UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number: 000-32249
ARMOR ELECTRIC INC.
(Exact name of small business issuer as specified in its charter)
Nevada 65-0853784
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
201 Lomas Santa Fe, Suite #420, Solana Beach, CA 92075 (Address
of principal executive offices)
(858) 720-0123
(Issuer's telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $0.001 par value 40,671,681
(Class) (Outstanding as of March 31, 2006)
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
ARMOR ELECTRIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
TABLE OF CONTENTS
Part I Financial Information Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 2006 (unaudited) and June 30, 2005 ..................... 2
Unaudited Condensed Consolidated Statements of Operations
for the three and nine months ended March 31, 2006 and 2005,
and cumulative from inception on October 29, 2003 through
March 31, 2006 ................................................... 3
Unaudited Condensed Consolidated Statements of Cash Flows
for the nine months ended March 31, 2006 and 2005, and
cumulative from inception on October 29, 2003 through
March 31, 2006 ................................................... 4
Statements of Stockholders' equity for the period from
from inception on October 29, 2003 through March 31, 2006 ......... 5
Notes to Consolidated Financial Statements (unaudited) ............ 6
Item 2. Management's Discussion and Analysis or Plan of Operation.......... 11
Item 3. Controls and Procedures............................................ 12
Part II OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds........ 13
Item 3. Defaults upon Senior Securities.................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................ 13
Item 5. Other Information.................................................. 13
Item 6. Exhibits and Reports on Form 8-K................................... 13
Signatures.................................................................. 14
ARMOR ELECTRIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
2006 2005
---------- ----------
(unaudited)
ASSETS
------
Current Assets
Cash in bank $ 742 $ 107,700
Prepaid Expenses 4,204 -
---------- ----------
$ 4,946 $ 107,700
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIT
--------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 10,282 $ -
State income tax payable - 1,600
Accrued legal fees-related party - 10,000
Shareholder Loan 228,557 -
Accrued liquidating damages 64,991 -
Accrued payroll 36,700 13,600
---------- ----------
Total Current Liabilities 340,530 25,200
---------- ----------
STOCKHOLDERS' EQUITY DEFICIT
Preferred stock, $.001 par value, 10,000,000
shares authorized, none issued - -
Common stock, par value $.001, 100,000,000 shares
authorized, 40,671,681 issued and 40,371,681 outstanding 40,671 40,671
Common stock subscription receivable (1,000) (1,000)
Paid in capital 551,927 577,818
(Deficit) accumulated during the development stage (606,886) (235,693)
Shareholder - Advanced royalties (285,795) (264,795)
Shares held in escrow (34,500) (34,500)
---------- ----------
Total Stockholders' Equity (Deficit) (335,583) 82,501
---------- ----------
$ 4,946 $ 107,700
========== ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
ARMOR ELECTRIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
CUMULATIVE
THREE MONTHS NINE MONTHS FROM
ENDED ENDED OCTOBER 29, 2003
MARCH 31, MARCH 31, (INCEPTION) TO
2006 2005 2006 2005 MARCH 31, 2006
-------------------------- -------------------------- --------------
REVENUES $ - $ - $ - $ - $ -
-------------------------- -------------------------- -----------
EXPENSES
General and administrative:
Consulting Fees 350 62,596 350 62,596 58,851
Other 23,959 22,289 136,296 45,488 245,668
Research & Development 228,558 38,420 234,547 38,420 302,367
-------------------------- -------------------------- -----------
Total expenses 252,867 123,305 371,193 146,504 606,886
-------------------------- -------------------------- -----------
NET (LOSS) $ (252,867) $ (123,305) $ (371,193) $ (146,504) $ (606,886)
