EXPLANATORY NOTE
The Company is filing this Annual Report late due to delays in the audit of its financial statements as of and for the year ended July 31, 2012 by the Company’s independent registered public accounting firm, Madsen & Associates, CPA (“Madsen”). The offices of the Madsen auditors for the Company are located in New Jersey and, as a result of the devastation from Hurricane Sandy, power was not restored to their offices until November 15, 2012, which then permitted the auditors to commence completion of the audit of the annual financial statements of the Company for its fiscal year ended July 31, 2012. There were in addition delays in the Company’s auditors’ receipt of the financial information, as well as data loss in financial information sent to the auditors by the Company, which necessitated recreating work papers and draft financial statements. In summary, approximately ten days were lost in the audit of the Company’s annual financial statements. In conformity with and reliance upon the Order (the “Order”) under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specific Provisions of the Exchange Act and Certain Rules Thereunder (Securities Exchange Act of 1934 Release No. 68224, November 14, 2012), the Company is filing its 2012 Annual Report on or before November 21, 2012 in reliance on and as permitted by the Order since the Company was not able to meet the November 13, 2012 Form 12b-25 extended filing deadline applicable to its Annual Report on Form 10-K for the above stated reasons.
PART I
NOTE REGARDING FORWARD LOOKING STATEMENTS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report contains historical information as well as forward-looking statements. Statements looking forward in time are included in this Annual Report pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to be materially different from any future performance suggested herein. We wish to caution readers that in addition to the important factors described elsewhere in this Form 10-K, the following forward looking statements, among others, sometimes have affected, and in the future could affect, our actual results and could cause our actual results during 2012 and beyond, to differ materially from those expressed in any forward-looking statements made by or on our behalf.
1. Business.
Background
We were incorporated on July 15, 2002 under the laws of the State of Nevada. We changed our business in 2008, entering into a license agreement with Li-ion Motors on April 15, 2008, for the license of the development of their lithium battery technology. We sold our Zingo Telecom, Inc. and M/S Zingo BPO Services Pvt. Ltd. subsidiaries that offered telecommunications services to business and residential customers utilizing VoIP technology on May 15, 2008. To reflect our new business, we changed our name from Zingo, Inc. to Superlattice Power, Inc. on April 25, 2008 and on April 2, 2011, we merged with our wholly-owned subsidiary, Sky Power Solutions Corp., and in the merger the name of the Company was changed to Sky Power Solutions Corp.
On August 17, 2007, our Board of Directors approved the change in our fiscal year from the calendar year to a fiscal year ending on July 31.
We sold our Zingo Telecom, Inc. and M/S Zingo BPO Services Pvt. Ltd. subsidiaries that offered telecommunications services to business and residential customers utilizing VoIP technology on May 15, 2008. To reflect our planned new business under a license agreement with Li-ion, we changed our name from Zingo, Inc. to Superlattice Power, Inc. on April 25, 2008. We entered into a license agreement with Li-ion Motors on April 15, 2008, for the license of the technology related to the development of their lithium battery technology. The agreement was modified on May 25, 2010 to clarify that Li-ion was entitled to sell or grant other licenses and the Company had an exclusive license for the United States of America.
We also leased space within Li-ion’s plant and created a chemical lab and manufacturing facility to begin work on the lithium battery technology we had licensed. Effective May 31, 2012, our lease was terminated with Li-ion Motors due to the closure of their facility. Sky Power is currently searching for a new facility to continue working on our residential Solar Concentrating, Electric Power Generation Systems and the lithium battery development.
3
On April 2, 2011, the Company’s Board of Directors (the “Board”) approved of the filing with the Secretary of State of Nevada (“SOSN”) a Certificate of Change that affected a 1:300 reverse split in our outstanding common stock and a reduction of our authorized common stock in the same 1:300 ratio, from 750,000,000 shares to 2,500,000 shares was completed. The increase became effective on April 26, 2011.
On April 26, 2011, the Board approved the conversion of the Company’s debt with Blue Diamond and its assignees in the amount of $4,321,358 to be converted into 20,007,309 shares of the Company’s common stock. The conversion became effective on May 4, 2011.
On June 6, 2011, the Board approved the filing of a Certificate of Change with the Nevada Secretary of State which gave the Company the authority to issue 100 million shares of common stock and 10 million of preferred stock.
On April 26, 2012, debt to Li-ion Motors was assigned to Frontline Asset Management (“Frontline”) and Winsor Capital (“Winsor”) in the amount of $112,500 which was converted into 3,750,000 shares of the Company’s common stock.
