10-Q 1 p5715010q.htm FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015 p5715010q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  March 31, 2015

OR

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

For the transition period from _________ to _________

Commission File Number:  000-54015

POWIN CORPORATION
(Exact name of registrant as specified in its charter)

NEVADA
87-0455378
(State or other jurisdiction of incorporation or
organization)
(IRS Employer Identification Number)

20550 SW 115th Ave
Tualatin, OR 97062
(Address of principal executive offices)

T: (503) 598-6659
(Issuer’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)    N/A
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
    
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o
      
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one)  Large accelerated filer o  Accelerated filer o   Non-accelerated filer o   Smaller reporting company x
   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x
         
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of May 12, 2015, there were 16,246,839 shares of Common Stock, $0.001 par value, outstanding and 9,102 shares of Preferred Stock, $100 face value, outstanding.  
    


 
 

 
 
POWIN CORPORATION
 
Index
 
PART I.         FINANCIAL INFORMATION
 
Item 1.
Financial Statements.
3
 
Condensed Consolidated Balance Sheets as of March 31, 2015 (unaudited) and
December 31, 2014 (audited)
3
 
Condensed Consolidated Statements of Operations for the Three Months ended
March 31, 2015 and 2014 (unaudited)
4
 
Condensed Consolidated Statements of Comprehensive Loss for the Three Months
ended March 31, 2015 and 2014 (unaudited)
5
 
Condensed Consolidated Statements of Cash Flows for the Three Months ended
March 31, 2015 and 2014 (unaudited)
6
 
Notes to Condensed Consolidated Financial Statements (unaudited)
7
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
18
 
Note Regarding Forward Looking Statements
18
 
Overview
 
 
Critical Accounting Policies
 
 
Results of Operations
20
 
Liquidity and Capital Resources
22
 
Off-Balance Sheet Arrangements
24
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
24
     
Item 4.
Controls and Procedures.
24
     
     
PART II.  OTHER INFORMATION
     
Item 1.
Legal Proceedings.
25
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
25
     
Item 3.
Defaults Upon Senior Securities.
25
     
Item 4.
Mine Safety Disclosures.
25
     
Item 5.
Other Information.
25
     
Item 6.
Exhibits.
25

 
2

 

PART I.       FINANCIAL INFORMATION

Item 1.  Financial Statements.

POWIN CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
   
March 31,
   
December 31,
 
   
2015
   
2014
 
   
(unaudited)
   
(audited)
 
Assets
           
Current Assets
           
Cash
  $ 1,999,016     $ 757,074  
Accounts receivable, net
    1,855,177       2,265,515  
Notes and other receivables, net
    131,283       157,824  
Inventories, net
    2,582,752       2,139,323  
Prepaid expenses and deposits
    545,360       586,997  
Total current assets
    7,113,588       5,906,733  
                 
Property and equipment, net
    1,506,129       1,526,929  
Intangible assets, net
    41,043       50,111  
Total assets
  $ 8,660,760     $ 7,483,773  
                 
Liabilities and shareholders' deficit
               
Current Liabilities
               
Accounts payable
  $ 2,724,655     $ 2,448,442  
Accrued payroll and other accrued liabilities
    5,793,546       3,746,367  
Notes payable  current portion of long-term debt and accrued interest
    2,783,738       2,746,851  
Payable to related parties - current
    5,397,378       5,125,870  
Total current liabilities
    16,699,317       14,067,530  
Non-Current Liabilities
               
   Notes payables and long-term debt - non current
    8,499       19,270  
          Total non-current Liabilities
    8,499       19,270  
Total liabilities
    16,707,816       14,086,800  
Stockholders' deficit
               
Preferred stock, $100 face value, 25,000,000 shares
               
Authorized; 9,102 and 9,102 shares issued and outstanding, respectively
    910,200       910,200  
Common stock, $0.001 par value, 575,000,000 shares
               
Authorized; 16,246,839 and 16,243,839 shares issued and outstanding, respectively
    16,247       16,244  
Additional paid-in capital
    10,601,167       10,552,144  
Accumulated other comprehensive loss
    (30,432 )     (26,143 )
Accumulated deficit
    (18,874,348 )     (17,435,022 )
Total Powin Corporation stockholders' deficit
    (7,377,166 )     (5,982,577 )
                 