========================== ========================== ===========
NET (LOSS) PER SHARE $ (0.01) * $ (0.01) *
========================== ==========================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 40,371,681 38,555,014 40,371,681 36,046,560
========================== ==========================
* less than $.01 per share
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
ARMOR ELECTRIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
CUMULATIVE FROM
OCTOBER 29,
NINE MONTHS 2003
ENDED (INCEPTION) TO
MARCH 31, MARCH 31,
2006 2005 2006
---------- ---------- ----------
OPERATING ACTIVITIES
Net (loss) from operations $ (371,193) $ (146,504) $ (606,886)
Adjustments to reconcile net (loss) to net cash
provided (used) by operating activities:
Common Stock issued for Services - 35,000 93,501
Contributions to capital 4,100 18,880 71,610
Changes in operating assets and liabilities:
(Decrease) in state income tax payable (1,600) 800 -
Increase in accounts payable 10,282 - 9,756
(Decrease) in trust funds - 553
(Increase) in prepaid expenses (4,204) (4,204)
Increase in accrued payroll 23,100 9,925 26,700
---------- ---------- ----------
Total adjustments 31,678 64,605 197,916
---------- ---------- ----------
NET CASH PROVIDED (USED BY) OPERATING ACTIVITIES (339,515) (81,899) (408,970)
---------- ---------- ----------
INVESTING ACTIVITIES:
Shareholder advances - Advanced royalties (21,000) (200,000) (285,796)
---------- ---------- ----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (21,000) (200,000) (285,796)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from sale of common stock, net 35,000 449,000 477,819
Increase (Decrease) in Shareholder Loan 228,557 228,557
Increase (Decrease) in accounts payable - related party (10,000) - (10,868)
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 253,557 449,000 695,508
---------- ---------- ----------
NET INCREASE IN CASH (106,957) 167,101 742
CASH, BEGINNING OF PERIOD 107,700 - -
---------- ---------- ----------
CASH, END OF PERIOD $ 742 $ 167,101 $ 742
========== ========== ==========
SUPPLEMENTAL CASH INFORMATION
Income Taxes Paid $ 1,600 $ 1,600
========== ==========
SUPPLEMENTAL NON-CASH INFORMATION
Common Stock Subscribed,10,000 shares $ 1,000 $ 1,000
Common Stock Subscription receivable (1,000) (1,000)
---------- ----------
$ - $ -
========== ==========
Common stock issued for legal service retainer
held in escrow, 300,000 shares $ 34,500
==========
Accrued liquidating damages to shareholders $ 64,991 $ 64,991
========== ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
ARMOR ELECTRIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY
(Deficit)
Common Accumulated
Common Stock Stock Shares Shareholder During Total
---------------------- Paid-in Subscription Held in Advanced Development Stockholders'
Shares Amount Capital Receivable Escrow Royalty Stage Equity
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Inception, Oct 30, 2003,
Stock issued for services
@ $.001 per share 1,000 $ 1 $ - $ - $ - $ 1
April 21, 2004 Stock issued
for services @ $0.001 per share 20,999,000 20,999 1 21,000
Contributed Capital 15,232 15,232
Net (Loss), for the period
ended April 27, 2004 (37,033) (37,033)
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
BALANCE, APRIL 27, 2004 21,000,000 21,000 15,233 (37,033) (800)
Recapitalization, April 27, 2004 13,717,333 13,717 (34,558) - (20,841)
Contributed Capital 3,308 3,308
Net (loss) for period (9,308) (9,308)
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
BALANCE, JUNE 30, 2004 (RESTATED) 34,717,333 34,717 (16,017) (46,341) (27,641)
Shares issued October 15, 2004
@ $0.25 for marketing consulting
services 150,000 150 37,350 37,500
Shares issued January 21, 2005
to escrow @ $0.115 per share 300,000 300 34,200 (34,500) -
Shares issued January 21, 2005
@ $.115 per share for legal
services provided 304,348 304 34,696 35,000
Shares issued February 4, 2005
for cash at $.10 per share 300,000 300 29,700 30,000
Shares issued February 8, 2005
for cash at $.10 per share 1,050,000 1,050 103,950 105,000
Shares issued February 9, 2005
