition, the Financial Accounting Standards Board (“FASB”) issued, “The Fair Value Option for Financial Assets and Financial Liabilities,” effective for January 1, 2008. This guidance 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 option for any of its qualifying financial instruments.

Stock-Based Compensation

The Company accounts for the grant of stock and warrants awards in accordance with ASC Topic 718, Compensation – Stock Compensation (ASC 718).  ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of warrants and stock options and other equity based compensation.

The Company uses the Black-Scholes option valuation model for estimating the fair value of traded options.  This option valuation model requires the input of highly subjective assumptions including the expected stock price volatility.

For the six months ended June 30, 2010 and 2009, the Company recorded stock-based compensation of $992,001 and $494,899 respectively.

Basic and Diluted Earnings per Share

Basic earnings per share are calculated by dividing income available to stockholders by the weighted average number of common shares outstanding during each period.  Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period.  Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method).  The outstanding warrants amounted to 17,360,034 and 10,735,752 at June 30, 2010 and 2009 respectively.   For the six months ended June 30, 2010 and 2009, these potentially dilutive securities were not included in the calculation of loss per share because the Company incurred a loss during such periods and thus their effect would have been anti-dilutive.

New Accounting Pronouncements

In October 2009, the FASB issued guidance for amendments to FASB Emerging Issues Task Force on EITF Issue No. 09-1 “Accounting for Own-Share Lending Arrangements in Contemplation of a Convertible Debt Issuance or Other Financing” ( Subtopic 470-20 ) “Subtopic”. This accounting standards update establishes the accounting and reporting guidance for arrangements under which own-share lending arrangements issued in contemplation of convertible debt issuance. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2009. Earlier adoption is not permitted. Management believes this Statement will have no impact on the consolidated financial statements of the Company once adopted.

In December 2009, the FASB issued guidance for Consolidations – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities ( Topic 810 ). The amendments in this update are a result of incorporating the provisions of SFAS No. 167, Amendments to FASB Interpretation No. 46(R). The provisions of such Statement are effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2009. Earlier adoption is not permitted. The presentation and disclosure requirements shall be applied prospectively for all periods after the effective date. Management believes this Statement will have no impact on the consolidated financial statements of the Company once adopted.

11

CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements, which enhances the usefulness of fair value measurements. The amended guidance requires both the disaggregation of information in certain existing disclosures, as well as the inclusion of more robust disclosures about valuation techniques and inputs to recurring and nonrecurring fair value measurements. The amended guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disaggregation requirement for the reconciliation disclosure of Level 3 measurements, which is effective for fiscal years beginning after December 15, 2010 and for interim periods within those years. The Company does not anticipate that this pronouncement will have a material impact on its results of operations or financial position.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.

NOTE 4 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property and equipment and related accumulated depreciation consists of the following:

	June 30, 2010			December 31, 2009
Equipment and Vehicles	$	147,832		$	179,370
Software		39,289			39,289
Leasehold Improvements		938			938
Total Cost		188,059			219,597
Accumulated Depreciation		(58,639	)		(53,509	)
Net Property and Equipment	$	129,420		$	166,088

Equipment and vehicles are depreciated with an estimated useful life of 5 to 10 years and software has an estimated useful life of 5 years.  Depreciation expense was $13,262 and $18,113 for the six months ended June 30, 2010 and 2009 respectively.

During the six months ended June 30, 2010 the Company recorded disposals of two meteorological towers destroyed during an ice storm.

NOTE 5 – ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30, 2010		December 31, 2009
Accrued Payroll	$	355,792	$	216,254
Credit Cards Payable		32,592		23,262
Accrued Vacation		-		324
Accrued Interest		-		46
	$	388,384	$	239,886

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CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

NOTE 6 – STOCKHOLDERS’ DEFICIT

On February 22, 2010, the Company's Board of Directors executed a Unanimous Written Consent approving a private placement transaction to offer investors a minimum of $150,000 (428,571 shares) and a maximum of $700,000 (2,000,000 shares) of the Company’s common stock at $0.35 per share.  Each share sold included one warrant to purchase one share of the Company’s common stock, exercisable for a period of four years, at an exercise price of $1.50 per share, and one warrant to purchase one share of common stock, exercisable for four years, at an exercise price of $2.50 per share.  The Company issued 499,999 shares and 999,998 warrants for proceeds of $175,000.