On June 11, 2012, the Board approved the conversion of the Company’s debt to the assignees of Blue Diamond in the amount of $1,360,341 to be converted into 75,000,000 shares of the Company’s common stock. The conversion became effective on June 11, 2012.
On June 15, 2012, Mehboob Charania resigned as Secretary and Treasurer; and Liudmila Voinarovska was appointed as Secretary and Treasurer and added as a member of the Board of Directors.
On July 27, 2012, Mehboob Charania resigned as President and as a member of the board of directors; and Liudmila Voinarovska was appointed as President and became the CEO and sole director.
The mailing address for our executive office is 420 North Nellis Blvd., Suite A3-146 Las Vegas, Nevada 89110. The telephone number of our principal executive office is (702) 940-9940.
Liquidity and Capital Resources
As of July 31, 2012, we had cash on hand of $0. During the year ended July 31, 2012, we incurred a net loss of $137,432. On July 31, 2012, we had a working capital deficiency of $1,007,986 and a stockholders' deficit of $984,022.
We had 491,907,316 shares of common stock issued and outstanding as of November 2, 2012. Our common stock is quoted on the OTC Bulletin Board and the OTCQB of the Pink OTC Markets.
General
Currently we have in development a Stand Alone Residential Solar Concentrating Electric Power Generation System. Our system has proprietary elements that make it unique, with better functionality than other systems. We designed and developed this system as we anticipate that the North American Power Grid will not be able to support the recharging of anticipated sales of totally electric vehicles and other electric needs in the coming years. We are developing safe rechargeable battery systems for varied applications ranging from portable electronics to onboard energy storage in EVs. Lithium ion batteries are rechargeable and composed of cathode, anode, separator and electrolytes. In 1990, Sony (Japan) introduced the lithium ion battery and used an expensive cathode material, which was also unsafe. We are pioneering a superlattice cathode material for the use in lithium ion rechargeable batteries.
The Solar Concentrating Electric Power Generation System is an extremely efficient photovoltaic solar power generation unit. This system is able to produce in excess of 2 Kilowatts (kw) of electric power with zero emissions with Sun Light as the only fuel including built-in heat capture to provide hot water to users.
The lithium ion batteries that we plan to develop are rechargeable batteries composed of cells linked together, each cell created from lithiated cathode powder coated on aluminum foil (electrode material that the electron flows out from during charge) and anode powder coated on copper foil (electrode material that the electro flows into during charge) with a separator (polymer material in between anode and cathode) in a mixture of electrolytes, which is an ionically conductive medium.
Our goal is to continually improve our proprietary semi-solid synthesis process for the development of lithium ion rechargeable battery technologies to meet the growing needs for a less expensive, high-energy density, extended life and fast recharging battery while keeping safety as a priority.
4
We use a proprietary superlattice cathode material and its technically advanced synthesis process. Our other technical expertise includes Battery Management Systems (“BMS”) and a high current rate battery charger. A typical battery pack will consist of a number of lithium ion cells and a BMS.
Our technology development is in the initial phase of prototyping and testing. Once a prototype is successfully obtained, we plan to work closely with production specialists in the battery industry and material synthesis to lead the battery manufacturing unit along with marketing and sales teams. Our primary focus will then simultaneously operate research and development, production and marketing of the new products.
Sources and Availability of Raw Materials
We have used raw materials from several manufacturers in the United States, such as Alfa Aesar, Pred Chemicals, TIMCAL and Ferro Corporation. We use different types of lithium, manganese, cobalt, nickel and titanium salts, electrolytes, copper and aluminum foil which are available in large scale.
License Agreement with Li-ion Motors Corp.
Effective April 15, 2008, we entered into a License Agreement (“License Agreement”) with Li-ion Motors providing for Li-ion Motors’ license to us of Li-ion Motors patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications (“Licensed Products”).
Under the License Agreement, Li-ion Motors has the right to purchase its requirements of lithium ion batteries from us, and its requirements of lithium ion batteries shall be supplied in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for our other customers. Li-ion Motors’ cost for lithium ion batteries purchased from us is our actual manufacturing costs for such batteries for our fiscal quarter in which Li-ion Motors purchase takes place. On May 25, 2010 our agreement was amended to provide that we have exclusive license rights for the United States and Li-ion Motors may grant other companies rights elsewhere around the world.