for cash at $.10 per share 100,000 100 9,900 10,000
Shares issued February 16, 2005
for cash at $.10 per share 350,000 350 34,650 35,000
Shares issued February 17, 2005
for cash at $.10 per share 350,000 350 34,650 35,000
Shares issued February 18, 2005
for cash at $.10 per share 100,000 100 9,900 10,000
Shares issued February 20, 2005
for cash at $.10 per share 100,000 100 9,900 10,000
Shares issued February 22, 2005
for cash at $.10 per share 2,600,000 2,600 257,400 260,000
Shares issued February 28, 2005
for cash at $.10 per share 100,000 100 9,900 10,000
Shares issued March 4, 2005 for
cash at $.10 per share 40,000 40 3,960 4,000
Common stock subscribed, March 4,
2005 at $.10 per share 10,000 10 990 1,000
Shares issued May 20, 2005 for
cash at $.10 per share 100,000 100 9,900 10,000
Common stock subscription receivable (1,000) (1,000)
Stock offering costs (76,182) (76,182)
Shareholder Advanced Royalties (264,795) (264,795)
Contributed Capital 48,970 48,970
Net (loss) for period (189,352) (189,352)
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
BALANCE, JUNE 30, 2005, (UNAUDITED) 40,671,681 40,671 577,818 (1,000) (34,500) (264,795) (235,693) 82,501
Contributed Capital 4,100 4,100
Adjustment to Stock offering costs 35,000 35,000
Liquidating Damages (64,991) (64,991)
Shareholder Advanced Royalties (21,000) (21,000)
Net (loss) for nine months (371,193) (371,193)
---------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
BALANCE, MARCH 31, 2006, (UNAUDITED) 40,671,681 $ 40,671 $ 551,927 $ (1,000) $ (34,500) $ (285,795) $ (606,886) $ (335,583)
========== ========== ========== ========== ========== ========== =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
ARMOR ELECTRIC, INC.
Notes to Financial Statements (unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the Company's financial position as of March 31, 2006 and the
results of its operations and cash flows for the three and nine months ended
March 31, 2006 and 2005 have been made. Operating results for the nine months
ended March 31, 2006 are not necessarily indicative of the results that may be
expected for the year ended June 30, 2006.
These consolidated condensed financial statements should be read in conjunction
with the financial statements and notes thereto contained in the Company's Form
10-KSB for the year ended June 30, 2005.
On April 27, 2004 Armor acquired all of the issued and outstanding shares of
common stock of Nova Electric, Inc. (Nova, or the Company) a development stage
Nevada Corporation, formed October 29, 2003, in exchange for 21 million
restricted shares of common stock of Armor, pursuant to Section 368 (a) (1) (B)
of the Internal Revenue Code, which provides for a tax-free exchange under that
reorganization provision.
This stock exchange transaction, which is treated as a recapitalization of Nova
for accounting purposes, resulted in a change of control wherein the financial
statements included herein are those of the acquired company, Nova, the
accounting parent, consolidated with, Armor, Nova's accounting subsidiary, as
required for proper financial presentation purposes only. For legal purposes,
Armor is the parent and Nova is the subsidiary.
At the date of the stock exchange, all of the net assets of Armor were acquired
by Nova at fair value which equaled Armor's book value. Nova's fiscal year end
is June 30.
NOTE 2 - RECLASSIFICATION OF STOCK OFFERING COSTS
The September 30, 2005, statement of stockholders' equity included herein
provides for a reclassification of $35,000 of previously incurred stock offering
costs as a general and administrative expense due to the Company voluntarily
withdrawing its SB-2 filing during the current quarter to which those costs
relate.
6
NOTE 3 - RELATED PARTY TRANSACTIONS
As of March 31, 2006, the Company paid $285,795 towards its commitment to pay a
$650,000 advance royalty to Nu Age Electric, Inc., in connection with the
acquisition of certain marketing rights. Advance royalties are classified as a
contra equity account since the amount paid is to the majority owner of the
outstanding common stock of Armor.