Non-controlling interest
    (669,890 )     (620,450 )
Total liabilities and shareholders' deficit
  $ 8,660,760     $ 7,483,773  

The accompanying notes are an integral part of these condensed consolidated financial statements
 
 
3

 
 
POWIN CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(Unaudited)
 
             
   
Three Months ended March 31,
 
   
2015
   
2014
 
             
Net sales
  $ 2,710,268     $ 2,534,759  
Cost of sales
    2,172,335       2,019,404  
Gross profit
    537,933       515,355  
                 
Operating expenses
    1,950,566       1,914,724  
Loss from operations
    (1,412,633 )     (1,399,369 )
                 
Other income (expense)
               
Other income
    33,247       7,244  
Interest expense
    (108,478 )     (79,060 )
Other expenses
    (145 )     -  
Other expenses
    (75,376 )     (71,816 )
Loss before income taxes
    (1,488,009 )     (1,471,185 )
Provision for income taxes
    -       -  
Net loss
    (1,488,009 )     (1,471,185 )
Net loss attributable to non-controlling interest
    (48,683 )     (47,385 )
Net loss attributable to Powin Corporation
    (1,439,326 )     (1,423,800 )
                 
Loss per share:
               
  Basic
  $ (0.09 )   $ (0.09 )
  Diluted
  $ (0.09 )   $ (0.09 )
                 
Weighted average shares outstanding:
               
  Basic
    16,243,839       16,232,755  
  Diluted
    16,243,839       16,232,755  

The accompanying notes are an integral part of these condensed consolidated financial statements

 
4

 

POWIN CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
(Unaudited)
 
             
   
Three Months ended March 31,
 
   
2015
   
2014
 
             
Net loss
  $ (1,488,009 )   $ (1,471,185 )
Other comprehensive loss
               
Foreign currency translation adjustment
    (5,046 )     475  
Comprehensive loss
    (1,493,055 )     (1,470,710 )
                 
Comprehensive loss attributable to non-controlling interest
    (48,683 )     (47,314 )
Comprehensive loss attributable to Powin Corporation
  $ (1,444,372 )   $ (1,423,396 )

The accompanying notes are an integral part of these condensed consolidated financial statements
 
 
5

 
 
POWIN CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
   
Three Months ended March 31,
 
   
2015
   
2014
 
             
OPERATING ACTIVITIES
           
Net loss
  $ (1,488,009 )   $ (1,471,185 )
Adjustments to reconcile net loss to net cash (used in) operating activities
               
Depreciation and amortization
    128,894       130,012  
Reserve for slow moving and obsolete inventory
    25,543       31,481  
Share based compensation
    49,026       52,854  
Provision for doubtful accounts receivable
    38,323       7,180  
Provision for (recovery of) doubtful other receivable
    (1,436 )     13,663  
Changes in operating assets and liabilities
               
Accounts receivable
    372,015       152,089  
Notes and other receivables
    27,977       5,426  
Inventories
    (468,971 )     91,165  
Prepaid expenses and deposits
    41,637       32,928  
Accounts payable
    276,213       (384,293 )
Accrued payroll and other liabilities
    2,047,179       184,173  
Net cash provided by (used in) operating activities
    1,048,391       (1,154,507 )
                 
INVESTING ACTIVITIES
               
Capital expenditures
    (99,026 )     -  
Total cash used in investing activities
    (99,026 )     -  
                 
FINANCING ACTIVITIES
               
Proceeds from notes payables and debt
    36,542       -  
Repayments to notes payables and debt
    (10,428 )     (41,569 )
Net proceeds from payable to related parties
    271,508       900,000  
Net cash provided by financing activities
    297,622       858,431  
Impact of foreign exchange on cash
    (5,045 )     475  
Net increase (decrease) in cash
    1,241,942       (295,601 )
                 
Cash at beginning of period
    757,074       964,039  
                 
Cash at end of period
  $ 1,999,016     $ 668,438  
                 
SUPPLEMENTAL DISCLOURSE OF CASH FLOW INFORMATION
               
Interest paid
  $ 473     $ 3,098  
                 
Income taxes paid
  $ -     $ -  

The accompanying notes are an integral part of these condensed consolidated financial statements

 
6

 
 
POWIN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements 
 
Note 1 – Summary of Significant Accounting Policies

Basis of preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information required by GAAP for complete annual financial statement presentation.

