UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C.
FORM
S-1 A-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
WIND
WORKS POWER CORP.
(Exact
name of registrant as specified in its charter)
| Nevada | 3510 | 98-0409895 |
|
(State or other jurisdiction
of Incorporation)
|
(Primary
Industrial
Classification
Code)
|
(I.R.S.
Employer
Identification
No.)
|
346
Waverley Street
Ottawa,
Ontario Canada K2P 0W5
______________________________________________________________________________
(Address,
including zip code, and telephone number, including area code, of registrant's
principal executive offices)
Ingo
Stuckmann
346
Waverley Street
Ottawa,
Ontario Canada
K2P
OW5
(613)226-7883
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
______________________________________________________________________________
Copies of
all communications, including all communications sent to the agent for service,
should be sent to:
Jeffrey
G. Klein, P.A.
2600
North Military Trail
Suite
270
Boca
Raton, Florida 33431
(561)997-9920
______________________________________________________________________________
Approximate
date of commencement of proposed sale to the public:
From time
to time after the effective date of this registration statement.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933
check the following box. o
If this
form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering. o
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 o | Accelerated Filer o |
|
Non-accelerated Filer o
|
Smaller
Reporting Company x
|
CALCULATION
OF REGISTRATION FEE
|
Title
of
Each
Class
Of
Securities
To
Be Registered
|
Amount to be Registered(1) |
Proposed
Maximum
Offering Price Per
Share(2)
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount
of
Registration
Fee(2)
|
|
Common Stock
|
3,000,000 | $1.00 | $3,000,000 | $213.90 |
|
(2)
|
Based
on Rule 457 under the Securities
Act.
|
|
(3)
|
This
amount represents the maximum aggregate value of common stock which may be
put to the selling stockholder by the registrant pursuant to the terms and
conditions of an Investment Agreement between the selling stockholder and
the registrant.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. The
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Information in this preliminary prospectus is not complete and may be
changed. This preliminary prospectus is not an offer to sell these securities,
and they are not soliciting an offer to buy these securities, in any
jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
DATED MAY 4 , 2010
WIND
WORKS POWER CORP.
3,000,000 Shares of Common
Stock
This
prospectus relates to the resale of up to 3,000,000 shares of the
common stock of Wind Works Power Corp., a Nevada corporation, by Kodiak Capital
Group, LLC (“Kodiak” or the “Selling Stockholder”), a Delaware Corporation, and
a selling stockholder pursuant to a “put right” under an investment
agreement (the “Investment Agreement”), also referred to as an Equity Line of
Credit, that we have entered into with Kodiak. The Investment Agreement
permits us to “put” up to $103 million in shares of our common stock to
Kodiak. We are registering $3 million of our common
stock. We will have to either amend this registration statement or
file a new registration statement if we intend to sell to Kodiak $10 million of
our common stock. We are not selling any shares of common stock in
this offering. Therefore, we will not receive any proceeds from the
sale of these shares by Kodiak. However, we will
receive proceeds from the sale of securities pursuant to our exercise of this
put right. We will bear all costs associated with this
registration.
Kodiak
has informed us that they do not have any agreement or understanding, directly
or indirectly, with any person to distribute their common stock. We agree
to pay the expenses of registering the foregoing shares of our Common
Stock.
Pursuant
to registration rights granted by us to Kodiak, we are obligated to register the
shares acquired by Kodiak. The distribution of the shares by Kodiak
is not subject to any underwriting agreement. We will receive none of the
proceeds from the sale of shares by the selling stockholders. The selling
stockholders identified in this prospectus will receive the proceeds from any
sale of their shares.
Upon the
effective date of this registration statement, Kodiak will commit to purchase up
to $3,000,000 worth of the Company’s common stock over the course of thirty six
(36) months (the “Line”). The Company will be entitled to put to Kodiak
such number of shares of Common Stock as equals either (i)
$1,000,000 or (2) 200% of the average daily volume (U.S. market only)
multiplied by the closing price on the date that Kodiak receives notice of the
Company’s request to draw down on the Line (the “Put Date”).
The
offering price of the securities relative to Kodiak will equal 95% of the volume
average weighted price of the securities during the three consecutive trading
days immediately after the Put Date. There will be no underwriters discounts or
commissions,
Our
common stock currently trades on the Over the Counter Bulletin Board
("OTCBB”) under the symbol "WWPW.OB."
On May
4, 2010 the last reported sale price for our common stock on the
OTCBB was
$0.65 per share.
The
securities offered in this prospectus involve a high degree of risk. You should
purchase shares only if you can afford the entire loss of your
investment. See "Risk Factors" beginning on page 8 of this
prospectus to read about factors you should consider before buying shares of our
common stock.
The
information in this prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. No one may sell these securities nor
may offers to buy be accepted until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer, solicitation or sale is not
permitted.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
None.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
1
TABLE OF CONTENTS
| Page | |
|
PROSPECTUS
SUMMARY
|
4 |
|
THE
OFFERING
|
4 |
|
RISK
FACTORS
|
8 |
|
CAUTIONARY
NOTES REGARDING FORWAARD LOOKING STATEMENTS
|
25 |
|
USE
OF PROCEEDS
|
26 |
|
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
|
27 |
|
CAPITALIZATION
|
31 |
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
32 |
|
BUSINESS
|
38 |
|
MANAGEMENT
|
48 |
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
56 |
|
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CONTROL PERSONS
|
58 |
|
SELLING
STOCKHOLDER
|
58 |
|
DESCRIPTION
OF SECURITIES
|
59 |
|
SHARES
ELIGIBLE FOR FUTURE SALE
|
63 |
|
PLAN
OF DISTRIBUTION
|
64 |
|
LEGAL
MATTERS
|
67 |
|
EXPERTS
|
67 |
|
REPORT
TO STOCKHOLDERS
|
67 |
|
WHERE
YOU CAN FIND MORE INFORMATION
|
67 |
2
You may
only rely on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with different
information. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the common stock
offered by this prospectus. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any common stock in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
prospectus nor any sale made in connection with this prospectus shall, under any
circumstances, create any implication that there has been no change in our
affairs since the date of this prospectus or that the information contained by
reference to this prospectus is correct as of any time after its
date.
About
This Prospectus
Wind
Works Power Corp. (“Wind Works’) has not authorized anyone to give
any information or make any representation about the offering that differs from,
or adds to, the information in this Prospectus or the documents that are
publicly filed with the Securities and Exchange Commission (“SEC”). Therefore,
if anyone does give you different or additional information, you should not rely
on it. The delivery of this Prospectus does not mean that there have not been
any changes in the condition of Wind Works since the date of this
Prospectus. If you are in a jurisdiction where it is unlawful to offer to
purchase or exercise the securities offered by this Prospectus, or if you are a
person to whom it is unlawful to direct such activities, then the offer
presented by this Prospectus does not extend to you. This Prospectus speaks only
as of its date except where it indicates that another date applies. Documents
that are incorporated by reference in this Prospectus speak only as of their
date, except where they specify that other dates apply. The information in this
Prospectus may not be complete and may be changed. The selling shareholders may
not sell any securities until the registration statement filed with the SEC is
effective. This Prospectus is not an offer to purchase these securities and it
is not soliciting an offer to purchase these securities in any state
or other jurisdiction where the purchase or exercise is not
permitted.
This
prospectus, together with the applicable prospectus supplements and
amendments includes all material information relating to this offering. To
the extent that any statement that we make in a prospectus supplement is
inconsistent with statements made in this prospectus, the statements made in
this prospectus will be deemed modified or superseded by those made in a
prospectus supplement. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
“Where You Can Find More Information.”
Market
data and certain industry forecasts used in this prospectus were obtained from
market research, publicly available information and industry
publications. We believe that these sources are generally reliable ,
but the accuracy and completeness of such information is not
guaranteed. We have not independently verified this
information, and we do not make any representation as to the accuracy of such
information.
3
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. You
should read the entire prospectus carefully, including, the section entitled
"Risk Factors" before deciding to invest in our common stock. Wind Works Power
Corp. is referred to throughout this prospectus as "Wind Works," "we" or
"us."
The
Company
Wind
Works is a Nevada corporation which was incorporated November 20, 2002 as Reese
Corp. On August 9, 2006, we amended our certificate of
incorporation and changed our name to AmMex Gold Mining
Corp. On March 25, 2009 we further amended our certificate of
incorporation and changed our name to Wind Works Power Corp. Since
our inception we have been engaged in several different business
fields. Our initial focus was to develop high speed wireless
internet access to the public via public hot spots. This business
venture was not successful and was terminated in early 2006. In June
2006, we changed our business focus to concentrate on precious metal
exploration, primarily gold and silver. Neither of these business
ventures was
successful. In March 2009, we
changed our name to Wind Works Power Corp. to
reflect management’s decision to investigate opportunities
in wind power. Management believes that renewable energy supplies, such as
wind power, will be in increasing demand over the next ten
years.
Since
adopting its new business plan, management has entered into several
joint venture agreements.. We also acquired all of the issued and
outstanding shares of common stock of Zero Emission People , LLC (“Zero
Emission”). Zero Emission is a Delaware limited
liability company. It was incorporated on May 1, 2008 by our
current chief executive officer, Dr. Ingo Stuckmann. Zero Emission began
its commercial operations in July 2008 when Zero Emission acquired an early
stage wind farm project located near Bethany, Ontario. A
second 10 MW wind farm was also acquired near Maxville,
Ontario. Since then we have acquired equity interests in
additional project companies that hold the assets for wind farms located
in Ontario, Canada, Illinois and Montana. Wind Works has also entered
into option agreements for project acquisitions in Belgium and
Hungary.
THE
OFFERING
| Common Stock offered to Kodiak Capital | Up to 3,000,000 shares of our Common Stock |
| Common Stock to be outstanding after the offering | 30,049,046* |
| Use of Proceeds | We will not receive any proceeds from the sale of the common stock hereunder. We will, however, receive proceeds from the sale of our common stock pursuant to the Investment Agreement. See "Use of Proceeds" for a complete description. Upon the effective date of this registration statement, Kodiak will commit to purchase up to $3,000,000 worth of Company’s common stock over the course of thirty-six months |
4
| Risk Factors |
The
purchase of our common stock involves a high degree
of risk. You should carefully review and consider
"Risk Factors" as set forth herein.
|
| OTC Bulletin Board Trading Symbol | WWPW.OB |
* Based
on the current issued and outstanding number of shares of 27,049,046
as of April 8 ,2010, and assuming issuance of all shares registered herewith,
the number of shares offered herewith represents approximately 10% of the total
issued and outstanding shares of common stock. The Company is also
obligated to issue approximately a further 26 million shares of our common stock
pursuant to the Company’s acquisition of Zero Emission
People.
This
prospectus relates to the resale of up to 3,000,000 shares of
our common stock by Kodiak. We have entered into
an Investment Agreement with Kodiak. Pursuant to this Agreement,
Kodiak will commit to purchase up to $10,000,000 (the "Facility") of our Common
Stock over the course of 36 months ("Facility Period"), after a registration
statement has been declared effective by the SEC (the "Effective Date"). We are
registering $3million of our common stock. As a result, we
will not be able to draw down on the entire dollar amount of the equity credit
line without filing either an amendment to this registration statement or a new
registration statement for additional shares of common stock and that
registration statement would have to be declared effective prior to the issuance
of any additional shares of stock. The amount that we shall be
entitled to request from each of the purchase "Puts", shall be equal to either
(1) $1,000,000 or (2) 200% of the average daily volume (U.S market
only) ("ADV") of our Common Stock for the three trading days prior to
the "Put" notice, multiplied by the average of the 3 daily closing
prices immediately preceding the Put Date. The Pricing Period
shall be the five (5) consecutive trading days immediately after the Put Date.
The Market Price shall be the lowest closing bid price of the Common Stock
during the Pricing Period. The Purchase Price shall be set at 95% of the Market
Price. The Put Date shall be the date that the Investor receives a Put Notice of
draw down by us of a portion of the Facility. There are put restrictions applied
on days between the Put Date and the Closing Date with respect to that Put.
During this time, we shall not be entitled to deliver another Put
Notice.
For the
purpose of determining the number of shares of common stock to be offered by
this prospectus, we have assumed that we will issue not more than
3,000,000 shares pursuant to the exercise of our put right
under the Investment Agreement, although the number of shares that we will
actually issue pursuant to that put right may vary depending on the
trading price of our common stock. We currently do not intend to exercise
the put right in a manner which would result in our issuance of more
than 3,000,000 shares, but if we were to exercise the put right in
that manner, we would be required to file a subsequent registration statement
with the Securities and Exchange Commission (“SEC”) and that registration
statement would have to be declared effective prior to the issuance of any
additional shares.
5
The
Investment Agreement with Kodiak provides that following notice to Kodiak, we
may put to Kodiak up to $10,000,000 in shares of our common stock for a purchase
price equal to 95 percent of the lowest closing “best bid” price (the highest
posted bid price) of the common stock during the five consecutive trading days
immediately following the date of our notice to Kodiak of our election to put
shares pursuant to the Investment Agreement. The dollar value that we will
be permitted to put pursuant to the Investment Agreement will be
either:
|
▪
|
200
percent of the average daily volume (U.S. market only) of our common stock
for the three Trading Days prior to the applicable Put Notice Date,
multiplied by the average of the three daily closing prices immediately
preceding the Put Date; or
|
|
▪
|
$1,000,000.
Notwithstanding
the foregoing, we are registering $3 million of our securities and as
a result, we will not be able to put to Kodak the
entire amount of our credit
facility.
|
To the
extent that the disparity between the offering price and market price of the
Common Stock is material, such disparity was determined by the Company to be
fair in consideration of Kodiak establishing a line of credit to facilitate the
Company’s ongoing operations.
Kodiak
has indicated that it will resell those shares in the open market, resell our
shares to other investors through negotiated transactions, or hold our shares in
its portfolio. This prospectus covers the resale of our stock by Kodiak
either in the open market or to other investors through negotiated transactions.
The obligations of Kodiak under the Investment Agreement are not
transferable and this registration statement does not cover sales of our common
stock by transferees of Kodiak.
Kodiak
will only purchase shares when we meet the following conditions:
|
▪
|
A
registration statement shall have been declared effective and shall remain
effective and available for the resale of all the registrable securities
(as defined in the Registration Rights Agreement to be executed in
connection with the Investment Agreement) at all times until the Closing
with respect to the subject Put
Notice;
|
|
▪
|
At
all times during the period beginning on the related Put Notice Date and
ending on and including the related Closing Date, our common stock shall
have been listed on the Principal Market and shall not have been suspended
from trading thereon for a period of two consecutive Trading Days during
the Open Period and we shall not have been notified of any pending or
threatened proceeding or other action to suspend the trading of our common
stock;
|
6
|
▪
|
We
have complied with our obligations and are otherwise not in breach of or
in default under, the Investment Agreement, the Registration Rights
Agreement or any other agreement executed in connection therewith which
has not been cured prior to delivery of Kodiak’ Put Notice
Date;
|
|
▪
|
No
injunction shall have been issued and remain in force, or action commenced
by a governmental authority which has not been stayed or abandoned,
prohibiting the purchase or the issuance of the Securities;
and
|
|
▪
|
The
issuance of the Securities will not violate any shareholder approval
requirements of the Principal
Market.
|
|
▪
|
The
representations and warranties of the Company shall be true and correct as
of the date when made and as of the applicable Closing Date as though made
at that time and the Company shall have performed, satisfied and complied
with the covenants, agreements and conditions required by the Equity
Credit Line.
|
|
▪
|
If
any of the events described above occurs during a Pricing Period, then
Kodiak shall have no obligation to purchase the Put Amount of our common
stock set forth in the applicable Put
Notice.
|
The
Investment Agreement will terminate when any of the following events
occur:
|
▪
|
When
Kodiak has purchased an aggregate of $10,000,000 of our common stock
pursuant to the Investment Agreement;
or,
|
|
▪
|
On
the date which is 36 months after the Effective Date of the Investment
Agreement; or,
|
|
▪
|
Upon
written notice of Wind Works to Kodiak.
|
Any and
all shares, or penalties, if any, due under the Investment Agreement shall be
immediately payable and due upon termination of the agreement.
As we
draw down on the Equity Line of Credit, shares of our common stock will be sold
into the market by Kodiak. The sale of these additional shares could cause
our stock price to decline. In turn, if the stock price declines and we
issue more puts, more shares will come into the market, which could cause a
further drop in the stock price. You should be aware that there is an
inverse relationship between the market price of our common stock and the number
of shares to be issued under the Equity Line of Credit. If our stock price
declines, we will be required to issue a greater number of shares under the
Equity Line of Credit. We have no obligation to utilize the full amount
available under the Equity Line of Credit.
7
In
addition to the shares to be issued pursuant to the Equity Line of Credit, we
have agreed to pay to Kodiak a Commitment Fee equal to 2.5% of the Facility
Amount, whereby the total Commitment Fee of $250,000 is payable half on the
first draw-down and the balance on the earlier of the second draw-down or six
months from execution of the Term Sheet (December 19, 2009). We have
issued Kodiak 75,000 shares of our restricted common
stock. Said shares are not covered by the registration statement with
respect to this prospectus and paid Kodiak $10,000 in addition to the
commitment fee.
RISK
FACTORS
This
investment has a high degree of risk. Before you invest you should
carefully consider the risks and uncertainties described below and the other
information in this prospectus. The risks and uncertainties described
below are not the only ones facing the Company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations. If any of the following risks
actually occur, our business, operating results and financial condition could be
harmed and the value of our stock could go down. This means you could lose
all or a part of your investment.
RISKS
ASSOCIATED WITH THE COMPANY'S PROSPECTIVE BUSINESS AND
OPERATIONS
It
is unlikely that we will be able to sustain profitability in the
future.
We have
incurred significant losses to date and there can be no assurance that we will
be able to reverse this trend. We have a working capital deficit. In
addition, we expect to increase our infrastructure and operating expenses to
fund our anticipated growth. As a result, we do not expect
to generate profits in 2010 or thereafter and may not be able to support our
operations or otherwise establish a return on invested capital. We
cannot assure you that any of our business strategies will be successful or that
significant revenues or profitability will ever be achieved or, if they are
achieved, that they can be consistently sustained or increased on a quarterly or
annual basis.
We
expect our operating losses to continue.
We expect
to incur increased operating expenses during fiscal year 2010 and 2011. The
amount of net losses and the time required for us to reach and sustain
profitability is uncertain. The likelihood of our success must be considered in
light of the problems, expenses, difficulties, and delays frequently encountered
in connection with a new business, including, but not limited to, uncertainty as
to development and acquisitions and the time required for the Company’s planned
production to become available in the marketplace. There can be no assurance
that we will ever generate increased product revenue or achieve
profitability at all or on any substantial basis.
8
Risks
and uncertainties can impact our growth.
There are
several risks and uncertainties, including those relating to our ability to
raise money and grow our business and potential difficulties in integrating new
acquisitions. These risks and uncertainties can materially affect the results
predicted. Other risks include the Company’s limited operating history in wind
energy, the limited financial resources, domestic or global economic conditions,
activities of competitors and the presence of new or additional competition, and
changes in federal, prvincial or state laws and conditions of equity
markets.
Our
future operating results over both the short and long term will be subject to
annual and quarterly fluctuations due to several factors, some of which are
outside of our control. of the Company. These factors include
but are not limited to fluctuating market demand for our services, and general
economic conditions.
Failure
to close acquisition opportunity.
We will
need to identify, locate, or address replacing current potential acquisitions or
strategic alliances with new prospects or initiate other existing available
projects that may have been planned for later stages of growth and the Company
may therefore not be ready to activate. This process can place a strain on the
Company. New acquisitions, business opportunities, and alliances, take time for
review, analysis, inspections and negotiations. The time taken in the review
activities is an unknown factor, including the business structuring of the
project and related specific due diligence factors.
We
must submit a competitive bid with respect to the wind power
contracts.
We have and will be continue to submit applications or bids for wind power contracts to various utilities. If we secure the contracts and have not accurately calculated the return on investment or the costs to generate the wind energy, we will not maximize the value of the power contracts. If potential buyers of our wind parks do not believe that the power contracts are not economically viable or represent minimum profitability, we will not be able to sell these wind farms or if we sell these wind parks, we will not be able to generate the revenues we expect.
Our acquisitions
were not negotiated at arm’s length.
The
acquisition of Zero Emission and other projects in which we have an interest
were not transactions negotiated at arm’s length. While we believe
that the consideration paid for the acquisitions or investment opportunities, is
equivalent to the consideration that would be paid to a third
party, there can be no assurance that in fact we paid fair market
value for the acquisitions. We did not retain an independent
analyst to determine the value of any of these acquisitions.
Our
Independent Registered Public Accounting Firm has issued a going concern
opinion.
Due to
our operating losses and deficits, our independent registered public accounting
firm in their financial statements have raised substantial doubts about our
ability to continue as a going concern. If we are not able to
continue as a going concern, our operations will terminate and any investment in
the Company will likely become worthless.
9
We
will need to raise additional capital.
The
commercial exploitation of wind power technology will require additional
capital. The development of the wind farm projects will require
significant capital infusion. There is no commitment in place to
secure this additional financing. Any equity financing may be dilutive to
shareholders, and debt financing, if available, would increase expenses and may
involve restrictive covenants. The Company will be required to raise additional
capital, at times and in amounts, which are uncertain, especially under the
current capital market conditions. Under these circumstances, if the
Company is unable to acquire additional capital or is required to raise it on
terms that are less satisfactory than desired, it may have a material adverse
effect on its financial condition and you will lose your
investment.
Our
executive officers, board of directors and key employees are crucial to our
business, and we may not be able to recruit, integrate and retain the personnel
we need to succeed.
Our
success depends upon a number of key management, sales, technical and other
critical personnel, including our executive officers, our board of directors and
key employees with expertise in the industry. The loss of the services of any
key personnel, or our inability to attract, integrate and retain highly skilled
technical, management, sales and marketing personnel could result in significant
disruption to our operations, including our inability or limited success in
locating new sites, effectiveness of sales efforts, quality of customer service,
and completion of our initiatives, including growth plans and the results of our
operations. Any failure by us to find suitable replacements for our key senior
management may be disruptive to our operations. Competition for such personnel
in the technology industries is intense, and we may be unable to attract,
integrate and retain such personnel successfully.
Any
revenues from the sale or lease of our wind farms will be subject to fluctuating
market prices for energy and capacity.
Any
revenues that can be generated by wind farms depend on market prices of energy
in competitive energy markets. Market prices for both energy and capacity are
volatile and depend on numerous factors outside our control including economic
conditions, population growth, electrical load growth, government and regulatory
policy, weather, the availability of alternate generation and transmission
facilities, balance of supply and demand, seasonality, transmission and
transportation constraints and the price of natural gas and alternative fuels or
energy sources. These factors will impact the value of our wind
farms.
We
may fail to establish and maintain strategic relationships.
We
believe that the establishment of strategic partnerships will greatly benefit
the growth of our business, and we intend to seek out and enter into strategic
alliances. We may not be able to enter into these strategic partnerships
on commercially reasonable terms, or at all. Even if we enter into
strategic alliances, our partners may not attract significant numbers of
customers or otherwise prove advantageous to our business. Our inability
to enter into new distribution relationships or strategic alliances could have a
material and adverse effect on our business.
10
There
are a small number of wind turbine manufacturers, and increased demand may lead
to difficulty in obtaining wind turbines and related components at affordable
prices or in a timely manner.
There are
only a small number of companies that have the expertise and access to the
necessary components to build multi-megawatt class wind turbines. The rapid
growth in the aggregate worldwide wind energy industry has created significantly
increased demand for wind turbines and their related components that is
currently not being adequately satisfied by suppliers. Wind turbine suppliers
have had significant supply backlogs in the past, which tend to drive up prices
and delay the delivery of ordered wind turbines and
components. If this continues, our wind farms will become less
attractive.
The
federal government may not extend or may decrease tax incentives for renewable
energy, including wind energy, which would have an adverse impact on our
development strategy.
Tax
incentives offered by the United States and other governments make wind energy
an attractive business opportunity. If these incentives are
eliminated or reduced, our wind farms will be less attractive
to prospective purchasers.
Currently,
federal tax incentives applicable to the wind energy industry currently in
effect include the production tax credit (“PTC”) and business energy investment
tax credit (“ITC”) together with accelerated tax depreciation for certain assets
of wind farms. The PTC provides the owner of a wind turbine placed in
operation before the end of 2012 with a ten-year credit against its federal
income tax obligations based on the amount of electricity generated by the wind
turbine. The ITC provides a 30% credit in the form of a tax credit for property
placed in service before the end of year 2012, or, alternatively, a 30% cash
grant from the U.S. Treasury Department if an application is submitted by
October 2011. The accelerated depreciation for certain assets of wind farms
provides for a five-year depreciable life for these assets, rather than the 15
to 25 year depreciable lives of many non-renewable energy assets, with an
additional 50% bonus depreciation allowed for wind energy assets placed in
service by the end of 2009.
The PTC
and ITC are scheduled to expire on December 31, 2012, and, unless extended
or renewed by the U.S. Congress, will not be available for energy generated from
wind turbines placed in service after that date. We cannot assure you that
current or any subsequent efforts to extend or renew this tax incentive will be
successful or that any subsequent extension or renewal will be on terms that are
as favorable as those that currently exist. In addition, there can be no
assurance that any subsequent extension or renewal of the PTC and/or ITC would
be enacted prior to its expiration or, if allowed to expire, that any extension
or renewal enacted thereafter would be enacted with retroactive effect. We also
cannot assure you that the tax laws providing for accelerated depreciation of
wind farm assets will not be modified, amended or repealed in the future. If the
federal PTC or ITC are not extended or renewed, or are extended or renewed at
lower rates, financing options for wind farms will be reduced and development
plans for additional wind farms will be adversely affected.
11
The
effect of probable governmental regulation on the business domestically and in
foreign countries may adversely affect our operations.
As we
expand our efforts to develop our business, we will have to remain attentive to
relevant federal and state regulations. We intend to comply fully with all laws
and regulations, and the constraints of federal, state and provincial
restrictions could impact the success of our efforts.
Our new
business operations and services may become established in multiple states and
foreign countries. These jurisdictions may claim that we are required to qualify
to do business as a foreign corporation in each such state and foreign country.
New legislation or the application of laws and regulations from jurisdictions in
this area could have a detrimental effect upon our business. We cannot predict
the impact, if any, that future regulatory changes or developments may have on
our business, financial condition, or results of operation.
At this
time no regulatory or additional regulatory approvals are necessary and, to the
best knowledge of the officers, we have complied with all laws, rules and
regulations.
Insufficient
transmission capacity might prevent our Ontario projects from
realization.
A
majority of our projects are located in Ontario, Canada. We have applied
for 15 Feed-In-Tariff contracts( FIT contracts) to the Ontario Power
Authority. On April 8, 2010, we have been notified that we are being
awarded a total of seven FIT contracts. Even though we have been awarded a
FIT contract, there may not be sufficient transmission capabilities to
connect the project. In the alternative, if we move
forward with the project, we will incur significant costs in
improving transmission capacity and by devoting these resources to this
project, our other projects and business plan may be adversely
affected. The
remainder of our project applications, a total of 8 projects, have been placed
into the Economic Testing Round as a result of limited connection capacity at
the point of interconnection proposed in the application to the Ontario Power
Authority.
The
performance of wind farms is dependent upon meteorological and atmospheric
conditions that fluctuate over time.
Identifying
suitable locations for our wind farms is critical. The production of
electricity generated by wind farms will be highly dependent on meteorological
and atmospheric conditions.
Site
selection requires the evaluation of the quality of the wind resources based
upon a variety of factors. The wind data gathered on site and data collected
through other sources form the basis of wind resource projections for a wind
farm’s performance. Wind resource projections do not predict the wind
at any specific period of time in the future. Therefore, even in the event where
prediction of a wind farm’s wind resources becomes validated over time, the wind
farm will experience hours, days, months and even years that are below wind
resource predictions. Wind resource projections may not predict the actual wind
resources observed by the wind farm over a long period of time. Assumptions
included in wind resource projections, such as the interference between
turbines, effects of vegetation and land use, and terrain effects may not be
accurate. Wind resources average monthly and average time of day long-term
predictions may not be accurate and, therefore, the energy wind farms produce
over time may have a different value than forecast.
12
Operational
factors may reduce energy production below projections, causing a reduction in
revenue.
The
amount of electricity generated by a wind farm depends upon many factors in
addition to the quality of the wind resources, including but not limited to
turbine performance, aerodynamic losses resulting from wear on the wind turbine,
degradation of other components, icing or soiling of the blades and the number
of times an individual turbine or an entire wind farm may need to be shut down
for maintenance or to avoid damage due to extreme weather conditions. In
addition, conditions on the electrical transmission network can impact the
amount of energy a wind farm can deliver to the network. These matters could
adversely impact the value of our wind farms.
The
wind energy industry is extensively regulated and changes in or new regulations
or delays in regulatory approval could hurt our business
development.
Developing
our wind farms will be subject to extensive energy and environmental regulation
by federal, provincial, state and local authorities. Delay in obtaining, or
failure to obtain and maintain in full force and effect, any of the regulatory
approvals we need to develop our wind farms, or delay or failure to satisfy any
applicable regulatory requirements, could prevent us from fully implementing our
business strategy.
Various
state and provincial governments may not extend or may decrease incentives for
renewable energy, including wind energy, which would have an adverse impact on
our development strategy.
Various
types of incentives which support the sale of electricity generated from wind
energy presently exist in the United States and Canada. These
incentives can be offered at both the state and provincial level. We
cannot assure you that governmental support for alternative energy sources in
the form of RPS programs or RECs recognition and trading will continue at the
state or provincial level or that the wind farms that we develop will qualify
for such incentives. Any decrease in government incentives
would have an adverse impact on our development strategy.
We
will need to locate and develop new sources of wind power in a timely and
consistent manner, and failure to do so would adversely affect our operations
and financial performance.
Our
success in the industry requires additional and continuing development to become
and remain competitive. Subject to available working capital, we
expect to make substantial investments in development activities. Our future
success will depend, in part, on our ability to continue to locate additional
wind power sites. Developing a wind farm site is dependent upon, among other
things, acquisition of rights to parcels of property and receipt of required
local, state and federal permits. This development activity
will require continued investment in order to maintain and grow our market
position. We may experience unforeseen problems in our development endeavors. We
may not achieve widespread market acceptance of our wind farms. We
may not meet some of these requirements or may not meet them on a timely basis.
We may modify plans for the development of a wind farm. We will typically incur
substantial expense in the development of wind farms. Many of these expenses,
including obtaining permits and legal and other services, are incurred before we
can determine whether a site is environmentally or economically feasible. After
such a determination is made, significant expenses, such as environmental impact
studies, are incurred. A number of factors are critical to a determination of
whether a site will ultimately be developed as a wind farm including changes in
regulatory environment, changes in energy prices, community opposition, failure
to obtain regulatory and transmission approvals and permits. These factors could
materially affect our ability to forecast operations and negatively affect our
stock price, results of operations, cash flow and financial
condition.
