XOTC:NOVZ Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

or

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file # 333-149617

 

NOVAGEN SOLAR, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada   98-0471927
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification number)
     
284 West Millbrook Road, Raleigh, North Carolina   27609

(Address of principal executive offices)

 

  (Zip Code)

 

Registrant's telephone number: 310-994-7988

 

Securities registered under Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

 

As of August 20, 2012 the registrant had 45,575,900 shares of its Common Stock outstanding.

 

 
 

Part I -- Financial Information

 

NOVAGEN SOLAR INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(Expressed in US Dollars)

(Unaudited)

 

   June 30,  December 31,
   2012  2011
ASSETS          
           
CURRENT ASSETS          
Cash   1,188    —   
Rental Bond   12,881    —   
GST refund receivable   13,983    —   
Inventories   140,761    —   
TOTAL CURRENT ASSETS  $168,813   $—   
           
PROPERTY AND EQUIPMENT, net  $371,002   $—   
           
TOTAL ASSETS  $539,815   $—   
           
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
CURRENT LIABILITIES          
Accounts payable and accrued liabilities   60,090    267 
Notes payable   279,294    —   
TOTAL CURRENT LIABILITIES  $339,384   $267 
           
STOCKHOLDERS' EQUITY          
Preferred stock,  $0.0001 par value, 50,000,000 shares authorized; no shares issued and outstanding, respectively   —      —   
           
Common stock,  $0.0001 par value, 100,000,000 shares authorized;
44,075,900 shares issued and outstanding, respectively
(December 31, 2011: 43,675,900)
   4,408    4,367 
Additional paid-in capital   592,290    516,330 
Accumulated other comprehensive income   776    —   
Accumulated deficit prior to current development stage   (520,964)   (520,964)
Accumulated deficit during development stage   123,921    —   
TOTAL STOCKHOLDERS' EQUITY  $200,431   $(267)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $539,815   $—   

 

The accompanying notes are an integral part of these financial statements.

1
 

NOVAGEN SOLAR INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Expressed in US Dollars)

(Unaudited)

 

               Cumulative from
   Three  Three  Six  Six  January 1, 2012
   months  months  months  months  (beginning of
   ended  ended  ended  ended  development stage)
   June 30,  June 30,  June 30,  June 30,  to June 30,
   2012  2011  2012  2011  2012
                          
EXPENSES                         
Administration expenses   26,370    —      44,644    7,812    44,644 
Depreciation   4,454    —      4,816    —      4,816 
Professional fees   22,462    1,584    38,131    8,281    38,131 
Rent   18,907    —      29,989    —      29,989 
Travel   3,579    —      13,669    —      13,669 
Compensation related expenses   69,781    —      132,378    —      132,378 
Research & development   3,309    —      11,128    —      11,128 
TOTAL EXPENSES  $148,862   $1,584   $274,755   $16,093   $274,755 
                          
OTHER ITEMS                         
Gain on acquisition of subsidiary   398,676    —      398,676    —      398,676 
                          
NET PROFIT/(LOSS)  $249,814   $(1,584)  $123,921   $(16,093)  $123,921 
                          
OTHER COMPREHENSIVE INCOME                         
Currency translation   (1,000)   —      776    —      776 
                          
NET COMPREHENSIVE PROFIT/(LOSS)  $248,814   $(1,584)  $124,697   $(16,093)  $124,697 
                          
BASIC AND DILUTED NET LOSS PER SHARE  $(0.00)  $(0.00)  $(0.00)  $(0.00)     
                          
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING   43,697,878    43,675,900    43,686,950    43,675,900      

 

The accompanying notes are an integral part of these financial statements.