The Company also accrued payroll for shareholders of the company in the amount
of $10,500, for the quarter ended March 31, 2006. One of the same shareholders
also contributed office rent to the company in the amount of $2,000 for the
three months ending March 31, 2006.
The President of the Company loaned $228,557 to the Company as of March 31,
2006. He subsequently loaned the Company an additional $45,000 through April 14,
2006.
NOTE 4 - THREATENED LITIGATION
In August 2005 the Company received two letters from two law firms representing
two of the shareholders who purchased common stock in a private placement in
March 2005. The shareholders had threatened litigation concerning unpaid
liquidating damages, as further described below in Note 6 of the Notes to
financial statements, along with related legal fees and costs. The shareholders
have decided not to pursue litigation.
NOTE 5 - LITIGATION
Armor was a defendant in a small claims court action in the Province of British
Columbia on May 16, 2002, involving two Plaintiffs alleging a $5,000 deposit was
not returned to them, which was intended to apply towards the purchase of common
stock of the Company, which was never issued. Armor claims that no amount was
ever received from plaintiffs and filed a response on June 20, 2002, disputing
all allegations. In the opinion of Company counsel, the claim is a nuisance
lawsuit and is confident no liability will result on its behalf. As a jester of
goodwill, the company paid the two defendants a total of $5,500 to settle this
matter.
NOTE 6 - LIQUIDATING DAMAGES
In 2005, the Company agreed to file a registration statement on form SB-2 to
register its two private placements of common stock. A provision of the
Securities Purchase Agreement for several shareholders of one private placement
was for liquidating damage of 2% per month on $360,000 to be paid to them in the
event the registration statement did not become effective as of May 17, 2005,
which it did not. Since the Company took the position that the wording for this
provision of the agreement was ambiguous, it did not record as of June 30, 2005,
the approximately $3,000 applicable to that provision at that date.
Subsequently, the Company voluntarily withdrew its registration statement on
Form SB-2.
7
As a result of settling the aforementioned threatened litigation, the Company
agreed to pay the liquidating damages in consideration of the shareholders
relinquishing their lawsuit. As of September 30, 2005 a total of $64,991 was
incurred and accrued and is outstanding as of March 31, 2006.
NOTE 7 - JOINT VENTURE AGREEMENT
On January 12, 2006, the Company entered into a Letter of Intent to form a Joint
Venture Company, ( JVC), with Nu Pow'r, LLC (Nu Pow'r) in which Armor will be
responsible for all capitalization and administrative management.
On January 17, 2006, the Company entered into a Joint Venture Agreement with Nu
Pow'r to form a JVC. The formation agreement includes commitments for
contributions from both Companies. The Company will be responsible for initial
capitalization of $250,000 and on-going responsibility for providing Operational
as well as Research and Development capital as necessary. The agreement also
provides for payments to Nu Pow'r for EPS (Electric Propulsion System)
Technologies totaling $5,000,000 paid to Nu Pow'r in cash payments and
$5,000,000 for 50% equity in the JVC.
The payment schedule for the first $250,000 to the JVC is as follows; a payment
of $50,000 payable on January 13, 2006, this payment has been made; a payment of
$50,000 upon execution of the JVC agreement; a payment of $150,000 between
January 17 and April 1, 2006 as needed for operations of the JVC. When all these
payments have been made the Company will receive a 25% equity interest in the
JVC, and receive an option to get an additional 25% equity interest for an
additional payment of $250,000. The balance of $4,750,000 ( $4,500,000,
respectively) will be paid through a percentage of 25% of gross profits from
sales.
The Company will be responsible Marketing and Sales of products for the JVC, as
well as Administrative services. The agreement also provides for profit
distributions for a specific contract identified as "BIMO". Net profit
distributions from BIMO will be split 33.33% between Nu Pow'r, Pinstripe
Financial LLC (Pinstripe), a party from whom the initial funding for the JVC
will be derived, and the Company. All other net profits and net losses will be
divided as to the equity interest owned at the time of distribution by the Joint
Venture parties.
The JVC may be cancelled at any time by the mutual consent of all Joint
Venturers.