On February 24, 2010 the $20,000 short-term note payable to StarInvest Group, Inc. was converted to common stock through the private placement.  A total of 57,142 shares and 114,284 warrants were issued.

On March 29, 2010 the Company issued a total of 400,000 shares of common stock in exchange for short-term loans from two of the Company’s stockholders.  Terms of the loans were $100,000 payable in 60 days for 150,000 shares of stock in lieu of interest, and $100,000 payable in 60 days for 250,000 shares of stock in lieu of interest.  Principal payments on both loans were due June 7, 2010.  As of June 30, 2010, these loans are outstanding and are now past due.

On March 31, 2010 the Company made an adjustment to increase common stock issued for 30,000 shares sold in 2009 in a transaction that was to be unwound by December 31, 2009. The stockholders later elected to keep the shares.

On April 27, 2010 the Company issued 100,000 shares of common stock in exchange for consulting services totaling $22,000.

On April 29, 2010, the Company's Board of Directors executed a Unanimous Written Consent approving the issuance of warrants to four Company employees and executives.  The warrants consist of options to purchase 9,010,000 shares of the Company’s common stock at $0.1101 per share exercisable for a period of five years.  The warrants vested immediately.  Stock-based compensation expense totaled $992,001.  The Company valued these warrants utilizing the Black-Scholes pricing model and the following assumption terms:  5 years, interest rate: 1%, volatility:  388%.

On June 2, 2010 the Company issued 250,000 shares of common stock to Gottbetter Capital Group, Inc. in exchange for a $25,000 short-term loan dated June 3, 2010.  Interest expense totaling $35,000 was recorded for the shares issued.  See Note 7.

On June 2, 2010 the Company’s Board of Directors executed a Unanimous Written Consent to reduce the exercise price on 3,118,000 warrants expiring July 2, 2010 through September 8, 2010 from $2.50 to $0.24 per share if exercised by July 1, 2010.  In accordance with ASC 718, the value of the modified terms of the warrant (reduced price for a set period) was compared to the value of the warrants immediately before the modified terms. The difference for all outstanding warrants was recorded as an other expense on the income statement. The Company utilized the Black Scholes pricing model to calculate the fair value of the warrants before and after this reduction in exercise price for the 28 day period. A fair value of $105,077 was determined and expensed.  Warrant holders electing to accept this offer would also receive one warrant with an exercise price of $1.00 per share exercisable for one year.  Only one warrant holder accepted the offer.

On June 29, 2010 the Company issued 3,333 shares common stock to Director Ross Mushik for director fees totaling $500.

NOTE 7 – RELATED PARTY TRANSACTIONS

The Company borrowed funds from Timothy Simons, one of the Company’s stockholders and its CEO.  The terms of the loans are non-interest bearing and payable upon demand.  Amounts owed totaled $29,380 as of June 30, 2010 and $42,380 as of December 31, 2009, respectively.

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CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

The Company borrowed funds from StarInvest Group, Inc., one of the Company’s stockholders.  Terms of the loan are $20,000 at 6% annual interest, due within one year.  The date of the loan is December 18, 2009.  As of December 31, 2009, the Company owed $20,000.  On February 24, 2010, the note was converted to common stock and warrants through the private placement.  The principal balance as of June 30, 2010 is $0.  See Note 6.

On March 29, 2010 the Company borrowed a total of $200,000 from two of its stockholders.  Terms of the loans are $100,000 each payable on June 7, 2010.  150,000 shares of  common stock was issued in lieu of interest payments.  These notes are currently in default.  See Note 6.

On May 21, 2010 the Company borrowed $5,000 from StarInvest Group, Inc., one of the Company’s stockholders.  Terms of the loan are non-interest bearing and payable upon demand.  The principal balance as of June 30, 2010 is $5,000.

