NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
SavWatt USA, Inc. (“SavWatt”) formerly known as Ludvik Capital, Inc. (“Ludvik Capital”) (hereinafter "the Company") was incorporated on October 20, 2006 under the laws of the State of Delaware for the purpose of becoming a successor corporation by way of merger with Patriot Advisors, Inc. (“Patriot”) and Templar Corporation (“Templar”), pursuant to a plan of reorganization and merger approved by the United States Bankruptcy Court, District of Maine in Case No. 04-20328 whereby Ludvik Capital is the continuing entity. Hereinafter, SavWatt, Ludvik Capital, Patriot and Templar are referred to as the “Company” unless specific reference is made to one of these entities.
The Company's business plan consisted of investing in public and private companies, providing long term equity and debt investment capital to fund growth and acquisitions and recapitalizations of small and middle market companies in a variety of industries primarily located in the United States.
Since inception, the Company has had minimal operations and no revenues earned. On April 5, 2010, the Company amended its articles of incorporation and changed its name to SavWatt USA, Inc.
The Company plans to capitalize on the largely unaddressed commercial and consumer market for energy-efficient LED lighting by investing in product and corporate marketing. With public relations and advertising throughout the media, a recognized, popular consumer LED brand will be cultivated, spearheading and establishing a leading market share in the growing energy-efficient bulb sector during the next three to five years. SavWatt has the exclusive marketing rights in the United States to sell LED street lighting for a number of Asian companies.
The Company is a development stage enterprise.
The Company's year end is December 31st
.
The Company's corporate headquarters were originally located in Virginia but are currently located in Baltimore MD.
GOING CONCERN AND BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company incurred net losses of $5,545,349 for the nine months ended September 30, 2011. In addition, the Company has incurred a net loss from inception (October 20, 2006) through September 30, 2011 and accumulated deficit amounting to $44,765,558 its inception, the Company has generated minimal revenues and has minimal cash resources.
These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's efforts have been directed towards the development and implementation of a plan to generate sufficient revenues to cover all of its present and future costs and expenses.
Management is taking steps to address this situation. The Company has determined that it cannot continue with its business operations as outlined in its original business plan because of a lack of financial resources; therefore, management has redirected their focus towards identifying and pursuing options regarding the development of a new business plan and direction. The Company intends to explore various business opportunities that have the potential to generate positive revenue, profits and cash flow in order to financially accommodate the costs of
being a publicly held company. The Company is in the process of raising capital by implementing its business plan in LED lighting and expects to generate sufficient revenue by the 1st quarter of 2012 with a positive cash flow. Until then, the Company the Company will not have the required capital resources or credit lines available that are sufficient to fund operations.
The Company has minimal operating costs and expenses at the present time due to its limited business activities. The Company, however, will be required to raise additional capital over the next twelve months to meet its current administrative expenses, and it may do so in connection with or in anticipation of possible acquisition transactions. This financing may take the form of additional sales of its equity securities and/or loans from its directors. There is no assurance that additional financing will be available, if required, or on terms favorable to the Company.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
The foregoing unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2010. In the opinion of management, the unaudited interim financial statements furnished herein include adjustments, all of which are of a normal recuing nature, necessary for a fair statement of the results for all the interim periods presented. Operating results for the three and nine month periods ending September 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the accompanying financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of SavWatt USA, Inc., as well as Pro Eco Solutions, LLC for the period from November 1, 2010 through March 31, 2011 and are prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). All significant intercompany accounts and transactions between the Company and its subsidiary have been eliminated upon consolidation.
NONCONTROLLING INTERESTS
Noncontrolling interests in our subsidiary are recorded in accordance with the provisions of ASC 810, "Consolidation" and are reported as a component of equity. In November 2010 the Company formed a joint venture in the form of a limited liability company Pro Eco Solutions LLC ("LLC"), whose purpose is specializing in comprehensive support services for all energy services companies and performance contractors. The Company was a 50.1% member/owner and the Company's President, was also the chief executive officer of the LLC. During the quarter ended September 30, 2011 the LLC members decided to dissolve the LLC. Previously reflected losses attributable the non-controlling member have been assumed by the Company and are reflected as such for all periods presented in the accompanying financial statements.