We have agreed to invest a minimum of $1,500,000 in each of the first two years under the License Agreement in development of the technology for the Licensed Products. In the initial year under the License Agreement, the Company invested approximately $264,043 in the development of technology, and therefore is not in compliance with its obligations under this covenant of the license agreement. Li-ion Motors has advised us that it will not give notice of default against us for our failure to comply with this over the term of the License Agreement. As of fiscal year ended July 31, 2012; we are still not in compliance under this covenant.
On April 16, 2008, we leased approximately 5,000 square feet of space (“Leased Space”) in Li-ion Motors’ North Carolina facility, such Leased Space was to be suitable for, and utilized by us for, our developmental and manufacturing operations for Licensed Products pursuant to the License Agreement, that lease was terminated May 31, 2012, when Li-ion closed their facility. The Leased Space, had been leased by Li-ion Motors to us on a month-to-month basis at a monthly rental of $3,038, the monthly rental to be escalated five (5%) percent annually. Effective April 16, 2008, Li-ion Motors also sold us for the purchase price of $29,005, specified equipment and supplies related to the licensed field.
Competition
Our lithium battery development operations face substantial competition from other companies which have significantly greater financial resources than we do. At this time the lithium ion battery market is controlled by Asian manufacturers, and the Company is not aware of any volume battery manufacturer in the United States. LIB manufacturing moved out from USA in earlier days citing the complicated and costly manufacturing process. Our Solar Power Generation System faces substantial competition from other companies.
Government Regulation
According to lithium battery federal regulations, no lithium ion batteries may be shipped without having passed a series of tests defined by the UN Committee of Experts on the Transport of Dangerous Goods. Additional cost associated with these tests and special packaging requirements along with the troubles posed by delays in obtaining the lithium ion batteries on time have caused difficulties for American companies dealing with the Asian battery suppliers.
Employees
As of the date of this report, we no longer have employees and all ongoing work is being done by paid consultants.
5
Research and Development Expenditures
We incurred $10,812 of research and development expenditures in the year ended July 31, 2012, and $29,753 during the year ended July 31, 2011.
Patents and Trademarks
We have licensed patents and provisional patent applications involving rechargeable battery cathode material and battery management systems from Li-ion Motors. We have acquired a U.S. patent for technology involving varied current and voltage rating battery packs. These patent rights enable us to customize and commercialize the battery packs inside electric vehicles according to the customer’s power requirements. This technology also gives us the ability to select a parallel or series combination of cells to produce a battery pack. In addition, on June 20, 2011, we applied for a patent for our stand alone, residential solar concentrating, and electric power generation system. This unit has several unique features; that allow the use of fewer cells, the ability to use generated heat in water heaters, smaller size and weight. Consumers who have this system will have savings on energy consumption and the ability to sell excess power back to the utility company.
1A. Risk Factors.
You should be particularly aware of the inherent risks associated with our business plan. These risks include but are not limited to:
General
The current worldwide economic slowdown could have a material adverse impact on our product research and developmental activities and planned commercialization of our lithium battery technology.
The automotive industry is cyclical in nature and tends to reflect general economic conditions. The U.S. and other world economies are in an economic slowdown or a recession, which could last well into 2012 and beyond. The recession may lead to a significant decline in prices and demand for automotive power train components, which would in turn adversely affect the demand for our proposed lithium battery products.
We do not have sufficient revenues to sustain our operations.
We have not had sufficient revenues from our operations to operate without substantial loans from a former major stockholder. As of July 31, 2012, we did not have any cash on hand. During our fiscal year ended July 31, 2012, we incurred a net loss of $137,472, a working capital deficiency of $1,007,986, and a stockholders' deficit of $984,022. We expect that we will continue to incur operating losses in the future in connection with the development of our lithium battery technology and our solar generation system. If development, production, and sales of lithium batteries and the solar systems are not actualized in the near future it will adversely affect the company. Failure to achieve or maintain profitability may materially and adversely affect the future value of our common stock.
If we do not obtain additional financing, our business will fail.
Our current operating funds are less than necessary for commercialization of our products, and therefore, we will need to obtain additional financing in order to complete our business plan. We do not currently have any arrangements for financing and we may not be able to find such financing if required. Market factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
Our management has limited experience in development, production and negotiating commercial arrangements.
Our Board has limited experience in development, production, commercialization of and negotiating licenses and joint ventures to commercialize the lithium ion batteries we are developing and the solar power generating system. As a result of this inexperience, there is a high risk we may be unable to complete our business plan and successfully commercialize our lithium ion battery products or the solar generating system, if we succeed in developing such products. Because of the intense competition for our planned products, there is substantial risk that we will not successfully commercialize these products. The Company currently has one Officer and paid consultants; if we do not hire qualified personnel we will not be able to complete our business plan.