13
Wind
farms can be built only in regions with suitable wind conditions. In addition,
certain constraints must be taken into account in connection with the
development of each wind farm. These include topographic constraints,
landowners’ willingness to grant access to their land, connection capacities of
the local transmission network and regulatory constraints associated with the
proximity to housing, airports or protected sites.
If we
cannot locate sufficient available sites on which to develop wind farms, it
could have a material adverse effect on our business, results of operations,
financial condition, or on our ability to implement our business
strategy.
We will face competitive pressures
from a variety of competitors.
We are a
small company, and we will be operating in a highly competitive market, and this
competition may accelerate in the future. In both Canada and the United States,
large utility companies dominate the energy production industry and coal
continues to dominate as the primary resource for electricity production
followed by other traditional resources such as nuclear, oil and natural gas. We
expect that primary competition for the wind power industry will continue to
come from utility company producers of electricity generated from coal and other
non-renewable energy sources. Within the wind power market itself, there is also
a high degree of competition, with growth opportunities in all sectors of the
industry regularly attracting new entrants.
There are
a limited number of sites desirable for wind farms and a limited supply of wind
turbines and other related equipment necessary to operate wind farm facilities.
Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements. They may also be able to
devote greater resources to the development, promotion and sale of wind
farms. Current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties that enhance their ability to address the needs of our prospective
customers. It is possible that new competitors or alliances among competitors
may emerge and rapidly gain significant market share. This would in turn reduce
our ability to develop wind farms.
Access
to, availability and cost of transmission networks are critical to development
of wind farms; failure to obtain sufficient network connections for future wind
farms would adversely affect our operations and financial
performance.
Wind farm
operators will be dependent on electric transmission facilities owned and
operated by third parties to deliver the electricity. To the extent
that these facilities are not readily available, the value of our wind farms
will be adversely affected. The capacity of the local transmission
network may be limited or constrained, and the owner of the network may not
allow wind farm operators to interconnect without first constructing the system
upgrades that the owner requires. For this reason, we may be required to pay
some or all of the costs of upgrading the existing transmission facilities to
support the additional electricity that a wind farm will be delivering into the
network. The location of a wind farm in a particular area therefore depends
significantly on whether it is possible to interconnect with the transmission
network at a reasonable cost. Many wind farms are located in remote areas with
limited transmission networks where intense competition exists for access to,
and use of capacity on, the existing transmission facilities. We cannot assure
you that we will obtain sufficient network connections for future wind farms
within planned timetables and budgetary constraints.
14
Wind
farms are required to meet certain technical specifications in order to be
connected to the transmission network. If any wind farm does not meet, or ceases
to comply with, these specifications, we will not be able to connect, to or
remain connected, to the transmission network. We may also incur liabilities and
penalties, including disconnection from the network, if the transmission of
electricity by one or more of wind farms does not comply with applicable
technical requirements. In the agreements with respect to connecting to the
existing electricity transmission network between wind farms and the applicable
transmission owner or operator, the transmission owner or operator retains the
right to interrupt or curtail our transmission deliveries as required in order
to maintain the reliability of the transmission network. We cannot assure you
that our wind farms will not be adversely impacted by any such interruption or
curtailment.
Public opposition toward wind farms
may make it more difficult to obtain the necessary permits and authorizations
required to develop or maintain a wind farm.
Public
attitude towards aesthetic and environmental impacts of wind energy projects
impacts the ability to develop our wind farms. In many localities, the
environmental impact review process ensures a role for concerned members of the
public that can lead to changes in design or layout, extensive impact mitigation
requirements, or even the rejection of a project. In such areas, local
acceptance is critical to the ability to obtain and maintain necessary permits
and approvals. We cannot assure you that any wind farm projects under
development will be accepted by the affected population. Public opposition can
also lead to legal challenges that may result in the invalidation of a permit
or, in certain cases, the dismantling of an existing wind farm as well as
increased cost and delays. Reduced acceptance of wind farms by local
populations, an increase in the number of legal challenges or an unfavorable
trend in the outcome of these challenges could prevent us from achieving our
plans, which, in turn, could have a material adverse effect on our business,
results of operations and financial condition.
There is an
absence of historical price data that you can use to evaluate the likely success
of our business model.
There is
an absence of historical price data that you can use to assess the likelihood
that we will be able to recoup the costs of developing the wind
parks. In addition, factors beyond our control may impact our
operations including:
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a
decrease in prices of other sources of electricity, which would make
electricity prices from those other sources more competitive with our
wind-powered electricity generating
stations,
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▪
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additional
supplies of electric energy becoming available from our current
competitors or new market entrants, including the development of new
generation facilities that may be able to produce energy less expensively
than our wind-powered electricity generating
stations,
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15
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additional
supplies of energy or energy-related services becoming available if there
is an increase in physical transmission capacity into the power
pool,
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the
extended operation of nuclear generating plants located in adjacent
markets or the resumption of generation by nuclear facilities that are
currently out of service,
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weather
conditions prevailing in the province of Ontario where the wind power will
be generated initially,
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the
possibility of a reduction in the projected rate of growth in electricity
usage as a result of factors such as regional economic conditions and the
implementation of conservation programs,
and
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our
ability to negotiate successfully and enter into advantageous contracts
for sales of our electric energy.
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We have no patent protection on our
products.
We have
no patents on our products relating to the generation of wind energy. There is
no assurance that our products will not infringe upon patents or technologies
owned by others. We do not consider a grant of patents essential to the success
of our business.
Our
operating results may be adversely affected by the uncertain geopolitical
environment and unfavorable factors affecting economic and market
conditions.
Adverse
factors affecting economic conditions worldwide have contributed to a general
inconsistency in the power industry and may continue to adversely impact our
business, resulting in:
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reduced
demand for electricity as a result of a decrease in spending by customers
and potential customers
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increased
price competition for electricity,
and
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higher
overhead costs as a percentage of
revenues.
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Terrorist
and military actions may continue to put pressure on economic conditions. If
such an attack should occur or if the economic and market conditions
could deteriorate as a result of a terrorist attack, we may
experience a material adverse impact on our business, operating results, and
financial condition as a consequence of the above factors or
otherwise.
It
is unlikely that we will be able to sustain profitability in the
future.
We have
incurred significant losses to date and there can be no assurance that we will
be able to reverse this trend. Even if we are able to successfully
launch our new business, there can be no assurance that we will be able to
generate revenues to operate profitably.
16
If we cannot satisfy our debt
obligations, we may lose several of our projects.
In
connections with a recent financing, investors were
granted security interests in nine of our Ontario projects (the
“Secured Projects”). If we cannot satisfy the terms and conditions of the
financing agreements, investors could foreclose on these security interests
in which case we would lose these Secured Projects.
Security
interests in our Projects may restrict our ability to sell or develop the
Projects.
The
Secured Projects are covered by a blanket security
interest. If we wish to sell any of these Projects, our
creditors may not release the security interest without payment in
full of the outstanding
obligations. Similarly, financing on any of
these projects will be difficult and/or more costly as lenders will not have a
first lien on the Projects.
We may not be
able to secure releases for all secured lenders.
We have
granted security interests to multiple lenders. Any lender may refuse
to execute a release on any of the Secured Projects even if agreed to by other
secured lenders. In such case, our ability to sell or secure
financing will be limited
RISKS
RELATED TO OUR EQUITY CREDIT LINE AND COMMON STOCK
We
are registering an aggregate of 3,000,000 shares of common stock to be issued
under the Equity Line of Credit. The sale of such shares could depress the
market price of our common stock.
We are
registering an aggregate of 3,000,000 shares of common stock under
the registration statement of which this prospectus forms a part for issuance
pursuant to the Equity Line of Credit. These shares may be
sold into the public market by Kodiak or a transferee thereof. As of April
8, 2010 there were 27,049,046 shares of our common stock issued and
outstanding.
Assuming
we utilize the maximum amount available under the Equity Line of Credit,
existing stockholders could experience substantial dilution upon the issuance of
common stock.
Our
Equity Line of Credit with Kodiak contemplates the potential future issuance and
sale of up to $10,000,000 of our common stock to Kodiak subject to certain
restrictions and obligations. We are limiting this registration statement
to $3 million of our common stock. The following table is an example of the
number of shares that could be issued at various prices assuming we utilize the
maximum amount remaining available under the Equity Line of Credit.
17
The
following table should be read in conjunction with the footnotes immediately
following the table:
|
Price
Per share(1)
|
No of shares
issuable
(2)
|
Shares
Outstanding
after
issuance (3)
|
Percent
of Shares
outstanding (4)
|
|
$1.00
|
3,000,000
|
30,049,046
|
11.1%
|
|
$0.50
|
6,000,000
|
33,049.046
|
22.2%
|
|
$1.50
|
2,250,000
|
29,299,046
|
8.3%
|
|
$2.00
|
1,500,000
|
28,549,046
|
5.5%
|
|
(1)
|
Represents 95%
of the volume weighted price per
share.
|
|
(2)
|
Represents
the number of shares issuable if the entire remaining commitment of
$3,000,000 under the Equity Line of Credit were drawn down at the
indicated purchase prices.
|
|
(3)
|
Based
on 27,049,046 shares of common stock outstanding as of April
8, 2010.
|
|
(4)
|
Percentage
of the total outstanding shares of common stock after the issuance of the
shares indicated, without considering any contractual restriction on the
number of shares the selling stockholder may own at any point in time or
other restrictions on the number of shares we may
issue.
|
A
decline in the price of our common stock will require us to issue a
significantly larger number of shares of our common stock.
The
number of shares that Kodiak will receive under its agreement with us is
calculated based upon the market price of our common stock prevailing at the
time of each "put". The lower the market price, the greater the number of shares
issuable under the agreement. Upon issuance of the shares, to the extent that
Kodiak will attempt to sell the shares into the market, these sales may further
reduce the market price of our common stock. This in turn will increase the
number of shares issuable under the agreement. This may lead to an escalation of
lower market prices and ever greater numbers of shares to be issued. A larger
number of shares issuable at a discount to continuously declining
stock price will expose our shareholders to greater dilution and a
reduction
of the value of their investment.
Short
sales of our common stock could result in further price declines.
The sale
of our stock under the Kodiak agreement could encourage short sales by third
parties, which could contribute to the future decline of our stock price and
materially dilute existing stockholders' equity and voting rights. This is
particularly the case if the shares being placed into the market exceed the
market's ability to absorb the increased number of shares of stock or if we have
not performed in such a manner to show that the equity funds raised will be used
by us to grow. Such an event could place further downward pressure on the price
of our common stock. Even if we use the proceeds under the agreement to increase
our revenues and / or invest in assets, which are materially beneficial to us,
the opportunity exists for short sellers and others to contribute to the future
decline of our stock price. If there are significant short sales of our stock,
the price decline that would result from this activity will cause the share
price to decline more so, which, in turn, may cause long holders of the stock to
sell their shares thereby contributing to sales of stock in the market. If there
is an imbalance on the sell side of the market for the stock, our stock price
will decline. If this occurs, the number of shares of our common stock that is
issuable pursuant to the Investment Agreement will increase, which will
materially dilute existing stockholders' equity and voting rights.
18
Kodiak
will pay less than the then-prevailing market price for our common
stock.
The
common stock to be issued to Kodiak pursuant to the Investment Agreement will be
purchased at a five percent discount to the lowest closing “best bid” price (the
highest posted bid price) of the common stock during the five consecutive
trading days immediately following the date of our notice to Kodiak of our
election to put shares pursuant to the Investment Agreement. Kodiak has a
financial incentive to sell our common stock immediately upon receiving the
shares to realize the profit equal to the difference between the discounted
price and the market price. If Kodiak sells the shares, the price of our
common stock could decrease. If our stock price decreases, Kodiak may have
a further incentive to sell the shares of our common stock that it
holds.
There
may not be sufficient trading volume in our common stock to permit us to
generate adequate funds from the exercise of our put.
The
Investment Agreement provides that the dollar value that we will be permitted to
put to Kodiak will be either:
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▪
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200
percent of the average daily volume (U.S. market only) of our common stock
for the three Trading Days prior to the applicable Put Notice Date,
multiplied by the average of the three daily closing prices immediately
preceding the Put Date; or
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▪
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$1,000,000.
|
If the
average daily trading volume in our common stock is too low, it is possible that
we would only be permitted to exercise a put for $1,000,000, which may not
provide adequate funding for our planned operations.
19
Although
publicly traded, our common stock has substantially less liquidity than the
average trading market for a stock quoted on other national exchanges, and our
price may fluctuate dramatically in the future.
Although the Company's common stock is listed for trading on the
Over-the-Counter Electronic Bulletin Board, the
trading market in the commons stock
has substantially less liquidity than
the average trading market for companies quoted
on other national stock exchanges and our price
may fluctuate dramatically. A public trading market having the
desired characteristics of depth, liquidity and orderliness depends on the
presence in the marketplace of willing buyers and sellers of our common stock at
any given time. This presence depends on the individual decisions of
investors and general economic and market conditions over which we have no
control. Due to limited trading volume, the market price of the Company's common
stock may fluctuate significantly in the future, and these fluctuations may be
unrelated to the Company's performance. General market price declines or overall
market volatility in
the future could adversely affect the price of
the Company's common stock, and the
current market price may not be indicative of future market
prices.
The
market price for our common stock is particularly volatile given our status as a
relatively unknown company with a small and thinly traded public float, limited
operating history and lack of net revenues which could lead to wide fluctuations
in our share price. The price at which you purchase our common stock may
not be indicative of the price that will prevail in the trading
market.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of
factors. First, the shares of our common stock are sporadically and/or
thinly traded. As a consequence of this lack of liquidity, the trading of
relatively small quantities of shares by our stockholders may disproportionately
influence the price of those shares in either direction. The price for our
shares could, for example, decline precipitously in the event that a large
number of shares of our common stock are sold on the market without commensurate
demand, as compared to a seasoned issuer which could better absorb those sales
without adverse impact on its share price.
Secondly,
we are a speculative or “risky” investment due to our limited operating history
and lack of profits to date, and uncertainty of future market acceptance for our
products and services. As a consequence of this enhanced risk, more
risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer.
As a
consequence, there may be periods of several days or more when trading activity
in our shares is minimal or non-existent, as compared to a mature issuer which
has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. It is possible
that a broader or more active public trading market for our common stock will
not develop or be sustained, or that current trading levels will
continue.
20
Shares eligible
for future sale by our current stockholders may adversely affect our stock
price.
The sale
of a significant number of shares of common stock at any particular time could
be difficult to achieve at the market prices prevailing immediately before such
shares are offered. In addition, sales of substantial amounts of common
stock, including shares issued under Securities and Exchange Commission Rule 144
or otherwise could adversely affect the prevailing market price of our common
stock and could impair our ability to raise capital at that time through the
sale of our securities.
Our
issuance of additional common stock in exchange for services or to repay debt
would dilute your proportionate ownership and voting rights and could have a
negative impact on the market price of our common stock.
Our board
of directors may generally issue shares of common stock to pay for debt or
services, without further approval by our stockholders based upon such factors
as our board may deem relevant at that time. We have issued shares of our
common stock in payment for services in the past. It is likely that we
will issue additional securities to pay for services and reduce debt in the
future. It is possible that we will issue additional shares of common
stock under circumstances we may deem appropriate at the time.
You
may be unable to sell your common stock at or above your purchase price, which
may result in substantial losses to you.
The
following factors may add to the volatility in the price of our common stock:
actual or anticipated variations in our quarterly or annual operating results;
government regulations, announcements of significant acquisitions, strategic
partnerships or joint ventures; our capital commitments; and additions or
departures of our key personnel. Many of these factors are beyond our
control and may decrease the market price of our common stock, regardless of our
operating performance. We cannot make any predictions or projections as to
what the prevailing market price for our common stock will be at any time,
including as to whether our common stock will sustain its price or as to what
effect that the sale of shares or the availability of common stock for sale at
any time will have on the prevailing market price.
Volatility
in our common stock price may subject us to securities litigation.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will be
more volatile than a seasoned issuer for the indefinite future. In the
past, plaintiffs have often initiated securities class action litigation against
a company following periods of volatility in the market price of its securities.
We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management’s attention and resources.
We may issue additional common shares
in the future which would dilute the outstanding shares.
The
prices at which we sell these securities and other terms and provisions will
depend on prevailing market conditions and other factors in effect at that time,
all of which are beyond our control.
21
We
may need to raise additional capital. If we are unable to raise necessary
additional capital, our business may fail or our operating results and our stock
price may be materially adversely affected.
We may
need to secure adequate funding. If we are unable to obtain adequate
funding, we may not be able to successfully develop and market our proposed
products and our business will most likely fail. We do not have
commitments for additional financing, other than the Investment Agreement with
Kodiak. To secure additional financing, we may need to borrow money or
sell more securities, which may reduce the value of our outstanding securities.
We may be unable to secure additional financing on favorable terms or at
all.
Selling
additional stock, either privately or publicly, would dilute the equity
interests of our stockholders. If we borrow more money, we will have to
pay interest and may also have to agree to restrictions that limit our operating
flexibility. If we are unable to obtain adequate financing, we may have to
curtail business operations, which would have a material negative effect on
operating results and most likely result in a lower stock price.
An active trading market in our
shares may not be sustained.
Although
our shares of common stock are quoted for sale on the OTC Bulletin Board,
currently there is only a limited trading market in our shares. An active
trading market in our shares may not be sustained. Factors such as those
discussed in this “Risk Factors” section may have a significant impact upon the
market price of the securities to be distributed by us. Many brokerage
firms may not be willing to participate in transactions in a security if a low
price develops in the trading of the security. Even if a purchaser finds a
broker willing to effect a transaction in our securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not
permit the use of our securities as collateral for any loans.
If
we fail to remain current in our reporting requirements, we could be removed
from the OTC Bulletin Board, which would limit the ability of broker-dealers to
sell our securities and the ability of stockholders to sell their securities in
the secondary market.
Companies
trading on the OTC Bulletin Board, must be reporting issuers under Section 12 of
the Exchange Act, and must be current in their reports under Section 13 of the
Exchange Act, in order to maintain price quotation privileges on the OTC
Bulletin Board. If we fail to remain current in our reporting
requirements, we could be removed from the OTC Bulletin Board. As a
result, the market liquidity for our securities could be adversely affected by
limiting the ability of broker-dealers to sell our securities and the ability of
stockholders to sell their securities in the secondary market.
Our
common stock is subject to the “penny stock” rules of the Securities and
Exchange Commission, and the trading market in our common stock is limited,
which make transactions in our stock cumbersome and may reduce the investment
value of our stock.
Our
shares of common stock are “penny stocks” because they are not be registered on
a national securities exchange or listed on an automated quotation system
sponsored by a registered national securities association, pursuant to Rule
3a51-1(a) under the Exchange Act. For any transaction involving a penny
stock, unless exempt, the rules require:
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▪
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That
a broker or dealer approve a person’s account for transactions in penny
stocks; and
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22
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▪
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That
the broker or dealer receives from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Securities and Exchange Commission
relating to the penny stock market, which, in highlight form:
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▪
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Sets
forth the basis on which the broker or dealer made the suitability
determination; and
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▪
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That
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Generally,
brokers may be less willing to execute transactions in securities subject to the
“penny stock” rules. This may make it more difficult for investors to
dispose of our common stock and cause a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
The
market for penny stocks has suffered in recent years from patterns of fraud and
abuse.
Stockholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include:
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▪
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Control
of the market for the security by one or a few broker-dealers that are
often related to the promoter or
issuer;
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▪
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Manipulation
of prices through prearranged matching of purchases and sales and false
and misleading press releases;
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▪
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Boiler
room practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced
salespersons;
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▪
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Excessive
and undisclosed bid-ask differential and markups by selling
broker-dealers; and
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23
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▪
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The
wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the
resulting inevitable collapse of those prices and with consequential
investor losses.
|
Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
The occurrence of these patterns or practices could increase the
volatility of our share price.
We
may incur significant costs to ensure compliance with U.S. corporate governance
and accounting requirements.
We may
incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the United States Securities and Exchange Commission
(the “SEC”). We expect all of these applicable rules and regulations to
increase our legal and financial compliance costs and to make some activities
more time-consuming and costly. We also expect that these applicable rules
and regulations may make it more difficult and more expensive for us to obtain
director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. As a result, it may be more difficult for us
to attract and retain qualified individuals to serve on our board of directors
or as executive officers. We are currently evaluating and monitoring
developments with respect to these newly applicable rules, and we cannot predict
or estimate the amount of additional costs we may incur or the timing of such
costs.
We
may be required to raise additional financing by issuing new securities with
terms or rights superior to those of our shares of common stock, which could
adversely affect the market price of our shares of common stock.
We may
require additional financing to fund future operations, including expansion in
current and new markets, programming development and acquisition, capital costs
and the costs of any necessary implementation of technological innovations or
alternative technologies. We may not be able to obtain financing on
favorable terms, if at all. If we raise additional funds by issuing equity
securities, the percentage ownership of our current stockholders will be
reduced, and the holders of the new equity securities may have rights superior
to those of the holders of shares of common stock, which could adversely affect
the market price and the voting power of shares of our common stock. If we
raise additional funds by issuing debt securities, the holders of these debt
securities would similarly have some rights senior to those of the holders of
shares of common stock, and the terms of these debt securities could impose
restrictions on operations and create a significant interest expense for
us.
24
We
may have difficulty raising necessary capital to fund operations as a result of
market price volatility for our shares of common stock.
In recent
years, the securities markets in the United States have experienced a high level
of price and volume volatility, and the market price of securities of many
companies have experienced wide fluctuations that have not necessarily been
related to the operations, performances, underlying asset values or prospects of
such companies. For these reasons, our shares of common stock can also be
expected to be subject to volatility resulting from purely market forces over
which we will have no control. If our business development plans are
successful, we may require additional financing to continue to develop and
exploit existing and new technologies and to expand into new markets. The
exploitation of our technologies may, therefore, be dependent upon our ability
to obtain financing through debt and equity or other means.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This prospectus
contains such “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements may be made directly
in this prospectus, and they may also be made a part of this prospectus by
reference to other documents filed with the Securities and Exchange Commission,
which is known as “incorporation by reference.”
This
registration statement, the accompanying prospectus and the information
incorporated by reference herein and therein contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Such statements are
based on assumptions and expectations which may not be realized and are
inherently subject to risks, uncertainties and other factors, many of which
cannot be predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, performance, transactions or
achievements, financial and otherwise, may differ materially from the results,
performance, transactions or achievements expressed or implied by the
forward-looking statements.
The risks and uncertainties of our
business, including those discussed under the section entitled “Risk
Factors” could cause our actual results and expectations to differ
materially from the anticipated results or other expectations expressed in any
forward-looking statements. Words such as “may,” “anticipate,”
“estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and
terms of similar substance used in connection with any discussion of future
operating or financial performance identify forward-looking statements. All
forward-looking statements are management's present expectations of future
events and are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those described in the forward-looking
statements. Forward-looking statements might include one or more of the
following:
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▪
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anticipated
results of financing activities;
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▪
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anticipated
licensing or other agreements;
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▪
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anticipated
litigation results;
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▪
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anticipated
research and product development
results;
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25
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▪
|
descriptions
of plans or objectives of management for future
operations,
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▪
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products
or services;
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▪
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forecasts
of future economic
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▪
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performance;
and
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▪
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descriptions
or assumptions underlying or relating to any of the above
items.
|
In light
of these assumptions, risks and uncertainties, the results and events discussed
in the forward-looking statements contained in this prospectus or in any
document incorporated by reference might not occur. Investors are cautioned not
to place undue reliance on the forward-looking statements, which speak only as
of the date of this prospectus or the date of the document incorporated by
reference in this prospectus. We are not under any obligation, and we expressly
disclaim any obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise. All
subsequent forward-looking statements attributable to Document Security Systems
or to any person acting on its behalf are expressly qualified in their entirety
by the cautionary statements contained or referred to in this
section.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. These forward-looking statements involve risks, uncertainties
and other factors that may cause our actual results in future periods to differ
materially from forecasted results. We do not undertake to publicly update or
revise these forward-looking statements, whether as a result of new information,
future events or otherwise, other than to reflect a material change in the
information previously disclosed, as required by applicable law. You should
review our subsequent reports filed from time to time with the SEC on Forms
10-K, 10-Q and 8-K and any amendments thereto. We qualify all of our
forward-looking statements by these cautionary statements.
USE
OF PROCEEDS
We will
not receive any proceeds from the sale of common stock offered by Kodiak.
However, we will receive proceeds from the sale of our common stock to
Kodiak pursuant to the Investment Agreement. The proceeds from our
exercise of the put option pursuant to the Investment Agreement will be used for
working capital and general corporate expenses.
We propose to expend these proceeds as
follows:
|
Use of Proceeds
|
If
we “put” 100% of available
line.
|
If
we “put” 50% of our
available line.
|
||||||
|
Gross
proceeds
|
$ | 3,000,000 | $ | 1,500,000 | ||||
|
Project
Acquisitions
|
$ | 1,252,500 | 626,000 | |||||
| Project Development Costs | $ | 1,530,000 | 765,000 | |||||
| General Working Capital | $ | 217,500 | 108,750 | |||||
26
The
actual amount that we spend in connection with each of the intended uses of
proceeds may vary significantly from the amounts specified above, and will
depend on a number of factors, including those described in the “Risk Factors”
section of this prospectus.
MARKET
FOR OUR COMMON EQUITY AND
RELATED
SHAREHOLDER MATTERS
Market
Information
Our
common stock trades on the NASDAQ Over-the-Counter-Bulletin Board under the
symbol ("WWPW"). There is a very limited market for our common stock, with very
limited trading activities. Until July 6, 2006, there was no posted bid or ask
price for our common stock. The reported bid quotations reflect inter-dealer
prices without retail markup, markdown or commissions, and may not necessarily
represent actual transactions.
The high
and low bid price for those periods in which quotes are available is set forth
below:
| HIGH* | LOW* | |||||
| Through May 4, 2010 | $0.72 | $0.53 | ||||
| 2009 | ||||||
| First Quarter | $0.50 | $0.10 | ||||
| Second Quarter | $0.51 | $0.20 | ||||
| Third Quarter | $1.02 | $0.17 | ||||
| Fourth Quarter | $1.41 | $0.55 | ||||
| 2008 | ||||||
| First Quarter | $1.80 | $0.60 | ||||
| Second Quarter | $1.50 | $0.60 | ||||
| Third Quarter | $0.70 | $0.30 | ||||
| Fourth Quarter | $0.40 | $0.10 | ||||
*The
price of the common stock has been adjusted to reflect a 10:1 reverse split of
our common stock in June 2009.
27
Dividends
Holders
of our common stock are entitled to receive such dividends as our board of
directors may declare from time to time from any surplus that we may have. We
have not paid dividends on our common stock since the date of our incorporation
and we do not anticipate paying any common stock dividends in the foreseeable
future. We anticipate that any earnings will be retained for development and
expansion of our businesses and we do not anticipate paying any cash dividends
in the foreseeable future. Future dividend policy will depend upon our earnings,
financial condition, contractual restrictions and other factors considered
relevant by our Board of Directors and will be subject to limitations imposed
under Nevada law.
Equity
Compensation Plans
2007/08 Stock INCENTIVE AND
COMPENSATION PLAN
We have
approved the 2007/08 Stock Incentive and Compensation Plan (the
“Plan”). The purpose of the Plan is to enhance the profitability and value
of the Company for the benefit of its stockholders by enabling the
Company to attract, retain and reward directors, employees and consultants
(collectively, “Participants”) and strengthen the mutuality of interests between
such persons and the Company’s stockholders.
Awards
Pursuant
to the Plan, the Company may issue non-qualified stock options (“Non-Qualified
Stock Options”), incentive stock options (“Incentive Stock Options”, together
with Non-Qualified Stock Options referred to herein as “Stock Options”), stock
appreciation rights (“Stock Appreciation Rights”), restricted stock (“Restricted
Stock”) and registered stock (“Registered Stock”), (collectively, the “Awards”)
to eligible Participants.
All
employees of and consultants to the Company and its affiliates are eligible to
be granted Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock and Registered Stock. All employees and directors of the Company and its
affiliates are eligible to be granted Incentive Stock Options.
The
aggregate number of shares of Common Stock which may be issued under the Plan
with respect to which Awards may be granted shall not exceed 6,000,000 shares of
Common Stock. The number of shares of our common stock authorized
under the Plan was not required to be adjusted as a result of our 10:1 Reverse
Stock Split. As of February 28, 2010 we have issued a
total of 3 million shares of our common stock and one million options
exercisable at $0.85 per share of our common stock under the Plan to
our officers, directors and consultants.
If any
Stock Option or Stock Appreciation Right granted under the Plan expires,
terminates or is cancelled for any reason without having been exercised in full
or, with respect to Stock Options, the Company repurchases any Stock Option, the
number of shares of Common Stock underlying the repurchased Stock Option, and/or
the number of shares of Common Stock underlying any unexercised Stock
Appreciation Right or Stock Option shall again be available for the purposes of
Awards under the Plan.
28
Administration
The Plan
is administered and interpreted by a Committee (“Committee”) appointed by the
Board of Directors, or if no Committee, by the Board of Directors. The Company
expects the Plan will be administered by the newly formed Compensation
Committee. The Committee has full authority, among other things, to: (a) select
the eligible employees and consultants to whom Stock Options, Stock Appreciation
Rights, Restricted Stock or Registered Stock may from time to time be granted;
(b) determine, in accordance with the terms of the Plan, the number of shares of
Common Stock to be covered by each Award to an eligible employee or consultant
granted; and (c) determine the terms and conditions of any Award granted
hereunder, including, but not limited to, the exercise or purchase price (if
any), any restriction or limitation, any vesting schedule or acceleration
thereof, or any forfeiture restrictions or waiver thereof, regarding any Stock
Option or other Award, and the Common Stock relating thereto, based on such
factors, if any, as the Committee shall determine, in its sole
discretion.
Stock
Options
The
option price per Common Stock purchasable under an Incentive Stock Option shall
not be less than 100% of the fair market value of the Common Stock at the time
of grant. For the purposes of the Plan, the “fair market value” means: (i) if
the Common Stock is listed on a national securities exchange or quoted on the
Nasdaq National Market or Nasdaq SmallCap Market, the last sale price of the
Common Stock in the principal trading market for the Common Stock on such date;
(ii) if the Common Stock is not listed on a national securities exchange or
quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in
the over-the-counter market, the closing bid price for the Common Stock on such
date, as reported by the OTC Bulletin Board or the National Quotation Bureau,
Incorporated or similar publisher of such quotations; and (iii) if the fair
market value of the Common Stock cannot be otherwise determined, such price as
the Committee shall determine, in good faith, based on reasonable methods set
forth under Section 422 of the Code.
The
purchase price of shares of Common Stock subject to a Non-Qualified Stock Option
shall be determined by the Committee.
The term
of each Stock Option shall be fixed by the Committee, but no Stock Option shall
be exercisable more than ten (10) years after the date the Stock Option is
granted.