2
 

NOVAGEN SOLAR INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF CASH FLOWS

(Expressed in US Dollars)

(Unaudited)

 

         Cumulative from
         January 1, 2012
   Six months  Six months  (beginning of
   ended  ended  development stage)
   June 30  June 30,  to June 30,
   2012  2011  2012
                
CASH FLOWS FROM OPERATING ACTIVITIES:               
Net profit/(loss) for the period  $123,921   $(16,093)  $123,921 
Adjustments to reconcile net loss to net cash               
used by operating activities:               
Depreciation   4,816    —      4,816 
Non cash gain on acquisition   (398,676)   —      (398,676)
Changes in assets and liabilities:               
Prepaid expense   —      7,833    —   
Receivables   (26,741)   —      (26,741)
Accounts payable and accrued liabilities   59,809    4,084    59,809 
Net cash used by operating activities  $(236,871)  $(4,176)  $(236,871)
                
CASH FLOWS FROM INVESTING ACTIVITIES:               
Cash proceeds from acquisitions   168         168 
Purchase of property & equipment   (44,797)   —      (44,797)
Net cash used by investing activities  $(44,629)  $—     $(44,629)
                
CASH FLOWS FROM FINANCING ACTIVITIES:               
Proceeds from  notes payable   281,084    —      281,084 
Net cash provided by financing activities  $281,084   $—     $281,084 
                
NET INCREASE (DECREASE) IN CASH   416    —      416 
Foreign currency translation gain   772    —      772 
                
CASH, BEGINNING OF PERIOD   —      —      —   
                
CASH, END OF PERIOD  $1,188   $—     $1,188 
                
SUPPLEMENTAL CASH FLOW INFORMATION:               
Interest paid  $—     $—     $—   
Income taxes paid  $—     $—     $—   

 

The accompanying notes are an integral part of these financial statements.

 

3
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Novagen Solar Inc. (hereinafter, the “Novagen” and the “Company” collectively with its subsidiaries), was incorporated in the State of Nevada, U.S.A., on June 22, 2005 under the name of Pickford Minerals, Inc. The Company’s fiscal year end is December 31. On May 12, 2009, the Company changed its name to Novagen Solar Inc. The Company was originally engaged in the exploration of mineral deposits in Labrador, Newfoundland, but was unable to implement its exploration program. In April 2009, the Company began to pursue business opportunities relating to photovoltaic solar energy.

 

On December 7, 2011, there was a change in control of the Company when Twenty Second Trust, a trust organized under the laws of the State of Queensland, Australia acquired control of the Company by purchasing 67% of the issued and outstanding shares of the Company’s common stock from shareholders of the Company. Following the change in control of the Company, the board of directors determined that the Company should expand its business to include the development of environmentally sustainable energy solutions through innovative and eco-friendly products and technologies.

 

On January 3, 2012, the Company formed Novagen Pty Ltd under the laws of Australia, as a wholly owned operating subsidiary. All of the Company’s operations are currently conducted through Novagen Pty Ltd. On January 17, 2012, the Company formed Novagen Productions Pty Ltd. under the laws of Australia, as a wholly owned operating subsidiary. On March 2, 2012, the Company formed Novagen Finance Pty Ltd under the laws of Australia, as a wholly owned non-operating subsidiary. On June 25, 2012 the Company acquired Renegade Streetwear Pty Ltd, under the laws of Australia as a wholly owned operating subsidiary.

 

As part of the change in control and the incorporation of the new Australian subsidiaries, the Company has effectively entered into a new development stage for accounting purposes effective from January 1, 2012.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates that have been made using careful judgment. The financial statements have, in management’s opinion been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:

 

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 and reported in US Dollars.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. The Company reviews its estimates on an ongoing basis. The estimates were based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from these estimates. The Company believes the judgments and estimates required in its accounting policies to be critical in the preparation of the Company’s financial statements.

 

4
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. As at June 30, 2012 and December 31, 2011, there were no cash equivalents.

 

Property and Equipment

 

The Company has property and equipment being depreciated over the period between two to thirty-five years. Depreciation on property and equipment is provided on a straight line basis over their expected useful lives as follows:

 

Computer equipment 2 years straight line
Property improvements 10 to 35 years straight line
Plant & Equipment 7 years straight line
Motor Vehicles     7 years diminishing value
Office Furniture & Equipment 5 years straight line

 

Inventories

 

Inventories are measured at the lower of cost and net realizable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs.