DEVELOPMENT STAGE ACTIVITIES
The Company has been in the development stage since its formation.
From the Company's inception through March 2010, the Company was engaged in the business of providing long-term equity and debt investment capital to fund growth, acquisitions and recapitalizations of small and middle market companies in a variety of industries, primarily located in the United States. The Company during this time frame had been very active and had conducted substantial operations, as discussed in our numerous reports with the SEC during 2007 through the present.
In 2010, the Company changed its name to SavWatt USA, Inc. to reflect our new primary business of producing, marketing and selling Light Emitting Diode ("LED") lighting. In furtherance of our new business, the Company has developed numerous relationships with both Chinese and Korean.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all short-term debt with original maturities of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments may include cash, accounts receivable, inventory, other assets, loans payable and related accrued interest, and accounts payable. All such instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at September 30, 2011 and December 31, 2010.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at the amount the Company expects to collect. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company's estimate of the allowance for doubtful accounts will change.
Accounts receivable are presented net of an allowance for doubtful accounts of $0.
As of December 31, 2010 the Company wrote off a related party receivable amounting to $218,636 and recorded a bad debt expense, based on management's Company's evaluation of the balance and certainty that the balance would not be collectible in the future.
PROPERTY AND EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
Depreciation is provided for over the estimated useful lives of the related asset using the straight-line method. As of September 30, 2011 property and equipment consists of primarily computer equipment.
Included in leasehold improvements are costs related to the construction of the manufacturing facility in Baltimore Maryland. As we have not fully commenced operations in this facility as of September 30, 2011, the leasehold improvements have not been amortized
The estimated useful lives for significant equipment categories are from 3 to 5 years.
INVENTORY
The Company's inventory consists of entirely of finished goods, and is valued at lower of cost or market price. Cost is determined on a first-in, first-out ("FIFO") basis. To ensure inventory is carried at the lower of cost or market, the Company periodically evaluates the carrying value and also periodically performs an evaluation of inventory for excess and obsolete items. Such evaluations are based on management's judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.
REVENUE RECOGNITION
Revenue is recognized when all of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller's price to the buyer is fixed and determinable; and, (4) collectability is reasonably assured. The Company has earned minimal revenue since inception.
USE OF ESTIMATES
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
PROVISION FOR TAXES
Income taxes are provided based upon the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the "more likely than not" standard to allow recognition of such an asset.
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive.
The average number of common shares outstanding for the period from Inception ( October 20, 2006) through September 30, 2011 has been retroactively adjusted for the 2:1 forward stock split effective August 17, 2007.
STOCK BASED COMPENSATION
The Company accounts for stock based compensation transactions with employees under the provisions of ASC Topic No. 718, "Compensation, Stock Compensation" ("Topic No. 718"). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of the Company's equity instruments are estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of Topic No. 718.
The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, "Equity-Based Payments to Non-Employees" ("Topic No. 505-50"). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, which ever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of the equity instrument is estimated using the Black- Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to receive cash for the goods or services instead of paying with or using the equity instrument.
FORWARD STOCK SPLIT
All references to the Company's outstanding shares, and options, have been adjusted to give effect to the 2 for 1 forward stock split effective August 17, 2007.
FAIR VALUE MEASUREMENTS
The Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company's financial position or operating results, but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
These inputs are prioritized below:
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. The Company did not have any Level 1, Level 2 or Level 3 assets or liabilities as of September 30, 2011 and December 31, 2010.
The Company discloses the estimated fair values for all financial instruments for which it is practicable to estimate fair value. As of December 31, 2010 and September 30, 2011, the fair value short-term financial instruments including subscriptions receivable, loans payable, accounts payable and accrued expenses, approximates book value due to their short-term duration.
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.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior periods’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or the sum of stockholders’ deficit.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” which is not expected to have a material impact on the consolidated financial statements upon adoption.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” Under the amendments in this ASU, an entity has two options for presenting its total comprehensive income: to present total comprehensive income and its components along with the components of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The adoption of ASU No. 2011-05 will not have any material impact on the Company’s consolidated financial position and results of operations.