In the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the results of operations have been included in the accompanying unaudited condensed consolidated financial statements. Operating results for the three-month period ended March 31, 2015, are not necessarily indicative of the results to be expected for other interim periods or for the full year ended December 31, 2015. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities Exchange Commission.

Principles of consolidation
 
The accompanying unaudited condensed consolidated financial statements include the accounts of Powin Corporation and its subsidiaries. All intercompany transactions and balances have been eliminated. Equity investments through which the Company exercises significant influence over but does not control the investee and is not the primary beneficiary of the investee’s activities are accounted for using the equity method. Investments through which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.

Cash

The Company considers all highly liquid investments with maturity of three months or less to be cash equivalents. The cash deposits in U.S. financial institutions exceed the amounts insured by the U.S. government. The standard insurance amount is $250,000 per depositor, per insured bank. Non-performance by these institutions could expose the Company to losses for amounts in excess of insured balances. At March 31, 2015 and December 31, 2014, the Company’s bank balances exceeded insurances balances by $886,101 and $0, respectively. At March 31, 2015 and December 31, 2014, the Company had no cash equivalents.
 
 
7

 
 
Inventories

Inventories consist of parts and equipment including electronic parts and components, furniture, rubber products, plastic products and exercise equipment.  Inventory is valued at the lower of cost (first-in, first-out method) or market.  The Company capitalizes applicable direct and indirect costs incurred in the Company’s manufacturing operations to bring its products to a sellable state. For the three months ended March 31, 2015 and 2014, the Company recorded a provision for inventory obsolescence of $25,543 and $31,481, respectively, which is included in cost of sales. The components of inventories were as follows:

   
March 31, 2015
(Unaudited)
   
December 31, 2014
(Audited)
 
Raw materials
 
$
889,642
   
$
507,643
 
Work in progress
   
103,876
     
122,998
 
Finished goods
   
2,590,990
     
2,484,895
 
Reserve for slow moving
and obsolete inventory
   
(1,001,756
)
 
$
(976,213
)
Inventories, net
 
$
2,582,752
   
$
2,139,323
 

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization.  For financial reporting and income tax purposes, the costs of property and equipment are depreciated and amortized over the assets estimated useful lives, using principally the straight-line method for financial reporting purposes and an accelerated method for income tax purposes.  Costs associated with repair and maintenance of property and equipment are expensed as incurred.  Changes in circumstances, such as technological advances, changes to the Company’s business model or capital strategy could result in actual useful lives differing from the Company’s estimates.  In those cases where the Company determines that the useful life of property and equipment should be shortened, the Company would depreciate the asset over its revised remaining useful life thereby increasing depreciation expense.

The Company depreciates property and equipment over the following estimated useful lives:
 
Manufacturing equipment
 
7-15 years
Leasehold improvements
 
39 years
Office equipment and computers
 
3-5 years
Autos
 
5-7 years
 
The Company reviews the carrying value of property, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, and equipment was recorded in operating expenses during the three months ended March 31, 2015 and 2014.
 
 
8

 
 
Foreign currencies

Assets and liabilities recorded in foreign currencies are translated to U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated to U.S. dollars at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to other comprehensive income (“OCI”).

Use of estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires the use of management’s estimates. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates.

Revenue recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, the service is performed or delivery has occurred, the price is fixed or determinable, and collectability is probable.

For product shipped directly from the Company’s warehouse or manufactured by the Company in the United States and then shipped to the customer, revenue is recognized at time of shipment as it is determined that ownership and title has passed to the customer at shipment and revenue is recognized.  Amounts billed to customers for freight and shipping are classified as revenue.
 