 

Concentration of Credit Risk

 

The Company places its cash and cash equivalents with high credit quality financial institutions in uninsured accounts.

 

Consolidation Policy

 

In January, March and June 2012, the Company incorporated three subsidiaries and acquired one wholly-owned subsidiary, and as such, the consolidated financial statements include the accounts of Novagen Solar Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

 

Reclassifications

 

Certain financial statement amounts for the prior period have been reclassified to conform to the current period presentation. These reclassifications had no effect on the net loss or accumulated deficit as previously reported.

 

Foreign Currency Translations

 

Novagen maintains its accounting records in US Dollars. The Company’s subsidiaries are located and operating outside of the United States of America. They maintain their accounting records in Australian Dollars. For reporting purposes the Company reports its financial information in US Dollars.

 

Transactions in a currency other than the functional currency are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Exchange gains and losses are recorded in the statements of income and comprehensive income.

 

5
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

Assets and liabilities of the Company and its subsidiaries are translated into the U.S. dollars at exchange rates at the balance sheet date, equity accounts are translated at historical exchange rate and revenues and expenses are translated by using the average exchange rates. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of stockholders’ equity.

 

Fair Value of Financial Instruments

 

The Company's financial instruments as defined by Accounting Standards Codification (“ASC”) 825, "Disclosures about Fair Value of Financial Instruments," include accounts payable and accrued liabilities and notes payable. Fair values were assumed to approximate carrying value for these financial instruments, except where noted. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The Company is operating outside the United States of America and has significant exposure to foreign currency risk due to the fluctuation of currency in which the Company operates and U.S. dollars.

 

Long-lived assets impairment

 

Long-lived assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets.

 

Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value. Fair value is generally determined using a discounted cash flow analysis.

 

Going Concern

 

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America applicable to a going concern which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business. As of December 31, 2011, the Company has incurred accumulated losses of $520,964 since inception and has not generated any revenue. In the first six months of fiscal 2012 the Company had profits of $123,921 due to a gain on the acquisition of a subsidiary. The future of the Company is dependent upon its ability to develop profitable sales and distribution operations. These factors create doubt as to the ability of the Company to continue as a going concern. Realization values may be substantially different from the carrying values as shown in these financial statements should the Company be unable to continue as a going concern. Management is in the process of identifying sources for additional financing, or will provide the necessary financial support, to fund the ongoing development of the Company's businesses.

 

Stock-Based Compensation

 

The Company adopted ASC 718, "Share-Based Payment", to account for its stock options and similar equity instruments issued. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid. The Company did not grant any stock options during the year ended December 31, 2011 or the six months ended June 30, 2012.

 

Comprehensive Income

 

The Company adopted ASC 220, "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement of Stockholders' Equity and its Statements of Operations and Comprehensive Income. The Company’s comprehensive income consists of net earnings for the period and currency translation adjustments.

 

6
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

Income Taxes

 

The Company has adopted ASC 740, "Accounting for Income Taxes", which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

 

Basic and Diluted Loss Per Share

 

In accordance with ASC 260 – “Earnings Per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At June 30 2011, the basic loss per share was equal to diluted loss per share as there were no dilutive instruments.

 

Business Combinations

 

ASC 805 applies the acquisition method of accounting for business combinations established in ASC 805 to all acquisitions where the acquirer gains a controlling interest, regardless of whether consideration was exchanged. ASC 805 establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The adoption of the standard did not have a material impact on the Company.

 

Development Stage Enterprise

 

With the control change in December 2011, the Company entered into a new development stage prior to establishing profitable operations. During the development stage all equity transactions, operations and cash flows will be reported on the cumulative basis until sales are recognized in the normal course of the Company’s planned business. Losses accumulated in prior exploration stage and development stage activities are accumulated separately and reported on the balance sheet as a separate component of stockholders’ equity.