The Joint Venture is being treated as a VIE entity (Variable Interest Entity)
since all of the financing and investment is to come from the Company which will
ultimately own a 50% interest therein. No other Venturer is financially
responsible for an equity interest or has any commitment for financing the
operations of the Joint Venture. Accoringly, the Joint Venture was consolidated
in the accompanying financial statements.
8
NOTE 8 - SUBSEQUENT EVENT
DEBT AND EQUITY FINANCING
In April 2006, the Company entered into an agreement with three private entities
which provides, among other things, that it receive bridge financing relating to
a 10.25%, secured convertible debenture totaling up to $600,000. Of that total,
$215,000 was received as of April 26, 2006. The second amount of $150,000 is to
be funded no later than five days after the Company completes a Registration
Statement (Form SB-2), and provides reasonable proof that the BIMO order has
been achieved. The third amount of $235,000, no later than five days after the
Registration Statement has been declared effective. Total fees of approximately
$68,000 are to be withheld from the total disbursements indicated; $50,000 for
the security holders and legal fees of $18,000, leaving the Company with a net
amount of $532,000.
Each holder shall also be presented with a warrant to purchase shares of the
Company's Common Stock equal in amount to the loan value received divided by the
share price of $0.12. In the first installment, the Company granted warrants to
each entity for 597,222 shares. When the second installment is received the
company will grant the warrant for the second and third installment as a
condition of that closing.
The Holders are entitled, at their option, to convert, and sell on the same day,
at any time and from time to time, until payment in full of this Debenture, all
or any part of the principal amount of the Debenture into shares (the
"Conversion Shares") of the Company's common stock, par value US$.001 per share
("Common Stock"), at the price per share (the "Conversion Price") of $0.12.
The Company shall make annual interest payments to each holder, on each
conversion date (as to the principal amount being converted) and on the maturity
date. The interest shall be calculated on a 360 day basis and will accrue daily.
The Warrants shall have "piggy-back" and demand registration rights and shall
survive for seven (7) years from the Closing Date. All of the Company's assets
will collateralize the convertible security on a first priority basis. The note
can be called should the Company become insolvent.
REGISTRATION STATEMENT
The Company has also agreed to file a Registration Statement (SB-2) for the
above Secured Convertible Debentures Shares and Warrants. The effective date of
the SB-2 is to be before 180 days from closing, and the filing date of the SB-2
shall be before 120 days after closing. If the Company does not comply with the
above deadlines Liquidating Damages will become due for failure to file the
Registration Statement timely.
9
CONVERTIBLE DEBENTURE - RELATED PARTY
During the past several years the current President of the Company, personally
or through entities he controlled, principally Pinstripe Financial LLC,
(Pinstripe) funded the major shareholder of the Company, NuAge and its
president, and its now current Joint Venture partner, Nu Pow'r, in their
respective research and development of advanced electric propulsion systems. A
major portion of this funding predates the Nova/Armor merger on April 27, 2004.
The president estimates that approximately $500,000 has been advanced to date of
which $273,557 was advanced from June 2005 through April 14, 2006. The Pinstripe
advances of $273,557 are being treated as advances to Armor, who in turn
advanced the funds to the JV on behalf of the Company. Because of the funding
provided by Pinstripe, it is to ultimately receive a convertible debenture and
warrants for the $273,557 of advances. The debenture and warrants will be
similar in description to the debenture and warrants issued to the three private
parties mentioned above.. Funding prior to June 2005 by the President had no
formal repayment agreements and is not intended to be repaid.
As of March 31, 2006, the advances by Pinstripe to Armor and the related
investment by Armor in the JV amounted to $228,557, which are classified as
research and development expense in the accompanying consolidated financial
statements.