In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08, Intangibles — Goodwill and Other (Topic 350). This Accounting Standards Update amends FASB ASC Topic 350. This amendment specifies the change in method for determining the potential impairment of goodwill. It includes examples of circumstances and events that the entity should consider in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption does not have any material impact on the Company’s consolidated financial position and results of operations.
Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
NOTE 3 -STOCKHOLDER LOANS
|
|
On December 14th 2006, the Company entered into an Advisory Agreement (“Advisory Agreement”) with Ludvik Nominees Pty Ltd (“Ludvik Nominees”) (a Company 100% owned by Frank Kristan) for services to be rendered which were payable based on 3% assets under management and 20% of net profits of Ludvik Capital. The term of the agreement was for approximately 11 years, concluding on December 31, 2017.
|
|
|
Frank Kristan served as President and Chief Executive Officer of the Company from inception, October 20, 2006 through March 31, 2010 and is also the President of Ludvik Nominees. On March 31, 2010, Frank Kristan resigned as President and Director of the Company.
|
|
|
On March 31, 2010 the original 2006 agreement was terminated and a settlement agreement was created to resolve any outstanding obligations with respect to the 2006 agreement. In accordance with the settlement agreement both parties agreed that since advisory fees under the December 14th 2006 Agreement were based on assets under management that had no value, the Advisor had the option to get paid a fee of $30,000 per month starting October 2006 including interest. Furthermore, the remaining principal balance plus accrued interest as of September 30, 2010 was rolled over into a Secured Convertible Note amounting to $1,503,167.
|
|
|
From the period from the Company’s inception, October 20, 2006 through the termination of the Advisory Agreement on September 30, 2010, the Company issued its advisors 32,394,269 shares of common stock as payment for services amounting to $484,250.
|
|
|
This note was payable on September 30, 2010 and bears an interest rate of 12% per annum payable at the end of the term. Upon default, the unpaid principal balance of this note and any accrued and unpaid interest bear interest at the rate of 18%. The outstanding balance and accrued interest, all or in part, is convertible at the option of the holder into the Company's common stock at a conversion price of 50% of the stock price, with a minimum of $.01 per share. As of December 31, 2010 this note was in default. In April 2011, the Company received a waiver of the default and extended the due date of the note to December 31, 2011, at an interest rate of 18%. The note, plus accrued interest, was assignable
|
|
|
In the 3rd and 4th quarter of 2010 this stockholder assigned $373,469 of the convertible loan payable to investors (as discussed in Note 5)
|
|
|
In the 1
st
quarter of 2011, the stockholder assigned $580,000 of the convertible loan payable to investors and converted $46,927 into 4,692,700 shares of common stock.
|
|
|
In the 2
nd
quarter of 2011, the stockholder assigned $554,893 of the convertible loan payable to investors and converted $10,000 into 5,000,000 shares of common stock.
|
|
|
In the 3
rd
quarter of 2011, the stockholder assigned $300,000 of the convertible loan payable to investors, primarily consisting of previously accrued interest from the original September 30, 2010 convertible note which was assigned to investors in the above noted assignments. Subsequent to this assignment the Company has no further note payable obligation to this stockholder as of September 30, 2011.
|
|
|
In the 2
nd
quarter of 2011, entities related to the Company’s current President and sole director assigned $300,000 in payables to the stockholder, who in turn assigned this $300,000 of loan payable to investors.
|
NOTE 4 - RELATED PARTY TRANSACTIONS
On September 30, 2010, Isaac H. Sutton was elected to the Board of Directors and currently serves as the Company's new President and sole director.
As of December 31, 2010, the Company recorded $30,000 expense related to consulting fees earned by the Company's President for 6 months.
During the Period of April 1, 2010 - December 31, 2010, the Company received short term funding from Sutton Global Associates, Inc., which is a related party since this company is controlled by Isaac H. Sutton the Company's President and Sole Director. As of December 31, 2010, the Company owes $479,600 to Sutton Global Associates, Inc.
During 2010, the Company advanced certain monies to GoIP Global, a related party controlled by Isaac H. Sutton the Company's President and Sole Director, to fund its operations. In addition, the Company entered into a one year agreement with GoIP where as GoIP provided messaging services to the Company. As of December 31, 2010, the Company's payable related to these services amounted to $25,000.