6
Our planned lithium ion battery business is subject to substantial risks.
The lithium ion battery market is competitive and risky. We are competing against numerous competitors with greater financial resources than us, and due to the difficulties of entry into these markets, we may be unsuccessful and not be able to complete our business plan.
We may be required to obtain Federal and state certifications or approvals for our planned products. Our products, when fully developed, may not meet these Federal or state performance or safety standards in effect at the time for lithium ion batteries for the uses for which we intend to sell our products.
Lithium ion batters, if not properly managed, may pose a fire hazard.
We will have to develop batteries and battery management systems that eliminate the risk of fire from use of lithium ion batteries as a power source. If we are not able to develop such systems, our business will not develop as planned. If our battery management systems fail, we could be liable to those who are harmed as a result of such failure.
Our products are subject to extensive federal, state and local safety environmental and other government regulations that may require us to incur expenses modify product offerings or cease all operations of our business in order to maintain compliance with the actions of the regulators.
The Company’s business and facilities are also subject to regulation under various federal, state and local regulations relating to the sale of its products, operations, occupational safety, environmental protection, hazardous substance control and product advertising and promotion. Failure to comply with any of these regulations in the operation of the business could subject the Company to administrative or legal action resulting in fines or other monetary penalties or require the Company to change or cease business.
A significant adverse determination in any material product liability claims against the company could adversely affect our operating resulting or financial condition.
Accidents involving personal injury and property damage could occur in the use of products that we plan to develop, and no assurance can be given that material product liability claims against us will not be made in the future. Adverse determination of material product liability claims made against us or a lapse in coverage of any product liability policy that we may have in effect in the future when we are marketing our products commercially could adversely affect our operating results or financial condition.
We have been the subject of a going concern opinion from our independent auditors, which means that we may not be able to continue operations unless we obtain additional funding.
Our independent auditors have added an explanatory paragraph to their audit opinions, issued in connection with our financial statements, which states that our ability to continue as a going concern is uncertain.
Because our stock is deemed a “penny stock”, you may have difficulty selling shares of our common stock.
Our common stock is a “penny stock” and is therefore subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934, as amended. Under this rule, broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the Securities and Exchange Commission (“SEC”). The penny stock rules severely limit the liquidity of securities in the secondary market, and many brokers choose not to participate in penny stock transactions. As a result, there is generally less trading in penny stocks and you may not always be able to resell shares of our common stock publicly at the time and prices that you feel are fair or appropriate. Under applicable regulations, our common stock will generally remain a penny stock until and for such time as its per-share price is $5.00 or more (as determined in accordance with SEC regulations), or until we meet certain net asset or revenue thresholds. These thresholds include the possession of net tangible assets (that is, total assets less intangible assets and liabilities) in excess of $2,000,000, and the recognition of average revenues equal to at least $6,000,000 for each of the last three years. We do not anticipate meeting any of the thresholds in the foreseeable future.
7
1B. Unresolved Staff Comments.
None.
2. Properties.
Our mailing address is 420 North Nellis Blvd., Suite A3-146, Las Vegas, Nevada 89110, for which we pay $11.00 per month, on a month to month basis.
3. Legal Proceedings.
4. Mine Safety Disclosures.
None.
8
PART II
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of July 31, 2012, there were approximately 20 record owners of the Company's Common Stock. The Company's Common Stock is quoted on the National Association of Securities Dealers OTCBB Bulletin Board under the symbol “SPOW.OB”. Our Common Stock is also quoted on the Pink OTC Markets OTCQB market.