On June 3, 2010 the Company borrowed $25,000 from Gottbetter Capital Group, Inc., one of the Company’s stockholders.  The short-term loan matures July 2, 2010 and accrues interest at 10% annually.  The lender required issuance of 250,000 shares of common stock as an inducement to lend.  See Note 6.  Gottbetter Capital Group, Inc., is an affiliate of Gottbetter & Partners, LLP, which has provided and continues to provide legal services to the Company.  Conditions of the note included commitment of 100% of the Company’s future receipts until the Company’s receivable balance for legal services had been paid in full.  The note was personally guaranteed by another Company stockholder.  On June 25, 2010 the Company repaid the note plus accrued interest.  The remaining terms of the note were modified, at the Company’s request, to reduce the commitment from 100% of all future receipts to 10%.  See Note 10.

NOTE 8 – RETIREMENT PLAN

In August 2007, the Company established a SIMPLE retirement plan. The Company matches employee contributions up to 3% of gross wages. The Company’s contributions to the plan were $1,450 and $4,363 for the six months ended June 30, 2010 and 2009 respectively.

NOTE 9 – PROJECT DEVELOPMENT COSTS AND INTERCONNECT APPLICATION DEPOSITS

The Company expenses all project development costs until management deems a project probable of being technically, commercially, and financially viable.  The Company capitalizes project development costs generally once management deems a project probable of being technically, commercially, and financially viable.  This generally occurs in tandem with management’s determination that a project should be classified as an advanced project, such as when favorable results of a system impact study are received, interconnect agreements obtained, and project financing is in place.

On May 27, 2008 the Company entered into a joint venture agreement with Westmoreland Power, Inc., a coal company, under the name of Gascoyne II Wind Project to develop, construct, manage, and operate a 200 MW wind power project in southwest North Dakota.  Crownbutte is the managing party.  For the six months ended June 30, 2010 and 2009, the Company expensed development costs of $5,552 and $5,555 respectively, for this project.

On June 20, 2008 the Company entered into an agreement with a wind development company to purchase the rights to develop a wind park near New England, ND for $100,000.  Assets purchased by the Company consist of one met tower, 3.5 years meteorological data, and a land lease cooperation agreement.  For the six months ended June 30, 2010 and 2009, the Company expensed development costs of $11,132 and $5,038 respectively for this project.

In 2007, the Company sold project development rights for a 20 MW wind park near Gascoyne, ND to a wind energy company.  The Company recognized $75,000 revenue in 2006 for preliminary development work completed and earned in 2006. For the year ended December 31, 2007, additional revenue of $250,000 for sale of project development rights was earned and recognized for final development work completed prior to transfer of ownership.

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CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

In 2008, the Company decided to repurchase the project.  On September 30, 2008 the Company entered into an agreement with the wind development company to repurchase the development rights for the 20 MW Gascoyne, ND wind park for $325,000.   For the six months ended June 30, 2010 and 2009, the Company expensed development costs totaling $48,876 and $90,980 respectively for this project as it has not yet deemed the project probable of being technically, commercially, and financially viable.

For the six months ended June 30, 2010 and 2009 the Company expensed an additional $35,308 and $19,618 respectively in development costs for smaller projects not listed above.

The Company has deemed all of the projects described above as research and development costs which have been expensed accordingly.

Interconnect Application Deposits

The Company pays in advance for electrical interconnect studies.  As the studies are performed, the portions of the advances that are used are expensed. These costs are incurred as part of the process to obtain an interconnect agreement. Interconnect deposits are classified as non-current assets as studies generally exceed one year in length.  If a study is complete, any unused deposits are refunded to the Company.  At June 30, 2010 and December 31, 2009, the Company had $230,325 and $91,638 respectively, of unused deposits on its balance sheet.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Legal proceedings

On August 19, 2008, Centre Square Capital, LLC filed a claim in the amount of $3,000,000 plus attorneys fees, interest, and arbitration costs in a demand for arbitration, claiming that the Company has not compensated it for introducing the Company to the firm that raised the private placement capital in March, 2008 and thereafter.   On March 16, 2009 a judge dismissed Centre Square Capital LLC’s claim and awarded the Company reimbursement of all attorney fees and costs related to the claim.  A reimbursement of approximately $129,227 is payable to the Company.