Stock
Awards
Shares of
Restricted Stock or Registered Stock may be issued to eligible employees or
consultants either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the eligible persons to whom, and the time or
times at which, grants of Restricted Stock or Registered Stock will be made, the
number of shares to be awarded, the price (if any) to be paid by the recipient,
the time or times within which such Awards may be subject to forfeiture, the
vesting schedule and rights to acceleration thereof, and all other terms and
conditions of the Awards. The purchase price of Restricted Stock
shall be fixed by the Committee. The purchase price for shares of Restricted
Stock may be zero to the extent permitted by applicable law. The Participant
shall not be permitted to transfer shares of Restricted Stock awarded under the
Plan during a period set by the Committee.
29
Tandem
Stock Appreciation Rights
Stock
Appreciation Rights may be granted in conjunction with all or part of any Stock
Option (a “Reference Stock Option”) granted under the Plan (“Tandem Stock
Appreciation Rights”). In the case of a Non-Qualified Stock Option, such rights
may be granted either at or after the time of the grant of such Reference Stock
Option. In the case of an Incentive Stock Option, such rights may be granted
only at the time of the grant of such Reference Stock Option.
A Tandem
Stock Appreciation Right or applicable portion thereof granted with respect to a
Reference Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the Reference Stock Option, except that, unless
otherwise determined by the Committee, in its sole discretion, at the time of
grant, a Tandem Stock Appreciation Right granted with respect to less than the
full number of shares covered by the Reference Stock Option shall not be reduced
until and then only to the extent the exercise or termination of the Reference
Stock Option causes the number of shares covered by the Tandem Stock
Appreciation Right to exceed the number of shares remaining available and
unexercised under the Reference Stock Option.
Upon the
exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled
to receive up to, but no more than, an amount in cash and/or Common Stock equal
in value to the excess of the fair market value of one share of Common Stock
over the option price per share specified in the Reference Stock Option
multiplied by the number of shares in respect of which the Tandem Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
Non-Tandem
Stock Appreciation Rights
Stock
Appreciation Rights may also be granted without reference to any Stock Options
granted under the Plan (“Non-Tandem Stock Appreciation Rights”). The
term of each Non-Tandem Stock Appreciation Right shall be fixed by the
Committee, but shall not be greater than ten (10) years after the date the right
is granted.
Non-Tandem
Stock Appreciation Rights shall be exercisable at such time or times and subject
to such terms and conditions as shall be determined by the Committee at
grant. Subject to such terms and conditions, Non-Tandem Stock
Appreciation Rights may be exercised in whole or in part at any time during the
option term, by giving written notice of exercise to the Company specifying the
number of Non-Tandem Stock Appreciation Rights to be exercised.
Upon the
exercise of a Non-Tandem Stock Appreciation Right, a Participant shall be
entitled to receive, for each right exercised, up to, but no more than, an
amount in cash and/or Common Stock equal in value to the excess of the fair
market value of one share of Common Stock on the date the right is exercised
over the fair market value of one (1) share of Common Stock on the date the
right was awarded to the Participant.
Transfer
of Awards
No Stock
Option or Stock Appreciation Right granted shall be transferable by the
Participant otherwise than by will or by the laws of descent and distribution.
All Stock Options and all Stock Appreciation Rights granted to Participants
shall be exercisable, during the Participant’s lifetime, only by the
Participant. Tandem Stock Appreciation Rights shall be transferable, to the
extent permitted, only with the underlying Stock Option. Shares of Restricted
Stock may not be transferred prior to the date on which shares are issued, or,
if later, the date on which any applicable restriction period
lapses.
30
Termination
of Employment
Generally,
unless otherwise determined by the Committee at grant, if a Participant is
terminated for cause, any Stock Option held by such Participant shall thereupon
terminate and expire as of the date of termination. Unless otherwise determined
by the Committee at grant, any Stock Option held by a Participant:
|
(i)
|
on
death or termination of employment or consultancy by reason of disability
or retirement may be exercised, to the extent exercisable at the
Participant’s death or termination, by the legal representative of the
estate or Participant as the case may be, at any time within a period of
one (1) year from the date of such death or
termination;
|
|
(ii)
|
on
termination of employment or consultancy by involuntary termination
without cause or for good reason may be exercised, by the
Participant at any time within a period of ninety (90) days from the date
of such termination; or
|
|
(iii)
|
on termination of employment or
consultancy by voluntary termination but without good reason and occurs
prior to, or more than ninety (90) days after, the occurrence of an event
which would be grounds for termination by the Company for cause, any Stock
Option held by such Participant may be exercised, to the extent
exercisable at termination, by the Participant at any time within a period
of thirty (30) days from the date of such termination, but in no
event beyond the expiration of the stated term of such Stock
Option.
|
Amendments
to the Plan
The Board
may at any time amend, in whole or in part, any or all of the provisions of the
Plan, or suspend or terminate the Plan entirely. Provided, however, that, unless
otherwise required by law or specifically provided in the Plan, the rights of a
Participant with respect to Awards granted prior to such amendment, suspension
or termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company, if
and to the extent required by the applicable provisions of Rule 16b-3 of the
1934 Act or, if and to the extent required, under the applicable provisions of
the Code, no amendment may be made which would, among other things: increase the
aggregate number of shares of Common Stock that may be issued under the Plan;
change the classification of Participants eligible to receive Awards under the
Plan; decrease the minimum option price of any Stock Option; extend the maximum
option period; change any rights under the Plan with regard to non-employee
directors; or require stockholder approval in order for the Plan to continue to
comply with the applicable provisions.
CAPITALIZATION
As
of April 8, 2010 we had 27,049,046 shares of common stock issued and
outstanding. If we issue the 3,000,000 shares of
common stock being registered, we will have 30,049,046 shares of
common stock issued and outstanding.
31
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion reflects our plan of operation. This discussion should be
read in conjunction with our audited financial statements for the year ended
June 30, 2009 and our unaudited financial statements for the quarter ended
December 2009 which are attached to this prospectus. This discussion
contains forward-looking statements, including statements regarding our expected
financial position, business and financing plans. These statements involve
risks and uncertainties. Our actual results could differ materially from
the results described in or implied by these forward-looking statements as a
result of various factors, including those discussed below and elsewhere in this
prospectus, particularly under the headings “Special Note Regarding
Forward-Looking Statements” and “Risk Factors.”
Our goal
is to develop wind farms in Canada, the United States and in
Europe. Our ability to develop these wind farms will be subject to
our ability to secure financing. Federal, state, provincial and local
rules and regulations may impact our ability to implement our business
strategy. Tax incentives will also play a critical role in
implementing our business strategy. Our plan of growth is to
capitalize on the growing demand for renewable energy sources.
Seasonality
We do not
believe that our business is seasonal in nature. Although energy
demands will vary, if we are successful in developing our wind
farms, we do not believe that fluctuating energy demands will impact
our business.
Impact
of Inflation
General
inflation in the economy will increase our operating
expenses. We will endeavor to reduce costs and streamline
operations. While we are subject to inflation as described
above, our management believes that inflation currently does not have a material
effect on our operating results. However, inflation may become a factor in
the future.
32
Critical
Accounting Policies
The
preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States requires us to
make judgments, assumptions and estimates that affect the amounts reported.
Note A of Notes to Financial Statements describes the significant
accounting policies used in the preparation of the financial statements.
Certain of these significant accounting policies are considered to be
critical accounting policies, as defined below.
A
critical accounting policy is defined as one that is both material to the
presentation of our financial statements and requires management to make
difficult, subjective or complex judgments that could have a material effect on
our financial condition and results of operations. Specifically, critical
accounting estimates have the following attributes:
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▪
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We
are required to make assumptions about matters that are highly uncertain
at the time of the estimate; and
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▪
|
Different
estimates we could reasonably have used, or changes in the estimate that
are reasonably likely to occur, would have a material effect on our
financial condition or results of
operations.
|
Estimates
and assumptions about future events and their effects cannot be determined with
certainty. We base our estimates on historical experience and on various
other assumptions believed to be applicable and reasonable under the
circumstances. These estimates may change as new events occur, as
additional information is obtained and as our operating environment changes.
These changes have historically been minor and have been included in the
consolidated financial statements as soon as they became known. Based on a
critical assessment of our accounting policies and the underlying judgments and
uncertainties affecting the application of those policies, management believes
that our financial statements are fairly stated in accordance with accounting
principles generally accepted in the United States, and present a meaningful
presentation of our financial condition and results of operations.
In
preparing our financial statements to conform to accounting principles generally
accepted in the United States, we make estimates and assumptions that affect the
amounts reported in our financial statements and accompanying notes. These
estimates include useful lives for fixed assets for depreciation calculations
and assumptions for valuing options and warrants. Actual results could
differ from these estimates.
Comparison
of Operating Results for the Six Months ended December 31, 2009 and 2008
and from November 20, 2002 (“Inception”) to December 31, 2009.
Revenues
Our focus
continues to be the development of wind energy parks. During the
second quarter of 2008, we were an exploratory mining company. With
different lines of business, it will be difficult for you to compare
operating results and expenses.
We have
not earned any revenues from either our mining or wind power projects. All
of our revenues to date represent interest income which we have earned as a
result of our cash holdings. Monies are deposited in interest bearing
accounts. Our cash holdings were generated from the sale of
our securities. Most of this cash has been used in operations and as a
result interest income for the three and six months ended December 31, 2009 and
2008 was nominal. Total interest income since inception was
$12,557.
33
Operating
Expenses
For the
three and six months ended December 31, 2009 our operating expenses totaled
$6,224,054 and $8,162,061 as compared to $62,106 and $173,138 for the three and
six months ended December 31, 2008. Total operating expenses since
inception were $15,497,752. The primary reason for the significant
increase in our operating expenses is directly attributable to an increase in
stock based compensation from $62,106 and $159,064 for the three and six months
ended December 31, 2008 to $5,128,293 and $6,991,644 for the comparable periods
in 2009. Total stock based compensation since inception totaled
$7,173,332.
With a
new business plan we engaged consultants and other specialists in the
alternative energy field. We did not have sufficient cash to pay these
individuals for their services and determined that it would be in the best
interests of the Company to compensate these people with shares of our Common
Stock. In addition, certain of our officers and directors were
issued shares of our common stock in lieu of cash compensation.
For the
three and six months ended December 31, 2009, project development costs related
to the wind farms totaled $979,324. We did not have similar expenses in
2008.
With the
acquisition of Zero Emission and a new business focus, advertising became
critical for prospective joint venture partners and the business community.
Advertising expenses for the three and six months ended December 31, 2009
totaled $37,049 and $39,776 as compared to $703 and $1,372 during the comparable
periods in 2008. Total advertising and marketing fees since inception
totaled $114,696.
With
changes to our business plan, acquisitions, financings and regulatory compliance
matters, professional fees for the three and six months ended December 31, 2009
totaled $49,931 and $85,536 as compared to $(309) and $8,950 in 2008.
Total professional fees since inception were $384,054.
With
changes to our business plan, we will no longer incur any exploration or geology
expenses. As a result of the Company relinquishing its 70% earned interest
in the Cerro Gordo joint venture property with EXMIN Resources, EXMIN waived the
debt due and owing on the property resulting in a $(39,866) recovery
charge. Since inception, exploration and geology costs totaled $1,606,467.
All other
line item expenses that we incurred for the quarter ended December 31, 2009
represented less than 1% of our total expenses for the year.
Net
Income (loss)
Our Net
Loss from operations for the three and six months ended December 31, 2009
totaled $(6,224,051) and $(8,162,028) as compared to $(62,093) and $(173,085) in
2008. Losses since inception totaled $(15,485,195). The reason for
the significant increase in our quarterly loss is attributable to a significant
increase in stock based compensation.
34
Net Loss
per share for the three and six months ended December 31, 2009 and 2008 was
$(0.25) and $(0.44) as compared to $(0.01) for the three and six months ended
December 31, 2008.
We will
require additional capital to fully implement our business plan or to exercise
any outstanding options. There can be no assurance that we will be able to
secure additional capital or if available, on commercially acceptable terms.
Until such time as we can fully implement our business plan, that we are
awarded wind power contracts and develop our wind farms, it is unlikely that we
will be able to reverse our continuing losses in which case an investor lose
their entire investment.
Liquidity
and Capital Resources
Assets
and Liabilities
At
December 31, 2009 we had cash and cash equivalents totaling $68,545, and prepaid
expenses totaling $7,793 as compared to cash totaling $28,606 and prepaid
expenses of $11,290 at June 30, 2009. The increase in our cash reserves is
directly attributable to equity financing that we secured during our last fiscal
quarter.
Total
current assets at December 31, 2009 were $76,836 as compared to $40,373 at June
30, 2009. Our fixed assets (inclusive of our wind projects) at December
31, 2009 totaled $2,413,314_ as compared to $4,667 at June 30, 2009. Total
assets at December 31, 2009 were $2,490,150 as compared to $45,040 at June 30,
2009.
Our
current liabilities at December 31, 2009 totaled $2,986,136 consisting of
accounts payable totaling $2,030,540 and short term loans totaling $955,596 as
compared to $198,499 at June 30, 2009 consisting of primarily of accounts
payable totaling $73,731 and subscription payables totaling $88,500.
We have a
working capital deficit at December 31, 2009 (current assets less
current liabilities) of $2,909,301 as compared to a working capital deficit of
$158,126 at June 30, 2009. Unless we secure additional funding to
meet our short term capital requirements, there can be no assurance that we will
be able to implement our business plan. If we are unable to pay our liabilities
as they become due, and our creditors are not willing to defer payments,
we may be required to secure protection from creditor claims.
Off-Balance
Sheet Arrangements
We are
not currently a party to, or otherwise involved with, any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
material effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.
Not
applicable.
35
The term
disclosure controls and procedures means controls and other procedures of an
issuer that are designed to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Exchange Act (15
U.S.C. 78a, et
seq. ) is recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer’s management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
The term
internal control over financial reporting is defined as a process designed by,
or under the supervision of, the issuer’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
issuer’s board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:
|
▪
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the
issuer;
|
|
▪
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the issuer
are being made only in accordance with authorizations of management and
directors of the issuer; and
|
|
▪
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the issuer’s assets that
could have a material effect on the financial
statements.
|
Our
management, including our chief executive officer and chief financial officer,
does not expect that our disclosure controls and procedures or our internal
controls over financial reporting will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of inherent limitations in all
control systems, internal control over financial reporting may not prevent or
detect misstatements, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
36
Evaluation of Disclosure and
Controls and Procedures. Our management is responsible for
establishing and maintaining adequate internal control over financial reporting
as defined in Rule 13a-15(f) under the Exchange Act. Our internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States. We carried out an
evaluation, under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report. The
evaluation was undertaken in consultation with our accounting personnel.
Based on that evaluation, our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures are currently
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms. As we develop new business or if we engage in an extraordinary
transaction, we will review our disclosure controls and procedures and make sure
that they remain adequate.
Changes in Internal Controls over
Financial Reporting. There were no changes in the internal controls
over our financial reporting that occurred during the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
This
prospectus does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management’s report in this
prospectus.
Stock-Based
Compensation
As of
July 1, 2009, we adopted the provisions of SFAS No. 123(R), Accounting for Stock-Based
Compensation (“SFAS 123(R)”), which requires companies to recognize
compensation cost for stock-based awards based on the estimated fair value of
the award on date of grant. We measure compensation cost at the grant date
based on the fair value of the award and recognize compensation cost upon the
probable attainment of a specified performance condition or over a service
period. We use the Black-Scholes option
valuation model to calculate the fair value disclosures under SFAS 123(R).
In calculating this fair value, there are certain assumptions that we use
consisting of the expected life of the option, risk-free interest rate, dividend
yield, volatility and forfeiture rate. The use of a different estimate for
any one of these components could have a material impact on the amount of
calculated compensation expense.
For
common stock issued for services, we apply the provisions of EITF
96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services and EITF
00-18, Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees . Together, EITF 96-18 and 00-18 address when
an entity should measure the fair value of its equity instruments that it grants
to non-employees in connection with an arrangement for goods or services and the
method employed for recognition of the related expense.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements.
37
BUSINESS
Our
business strategy is to pursue opportunities in the alternative energy field
with a particular emphasis on wind energy. We intend to develop wind
farms We will assemble land packages (“Wind Farms”), secure requisite
environmental permitting, provide wind testing for a one year
period by erecting towers to measure wind speed. Subject
to favorable wind testing results, we will then apply for a power contract for
the number of megawatts (MW) that our land position will allow. Once we secure
power contracts, we believe that we will be able to lease or sell the
Wind Farms to operating utility companies or companies desiring to purchase wind
turbines and erect the necessary power lines.
We are no
longer pursuing mining activities in North America
In order
to implement this new business plan, new officers and directors have been
appointed. We entered into a joint venture agreement and option
agreement with Zero Emission People LLC, (“Zero Emission”) an
entity controlled by Ingo Stuckmann, our recently appointed chief executive
officer. After further evaluating opportunities in wind energy, our
board of directors proposed that we acquire all of the outstanding equity
interests in Zero Emission. In furtherance thereof, we signed a share
exchange agreement with Zero Emission which provides in part for Wind Works to
acquire all of the issued and outstanding equity interest of Zero Emission in
consideration for the issuance of a total of 31 million shares of our common
stock. The shares will be issued pursuant to the following
schedule:
|
▪
|
5,000,000
shares of common stock on January 15,
2010
|
|
▪
|
9,000,000
shares of common stock on August 15,
2010
|
|
▪
|
9,000,000
shares of common stock on August 15,
2011
|
|
▪
|
8,000,000
shares of common stock on August 15,
2012
|
Closing
of the transaction will be subject to delivery of audited financial statements
and compliance with applicable state and federal statutes. Closing
Date was January 31, 2010.
Zero
Emission owns equity interests in wind energy projects in Canada and the United
States. Through its years of experience, we hope to capitalize on the
expertise and strategic alliances that Zero Emissions has forged to
date.
The
development of a wind farm involves many steps and can take years before coming
to fruition. Development in this context means the securing and
maintenance of land sites for the proposed turbine locations by ways and
according to the terms of the respective land lease or easement agreements,
planning and conducting of all necessary environmental studies such
as environmental screenings, noise assessments, visual assessments and avian and
floral assessments assemblance which is required for the
Environmental approval. Environmental approval is necessary to
obtain building permit for the wind farms.
Further development encompasses liaison with various Aboriginal and
First Nations groups as well as consultations with provincial and federal
agencies in order to obtain any permits that may be required for any such
project.
38
In
addition to environmental approval and consultations we have to
engage in the planning and commissioning of all technical reports and
engineering drawings and layouts of the planned projects in regards to the
construction of the actual wind farm and any auxiliary structures such as
transmission lines that are necessary to operate the wind farm.
Wind
energy engineers must prepare a three stage site implementation
program
The first
stage of the program involves locating the ideal placement for the wind turbines
and determining which type of wind turbine can provide the optimal results for
the wind farms. The second stage of the program involves building
access roads to the property and constructing transmission lines which can be
connected to the power grid. The final stage of the
site implementation program is determining the final yield assessment
which occurs after a power purchase agreement is signed with a local
utility.
After we
have secured the required licensing, and paid any required fees we
intend to secure power contracts with local utilities. At
this time, we do not intend to become a wind energy producer. Rather,
we will develop the wind park for sale to wind energy
producers. Our business model is to assemble a land package,
secure regulatory approval, provide engineering
studies, build the required infrastructure and finally enter into
power purchase agreements with local utilities. When we sell our wind
farms, we will be offering buyers a complete turnkey
package. Purchasers will be required to purchase the wind
turbines. Following the installation of the wind turbines, purchasers
will then be able to sell wind power electricity pursuant to the terms and
conditions of the power purchase agreements.
Following
is a brief description of the Company’s wind projects.
|
1.
|
Grey
Highlands Wind Park: WWPC holds 100% interest the Grey Highlands
Project. The Grey Highlands Wind Park project is a 10 MW* project
25kms south of Georgian Bay, Ontario, Canada which is an area that
benefits from the westerly winds crossing from Lake
Huron. Annual mean wind speeds are modeled at over 6.5 meters
per second at an 80 meter hub height, modeled meaning a finding based on
data as per the Canadian Wind Atlas for that area . The project area has
been secured by the execution of option and surface lease agreements with
various landowners. Environmental studies are near completion. The company
submitted an application for the FIT Power Purchase Contract fixed at a
basic rate of C$135.00/MWh, that can potentially be increased to
C$145.00/MW under certain conditions (community or aboriginal price
adder), over a 20-year term on November 30, 2009. WWPC was notified on April 8, 2010 that the Grey Highlands
project will be awarded a FIT contract by the Ontario Power Authority.
**
|
|
2.
|
Snowy
Ridge Wind Park: WWPC holds a 100% interest in the Snowy Ridge Project. Snowy
Ridge Wind Park Project is a 10 MW project in the vicinity of the
village of Bethany, Ontario. The project has been developed in
an area of high elevation that can optimize the wind resources to their
maximum. Annual mean wind speeds are modeled at over 6.7
metres per second at an 80 metre hub height. The project area
has been secured by the execution of option to a lease and easement
agreement with various land owners. The company submitted an application
for the FIT Power Purchase Contract fixed at a basic rate of C$135.00/MWh,
that can potentially be increased to C$145.00/MW under certain conditions
(community or aboriginal price adder), over a 20-year term on
November 29, 2009. WWPC was notified on April 8, 2010
that the Snow Ridge project will be awarded a FIT contract by the Ontario
Power Authority. * *
|
|
3.
|
Grand
Prairie Wind Park: WWPC holds a 100% in the Grand Prairie Project . The
Grand Prairie Wind Park project is a 75 MW project located in the state of
Illinois. This project has been developed in an area of crop
fields that can optimize the wind resources. Annual mean wind speeds are
measured at over 7 meters per second at a 100 m hub
height.
|
39
|
a.
|
Interconnection:
System Impact Study stage;
|
|
b.
|
Land
Acquisition: 3,000 acres secured;
|
|
c.
|
Environmental
Screening: preliminary data suggest no significant impact
expected;
|
|
d.
|
PPA:
application pending system impact
study;
|
|
4.
|
Baker
Wind Park: WWPC holds 90% interest in the Baker Wind Project.
The Baker Wind Park
project, a 200MW project located in the state of
Montana. This project has been developed in an area of
crop fields that can optimize the wind resources. Annual mean wind speeds
are measured at over 8 meters per second at an 80 m hub
height.
|
|
a.
|
Interconnection:
System Impact Study stage;
|
|
b.
|
Land
Acquisition: 5,000 acres secured;
|
|
c.
|
Environmental
Screening: preliminary data suggest no significant impact
expected;
|
|
d.
|
PPA:
application pending system impact
study;
|
|
5.
|
Polar
Bear Wind Park: WWPC holds a 50% interest (with an option to increase to
100%) in the Polar Bear
Project. The Polar Bear Project is a 20MW project located in
Ontario, Canada. Annual mean wind speeds are modelled at over 8 meters per
second at an 80 m hub height. The project area has been secured by the
execution of option for wind farm easement agreements with various
landowners. Environmental studies are near completion and the project is
eligible for a Feed-in Tariff application during the Ontario Power
Authority launch period. The company submitted an application
for the FIT Power Purchase Contract fixed at a basic rate of C$135.00/MWh,
that can potentially be increased to C$145.00/MW under certain conditions
(community or aboriginal price adder), over a 20-year term on
November 29, 2009. WWPC
was notified on April 8, 2010 that the Polar Bear project will be under
going Economic Connection Testing before a further decision in a FIT
contract award can be made by the Ontario Power Authority. *
, **
|
|
6.
|
Pleasant
Bay Wind Park: WWPC holds a 50% interest (with an option to increase to
100%) in the Pleasant Bay
Project. The Pleasant Bay Project is a 20MW project located in an
area just north of the shores of Lake Ontario that has one of the best
wind regimes in Ontario. The project area has been secured by the
execution of option for wind farm easement agreements with various
landowners. Annual mean wind speeds are modeled at over 8.0 meters per
second at an 80 m hub height. Environmental studies are near
completion and the project is eligible for a Feed-in Tariff application
during the Ontario Power Authority launch period. The company
submitted an application for the FIT Power Purchase Contract fixed at a
basic rate of C$135.00/MWh, that can potentially be increased to
C$145.00/MW under certain conditions (community or aboriginal price
adder), over a 20-year term on November 29, 2009. WWPC
was notified on April 8, 2010 that the Pleasant Bay project will be under
going Economic Connection Testing before a further decision in
a FIT contract award can be made by the Ontario Power
Authority. * , **
|
40
|
7.
|
Settlers
Landing Wind Park: WWPC holds a100% interest in the Settlers Landing
Project. The Settlers Landing Project is a 10MW project located
near Pontypool, Ontario, Canada. This project has been developed in an
area of high elevation. Annual mean wind speeds are modeled at over 6.8
meters per second at an 80 m hub height. The project area has been secured
by the execution of option for wind farm easement agreements and surface
lease agreements with various landowners. Environmental studies are near
completion and the project is eligible for a Feed-in Tariff application
during the Ontario Power Authority launch period. The company submitted an
application for the FIT Power Purchase Contract fixed at a basic rate of
C$135.00/MWh, that can potentially be increased to C$145.00/MW under
certain conditions (community or aboriginal price adder), over a
20-year term on November 29, 2009. WWPC was notified on April 8th,
2010 that the Settlers Landing project will be awarded a FIT contract by
the Ontario Power Authority * ,
**
|
|
8.
|
Zorra
Festival Wind Park: WWPC holds a 50% interest in the Zorra Wind Park
Project . The Zorra Wind Park Project is a 10MW project located northwest
of Woodstock, Ontario, Canada. Annual mean wind speeds are modeled at over
7.0 meters per second at an 80 m hub height. The project area has been
secured by the execution of option for wind farm easement
agreements with various landowners. The project is eligible for
a Feed-in Tariff application during the Ontario Power Authority launch
period. The company submitted an application for the FIT Power
Purchase Contract fixed at a basic rate of C$135.00/MWh, that can
potentially be increased to C$145.00/MW under certain conditions
(community or aboriginal price adder), over a 20-year term on
November 29, 2009. WWPC was notified on April 8th,
2010 that the Zorra Festival project will be under going
Economic Connection Testing before a further decision in a FIT
contract award can be made by the Ontario Power Authority * ,
**
|
|
9.
|
Clean
Breeze Wind Park: WWPC holds a 50% interest (with an option to increase to
100%) in the Clean
Breeze Wind Park Project . The Clean Breeze Wind Park is a 10MW
project located in Ontario, Canada in the Northumberland Hills. This
project has been developed only 5kms from the north shore of Lake Ontario
in an area of high elevation that can optimize the wind resources to a
maximum. The project area has been secured by the execution of option for
wind farm easement agreements with various landowners. Annual mean wind
speeds are modelled at over 6.7 meters per second at an 80 m hub height.
Environmental studies are near completion and the project is eligible for
a Feed-in Tariff application during the Ontario Power Authority launch
period. The company submitted an application for the FIT Power
Purchase Contract fixed at a basic rate of C$135.00/MWh, that can
potentially be increased to C$145.00/MW under certain conditions
(community or aboriginal price adder), over a 20-year term on
November 30, 2009. WWPC was notified on April 8th,
2010 that the Clean Breeze project will be awarded a FIT contract by the
Ontario Power Authority * ,
**
|
|
10.
|
Whispering
Woods Wind Park: WWPC holds a 50% interest (with an option to increase to
100%) in the
Whispering Woods . The Whispering Woods Wind Park Project is a 10MW
project located near Millbrook, Ontario, Canada. Annual mean wind speeds
are modeled at over 6.7 meters per second at an 80 m hub height. The
project area has been secured by the execution of option for wind farm
easement agreements with various landowners. Environmental studies are
near completion and the project is eligible for a Feed-in Tariff
application during the Ontario Power Authority launch
period. The company submitted an application for the FIT Power
Purchase Contract fixed at a basic rate of C$135.00/MWh, that can
potentially be increased to C$145.00/MW under certain conditions
(community or aboriginal price adder), over a 20-year term on
November 29, 2009. WWPC was notified on April 8th,
2010 that the Whispering Woods project will be awarded a FIT contract by
the Ontario Power Authority * ,
**
|
41
|
11.
|
Ganaraska
Wind Park: WWPC holds a 50% interest (with an option to increase to 100%)
in in the Ganaraska
Project. The Ganaraska Wind Park project is a 20MW project located
near Kirby, Ontario, Canada. Annual mean wind speeds are modelled at over
6,5 meters per second at an 80 m hub height. The project area has been
secured by the execution of option for wind farm easement agreements with
various landowners. Environmental studies are near completion and the
project is eligible for a Feed-in Tariff application during the Ontario
Power Authority launch period. The company submitted an
application for the FIT Power Purchase Contract fixed at a basic rate of
C$135.00/MWh, that can potentially be increased to C$145.00/MW under
certain conditions (community or aboriginal price adder), over a
20-year term on November 29, 2009. WWPC was notified on April 8th,
2010 that the Ganaraska project will be awarded a FIT contract by the
Ontario Power Authority. *,
**
|
|
12.
|
Stonetown
Wind Park: 50% interest (with an option to increase to 100%) in the
Stonetown Wind Project. The Stonetown Wind Park project is a
10MW project located near St. Mary, Ontario. Annual mean wind speeds are
modeled at over 6,7 meters per second at an 80 m hub height. The project
area has been secured by the execution of option for wind farm easement
agreements with various landowners. Environmental studies are near
completion and the project is eligible for a Feed-in Tariff application
during the Ontario Power Authority launch period. The company
submitted an application for the FIT Power Purchase Contract fixed at a
basic rate of C$135.00/MWh, that can potentially be increased to
C$145.00/MW under certain conditions (community or aboriginal price
adder), over a 20-year term on November 29, 2009. WWPC was notified
on April 8th,
2010 that the Stonetown project will be under going Economic
Connection Testing before a further decision in a FIT contract
award can be made by the Ontario Power
Authority*
|
|
13.
|
Lakeside
Breezes Wind Park: WWPC holds a 50% interest in two 10MW projects located
near Iona Station, Ontario, Canada. This project has been developed in an
area of high elevation. Annual mean wind speeds are modeled at over
6,5 meters per second at an 80 m hub height. The project area
has been secured by the execution of option and surface lease agreements
with various landowners. The project is eligible for a Feed-in Tariff
application during the Ontario Power Authority launch period. The company
submitted an application for the FIT Power Purchase Contract fixed at a
basic rate of C$135.00/MWh, that can potentially be increased to
C$145.00/MW under certain conditions (community or aboriginal price
adder), over a 20-year term on November 29, 2009. WWPC was notified
on April 8th,
2010 that the Lakeside Breezes project will be under going Economic
Connection Testing before a further decision in a FIT contract
award can be made by the Ontario Power
Authority*
|
|
14.
|
Pioneer
Wind Park: WWPC holds a 50% interest (with an option to increase to 100%)
in a 10MW project located near Iona Station, Ontario, Canada. Annual mean
wind speeds are modeled at over 6,5 meters per second at an 80
m hub height. The project area has been secured by the execution of option
and surface lease agreements with various landowners. The
project is eligible for a Feed-in Tariff application during the Ontario
Power Authority launch period. The company submitted an
application for the FIT Power Purchase Contract fixed at a basic rate of
C$135.00/MWh, that can potentially be increased to C$145.00/MW under
certain conditions (community or aboriginal price adder), over a
20-year term on November 29, 2009. WWPC was notified on April 8th,
2010 that the Pioneer project will be under going Economic
Connection Testing before a further decision in a FIT contract
award can be made by the Ontario Power
Authority*
|
42
|
15.
|
Beaconsfield
Wind Park: 50% interest (with an option to increase to 100%) in a 10MW
project located in Ontario, Canada. Annual mean wind speeds are measured
at over 6,7 meters per second at an 80 m hub height. The
project area has been secured by the execution of option for wind farm
easement agreements with various landowners Environmental
studies are near completion and the project is eligible for a Feed-in
Tariff application during the Ontario Power Authority launch
period. The company submitted an application for the FIT Power
Purchase Contract fixed at a basic rate of C$135.00/MWh, that can
potentially be increased to C$145.00/MW under certain conditions
(community or aboriginal price adder), over a 20-year term on
November 30, 2009. WWPC was notified on April 8, 2010
that the Beaconsfield project will be under going Economic
Connection Testing before a further decision in a FIT contract
award can be made by the Ontario Power
Authority*
|
|
16.
|
Cloudy
Ridge Skyway 126 Wind Park: WWPC holds a 70% interest in a 10 MW project
located in Grey Highlands, Ontario, Canada. Annual mean wind speeds are
measured at over 6,5 meters per second at an 80 m hub height.