|
Period
|
|
High*
|
|
|
Low*
|
|
| |
|
|
|
|
|
|
August 1, 2009 to October 31, 2009
|
|
|
|
|
|
|
|
|
November 1, 2009 to January 31, 2010
|
|
|
|
|
|
|
|
|
February 1, 2010 to April 30, 2010
|
|
|
|
|
|
|
|
|
May 1, 2010 to July 31, 2010
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
August 1, 2010 to October 31, 2010
|
|
|
|
|
|
|
|
|
November 1, 2010 to January 31, 2011
|
|
|
|
|
|
|
|
|
February 1, 2011 to April 30, 2011
|
|
|
|
|
|
|
|
|
May 1, 2011 to July 31, 2011
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
August 1, 2011 to October 31, 2011
|
|
|
|
|
|
|
|
|
November 1, 2011 to January 31, 2012
|
|
|
|
|
|
|
|
|
February 1, 2012 to April 30, 2012
|
|
|
|
|
|
|
|
|
May 1, 2012 to July 31, 2012
|
|
|
|
|
|
|
|
|
Period
High*
Low*
August 1, 2009 to October 31, 2009
August 1, 2009 to October 31, 2009
$
0.7600
0.1300
November 1, 2009 to January 31, 2010
November 1, 2009 to January 31, 2010
0.1800
0.0300
February 1, 2010 to April 30, 2010
February 1, 2010 to April 30, 2010
0.0600
May 1, 2010 to July 31, 2010
May 1, 2010 to July 31, 2010
0.0500
0.0100
August 1, 2010 to October 31, 2010
August 1, 2010 to October 31, 2010
0.0045
0.0029
November 1, 2010 to January 31, 2011
November 1, 2010 to January 31, 2011
0.0050
0.0020
February 1, 2011 to April 30, 2011
February 1, 2011 to April 30, 2011
0.1000
0.0012
May 1, 2011 to July 31, 2011
May 1, 2011 to July 31, 2011
1.8000
0.2600
August 1, 2011 to October 31, 2011
August 1, 2011 to October 31, 2011
0.5900
0.0700
November 1, 2011 to January 31, 2012
November 1, 2011 to January 31, 2012
0.0200
February 1, 2012 to April 30, 2012
February 1, 2012 to April 30, 2012
May 1, 2012 to July 31, 2012
May 1, 2012 to July 31, 2012
* Prices have been adjusted to reflect the 3-for-1 forward split effective October 19, 2009 and the 1-for-300 reverse split effective April 26, 2011.
Holders of common stock are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available therefore and, in the event of liquidation, to share pro rata in any distribution of the Company's assets after payment of liabilities. The Board of Directors is not obligated to declare a dividend. The Company has not paid any dividends and the Company does not have any current plans to pay any dividends.
Securities Authorized for Issuance under Equity Compensation Plans
6. Selected Financial Data.
Not applicable.
7. Management's Discussion and Analysis of our Financial Conditions and Results of Operations.
Forward Looking Statements
This annual report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in this section.
Introduction
We were incorporated on July 15, 2002, under the laws of the State of Nevada. We changed our business in 2008, entering into a license agreement with Li-ion Motors on April 15, 2008, for the license of the development of their lithium battery technology. We sold our Zingo Telecom, Inc. and M/S Zingo BPO Services Pvt. Ltd. subsidiaries that offered telecommunications services to business and residential customers utilizing VoIP technology on May 15, 2008. To reflect our new business, we changed our name from Zingo, Inc. to Superlattice Power, Inc. on April 25, 2008 and on April 2, 2011, we merged with our wholly-owned subsidiary, Sky Power Solutions Corp., and in the merger the name of the Company was changed to Sky Power Solutions Corp.
9
A three-for-one forward split in our common stock was effective October 19, 2009. The Certificate of Change filed with the Nevada Secretary of State on September 18, 2009, for the forward split changed the number of shares of our outstanding common stock from 115,000,000 to 345,000,000, and the number of shares of our authorized common stock in the same ratio, from 250,000,000 to 750,000,000. On April 2, 2011, the Board approved the filing with the Secretary of State of Nevada a Certificate of Change that affected a 1:300 reverse split in our outstanding common stock and a reduction of our authorized common stock in the same 1:300 ratio, from 750,000,000 shares to 2,500,000 shares. This was effective April 26, 2011.
Results of Operations for the Year Ended July 31, 2012
We incurred a net loss of $137,472 during the year ended July 31, 2012, which included: general and administrative (G&A) costs of $120,184; research and development (R&D) expenses of $10,812; loss on disposal of assets of $26,360 and other income of $19,884.
2012 Compared to 2011
For the year ended July 31, 2012, our net loss decreased to $137,472 from $474,647 for the same period ending July 31, 2011. The decrease was primarily due to no interest expense from debt and offset by a reduction in other income of $61,312 for a leased employee to our former parent, Li-ion Motors.
Plan of Operations
Commercial Initiatives
We have developed a standalone residential solar generation system. When testing is completed, we will work with manufactures to rapidly make these available to homeowners. We are also developing rechargeable lithium ion batteries for power production for a variety of uses. We plan to pioneer a superlattice cathode material for the use in lithium ion rechargeable batteries.
License Agreement with Li-Ion Motors
Effective April 15, 2008, we entered into a License Agreement with Li-ion Motors, our former controlling stockholder, providing for Li-ion Motors’ license to us of their patent applications and technologies for rechargeable lithium-ion batteries for hybrid vehicles and other applications.