The Company accounts for awards of attorney fees and costs resulting from judgments in its favor on a case-by-case basis.  Factors affecting the accounting treatment include timing of expenses incurred and date of award, likelihood of collection, and additional costs incurred in the collection process.  Judgments awarded that management deems collectible are recorded as a receivable.  Award amounts for expenses incurred in the same accounting period are recorded as reductions in the corresponding expense line item.  Reimbursements of prior period expenses are recorded as other income.  Collection of the Centre Square Capital judgment is uncertain and accordingly, no receivable has been recorded.  For the six months ended June 30, 2010 the Company collected $0 of this award.  

On November 3, 2009, the Company was served with a lawsuit filed against us in the Philadelphia County Court of Common Pleas under Case ID: 091100318. Stradley, Ronon, Stevens & Young, LLP (the plaintiffs) filed a claim against the Company for nonpayment of legal fees and are seeking to recover $93,526 plus interest, attorneys’ fees and costs.  This claim arose as a result of legal services provided in the Centre Square Capital, LLC arbitration claim filed August 19, 2008.  The Company has included the $93,526 in accounts payable as of December 31, 2009.

On December 14, 2009, the Company received a Notice of Intent to Take Default Judgment from Stradley, Ronon, Stevens & Young, LLP for the unpaid balance of $93,526.  The Company has been working with the plaintiff to make payments on the debt.  In exchange, the plaintiffs have agreed to postpone execution of the judgment.  The Company owed $73,526 as of June 30, 2010 which is included in accounts payable.

On June 3, 2010 the Company executed a short-term note payable with Gottbetter Capital Group, Inc..  Terms of the note include a stipulation the Company must remit 10% of future receipts from all sources until the Company’s account is paid in full.  See Note 7.  As of June 30, 2010 the Company owed Gottbetter Capital Group, Inc. $228,295 for legal services.  This amount is included in accounts payable.

15

CROWNBUTTE WIND POWER, INC.

Notes to Unaudited Consolidated Financial Statements

For the six months ended June 30, 2010 and 2009

NOTE 11 – SUBSEQUENT EVENTS

On July 14, 2010 the Company issued 20,000 shares common stock at $0.24 per share and a warrant to purchase 20,000 shares of common stock at an exercise price of $1.00 expiring July 5, 2011.  The common stock and new warrant was exchanged for a warrant to purchase 20,000 shares at $2.50 pursuant to the Company’s exchange offer dated June 2, 2010.

On July 29, 2010 a total of 2,000,000 warrants were exercised at $0.001 per share.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. Please see “Forward-Looking Statements” above and “Risk Factors” included in our Form 10-K for the fiscal year ended December 31, 2009, filed with the Securities and Exchange Commission (“SEC”) on April 15, 2010 (the “2009 Form 10-K”), for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.

The following discussion and analysis of the Company’s financial condition and results of operations is based on our consolidated financial statements. Our consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States on a “going concern” basis, which presumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  These condensed consolidated financial statements as of June 30, 2010, and for the six months ended June 30, 2010 and 2009, are unaudited. In the opinion of management, such financial statements include the adjustments and accruals necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in these financial statements as of June 30, 2010, and for the six months ended June 31, 2010 and 2009.

You should read this discussion and analysis together with such financial statements and the notes thereto.

Overview

Based in Mandan, ND, Crownbutte Wind Power, Inc. is an independent wind energy company focused exclusively on the development, ownership and operation of wind energy projects.  One wind park developed by us from “green-field” or blank state to operation was purchased directly in 2002 by Basin Electric Power Cooperative (2.6 megawatts (MW) near Chamberlain, South Dakota.  In addition to this operating park, we have completed various consulting activities with regional utilities and international energy companies.  Our goal is to develop, own and operate merchant wind parks in the 20-60 MW capacity range.  As of December 31, 2010, our portfolio of wind energy projects included approximately 638 MW (0 MW currently in operation) of prospective capacity in various stages of development primarily in the Dakotas and Montana.

The first wind park that we plan to build, own and operate is a 20 MW project called Gascoyne I located south of Dickinson, North Dakota.  Our goal is to have approximately 20 MW of owned operating capacity by mid-2011, and we target the construction and commissioning of approximately 40 MW of additional owned, operating by the end of 2011.  We do not currently and do not plan to act as an operator of wind parks we do not own.

