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AWGI > SEC Filings for AWGI > Form 8-K/A on 20-Nov-2012All Recent SEC Filings

Show all filings for AWG INTERNATIONAL WATER CORP

Form 8-K/A for AWG INTERNATIONAL WATER CORP


20-Nov-2012

Results of Operations and Financial Condition, Unregistered Sale o

Discussion and Analysis of Financial Condition and Results of Operations

Revenues

Revenue from sales to date has been negligible. For the next few quarters we are projecting modest sales as we build our distribution network. For the year ended December 31, 2011, we had $57,636 in revenue compared with $7,139 for the year ended December 31, 2010. This revenue was generated from the sale of the G2 product. The increase in revenue was attributable to G2 product availability from our manufacturer. This G2 product is no longer available for sale.
Currently, we are focusing sales efforts on the Model 2500 product. For the quarter ending September 30, 2012, we had revenue of $15,802 compared to $4,860 revenue for the quarter ending September 30, 2011. The increase resulted from initial shipments to our Philippine distributor.


Costs and Expenses

Our primary costs going forward are related to ongoing research and development, legal fees associated with patent activity, and professional fees. For the year ending December 31, 2011 we had $516,075 in general and administrative expenses compared to $451,695 in general and administrative expenses for the year ending December 31, 2010. This increase in general and administrative expenses was primarily the result of increased spending related to research and development, intellectual property and other general and administrative expenses. The research and development expenses for the years ending December 31, 2011 and December 31, 2010 were $61,991 and $2,593, respectively. The $59,399 increase was due to development work on the Model 2500. The intellectual property costs for the years ending December 31, 2011 and December 31, 2010 were $35,786 and $22,781, respectively. The $13,005 increase was related to patent work on the G3, G4 and G5 product development. The other general and administrative operating costs for the years ending December 31, 2011 and December 31, 2010 were $95,811 and $56,051, respectively. The $39,759 increase was related primarily to increase travel associated with establishing vendor and manufacturing relationship as well as attending some industry conventions.
Professional fees for the years ending December 31, 2011 and December 31, 2010 were $322,487 and $370,270, respectively. The $47,783 decrease was related to a reduction in the use of professional services.

For the quarter ending September 30, 2012 the Company had $505,728 general and administrative expenses compared with $100,816 for the quarter ending September 30, 2011. This increase in general and administrative expenses was the result of the non-cash amortization of stock options $306,250 and increased expenditure for professional fees.

More specifically, legal fees associated with patent and acquisition matters increased by approximately $40,000, technical services related to research and development, primarily associated with the consulting services of a refrigeration engineer, increased by approximately $45,000 and business professional fees increased by approximately $15,000.

The Company reported a negative gross profit since inception on March 18, 2010.
The negative gross profits were the result of shipping evaluation products to prospective distributors. The added cost of freight and product returns contributed to the historic negative gross profits. We do not anticipate negative margins going forward.

Liquidity and Capital Resources

For the year ended December 31, 2011, we funded our operations with debt.
During the fourth quarter of 2011, AWG International, Inc. borrowed $273,853 from AWG International Water Corporation (formerly MIP Solutions, Inc.). AWGI's funding source was a private placement of equity securities and a loan transaction with Coghlan Family Corporation in the amount of $150,000. The balance outstanding on this loan is $125,000.

. . .



Item 3.02. Unregistered Sale of Equity Securities

During the quarter ended September 30, 2012, the Company sold 850,000 common shares resulting from the exercise of 850,000 common stock purchase warrants for a total consideration of $51,000. The common shares were priced at $0.06 per share under the terms of the warrant agreements.

As discussed in Items 1.01 and 2.01, on July 10, 2012, the Company consummated the Acquisition, pursuant to which the Company issued to the fourteen (14) stockholders of AWG International, Inc. in exchange for their AWG Common Stock, an aggregate of 77,931,100 shares of the Company's Common Stock.

The issuance of the shares of Common Stock of the Company in the Acquisition was made in reliance upon an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the " Securities Act "), and Regulation D and S promulgated thereunder. As such, the shares of the Company's Common Stock issued in connection with the Acquisition may not be offered or sold in the United States unless they are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. No registration statement covering these securities has been filed with the Commission or with any state securities commission in respect of the Acquisition.