Under the License Agreement, Li-ion Motors has the right to purchase its requirements of lithium ion batteries from us, and its requirements of lithium ion batteries shall be supplied in preference to, and on a priority basis as compared with, supply and delivery arrangements in effect for our other customers. Li-ion Motors cost for lithium ion batteries purchased from us will be our actual manufacturing costs for such batteries for our fiscal quarter in which Li-ion Motors’ purchase takes place. On May 25, 2010 the Agreement was amended limiting us to only the United States with Li-ion Motors able to grant other licenses to companies in other parts of the world.
Under Section 2.2 of the License Agreement, we have agreed to invest a minimum of $1,500,000 in each of the first two years of the term of the License Agreement in development of the technology for the Licensed Products. In the initial year under the License Agreement, we invested approximately $264,043 in the development of our technology, and therefore are not in compliance with our obligations under this covenant of the License Agreement. Li-ion Motors has advised us that it will not give notice of default against us for our failure to comply with this over the term of the License Agreement.
Effective April 16, 2008, we agreed to lease approximately 5,000 square feet of space in Li-ion Motors’ North Carolina facility, such Leased Space to be suitable for, and utilized by us for, our developmental and manufacturing operations for Licensed Products pursuant to the License Agreement. The Leased Space is leased by Li-ion Motors to us on a month-to-month basis at a monthly rental of $3,038, the monthly rental to be escalated five (5%) percent annually. Li-ion closed their facility on May 31, 2012, and terminated our lease. Effective April 16, 2008, Li-ion Motors also sold us for the purchase price of $29,005, specified equipment and supplies related to the licensed intellectual property.
Sale of our Telecom Subsidiaries
At a closing held on May 15, 2008, we sold for $215,000 the 80,000 outstanding shares of common stock, constituting 100% of the outstanding stock, of our subsidiary Zingo Telecom, Inc. In addition, at the closing, we assigned and transferred all receivables or debt obligations of Zingo Telecom owing to or held by us at the closing date, and all outstanding shares of M/S Zingo BPO Services Pvt. Ltd., our subsidiary incorporated in India.
10
5.2 Liquidity and Capital Resources
As of July 31, 2012, we had cash on hand of $0 and liabilities of $1,007,986, as compared with $2,381,634 at July 31, 2011; and our property plant and equipment decreased to $23,964 at July 31, 2012, as compared with $60,448 for 2011. Accounts payable and accrued expenses decreased at July 31, 2012, to $1,007,986 as compared with $1,445,708 at July 31, 2011, and advances and due to related parties decreased to $882,202 at July 31, 2012, as compared to $935,927 for 2011.
At July 31, 2012, we had a working capital deficiency of $1,007,986 and a stockholders' deficit of $984,022.
We used net cash in operating activities of $58,782 in the year ended July 31, 2012, as compared with $94,871 in the comparable period in 2011, and cash flows used in investing activities for the purchase of property, plant and equipment was $0 in 2012 and $0 in 2011.
In the year ended July 31, 2012, we received $0 in advances from a related party, and made payments to the related party of $0, as compared with advances from the related party of $173,600 in 2011, and payments to the related party of $0.
During the year ended July 31, 2012, we received $81,758 from the proceeds from our promissory note to Li-ion Motors Corp. and repaid $22,983 as compared to advances received in 2010, of $208,587 and repayment of $287,467.
Since our incorporation, we have financed our operations almost exclusively through advances from our controlling shareholders. We expect to finance operations through the sale of equity or other investments for the foreseeable future, as we do not receive significant revenue from our new business operations. There is no guarantee that we will be successful in arranging financing on acceptable terms.
Our ability to raise additional capital is affected by trends and uncertainties beyond our control. We do not currently have any arrangements for financing and we may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor sentiment. Market factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
Our auditors are of the opinion that our continuation as a going concern is in doubt. Our continuation as a going concern is dependent upon continued financial support from our shareholders and other related parties.
Critical Accounting Issues
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to intangible assets, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
7A. Quantitative and Qualitative Disclosures About Market Risk.
Commodity Price Risk – The raw materials for manufacturing our batteries could be affected by changes in the commodities markets, and if we commence manufacturing our own lithium ion batteries, we could be subject to this risk.
11
8. Financial Statements and Supplementary Data.
SKY POWER SOLUTIONS CORP.
FINANCIAL STATEMENTS
July 31, 2012
12