Our business model focuses on the development of merchant parks.  We do not plan to enter into power purchase agreements unless they are offered on favorable terms.

17

Results of Operations for Six Months Ended June 30, 2010

Revenues

For the three months and six months ended June 30, 2010, we recognized no revenues.  The Company had no revenues for the same periods 2009.  No new sales of development rights or consulting projects were secured during the current period.  We continue to engage in discussions with finders and interested parties.  However, we cannot be assured of success in our endeavors to sell development rights, secure consulting contracts, or to raise the necessary project financing required to construct and operate wind parks for the sale of electricity.  See further discussion in Financing Outlook.

Cost of Revenues

There was no cost of revenues.

Operating Expenses

Operating expenses for the six months ended June 30, 2010 increased $283,445 compared to the same period 2009.  The Company recognized $992,001 in stock compensation expense for four of its officers and employees, an increase of $497,102 compared to stock compensation expense of $494,899 for the six months ended June 30, 2009.  Stock compensation expense for the three months ended June 30, 2010 and 2009 totaled $992,001 and $248,817, respectively, an increase of $743,184 quarter over quarter.  Other operating expenses were reduced due to cost-containment measures implemented in 2009 for nonessential staff and overhead.  For the six months ended June 30, 2010, other operating expenses decreased as follows:  research and development, $18,171; legal and accounting fees, $64,789; travel and entertainment, $18,663; payroll, payroll taxes and simple plan contributions, $95,694.

The $18,171 decrease in research and development expenses resulted from less early-stage development activity for 2010 compared to the same period last year as the Company continues to focus on financing its shovel-ready projects.  Although expenses decreased in total for the six months ended June 30, 2010, expenses for the current quarter increased $2,362 for due diligence fees related to our Gascoyne I project.

Legal fees decreased for the current period compared to the same period last year due to legal expenses incurred in 2009 related to the Centre Square Capital litigation.  Legal and accounting fees for the six months ended June 30, 2010 totaled $191,843 compared to $256,633 for the same period in 2009.   For the quarter ended June 30, 2010, legal and accounting fees totaled $95,496 compared to $102,656 for the same quarter last year, a decrease of $7,159.

Excluding stock compensation, salaries and wages for the current quarter totaled $56,048 compared to $131,603 second quarter 2009, a decrease of $75,555.  Other payroll-related expenses including payroll taxes and simple plan contributions totaled $1,793 for the current quarter versus $7,542 for the three months ended June 30, 2009, a decrease of $5,749.

The Company curtailed all unnecessary travel and entertainment expenses after first quarter 2009.  Travel and entertainment for the quarter ended June 30, 2010 totaled $82 compared to $6,266 for the same period last year.

Non-Operating Income and Expenses

The Company recognized $500 in other income for the three months ended June 30, 2010.  No interest income was earned during the current quarter compared to $180 earned the same period last year.  For the three months ended June 30, 2009, the Company recognized a loss on sale of fixed assets totaling $14,362 compared to $0 gains or losses for the current quarter.

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Interest expense totaled $184,931 for the current quarter compared to $649 for the same period last year.  Of the current quarter interest expense, stock-based interest payments and amortized debt discount related to stockholder loans totaled $35,000 and $148,000, respectively.

The Company recognized a modification expense totaling $105,077 for the current quarter related to the Company’s June 2, 2010 warrant offer.  No modification expenses were incurred for the quarter ended June 30, 2009.

Financing Outlook

The Company continues to experience significant liquidity issues.  Even though cost-containment measures have been implemented, lack of revenues and difficulty in obtaining project financing has continued to negatively impact the Company.  A private placement initiated during the first quarter of 2010  resulted in a $175,000 capital investment into the Company.   The Company also borrowed funds from two stockholders during the previous quarter, and smaller amounts, again this quarter. A total of $30,000 was borrowed from stockholders or affiliates of stockholders during the current quarter.  Proceeds were used to pay operating expenses. First quarter borrowings, which totaled $200,000, were used to finance Midwest Independent Systems Operator (MISO) deposit requirements for the Elgin and Wibaux projects and allowed the Company to maintain fast-tracked status for both of these projects.  Fast-tracking through the MISO queue allows the Company to achieve an interconnect agreement much earlier than projects that remain in the regular queue awaiting further impact studies.  The Company anticipates Elgin and Wibaux, each 20 MW projects, should attain shovel-ready status before 2010 year end.  Funds borrowed during the three months ended June 30, 2010 were used to pay operating expenses, including due diligence fees for Gascoyne I.