The project area has been secured by the execution of option for wind farm
easement agreements with various landowners Environmental
studies are near completion and the project is eligible for a Feed-in
Tariff application during the Ontario Power Authority launch
period. The company submitted an application for the FIT Power
Purchase Contract fixed at a basic rate of C$135.00/MWh, that can
potentially be increased to C$145.00/MW under certain conditions
(community or aboriginal price adder), over a 20-year term on
November 30, 2009. WWPC was notified on April 8, 2010
that the Cloudy Ridge Skyway 126 project will be awarded a FIT contract by
the Ontario Power Authority *,
**
|
* Wind
development determines the MW capacity of a project. Generally, MW
for projects are decided as follows: Generally, the location (land) where
the wind farm is located allows for a certain number of turbines to be fitted on
to the projects land due to setbacks from houses roads and other buildings or
infrastructure items. Also turbines create a noise parameter which circles
out a portion of the land and which parameter has to be fitted in with the
setbacks towards any structure. (Generally, in Ontario at least
550m from a house. Most ordinances prohibit more than 45 decibel in
an inhabited structure at any time). Wind turbines have a nameplate
capacity of generally 1.5-2.5 MW. By using the land and the
turbine model you create a layout which is used to determine whether these
turbines fit within the layout and how many turbine sites must be
secured under an easement agreement.
** Subject to security
interest pursuant to the terms of a financing agreement.
WIND
POWER
Industry
Overview
In
today’s society, wind power and alternative energy are becoming a fast growing
force along with the “Go Green” attitude. Renewable energy is
produced using resources that are naturally replenished, such as wind, sunlight,
geothermal heat, tides and biofuels. Technologies that produce energy from these
renewable sources (other than biofuels) are often referred to as “clean” or
“green” as they produce few, if any, pollutants that negatively impact the
environment. Comparatively, fossil fuels such as coal, natural gas and oil are
exhaustible and release greenhouse gases such as carbon dioxide or other
pollutants into the atmosphere during energy production. As a result of
increased environmental awareness, the deployment of renewable energy
technologies has grown rapidly during the past several years. According to the
Energy Information Administration, 37% of new U.S. power generation capacity in
2007 consisted of renewable technologies, compared with only 2% in 2003. This
increase is expected to continue in both the United States and Canada. It is
anticipated that renewable energy capacity in North America is expected to grow
by a compounded annual growth rate between 9% and 11% through
2025. At this rate, the United States and Canada could supply 25% of
its electrical energy requirements with renewable energy by 2025.
43
Wind
energy is the fastest-growing renewable energy generation technology worldwide
due to its cost efficiency, technological maturity and the wide availability of
wind resources. It has been suggested that wind power has the greatest potential
among all renewable energy technologies for further growth in North
America. Although the United States and Canada have hydroelectric and
geothermal resources, many potential hydroelectric sites have already been
developed and geothermal production is confined by geographical limitations to
only certain areas. In contrast, the available untapped wind
resources across North America remains vast. Additionally, other renewable
energy technologies, such as solar power, are currently less economically
attractive than wind energy, and others, such as biofuels, emit particulates
which have a greater negative impact on the environment than wind
energy.
Wind
Energy Fundamentals
The term
“wind energy” refers to the process used to generate electricity through wind
turbines. The turbines convert wind’s kinetic energy into electrical power by
capturing it with a three blade rotor mounted on a nacelle that houses a gearbox
and generator. When the wind blows, the combination of the lift and drag of the
air pressure on the blades spins the blades and rotor, which turns a shaft
through the gearbox and generator to create electricity.
Wind
turbines are typically grouped together in what are often referred to as “wind
parks.” Electricity from each wind turbine travels down a cable inside its tower
to a collection point in the wind park and is then transmitted to a substation
for voltage step-up and delivery into the electric utility transmission network,
or “grid.” Today’s wind turbines can efficiently generate electricity when the
wind speed is between 11 and 55 miles per hour.
A key
factor in the success of any wind park is the profile and predictability of the
wind resources at the site. Extensive studies of historical weather and wind
patterns have been performed across North America and many resources, in the
forms of charts, graphs and maps, are available to wind energy developers. The
most attractive wind park sites offer a combination of land accessibility, power
transmission, proximity to construction resources and strong and dependable
winds.
When wind
energy developers identify promising sites, they perform detailed studies to
provide greater certainty with respect to the long-term wind characteristics at
the site and to identify the most effective turbine strategy. The long-term
annual output of a wind park is assessed through the use of on-site wind data,
publicly available reference data and sophisticated software. Wind speeds are
estimated in great detail for specific months, days or even hours, and are then
correlated to turbine manufacturers’ specifications to identify the most
efficient turbine for the site. Additional calculations and adjustments for
turbine availability (which is principally affected by planned and unplanned
maintenance events), wake effects (wind depletion caused by turbines sited
upwind), blade soiling and icing and other factors are made to arrive at an
estimate of net expected annual kilowatt hour electricity production at the
site.
44
Growth in Wind
Energy
The
growth in wind energy will likely continue due to a number of key factors,
including:
|
▪
|
Increases
in electricity demand coupled with the rising cost of fossil fuels used
for conventional
energy generation resulting in increases in electricity
prices;
|
|
▪
|
Heightened
environmental concerns, creating legislative and popular support to reduce
carbon
dioxide and other greenhouse
gases;
|
|
▪
|
Regulatory
mandates as well as government tax
incentives.
|
|
▪
|
Improvements
in wind energy technology;
|
|
▪
|
Increasing
obstacles for the construction of conventional fuel plants;
and
|
|
▪
|
Abundant
wind resources in attractive energy
markets.
|
Wind
energy, which has no fuel costs, has become much more competitive by comparison
to traditional electricity generation sources, and has grown dramatically
relative to other non-hydroelectric renewable sources (including biofuels,
geothermal and solar) in recent years. Wind energy also offers an
attractive method of managing commodity price risk while maintaining strict
environmental standards, as it provides a stable, affordable hedge against the
risk of increases in the price of coal, natural gas and other fuels over time.
Increasing the use of wind energy also has the implied benefit of lowering
overall demand for natural gas, particularly during winter peak
demand.
Concerns
over the recent volatility in fuel prices, coupled with the significant
dependence on fossil fuels, has been and will continue to be a factor in the
political and social movement towards greater use of clean energy.
Heightened
Environmental Concerns, Creating Legislative and Popular Support to Reduce
Carbon Dioxide and Other Greenhouse Gases
The
growing concern over global warming caused by greenhouse gas emissions has also
contributed to the growth in the wind energy industry. According to the
Intergovernmental Panel on Climate Change Fourth Assessment Report, experts have
noted that eleven of the last twelve years (1995–2006) rank among the warmest
years since 1850. Additionally, the global average sea level has risen at an
average rate of 1.8 millimeters per year since 1961 and at 3.1 millimeters per
year since 1993, due to the melting of glaciers, ice caps and polar ice sheets,
coupled with thermal expansion of the oceans. The importance of reducing
greenhouse gases has been recognized by the international community, as
demonstrated by the signing and ratification of the Kyoto Protocol, which
requires reductions in greenhouse gases by the 177 (as of March 2008) signatory
nations (not including the United States).
45
Substituting
wind energy for traditional fossil fuel-fired generation would help reduce CO2
emissions due to the environmentally-friendly attributes of wind energy.
According to the Energy Information Administration, the United States had the
highest CO2 emissions of all countries in the world in 2005, contributing
approximately 20% of the world’s CO2 emissions. Since 1990, CO2 emissions from
the United States’ electric power industry have increased by a cumulative amount
of 27%, from 1.9 billion metric tons to 2.5 billion metric
tons.
Environmental
legislation and regulations provide additional incentives for the development of
wind energy by increasing the marginal cost of energy generated through
fossil-fuel technologies. Such legislation and regulations have been designed
to, for example, reduce ozone concentrations, particulate emissions, haze and
mercury emissions and can require conventional energy generators to make
significant expenditures, implement pollution control measures or purchase
emissions credits to meet compliance requirements. These measures have increased
fossil fuel-fired generators’ capital and operating costs and put upward
pressure on the market price of energy. Because wind energy producers are price
takers in energy markets, these legislative measures effectively serve to make
the return on wind energy more attractive relative to other sources of
generation.
It is
anticipated that there is significant support to enact legislation that will
attempt to reduce the amount of carbon produced by electrical generators.
Although the ultimate form of legislation is still being debated, the two most
likely alternatives are (i) a direct emissions tax or (ii) a
cap-and-trade regime. We believe either of these alternatives would likely
result in higher overall power prices, as the marginal cost of
electricity.
Improvements in
Wind Energy Technology
Wind
turbine technology has improved considerably in recent years with significant
increases in capacity and efficiency. Multiple types and sizes of turbines are
now available to suit a wide range of wind resource characteristics and
landscapes. Modern wind turbines are capable of generating electricity for 20 to
30 years.
There
have been two major trends in the development of wind turbines in recent
years:
|
▪
|
According
to the Danish Wind Industry Association and the U.S. Department of Energy,
individual
turbine capacity has increased dramatically over the last 25 years, with
30
kW machines that operated in 1980 giving way to the 1.5 MW machines that
are standard today;
|
|
▪
|
Wind
park performance has improved significantly, according to the U.S.
Department of Energy, s
turbines installed in 2004 through 2006 averaged a 33%-35% net capacity
factor (the ratio of
the actual output over a period of time and the output if the wind park
had operated at full capacity
over that time period) as compared to the 22% net capacity factor realized
by turbines installed
prior to 1998.
|
Additionally,
as wind energy technology has continued to improve, according to AWEA, the
capital cost of wind energy generation has fallen by approximately 80% over the
past 20 years.
46
Increasing
Obstacles for the Construction of Conventional Fuel Plants
In
addition to the impediments presented by the extensive and growing environmental
legislation, new power plants that use conventional fuels, such as coal and
nuclear technologies, face a difficult, lengthy and expensive permitting
process. Furthermore, increasing opposition from public environmental groups
towards coal-fired power plants, coupled with rising construction costs,
contributed to the cancellation of many planned coal plants in 2007. Traditional
energy developers and utilities are likely to face permitting and restricted
supply issues in the future. As a result, alternative energy sources such as
wind will need to be developed to meet increasing electricity demand and will be
able to capitalize on the resulting higher energy prices.
Abundant
Wind Resources in Attractive Energy Markets
The
potential for future growth in the North American wind energy market is
supported by the large land area available for turbine installations and the
availability of significant wind resources. According to
AWEA,
Wind energy
project revenues are highly dependent on suitable wind and associated weather
conditions.
The
energy and revenues generated at a wind energy project are highly dependent on
climatic conditions, particularly wind conditions, which are variable and
difficult to predict. Turbines will only operate within certain wind speed
ranges that vary by turbine model and manufacturer, and there is no assurance
that the wind resource at any given project site will fall within such
specifications. Even after undertaking studies to determine the
feasibility of a project, actual climatic conditions at a project site,
particularly wind conditions, may not conform to the findings of these wind
studies, and, therefore, wind energy projects may not meet anticipated
production levels, which could adversely affect forecasts. In
addition, global climate change could change existing wind patterns; such
effects are impossible to predict.
Tornados,
lightning strikes, floods, severe storms, wildfires or other exceptional weather
conditions or natural disasters could damage wind energy projects and related
facilities and decrease production levels. These events could have a material
adverse effect on the operations of any wind farm.
Environmental
Regulation
Wind park
development activities are subject to various government environmental laws and
regulations, primarily including environmental impact review requirements and
regulations governing the discharge of fill materials into protected wetlands.
The impact of these laws and regulations on the development, construction and
operation of wind parks is site specific and varies depending upon the location
and design of the wind park and the relevant
regulations. Potential regulation may require an evaluation us
to evaluate the potential environmental impacts caused by wind parks, including
assessments of visual and noise impacts, effects on wildlife (primarily birds
and bats) and impacts to historical and cultural resources, and to implement
measures to mitigate those impacts to the extent practicable. Additional
regulation may be imposed with respect to the operations of the wind parks by
setting limits on the use of local roads, setback requirements and noise
standards. Failure to comply with these requirements or with other regulatory
standards may result in the denial of required permits that are required for
construction or operation or become subject to regulatory enforcement
actions. Legal challenges or enforcement actions, even if ultimately
defeated, can result in substantial delays in the completion of a wind park and
may have a material adverse effect on business, results of operations and
financial condition.
47
Wind
parks need to be designed to have minimal operational impact on the environment.
Operation of a wind park does not produce significant wastes, generate air
emissions or result in wastewater discharges. While most of our environmental
regulatory obligations arise during or prior to the construction stage for some
wind parks, significant environmental obligations may still exist even after
construction is complete. For example, wind parks may be
required to monitor impacts on avian species and to adopt mitigating measures if
substantial impacts are determined. In most cases, the precise nature of this
potential mitigation is not specified in the wind parks’
permits. Wind parks may also be required to mitigate for damage
to or loss of wetland areas which, in some instances, may not be completed for
several years after the wind park is constructed.
Management
believes that there is tremendous opportunity in entering the renewable energy
field. However, any undertaking of this kind will require an infusion
of capital and/or a strategic partner
Description
of Property
Our
principal place of business is located at 346 Waverley Street, Ottawa, Ontario
Canada K2P0W5. We pay a monthly rent of
$750. We occupy three offices at this building. Our
lease is on a month to month basis. A 50% owner of the leased
property is the wife of Greg Wilson, one of our
officers. We believe that the rent that we pay for the leased
premises is comparable to rental rates which we would pay if the rental terms
were negotiated at arm’s length. If our lease agreement is
terminated, we do not believe that there will be any difficulty in
leasing comparable space at a competitive price.
Legal
Proceedings
We are
not engaged in any litigation, and we are unaware of any claims or complaints
that could result in future litigation. We will seek to minimize disputes
with our customers but recognize the inevitability of legal action in today’s
business environment as an unfortunate price of conducting
business.
MANAGEMENT
Executive
Officers and Directors
The
following table sets forth information concerning the directors and executive
officers of Wind Works as of the date of this prospectus:
Our
directors and executive officers are:
| Name | Position | Age |
| Dr. Ingo Stuckmann | CEO/Director | 42 |
| J.C. Pennie | Chairman | 70 |
| Greg Wilson | Director | 46 |
| W. Campbell Birge | CFO/Secretary/Treasurer | 56 |
48
Dr. Ingo
Stuckmann serves as our chief executive officer, president and
serves on our Board of Directors. Dr. Stuckmann received a Ph.D. in
Natural Sciences from the University of Heidelberg. Thereafter, he
conducted research at Harvard University. In 2002, Dr.
Stuckmann joined Energy Farming International, a wind farm financing
and construction company based in Germany. During his tenure, wind
farm projects were developed in both Spain and the United
States. In 2007, Energy Farming International merged with Seeba
Energy Farming Group at which time Dr. Stuckman served as a principal
of the merged entity. See Ba Energy Farming Group has
approximately 80 employees and is involved in the planning and
development of wind turbines throughout the world. In
2008, Dr. Ingo co-founded Zero Emission People LLC for wind energy development
in North America. Dr. Stuckmann also serves in various capacities
with companies engaged in the wind energy field including Global Winds Harvest,
Inc., Global Wind Harvest LLC, Energy Farming Ontario,
Inc. and Sunbeam LLC.
J.C. Pennie serves as chairman
of our Board of Directors. Mr. Pennie has developed six
wind energy projects in Ontario, Canada.. Several of these wind
energy projects have been sold or joint ventures have been
established with international firms such as Energy Faming International of
Germany and Schneider Power of Toronto. Mr. Pennie is on the IESO (Independent
Electrical System Operators) renewable energy standing committee. The IESO is
responsible for coordination of generation and transmission with electricity
demand. Mr. Pennie is also Vice-Chairman of DareArts Foundation for Children,
founded in 1994 using multi-cultural arts education programs for
children at risk. DareArts has reached over 110,000 children in
Canada.
Greg Wilson serves on our
Board of Directors. Mr. Wilson is a financier
and corporate strategist. In 1997, he founded EMT Capital Corp., a financial
advisory firm concentrating in various aspects of capital
market transactions including mergers and acquisitions and
corporate financings. Mr. Wilson also serves on the Board of
Directors of Empire Capital Corp. Mr. Wilson has completed the
Canadian Investment Management (CIM) program, and has earned the Fellow of the
Canadian Securities Institute (FCSI) designation.
W. Campbell
Birge was appointed our president and joined our board
of directors in December 2007. In September
2009, he stepped down as our president and as a director and assumed the role of
chief financial officer. Mr. Birge has been a consultant to several
public and private companies located in the United States, Canada and Mexico
including Industrial Minerals Inc. and Sigma Capital Group. He was on the
Advisory Board of the Trust for Sustainable Development and was instrumental in
working on the Loreto Bay project, a large real estate development project.
Mr. Birge has lived in Mexico and was an Associate Professor at United
States International University (Mexico City campus) for five years. He
was also elected to serve on the Academic counsel as the Head of the Graduate
Business studies while at the university Mr. Birge earned a
Master’s Degree in Management and Organizational Development from United States
International University, a Bachelor of Arts degree in Sociology from Simon
Fraser University and a Bachelor of Education degree from the University of
Calgary.
Involvement
in Certain Legal Proceedings
None.
49
Penalties
or Sanctions
To the
best of our knowledge, none of our directors, officers or stockholders holding a
sufficient number of securities to affect materially the control of the Company,
has been subject to any penalties or sanctions imposed by a court relating to
securities legislation or by a securities regulatory authority or has entered
into a settlement agreement with a securities regulatory authority or
has been subject to any other penalties or sanctions imposed by a
court or regulatory body that would likely be considered important to a
reasonable investor making an investment decision.
Family
Relationships:
There are
no family relationships between or among the directors, executive officers or
persons nominated or chosen by us to become directors or executive
officers.
Committees
of the Board
We do not
currently have an Audit, Compensation, or Nominating Committee, or
any other committee of the board of directors. Since we do not have any
of the subject committees, our entire board of directors participates in all of
the considerations with respect to our audit, compensation and nomination
deliberations.
Audit
Committee
The
entire board of directors performs the functions of an audit committee, but no
written charter governs the actions of the board when performing the functions
of what would generally be performed by an audit committee. The board
approves the selection of our independent accountants and meets and interacts
with the independent accountants to discuss issues related to financial
reporting. In addition, the board reviews the scope and results of the
audit with the independent accountants, reviews with management and the
independent accountants our annual operating results, considers the adequacy of
our internal accounting procedures and considers other auditing and accounting
matters including fees to be paid to the independent auditor and the performance
of the independent auditor.
Nomination
and Compensation Committees
We do not
have separate nominating and compensation committees. When evaluating
director nominees and the appropriate compensation to be paid to each, our
directors will consider the following factors:
|
▪
|
The
appropriate size of our board of
directors;
|
|
▪
|
Our
needs with respect to the particular talents and experience of our
directors;
|
|
▪
|
The
knowledge, skills and experience of nominees, including experience in
finance, administration or public service, in light of prevailing business
conditions and the knowledge, skills and experience already possessed by
other members of the board;
|
50
|
▪
|
Experience
with accounting rules and practices;
and
|
|
▪
|
The
desire to balance the benefit of continuity with the periodic injection of
the fresh perspective provided by new board
members.
|
When
considering compensation levels for our Board Members, the entire Board will
consider such matters as the time the directors will be required to devote to
the operations of the Company, the financial condition of the
Company, the overall performance of the Company and the compensation
level paid to similar situated companies.
Our goal
is to assemble a board that brings together a variety of perspectives and skills
derived from high quality business and professional experience. In doing
so, the board will also consider candidates with appropriate non-business
backgrounds.
Other
than the foregoing, there are no stated minimum criteria for director nominees,
although the board may also consider such other factors as it may deem are in
our best interests as well as our stockholders. In addition, the board
identifies nominees by first evaluating the current members of the board willing
to continue in service. Current members of the board with skills and
experience that are relevant to our business and who are willing to continue in
service are considered for re-nomination. If any member of the board does
not wish to continue in service or if the board decides not to re-nominate a
member for re-election, the board then identifies the desired skills and
experience of a new nominee in light of the criteria above. Current
members of the board are polled for suggestions as to individuals meeting the
criteria described above. The board may also engage in research to
identify qualified individuals. To date, we have not engaged third parties
to identify or evaluate or assist in identifying potential nominees, although we
reserve the right in the future to retain a third party search firm, if
necessary. The board does not typically consider stockholder nominees
because it believes that its current nomination process is sufficient to
identify directors who serve our best interests.
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, the directors and certain of the officers,
and persons holding more than 10 percent of our common stock are required to
file forms reporting their beneficial ownership of our common stock and
subsequent changes in that ownership with the Securities and Exchange
Commission. Such persons are also required to furnish management with
copies of all forms so filed.
51
Based solely upon a review of copies of
such forms filed on Forms 3 and 4, we are not aware of any persons who during
the quarter ended December 31, 2009, were directors, officers, or
beneficial owners of more than 10 percent of our common stock, and who
failed to file, on a timely basis, reports required by Section 16(a) of the
Exchange Act during such fiscal year.
Communication
with Directors
Stockholders
and other interested parties may contact any of our directors by writing to them
at Wind Works Power Corp. 346 Waverley Street, Ottawa, Ontario
Canada K2P 0W5, Attention: Corporate
Secretary.
Our board
has approved a process for handling letters received by us and addressed to any
of our directors. Under that process, the Secretary reviews all such
correspondence and will forward to the directors a summary of all such
correspondence, together with copies of all such correspondence that, in the
opinion of the Secretary, deal with functions of the board or committees thereof
or that he otherwise determines requires their attention. Directors may at
any time review a log of all correspondence received by us that is addressed to
members of the board and request copies of such correspondence.
Conflicts
of Interest
From time
to time, one or more of our affiliates may form or hold an ownership interest in
and/or manage other businesses both related and unrelated to the type of
business that we own and operate. These persons expect to continue to form, hold
an ownership interest in and/or manage additional other businesses which may
compete with ours with respect to operations, including financing and marketing,
management time and services and potential customers. These activities may
give rise to conflicts between or among the interests of Wind
Works and other businesses with which our affiliates are associated.
Our affiliates are in no way prohibited from undertaking such activities,
and neither we nor our stockholders will have any right to require participation
in such other activities
Further,
because we intend to transact business with some of our officers, directors and
affiliates, as well as with firms in which some of our officers, directors or
affiliates have a material interest, potential conflicts may arise between the
respective interests of us and these related persons or entities. We
believe that such transactions will be effected on terms at least as favorable
to us as those available from unrelated third parties.
With
respect to transactions involving real or apparent conflicts of interest, we
have adopted policies and procedures which require that: (i) the fact of the
relationship or interest giving rise to the potential conflict be disclosed or
known to the directors who authorize or approve the transaction prior to such
authorization or approval, (ii) the transaction be approved by a majority of our
disinterested outside directors, and (iii) the transaction be fair and
reasonable to us at the time it is authorized or approved by our
directors.
Code
of Ethics for Senior Executive Officers and Senior Financial
Officers
We have
adopted a Code of Ethics for our officers. The code provides as
follows:
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▪
|
Each
officer is responsible for full, fair, accurate, timely and understandable
disclosure in all periodic reports and financial disclosures required to
be filed by us with the Securities and Exchange Commission or disclosed to
our stockholders and/or the public.
|
52
|
▪
|
Each
officer shall immediately bring to the attention of the audit committee,
or disclosure compliance officer, any material information of which the
officer becomes aware that affects the disclosures made by us in our
public filings and assist the audit committee or disclosure compliance
officer in fulfilling its responsibilities for full, fair, accurate,
timely and understandable disclosure in all periodic reports required to
be filed with the Securities and Exchange
Commission.
|
|
▪
|
Each
officer shall promptly notify our general counsel, if any, or the
president or chief executive officer as well as the audit committee of any
information he may have concerning any violation of our Code of Business
Conduct or our Code of Ethics, including any actual or apparent conflicts
of interest between personal and professional relationships, involving any
management or other employees who have a significant role in our financial
reporting, disclosures or internal
controls.
|
|
▪
|
Each
officer shall immediately bring to the attention of our general counsel,
if any, the president or the chief executive officer and the audit
committee any information he may have concerning evidence of a material
violation of the securities or other laws, rules or regulations applicable
to us and the operation of our business, by us or any of our
agents.
|
|
▪
|
Any
waiver of this Code of Ethics for any officer must be approved, if at all,
in advance by a majority of the independent directors serving on our board
of directors. Any such waivers granted will be publicly disclosed in
accordance with applicable rules, regulations and listing
standards.
|
We will
post a copy of our Code of Ethics on our website at www.windworkspower.com
In addition, we have filed a copy of our Code of Ethics
as an exhibit to this
registration statement. We will provide to any
person without charge, upon request, a copy of our Code of Ethics. Any
such request should be directed to our corporate secretary at 346
Waverley Street, Ottawa, Ontario K2P OW5. The
information contained in our website shall not constitute part of this
prospectus.
Summary
of Cash and Certain Other Compensation
We
currently have one executive officer, We have not established a
compensation package for our current officers or directors. We anticipate
that our compensation program will consist of three key elements
which will be considered by a compensation committee to be
appointed:
53
|
▪
|
A
base salary;
|
|
▪
|
A
performance bonus; and
|
|
▪
|
Periodic
grants and/or options of our common
stock.
|
Base Salary. Our chief
executive officer and all other officers receive compensation based on such
factors as competitive industry salaries, a subjective assessment of the
contribution and experience of the officer, and the specific recommendation by
our chief executive officer.
Performance Bonus. A
portion of each officer’s total annual compensation is in the form of a bonus.
All bonus payments to officers must be approved by our compensation
committee based on the individual officer’s performance and company
performance.
Stock Incentive. Stock
options are granted to executive officers based on their positions and
individual performance. Stock options provide incentive for the creation
of stockholder value over the long term and aid significantly in the recruitment
and retention of executive officers. The compensation committee considers
the recommendations of the chief executive officer for stock option grants to
executive officers (other than the chief executive officer) and approves,
disapproves or modifies such recommendation. See “Market Price of and
Dividends on our Common Equity and Related Stockholder Matters - Securities
Authorized for Issuance under Equity Compensation Plans.”
Retirement
Benefits
We
currently do not offer any type of retirement savings plan for our executive
officers, directors or employees.
Perquisites
None of
our executive officers have perquisites in excess of $10,000 in annual
value.
Severance
Benefits
We
currently do not offer any type of severance program for our executive officers
or employees. As we expand our operations, and on the recommendation of our
Compensation Committee, we may implement such a plan to preserve employee morale
and productivity and encourage retention in the face of the disruptive impact of
an actual or rumored workforce reduction or a change in control of our
company.
Compensation
of our Officers
The
Company has no formalized any employment agreement with either Mr. Stuckmann or
Mr. Birge. Our Compensation Committee will recommend to our entire
Board a salary commensurate to their experience, service and contributions to
the Company. The Compensation Committee and the entire Board of Directors has
not established any quantifiable criteria with respect to the level of either
the stock grants or options. Rather, the Compensation Committee evaluates both
cash, stock grants and stock options paid to similarly situated
companies.
With
respect to stock grants and options issued to the Company’s officers we will
consider an overall compensation package that included both cash and
stock based compensation which would be in line with the Company’s overall
operations and compensation levels paid to similarly
situated companies.
54
We intend
to value stock options will be granted at the market on
the date of grant. Under Generally Accepted Accounting Principles (“GAAP”) we
will be required to value these grants based on the date of grant.
The dollar value of both the stock options and the stock awards are accounting
entries and do not necessarily reflect actual compensation received by any of
our officers.
The
following table discloses compensation paid during the fiscal years ended
June 30, 2009 and 2008 to (i) the Company’s Chief Executive Officer, (ii)
chief financial officer and (ii) individual(s) who were the only executive
officers, other than the Chief Executive Officer or Chief Financial Officer,
serving as executive officers at the end of fiscal year whose total salary and
bonus exceeded $100,000 (the “Named Executive Officers”). No restricted stock
awards, long-term incentive plan payouts or other types of compensation, other
than the compensation identified in the chart below, were paid to these
executive officers during these fiscal years.
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
(1)
|
Option
Awards
($)
(2)
|
Total
($)
|
|
W.
Campbell Birge
|
2009
2008
|
10,000
12,000
|
0
0
|
75,000
75,000
|
0
0
|
85,000
87,000
|
|
Charles
Reed(3)
|
2009
2008
|
0
0
|
0
0
|
30,000
66,176
|
0
0
|
30,000
66,176
|
|
Lucie
Letellier(3)
|
2009
2008
|
0
10,780
|
0
0
|
60,000
66,176
|
0
0
|
60,000
75,011
|
|
(1)
|
The
amounts in these columns reflect the dollar amount recognized for
financial statement reporting purposes for the fiscal years indicated in
accordance with SFAS No. 123(R). These amounts reflect the Company’s
accounting expense for these awards, and do not correspond to the actual
value that will be recognized by the named
executives.
|
|
(2)
|
All
options awards have been cancelled.
|
|
(3)
|
Former
Officer
|
Stock
Options Granted/Exercised in Last Year
None.
Outstanding Equity Awards at Fiscal Year-End
None.
55
Director
Compensation
As of the
end of the Company’s last fiscal year, directors did
not receive any compensation for serving on the Company’s Board of
Directors.
Does not
include any shares of our common stock received in connection with the
acquisition of Projects in which a director has an interest.
Employment
Agreements
As of the
date of this prospectus, we do not have any employment agreements with our
employees.
Director
Compensation
Our
directors do not receive compensation for their services as
directors.
