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| WWPW.OB > SEC Filings for WWPW.OB > Form 10-K on 28-Oct-2011 | All Recent SEC Filings |
28-Oct-2011
Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD LOOKING STATEMENTS
The statements contained in this report that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future developments and
their potential effects upon the Company. There can be no assurance that future
developments affecting the Company will be those anticipated by management.
Actual results may differ materially from those included in the forward-looking
statements.
Readers are also directed to other risks and uncertainties discussed in other documents filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.
The following discussion and analysis should be read in conjunction with our audited financial statements for the fiscal year ended June 30, 2011.
Introduction
The Company's business strategy is to pursue opportunities in the alternative energy field with a particular emphasis on wind energy. The Company intends to develop wind parks. The Company will assemble land packages ("Wind Parks"), secure requisite environmental permitting, provide wind testing by erecting towers to measure wind speed. Subject to favorable wind testing results, it will then apply for a power contract for the number of megawatts (MW) that the project will allow.
We began our new business operations with the acquisition of Zero Emission People, LLC. ("Zero Emission"). The acquisition is deemed to be a reverse acquisition. Wind Works (the legal acquirer) is considered the accounting acquiree and Zero Emissions People (the legal acquiree) is considered the accounting acquirer. The combined financial statements of the combined entity are in substance those of Zero Emissions People, with the assets and liabilities, and revenues and expenses of Wind Works being included effective from the date of consummation of Share Exchange Transaction. Wind Works is deemed to be a continuation of business of Zero Emissions People.
Our primary focus has been the acquisition of wind parks in Canada. We have however acquired projects in both the United States and Europe. We financed these acquisitions with cash, shares of our common stock or both. We received a 6.64% simple interest loan from a third party (the "lender"). As of June 30, 2011 We have borrowed $8,535,640 in Canadian funds ($8,849,752 in US funds). The maturity date of the loan is the earliest of (i) an event of default or (ii) January 31, 2013 at which time the company is required to repay all principal and accrued interest. The loan is senior to all indebtedness of the company and is secured by any existing registered security on the
assets of the company up to an aggregate amount of $1,500,000 for each bridge loan provided that any indebtedness relating to the registered security may not be re-financed, re-borrowed or increased in any way. There were 6 bridge loans outstanding at year-end secured by an aggregate amount of $9,000,000. The Company has signed promissory notes guaranteeing the amount of the loan.
Four parties entered into a convertible debenture agreement first and then
entered into bridge loan agreements prior to the Closing date. The cumulative
amount of financing available under the convertible debenture agreement is
$8,500,000 in Canadian funds. Closing shall occur on such date as may be agreed
to by the Company and the lender and upon closing the promissory notes shall be
returned to the Company and a debenture shall be issued by the Company in an
amount equal to the value of the notes then outstanding. The debentures shall
carry a yield equal to 6.64% per annum, with interest calculated quarterly. At
the lender's sole option, and at a date of its choosing, all principal and
accrued interest under the debentures may be converted into an equity interest
in any of the projects that were funded using this financing. In such a case
the lender would earn up to a 49% interest in those specific wind projects.
Following conversion the Company would have the option to repurchase the
project equity upon thirty days notice.
Results Of Operations For Fiscal Year Ended June 30, 2011 as compared to June 30, 2010
Revenues
To date, we have had not generated any revenues. Our cash holdings were generated from the sale of our securities. All funds generated from the sale of our securities are used for general working capital purposes including but not limited to fees associated with power contract submissions and acquisitions. We have also secured financings from an independent third party to assist in the development of several of our wind parks.
For the year ended June 30, 2011 we incurred operating expenses totaling $5,176,767 as compared to operating expenses totaling $2,477,370 for the year ended June 30, 2010. Cumulative operating expenses since May 2, 2008 ("Inception") totaled $7,610,753. Project developments costs continue to be a significant expense totaling $1,617,656, as compared to $555,420 during the prior year. We believe that it is critical to our business model to continue to invest capital into our wind parks. Without investment in our infrastructure, complying with contractual commitments with respect to the wind farms, it is unlikely that we will be able to recover our acquisition and prior developmental costs.
We also incurred consulting expenses of $1,624,797 as compared to $457,198 in 2010. We hired engineers and other skilled professionals to help us in evaluating the various wind farms, their proposed operations as well as general business development. Professional fees for the year ended June 30, 2011 was $436,552 as compared to $127,525 in 2010. Professional fees are primarily attributable to costs incurred with respect to the Company's ongoing reporting requirements as well as professional fees incurred with respect to the various project financings. The Company will continue to monitor these expenses.
Accretion expenses increased from $591,043 to $984,705. We incurred no loss from the extinguishment of debt as compared to $564,130 in 2010.
Interest and service charges totaled $241,300 as compared to $48,855 in 2010.
Our net loss for the year ended June 30, 2011 totaled $(5,078,948) as compared to a net loss of $(2,477,370) in 2010. Total losses since inception were $(7,610,653).