Pinstripe entered into an agreement on April 26, 2006, to assign ratably, 40% of
its 33 1/3 % interest it received for its funding in any contracts provided to
the Joint Venture by Bimoelectric, SA de CV and its affiliates, to three parties
who entered into a securities purchase agreement with the Company on April 26,
2006, as further described above. The assignment will become effective upon
Pinstripe receiving disbursements from its net profits interest in the BIMO
contract in the Joint Venture totaling $273,557.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion contains forward-looking statements that are subject to
significant risks and uncertainties. There are several important factors that
could cause actual results to differ materially from historical results and
percentages and results anticipated by the forward-looking statements. The
Company has sought to identify the most significant risks to its business, but
cannot predict whether or to what extent any of such risks may be realized nor
can there be any assurance that the Company has identified all possible risks
that might arise. Investors should carefully consider all of such risks before
making an investment decision with respect to the Company's stock.
OVERVIEW
- ---------
The Company is considered a development stage company in the business of
developing and marketing electronic propulsion and battery power systems for
electric powered vehicles. The costs and expenses associated with the
preparation and filing of this quarterly report and other operations of the
Company have been paid for by private placement financing and loans from
shareholders and officers of the Company.
PLAN OF OPERATION
- ------------------
The Company acquired all the rights held by Nova Electric Systems Inc., (Nova)
when it entered into a stock exchange agreement whereby the Company exchanged
all the outstanding shares of Nova for Company shares.
Nova acquired rights from Nu Age Electric Inc., to certain agreements between Nu
Age and a large manufacturer of bicycles and scooters, Hero Cycles in India, for
the joint venture to manufacture and distribute many of the electric powered two
and three wheel vehicles in India and for distribution from the Hero
manufacturing facilities worldwide.
The Nova Business Plan details a number of electric powered vehicles built as
proto-type working models at the Las Vegas facility and the intent of Nova to
continue to develop a wide variety of commercial viable vehicles and products
here.
Nova will also work closely with their strategic partner, Nu Age Electric Inc.,
who has developed the agreements with Hero Cycles for manufacturing
and sales capabilities but also with other additional sales distributorships for
these electric powered products in the countries of Brazil, Mexico, Chile,
Germany, Italy, the Caribbean, Canada, the USA and other exceptional locations.
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- -----------------------------------------------
The Company has incurred operating losses since its inception related primarily
to development and general administration costs. During the three months ended
March 31, 2006, the Company posted a loss of $252,867 and the Company has
posted a cumulative loss of $606,886 since inception
The Company's main focus during the three months ended March 31, 2006 has
been continued development of the marketing rights acquired from Nova Electric
Systems Inc.
GENERAL & ADMINISTRATIVE EXPENSES
- ----------------------------------
General and administrative expenses were $24,309 during the three months ended
March 31, 2006, The Company anticipates this will increase as operations
increase.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------
Since inception, the Company has financed its operations from private financing.
The company has suffered recurring losses from operations and has a working
capital deficiency of $335,584 (current assets less current liabilities) as of
March 31, 2006.
11
FINANCING
- ----------
The Company's capital requirements have not been significant in the past but the
Company anticipates it will increase as development and product launch begins.
CASH REQUIREMENTS AND NEED FOR ADDITIONAL FUNDS
In order to develop the Company's marketing strategy and launch its product, the
Company anticipates it will require approximately $100,000 in the coming year
for general and administrative expenses as well as a minimum of $250,000 to
meets its obligations under the Joint Venture agreement, dated January 17, 2006,
with Nu Pow'r, to earn a 25% interest in the Joint Venture Company (JVC). Beyond
that the Company may earn an additional 25% interest in the JVC upon the payment
of an additional $250,000. However only the initial $250,000 must be paid in
installments by April 1, 2006, the next $250,000 can be paid at any time during
the term of the agreement. The $100,000 for general and administrative expenses
could be provided through additional financing by way of private placements such
as the Company has done in the past. The $250,000 for the JVC will be financed
in cooperation with Pinstripe Financial LLC, which has made a commitment, and
has been rewarded with a percentage of the profits on a certain sales contract
referenced in Joint Venture agreement. The Company is confident that it will
successfully raise the total $250,000 cash payments required under the JV
agreement in cooperation with Pinstripe.