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
On
January 4, 2010 the Company’s auditors, Cinnamon Jang Willoughby &
Company, merged with Meyers Norris Penny LLP, Chartered Accountants. In
accordance with SEC rules this constitutes a change of auditor. On
February 11, 2010 the Company engaged Meyers Norris Penny LLP, Chartered
Accountants, as its independent auditor and independent certified public
accountant on the same terms and conditions.
Except as
noted above, during the last two fiscal years, we have had no changes in or
disagreements with our accountants on accounting and financial disclosure.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The
following table sets forth certain information as of February 28,
2010 with respect to the beneficial ownership of the Company's Common Stock by:
(i) all persons known by the Company to be beneficial owners of more than 5% of
the Company's Common Stock, (ii) each current officer and director and Named
Executive Officer, and (iii) by all executive officers and directors as a
group.
| Name | Shares (1) |
Options(2)
Warrants/(5)Convertible
Debt
|
Percent of Class(1) | |||||||||
| Ingo Stuckmann(3) | 2,000,000 | 300,000 | 8.5% | |||||||||
| Thomas Tschiesche (3) | 2,000,000 | 200,000 | 8.3% | |||||||||
| Derek Tennant | 2,225,000 | nil | 8.4% | |||||||||
| John Pennie | 1,900,000 | 200,000 | 7.7% | |||||||||
| Greg Wilson(4)(5) | 736,567 | 564,285 | 4.8% | |||||||||
| W. Campbell Birge(7) | 400,000 | 100,000 | 1.8% | |||||||||
|
(All
officers and directors
as a group (iii) members)
|
5,036,567 | 1,164,285 | 18.6% | |||||||||
56
(1) Under
Rule 13d-3, a beneficial owner of a security includes any person who, directly
or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition
of shares. Certain shares may be deemed to be beneficially owned by more
than one person (if, for example, persons share the power to vote or the power
to dispose of the shares). In addition,
shares are deemed to be beneficially
owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the
date as of which the information is provided. In
computing the percentage ownership of any person,
the amount of shares outstanding is deemed to include the
amount of shares beneficially owned by such person (and only such
person) by reason of these acquisition rights. As a
result, the percentage of outstanding shares of any person as shown in this
table does not necessarily reflect the person's actual ownership or voting power
with respect to the number of shares of common stock actually
outstanding.
Based on
a total of 27,049,046 shares of common stock issued and
outstanding.
(2) All options are exercisable at $0.85
per share. Warrants at $1.00
(3) Excludes
170,750 shares owned by spouse.
(4) Excludes
53,000 shares owned by spouse.
(5) Includes
200,000 options, 150,000 warrants exercisable at $1.00 per share and
the conversion of a convertible debenture in the amount
of $150,000 which can be converted into 214,285 shares of
common stock.
The
mailing address for Dr. Stuckmann is in care of Wind Works Power Corp. 346 Waverley Street
Ottawa, Ontario Canada K2P 0W5
The
mailing address for Mr. Pennie is in care of Wind Works Power Corp. 346 Waverley Street
Ottawa, Ontario Canada K2P 0W5
The
mailing address for Mr. Wilson is in care of Wind Works Power Corp. 346 Waverley Street
Ottawa, Ontario Canada K2P 0W5
The
mailing address for Mr Birge is in care of Wind Works Power Corp. 346 Waverley Street
Ottawa, Ontario Canada K2P 0W5.
57
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CONTROL PERSONS.
All
transactions related to our wind energy projects have been entered into with
entities affiliated with our management. Ingo Stuckmann (and former
Director Thomas Tschiesche) have been engaged for many years in wind energy
projects and have acquired projects on behalf of various corporate entities,
and/or partnerships located in both the United States, Canada and
overseas.
SELLING
STOCKHOLDER
On behalf
of the selling security holder, we have agreed to file a registration statement
with the SEC covering the resale of our common stock as described in this
prospectus. We have also agreed to use our reasonable efforts to keep the
registration statement effective and update the prospectus until the securities
owned by the selling security holder have been sold or may be sold without
registration or prospectus delivery requirements under the 1933 Act. We will pay
the costs and fees of registering the shares, but the selling security holders
will pay any brokerage commissions, discounts or other expenses relating to the
sale of the shares.
The
registration statement which we have filed with the SEC, of which this
prospectus forms a part, covers the resale of our common stock by the selling
security holder from time to time under Rule 415 of the 1933 Act. Our
agreement with the selling security holder was entered into with the intention
of providing those security holders with additional liquidity with respect to
their ownership of shares of our common stock.
The
selling security holder may offer our securities covered under this prospectus
for resale from time to time. The selling security holders may also sell,
transfer or otherwise dispose of all or a portion of our securities in Canada or
in transactions exempt from the registration requirements of the 1933
Act.
The table
below presents information as of December 31, 2009 regarding the selling
security holder and the shares of our common stock that the selling security
holder may offer and sell from time to time under this prospectus. The table is
prepared based on information we were able to secure from public filings and
transfer agent records. Although we have assumed, for purposes of the table
below, that the selling security holder will sell all of the securities offered
by this prospectus, because they may offer all or some of the securities in
transactions covered by this prospectus or in another manner, no assurance can
be given as to the actual number of shares that will be resold by the selling
security holder. Information covering the selling security holders may change
from time to time, and changed information will be presented in a supplement to
this prospectus or an amendment to the registration statement if and when
required. Except as described above, there are no agreements, arrangements or
understandings with respect to resale of any of the securities covered by this
prospectus.
This
Registration Statement relates to the resale of our securities pursuant to a
Registration Rights with Kodiak. Under the terms of the Registration
Rights Agreement we are required to register the number of shares issued or
issuable pursuant to the Investment Agreement and any shares of capital stock
issued or issuable with respect to such shares of common stock as a result of
any stock split, stock dividend, recapitalization, exchange or similar
event.
58
|
Beneficial
Ownership of Common Shares Prior to this Offering
|
Number
of Shares to be Sold Under this Prospectus (1)
|
Beneficial
Ownership of Common Shares after this
Offering
|
|
Selling
Stockholder
|
Number
of Shares
|
Percent
of
Class
|
Number
of
Shares
(3)
|
Percent
of
Class
|
|
|
Kodiak
Capital Group, LLC
|
75,000
|
*
|
______
|
_____
|
_____
|
*Less
than one percent
|
(1)
|
These
numbers assume the selling stockholder sells all of its shares after the
completion of the offering.
|
|
(2)
|
The
number of shares set forth in the table represents an estimate of the
number of common shares to be offered by the selling stockholder. We
have assumed the sale of all of the common shares offered under this
prospectus will be sold. However, as the selling stockholder can
offer all, some or none of its common stock, no definitive estimate can be
given as to the number of shares that the selling stockholder will offer
or sell under this prospectus.
|
|
(3)
|
In
addition to the shares to be issued pursuant to the Equity Line of Credit,
we have issued to Kodiak 75,000 shares of our common stock as
a Commitment Fee
|
Beneficial
ownership is determined in accordance with Rule 13d-3(d) promulgated by the
Securities and Exchange Commission under the Exchange Act. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to the shares, subject to community property laws
where applicable.
DESCRIPTION
OF SECURITIES
GENERAL
The
following is a summary of information concerning our capital
stock. The summaries and descriptions below do not purport to be
complete statements of the relevant provisions of the Company's Articles of
Incorporation and all amendments thereto. The summary is qualified by reference
to these documents, which you must read for complete information on the capital
stock of the Company.
COMMON
STOCK
We are
authorized to issue 200,000,000 shares of Common Stock of
which 27,049,046 are issued and outstanding as of April 8,
2010.
59
VOTING
RIGHTS
Holders
of Common Stock have the right to cast one vote for each share of stock in his
or her own name on the books of the corporation, whether represented in person
or by proxy, on all matters submitted to a vote of holders of common stock,
including the election of directors. There is no right to cumulative voting in
the election of directors. Except where a greater requirement is provided by
statute or by the Certificate of Incorporation, or by the bylaws, the presence,
in person or by proxy duly authorized, of the holder or holders of fifty percent
(50%) of the outstanding shares of the our Common Stock shall constitute a
quorum for the transaction of business. The vote by the holders of a majority of
such outstanding shares is required to effect certain fundamental corporate
changes such as liquidation, merger or amendment of our Certificate of
Incorporation.
DIVIDENDS
There are
no restrictions in our Certificate of Incorporation or bylaws that prevent us
from declaring dividends. We have not declared any dividends, and we do not plan
to declare any cash dividends in the foreseeable future.
PRE-EMPTIVE
RIGHTS
Holders
of Common Stock are not entitled to pre-emptive or subscription or conversion
rights, and there are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of common stock are, and the shares of
common stock offered hereby will be when issued, fully paid and
non-assessable.
WARRANTS,
OPTIONS AND CONVERTIBLE DEBT.
We have
issued a total of 2,087,000 common stock purchase warrants of which
1,000,000 are exercisable at $1.00 per share, of which 687,000 are exercisable
at $ 0.75 per share and 400,000 warrants are exercisable at $0.85 per
share.
We have
issued a total of $ 955,596.00 of our convertible debt. The
convertible debt provides for annual interest at the rate of 10% per annum and
matures November 30, 2010. The Convertible debt can be converted into
shares of our common stock at the conversion price of $0.70 per
share.
We have
also issued a further total of $ 275,000.00 of our convertible
debt. The convertible debt provides for annual interest at the rate
of 10% per annum and matures March 31, 2011. The Convertible debt can
be converted into shares of our common stock at the conversion price of $0.40
per share.
We have
issued a total of $1,000,000 common stock options with an exercise price of
$0.85 per share
60
CERTAIN
PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
General
Provisions
of our articles of incorporation and bylaws concern matters of corporate
governance and the rights of our stockholders, such as the ability of our board
of directors to issue shares of our capital stock and to set the voting rights,
preferences, and other terms of our preferred stock without further stockholder
action. These provisions could also delay or frustrate the removal of
incumbent directors or the assumption of control of our board of directors by
our stockholders, and may be deemed to discourage takeover attempts, mergers,
tender offers, or proxy contests not first approved by our board of directors,
which some stockholders may deem to be in their best interests.
Board
of Directors
Our business
and affairs are managed under the direction of our board of
directors, which currently consists of three members and one (forth) vacant
position. Newly created directorships resulting from any increase in the
number of directors and any vacancies on our board of directors resulting from
death, resignation, disqualification, removal or other causes shall be filled by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the board of directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term for which the new directorship was created or the
vacancy occurred and until the director’s successor shall have been elected and
qualified or until his earlier death, resignation, or removal. No decrease
in the number of directors constituting the board of directors shall shorten the
term of any incumbent director. Our board of directors may not have less
than one member. There is no limit on the maximum size of our
board.
Whenever
the holders of any class or series of our capital stock are entitled to elect
one or more directors under any resolution or resolutions of our board of
directors designating a series of our preferred stock, vacancies and newly
created directorships of a class or series may be filled by a majority of the
directors then in office elected by the applicable class or series, by a sole
remaining director so elected, or by the unanimous written consent, or the
affirmative vote of a majority of the outstanding shares of the class or series
entitled to elect the directors.
Any
director may be removed from office only by the affirmative vote of the holders
of a majority of the combined voting power of our then outstanding shares of
capital stock entitled to vote at a meeting of stockholders called for that
purpose, voting together as a single class.
Meetings
of Stockholders
Our
bylaws provide that a special meeting of our stockholders may only be called
by:
|
▪
|
Our
chairman of the board, or our president if there is no
chairman;
|
|
▪
|
The
holders of at least 10 percent of the outstanding shares of our capital
stock entitled to vote at the proposed special meeting;
or
|
|
▪
|
Our
board of directors by means of a duly adopted
resolution.
|
Special
stockholder meetings may not be called by any other person or in any other
manner. Our bylaws provide that only those matters set forth in the notice
of the special meeting may be considered or acted upon at the special meeting.
Our articles of incorporation do not permit our stockholders to take an
action by written consent unless the action to be taken and the taking of that
action by written consent have been approved in advance by our board of
directors.
The next annual meeting of our stockholders will be held in 2010,
on a date and at a place and time designated by our board of directors.
61
Limitation
of Liability
Our
articles of incorporation provide that the liability of our directors for
monetary damages shall be eliminated to the fullest extent permissible under
Nevada law. In addition, we
are authorized to indemnify our agents, including without
limitation, directors and officers, whether by bylaw, agreement or otherwise, to
the fullest extent permissible.
Our
bylaws contain similar indemnification and limitation of liability provisions.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, or persons controlling Wind Works
under the indemnification provisions, or otherwise, Wind Works is aware that, in
the opinion of the SEC, the indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
Amendment
of Bylaws
Under our
articles of incorporation, our bylaws may be amended by our board of directors
or by the affirmative vote of the holders of at least a majority of the combined
voting power of the outstanding shares of our capital stock then outstanding and
entitled to vote, voting together as a single class.
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
Our
articles of incorporation permit us to limit the liability of our directors to
the fullest extent permitted under Nevada
Statutes. As permitted by Nevada law, our bylaws and
articles of incorporation also include provisions that eliminate the personal
liability of each of our officers and directors for any obligations arising out
of any acts or conduct of such officer or director performed for or on behalf of
Wind Works. To the fullest extent allowed, we will defend,
indemnify and hold harmless its directors or officers from and against any and
all claims, judgments and liabilities to which each director or officer becomes
subject to in connection with the performance of his or her duties and will
reimburse each such director or officer for all legal and other expenses
reasonably incurred in connection with any such claim of liability.
However, we will not indemnify any officer or director against, or
reimburse for, any expense incurred in connection with any claim or liability
arising out of the officer’s or director’s own negligence or misconduct in the
performance of duty.
The
provisions of our bylaws and articles of incorporation regarding indemnification
are not exclusive of any other right we have to indemnify or reimburse our
officers or directors in any proper case, even if not specifically provided for
in our articles of incorporation or bylaws.
We
believe that the indemnity provisions contained in our bylaws and the limitation
of liability provisions contained in our articles of incorporation are necessary
to attract and retain qualified persons for these positions. No pending
material litigation or proceeding involving our directors, executive officers,
employees or other agents as to which indemnification is being sought exists,
and we are not aware of any pending or threatened material litigation that may
result in claims for indemnification by any of our directors or executive
officers.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
62
TRANSFER
AGENT
Our stock
transfer agent is Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South
Suite 430 Denver, Colorado.
SHARES
ELIGIBLE FOR FUTURE SALE
Future
sales of a substantial number of shares of our common stock in the public market
could adversely affect market prices prevailing from time to time. Under
the terms of this offering, the shares of our common stock offered may be resold
without restriction or further registration under the Securities Act, except
that any shares purchased by our “affiliates,” as that term is defined under the
Securities Act, may generally only be sold in compliance with Rule 144 under the
Securities Act.
Sale
of Restricted Shares
Certain
shares of our outstanding common stock were issued and sold by Wind Works in
private transactions in reliance upon exemptions from registration under the
Securities Act and have not been registered for resale. Such shares may be
sold only pursuant to an effective registration statement filed by Wind Works or
an applicable exemption, including the exemption contained in Rule 144
promulgated under the Securities Act.
Rule
144
In
general, Rule 144 promulgated by the Securities and Exchange Commission pursuant
to the Securities Act, provides:
|
▪
|
If
the issuer of the securities is, and has been for a period of at least 90
days immediately before the sale, subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, a minimum of six months must
elapse between the later of the date of the acquisition of the securities
from the issuer, or from an affiliate of the issuer, and any resale of
such securities in reliance on this section for the account of either the
acquiror or any subsequent holder of those
securities.
|
63
|
▪
|
If
the issuer of the securities is not, or has not been for a period of at
least 90 days immediately before the sale, subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, a minimum of one
year must elapse between the later of the date of the acquisition of the
securities from the issuer, or from an affiliate of the issuer, and any
resale of such securities in reliance on this section for the account of
either the acquiror or any subsequent holder of those
securities.
|
|
▪
|
Except
as provided in Rule 144, the amount of securities sold for the account of
an affiliate of the issuer in reliance upon this section shall be
determined as follows: If any securities are sold for the account of an
affiliate of the issuer, regardless of whether those securities are
restricted, the amount of securities sold, together with all sales of
securities of the same class sold for the account of such person within
the preceding three months, shall not exceed the greatest of: (A) one
percent of the shares or other units of the class outstanding as shown by
the most recent report or statement published by the issuer, or (B) the
average weekly reported volume of trading in such securities on all
national securities exchanges and/or reported through the automated
quotation system of a registered securities association during the four
calendar weeks preceding the filing of notice required by paragraph (h) of
Rule 144, or if no such notice is required the date of receipt of the
order to execute the transaction by the broker or the date of execution of
the transaction directly with a market maker, or (C) the average weekly
volume of trading in such securities reported pursuant to an effective
transaction reporting plan or an effective national market system plan
during the four-week period specified in paragraph (e)(1)(ii) of Rule
144.
|
We will
publish information necessary as required by the Exchange Act to permit transfer
of the common stock in accordance with Rule 144 of the Securities Act.
However, the investor is cautioned that on the effective date of this
prospectus, there is only limited trading in the shares of our common
stock.
PLAN
OF DISTRIBUTION
The
selling stockholders and any of their permitted pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. Our common stock currently trades
on the Over the Counter Bulletin Board. Any sales by the selling
stockholders may be at fixed or negotiated prices. The selling stockholders may
use any one or more of the following methods when selling shares:
|
▪
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
▪
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
▪
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
64
|
▪
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
▪
|
privately
negotiated transactions;
|
|
▪
|
short
sales;
|
|
▪
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
▪
|
a
combination of any such methods of sale;
and
|
|
▪
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The
selling stockholder may from time to time pledge or grant a security interest in
some or all of the shares of common stock or warrants owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus, or under an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this
prospectus.
The
selling stockholder also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The selling stockholders have informed us
that they do not have any agreement or understanding, directly or indirectly,
with any person to distribute the common stock.
The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against liabilities, including
liabilities arising under the Securities Act.
We are
required to pay all fees and expenses incident to the registration of the
shares.
We will
not receive any proceeds from sales of any shares by the selling
stockholders.
65
The
selling stockholders may be subject to the prospectus delivery requirements of
the Securities Act including Rule 172 thereunder. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than this
prospectus There is no underwriter or coordinating broker-dealer
acting in connection with the proposed sale of the resale shares by the selling
stockholders.
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by any selling stockholder may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts
from the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with
FINRA NASD Rule 2440; and in the case of a principal transaction a markup or
markdown in compliance with FINRA IM-2440.
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of our common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions and to return borrowed shares in
connection with such short sales, or loan or pledge our common stock to
broker-dealers that in turn may sell these securities. The selling stockholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction).
We are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
The
selling stockholders may be subject to the prospectus delivery requirements of
the Securities Act including Rule 172 thereunder. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than this
prospectus There is no underwriter or coordinating broker-dealer
acting in connection with the proposed sale of the resale shares by the selling
stockholders.
Under the
terms of the registration rights agreement entered into, we agreed to
keep the registration statement effective until the earlier of (i) the date on
which all of those shares of common stock may be resold without registration
under the Securities Act without regard to any volume limitations under Rule 144
under the Securities Act or (ii) the date on which all of those shares of common
stock have been resold pursuant to the registration statement or Rule 144 under
the Securities Act.
The
resale shares will be sold only through registered or licensed broker-dealers if
required under applicable state securities laws. In addition, in certain states,
the resale shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with. As of
the date of this prospectus, we have not filed for registration or qualification
in any state.
66
Under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to our common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of our common stock by the selling stockholders or any other
person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
LEGAL
MATTERS
The
legality of the issuance of shares offered hereby will be passed upon by the Law
Offices of Jeffrey G. Klein, P.A. located in Boca Raton, Florida. Mr. Klein
owns approximately 40,000 shares of the common stock of Wind
Works.
EXPERTS
The
financial statements for the two most recent fiscal years ended December 31,
2008 and 2007 have been audited by audited by Cinnamon Jang Willoughby &
Company, registered independent accountants, as set forth in their report
thereon which is incorporated by reference. Following the preparation of these
financial statements, the firm of Cinnamon Jang Willoughby &
Company merged with Meyers Norris Penny LLP, Chartered Accountants
and the audited financial statements are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
REPORTS
TO STOCKHOLDERS
We will
furnish our stockholders with an annual report which describes the nature and
scope of our business and operations for the prior year and which will contain a
copy of our audited financial statements for our most recent fiscal year.
In addition, we will furnish our stockholders with a proxy statement as
required by the Exchange Act covering matters to be voted upon at our annual
meeting of stockholders.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the SEC under the Securities Act a registration statement on Form S-1
with respect to the shares being offered in this prospectus. This
prospectus does not contain all of the information set forth in the registration
statement, certain items of which are omitted in accordance with the rules and
regulations of the SEC. The omitted information may be inspected and
copied at the Public Reference Room maintained by the SEC at 100 F Street N.E.,
Washington, D.C. 20549. Copies of such material can be obtained from the
public reference section of the SEC at prescribed rates.
For
further information with respect to Wind Works and the securities being offered
hereby, reference is hereby made to the registration statement, including the
exhibits thereto and the financial statements, notes, and schedules filed as a
part thereof.
67
No person
is authorized to give you any information or make any representation other than
those contained or incorporated by reference in this prospectus. Any such
information or representation must not be relied upon as having been authorized.
Neither the delivery of this prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in
our affairs since the date of the prospectus.
We are
subject to the informational requirements of the Exchange Act, and must file
reports, proxy statements and other information with the SEC, such as current,
quarterly and annual reports on Forms 8-K, 10-Q and 10-K. Our executive
officers, directors and beneficial owners of 10 percent or more of our common
stock also file reports relative to the acquisition or disposition of shares of
our common stock or acquisition, disposition or exercise of any of our common
stock purchase options or warrants. These filings will be a matter of
public record and any person may read and copy any materials we file with the
SEC at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. Further, the SEC maintains an
Internet web site at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers, including us,
that file electronically with the SEC.
68
WINDWORKS
POWER
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp.- an Exploration Stage Mining Company)
Audited
Consolidated
Financial Statements
Year
ended June 30, 2009 and 2008
F-1
MANAGEMENT’S
RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS
To the shareholders of Wind Works
Power Corp. (Formerly AmMex Gold Mining Corp. - an Exploration
Stage Mining Company)
The
consolidated financial statements and the notes thereto are the responsibility
of the management of Wind Works Power Corp. (Formerly AmMex Gold Mining Corp.
- an Exploration Stage Mining Company). These consolidated financial
statements have been prepared in accordance with United States generally
accepted accounting principles.
Management
has developed and maintained a system of internal controls to provide reasonable
assurance that all assets are safeguarded and to facilitate the preparation of
relevant, reliable and timely financial information.
The Board
of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control.
“Ingo
Stuckmann”
Ingo
Stuckmann
President
F2
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of Wind Works Power Corp. (A Development
Stage Corporation):
We have
audited the accompanying consolidated balance sheets of Wind Works Power Corp.
as at June 30, 2009 and 2008, and the related consolidated statements of
operations, stockholders' deficiency and cash flows for each of the two years in
the period ended June 30, 2009 and cumulative from inception November 20, 2002
to June 30, 2009. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company's internal control over financial
reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our
opinion, these consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the company as at
June 30, 2009 and 2008, and the results of its operations and its cash flows for
each of the two years in the period ended June 30, 2009 and cumulative from
inception November 20, 2002 to June 30, 2009 in conformity with U.S. generally
accepted accounting principles.
The
accompanying financial statements referred to above have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, the Company is in the development
stage, has no established source of revenue and is dependent on its ability to
raise capital from shareholders or other sources to sustain operations.
These factors, along with other matters as set forth in Note 1, raise
substantial doubt that the Company will be able to continue as a going concern.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/
“Cinnamon Jang Willoughby”
Chartered
Accountants
Burnaby,
BC, Canada
September
21, 2009
MetroTower
II - Suite 900 - 4720 Kingsway, Burnaby, BC Canada V5H 4N2. Telephone: +1
604 435 4317. Fax: +1 604 435 4319.
HLB
Cinnamon Jang Willoughby & Company is a member of International. A
world-wide organization of accounting firms and business advisors.
F-3
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Consolidated
Balance Sheets
As
at June 30, 2009 and 2008
(Expressed
in United States dollars, unless otherwise stated)
|
Assets
|
||||||||
|
June
30,
2009
|
June
30,
2008
|
|||||||
|
Current
Assets
|
||||||||
|
Cash
|
$ | 28,606 | $ | 82,054 | ||||
|
Prepaid
Expenses
|
11,290 | 170,492 | ||||||
|
Accounts
Receivable
|
477 | 484 | ||||||
| 40,373 | 253,030 | |||||||
|
Fixed
Assets (Note 5)
|
4,667 | 5,834 | ||||||
| $ | 45,040 | $ | 258,864 | |||||
|
Liabilities
and Stockholders’ Deficiency
|
||||||||
|
Liabilities
|
||||||||
|
Current
Liabilities
|
||||||||
|
Accounts
payable and accrued liabilities
|
$ | 73,731 | $ | 324,015 | ||||
| Other short term loans (Note 6) | 36,268 | - | ||||||
| Subscriptions payable (Note 7) | 88,500 | - | ||||||
| 198,499 | 324,015 | |||||||
|
Stockholders’
Deficiency
|
||||||||
|
Common stock, $0.001 par value (Note 8)
|
5,681 | 50,834 | ||||||
|
Additional Paid-in capital
|
7,038,443 | 6,784,221 | ||||||
|
Contributed surplus
|
22,625 | 22,625 | ||||||
|
Deficit accumulated during the Development Stage
|
(7,215,808 | ) | (6,918,431 | ) | ||||
|
Accumulated other comprehensive loss
|
(4,400 | ) | (4,400 | ) | ||||
| (153,459 | ) | (65,151 | ) | |||||
| $ | 45,040 | $ | 258,864 | |||||
Going
concern (Note 1) Commitment (Note 11)
The
accompanying notes are an integral part of the consolidated financial
statements.