Products imported from China and shipped directly to the customer may be either FOB Port of Origin or FOB Shipping Destination United States. If the product is shipped FOB Port of Origin revenue is recognized at time of delivery to the Company’s representative in China, when the proper bills-of-lading have been signed by the customer’s agent and ownership passed to the customer.  For product shipped FOB Shipping Destination U.S., revenue is recognized when product is off-loaded at the United States Port of Entry and delivered to the customer, when all delivery documents have been signed by the receiving customer, and ownership has passed to the customer. 

For orders placed requiring customized manufacturing, the Company requires the customer to issue its signed purchase order with documentation identifying the specifics of the product to be manufactured. Revenue is recognized on customized manufactured products upon delivery of the product.  If the customer cancels the purchase order after the manufacturing process has begun, the Company invoices the customer for any manufacturing costs incurred and revenue is recognized.  Orders canceled after delivery has occurred are fully invoiced to the customer and revenue is recognized, provided all other revenue recognition criteria are met.
 
 
9

 
 
Segment reporting

ASC 280, Segment Reporting, formerly known as Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information, requires use of the “management approach” model for segment reporting. Under this model, segment reporting is consistent with the manner that the Company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure or any other manner in which management disaggregates a company.
 
Note 2: Going concern

The Company sustained operating losses during the three months ended March 31, 2015 and 2014 and for the years ended December 31, 2014 and 2013. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing, as may be required.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Note 3: Property and equipment, net

The components of property and equipment were as follows: 

   
March 31, 2015
   
December 31, 2014
 
Equipment
 
$
2,925,241
   
$
2,887,215
 
Leasehold improvements
   
378,152
     
317,152
 
Computers
   
302,397
     
302,397
 
Vehicles
   
85,714
     
85,714
 
Furniture and fixtures
   
83,511
     
83,511
 
     
3,775,015
     
3,675,989
 
Accumulation depreciation
   
(2,268,886
)
   
(2,149,060
)
Property and equipment - net
 
$
1,506,129
   
$
1,526,929
 

For the three months ended March 31, 2015 and 2014, depreciation of property and equipment amounted $119,826 and $130,012, respectively.

Note 4: Loss per share

Basic loss per share is based on the weighted-average effect of all common shares issued and outstanding, and is calculated by dividing net loss by the weighted-average shares outstanding during the year.  Diluted loss per share is calculated by dividing net income by the weighted-average number of common shares used in the basic loss per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.  The Company excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is antidilutive. 
 
 
10

 

The components of basic and diluted loss per share are as follows:

     
For the three months ended March 31,
 
     
2015
     
2014     
 
                 
Net loss attributable to Powin Corporation(A)
 
$
(1,439,326
)
 
$
(1,423,800
Less preferred share dividends
   
-
     
-
 
Net loss available to Powin Corporation (B)
   
(1,439,326
)
   
(1,423,800
                 
Weighted average outstanding shares of 
common stock (C)
   
16,243,839
     
16,232,755
 
Dilutive effect of securities
   
-
     
-
 
Common stock and common stock equivalents (D)
   
16,243,839
     
16,232,755
 
                 
Loss per share
               
Basic (A/D)
 
$
(0.09
)
 
$
(0.09
)
Diluted (B/D)
 
$
(0.09
)
 
$
(0.09
)

For the three months ended March 31, 2015 and 2014, the effect of warrants, stock options and convertible preferred stock are excluded from loss per share because their impact is considered to be anti-dilutive.

Note 5: Notes Payable and Long Term Debt
 
The total carrying value of notes payable and long-term debt, including current and long-term portions, was as follows:

   
March 31, 2015
   
December 31, 2014
 
   
(Unaudited)
   
(Audited)
 
   
Current
    Non
Current
   
Current
    Non
Current
 
Equipment loan starting December 18, 2012,
due January 1, 2017, with 3.05% interest rate, with
no collateral
 
 $
42,554
   
 $
8,499
   
 $
42,212
   
 $
19,270
 
Loan from a third party, starting December 20, 2013,
due June 30, 2015, with 6% interest  rate, with no
collateral
   
270,000
     
-
     
270,000
     
-
 
Loan from a third party,starting March 26,
2013, 
dueJune 30, 2015, with 6% interest rate, with
no collateral
   
2,000,000
     
-
     
2,000,000
     
-
 
Loan from a third party,starting July 16, 2014, due
July 31, 2015, with 6%interest rate, withno collateral
   
200,000
     
-
     
200,000
     
-
 
Accrued interest
   
271,184
     
-
     
234,639
     
-
 
Total long-term debt, including current portion and
accrued interest
 
$
2,783,738
     
8,499
   
$
2,746,851
     
19,270
 
 
 
11

 
 
Interest expenses related to notes payables and long-term debt amounted to $37,015 and $36,682 for the three months ended March 31, 2015 and 2014, respectively.