In December 2010, the Company wrote off $218,636 due from another affiliated company SavWatt Industries, LLC, a company later controlled by Isaac H. Sutton. The original owners are now employees of the Company. The Company determined that this amount would not be collectible and therefore recorded this amount as bad debt expense.
During the nine months ending September 30, 2011, the Company received approximately $1,037,000 in short term funding from Sutton Global Associates, Inc.
In April and June 2011, Sutton Global Associates converted $600,000 of its short term funding in to into two Notes. The Notes bear interest at a rate of 6 % per annum and are convertible into common stock of the Company at the discretion of the holder. The notes are due in April and June of 2012. The Company recorded a $257,142 discount on these convertible notes, related to their beneficial conversion features, and amortized $105,745 and $168,866 of this discount recorded as interest expense during the three and nine months ended September 30, 2011, respectively. The net note payable, inclusive of unamortized discount was $511,724 as of September 30, 2011. The note has accrued interest of $15,150 included in accrued expenses, at September 30, 2011.
In April 2011, Sutton Global Associates assigned $300,000 of amounts owed to them to stockholders associated with Ludvik Nominees a stockholder of the Company.
In January 2011 Sutton Global Associates converted $250,000 of amounts owed to them into 5,000,000 shares of Preferred A shares.
In July 2011, Sutton Global Associates converted $250,000 of amounts owed to them into 5,000,000 shares of Preferred A shares.
As of September 30, 2011, the Company owes to Sutton Global Associates a total of $141,591 in unsecured advances included in due to related party, which was has not been converted into a convertible note, assigned to stockholders, or have not been converted into equity
NOTE 5 – DEBT
Short term Convertible Debt
In August 2010 through December 2010 a stockholder assigned $373,469 of his loan payable to investors transferring all the rights and interests of the original note (as disclosed in Note 3). As of December 31, 2010 the assignee debt holders have converted $173,469 of their outstanding debt into 18,374,278 shares of the Company's common stock resulting in the loan payable balance of $200,000.
In the 1
st
quarter of 2011, a stockholder assigned $580,000 of the convertible loan payable to investors. In the 2
nd
quarter of 2011, the stockholder assigned $554,893 of the convertible loan payable to investors. In the 3
rd
quarter of 2011, the stockholder assigned $300,000 of the convertible loan payable to investors, primarily consisting of previously accrued interest.
In the 2
nd
quarter of 2011, entities related to the Company’s current President and sole director assigned $300,000 in payables to the stockholder, who in turn assigned this $300,000 of loan payable to investors.
During the nine months ended September 30, 2011 the Company converted $59,673 in accrued expenses and accounts payable into debt. During this period this debt was assigned to other debt holders
With respect to some of these assigned convertible notes, some of the terms conversion were modified thereby resulting in the Company recording a beneficial conversion with respect to the modifications.
During the nine months ended September 30, 2011, the Company entered into several short-term convertible notes with a total face amount of $1,660,500. Of this amount the Company has received $1,216,000. Upon receipt of the remaining $444,500 due under these notes the Company will record the respective liability of these notes. These notes bear interest rates ranging from 5% to 18% payable in full in twelve months or less and which were convertible into shares of Company's common stock at discounts to market on their dates of conversion ranging from 30% to 50% from the market price. These notes have a minimum conversion floors ranging from $0.01 to $0.0001 per share.
With respect to the convertibility feature of the assigned convertible notes and the convertible notes entered into during the nine months ended September 30, 2011 the Company recorded a total beneficial conversion of $2,338,452 and
amortized $2,013,818 of this discount, recorded as interest expense during the nine months ended September 30, 2011.
At various times during the nine months ended September 30, 2011 the Company has converted $2,033,315 of debt and $31,725 in accrued interest into 1,681,188,693 shares of common stock. In addition to debt the Company has recorded $1,154,090 of modification expense with respect to the conversion.
As of September 30, 2011 the balance of the Company’s short term convertible notes amounted to $852,617. The interest on these debentures is accrued and due at the end of the notes term. As of September 30, 2011 the accrued interest amounted to approximately $85,000 and is included in accounts payable and accrued expenses.