F-4
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Consolidated
Statement of Operations
For
the Year Ended June 30, 2009 and 2008
(Expressed
in United States dollars, unless otherwise stated)
|
Year
Ended
June
30, 2009
|
Year
Ended
June
30, 2008
|
Cumulative
Since November 20, 2002 to
June
30, 2009
|
||||||||||
|
Revenue
|
||||||||||||
|
Interest
Income
|
$ | 62 | $ | 9,833 | $ | 12,525 | ||||||
|
Expenses
|
||||||||||||
|
Exploration
Expenses
|
29,786 | 500,010 | 1,646,333 | |||||||||
|
Geologists
|
- | 29,593 | 264,469 | |||||||||
|
Advertising
and Promotion
|
1,586 | 18,535 | 74,920 | |||||||||
|
Consulting
Fees
|
23,646 | 175,594 | 458,951 | |||||||||
|
Corporate
Communications
|
528 | 409,928 | 531,434 | |||||||||
|
Employment
Compensation
|
10,000 | 863,797 | 1,230,483 | |||||||||
|
Insurance
|
10,201 | 47,466 | 99,308 | |||||||||
|
Depreciation
|
1,167 | 1,458 | 3,435 | |||||||||
|
Office
and Miscellaneous
|
2,571 | 25,674 | 68,574 | |||||||||
|
Professional
Fees
|
52,860 | 78,006 | 298,518 | |||||||||
| Rent | 5,146 | 8,543 | 24,475 | |||||||||
|
Stock-based
Compensation
|
159,064 | 22,625 | 181,689 | |||||||||
|
Travel
and Lodging
|
- | 7,655 | 16,278 | |||||||||
|
Interest
and Service charges
|
883 | 1,168 | 5,176 | |||||||||
|
Write-down
of Mineral Properties
|
- | 2,431,650 | 2,431,650 | |||||||||
|
Total
Operating Expenses
|
297,438 | 4,621,702 | 7,335,693 | |||||||||
|
Loss
for the period before other item:
|
297,376 | 4,611,869 | 7,323,168 | |||||||||
|
Other
items:
|
||||||||||||
|
Gain
on forgiveness of debt
|
- | - | 102,960 | |||||||||
|
Net
Loss for the period from continuing operations
|
297,376 | 4,611,869 | 7,220,208 | |||||||||
| Comprehensive Loss | ||||||||||||
| Foreign currency translation | - | - | - | |||||||||
|
Adjustments
|
- | - | (4,400 | ) | ||||||||
|
Comprehensive
loss for the period
|
$ | 297,376 | $ | 4,611,869 | $ | 7,215,808 | ||||||
|
Basic
and diluted loss per share
|
$ | 0.05 | $ | 0.90 | ||||||||
|
Weighted
average number of shares outstanding
|
5,551,401 | 4,866,177 | ||||||||||
The
accompanying notes are an integral part of the consolidated financial
statement
F-5
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Consolidated
Statement of Cash Flows
For
the Year Ended June 30, 2009 and 2008
(Expressed
in United States dollars, unless otherwise stated)
|
Year
ended
June
30, 2009
|
Year Ended
June
30, 2008
|
November
20, 2002 (Date of Inception) to
June
30, 2009
|
||||||||||
|
Cash
Flows from Operating Activities
|
||||||||||||
|
Net loss for the period
|
$ | (297,376 | ) | $ | (4,611,869 | ) | $ | (7,215,808 | ) | |||
|
Add
(deduct) non-cash items:
|
||||||||||||
|
Depreciation
|
1,167 | 1,458 | 3,435 | |||||||||
|
Write-down of Mineral Properties
|
2,431,650 | 2,431,650 | ||||||||||
|
Shares issued for services
|
- | 1,409,074 | 2,040,218 | |||||||||
|
Stock based compensation
|
159,064 | 22,625 | 181,689 | |||||||||
|
Write-off of accounts receivable
|
333 | |||||||||||
|
Loss on disposal of assets
|
(675 | ) | ||||||||||
|
Gain on forgiveness of debt
|
(102,960 | ) | ||||||||||
|
Foreign exchange
|
(4,069 | ) | (4,069 | ) | ||||||||
|
Changes
in non-cash working capital items:
|
||||||||||||
|
Accounts receivable
|
7 | (376 | ) | (477 | ) | |||||||
|
Prepaid expenses
|
4,206 | 1,706 | (11,289 | ) | ||||||||
|
Accounts payable and accrued liabilities
|
(41,215 | ) | 272,606 | 252,700 | ||||||||
| $ | (178,216 | ) | $ | (473,126 | ) | (2,425,252 | ) | |||||
|
Cash
Flows from Investing Activities
|
||||||||||||
|
Purchase
of equipment
|
- | - | (8,102 | ) | ||||||||
|
Acquisition
of mineral properties
|
- | (25,000 | ) | (60,000 | ) | |||||||
| $ | $ | (25,000 | ) | $ | (68,102 | ) | ||||||
|
Cash
Flows from Financing Activities
|
||||||||||||
|
Capital
stock issued
|
- | 555,000 | 2,079,780 | |||||||||
|
Demand
note
|
- | - | 180,000 | |||||||||
|
Advances
from related parties
|
36,268 | 48,912 | ||||||||||
|
Subscriptions
payable
|
88,500 | 88,500 | ||||||||||
|
Long
term debt
|
124,768 | |||||||||||
| $ | 124,768 | $ | 555,000 | $ | 2,521,960 | |||||||
|
Increase
(decrease) in cash from continuing operations
|
(53,448 | ) | 56,874 | 28,606 | ||||||||
|
Cash,
beginning of the year
|
82,054 | 25,183 | - | |||||||||
|
Cash,
end of the year
|
$ | 28,606 | $ | 82,057 | $ | 28,606 | ||||||
Supplemental
disclosure of non-cash transactions (Note 4)
The
accompanying notes are an integral part of the consolidated financial
statement
F-6
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Consolidated
Statements of Stockholders’ Deficiency
For
the period November 20, 2002 (Date of Inception) to June 30, 2009
(Stated
in US Dollars)
|
Common
Shares
|
Additional
Paid-in
Capital
|
Contributed
Surplus
|
Deficit
Accumulated
During
the Exploration
Stage
|
Accumulated
Other
Comprehensive
Loss
|
Total
Stockholders’ Deficiency
|
|||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||||||
|
Issued
for services on November 23, 2002 –
at
$0.0002 per share
|
5,760,000 | $ | 5,760 | $ | 6,240 | $ | - | $ | - | $ | - | $ | 12,000 | |||||||||||||||
|
Issued
for cash – at $0.0004 per share
|
4,860,000 | 4,860 | 15,390 | - | - | - | 20,250 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (374 | ) | (374 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2003
|
- | - | - | - | (47,677 | ) | - | (47,677 | ) | |||||||||||||||||||
|
Balance,
September 30, 2003
|
10,620,000 | 10,620 | 21,630 | - | (47,677 | ) | (374 | ) | (15,801 | ) | ||||||||||||||||||
|
Issued
for cash – at $0.025 per share
|
18,120 | 18 | 4,512 | - | - | - | 4,530 | |||||||||||||||||||||
|
Contributed
services
|
- | - | 40,000 | - | - | - | 40,000 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (229 | ) | (229 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2004
|
- | - | - | - | (80,605 | ) | - | (80,605 | ) | |||||||||||||||||||
|
Balance,
September 30, 2004
|
10,638,120 | 10,638 | 66,142 | - | (128,282 | ) | (603 | ) | (52,105 | ) | ||||||||||||||||||
|
Contributed
services
|
- | - | 30,000 | - | - | - | 30,000 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (1,705 | ) | (1,705 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2005
|
- | - | - | - | (83,763 | ) | - | (83,763 | ) | |||||||||||||||||||
|
Balance,
September 30, 2005
|
10,638,120 | 10,638 | 96,142 | - | (212,045 | ) | (2,308 | ) | (107,573 | ) | ||||||||||||||||||
SEE
ACCOMPANYING NOTES
F-7
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Consolidated
Statements of Stockholders’ Deficiency
For
the period November 20, 2002 (Date of Inception) to June 30, 2009
(Stated
in US Dollars)
|
Common
Shares
|
Additional
Paid-in
Capital
|
Contributed
Surplus
|
Deficit
Accumulated During the Exploration
Stage
|
Accumulated
Other
Comprehensive
Loss
|
Total
Stockholders’ Deficiency
|
|||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||||||
|
Issued
for services
|
300,000 | 3,00 | 119,700 | - | - | - | 120,000 | |||||||||||||||||||||
|
Shares
returned to treasury
|
(729,736 | ) | (730 | ) | 730 | - | - | - | - | |||||||||||||||||||
|
Contributed
services
|
- | - | 40,000 | - | - | - | 40,000 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (2,092 | ) | (2,092 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2006
|
- | - | - | - | (59,587 | ) | - | (59,587 | ) | |||||||||||||||||||
|
Balance
September 30, 2006
|
10,208,384 | 10,208 | 256,572 | - | (271,632 | ) | (4,400 | ) | (9,252 | ) | ||||||||||||||||||
|
Capital
issued for financing
|
75,000 | 75 | 1,499,925 | - | - | - | 1,500,000 | |||||||||||||||||||||
|
Capital
issued for services
|
66,800 | 67 | 462,083 | - | - | - | 462,150 | |||||||||||||||||||||
|
Capital
issued on acquisition of Minera Jeronimo SA de CV
|
145,500 | 145 | 2,371,505 | - | - | 2,371,650 | ||||||||||||||||||||||
|
Cancellation
of shares
|
(6,205,400 | ) | (6,205 | ) | 6,205 | - | - | - | - | |||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (2,034,931 | ) | - | (2,034,931 | ) | |||||||||||||||||||
|
Balance
December 31, 2007
|
4,290,284 | 4,290 | 4,596,290 | - | (2,306,563 | ) | (4,400 | ) | 2,289,617 | |||||||||||||||||||
SEE
ACCOMPANYING NOTES
F-8
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Consolidated
Statements of Stockholders’ Deficiency
For
the period November 20, 2002 (Date of Inception) to June 30, 2009
(Stated
in US Dollars)
|
Common
Shares
|
Additional
Paid-in
Capital
|
Contributed
Surplus
|
Deficit
Accumulated
During
the Exploration
Stage
|
Accumulated
Other
Comprehensive
Loss
|
Total
Stockholders’ Deficiency
|
|||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||||||
|
Capital
issued for financing
|
100,909 | 101 | 554,899 | - | - | - | 555,000 | |||||||||||||||||||||
|
Capital
issued for services
|
659,430 | 659 | 1,498,817 | - | - | - | 1,499,476 | |||||||||||||||||||||
|
Capital
issued for debt
|
32,727 | 33 | 179,967 | - | - | - | 180,000 | |||||||||||||||||||||
|
Stock
based Compensation
|
- | - | - | 22,625 | - | - | 22,625 | |||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (4,611,869 | ) | - | (4,611,869 | ) | |||||||||||||||||||
|
Balance
June 30, 2008
|
5,083,350 | 5,083 | 6,829,973 | 22,625 | (6,918,432 | ) | (4,400 | ) | (65,151 | ) | ||||||||||||||||||
|
Capital
issued for financing
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Capital
issued for services
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Capital
issued for debt
|
597,339 | 598 | 208,470 | - | - | - | 209,068 | |||||||||||||||||||||
|
Stock
based Compensation
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (297,376 | ) | - | (297,376 | ) | |||||||||||||||||||
|
Balance
June 30, 2009
|
5,680,689 | 5,681 | 7,038,443 | 22,625 | (7,215,808 | ) | (4,400 | ) | (153,459 | ) | ||||||||||||||||||
The
number of shares issued and outstanding has been restated to give retroactive
effect for four forward stock splits, on a six for one basis, a two for one
basis, a two for one basis and a two for one basis effective April 29, 2003,
March 1, 2006, May 3, 2006 and May 31, 2006, respectively. The par
value and additional paid in capital were adjusted in conformity with the number
of shares then issued.
SEE
ACCOMPANYING NOTES
F-9
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
1
a) Basis of
Presentation
AmMex
Gold Mining Corp. changed its name to Wind Works Power Corp. on March 25, 2009.
The Company, incorporated under the laws of the State of Nevada, was
primarily engaged in the acquisition and exploration of mining properties, but
has since modified its business plan to focus on alternate energy. The
Consolidated financial statements of Wind Works Power Corp. include the accounts
of its wholly owned subsidiary Minera Jeronimo S.A. de C.V.
The
accompanying consolidated financial statements and notes thereto of Wind Works
Power Corp (the “Company”) have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
(“GAAP”) have been omitted. The accompanying consolidated financial statements
and notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s 2008 Annual Report on
Form 10-K.
In the
opinion of management, these consolidated financial statements reflect all
adjustments necessary to present fairly the Company’s consolidated financial
position at June 30, 2009 and the consolidated results of operations and
consolidated statements of cash flows for the period ended June 30,
2009.
b) Going
Concern
These
financial statements have been prepared with the on-going assumption that the
Company will be able to realize its assets and discharge its liabilities in the
normal course of business. However, certain conditions noted below currently
exist which raise substantial doubt about the Company’s ability to continue as a
going concern. These financial statements do not include any adjustments to the
amounts and classifications of assets and liabilities that might be necessary
should the Company be unable to continue as a going concern.
The
operations of the Company have primarily been funded by the sale of common
stock. Continued operations of the Company are dependent on the Company’s
ability to complete additional equity financings or generate profitable
operations in the future. Management’s plan in this regard is to secure
additional funds through future equity financings.
|
June
30, 2009
|
June
30 2008
|
|||||||
|
Deficit
accumulated during the exploration stage
|
7,215,808 | 6,918,431 | ||||||
|
Working
capital (deficiency)
|
(158,126 | ) | (70,985 | ) | ||||
F-10
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
2
Significant Accounting
Policies
The
consolidated financial statements are prepared by management in accordance with
generally accepted accounting principles of the United States of America.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and the disclosure of contingent liabilities at the date of the
financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates. The
principal accounting policies followed by the Company are as
follows:
Cash and cash
equivalents
Cash and
cash equivalents include cash and highly liquid investments with an original
maturity of three months or less.
Fair Value of Financial
Instruments
The fair
market value of the Company’s financial instruments comprising cash, accounts
receivable, and accounts payable and accrued liabilities were estimated to
approximate their carrying values due to immediate or short-term maturity of
these financial instruments. The Company maintains cash balances at
financial institutions which at times, exceed federally insured amounts. The
Company has not experienced any material losses in such accounts
Fixed
Assets
Fixed
Assets are capitalized at cost. Amortization is recorded on a declining
balance basis at a rate between 20% and 30% per annum.
Use of
Estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the period.
Actual results could differ from these estimates.
Mineral
Properties
The
Company has not yet realized any revenues from its planned operations. It
was primarily engaged in the acquisition and exploration of mining properties,
but has since modified its business plan to focus on alternate energy. The
Company continues to hold a 70% earned interest in the Cerro Gordo joint venture
property with EXMIN Resources in Zacatecas State in Mexico as of June 30,
2009.The Company expenses all costs related to the maintenance and exploration
of mineral claims in which it has secured exploration rights prior to
establishment of proven and probable reserves. To date, the Company
has not established the commercial feasibility of its exploration prospects;
therefore, all exploration costs are being expensed. Mineral property
acquisition costs are initially capitalized when incurred using the guidance in
EITF 04-02, “Whether Mineral
Rights Are Tangible or Intangible Assets.” The Company assesses the
carrying cost for impairment under SFAS No. 144, “Accounting for Impairment or
Disposal of Long Lived Assets” at each fiscal quarter end.
F-11
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
2
Significant Accounting
Policies (Continued)
When it
has been determined that a mineral property can be economically developed as a
result of establishing proven and probable reserves, the costs then incurred to
develop such property are capitalized. Such costs will be amortized using
the units-of-production method over the estimated lie of the probable reserve.
If mineral properties are subsequently abandoned or impaired, any
capitalized costs will be charged to operations.
Income
Taxes
The
Company records income taxes in accordance with SFAS No. 109, using the asset
and liability method. Pursuant to SFAS No. 109 the company is required to
compute tax asset benefits for net operating losses carried forward.
Potential benefits of net operating losses have not been recognized in
these financial statements because the Company cannot be assured it is more
likely than not it will utilize the net operating losses carried forward in
future period and accordingly is offset by a valuation allowance. FIN No.48
prescribes a recognition threshold and measurement attribute for financial
statement recognition and measurement of tax positions taken into in tax
returns.
To the
extent interest and penalties may be assessed by taxing authorities on any
underpayment of income tax, such amounts would have been accrued and are
classified as a component of income tax expense in our Consolidated Statements
of Operations. The Company elected this accounting policy, which is a
continuation of our historical policy, in connection with our adoption of
FIN 48.
Foreign Currency
Translation
The
Company’s functional currency is the United States dollar. The consolidated
financial statements of the Company are translated to United States dollars in
accordance with SFAS No. 52 “Foreign Currency Translation”
(“SFAS No. 52). Monetary assets and liabilities denominated in foreign
currencies are translated using the exchange rate prevailing at the consolidated
balance sheet date. Gains and losses arising on translation or settlement of
foreign currency denominated transactions or balances are included in the
determination of income. Foreign currency transactions are primarily undertaken
in Mexican pesos and Peruvian sols. The Company has not, to the date of these
financial statements, entered into derivative instruments to offset the impact
of foreign currency fluctuations.
The
functional currency of the Company’s wholly-owned subsidiary is the Mexican
peso. The financial statements of the subsidiary are translated to United States
dollars in accordance with SFAS No. 52 using period-end rates of exchange for
assets and liabilities, and average rates of exchange for the period for
revenues and expenses. Translation gains (losses) are recorded in accumulated
other comprehensive income (loss) as a component of stockholders’ equity.
Foreign currency transaction gains and losses are included in current
operations.
Comprehensive
Income
SFAS No.
130, “Reporting Comprehensive Income” establishes standards for the reporting
and display of comprehensive income and its components in the financial
statements. As at December 31, 2008, the Company’s only component of
comprehensive income was foreign currency translation adjustments.
F-12
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note 2
Principal Accounting
Policies (Continued)
Asset Retirement
Obligation
The
Company has adopted Statement of Financial Accounting Standards No. 143 (“SFAS
143”), “Accounting for Asset Retirement Obligations”, which requires that an
asset retirement obligation (“ARO”) associated with the retirement of a tangible
long-lived asset be recognized as a liability in the period in which it is
incurred and becomes determinable, with an offsetting increase in the carrying
amount of the associated asset. The cost of the tangible asset, including the
initially recognized ARO, is depleted, such that the cost of the ARO is
recognized over the useful life of the asset. The ARO is recorded at fair value,
and accretion expense is recognizable over time as the discounted liability is
accreted to its expected settlement value. The fair value of the ARO is measured
using expected future cash flow, discounted at the Company’s
credit-adjusted-risk-free interest rate. To date, no material asset retirement
obligation exists due to the early stage of the Company’s mineral exploration.
Accordingly, no liability has been recorded.
Environmental Protection and
Reclamation Costs
The
operations of the Company have been, and may in the future be affected from time
to time in varying degrees by changes in environmental regulations, including
those for future removal and site restoration costs. Both the likelihood of new
regulations and their overall effect upon the Company may vary from region to
region and are not predictable.
Environmental
expenditures that relate to ongoing environmental and reclamation programs are
charged against statements of operations as incurred or capitalized and
amortized depending upon their future economic benefits. The Company does not
anticipate any material capital expenditures for environmental control
facilities.
Basic and Diluted Net Loss
Per Share
The
Company computes net income (loss) per share in accordance with SFAS No. 128,
“Earnings per Share”. SFAS No. 128 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic EPS
is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS give effect to all dilutive potential common
shares outstanding during the period using the treasury stock method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive.
Stock Issued in Exchange for
Services
The
valuation of the Company’s common stock issued in exchange for services is
valued at an estimated fair market value as determined by officers and directors
of the Company based upon trading prices of the Company’s common stock on the
dates of the stock transactions. The corresponding expense of the services
rendered is recognized over the period that the services are
performed.
F-13
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
2
Principal Accounting
Policies (Continued)
Stock Based
Compensation
The
Company has adopted the provisions of SFAS No. 123(R), “Share-Based Payment” (“SFAS
123(R)”), which establishes accounting for equity instruments exchanged for
employee services. Under the provisions of SFAS 123(R), stock-based compensation
cost is measured at the grant date, based on the calculated fair value of the
award, and is recognized as an expense over the employees’ requisite service
period (generally the vesting period of the equity grant).
Fair value
measurement
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, "Fair Value Measurement" ("SFAS 157"). The Statement provides guidance
for using fair value to measure assets and liabilities. The Statement also
expands disclosures about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value, and the
effect of fair value measurement on earnings.
This
Statement applies under other accounting pronouncements that require or permit
fair value measurements. This Statement does not expand the use of fair value
measurements in any new circumstances. Under this Statement, fair value refers
to the price that would sell an asset or paid to transfer a liability in an
orderly transaction between market participants in the market in which the
entity transacts. SFAS 157 is effective for the Company for fair value
measurements and disclosures made by the Company in its fiscal period beginning
on July 1, 2008.
The Fair Value Option for
Financial Assets and Financial Liabilities
On July
1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”)
as it relates to financial assets and financial liabilities. In February 2008,
the FASB staff issued Staff Position No. 157-2, Effective Date of FASB Statement
No. 157 (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective date of SFAS 157
for nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The provisions of FSP FAS 157-2 are effective for the
Company’s fiscal year beginning July 1, 2009.
SFAS 157
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. This standard
is now the single source in GAAP for the definition of fair value, except for
the fair value of leased property as defined in SFAS 13. SFAS 157 establishes a
fair value hierarchy that distinguishes between (1) market participant
assumptions developed based on market data obtained from independent sources
(observable inputs) and (2) an entity’s own assumptions about market participant
assumptions developed based on the
F-14
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
2
Principal Accounting
Policies (Continued)
best
information available in the circumstances (unobservable inputs). The fair value
hierarchy consists of three broad levels, which gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three
levels of the fair value hierarchy under SFAS 157 are described
below:
|
Level
1
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities.
|
|
Level
2
|
Inputs
other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets; quoted prices
for identical or similar assets or liabilities in markets that are not
active; inputs other than quoted prices that are observable for the asset
or liability (e.g., interest rates); and inputs that are derived
principally from or corroborated by observable market data by correlation
or other means.
|
|
Level
3
|
Inputs
that are both significant to the fair value measurement and
unobservable.
|
The fair
value of cash and cash equivalents and accounts receivables for all periods
presented approximate their respective carrying amounts.
Accounting for Deferred
Compensation and Post Retirement Benefit Aspects of Collateral Assignment Split
Dollar Life Insurance
The
Emerging Issues Task Force (EITF) reached consensus on EITF Issue
No. 06-10, Accounting
for Deferred
Compensation and Postretirement Benefit Aspects of Collateral Assignment
Split-Dollar Life Insurance Arrangements (EITF 06-10), which
requires that a company recognize a liability for the postretirement benefits
associated with collateral assignment split-dollar life insurance arrangements.
The provisions of EITF 06-10 are effective as of July 1, 2008, and
will impact the Company in instances where the Company has contractually agreed
to maintain a life insurance policy (i.e., the Company pays the premiums) for an
employee in periods in which the employee is no longer providing services.
Adoption of this standard has not had a material impact on the Company’s
financial position, results of operations or cash flows.
F-15
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
2
Principal Accounting
Policies (Continued)
Employers’ accounting for
defined benefit pension and other postretirement plans
In
September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
No. 87, 88, 106 and 132(R)" (SFAS 158"). SFAS 158 requires an employer that
sponsors one or more single-employer defined benefit plans to (a) recognize the
overfunded or underfunded status of a benefit plan in its statement of financial
position, (b) recognize as a component of other comprehensive income, net of
tax, the gains or losses and prior service costs or credits that arise during
the period but are not recognized as components of net periodic benefit cost
pursuant to SFAS 87, "Employers' Accounting for Pensions", or SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", (c)
measure defined benefit plan assets and obligations as of the date of the
employer's fiscal period-end, and (d) disclose in the notes to financial
statements additional information about certain effects on net periodic benefit
cost for the next fiscal period that arise from delayed recognition of the gains
or losses, prior service costs or credits, and transition asset or obligation.
SFAS 158 is effective for the Company's fiscal period beginning July 8, 2008.
The adoption of SFAS No. 158 did not have a material impact on the
Company's financial position, results of operations or cash flows.
Note
3
Related Party
Transactions
During
the year ended June 30, 2009, directors received payments on account of
professional fees and reimbursement of expenses in the amount of
$1,636 (2008: $50,308).
During
the year ended June 30, 2009, the company issued 4,714,290 common shares with a
total fair market value of $165,000 to directors and officers of the Company in
settlement of accounts payable.
At the
year ended June 30, 2009, the company owes $10,000 (2008: Nil) in loans payable
to an officer of the company. There are no terms or conditions to this
loan.
All
transactions above were in the normal course of business and occurred at fair
value.
Note
4
Non-cash
Transactions
There
were no interest or income taxes paid during 2008 or 2007. During the year ended
June 30, 2009, the company entered into certain non-cash operating activities as
follows:
a)
The Company expensed $159,064 (2007: $822,734) for common shares issued for
services. The common shares had been issued prior to June 30, 2008, and
this amount had been previously included in prepaid expenses as at June 30,
2008.
b)
The Company issued 5,973,393 common shares of the company at a value of $0.035
per share in settlement of accounts payable in the amount of $209,069 (Note
7).
F-16
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
5
Fixed
Assets
|
Cost
Opening
Balance
|
Additions
During
the Period
|
Accumulated
Depreciation
|
Net
Book Value at
June
30, 2009
|
Net
Book Value at
June
30, 2008
|
||||||||||||||
| $ | 8 ,102 | $ | - | $ | 3,435 | $ | 4,667 | $ | 5,834 | |||||||||
Note
6
Other sort term
loans
Other
short term loans balance of $26,268 bear interest at 12% per annum, and have no
terms of repayment. Remaining short term loan of $10,000 bears no interest, and
has no terms of repayment. All loan balances have been repaid subsequent to year
end.
Note
7
Subscriptions
payable
Subscriptions
payable represents balances owing by the company to investors for funds received
relating to unissued shares at year end. These shares have been issued
subsequent to year end (refer to note 13)
Note
8
Share
Capital
Total
authorized share capital of the Company is as follows:
200,000,000
Common shares with a par value of $0.001
During
the year ended June 30, 2009:
a)
The Company settled accounts payable in the amount of $209,069 by issuance of
5,973,393 common shares.
During
the year ended June 30, 2009, the Board of Directors authorized a reverse split
of the Company’s Common stock in which every 10 shares of Common stock held by a
shareholder were reduced to one share of Common stock. The reverse split was
effective as of June 11, 2009.
Note
9
Employee Stock Option
Plan
On July
12, 2007, the board and shareholders approved the 2007/08 Stock Incentive &
Compensation Plan thereby reserving 6,000,000 common shares for issuance to
employees, directors and consultants. The significant details of the plan are as
follows:
F-17
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
9
Employee Stock Option Plan
(Continued)
|
s
|
All
employees and consultants of the company are eligible to be granted stock
options;
|
|
s
|
May
issue up to 6,000,000 common
shares;
|
|
s
|
Options
shall not be priced at less than 100% of the FMV of common stock at the
date of grant;
|
|
s
|
Maximum
life of option is 10 periods;
|
|
s
|
Options
are non-transferable, may only be
exercised;
|
|
s
|
Options
expire on termination of
employment.
|
On
November 29, 2007, the board granted 500,000 stock options expiring December 31,
2009 to a director of the company vesting on January 1, 2008. During
the year ended all options to purchase common stock were cancelled by the board
of directors.
Changes
in the Company’s stock options for the year ended June 30, 2009 are summarized
below:
|
Number
|
Weighted
Avg. Exercise Price
|
|||||||
|
Balance,
beginning of Year
|
500,000 | $ | 0.20 | |||||
|
Cancelled
|
(500,000 | ) | 0.20 | |||||
|
Balance,
end of Year
|
- | $ | 0.00 | |||||
F-18
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
10
Segmented
Information
Segmented
information has been compiled based on the geographic regions that the company
has acquired mineral properties and performed its exploration
activities.
Loss for
the year by geographical segment for the year ended June 30, 2009:
|
|
|
United
States
|
Mexico
|
Total
|
||||||||||
|
Interest
income
|
$ | 62 | - | 62 | ||||||||
|
Expenses:
|
||||||||||||
|
Exploration Expenses
|
- | 29,786 | 29,786 | |||||||||
|
Geologists
|
- | - | - | |||||||||
|
Advertising and Promotion
|
1,586 | - | 1,586 | |||||||||
|
Consulting Fees
|
23,646 | - | 23,646 | |||||||||
|
Corporate Communications
|
528 | - | 528 | |||||||||
|
Employment Compensation
|
10,000 | - | 10,000 | |||||||||
|
Insurance
|
10,201 | - | 10,201 | |||||||||
|
Amortization
|
1,167 | - | 1,167 | |||||||||
|
Office and Miscellaneous
|
2,189 | 382 | 2,571 | |||||||||
|
Professional Fees
|
52,860 | - | 52,860 | |||||||||
|
Rent
|
5,146 | - | 5,146 | |||||||||
|
Stock based Compensation
|
159,064 | - | 159,064 | |||||||||
|
Travel and Lodging
|
- | - | - | |||||||||
|
Interest and Service charges
|
862 | 21 | 883 | |||||||||
|
Write-down of Mineral Properties
|
- | - | - | |||||||||
|
Total Expenses
|
267,249 | 30,189 | 297,438 | |||||||||
|
Net
loss from continuing operations
|
$ | 267,187 | 30,189 | 297,376 | ||||||||
F-19
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
10
Segmented Information
(Continued)
Loss for
the year by geographical segment for the year ended June 30, 2008:
|
United
States
|
Mexico
|
Total
|
||||||||||
|
Interest
income
|
$ | 9,833 | $ | - | $ | 9,833 | ||||||
|
Expenses:
|
||||||||||||
|
Exploration Expenses
|
349,358 | 150,652 | 500,010 | |||||||||
|
Geologists
|
26,593 | 3,000 | 29,593 | |||||||||
|
Advertising and Promotion
|
18,535 | - | 18,535 | |||||||||
|
Consulting Fees
|
175,594 | - | 175,594 | |||||||||
|
Corporate Communications
|
409,927 | - | 409,927 | |||||||||
|
Employment Compensation
|
863,797 | - | 863,797 | |||||||||
|
Insurance
|
47,466 | - | 47,466 | |||||||||
|
Amortization
|
1,458 | - | 1,458 | |||||||||
|
Office and Miscellaneous
|
25,674 | - | 25,674 | |||||||||
|
Professional Fees
|
78,006 | - | 78,006 | |||||||||
|
Rent
|
8,543 | - | 8,543 | |||||||||
|
Stock based Compensation
|
22,625 | - | 22,625 | |||||||||
|
Travel and Lodging
|
7,655 | - | 7,655 | |||||||||
|
Interest and Service charges
|
1,168 | - | 1,168 | |||||||||
|
Write-down of Mineral Properties
|
2,431,650 | - | 2,431,650 | |||||||||
|
Total Expenses
|
4,468,048 | 153,652 | 4,621,702 | |||||||||
|
Net
loss from continuing operations
|
$ | 4,458,215 | $ | 153,652 | $ | 4,611,869 | ||||||
F-20
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
10
Segmented Information
(Continued)
Assets by
geographical segment:
|
United
States
|
Mexico
|
Total
|
||||||||||
| $ | $ | $ | ||||||||||
|
June
30, 2009
|
||||||||||||
|
Mineral
properties
|
- | - | - | |||||||||
|
Equipment
|
4,667 | - | 4,667 | |||||||||
|
June
30, 2008
|
||||||||||||
|
Mineral
properties
|
- | - | - | |||||||||
|
Equipment
|
5,834 | - | 5,834 | |||||||||
F-21
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
11
Commitments
By a
lease agreement dated July 6, 2006, the Company agreed to lease office premises
for three periods commencing August 1, 2006 for the following
consideration:
|
2010
|
$ | 7,832 | ||
Note
12
Recent Accounting
Pronouncements
Business
Combinations
In
December 2007, the FASB issued SFAS 141 (revised 2007), Business
Combinations (SFAS 141R). SFAS 141R significantly changes the
accounting for business combinations in a number of areas including the
treatment of contingent consideration, preacquisition contingencies, transaction
costs, in-process research and development, and restructuring costs. In
addition, under SFAS 141R, changes in an acquired entity's deferred tax
assets and uncertain tax positions after the measurement period will impact
income tax expense. SFAS 141R is effective for fiscal periods beginning
after December 15, 2008. We will adopt SFAS 141R on July 1, 2009.
This standard will change our accounting treatment for business combinations on
a prospective basis.
Noncontrolling Interests in
Consolidated Financial Statements
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners.
SFAS 160 is effective for fiscal periods beginning after December 15,
2008. Adoption of this standard is not expected to have a material impact
on the Company’s financial position, results of operations or cash
flows.
F-22
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
12
Recent Accounting
Pronouncements (Continued)
Disclosures about Derivative
Instruments and Hedging Activities
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (SFAS 161). SFAS 161 amends
and expands the disclosure requirements of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. It requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative disclosures
about fair value amounts of gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
agreements. This statement is effective for financial statements issued for
fiscal periods beginning after November 15, 2008. Accordingly, the Company
will adopt SFAS 161 in fiscal 2010.
The Hierarchy of Generally
Accepted Accounting Principles
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS 162). This statement identifies the sources of
accounting principles and the framework for selecting the principles used
in the preparation of financial statements of nongovernmental entities that are
presented in accordance with GAAP. With the issuance of this statement, the FASB
concluded that the GAAP hierarchy should be directed toward the entity and not
its auditor, and reside in the accounting literature established by the FASB as
opposed to the American Institute of Certified Public Accountants (AICPA)
Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.” This statement is
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles.” The Company
has evaluated the new statement and have determined that it will not have a
significant impact on the determination or reporting of the Company’s financial
results.
Accounting for Financial
Guarantee Insurance Contracts
In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts - an interpretation of FASB Statement No. 60." SFAS 163
requires that an insurance enterprise recognize a claim liability prior to
an event of default (insured event) when there is
evidence that credit deterioration has occurred in an insured financial
obligation. This Statement also clarifies how Statement 60
applies to financial guarantee insurance contracts,
including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those
clarifications will increase comparability in financial reporting of
financial guarantee insurance contracts by insurance enterprises.
This Statement requires expanded disclosures about financial
guarantee insurance contracts. The accounting and disclosure requirements
of the Statement will improve the quality of information provided to users of
financial statements. SFAS 163 will be effective for financial
statements issued for fiscal
years beginning after December 15, 2008. We will
adopt SFAS 160 on July 1, 2009. The Company does not expect the adoption of SFAS
163 will have a material impact on its financial condition or results of
operation.
F-23
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
12
Recent Accounting
Pronouncements (Continued)
Subsequent
events
In May
2009, the FASB issued SFAS No. 165, "Subsequent Events," which establishes
general standards for accounting for and disclosure of events that occur after
the balance sheet date but before the financial statements are issued or are
available to be issued. The pronouncement requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, whether that date represents the date the financial statements were issued
or were available to be issued. SFAS 165 is effective with interim and annual
financial periods ending after June 15, 2009. We will adopt SFAS 160 on July 1,
2009. Management has evaluated the impact of the adoption of SFAS 165 and it has
had no impact the Company's results of operations, financial position or cash
flows.
Accounting for Transfers of
Financial Assets
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets—an amendment of FASB Statement” (“SFAS 166”). SFAS No. 166 is
intended to establish standards of financial reporting for the transfer of
assets and transferred assets to improve the relevance, representational
faithfulness, and comparability. SFAS 166 was established to clarify
derecognition of assets under FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS No. 166 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15,
2009. We will adopt SFAS 166 on July 1, 2009. The Company has determined
that the adoption of SFAS No. 166 will have no impact will have on its
consolidated financial statements.