Note 6:  Capital stock

For the three months ended March 31, 2015 the Company issued 3,000 shares of common stock to six board members as compensation for their services based on the fair value of the shares valued at $1.95 per share for their service.

Note 7:  Related party transaction

Rent From Related Parties

All of the Company’s facilities are owned by Lu Pacific a company owned by Joseph Lu (“Mr. Lu”), CEO and Chairman of the Board. Rent expenses was $188,721 and $188,721 for the three months ended March 31, 2015 and 2014, respectively. Rental rates are deemed to be and were derived by local market rates for the rents when the contracts were entered.

Sales to Related Parties

Danny Lu and Peter Lu together own 20% of PEI MFG, LLC (“PEI”). The Company made sales to PEI in the amount of $26,691 and $98,043 for the three months ended March 31, 2015 and 2014, respectively. There were no amounts payable to PEI at March 31, 2015 and December 31, 2014, respectively. Amounts due from PEI amounted to $74,185 and $104,094 at March 31, 2015 and December 31, 2014, respectively.

Notes Payable To Related Parties

As of March 31, 2015, notes payable to Lu Pacific amounted to $508,475. The Company borrowed $0 and paid back $0 during the three months ended March 31, 2015.

As of March 31, 2015, notes payable to Mr. Lu amounted to $3,370,492. The Company borrowed $200,000 and paid back $0 during the three months ended March 31, 2015.

Peter Lu is Mr. Lu’s son. As of March 31, 2015, notes payable to Peter Lu amounted to $555,000. The Company borrowed $0 and paid back $0 during the three months ended March 31, 2015.
 
 
12

 
 
Danny Lu is Mr. Lu’s son. Danny Lu is also a director of the Company. As of March 31, 2015, notes payable to Danny Lu amounted to $555,000. The Company borrowed $0 and paid back $0 during the three months ended March 31, 2015.
 
The total carrying value of payable to related parties, including current and long-term portions, was as follows:

   
March 31, 2015
   
December 31, 2014
 
   
(unaudited)
 
(Audited)
 
   
Current
   
Non 
Current
   
Current
   
Non 
Current
 
Loan from Mr. Lu, starting March 11, 2013, due June
30, 2015, with 6% annual interestrate, with no
collateral
 
$
2,000,000
   
$
-
   
$
2,000,000
   
$
-
 
Loan from Mr. Lu, starting October 15, 2013, due
June30, 2015, with 6% annual interestrate, with no
collateral
   
500,000
     
-
     
500,000
     
-
 
Loan from Mr. Lu, starting May 14, 2014, due June
30,2015, with 6% annual interestrate, with no
collateral
   
200,000
     
-
     
200,000
     
-
 
Loan from Mr. Lu, starting June 11, 2014, due June
30,2015, with 6% annual interestrate, with no
collateral
   
70,492
     
-
     
70,492
     
-
 
Loan from Mr. Lu, starting June 25, 2014, due June
30,2015, with 6% annual interestrate, with no
collateral
   
200,000
     
-
     
200,000
     
-
 
Loan from Mr. Lu, starting December 29, 2014, due
June 30,2015, with 6% annual interestrate, with no
collateral
   
200,000
     
-
     
200,000
     
-
 
Loan from Mr. Lu, starting March 12, 2015, due June
30,2015, with 6% annual interestrate, with no
collateral
   
200,000
     
-
     
-
     
-
 
Loan from Lu Pacific, starting April 29, 2014, due
July 31,2015, with 6% interestrate, with no
collateral
   