Future efforts to generate positive cash flow depend on Crownbutte’s success in selling development rights to parks in the short term, and constructing wind parks to generate electricity sales in the long term.  As of the date of this report, the Company continues to focus on efforts to finance the Gascoyne I wind park (a 19.5 MW project).  As reported in previous filings, although the Company had received a non-binding term sheet to provide $37.5 million financing for this project, the lender terminated the deal during the due diligence period.

The Company continues discussion with multiple parties who have expressed interest in financing shovel-ready projects, including Gascoyne I, Wibaux, and Elgin.  A financing of either of these projects would allow the Company to eliminate most of our liabilities and obligations through the date of financing, however, we will still be dependent upon sales of project development rights, consulting revenues, or other sources of cash flow until such time our parks are operational and generating sufficient revenues to meet corporate overhead.

We continue to seek financing for these three projects and discussions are on-going with various interested parties.  The Company is also seeking to sell one or more projects.  To date, none of these discussions have advanced beyond exchange of information and there can be no assurance we will succeed in either financing or sale of these projects.

19

Liquidity and Capital Resources

The Company has accrued significant liabilities and has a working capital deficit of $1,045,952 as of June 30, 2010.  For the six months ended June 30, 2010 we used $415,790 cash in operations compared to $442,662 used in operations during the same period in 2009.  The decrease in cash used is mainly due to increases in accounts payable and accrued expenses.  Key employees and officers have elected to defer compensation.   Payroll and staff-related expenses were significantly reduced for the six months ended June 30, 2010 as the Company employed approximately 50% less staff than the period ended June 30, 2009.

Cash flows from investing activities for the current period totaled $32,288 compared to $163,370 for the same period last year.  The only source of cash flow from investing activities for the six months ended June 30, 2010 was $32,288 insurance proceeds from loss of two met towers destroyed in an ice storm.  For the period ended June 30, 2009 the Company received $16,600 for sale of fixed assets, redeemed certificates of deposit totaling $152,029, and purchased $5,259 in fixed assets.

Cash flows from financing activities for the period ended June 30, 2010 totaled $367,000 compared to $0 for the same period last year.  Sources of cash included $175,000 net proceeds from a private placement and $230,000 borrowed from stockholders.  The Company made payments totaling $13,000 on a loan from officer, and repaid $25,000 borrowed from stockholders.

Going Concern

This Management’s Discussion and Analysis and the consolidated financial statements included in this Report have been prepared on a “going concern” basis, which presumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

The Company has incurred operating losses and negative cash flows from its operating activities for the six months ended June 30, 2010, as well as an accumulated deficit of approximately $7,418,005 as of June 30, 2010 and a working capital deficit of $1,045,952.  Total current liabilities at June 30, 2010 were $1,057,833.

As of June 30, 2010, the Company had only $820 in cash.  As of the date of this Report, the Company has only approximately $400 in cash. The Company’s ability to pay its obligations as they become due is in danger as it is in need of immediate financing.  Our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining equity and or debt financing.  Our current operations are not an adequate source of cash to fund future operations or pay current liabilities.  In the event that we are unable to obtain debt or equity financing, we may have to cease or curtail operations.

Our ability to continue as a going concern is dependent upon either the sale of one or more greenfield projects, obtaining additional financing to develop the properties and the ultimate realization of profits through future production or sale of properties, and the success of our business plan.  The outcome of these matters cannot be predicted at this time.  These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should we be unable to continue its business.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

20

New Accounting Pronouncements

In October 2009, the FASB issued guidance for amendments to FASB Emerging Issues Task Force on EITF Issue No. 09-1 “Accounting for Own-Share Lending Arrangements in Contemplation of a Convertible Debt Issuance or Other Financing” ( Subtopic 470-20 ) “Subtopic”. This accounting standards update establishes the accounting and reporting guidance for arrangements under which own-share lending arrangements issued in contemplation of convertible debt issuance. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2009. Earlier adoption is not permitted. Management believes this Statement will have no impact on the consolidated financial statements of the Company once adopted.