Amendments of FASB
Interpretation No. 46(R)
In
June 2009, the FASB issued SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R)” (“SFAS No. 167”). SFAS No. 167
eliminates the exception to consolidate a qualifying special-purpose entity,
changes the approach to determining the primary beneficiary of a variable
interest entity and requires companies to more frequently re-assess whether they
must consolidate variable interest entities. Under the new guidance, the
primary beneficiary of a variable interest entity is identified qualitatively as
the enterprise that has both (a) the power to direct the activities of a
variable interest entity that most significantly impact the entity’s economic
performance, and (b) the obligation to absorb losses of the entity that
could potentially be significant to the variable interest entity or the right to
receive benefits from the entity that could potentially be significant to the
variable interest entity. SFAS No. 167 becomes effective for the
Company’s fiscal 2011 year-end and interim reporting periods thereafter.
The Company does not expect SFAS No. 167 to have a material impact on its
financial statements.
F-24
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
12
Recent Accounting
Pronouncements (Continued)
FASB Accounting Standards
Codification
In July
2009, the FASB issued SFAS No. 168, "FASB Accounting Standards Codification"
("SFAS 168"), as the single source of authoritative nongovernmental U.S.
generally accepted accounting principles (GAAP). The Codification is effective
for interim and annual periods ending after September 15, 2009. All existing
accounting standards are superseded as described in SFAS 168. All other
accounting literature not included in the Codification is non-authoritative.
Management is currently evaluating the impact of the adoption of SFAS 168 but
does not expect the adoption of SFAS 168 to impact the Company's results of
operations, financial position or cash flows.
Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion
In May
2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (“FSP 14-1”). FSP 14-1 applies to convertible debt instruments
that, by their stated terms, may be settled in cash (or other assets) upon
conversion, including partial cash settlement, unless the embedded conversion
option is required to be separately accounted for as a derivative under FASB
Statement No. 133. Convertible debt instruments within the scope of FSP 14-1 are
not addressed by the existing APB 14. FSP 14-1 would require that the liability
and equity components of convertible debt instruments within the scope of FSP
14-1 be separately accounted for in a manner that reflects the entity’s
nonconvertible debt borrowing rate. This will require an allocation of the
convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component would be reported as a debt discount and subsequently
amortized to earnings over the instrument’s expected life using the effective
interest method. FSP APB 14-1 is effective for the Company’s fiscal year
beginning July 1, 2009 and will be applied retrospectively to all periods
presented. Adoption of this standard is not expected to have a material impact
on the Company’s financial position, results of operations or cash
flows.
F-25
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
13
Subsequent
events
On July
1, 2009 Wind Works entered into two consulting contracts which provide in part
for the consultants to provide detailed market research reports on the wind
industry in both Asia and Europe. In consideration for the
preparation of the reports, we issued to each of the consultants 1.5 million
shares of our registered common stock. The issuance of the shares of
common stock was subject to approval by our Board of Directors. The Board
approved the issuance of the shares of common stock on September 11,
2009.
On August
7, 2009 the Company issued 375,577 restricted shares to convert a portion of the
loans payable of $37,657.70 to equity at $0.10 per share. On September 21, 2009,
the company issued 1,000 restricted shares at $.10 per share to convert the
remaining loans payable balance to equity.
On August
20, 2009 the previously announced private placement of June 12, 2009 was closed.
The funds raised through the private placement total $276,015. The total number
of restricted shares issued was 2,460,150 at $.10 per share. On September 21,
2009, the company issued the remaining 300,000 shares left as part of this
private placement at $.10 per share.
On August
27, 2009 the Company issued 4,950,000 shares at $0.10 per share for services
rendered.
On Sept.
21, 2009 the Company announced it signed two agreements with Zero Emission
People LLC (ZEP). The first is a Joint Venture Agreement relating to
two wind energy projects totaling 20 megawatts located in Ontario,
Canada. The second is an Option Agreement whereby Wind Works has the
right to acquire up to a 100% interest in an additional 400 megawatts of wind
energy projects over the next 12 months.
As
consideration for the contribution of the Projects to the Joint Venture, the
Company shall issue to ZEP, or its nominees, 1,500,000 shares of Wind Works
common stock. The common stock will be issued pursuant to an exemption from
registration and will be subject to resale limitations as prescribed by Rule 144
of the Securities Act of 1933. Wind Work’s equity interest in the Joint
Venture can increase to up to 100% by Wind Works paying to ZEP the fair market
value of the increased interest in a combination of stock and cash, the exact
terms of which will be subject to mutual agreement. Following
formation of the Joint Venture, the first $210,000 of expenses will be paid by
Wind Works, and thereafter all expenses and revenues shall be allocated between
the parties based on a pro rata with respect to each party’s respective equity
ownership in the Joint Venture.
In
consideration for the grant of the Option, Wind Works shall issue to ZEP or
its nominee(s) a total of 3,500,000 shares of Wind Works common
stock. The common stock will be issued pursuant to an exemption from
registration from the Securities Act of 1933, as amended, and will be subject to
resale limitations as prescribed by Rule 144 of the Act.
F-26
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
14
Income
taxes
At June
30, 2009, the Company has unused tax loss carry forwards in the United States of
$3,727,945 (2008 - $3,580,914 expiring between the years 2026 and 2029 which are
available to reduce taxable income. As at June 30, 2009 the Company has unused
tax loss carry forwards in Mexico of $875,523 (2008 - $885,509) which are
available to reduce taxable income. The tax effect of the significant components
within the Company's deferred tax asset (liability) at June 30, 2009 are as
follows:
|
2009
|
2008
|
|||||
|
United
States
|
||||||
| Loss carry forwrds | 1,267,501 | 1,217,477 | ||||
|
Property,
plant and equipment
|
827,930 | 827,533 | ||||
|
Mexico
|
||||||
| Loss carry forwards | 245,146 | 247,943 | ||||
|
Property,
plant and equipment
|
- | - | ||||
|
Valuation
allowance
|
(2,340,577 | ) | (2,292,952 | ) | ||
|
Net
deferred tax asset
|
- | - | ||||
|
The
income tax expense differs from the amounts computed by applying the
statutory rate to pre-tax
losses as a result of the following:
|
||||||
|
|
||||||
| 2009 | 2008 | |||||
|
Loss
before income taxes
|
(297,376 | ) | (4,611,867 | ) | ||
|
Statutory
tax rate
|
34 | % | 34 | % | ||
|
Effective
tax rate
|
- | |||||
|
Expected
recovery at statutory tax rate
|
(101,108 | ) | (1,568,035 | ) | ||
|
Adjustments
to benefits resulting from:
|
||||||
|
Impact
of lower tax rate in subsidiaries
|
(996 | ) | 9,219 | |||
|
Non
deductible expenses
|
54,479 | 7,693 | ||||
|
Terminal
loss on disposal of asset
|
- | - | ||||
|
Valuation
allowance
|
47,625 | 1,551,123 | ||||
|
Provision
for income taxes
|
- | - | ||||
F-27
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements
June
30, 2009
|
(Stated
in US Dollars)
|
Note
14
Income taxes
(Continued)
Potential
benefit of net operating losses have not been recognized in these financial
statements because the
Company cannot be assured it is more likely than not it will utilize the net
operating losses carried forward
in future years.
F-28
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Unaudited
Consolidated
Financial Statements
Period
ended December 31, 2009 and 2008
F-29
MANAGEMENT’S
RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS
To the shareholders of Wind Works
Power Corp. (Formerly AmMex Gold Mining Corp. - an Exploration Stage
Mining Company)
The
consolidated financial statements and the notes thereto are the responsibility
of the management of Wind Works Power Corp. (Formerly AmMex Gold Mining Corp. -
an Exploration Stage Mining Company). These consolidated financial statements
have been prepared in accordance with country-regionUnited States generally
accepted accounting principles.
Management
has developed and maintained a system of internal controls to provide reasonable
assurance that all assets are safeguarded and to facilitate the preparation of
relevant, reliable and timely financial information.
The Board
of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control.
“Ingo
Stuckmann”
Ingo
Stuckmann
President
F-30
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Consolidated
Balance Sheets (Unaudited)
As
at December 31, 2009 and June 30, 2009
(Expressed
in country-regionUnited States dollars, unless otherwise stated)
|
December
31, 2009
(Unaudited)
|
June
30,
2009
(Audited)
|
|||||||
|
Assets
|
||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | 68,545 | $ | 28,606 | ||||
| Prepaid Expenses | 7,793 | 11,290 | ||||||
| Accounts Receivable | 498 | 477 | ||||||
| 76,836 | 40,373 | |||||||
| Long Term Assets | ||||||||
| Wind Projects (Note 11) | 2,409,118 | - | ||||||
| Fixed Assets (Note 5) | 4,196 | 4,667 | ||||||
| 2,413,314 | 4,667 | |||||||
| $ | 2,490,150 | $ | 45,040 | |||||
|
Liabilities
and Stockholders' Deficiency
|
||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable and Accrued Liabilities | $ | 2,030,540 | $ | 73,731 | ||||
| Other Short Term Loans (Note 6) | 955,596 | 36,268 | ||||||
| Subscriptions Payable (Note 7) | - | 88,500 | ||||||
| 2,986,136 | 198,499 | |||||||
| Stockholders' Deficiency | ||||||||
| Common Stock (Note 9) | 26,868 | 5,681 | ||||||
| Additional Paid-in Capital | 14,146,212 | 7,038,443 | ||||||
| Contributed Surplus | 713,169 | 22,625 | ||||||
| Deficit Accumulated during the Development Stage | (15,377,835 | ) | (7,215,808 | ) | ||||
| Accumulated Other Comprehensive Loss | (4,000 | ) | (4,400 | ) | ||||
| (495,986 | ) | (153,459 | ||||||
| $ | 2,490,150 | $ | 45,040 | |||||
Going
concern (Note 1), Subsequent events (Note 13)
The
accompanying notes are an integral part of the consolidated financial
statements.
F-31
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Consolidated
Statement of Operations (Unaudited)
For
the Period Ended December 31, 2009 and 2008
(Expressed
in country-regionUnited States dollars, unless otherwise stated)
|
Three
Month
Period
Ended
December
31,
2009
|
Six
Month
Period
Ended
December
31,
2009
|
Three
Month
Period
Ended
December
31,
2008
|
Six
Month
Period
Ended
December
31,
2008
|
Cumulative
Since November 20, 2002 to
December
31,
2009
|
||||||||||||||||
|
Revenue
|
||||||||||||||||||||
|
Interest Income
|
$ | 3 | $ | 33 | $ | 13 | $ | 53 | $ | 12,557 | ||||||||||
|
Expenses
|
||||||||||||||||||||
|
Exploration Expenses (Recovery)
|
5,360 | (39,866 | ) | (2,096 | ) | (10,885 | ) | 1,606,467 | ||||||||||||
|
Geologists
|
- | - | - | - | 264,469 | |||||||||||||||
|
Advertising and Promotion
|
37,049 | 39,776 | 703 | 1,372 | 114,696 | |||||||||||||||
|
Consulting Fees
|
998 | 998 | - | - | 459,949 | |||||||||||||||
|
Corporate Communications
|
- | 72 | 151 | 230 | 531,506 | |||||||||||||||
|
Employment Compensation
|
- | - | - | - | 1,230,483 | |||||||||||||||
|
Insurance
|
- | - | - | 10,201 | 99,308 | |||||||||||||||
|
Depreciation
|
235 | 471 | 294 | 588 | 3,905 | |||||||||||||||
|
Office and Miscellaneous
|
4,474 | 8,248 | 341 | 825 | 76,822 | |||||||||||||||
|
Professional Fees
|
49,931 | 85,536 | (309 | ) | 8,950 | 384,054 | ||||||||||||||
|
Rent
|
2,190 | 4,413 | - | 2,232 | 28,888 | |||||||||||||||
|
Stock-based Compensation
|
5,128,293 | 6,991,644 | 62,739 | 159,064 | 7,173,332 | |||||||||||||||
|
Travel and Lodging
|
5,718 | 11,443 | - | - | 27,721 | |||||||||||||||
|
Interest and Service charges
|
10,482 | 80,002 | 283 | 561 | 85,178 | |||||||||||||||
|
Project Development Costs
|
979,324 | 979,324 | - | - | 979,324 | |||||||||||||||
|
Write-down on Mineral Properties
|
- | - | - | - | 2,431,650 | |||||||||||||||
|
Total
Operating Expenses
|
6,224,054 | 8,162,061 | 62,106 | 173,138 | 15,497,752 | |||||||||||||||
|
Net
Loss for the Period before Other Items
|
6,224,051 | 8,162,028 | 62,093 | 173,085 | 15,485,195 | |||||||||||||||
|
Other
Items:
|
||||||||||||||||||||
|
Gain on Forgiveness of Debt
|
- | - | - | - | 102,960 | |||||||||||||||
|
Net
Loss for the Period
|
6,224,051 | 8,162,028 | 62,093 | 173,085 | 15,382,235 | |||||||||||||||
|
Comprehensive
Loss
|
- | - | - | - | (4,400 | ) | ||||||||||||||
|
Comprehensive
Loss for the Period
|
$ | 6,224,051 | $ | 8,162,028 | $ | 62,093 | $ | 173,085 | $ | 15,377,835 | ||||||||||
|
Basic
and Diluted Loss per Share
|
$ | (0.25 | ) | $ | (0.44 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||
|
Weighted
Average Number of Shares Outstanding
|
24,723,939 | 18,654,999 | 56,806,885 | 55,313,536 | ||||||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statement
F-32
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Consolidated
Statement of Cash Flows (Unaudited)
For
the Period Ended December 31, 2009 and 2008
(Expressed
in United States dollars, unless otherwise stated)
|
Period
ended December 31, 2009
|
Period Ended
December
31,
2008
|
November
20, 2002 (Date of Inception) to December 31, 2009
|
||||||||||
|
Cash
Flows from Operating Activities
|
||||||||||||
|
Net loss for the period
|
$ | (8,162,028 | ) | $ | (173,085 | ) | $ | (15,377,835 | ) | |||
|
Add
(deduct) non-cash items:
|
||||||||||||
|
Depreciation
|
471 | 588 | 3,906 | |||||||||
|
Write-down of mineral properties
|
- | - | 2,431,650 | |||||||||
|
Loan interest
|
- | - | 1,391 | |||||||||
|
Shares issued for services
|
6,301,100 | 159,064 | 8,339,927 | |||||||||
|
Stock based compensation
|
690,544 | - | 872,233 | |||||||||
|
Write-off of accounts receivable
|
- | - | 333 | |||||||||
|
Loss on disposal of assets
|
- | - | (675 | ) | ||||||||
|
Gain on forgiveness of debt
|
- | - | (102,960 | ) | ||||||||
|
Foreign exchange
|
- | - | (4,069 | ) | ||||||||
|
Changes
in non-cash working capital items:
|
||||||||||||
|
Accounts receivable
|
(21 | ) | 27 | (498 | ) | |||||||
|
Prepaid expenses
|
(1,503 | ) | 8,320 | (2,793 | ) | |||||||
|
Accounts payable and accrued liabilities
|
68,266 | (83,064 | ) | 310,967 | ||||||||
| $ | (1,103,171 | ) | $ | (88,150 | ) | (3,528,423 | ) | |||||
|
Cash
Flows from Investing Activities
|
||||||||||||
|
Purchase
of equipment
|
- | - | (8,102 | ) | ||||||||
|
Acquisition
of mineral properties
|
- | - | (60,000 | ) | ||||||||
| $ | - | $ | - | $ | (68,102 | ) | ||||||
|
Cash
Flows from Financing Activities
|
||||||||||||
|
Capital
stock issued
|
187,514 | - | 2,267,294 | |||||||||
|
Demand
note
|
- | 10,000 | 180,000 | |||||||||
|
Advances
from related parties
|
- | - | 137,412 | |||||||||
|
Subscriptions
payable
|
955,596 | - | 955,596 | |||||||||
|
Long
term debt
|
- | - | 124,768 | |||||||||
| $ | 1,143,110 | $ | 10,000 | $ | 3,665,070 | |||||||
|
Increase
(decrease) in cash from continuing operations
|
39,939 | (78,150 | ) | 68,545 | ||||||||
|
Cash,
beginning of the year
|
28,606 | 82,054 | - | |||||||||
|
Cash,
end of the year
|
$ | 68,545 | $ | 3,904 | $ | 68,545 | ||||||
Supplemental
disclosure of non-cash transactions (Note 4)
The
accompanying notes are an integral part of the consolidated financial
statement
F-33
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Consolidated
Statements of Stockholders’ Deficiency (Unaudited)
For
the period November 20, 2002 (Date of Inception) to December 31,
2009
(Stated
in US Dollars)
|
Common
Shares
|
Additional
Paid-in
Capital
|
Contributed
Surplus
|
Deficit
Accumulated During the Exploration Stage
|
Accumulated
Other
Comprehensive
Loss
|
Total
Stockholders’ Deficiency
(Equity)
|
|||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||||||
|
Issued
for services on November 23, 2002 –
at
$0.0002 per share
|
5,760,000 | $ | 5,760 | $ | 6,240 | $ | - | $ | - | $ | - | $ | 12,000 | |||||||||||||||
|
Issued
for cash – at $0.0004 per share
|
4,860,000 | 4,860 | 15,390 | - | - | - | 20,250 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (374 | ) | (374 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2003
|
- | - | - | - | (47,677 | ) | - | (47,677 | ) | |||||||||||||||||||
|
Balance,
September 30, 2003
|
10,620,000 | 10,620 | 21,630 | - | (47,677 | ) | (374 | ) | (15,801 | ) | ||||||||||||||||||
|
Issued
for cash – at $0.025 per share
|
18,120 | 18 | 4,512 | - | - | - | 4,530 | |||||||||||||||||||||
|
Contributed
services
|
- | - | 40,000 | - | - | - | 40,000 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (229 | ) | (229 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2004
|
- | - | - | - | (80,605 | ) | - | (80,605 | ) | |||||||||||||||||||
|
Balance,
September 30, 2004
|
10,638,120 | 10,638 | 66,142 | - | (128,282 | ) | (603 | ) | (52,105 | ) | ||||||||||||||||||
|
Contributed
services
|
- | - | 30,000 | - | - | - | 30,000 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (1,705 | ) | (1,705 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2005
|
- | - | - | - | (83,763 | ) | - | (83,763 | ) | |||||||||||||||||||
|
Balance,
September 30, 2005
|
10,638,120 | 10,638 | 96,142 | - | (212,045 | ) | (2,308 | ) | (107,573 | ) | ||||||||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statement
F-34
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Consolidated
Statements of Stockholders’ Deficiency (Unaudited)
For
the period November 20, 2002 (Date of Inception) to December 31,
2009
(Stated
in US Dollars)
|
Common
Shares
|
Additional
Paid-in
Capital
|
Contributed
Surplus
|
Deficit
Accumulated
During
the Exploration
Stage
|
Accumulated
Other
Comprehensive
Loss
|
Total
Stockholders’ Deficiency (Equity)
|
|||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||||||
|
Issued
for services
|
300,000 | 3,00 | 119,700 | - | - | - | 120,000 | |||||||||||||||||||||
|
Shares
returned to treasury
|
(729,736 | ) | (730 | ) | 730 | - | - | - | - | |||||||||||||||||||
|
Contributed
services
|
- | - | 40,000 | - | - | - | 40,000 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | - | - | (2,092 | ) | (2,092 | ) | |||||||||||||||||||
|
Net
loss for the period ended September 30, 2006
|
- | - | - | - | (59,587 | ) | - | (59,587 | ) | |||||||||||||||||||
|
Balance
September 30, 2006
|
10,208,384 | 10,208 | 256,572 | - | (271,632 | ) | (4,400 | ) | (9,252 | ) | ||||||||||||||||||
|
Capital
issued for financing
|
75,000 | 75 | 1,499,925 | - | - | - | 1,500,000 | |||||||||||||||||||||
|
Capital
issued for services
|
66,800 | 67 | 462,083 | - | - | - | 462,150 | |||||||||||||||||||||
|
Capital
issued on acquisition of Minera
Jeronimo
SA de CV
|
145,500 | 145 | 2,371,505 | - | - | 2,371,650 | ||||||||||||||||||||||
|
Cancellation
of shares
|
(6,205,400 | ) | (6,205 | ) | 6,205 | - | - | - | - | |||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (2,034,931 | ) | - | (2,034,931 | ) | |||||||||||||||||||
|
Balance
December 31, 2007
|
4,290,284 | 4,290 | 4,596,290 | - | (2,306,563 | ) | (4,400 | ) | 2,289,617 | |||||||||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statement
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Consolidated
Statements of Stockholders’ Deficiency (Unaudited)
For
the period November 20, 2002 (Date of Inception) to December 31,
2009
(Stated
in US Dollars)
|
Common
Shares
|
Additional
Paid-in
Capital
|
Contributed
Surplus
|
Deficit
Accumulated
During
the Exploration
Stage
|
Accumulated
Other
Comprehensive
Loss
|
Total
Stockholders’ Deficiency (Equity)
|
|||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||||||
|
Capital
issued for financing
|
100,909 | 101 | 554,899 | - | - | - | 555,000 | |||||||||||||||||||||
|
Capital
issued for services
|
659,430 | 659 | 1,498,817 | - | - | - | 1,499,476 | |||||||||||||||||||||
|
Capital
issued for debt
|
32,727 | 33 | 179,967 | - | - | - | 180,000 | |||||||||||||||||||||
|
Stock
based Compensation
|
- | - | - | 22,625 | - | - | 22,625 | |||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (4,611,869 | ) | - | (4,611,869 | ) | |||||||||||||||||||
|
Balance
June 30, 2008
|
5,083,350 | 5,083 | 6,829,973 | 22,625 | (6,918,432 | ) | (4,400 | ) | (65,151 | ) | ||||||||||||||||||
|
Capital
issued for financing
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Capital
issued for services
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Capital
issued for debt
|
597,339 | 598 | 208,470 | - | - | - | 209,068 | |||||||||||||||||||||
|
Stock
based Compensation
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (297,376 | ) | - | (297,376 | ) | |||||||||||||||||||
|
Balance
June 30, 2009
|
5,680,689 | 5,681 | 7,038,443 | 22,625 | (7,215,808 | ) | (4,400 | ) | (153,459 | ) | ||||||||||||||||||
|
Capital
issued for financing
|
2,760,150 | 2,760 | 273,255 | - | - | - | 276,015 | |||||||||||||||||||||
|
Capital
issued for services
|
7,950,000 | 7,950 | 1,970,550 | - | - | - | 1,978,500 | |||||||||||||||||||||
|
Capital
issued for debt
|
376,577 | 377 | 105,065 | - | - | - | 105,442 | |||||||||||||||||||||
|
Subscription
receivable
|
(5,000 | ) | (5,000 | ) | ||||||||||||||||||||||||
|
Stock
based Compensation
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (1,937,977 | ) | - | (1,937,978 | ) | |||||||||||||||||||
|
Balance
September 30, 2009
|
16,767,416 | 16,768 | 9,382,313 | 22,625 | (9,153,785 | ) | (4,400 | ) | 263,520 | |||||||||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statement
F-36
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining Company)
Consolidated
Statements of Stockholders’ Deficiency (Unaudited)
For
the period November 20, 2002 (Date of Inception) to December 31,
2009
(Stated
in US Dollars)
|
Common
Shares
|
Additional
Paid-in
Capital
|
Contributed
Surplus
|
Deficit
Accumulated
During
the Exploration
Stage
|
Accumulated
Other
Comprehensive
Loss
|
Total
Stockholders’ Deficiency (Equity)
|
|||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||||||
|
Capital
issued for financing
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Capital
issued for services
|
3,100,000 | 3,100 | 2,880,900 | - | - | - | 2,884,000 | |||||||||||||||||||||
|
Capital
issued for debt
|
- | - | 5,000 | - | - | - | 5,000 | |||||||||||||||||||||
|
Capital
issued for wind projects
|
2,000,000 | 2,000 | 1,878,000 | - | - | - | 1,880,000 | |||||||||||||||||||||
|
Capital
issued for acquisition of ZEP
|
5,000,001 | 5,000 | - | - | - | - | 5,000 | |||||||||||||||||||||
|
Stock
based compensation
|
- | - | - | 690,544 | - | - | 690,544 | |||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (6,224,051 | ) | - | (6,224,051 | ) | |||||||||||||||||||
|
Balance
December 31, 2009
|
26,867,417 | 26,868 | 14,146,212 | 713,169 | (15,377,835 | ) | (4,400 | ) | (495,986 | ) | ||||||||||||||||||
The
number of shares issued and outstanding has been restated to give retroactive
effect for four forward stock splits, on a six for one basis, a two for one
basis, a two for one basis and a two for one basis effective April 29, 2003,
March 1, 2006, May 3, 2006 and May 31, 2006, respectively. Also, the number of
shares issued and outstanding has been restated to give retroactive effect for a
reverse stock split on a ten for one basis. The par value and additional paid in
capital were adjusted in conformity with the number of shares then
issued.
The
accompanying notes are an integral part of the consolidated financial
statement
F-37
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
1.
|
Basis of
Presentation
|
AmMex
Gold Mining Corp. changed its name to Wind Works Power Corp. (the “Company”) on
March 25, 2009. The Company, incorporated under the laws of the State of
Nevada, was primarily engaged in the acquisition and exploration of mining
properties, but has since modified its business plan to focus on alternate
energy. The unaudited consolidated financial statements of Wind Works
Power Corp. include the accounts of its wholly owned subsidiary Minera Jeronimo
S.A. de C.V.
The
accompanying unaudited consolidated financial statements and notes thereto of
Wind Works Power Corp have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States (“GAAP”) have
been omitted. The accompanying unaudited consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s June 30, 2009 Annual
Report on Form 10-K.
In the
opinion of management, these unaudited consolidated financial statements reflect
all adjustments necessary to present fairly the Company’s consolidated financial
position at December 31, 2009 and the consolidated results of operations and
consolidated statements of cash flows for the period ended December 31, 2009.
The results of operations for the three and six month’s periods ended December
31, 2009 are not necessarily indicative of the results to be expected for the
entire fiscal year.
Going
Concern
These
financial statements have been prepared with the on-going assumption that the
Company will be able to realize its assets and discharge its liabilities in the
normal course of business. However, certain conditions noted below currently
exist which raise substantial doubt about the Company’s ability to continue as a
going concern. These financial statements do not include any adjustments to the
amounts and classifications of assets and liabilities that might be necessary
should the Company be unable to continue as a going concern.
The
operations of the Company have primarily been funded by the sale of common
stock. Continued operations of the Company are dependent on the Company’s
ability to complete additional equity financings or generate profitable
operations in the future. Management’s plan in this regard is to secure
additional funds through future equity financings.
|
December
31, 2009
|
June
30 2009
|
||||||||
|
Deficit
accumulated during the exploration stage
|
15,377,835 | 7,215,808 | |||||||
|
Working
capital (deficiency)
|
(2,909,301 | ) | (158,126 | ) | |||||
F-38
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
The
consolidated financial statements are prepared by management in accordance with
generally accepted accounting principles of the United States of
America. Actual results could differ from these estimates. The principal
accounting policies followed by the Company are as follows:
Cash and cash
equivalents
Cash and
cash equivalents include cash and highly liquid investments with an original
maturity of three months or less.
Fair Value of Financial
Instruments
The fair
market value of the Company’s financial instruments comprising cash, accounts
receivable, and accounts payable and accrued liabilities were estimated to
approximate their carrying values due to immediate or short-term maturity of
these financial instruments. The Company maintains cash balances at
financial institutions which at times, exceed federally insured amounts. The
Company has not experienced any material losses in such accounts
Fixed
Assets
Fixed
Assets are capitalized at cost. Amortization is recorded on a declining
balance basis at a rate of 20% per annum.
Use of
Estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the period.
Actual results could differ from these estimates.
Wind Farm Developmental
Properties
The
Company has not yet realized any revenues from its planned
operations. It was primarily engaged in the acquisition and
exploration of mining properties, but has since modified its business plan to
focus on alternate energy. The Company expenses all costs related to
the maintenance and exploration of developmental wind farms in which it has
secured rights prior to establishment of commercial feasibility. To
date, the Company has not established the commercial feasibility of its
projects; therefore, all costs are being expensed. Developmental wind
farm acquisition costs are initially capitalized when incurred using the
guidance in EITF 04-02, “Whether Mineral Rights Are Tangible
or Intangible Assets.” The Company assesses the carrying cost for
impairment under SFAS No. 144, “Accounting for Impairment or
Disposal of Long Lived Assets” at each fiscal quarter
end. When it has been determined that a wind farm property can be
economically developed, the costs then incurred to develop such property are
capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the project. If
developmental wind farm properties are subsequently abandoned or impaired, any
capitalized costs will be charged to operations.
F-39
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
Income
Taxes
The
Company records income taxes in accordance with SFAS No. 109, using the asset
and liability method. Pursuant to SFAS No. 109 the company is required to
compute tax asset benefits for net operating losses carried forward.
Potential benefits of net operating losses have not been recognized in
these financial statements because the Company cannot be assured it is more
likely than not it will utilize the net operating losses carried forward in
future period and accordingly is offset by a valuation allowance. FIN No.48
prescribes a recognition threshold and measurement attribute for financial
statement recognition and measurement of tax positions taken into in tax
returns.
To the
extent interest and penalties may be assessed by taxing authorities on any
underpayment of income tax, such amounts would have been accrued and are
classified as a component of income tax expense in the Consolidated Statements
of Operations. The Company elected this accounting policy, which is a
continuation of our historical policy, in connection with the Company’s adoption
of FIN 48.
Foreign Currency
Translation
The
Company’s functional currency is the United States dollar. The consolidated
financial statements of the Company are translated to United States dollars in
accordance with SFAS No. 52 “Foreign Currency Translation”
(“SFAS No. 52). Monetary assets and liabilities denominated in foreign
currencies are translated using the exchange rate prevailing at the consolidated
balance sheet date. Gains and losses arising on translation or settlement of
foreign currency denominated transactions or balances are included in the
determination of income. Foreign currency transactions are primarily undertaken
in Mexican pesos and Peruvian sols. The Company has not, to the date of these
financial statements, entered into derivative instruments to offset the impact
of foreign currency fluctuations.
The
functional currency of the Company’s wholly-owned subsidiary is the Mexican
peso. The financial statements of the subsidiary are translated to United States
dollars in accordance with SFAS No. 52 using period-end rates of exchange for
assets and liabilities, and average rates of exchange for the period for
revenues and expenses. Translation gains (losses) are recorded in accumulated
other comprehensive income (loss) as a component of stockholders’ equity.
Foreign currency transaction gains and losses are included in the statement of
operations.
Comprehensive
Income
SFAS No.
130, “Reporting Comprehensive Income” establishes standards for the reporting
and display of comprehensive income and its components in the financial
statements. As at December 31, 2009, the Company’s only component of
comprehensive income was foreign currency translation adjustments.
F-40
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
Asset Retirement
Obligation
The
Company has adopted Statement of Financial Accounting Standards No. 143 (“SFAS
143”), “Accounting for Asset Retirement Obligations”, which requires that an
asset retirement obligation (“ARO”) associated with the retirement of a tangible
long-lived asset be recognized as a liability in the period in which it is
incurred and becomes determinable, with an offsetting increase in the carrying
amount of the associated asset. The cost of the tangible asset, including the
initially recognized ARO, is depleted, such that the cost of the ARO is
recognized over the useful life of the asset. The ARO is recorded at fair value,
and accretion expense is recognizable over time as the discounted liability is
accreted to its expected settlement value. The fair value of the ARO is measured
using expected future cash flow, discounted at the Company’s
credit-adjusted-risk-free interest rate. To date, no material asset retirement
obligation exists due to the early stage of the Company’s mineral exploration.