 

Fair Value Measurement and Disclosures

 

The Company adopted ASC 820 Fair Value Measurements and Disclosures (“ASC 820”). As defined in ASC 820, fair value is based on 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. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

 

Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3: Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 

7
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

 

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, payroll withholding payable, and notes payable. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

New Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

 

NOTE 3: PROPERTY AND EQUIPMENT

 

The Company has property and equipment being depreciated over period between two to thirty-five years. Depreciation on property and equipment is provided on a straight line basis over their expected useful lives.

 

          Accumulated     Net book  
   

Cost

$

   

amortization

$

   

value

$

 
                         
June 30, 2012                        
Property Improvements     3,571       (115)       3,456  
Plant & Equipment     78,547       (3,614)       74,933  

Motor Vehicles

Office Furniture & Equipment

   

270,705

28,831

     

(6,063)

(860)

     

264,642

27,971

 
      381,654       (10,652)       371,002  
December 31, 2011                        

Property Improvements

Plant & Equipment

    -       -       -  
Motor Vehicles     -       -       -  
Office Furniture & Equipment     -       -       -  
      -       -       -  

 

NOTE 4: NOTES PAYABLE

 

The Company entered into four notes payable at the end of March 2012 for a total $129,889 in Australian Dollars $135,151 US Dollars). The amounts borrowed increased by $139,908 Australian Dollars during the current quarter and at June 30, 2012 totaled $269,797 in Australian Dollars ($279,294 US Dollars). The notes are payable on demand with no guarantee or stated maturity date, and bear 5% annual interest on un-matured amounts and 10% on matured, unpaid amounts. As demand notes these notes are considered current liabilities. No interest was accrued as of June 30, 2012 and the reported balance owing in US Dollars was $279,294. These loans were from officers of the Company and its affiliates.

 

8
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

NOTE 5: PREFERRED AND COMMON STOCK

 

The Company has 50,000,000 shares of preferred stock authorized and none issued. The Company has 100,000,000 shares of common stock authorized, of which 43,675,900 shares are issued and outstanding. All shares of common stock are non-assessable and non-cumulative, with no preemptive rights.

 

On June 25, 2012, the Company issued 400,000 shares of common stock to acquire all the issued and outstanding shares of Renegade Streetwear Pty Ltd., an Australian company, from unaffiliated persons not resident in the United States.

 

 

NOTE 6: RELATED PARTY TRANSACTIONS

 

 

On December 7, 2011, a former director of the Company released the Company from all debt owing to him for disbursements incurred on behalf of the Company. As a result of the release, $13,395 was forgiven and recorded in additional paid in capital. Also during the year ended December 31, 2011, a company related to an officer of the Company forgave $5,000 used to pay for outstanding bills and the amount was recorded in additional paid in capital.

 

Also see Note 4.

 

NOTE 7: BUSINESS COMBINATIONS

 

On June 25, 2012, the Company acquired 100% of the issued and outstanding shares of Renegade Streetwear Pty Ltd., an Australian company, for consideration of 400,000 shares of common stock in Novagen Solar Inc. Through obtaining 100% of the issued and outstanding shares of Renegade Streetwear Pty Ltd., Novagen Solar Inc. has obtained control of the company. The preliminary estimation of fair value of the assets and liabilities obtained as a result of the transaction are as follows:

 

From the acquisition date through to June 30, 2012, Renegade Streetwear Pty Ltd. has not earned any revenue or incurred any expenses.

 

    Fair Value  
    $  
Purchase consideration      
Equity issued (400,000 shares of common stock)   76,000  
       
Fair value of assets and liabilities obtained      
Cash and cash equivalents   168  
Receivables   293  
Inventories   140,842  
Property, plant and equipment   333,772  
Payables   (399)  
Identifiable assets and liabilities acquired   474,676  
       
Gain recognized on bargain purchase   398,676  
       

From the acquisition date through to June 30, 2012, Renegade Streetwear Pty Ltd. has not earned any revenue or incurred any expenses.