In December 2009, the FASB issued guidance for Consolidations – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities ( Topic 810 ). The amendments in this update are a result of incorporating the provisions of SFAS No. 167, Amendments to FASB Interpretation No. 46(R). The provisions of such Statement are effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2009. Earlier adoption is not permitted. The presentation and disclosure requirements shall be applied prospectively for all periods after the effective date. Management believes this Statement will have no impact on the consolidated financial statements of the Company once adopted.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements, which enhances the usefulness of fair value measurements. The amended guidance requires both the disaggregation of information in certain existing disclosures, as well as the inclusion of more robust disclosures about valuation techniques and inputs to recurring and nonrecurring fair value measurements. The amended guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disaggregation requirement for the reconciliation disclosure of Level 3 measurements, which is effective for fiscal years beginning after December 15, 2010 and for interim periods within those years. The Company does not anticipate that this pronouncement will have a material impact on its results of operations or financial position.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.

Item 3.  Qualitative and Quantitative Disclosure about Market Risk

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide disclosure under this Item 3.

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Item 4.  Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2010, the end of the period covered by this Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, 2010, were not effective to ensure that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the registrant’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and Rule 15d-15(f)). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company’s operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

We have identified the following material weaknesses in our internal control over financial reporting:

Lack of Independent Board of Directors and Audit Committee

Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established.  Considering the costs associated with procuring and providing the infrastructure to support an independent audit committee and the limited number of transactions, management has concluded that the risks associated with the lack of an independent audit committee are not sufficient to justify the creation of such a committee at this time.  Management will periodically reevaluate this situation.

Lack of Segregation of Duties

Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases.  Management will periodically reevaluate this situation.

(b) Changes in Internal Control over Financial Reporting

During the six months ended June 30, 2010, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

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PART II—OTHER INFORMATION

Item 1.  Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters that may arise from time to time that may harm business.

Except for the matter described below, other than routine litigation arising in the ordinary course of business that we do not expect, individually or in the aggregate, to have a material adverse effect on us, there is no currently pending legal proceeding and, as far as we are aware, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, other than the Company’s applications for permits to install or erect wind turbines or weather-monitoring equipment, which are incidental to the business of the Company.

Although there can be no assurance as to the ultimate outcome, we have denied liability in the case pending against us, and we intend to defend vigorously such case.  Based on information currently available, we believe the amount, or range, of reasonably possible losses in connection with the action against us not to be material to our consolidated financial condition or cash flows.  However, losses may be material to our operating results for any particular future period, depending on the level of income for such period.

On August 19, 2008, Centre Square Capital, LLC filed a claim with the American Arbitration Association in the amount of $3,000,000 plus attorneys’ fees, interest, and arbitration costs in a demand for arbitration, claiming that the Company has not compensated it for introducing the Company to the firm that identified the Company’s private placement investors in March 2008 and thereafter.  The Company maintained that the agreement pertains only to funds raised as a result of business with the People’s Republic of China.  On March 16, 2009, the court dismissed the plaintiff’s claim and awarded the Company reimbursement of all attorney fees and costs related to the claim.  A reimbursement of approximately $129,227 is payable to the Company.

As of the date of this report and as disclosed in the accompanying notes to consolidated financial statements as of June 30, 2010, and for the six months ended June 30, 2010 and 2009, the Company has received $0 of the damages awarded on March 16, 2009.  We believe there will be no recovery of this award.

Subsequent to the damages award, the Company was threatened with litigation over non-payment of attorney fees related to the Centre Square Capital arbitration and defense.  On November 3, 2009, the Company was served with a lawsuit filed in the Philadelphia County Court of Common Pleas by Stradley, Ronon, Stevens & Young, LLP, seeking to recover $93,526 plus interest, attorneys’ fees, and costs.  On December 14, 2009, the Company received a Notice of Intent to Take Default Judgment for the unpaid balance of $93,526.  The Company has been working with the plaintiff to make payments on the debt.  In exchange, the plaintiffs have agreed to postpone execution of the judgment.  There has been no change in the status of this situation and we continue to work toward full payment of the debt.