Other Debt
In October 2010, the Company entered into a secured promissory note for $50,000. The note was payable within 90 days and bears an interest rate of 5%. In connection with this note the Company issued 500,000 shares of its common stock as additional consideration valued at $21,249, and accounted for as interest expense during the year ended December 31, 2010. This note is outstanding as of December 31, 2010 and September 2011.
NOTE 6 - EQUITY TRANSACTIONS FROM INCEPTION
On October 20, 2006, Ludvik Capital, Inc. was formed to be the successor corporation by merger of Patriot and Templar.
Pursuant to a court order in the US bankruptcy court and a December 12th Stock Purchase Agreement between the Company and Ludvik Nominees, Patriot and Templar whereby Patriot and Templar merged with the Ludvik Capital, whereby the surviving corporation became the registrant, Ludvik Capital, or the Company.
Ludvik Nominees was issued 40,000,000 shares (post forward stock split), of which approximately 18 million shares of Ludvik common stock were issued to old creditors of Patriot and Templar as payment for past outstanding services and approximately 22 million shares of Ludvik Capital, or the Company’s, common stock were held by Ludvik Nominees for the initial capital of $20,000.
On February 7, 2007 the United States Bankruptcy Court for the District of Maine entered an order confirming the December 12, 2006 agreement with the Debtor whereby, there were 40,000,000 (post forward stock split) unrestricted shares of the Company's Common Stock issued to creditors and plan participants .
In Apri12010, the Company amended its Articles of Incorporation changing the name of the Company to SavWatt USA, Inc. and increasing their authorized capital shares from 100,000,000 shares to 2,200,000,000 shares designating 2,000,000,000 as common stock and 200,000,000 shares as preferred stock. In September 2011 the Company increased the total capital to 5,000,000,000 shares authorized designating 4,800,000,000 as common stock and 200,000,000 shares as preferred stock. In 2011 the Company designated 25,000,000 shares of the preferred shares to be Series A Cumulative Preferred Stock ("Preferred Series A"). The Preferred Series A is convertible a one share of preferred into ten shares of common stock. The Preferred Series A shares are entitled to two hundred votes for each share of Preferred Series A.
shares as preferred stock. In 2011 the Company designated 25,000,000 shares of the preferred shares to be Series A Cumulative Preferred Stock ("Preferred Series A"). The Preferred Series A is convertible a one share of preferred into ten shares of common stock. The Preferred Series A shares are entitled to two hundred votes for each share of Preferred Series A.
In 2011 the Company designated 25,000,000 shares of the preferred shares to be Series A Cumulative Preferred Stock (“Preferred Series A”). The Preferred Series A is convertible a one share of preferred into ten shares of common stock. The Preferred Series A shares are entitled to two hundred votes for each share of Preferred Series A.
In January 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.
In July 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.
During the nine months ended September 30,2011 the company issued 44,238,683 common shares for services valued at $147,292.
The issuance of common stock from inception, October 20, 2006 through the year ended December 31, 2010 is summarized in the table below:
|
|
|
Number of shares of common stock
|
|
|
Fair Value at Issuance
|
|
|
Per Share Value at Issuance
|
|
|
Stock issued upon merger in accordance with Court Order
|
|
|
40,000,000
|
|
|
$
|
20,000
|
|
|
$
|
0.0005
|
|
|
Stock issued in connection with acquisition
|
|
|
24,196
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock issued for services
|
|
|
38,905,710
|
|
|
|
13,061,326
|
|
|
|
.0395 - 5.52
|
|
|
Stock issued to retire debt - Shareholder loans
|
|
|
32,394,269
|
|
|
|
23,494,294
|
|
|
|
.040 - 1.01
|
|
|
Common stock issued for cash
|
|
|
37,333,333
|
|
|
|
315,000
|
|
|
|
.003 - .01
|
|
|
Fair value of common stock issued for interest
|
|
|
500,000
|
|
|
|
21,249
|
|
|
|
0.0425
|
|
|
Common stock issued pursuant to note holder debt conversion
|
|
|
18,374,278
|
|
|
|
173,469
|
|
|
|
.009 - .01
|
|
|
|
|
|
167,531,786
|
|
|
|
37,085,338
|
|
|
|
|
|
The issuance of common stock from January 1, 2011 through September 30, 2011 is summarized in the table below:
|
|
|
Number of shares of common stock
|
|
|
Fair Value at Issuance
|
|
|
Per Share Value at Issuance
|
|
|
Common Stock cancelled
|
|
|
(5,000,000
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Stock issued for related party debt settlement
|
|
|
2,500,000
|
|
|
|
35,000
|
|
|
|
0.014
|
|
|
Stock issued for services
|
|
|
44,238,683
|
|
|
|
147,292
|
|
|
|
0.014
|
|
|
Stock issued to retire debt - Shareholder loans
|
|
|
9,692,700
|
|
|
|
56,927
|
|
|
|
0.002-0.01
|
|
|
Fair value of common stock issued for interest
|
|
|
1,000,000
|
|
|
|
14,000
|
|
|
|
.014
|
|
|
Common stock issued pursuant to note holder debt conversion
|
|
|
1,680,188,693
|
|
|
|
3,205,130
|
|
|
|
.00050-.01
|
|
|
|
|
|
1,732,620,076
|
|
|
|
3,458,349
|
|
|
|
|
|
NOTE 7 - COMMITMENTS AND CONTINGENCIES
On July 1, 2010, the Company entered into an employment agreement with Michael Haug, as the Company's CEO, which responsibilities include running the daily operations of SavWatt USA, Inc. The term of the agreement is for one year at a salary of $84,000, and may be renewed upon mutual agreement by the Company and the employee.
The employment agreement with Michael Haug was not renewed and in October 2011, Mr. Haug was appointed Executive Vice President of Sale.
On February 11, 2011, the Company entered into a lease for approximately 24,561 square feet at 1100 Wicomico Street, Suite 700, Baltimore, Maryland, under a written lease for a term of ten years. This new facility will be the Company's new principal executive offices, as well as a manufacturing and assembly facility. We will not have to pay rent on this facility until February 1, 2012. In accordance with ASC 840 Leases, the Company has recorded a $74,280 liability in recognition of this rent holiday as of September 30, 2011. Thereafter, the Company will pay rent as follows
:
|
February 1, 2012 - January 31, 2013 $ 9,926.74 per month
February 1, 2013 - January 31, 2016 $11,564.14 per month
February 1, 2016 - January 31, 2019 $12,526.11 per month
February 1, 2019 - January 31, 2021 $13,549.49 per month
|
The Company has entered into an exclusive worldwide license for LED lights with P2i Limited (“P2i”), a company incorporated in England, utilizing P2i's liquid repellent nano-coating technology.
Under the terms of The Technology Exclusivity Agreement (“P2i Agreement”) with P2i, the Company is granted an exclusive worldwide license to P2i patents for liquid repellent nano-coating technology (“repellent technology”) with respect to its application for LED lighting. The term of the P2i Agreement is for five years commencing July 14, 2011. The payment due under the agreement is $1,100,00, within an initial payment and additional payments on each of the four subsequent anniversary dates of the agreement. The P2i Agreement will be amortized over the life of the agreement.
In addition to the P2i Agreement, the Company also entered into an Equipment Purchase and Technology License Agreement (“P2i Equipment Agreement”) with P2i. This agreement runs a concurrent term with that of the p2i Agreement. Under the P2i Equipment Agreement, the Company is obligated to purchase an initial machine, during the first year, from P2i, that applies their repellent technology. The Company is also required to pay P2i a royalty for product made using their technology under the P2i Equipment Agreement.
The Company plans to initially perform this process in its Baltimore facility with future facilities to be established worldwide. In addition, the Company has the right to sub-license this technology to its worldwide partners.
NOTE 8 – SUBSEQUENT EVENTS
During October and November 2011, the Company recorded the following transactions:
|
·
|
Issued 506,961,203 shares of Common Stock pursuant to the conversion of $259,250 of debt
|
|
·
|
Issued 9,000,000 shares of Common Stock related to services
|
|
·
|
Received proceeds amounting to $125,000 related to the issuance of convertible notes
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY FORWARD - LOOKING STATEMENT
This Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the statements contained in this Form 10-Q for SavWatt USA, Inc., formerly known as Ludvik Capital, Inc. ("Company"), discuss future expectations, contain projections of results of operation or financial condition or state other "forward-looking" information. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions.