300,000
     
-
     
300,000
     
-
 
Loan from Lu Pacific, starting August 29, 2014, due
June 30,2015, with 6% annual interestrate, with no
collateral
   
208,475
     
-
     
208,475
     
-
 
Loan from Danny, starting January 27, 2014, due
June30, 2015, with 6% annual interestrate, with no
collateral
   
250,000
     
-
     
250,000
     
-
 
Loan from Danny, starting February 24, 2014, due
July31, 2015, with 6% annual interestrate, with no
collateral
   
100,000
     
-
     
100,000
     
-
 
 
 
13

 
 
Loan from Danny, starting March 28, 2014, due June
30, 2015, with 6% interestrate, with no collateral
   
100,000
     
-
     
100,000
     
-
 
Loan from Danny, starting August 4, 2014, due June
30,2015, with 6% annual interest rate, with no
collateral
   
80,000
     
-
     
80,000
     
-
 
Loan from Danny, starting August 15, 2014, due
June 30,2015, with 6% annual interestrate, with no
collateral
   
25,000
     
-
     
25,000
     
-
 
Loan from Peter, starting February 11, 2014, due
June30, 2015, with 6% annual interestrate, with no
collateral
   
250,000
     
-
     
250,000
     
-
 
Loan from Peter, starting March 28, 2014, due June
30,2015, with 6% annual interestrate, with no
collateral
   
200,000
     
-
     
200,000
     
-
 
Loan from Peter, starting August 4, 2014, due June
30,2015, with 6% annual interestrate, with no
collateral
   
80,000
     
-
     
80,000
     
-
 
Loan from Peter, starting August 15, 2014, due June
30,2015, with 6%annualinterestrate, with no
collateral
   
25,000
     
-
     
25,000
     
-
 
Accrued interest
   
408,411
     
-
     
336,903
     
-
 
Total payable related parties, including current
portion andaccrued interest
 
$
5,397,378
   
$
-
   
$
5,125,870
   
$
   

Interest expenses related to payable to related parties amounted to $71,508 and $42,378 for the three months ended March 31, 2015 and 2014, respectively.
 
Proceeds during the three months ended March 31, 2015

Proceeds from payables to related parties include the following for the three months ended March 31, 2015:

On March12, 2015, the Company issued a promissory note in the amount of $200,000 to Mr. Lu. The note is due June 30, 2015, is with no collateral, and accrues interest at 6%per annum.

Proceeds during the year ended December 31, 2014

Proceeds from payables to related parties include the following for the year ended December 31, 2014:

On January 27, 2014, the Company borrowed an additional $250,000 from Danny Lu. The note was due June 30, 2014 and has accrued interest at 6% per annum. The note due date is extended to June 30, 2015, is with no collateral, and with an interest rate of 6% per annum.
 
 
14

 

On February 11, 2014, the Company borrowed an additional $250,000 from Peter Lu. The note was due June 30, 2014 and has accrued interest at 6%per annum. The note due date is extended to June 30, 2015, with no collateral, and with an interest rate of 6% per annum.

On February 24, 2014, the Company borrowed an additional $100,000 from Danny Lu. The note is due July 31, 2015 is with no collateral, and accrues interest at 6%per annum.

On March 28, 2014, the Company borrowed an additional $100,000 from Danny Lu. The note was due June 30, 2014 and accrued interest at 6%per annum. The note due date is extended to June 30, 2015, with no collateral, and with an interest rate of 6%per annum.

On March 28, 2014, the Company borrowed an additional $200,000 from Peter Lu. The note was due June 30, 2014 and accrued interest at 6% per annum. The note due date is extended to June 30, 2015, with no collateral, and with an interest rate of 6%per annum.

On April 29, 2014, the Company issued a promissory note in the amount of $300,000 to Lu Pacific. The note is due July 31, 2015, is with no collateral, and accrues interest at 6%per annum.

On May 14, 2014, the Company borrowed an additional $200,000 from Mr. Lu. The note was due June 30, 2014 and accrued interest at 6%per annum. The note due date is extended to June 30, 2015, with no collateral, and with an interest rate of 6%per annum.
 