As of the date of this report, the Company owes Stradley, Ronon, Stevens & Young, LLP $73,526.  There is no guarantee we will obtain financing or that we will have the capital available to pay this debt.

If the Company cannot raise sufficient capital to pay this debt soon, there is no guarantee the judgment against us will not be exercised.  Should they do so, the only liquid assets available to satisfy the judgment are the Company’s interconnect application deposits for Wibaux and Elgin.  Forfeiture of the deposits would significantly impair the status of our project queue positions.  Loss of queue position may require new applications, additional deposits and development costs, and several years to obtain shovel-ready status for these two projects.

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Item 1A.  Risk Factors

There have been no material changes from the risk factors disclosed in our 2009 Form 10-K under Part I, Item 1A, therein.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

On June 2, 2010 the Company issued 250,000 shares of common stock to Gottbetter Capital Group, Inc., in consideration of its willingness to make a $25,000 short-term loan to the Company.  Gottbetter Capital Group, Inc., is an affiliate of Gottbetter & Partners, LLP, which has provided and continues to provide legal services to the Company.  See Notes 7 and 10 to the Unaudited Consolidated Financial Statements in Item 1 of this Report for additional information about the terms of the loan.  The Company’s issuance of these shares was not registered under the Securities Act in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering.

On June 29, 2010, the Company issued 3,333 shares common stock to its Director, Ross Mushik, as director compensation.  The Company’s issuance of these shares was not registered under the Securities Act in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering.

On July 14, 2010, the Company issued to an existing stockholder (i) 20,000 shares of common stock upon exercise of an outstanding warrant and (ii) a new warrant to purchase 20,000 shares of common stock at an exercise price of $1.00 expiring July 5, 2011.  The common stock and new warrant were issued in connection with an offer commenced in June 2010 to reduce the exercise price of existing warrants from $2.50 per share to $0.24 per share and to issue a new warrant to purchase one share of Common Stock, exercisable for a term of one year, at an exercise price of $1.00per share, for each original warrant so exercised.  The offer was made, and the securities were issued, in reliance upon the exemption from registration provided by regulation D under the Securities Act

On July 29, 2010, the Company issued 2,000,000 shares of common stock upon exercise of outstanding warrants.   The Company’s issuance of these shares was not registered under the Securities Act in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering.

Item 3.  Defaults upon Senior Securities.

None.

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Item 4.  (Removed and Reserved)

Item 5.  Other Information.

None.

Item 6.  Exhibits.

The following Exhibits are being filed or furnished with this Quarterly Report on Form 10-Q.

Exhibit
Number		Description
10.1	*	Promissory Note, dated as of June 3, 2010, in the principal amount of $25,000, issued by the Registrant to Gottbetter Capital Group, Inc.
10.2	*	Amendment dated June 25, 2010, to Promissory Note, dated as of June 3, 2010, in the principal amount of $25,000, issued by the Registrant to Gottbetter Capital Group, Inc.
10.3	*	Form of Common Stock Purchase Warrant issued to certain investors on July 14, 2010
10.4	*	Interconnect and Operation Agreement dated July 8, 2004, between Crownbutte Wind Power LLC and Midwest Independent Transmission System Operator, Inc.
31.1	*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a)
32.1	*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.)

*      Filed/furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CROWNBUTTE WIND POWER, INC.
Dated: August 23, 2010	By:	/s/ Timothy H. Simons
		Timothy H. Simons
		Chief Executive Officer (Principal Executive
		Officer and Principal Financial Officer)

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EXHIBIT INDEX

Exhibit
Number	Description
10.1	Promissory Note, dated as of June 3, 2010, in the principal amount of $25,000, issued by the Registrant to Gottbetter Capital Group, Inc.
10.2	Amendment dated June 25, 2010, to Promissory Note, dated as of June 3, 2010, in the principal amount of $25,000, issued by the Registrant to Gottbetter Capital Group, Inc.
10.3	Form of Common Stock Purchase Warrant issued to certain investors on July 14, 2010
10.4	Interconnect and Operation Agreement dated July 8, 2004, between Crownbutte Wind Power LLC and Midwest Independent Transmission System Operator, Inc.
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.)

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