Management expresses its expectations, beliefs and projections in good faith and believes the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, Management cannot assure current stockholders or prospective stockholders that these expectations, beliefs and projections will prove to be correct. Such forward-looking statements reflect the current views of Management with respect to the Company and anticipated future events.
Management cautions current stockholders and prospective stockholders that such forward-looking statements, including, without limitation, those relating to the Company's future business prospects, demand for its products, revenues, capital needs, expenses, development and operation costs, wherever they occur in this Form 10-Q, as well as in the documents incorporated by reference herein, are not guarantees of future performance or results, but are simply estimates reflecting the best judgment of Management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by such forward-looking statements.
Important factors that may cause actual results to differ from projections include, for example:
* the success or failure of management's efforts to implement their business strategy;
* the ability of the Company to raise sufficient capital to meet operating requirements;
* the uncertainty of consumer demand for our products, services and technologies;
* the ability of the Company to protect its intellectual property rights;
* the ability of the Company to compete with major established companies;
* the effect of changing economic conditions;
* the ability of the Company to attract and retain quality employees;
* the current global recession and financial uncertainty; and
* other risks which may be described in future filings with the SEC.
Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such
14forward-looking statements. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
GENERAL
The Company was incorporated on October 20, 2006, under the name of Ludvik Capital, Inc. We changed our name to SavWatt USA, Inc. on April 5, 2010. On January 12, 2007, we filed a Form 10 registration statement under section 12(g) of the Securities Exchange Act of 1934, as amended ("Exchange Act"). As a consequence of filing our Form 10, we became subject to the periodic reporting requirements of the Exchange Act and were required to file Annual Reports of Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements pursuant to Regulation 14A and Schedule 14C Information Statements pursuant to the Exchange Act.
The financial statements included in this Form 10-Q have been prepared in accordance with generally accepted accounting principles for financial information and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for smaller reporting companies. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the period from October 20, 2006 (Inception) to September 30, 2011 have been reflected herein.
The results of operations for the period from October 20, 2006 (Inception) to September 30, 2011 are not necessarily indicative of the results to be expected in the future. These statements should be read in conjunction with the audited financial statements for the year ended December 31, 2010 included in our previously filed Form 10-K.
RESULTS OF OPERATIONS
The Company has generated minimal revenues since its inception on October 20,2006.
FOR THE NINE MONTHS ENDED September 30, 2011 and 2010
The Company's operations for the nine months ended September 30, 2011 and 2010 consist of General and administrative expenses incurred in the amount of $1,528.334 and $105,819 respectively and professional fees amounting to $429,257 and $255,776, respectively.
FOR THE PERIOD FROM OCTOBER 20, 2006 (INCEPTION) TO September 30, 2011.
Expenses from inception consist of professional fees of $2,146,464 and general and administrative expenses consisting of organization and related expenses of $1,615,128 and $36,218,662 related to stock based compensation.
LIQUIDITY AND CAPITAL RESOURCES
We had minimal cash on hand as of September 30, 2011 and a working capital deficiency of $1,535,013. We will continue to need additional cash during the following twelve months and these needs will coincide with the cash demands resulting from implementing our business plan and remaining current with our Securities and Exchange Commission filings. There is no assurance that we will be able to obtain additional capital as required, or obtain the capital on acceptable terms and conditions.
GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has not begun generating significant revenues, and is still considered a development stage company, has experienced recurring net operating losses from operations and had a net loss from operations of $5,545,349 for the nine months ended September 30, 2011. These factors raise substantial doubt about the Company's ability to continue as a going concern.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. We will need to raise funds or implement our business plan to continue operations.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2010, that our disclosure controls and procedures were effective as of December 31, 2010.
(b) Changes in Internal Control over Financial Reporting During the quarter ended September 30, 2011, we did not make any changes in our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures provide our principal executive officer and principal financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any threatened or pending litigation against the Company.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. (REMOVED AND RESERVED)
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index below for exhibits required by Item 601 of regulation S-K.
EXHIBIT INDEX