Accordingly, no liability has been recorded.
Environmental Protection and
Reclamation Costs
The
operations of the Company have been, and may in the future be affected from time
to time in varying degrees by changes in environmental regulations, including
those for future removal and site restoration costs. Both the likelihood of new
regulations and their overall effect upon the Company may vary from region to
region and are not predictable.
Environmental
expenditures that relate to ongoing environmental and reclamation programs are
charged against statements of operations as incurred or capitalized and
amortized depending upon their future economic benefits. The Company does not
anticipate any material capital expenditures for environmental control
facilities.
Basic and Diluted Net Loss
Per Share
The
Company computes net income (loss) per share in accordance with SFAS No. 128,
“Earnings per Share”. SFAS No. 128 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic EPS
is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS give effect to all dilutive potential common
shares outstanding during the period using the treasury stock method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive.
Stock Issued in Exchange for
Services
The
valuation of the Company’s common stock issued in exchange for services is
valued at an estimated fair market value as determined by officers and directors
of the Company based upon trading prices of the Company’s common stock on the
dates of the stock transactions. The corresponding expense of the services
rendered is recognized over the period that the services are
performed.
F-41
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
Stock Based
Compensation
The
Company has adopted the provisions of SFAS No. 123(R), “Share-Based Payment” (“SFAS
123(R)”), which establishes accounting for equity instruments exchanged for
employee services. Under the provisions of SFAS 123(R), stock-based compensation
cost is measured at the grant date, based on the calculated fair value of the
award, and is recognized as an expense over the employees’ requisite service
period (generally the vesting period of the equity grant).
Fair value
measurement
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, "Fair Value Measurement" ("SFAS 157"). The Statement provides guidance
for using fair value to measure assets and liabilities. The Statement also
expands disclosures about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value, and the
effect of fair value measurement on earnings.
This
Statement applies under other accounting pronouncements that require or permit
fair value measurements. This Statement does not expand the use of fair value
measurements in any new circumstances. Under this Statement, fair value refers
to the price that would sell an asset or paid to transfer a liability in an
orderly transaction between market participants in the market in which the
entity transacts. SFAS 157 is effective for the Company for fair value
measurements and disclosures made by the Company in its fiscal period beginning
on July 1, 2008.
The Fair Value Option for
Financial Assets and Financial Liabilities
On July
1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”)
as it relates to financial assets and financial liabilities. In February 2008,
the FASB staff issued Staff Position No. 157-2, Effective Date of FASB Statement
No. 157 (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective date of SFAS 157
for nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The provisions of FSP FAS 157-2 are effective for the
Company’s fiscal year beginning July 1, 2009.
SFAS 157
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. This standard
is now the single source in GAAP for the definition of fair value, except for
the fair value of leased property as defined in SFAS 13. SFAS 157 establishes a
fair value hierarchy that distinguishes between (1) market participant
assumptions developed based on market data obtained from independent sources
(observable inputs) and (2) an entity’s own assumptions about market participant
assumptions developed based on the best information available in the
circumstances (unobservable inputs). The fair value hierarchy consists of three
broad levels, which gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy under SFAS 157 are described below:
F-42
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
|
Level
1
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities.
|
|
Level
2
|
Inputs
other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets; quoted prices
for identical or similar assets or liabilities in markets that are not
active; inputs other than quoted prices that are observable for the asset
or liability (e.g., interest rates); and inputs that are derived
principally from or corroborated by observable market data by correlation
or other means.
|
|
Level
3
|
Inputs
that are both significant to the fair value measurement and
unobservable.
|
The fair
value of cash and cash equivalents and accounts receivables for all periods
presented approximate their respective carrying amounts.
Accounting for Deferred
Compensation and Post Retirement Benefit Aspects of Collateral Assignment Split
Dollar Life Insurance
The
Emerging Issues Task Force (EITF) reached consensus on EITF Issue No. 06-10,
Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life
Insurance Arrangements (EITF 06-10), which requires that a company
recognize a liability for the postretirement benefits associated with collateral
assignment split-dollar life insurance arrangements. The provisions of EITF
06-10 are effective as of July 1, 2008, and will impact the Company in instances
where the Company has contractually agreed to maintain a life insurance policy
(i.e., the Company pays the premiums) for an employee in periods in which the
employee is no longer providing services. Adoption of this standard has not had
a material impact on the Company’s financial position, results of operations or
cash flows
F-43
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
Employers’ accounting for
defined benefit pension and other postretirement plans
In
September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
No. 87, 88, 106 and 132(R)" (SFAS 158"). SFAS 158 requires an employer that
sponsors one or more single-employer defined benefit plans to (a) recognize the
overfunded or underfunded status of a benefit plan in its statement of financial
position, (b) recognize as a component of other comprehensive income, net of
tax, the gains or losses and prior service costs or credits that arise during
the period but are not recognized as components of net periodic benefit cost
pursuant to SFAS 87, "Employers' Accounting for Pensions", or SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", (c)
measure defined benefit plan assets and obligations as of the date of the
employer's fiscal period-end, and (d) disclose in the notes to financial
statements additional information about certain effects on net periodic benefit
cost for the next fiscal period that arise from delayed recognition of the gains
or losses, prior service costs or credits, and transition asset or obligation.
SFAS 158 is effective for the Company's fiscal period beginning July 1, 2008.
The adoption of SFAS No. 158 did not have a material impact on the Company's
financial position, results of operations or cash flows.
Business
Combinations
In
December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations
(SFAS 141R). SFAS 141R significantly changes the accounting for business
combinations in a number of areas including the treatment of contingent
consideration, preacquisition contingencies, transaction costs, in-process
research and development, and restructuring costs. In addition, under SFAS 141R,
changes in an acquired entity's deferred tax assets and uncertain tax positions
after the measurement period will impact income tax expense. SFAS 141R is
effective for fiscal periods beginning after December 15, 2008. The Company
adopted SFAS 141R on July 1, 2009. This standard did not have a material impact
on the Company’s financial statements.
Non-controlling Interests in
Consolidated Financial Statements
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest, changes in a parent’s ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the non-controlling
owners. SFAS 160 is effective for fiscal periods beginning after
December 15, 2008. The Company adopted SFAS 141R on July 1, 2009.
This standard did not have a material impact on the Company’s financial
statements.
Disclosures about Derivative
Instruments and Hedging Activities
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (SFAS 161). SFAS 161 amends and
expands the disclosure requirements of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. It requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative disclosures
about fair value amounts of gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
agreements. This statement is effective for financial statements issued for
fiscal periods beginning after November 15, 2008. The Company adopted SFAS 141R
on July 1, 2009. This standard did not have a material impact on the Company’s
financial statements.
F-44
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
The Hierarchy of Generally
Accepted Accounting Principles
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS 162). This statement identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in accordance with GAAP. With the issuance of this statement, the FASB
concluded that the GAAP hierarchy should be directed toward the entity and not
its auditor, and reside in the accounting literature established by the FASB as
opposed to the American Institute of Certified Public Accountants (AICPA)
Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.” This statement is
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.” The Company has
evaluated the new statement and have determined that it did not have a
significant impact on the determination or reporting of the Company’s financial
results.
Accounting for Financial
Guarantee Insurance Contracts
In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts - an interpretation of FASB Statement No. 60." SFAS 163
requires that an insurance enterprise recognize a claim liability prior to an
event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This
Statement also clarifies how Statement 60 applies to financial guarantee
insurance contracts, including the recognition and measurement to be used to
account for premium revenue and claim liabilities. Those
clarifications will increase comparability in financial reporting of financial
guarantee insurance contracts by insurance enterprises. This
Statement requires expanded disclosures about financial guarantee insurance
contracts. The accounting and disclosure requirements of the
Statement will improve the quality of information provided to users of financial
statements. SFAS 163 will be effective for financial statements
issued for fiscal years beginning after December 15, 2008. The
Company adopted SFAS 141R on July 1, 2009. This standard did not have a material
impact on the Company’s financial statements.
Subsequent
events
In May
2009, the FASB issued SFAS No. 165, "Subsequent Events," which establishes
general standards for accounting for and disclosure of events that occur after
the balance sheet date but before the financial statements are issued or are
available to be issued. The pronouncement requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, whether that date represents the date the financial statements were issued
or were available to be issued. SFAS 165 is effective with interim and annual
financial periods ending after June 15, 2009. The Company adopted SFAS 141R on
July 1, 2009. This standard did not have a material impact on the Company’s
financial statements.
F-45
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
2.
|
|
Accounting for Transfers of
Financial Assets
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets—an amendment of FASB Statement” (“SFAS 166”). SFAS No. 166 is
intended to establish standards of financial reporting for the transfer of
assets and transferred assets to improve the relevance, representational
faithfulness, and comparability. SFAS 166 was established to clarify
derecognition of assets under FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS No. 166 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2009.
The Company adopted SFAS 141R on July 1, 2009. This standard did not have a
material impact on the Company’s financial statements.
Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion
In May
2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (“FSP 14-1”). FSP 14-1 applies to convertible debt instruments
that, by their stated terms, may be settled in cash (or other assets) upon
conversion, including partial cash settlement, unless the embedded conversion
option is required to be separately accounted for as a derivative under FASB
Statement No. 133. Convertible debt instruments within the scope of FSP 14-1 are
not addressed by the existing APB 14. FSP 14-1 would require that the liability
and equity components of convertible debt instruments within the scope of FSP
14-1 be separately accounted for in a manner that reflects the entity’s
nonconvertible debt borrowing rate. This will require an allocation of the
convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component would be reported as a debt discount and subsequently
amortized to earnings over the instrument’s expected life using the effective
interest method. The Company adopted SFAS 141R on July 1, 2009. This standard
did not have a material impact on the Company’s financial
statements.
|
3.
|
Related Party
Transactions
|
During
the period ended December 31, 2009, directors received payments on account of
professional fees and reimbursement of expenses in the amount of $ 14,527 (2008:
$ nil).
During
the period ended December 31, 2009, the Company issued 2,000,000 common shares
to related parties (2008- 4,714,285 common shares) for services rendered, for
total consideration of $1,880,000 (2008 - $165,000).
At
December 31, 2009, the Company recorded a payable to related parties for shares
granted of 1,400,000 common shares (2008 – nil common shares) for services
rendered, for total consideration of $1,316,000 (2008 – nil).
At
December 31, 2009, the Company recorded a payable to a company related by way of
directors in common of $225,000 (2008 – nil) related to the acquisition of a 50%
interest in the Settlers Landing wind development project (Note
11).
At
December 31, 2009, the Company recorded a payable to a company related by way of
directors in common of CDN $300,000 (2008 – nil) related to the acquisition of a
50% interest in the Settlers Landing wind development project (Note
11).
All
transactions with related parties are made in the normal course of business and
measured at carrying value.
F-46
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
4.
|
Non-Cash
Transactions
|
There
were no interest or income taxes paid during 2009 or 2008. During the period
ended December 31, 2009, the company entered into certain non-cash operating
activities as follows:
a) The
Company issued 3,100,000 shares of the company at various share prices for a
total consideration of $2,884,000 (2008: $159,064) for services rendered.
b) The
Company issued 2,000,000 common shares of the company at a value of $0.94 per
share in settlement of Wind Project Agreements for a total consideration of
$1,880,000 (2008: $ nil) (Note 11).
|
5.
|
Fixed
Assets
|
|
Cost
Opening
Balance
|
Accumulated
Depreciation
|
Net
Book Value at
December
31, 2009
|
Net
Book Value at
June
30, 2009
|
|||||||||||
| $ | 8 ,102 | $ | 3,906 | $ | 4,196 | $ | 4,667 | |||||||
During
the period ended December 31, 2009, total additions to property, plant and
equipment were $ nil (2008- $ nil). During the period ended December
31, 2009 the Company recorded depreciation of $471.
|
6.
|
Other short term
loans
|
During
the period ended December 31, 2009, the Company issued convertible debentures
relating to loans from investors in the amount of $955,596 (2008 - $nil). The
convertible debenture obligation is accounted for entirely as a liability with
interest of 10% per annum.
|
7.
|
Subscriptions
payable
|
Subscriptions
payable represented balances owing by the company to investors for funds
received relating to unissued shares at June 30, 2009. These shares were issued
during the period ended September 30, 2009 (refer to note 4 and 8).
|
8.
|
Share
Capital
|
Total
authorized share capital of the Company is as follows:
200,000,000
Common shares with a par value of $0.001
During
the period ended December 31, 2009:
a) The
Company issued 3,100,000 shares of the company at various share prices for a
total consideration of $2,884,000 (2008: $159,064) for services rendered.
b) The
Company issued 5,000,001 common shares of the company pursuant to the
acquisition of Zero Emissions People LLC. (2008: $ nil)(Note 11).
F-47
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
8.
|
Share Capital
(Continued)
|
|
a)
|
The
Company issued 2,000,000 common shares of the company at a value of $0.94
per share pursuant to the acquisition of a wind development project for a
total consideration of $1,880,000 (2008: $ nil) (Note
11).
|
The
following share purchase warrants and agent compensation warrants were
outstanding at December 31, 2009:
|
Exercise
price
|
Number
of
warrants
|
Remaining
contractual
life (years)
|
|||||||
|
Warrants
|
.85 | 150,000 | 3.00 | ||||||
|
Warrants
|
.85 | 150,000 | 4.88 | ||||||
|
Outstanding
and exercisable at December 31, 2009
|
300,000 |
The
Company uses the Black-Scholes option valuation model to value warrants granted.
The Black-Scholes model was developed for use in estimating the fair value of
traded warrants. The model requires management to make estimates, which are
subjective and may not be a representative of actual results. Changes in
assumptions can materially affect estimates of fair values. For purposes of the
calculation, the following assumptions were used:
|
December
31, 2009
|
December
31, 2008
|
||
|
Risk
free interest rate
|
0.48%
- 0.60%
|
N/A
|
|
|
Expected
life of warrants
|
1
year
|
N/A
|
|
|
Expected
stock price volatility
|
106.91%
- 106.94%
|
N/A
|
|
|
Expected
dividend yield
|
0%
|
N/A
|
|
9.
|
Employee Stock Option
Plan
|
On July
12, 2007, the board and shareholders approved the 2007/2008 Stock Incentive
& Compensation Plan thereby reserving 6,000,000 common shares for issuance
to employees, directors and consultants. The significant details of the plan are
as follows:
|
·
|
All
employees and consultants of the company are eligible to be granted stock
options;
|
|
·
|
May
issue up to 6,000,000 common
shares;
|
|
·
|
Options
shall not be priced at less than 100% of the FMV of common stock at the
date of grant;
|
|
·
|
Maximum
life of option is 10 periods;
|
|
·
|
Options
are non-transferable, may only be
exercised;
|
|
·
|
Options
expire on termination of
employment.
|
On
November 29, 2007, the board granted 500,000 stock options expiring December 31,
2009 to a director of the company vesting on January 1, 2008. As at
June 30, 2009, all options to purchase common stock were cancelled by the board
of directors.
On
October 19, 2009, the board granted 1,000,000 stock options expiring December
31, 2012 to officers and directors of the company vesting immediately at an
exercise price of $0.85.
F-48
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
9.
|
Employee Stock Option
Plan (Continued)
|
Changes
in the Company’s stock options for the period ended December 31, 2009 are
summarized below:
|
Number
|
Weighted
Avg.
Exercise
Price
|
|||||||
|
Balance,
beginning of Year
|
- | $ - | ||||||
|
Cancelled
|
- | - | ||||||
|
Issued
|
1,000,000 | 0.85 | ||||||
|
Balance,
December 31, 2009
|
1,000,000 | $0.85 | ||||||
Stock
Based Compensation
The
Company uses the Black-Scholes option valuation model to value stock options
granted. The Black-Scholes model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. The model requires management to make estimates, which are
subjective and may not be representative of actual results. Changes in
assumptions can materially affect estimates of fair values. For purposes of the
calculation, the following assumptions were used:
|
December
31, 2009
|
December
31, 2008
|
||
|
Risk
free interest rate
|
0.60%
|
0.40%
|
|
|
Expected
dividend yield
|
0%
|
0%
|
|
|
Expected
stock price volatility
|
106.94%
|
110%
|
|
|
Expected
life of options
|
1
year
|
2
to 5 years
|
During
the period ended December 31, 2009 the Company recognized stock based
compensation expense in the amount of $ nil (2008: 274,928) for the vested
portion of options issued in the previous year.
F-49
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
10.
|
Segmented
Information
|
Segmented
information has been compiled based on the geographic regions that the company
has acquired mineral properties and performed its exploration
activities.
Loss for
the period by geographical segment for the six months period ended December 31,
2009:
|
|
|
United
States/ Canada
|
Mexico
|
Total
|
||||||||||
|
Interest
income
|
$ | 33 | $ | - | $ | 33 | ||||||
|
Expenses:
|
||||||||||||
|
Exploration Expenses
|
(39,866 | ) | - | (39,866 | ) | |||||||
|
Geologists
|
- | - | - | |||||||||
|
Advertising and Promotion
|
39,776 | - | 39,776 | |||||||||
|
Consulting Fees
|
998 | - | 998 | |||||||||
|
Corporate Communications
|
72 | - | 72 | |||||||||
|
Employment Compensation
|
- | - | - | |||||||||
|
Insurance
|
- | - | - | |||||||||
|
Amortization
|
471 | - | 471 | |||||||||
|
Office and Miscellaneous
|
8,248 | - | 8,248 | |||||||||
|
Professional Fees
|
85,536 | - | 85,536 | |||||||||
|
Rent
|
4,413 | - | 4,413 | |||||||||
|
Stock based Compensation
|
6,991,644 | - | 6,991,644 | |||||||||
|
Travel and Lodging
|
11,443 | - | 11,443 | |||||||||
|
Interest and Service charges
|
80,002 | - | 80,002 | |||||||||
|
Project Development Costs
|
979,324 | - | 979,324 | |||||||||
|
Write-down of Mineral Properties
|
- | - | - | |||||||||
|
Total Expenses
|
8,162,061 | - | 8,162,061 | |||||||||
|
Net
loss from continuing operations
|
$ | 8,162,028 | $ | - | $ | 8,162,028 | ||||||
F-50
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
10.
|
Segmented Information
(Continued)
|
Loss for
the period by geographical segment for the six months period ended December 31,
2008:
|
United
States/ Canada
|
Mexico
|
Total
|
||||||||||
|
Interest
income
|
$ | 53 | $ | - | $ | 53 | ||||||
|
Expenses:
|
||||||||||||
|
Exploration Expenses
|
(516 | ) | (10,369 | ) | (10,885 | ) | ||||||
|
Geologists
|
- | - | - | |||||||||
|
Advertising and Promotion
|
1,372 | - | 1,372 | |||||||||
|
Consulting Fees
|
- | - | - | |||||||||
|
Corporate Communications
|
230 | - | 230 | |||||||||
|
Employment Compensation
|
- | - | - | |||||||||
|
Insurance
|
10,201 | - | 10,201 | |||||||||
|
Amortization
|
588 | - | 588 | |||||||||
|
Office and Miscellaneous
|
443 | 382 | 825 | |||||||||
|
Professional Fees
|
8,949 | - | 8,949 | |||||||||
|
Rent
|
2,232 | - | 2,232 | |||||||||
|
Stock based Compensation
|
159,064 | - | 159,064 | |||||||||
|
Travel and Lodging
|
- | - | - | |||||||||
|
Interest and Service charges
|
540 | 21 | 561 | |||||||||
|
Write-down of Mineral Properties
|
- | - | - | |||||||||
|
Total Expenses
|
183,104 | (9,966 | ) | 173,138 | ||||||||
|
Net
loss from continuing operations
|
$ | 183,051 | $ | (9,966 | ) | $ | 173,085 | |||||
F-51
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
10.
|
Segmented Information
(Continued)
|
Assets by
geographical segment:
|
United
States/ Canada
|
Mexico
|
Total
|
||||||||||
| $ | $ | $ | ||||||||||
|
December
31, 2009
|
||||||||||||
|
Mineral
properties
|
- | - | - | |||||||||
|
Wind
Projects
|
2,409,118 | - | 2,409,118 | |||||||||
|
Equipment
|
4,196 | - | 4,196 | |||||||||
|
December
31, 2008
|
||||||||||||
|
Mineral
properties
|
- | - | - | |||||||||
|
Equipment
|
5,245 | - | 5,245 | |||||||||
|
11.
|
Acquisitions, Option
Agreements and Power Contract
Applications
|
On
October 28, 2009 the Company announced it had signed a share exchange agreement
whereby it will acquire all of the outstanding equity interests in Zero Emission
People, which includes 10 wind energy development projects totaling 375
megawatts (MW). Closing of the transaction will be subject to
delivery of Zero Emission People audited financial statements, and regulatory
compliance by both companies. As consideration, the Company will issue
thirty-one million shares of its common stock pursuant to the following schedule
(Note 13):
-
5,000,000 shares of common stock on January 15, 2010
-
9,000,000 shares of common stock on August 15, 2010
-
9,000,000 shares of common shares on August 15, 2011
-
8,000,000 shares of common shares on August 15, 2012
On
October 23, 2009 the Company announced it had signed an agreement to
acquire a 70% controlling interest in Skyway 126 Wind Energy Inc. in exchange
for two million restricted shares of Wind Works’ common stock. Skyway 126
is a 10 megawatt (MW) project located in Grey-Highlands Township, Ontario,
Canada.
On
November 6, 2009 the Company announced it had signed an
agreement to acquire a 50% interest in the Settlers Landing Wind Park. The
agreement calls for the issuance of 300,000 restricted common shares of the
Company’s stock, and the payment in cash of $450,000, the latter subject to
milestones. The affect of payment is as follows:
Milestone 1:
The
payment of $225,000 upon the earlier of: within 30 days of award of FIT/power
contract or latest July 30, 2010 (Note 3).
F-52
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
11.
|
Acquisitions, Option
Agreements and Power Contract Applications
(Continued)
|
Milestone 2:
The payment of $225,000 within 90 days
upon award of a FIT/power contract.
As at
December 31, 2009, the restricted common shares have not yet been issued nor the
cash payment been made. As part of the acquisition of Zero Emission People,
announced October 28, 2009, the Company will acquire an additional 50% interest
in Settlers Landing, a 10 megawatt wind energy project located near Pontypool,
in Ontario, Canada.
On
November 8, 2009 we signed an option agreement to acquire a 100%
interest in Honelles, a 10 megawatt wind energy project located in Belgium. If
we choose to exercise the option, we will be required to make a cash payment of
EUR300,000 and enter a Development and Service Agreement with the initial
developer under which we will be required to pay EUR 10,000 for up to 24 months
for development costs and distribute 33% of the pre-tax profit as a success fee
if the project is sold. As per the original agreement the option is
valid for 90 days from the effective date, which was subsequently extended to
June 1, 2010.
On
November 8, 2009 we signed an option agreement to acquire a 100%
interest in Ecsed, a 50 megawatt wind energy project located in Hungary. If we
choose to exercise the option, we will be required to make a cash
payment of EUR 350,000 and enter into a Development and Service Agreement with
the initial developer under which we will be required to pay EUR 10,000 for up
to 24 months for development cost and distribute 50% of the pre-tax profit as a
success fee if the project is sold. As per the original agreement the
option is valid for 90 days from the effective date, which was subsequently
extended to June 1, 2010.
On
December 14, 2009 the Company announced it had acquired a 50% interest in
another 6 wind energy projects totaling 80 megawatts (MW) located in Ontario,
with an option to increase its interests to 100%. All 6 projects submitted power
contract applications on November 30th under the new Feed-in Tariff program of
the Ontario Power Authority. The agreement calls for the issuance of 1,200,000
restricted common shares of the Company’s stock, and payment in cash of $300,000
CDN on April 30, 2010 (Note 3). The restricted common shares have not yet been
issued and the cash payment has not yet been made.
|
12.
|
|
ASC
810
In June
2009, the FASB issued ASC 810, “Amendments to FASB Interpretation
No. 46(R)” (“ASC 810”). ASC 810 eliminates the exception to consolidate a
qualifying special-purpose entity, changes the approach to determining the
primary beneficiary of a variable interest entity, and requires companies to
more frequently re-assess whether they must consolidate variable interest
entities. Under the new guidance, the primary beneficiary of a
variable interest entity is identified qualitatively as the enterprise that has
both (a) the power to direct the activities of a variable interest entity that
most significantly impact the entity’s economic performance, and (b) the
obligation to absorb losses of the entity that could potentially be significant
to the variable interest entity or the right to receive benefits from the entity
that could potentially be significant to the variable interest entity. ASC 810
becomes effective for the Company’s fiscal 2011 year-end and interim reporting
periods thereafter. The Company does not expect ASC 810 to have a
material impact on its financial statements.
F-53
Wind
Works Power Corp.
(Formerly
AmMex Gold Mining Corp. - an Exploration Stage Mining
Company)
Notes
to the Consolidated Financial Statements (Unaudited)
For
the Six Month Period Ended December 31, 2009
(Stated
in US Dollars)
|
13.
|
Subsequent
events
|
On January 31, 2010, in an
addendum to the share exchange agreement between the Company and Zero Emission
People LLC, it was agreed that any provisions in regards to considerations in
shares made in the joint venture agreement and option agreements entered into on
September 18, 2009 will be superceded by the share exchange agreement of October
28, 2009. Both parties further acknowledged that any amount of shares
issued by the Company as consideration as per provisions contained in any of the
previous agreements shall be subtracted from the overall amount of shares due
under the share exchange agreement if such a previous issuance does concern a
project that is part of both the agreement under which the shares were issued
previously and the share exchange agreement.
On February 3, 2010 the
Company announced it had completed its acquisition of Zero Emission People LLC
effective January 31, 2010.
F-54
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
13. Other
Expenses of Issuance and Distribution.
The
following table sets forth an estimate of the costs and expenses payable by Wind
Works in connection with the offering described in this registration statement.
All of the amounts shown are estimates except the Securities and Exchange
Commission registration fee:
|
Securities
and Exchange Commission registration fee
|
$ | |||
|
Accounting
fees and expenses
|
10,000 | |||
|
Legal
fees and expenses
|
35,000 | |||
|
Printing
and Transfer Agent Fees
|
2,000 | |||
|
Miscellaneous
|
3,000 | |||
|
Total
|
$ | 50,000 | ||
Item
14. Indemnification
of Officers and Directors.
Our
bylaws provide to the fullest extent permitted
by law. Nevada corporate law provides that a corporation
may indemnify a director, officer, employee or agent made a party to an action
by reason of that fact that he was a director, officer employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually and reasonably incurred by him in connection with such action if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and with respect to any
criminal action, had no reasonable cause to believe his conduct was
unlawful. We believe that the indemnification provisions in our
bylaws are necessary to attract and retain qualified persons as directors and
officers.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of Wind
Works pursuant to the foregoing provisions, or otherwise, Wind Works
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Wind Works
of expenses incurred or paid by a director, officer or controlling person of
Wind Works in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, Wind Works will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-1
Item
15. Recent
Sales of Unregistered Securities.
With
respect to the sale of any unregistered securities, we
relied on the exemptive provisions of Section 4(2), Reg D
and/or Regulation S of the Securities Act of 1933, as
amended.
At all
times relevant the securities were offered subject to the following terms and
conditions:
|
|
·
|
the
sale was made to a sophisticated or accredited investor, as defined in
Rule 502;
|
|
|
·
|
we
gave the purchaser the opportunity to ask questions and receive answers
concerning the terms and conditions of the offering and to obtain any
additional information which we possessed or could acquire without
unreasonable effort or expense that is necessary to verify the accuracy of
information furnished;
|
|
|
·
|
at
a reasonable time prior to the sale of securities, we advised the
purchaser of the limitations on resale in the manner contained in
Rule 502(d)2; and
|
|
|
·
|
neither
we nor any person acting on our behalf sold the securities by any form of
general solicitation or general
advertising.
|
All funds
received from the sale of our shares were used for working capital
purposes.
All
shares bear a legend restricting their disposition.
Each
purchaser was provided with access to our filings with the SEC.
|
List
of Exhibits
|
Identification
of Exhibits
|
|
3.1.**
|
Certificate
of Incorporation
|
|
3.2.**
|
Certificate
of Amendment to Certificate of
Incorporation
|
|
3.3.**
|
Bylaws
|
|
3.4**
|
Form
of Convertible Debenture
|
|
3.5**
|
Form
of Warrant
|
|
3.6**
|
Form
of Option
|
|
5.*
|
Opinion
of Counsel
|
|
10.1**
|
Investment
Agreement with Kodiak Capital Group,
Inc.
|
|
10.2**
|
Registration
Rights Agreement with Kodiak Capital Group,
Inc.
|
|
10.3**
|
Share
Exchange Agreement between Wind Works Power Corp. and Zero
Emission People, LLC
|
|
10.4**
|
Addendum
to Share Exchange Agreement with Zero
Emission
|
|
10.5**
|
Joint
Venture Agreement with Sunbeam,
LLC
|
|
10.6**
|
Share
Exchange Agreement with Skyway 126
Inc.
|
|
14**
|
Code
of Business Conduct and
Ethics
|
|
21**
|
Subsidiaries
of Registrant
|
|
23.1*
|
Consent
of Counsel - included as part of Exhibit
5
|
|
23.2*
|
Consent
of Independent Certified Public
Accountant
|
* Filed
Herewith
** Previously
filed
II-2
(a)
The
undersigned Registrant hereby undertakes to:
(1)
File,
during any period in which it offers or sells securities, a post-effective
amendment to this registration statement to:
(i)
Include
any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)
Reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the information in the registration statement; and
notwithstanding the forgoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation From the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement.
(iii)
Include
any additional or changed material information on the plan of
distribution.
(2)
For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3)
File a
post-effective amendment to remove from registration any of the securities that
remain unsold at the end of the offering.
(4)
Each
prospectus filed pursuant to Rule 424(b) of Regulation C as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A of Regulation C, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use.
II-3
SIGNATURES
As
required under the Securities Act of 1933, the registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on the registration statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in Ottawa, on May
4, 2010 .
|
Wind
Works Power Corp.
|
|||
|
|
|
/s/ Ingo Stuckmann | |
| Ingo Stuckmann | |||
|
|
|
/s/ W. Campbell Birge | |
| W. Campbell Birge, CFO | |||
Pursuant
to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
|
Signature
|
Title
|
Date
|
||
|
/s/
Ingo Stuckmann
|
CEO/DIRECTOR
|
May 4,
2010
|
||
|
Ingo
Stuckmann
|
||||
|
/s/
J.C. Pennie
|
Chairman
of the Board
|
May 4,
2010
|
||
|
J.C. Pennie
|
||||
|
/s/
Greg Wilson
|
Director
|
May 4, 2010
|
||
|
Greg
Wilson
|
II-4