During the year ended June 30, 2011, we issued a total of 15,580,548 shares of our common stock. We issued 375,000 shares for financing, 9,550,000 shares for wind farm projects, 1,889,298 shares were issued in connection with our convertible debentures 2,366,250 shares were issued for services rendered and 1,400,000 shares were issued for debt settlement.
Liquidity and Capital Resources
Assets and Liabilities
At June 30, 2011 our primary assets consisted of cash equivalents totaling $180,173, prepaid expenses totaling $112,033,VAT receivables totaling $83,739 excess billing costs of $77,862 and other assets totaling $115,380, We have current assets totaling $574,621 and our long term assets total $11,216,186 which consist primarily of our wind farms which we have capitalized at $3,431,183 and wind project deposits totaling $7,731,252. $903,250 of the wind farm deposits were required to maintain our FIT contracts and $6,827,992 were for connection cost deposits.
At June 30, 2010 current assets totaled $574,621, long term assets totaled $11,216,186 and total assets were $11,790,807. The decline in our current assets is primarily attributable to the decline in our prepaid expenses from $625,961 to $112,033. The increase in cash holdings (from $39,263 to $180,173) is attributable to financings we incurred in connection with our wind farms.
Current liabilities at June 30, 2011 totaled $2,821,225 as compared to $3,061,649 at June 30, 2010. Our 2011 current liabilities consist of accounts payable and accrued liabilities totaling $2,233.438, convertible debentures totaling $385,000 and short term loans totaling $202,787. At June 30, 2010 our current liabilities totaled $3,061,649 consisting of $2,576,433 in accounts payable and accrued expenses, $385,216 in convertible debt and $100,000 in short term loans.
Our working capital deficit at June 30, 2011 totaled $(2,821,225) as compared to a working capital deficit of $(2,334,532) at June 30, 2010. We believe that this increase in our working capital deficit will not adversely affect our ongoing operations in the immediate future. From a long term perspective, the Company will have to take steps to reduce a growing working capital deficit by either securing additional capital, of which there can be no assurance, selling our equity interests in our wind farms or entering into joint venture agreements with other wind farm developers. We are currently in negotiations for the sale of a wind park. However, there can be no assurance that this transaction will close.
We secured a third party loan which accrues simple interest at the rate of 6.64% per year. The maturity date of the loan is January 31, 2013 unless a prior default occurs. At June 30, 2011 the outstanding principal totaled $8,827,589 plus accrued interest of $99,331. We used funds from this loan to finance development of various wind farms. . At the lender's sole option, the debentures may be converted into an equity interest in any of the projects that were funded using this financing. In such a case the lender would earn up to a 49% interest in those specific wind projects. Following conversion the Company would have the option to repurchase the project equity upon thirty days notice.
Plan of Operation For Fiscal Year 2012
We intend to develop the wind parks that we have acquired and investigate other possible purchases. We will also undertake further due diligence with respect to any wind energy projects which have been optioned to us. We may also sell our wind farms to a power utility or company that wants to build out the wind parks. Financings that we have occurred during fiscal year ended June 30, 2011 will continue in 2012. We expect to use the proceeds from these financing to develop our wind farms.
Any other cash infusion that we receive will be used to expand our wind power programs and for general working capital purposes.
Critical Accounting Policies
Financial Reporting Release No. 60, which was released by the Securities and Exchange Commission (the "SEC"), encourages all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The Company's consolidated financial statements include a summary of the significant accounting policies and methods used in the preparation of the consolidated financial statements. Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the financial statements.
Use of Estimates - Management's discussion and analysis or plan of operation is based upon the Company's consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates these estimates, including those related to allowances for doubtful accounts receivable and long-lived assets. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We review the carrying value of property and equipment for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
The Company's consolidated financial statements are prepared using the accrual method of accounting and according to the provision of Statement of Financial Accounting No. 7 ("SFAS 7"), "Accounting and Reporting for Development Stage Enterprises", as it were devoting substantially all of its efforts to acquiring and exploring mineral properties. It is industry practice that mining companies in the development stage are classified under Generally Accepted Accounting Principles as exploration stage companies. Until such properties are acquired and developed, the Company will continue to prepare its consolidated financial statements and related disclosures in accordance with entities in the exploration or development stage.
Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), "Share-Based Payment," under the modified prospective method. SFAS No. 123(R) eliminates accounting for share-based compensation transactions using the intrinsic value method prescribed under APB Opinion No. 25, "Accounting for Stock Issued to Employees," and requires instead that such transactions be accounted for using a fair-value-based method. Under the modified prospective method, we are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. For periods prior to adoption, the financial statements are unchanged, and the pro forma disclosures previously required by SFAS No. 123, as amended by SFAS No. 148, will continue to be required under SFAS No. 123(R) to the extent those amounts differ from those in the Statement of Operations.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements. We do not anticipate entering into any off-balance sheet arrangements during the next 12 months.
Item 7a.
Quantitative and Qualitative Disclosure.
Not applicable.
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