Item 5.01. Change in Control of Registrant

As discussed in Items 1.01 and 2.01, on July 10, 2012, the Company consummated the Acquisition, pursuant to which the Company issued to the stockholders of AWG International, Inc. in exchange for their AWG Common Stock, an aggregate of 77,931,100 shares of the Company's Common Stock.

At closing, Jeff Lamberson and Gary MacDonald resigned as directors and officers of the Company and Keith White, Robb Perkinson and Jeff Stockdale were appointed to the Company's Board of Directors filling existing board member vacancies.
They will serve until their respective successors are duly elected or appointed, or until their earlier death, resignation, or removal. See also Items 1.01, 2.01 and 5.02 of this Current Report.

Additionally, at closing, the Coghlan Family Corporation executed a Termination of Security Agreement which terminated its security interest in the original $150,000 loan it made to the Company on September 29, 2011. The loan is now unsecured.



Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

Based on the foregoing, as of the date of this Current Report, the Company's directors, executive officers, and key employees are as follows:

Name Positions and Office Keith White 51 Director, Chief Executive Officer, Chief Technology Officer Robb Perkinson 59 Director
Jeff Stockdale 51 Director, President, Chief Operating Officer Jeff Mitchell 46 Chief Financial Officer, Secretary

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. The Board of Directors may seek other qualified individuals to serve on the Board and to form committees to do the Board's work. Officers are elected by the Board of Directors and serve until their successors are appointed by the Board of Directors.


Except as set forth in the brief account of business experience in Item 5 on page 25, none of the events listed in Item 401(f) of Regulation S-K has occurred during the past ten years and that is material to the evaluation of the ability or integrity of any of the Company's directors, director nominees or executive officers.

Changes to the Company's Executive Compensation Plan

The Company plans to implement the following executive compensation plan. We plan to pay our named executive officers titled, Chief Executive Officer (CEO), Chief Technology Officer (CTO), Chief Operating Officer (COO) and Chief Financial Officer (CFO), as follows:

Base Compensation Effective July 10, 2012

Named Executive Officer Base Compensation Keith White, CEO, CTO $120,000 Jeff Stockdale, President, COO $120,000 Jeff Mitchell, CFO, Secretary $120,000



Item 5.06. Change in Shell Company Status

As disclosed in Items 1.01, 2.01 and 5.01 of this Current Report, on July 10, 2012, the Company acquired AWG International, Inc. Although the Company was a shell company, as defined in Rule 12b-2 of the Exchange Act, prior to the Acquisition, the Company believes that the completion of the Acquisition had the effect of causing the Company to cease being a shell company.

Item 8.01

Other Events

In response to the Everest Water Matter described in Patents and Licenses, the Company has placed and administrative a "stop transfer" on the 16,788,057 shares issued to CanAmera Management, Inc. CanAmera Management was issued 16,788,057 shares in exchange for 250,000 shares of AWG International, Inc. under the terms of the Exchange Agreement. Until such time as the Everest Water Matter is resolved, the stop transfer will remain in effect.

On November 8, 2012, Keith White, through Bahamas legal counsel, filed a petition with the Supreme Court of the Commonwealth of the Bahamas requesting reinstatement of Everest Water, Ltd. Mr. White anticipates that the petition will be granted in the near future.

Upon reinstatement, with the Bahamas Companies Registry, the March 12, 2007 patent assignment and the April 13, 2010 License Agreement will be restored and validated.

Item 9.01. Financial Statements and Exhibits

Note: For accounting purposes, the Acquisition of AWG International, Inc. was treated as a reverse acquisition with AWG International Water Corporation as the acquirer and AWG International, Inc. as the acquired party. When we refer in this Current Report to business and financial information for periods prior to the consummation of the Acquisition, we are referring to the business and financial information of the Company unless the context suggests otherwise.

(a) Financial statements of business acquired.

The financial statements of the business acquired for the periods specified in Rule 8-04(b) of Regulation S-X are incorporated by reference to Exhibit 99.1 to the Current Report filed on July 16, 2012.

(b) Pro forma financial information. Proforma Balance Sheet was filed as Exhibit 99.3 on Form 8-K, September 18, 2012.

(d) Exhibits.

See the Exhibit Index attached hereto which is incorporated by reference.


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