 

9
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

NOTE 8: SEGMENT INFORMATION

 

Identification of reportable segments

 

The Company has identified its operating segments based on the internal reports that are reviewed and used by the chief operating decision makers in assessing performance and determining the allocation of resources.

 

Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following:

 

·the products sold and/or services provided by the segment;
·the manufacturing process;
·the type or class of customer for the products or services;
·the distribution method; and
·any external regulatory requirements.

 

Types of products and services by segment

 

(i)Development of environmentally sustainable energy solutions

 

The key segment of the Company is the development of environmentally sustainable energy solutions utilizing innovative and eco-friendly products and technologies.

 

(ii) Manufacture and distribution

The Company’s subsidiary, Renegade Streetware Pty Ltd., is in the business of design, manufacture and distribution of V-Twin engines, custom motorcycles and related urban clothing under the Renegade brand.

 

All segment activities occur in Australia.

 

Basis of accounting for purposes of reporting by operating segments

 

(a) Accounting policies adopted

All amounts reported to the Board of Directors, being the chief operating decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

 

(b) Intersegment transactions

 

There are no intersegment transactions

 

(c) Segment assets

 

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of the economic value from the asset. In most instances, segment assets are clearly identifiable on the basis of their nature and physical location.

 

(d) Segment liabilities

 

Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings.

 

10
NOVAGEN SOLAR INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2012
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

(e) Segment information

 

(i) Segment revenue and expenses

 

The manufacturing and distribution segment was acquired on June 25, 2012. As a result this segment is yet to earn any revenue or incur any expenditure. All revenues and expenditure recorded by the group are related to the development of environmentally sustainable energy solutions. All revenue earned in the period and year to date is from external customers.

 

(ii) Segment assets

    Energy Solutions    

Manufacture

& Distribution

    Total 
    June 30, 2012    June 30, 2012    June 30, 2012 
                
Segment Net Assets   (271,663)   472,093    200,431 
Other unallocated amounts   —      —      —   
Consolidated total  $(271,663)  $472,093   $200,431 

 

 

NOTE 9: SUBSEQUENT EVENTS, COMMITMENTS AND CONTINGENCIES

 

On July 5, 2012, the Company entered into an agreement to acquire all the issued and outstanding shares of Y Engine Developments Pty Ltd, an Australian company (“YED”), from Micheal Nugent, President and Chief Executive Officer of the Company. The Company will issue one share of its common stock to Mr. Nugent in exchange for one Ordinary share of YED. The acquisition of YED is to complete on September 14, 2012.

 

On July 24, 2012, the Company entered into an agreement to acquire 28 acres of farmland in Beerwah, Queensland, Australia (the “Property”), from an unrelated third party. The acquisition of the Property is to close on October 3, 2012. On closing, the Company will pay $75,000 cash to the seller of the Property and issue to the seller 1,800,000 shares of its common stock plus 1,800,000 warrants exercisable at $0.10 per share that expire on July 25, 2017.

 

On July 26, 2012, the Company issued 1,500,000 shares of common stock to Wakabayashi Fund LLC for investment banking and public relations services to be rendered over a six month period.

11
 

Item 2. Management's Discussion and Analysis or Plan of Operations

 

The following discussion and analysis of our plan of operation should be read in conjunction with the financial statements and the related notes. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors.

 

Overview

 

Novagen Solar Inc. (hereinafter, “Novagen” and the “Company” collectively with its subsidiaries), was incorporated in the State of Nevada, U.S.A., on June 22, 2005 under the name of Pickford Minerals, Inc. The Company’s fiscal year end is December 31. On May 12, 2009, the Company changed its name to Novagen Solar Inc. The Company was originally engaged in the exploration of mineral deposits in Labrador, Newfoundland, but was unable to implement its exploration program. In April 2009, the Company began to pursue business opportunities relating to photovoltaic solar energy.

 

On December 7, 2011, there was a change in control of the Company when Twenty Second Trust, a trust organized under the laws of the State of Queensland, Australia acquired control of the Company by purchasing 67% of the issued and outstanding shares of the Company’s common stock from shareholders of the Company. Following the change in control of the Company, the board of directors determined that the Company should expand its business to include the development of environmentally sustainable energy solutions through innovative and eco-friendly products and technologies.