ITEM 3. CONTROLS AND PROCEDURES
The registrant's Principal executive officers and principal financial officer,
based on their evaluation of the registrant's disclosure controls and procedures
(as defined in Rules 13a-14 (c) of the Securities Exchange Act of 1934) as of
December 31, 2005 have concluded that the registrants' disclosure controls and
procedures are adequate and effective to ensure that material information
relating to the registrants and their consolidated subsidiaries is recorded,
processed, summarized and reported within the time periods specified by the
SEC's rules and forms, particularly during the period in which this quarterly
report has been prepared.
The registrants' principal executive officers and principal financial officer
have concluded that there were no significant changes in the registrants'
internal controls or in other factors that could significantly affect these
controls subsequent to December 31, 2005 the date of their most recent
evaluation of such controls, and that there was no significant deficiencies or
material weaknesses in the registrant's internal controls.
12
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 2005 the Company received two letters from two law firms representing
two of the shareholders who purchased common stock in a private placement in
March 2005. The shareholders had threatened litigation concerning unpaid
liquidating damagesalong with related legal fees and costs. The shareholders
have since decided not to pursue litigation.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Between February 8 and April 18, 2005, in private placement transactions under
Regulation D and Regulations S of the SECURITIES ACT, 1933, the Company sold
5,200,000 shares of Common Stock and 5,460,000 common share purchase warrants to
the Selling Security Holders. The warrants have an exercise price of $0.15 and
an expiry date of February 22, 2012. These shares and the shares that will be
issued when and if thee warrants are exercised, are the shares that are being
registered in this prospectus.
Granite Financial Inc. ("Granite") is a broker-dealer who received 260,000 of
the warrants with an exercise price of $0.15 and an expiry date of February 22,
2012 as compensation for acting as a placement agent in the private placement
transactions. Other than the warrants issued to Granite, no brokerage or
finder's fees or commissions were paid by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the private placement transactions.
Gross proceeds to the Company from the private placement transaction was
$520,000. Approximate expenses relating to the transactions are estimated at
$101,662. Therefore, net proceeds are estimated at $418,338. These proceeds will
be used for paying off the amount due under an Acquisition Agreement with Nova
Electric, Inc. and to pay operating expenses.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On January 30, 2006, the Company entered into a Joint Venture Agreement (JV),
effective January 17. 2006, with NU POW'R LLC to provide the technology for
production of electronic propulsion systems. Pursuant to the JV the Company will
provide the capitalization and administration and NU POW'R will be responsible
for the technology, engineering and management of operations. The Company will
issue a convertible note to a private company to receive the first required
capital of $150,000 for this project.
On January 31, 2006, the Company announced the transfer of a contract to the JV
with NU POW'R. The contract is for the production of 42,000 units to supply
electric power propulsion to three wheel taxi cab vehicles for a taxi cab
company in Mexico City.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1.1(1) Articles of Incorporation dated June 5, 1998
3.1.2(1) Articles of Amendment dated August 31, 1999
3.1.3(2) Articles of Amendment dated June 4, 2004
3.2(1) Bylaws
10.1 Joint Venture Agreement between Armor Enterprises, Inc. and
NU POW'R LLC dated effective January 17, 2006.
10.2 Agreement between Nova Electric Systems and Nu Age Electric
Systems dated effective April 19, 2004
31.1 Section 302 Certification
32.1 Section 906 Certification of CEO
32.2 Section 906 Certification of CFO
- ------------------------------------
(1) Previously filed as an exhibit to the Company's Form 10-SB as filed on
January 6, 2003
(2) Previously filed as an exhibit to the Company's Form 10-KSB as filed on
October 15, 2004
(b) Reports on Form 8-K filed during the three months ended March 31,
2006.
No Current Reports on Form 8-K were filed during the three months ended
March 31, 2006
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 22, 2006 ARMOR ELECTRIC INC.
/S/ Merrill Moses
------------------------------------
Merrill Moses
President
14