On June 11, 2014, the Company borrowed an additional $70,492 from Mr. Lu. The note was due July 15, 2014 and accrued interest at 6%per annum. The note due date is extended to June 30, 2015, is with no collateral, and with an interest rate of 6%per annum.

On June 25, 2014, the Company borrowed an additional $200,000 from Mr. Lu. The note was due July 1st, 2014 and accrued interest at 5%per annum. The note due date is extended to June 30, 2015, is with no collateral, and with an interest rate of 6%per annum.

On August 4, 2014, the Company issued a promissory note in the amount of $80,000 to Danny Lu. The note is due June 30, 2015, is with no collateral, and accrues interest at 6%per annum.
 
On August 4, 2014, the Company issued a promissory note in the amount of $80,000 to Peter Lu. The note is due June 30, 2015, is with no collateral, and accrues interest at 6%per annum.

On August 15, 2014, the Company issued a promissory note in the amount of $25,000 to Danny Lu. The note is due June 30, 2015, is with no collateral, and accrues interest at 6%per annum.
 
On August 15, 2014, the Company issued a promissory note in the amount of $25,000 to Peter Lu. The note is due June 30, 2015, is with no collateral, and accrues interest at 6%per annum.

On August 29, 2014, the Company issued a promissory note in the amount of $208,475 to Lu Pacific. The note is due June 30, 2015, is with no collateral, and accrues interest at 6%per annum.
 
 
15

 
 
On December 29, 2014, the Company issued a promissory note in the amount of $200,000 to Mr. Lu. The note is due June 30, 2015, is with no collateral, and accrues interest at 6%per annum.

Note 8:  Business segment reporting

Basis for Presentation

Our operating businesses are organized based on the nature of markets and customers. Segment accounting policies are the same as described in Note 1.
 
Effects of transactions between related companies are eliminated and consist primarily of inter-company transactions and transfers of cash or cash equivalents from corporate to support each business segment’s payroll, inventory sourcing and overall operations when each segment has working capital requirements. Corporate overhead costs are allocated to segments based on management’s estimates of the consumption of such services by each segment.
 
A description of our operating segments as of March 31, 2015 and December 31, 2014, follows.

Contract manufacturing (formerly OEM):

Outsourced manufacturing for North American companies, including senior citizen safety products; steel gun safes; outdoor cooking equipment; trampolines; plastic products and small electronic appliances. Contract manufacturing also offers logistic services and a qualified engineer team to support and provide in-house design.

Manufacturing (formerly QBF):

Our manufacturing segment, Powin Manufacturing formerly named Quality Bending and Fabrication (“QBF”), manufactures various truck parts and components primarily for Freightliner Trucks, a division of Daimler Trucks North America, the largest manufacturer of heavy-duty vehicles in North America. Daimler Trucks North America designs, builds and markets a wide range of Class 3-8 vehicles including long-haul highway tractors, heavy-duty construction and vocational trucks, mid-range trucks for distribution and service, school and transit buses, fire and emergency service apparatus, and chassis for step vans, school and shuttle buses, and motor homes.  Freightliner Trucks is headquartered in Portland, Oregon, with truck manufacturing facilities located in Portland and throughout the United States and Mexico.

Manufacturing is completed at the Company’s leased facility in Tualatin, Oregon as well as arranging the outsourced manufacturing at a third-party factory in Qingdao, China.
 
 
16

 

Energy:

Powin Energy has developed market leading architecture that utilizes proprietary patent-pending energy storage technology for scalable grid energy storage systems, power supply units for electric vehicles, and transportation applications. Through December 31, 2014, the Energy segment has focused on identifying target markets and applications and finalizing the development of products to serve those markets and applications. The Company expects increased operations from this segment in 2015.

Product & Service (formerly Channel Partner Program, Warehousing and Wooden)

The Product & Service segment contains the legacy operations of Channel Partner Program, a distribution channel for North American companies to sell their products in China as well as selling certain consumer products through U.S.-based retailers and marketplaces, including online; and Warehousing, which provides warehousing services in support of the Company’s customers across all segments. The segment will be used for future products and services that are not related to an existing segment and haven’t reach a level to require separate management and segmentation.On January 1, 2015, the Product & Service segment had been incorporated into our contractmanufacturingsegment.