 

On January 3, 2012, the Company formed Novagen Pty Ltd. under the laws of Australia, as a wholly owned operating subsidiary. Novagen Pty Ltd is engaged in the manufacture and distribution of products for commercialization in the area of solar energy and other clean technologies including low carbon emission engines. Novagen Pty Ltd operates from leased premises situated at Helensvale, Queensland for use as a workshop and employs seven full time employees, including qualified mechanics, machinists, a draughtsman and administrative support.

 

On January 17, 2012, the Company formed Novagen Productions Pty Ltd under the laws of Australia, as a wholly owned non-operating subsidiary.

 

On March 2, 2012, the Company formed Novagen Finance Pty Ltd under the laws of Australia as a wholly owned subsidiary. Novagen Finance Pty Ltd operates as an internal finance company for Novagen Solar Inc. and its subsidiaries.

 

On June 25, 2012, the Company completed the acquisition of all of the outstanding capital stock of Renegade Streetwear Pty Ltd, an Australian corporation ("Renegade"), for an aggregate of 400,000 shares of the Company’s common stock. Renegade is in the business of design, manufacture and distribution of V-Twin engines, custom motorcycles and related urban clothing under the Renegade brand. Management believes that the acquisition of Renegade will enable the Company to accelerate the development of its products and services.

 

On July 5, 2012, Novagen entered into an agreement to acquire Y Engine Developments Pty Ltd (hereunder “Y Engine Developments”) under the laws of Australia as a wholly-owned operating subsidiary. Y Engine Developments owns all rights to an opposing piston divaricate cylinder twin crank journal reciprocating piston engine developed by Micheal Nugent, the sole officer and director of Y Engine Developments, who has been a director and officer of Novagen since December 7, 2011. Novagen will issue one share of its common stock to Mr. Nugent in exchange for 1 ordinary share of Y Engine Developments. The acquisition of Y Engine Developments is to complete on September 14, 2012. Y Engine Developments will continue to research producing engines to utilize advances in bio fuel initiatives and development.

 

On July 24, 2012, Novagen entered into an agreement to acquire 28 acres of farmland in Beerwah, Queensland, Australia, from an unrelated person. Management intends to utilize the property for development and testing of environmentally sustainable energy solutions.

 

12
 

As part of the change in control and the incorporation and acquisition of new Australian subsidiaries, the Company has effectively entered into a new development stage for accounting purposes which commenced on January 1, 2012.

 

Our currently available capital and cash flow has been generated through share subscriptions and loans from management and non-affiliated third parties and it is our management’s intention that this will continue together until the Company earns sufficient revenue to become self-sustaining.

 

Our ultimate success will depend upon our ability to raise capital including joint venture projects and debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.

 

Our ability to obtain needed financing may be impaired by such factors as the capital markets, both generally and specifically in the renewable energy industry, and the fact that we have not been profitable, which could impact the availability or cost of future financings.

 

Results of Operations

 

We recorded a net profit of $249,814 for the three months ended June 30, 2012 (net profit of $123,921 for the 6 months ended June 30, 2012), compared with a net loss of $1,584 for the three months ended June 30, 2011 (net loss of $16,093 for the 6 months ended June 30, 2011). The net profit is due to the gain on acquisition of the wholly owned subsidiary, Renegade Streetware Pty Ltd.

 

Total expenses amounted to $148,862 for the three months ended June 30, 2012 ($274,755 for the 6 months ended June 30, 2012) compared with $1,584 for the three months ended June 30, 2011 ($16,093 for the 6 months ended June 30, 2011).

 

Expenses for the three months ended June 30, 2012 compared with the three months ended June 30, 2011 included:

 

 

·         Administration expenses $26,370 ($NIL)
·         Depreciation $4,454 ($NIL)
·          Professional fees $22,462 ($1,584)
·          Rent $18,907 ($NIL)
·         Travel $3,579 ($NIL)
·         Compensation related expenses $69,781 ($NIL)
·          Research & development $3,309 ($NIL)

 

Expenses for the six months ended June 30, 2012 compared with the six months ended June 30, 2011 included:

 

·          Administration expenses $44,644 ($7,812)
·          Depreciation $4,816 ($NIL)
·          Professional fees $38,131 ($8,281)
·          Rent $29,989 ($NIL)
·          Travel $13,669 ($NIL)
·          Compensation related expenses $132,378 ($NIL)
·          Research & development $11,128 ($NIL)

 

13
 

Liquidity and Capital Reserves

 

As at June 30, 2012 the Company had total assets of $539,815 including:

 

·          Inventory - engines $114,700
·          Inventory – bike parts $26,061
·          Plant & Equipment at cost $74,933
·          Motor Vehicles $264,642
·          Office Furniture & Equipment $27,971
·          Property Improvements $3,456

 

The above reflects an increase in the value of our total assets from $nil as at December 31, 2011.

 

As at June 30, 2012, the Company’s total liabilities amounted to $339,385 which reflects an increase of the value of total liabilities from $267 as at December 31, 2011. The increase was primarily due to $279,294 in notes payable.

 

The Company entered into four notes payable at the end of March 2012, with subsequent increases to the amounts borrowed in the June 2012 quarter. As at June 30, 2012 the notes total $269,797 Australian Dollars ($279,294 US Dollars). These notes are demand notes with no guarantee, no stated maturity date bearing 5% annual interest on un-matured amounts and 10% on matured, unpaid amounts. As demand notes these notes are considered current liabilities. No interest was accrued as of June 30, 2012 and the reported balance owing in US Dollars was $279,294. These loans were from officers of the Company and its affiliates.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of June 30, 2012. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective.

 

Changes in Disclosure Controls and Procedures

 

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2012, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

14
 

Part II. Other Information

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On June 30, 2012, the Company issued 400,000 shares of its common stock to acquire all the issued and outstanding shares of Renegade Streetwear Pty Ltd., an Australian company, from unaffiliated persons not resident in the United States. The issuance of our common stock was exempt from registration under Regulation S promulgated under the Securities Act of 1933.

 

On August 16, 2010, the Company issued 21,224,600 shares of common stock to three of its creditors at a price of $0.01 per share, in full and final settlement of a debt of $212,246 owed to the creditors. One of the creditors was the prior sole director of the Company, and he received 5,855,800 shares of common stock in full and final settlement of $58,558 owed to him by the Company for expenses incurred on the Company’s behalf. The issuance of our common stock was exempt from registration under sections 4(2) and 4(6) of the Securities Act of 1933 and Regulation S and Regulation D, promulgated thereunder.

 

Item 3. Default Upon Senior Notes

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit Description
   
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS* XBRL Instance Document
101.SCH* XBRL Schema Document
101.CAL* XBRL Calculation Linkbase Document
101.DEF* XBRL Definition Linkbase Document
101.LAB* XBRL Label Linkbase Document
101.PRE* XBRL Presentation Linkbase Document

 

* Pursuant to Rule 405(a)(2) of Regulation S-T, the Company will furnish the XBRL Interactive Data Files with detailed footnote tagging as Exhibit 101 in an amendment to this Form 10-Q within the permitted 30-day grace period for the first quarterly period in which detailed footnote tagging is required after the filing date of this Form 10-Q.

 

15
 

Signatures

 

In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  NOVAGEN SOLAR INC.
   
Date: August 20, 2012

By: /s/ Micheal Nugent

Micheal P. Nugent

Chief Executive Officer, President,

Chief Financial Officer and

Principal Accounting Officer

   
   
Date: August 20, 2012

By: /s/ Michael Norton-Smith

Michael Norton-Smith

Chief Financial Officer and

Principal Accounting Officer

 

XOTC:NOVZ Quarterly Report 10-Q Filling

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