Powin Mexico:

Powin Mexico is a manufacturing segment, currently manufacturing gun safes, but also capable of manufacturing heavy truck parts. Operations began in 2013, but are expected to increase in 2015.

Revenues and net loss before income taxes of each of the Company’s segments are as follows:  
 
   
Three months ended March 31,
 
   
2015 (Unaudited)
   
2014 (Unaudited)
 
Revenue
           
Contract manufacturing
 
$
                 1,392,701
   
$
1,299,123
 
Manufacturing
   
                   1,255,943
     
1,129,688
 
Energy
   
                      22,746
     
72,360
 
Mexico
   
                        38,878
     
33,588
 
Consolidated
 
$
                 2,710,268
   
$
2,534,759
 


   
Three months ended March 31,
 
   
2015 (Unaudited)
   
2014 (Unaudited)
 
Loss before income taxes
           
Contract manufacturing
 
$
(97,572
)
 
$
(150,387
)
Manufacturing
   
                      206,994
     
(179,505
)
Energy
   
                    (1,048,361
)
   
(746,330
)
Mexico
   
                    (324,555
)
   
(315,903
)
Corporate
   
                      (224,515
)
   
(79,060
Consolidated
 
$
               (1,488,009
)
 
$
(1,471,185
)
 
 
17

 

Note 9: Subsequent events

Effective April 2, 2015, Powin Corporation and its wholly-owned subsidiary, Powin Energy Corporation (collectively “Powin”) and SF Suntech, Inc. (“Suntech”) signed a Fourth Supplemental Agreement (“Supplement”) to the Share Subscription Agreement dated August 8, 2014 (“Subscription Agreement”).

Under the Supplement, the First Closing Date of the Subscription Agreement was April 2, 2015 (“First Closing”) at which time Suntech made a payment to Powin in the amount of $7,450,000. That payment plus the previous payments of $3,000,000 on August 29, 2014; $2,000,000 on January 15, 2015 and $50,000 on March 2, 2015 represent a total $12,500,000 paid toward the full $25,000,000 owing under the Subscription Agreement.  Powin issued 2,143 shares of Powin Energy Common Stock to Suntech for the $12,500,000 made investment to date.

The Supplement further establishes the Second Closing Date of the Subscription Agreement as May 31, 2015 (“Second Closing”) when the balance of $12,500,000 is to be paid. If that payment is made, Powin will issue to Suntech an additional 2,143 shares of Powin Energy Common Stock.  In the event Suntech is unable or unwilling to pay the remaining subscription balance, Powin will be free to sell the 2,143 shares to another purchaser for the same price per share as paid by Suntech.

Powin Energy Corporation is authorized by Suntech to make a payment of $1,500,000 to Powin Corporation from the proceeds of the First Closing as an additional payment against the remaining $4,000,000 outstanding obligation owing by Powin Energy to Powin Corporation. This will leave a balance owing by Powin Energy to Powin Corporation of approximately $2,500,000 which will be repaid from the proceeds of the Second Closing, if Suntech is able to complete its subscription commitment, or from the proceeds of a subscription commitment from another purchaser of Powin Energy’s Common Stock.
 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Note Regarding Forward Looking Statements

This information should be read in conjunction with the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on March 24, 2015, and the unaudited condensed interim consolidated financial statements and notes thereto included in this Quarterly Report.

References to “Powin,” the “Company,” “we,” “our” and “us” refer to Powin Corporation and its wholly owned and majority-owned subsidiaries, unless the context specifically states otherwise.

 
18

 
 
Basis of presentation

Effective January 1, 2014, the Company reorganized and renamed certain segments and changed the methodology for allocating corporate overhead costs. The below table lists legal entities and corresponding business segments as defined in the 10-Q compared to those described in previous filings.

As described in this Form 10-Q
 
As described in previous filings
 
Legal entity name
Business segment
name
 
Legal entity name
Business
segment 
name
 
           
Powin Corporation
Holding company and Corporate
 
Powin Corporation
Holding company
 
Powin Contract
Manufacturing
Corporation
Contract manufacturing
 
Powin Contract Manufacturing
Corporation
Contract manufacturing
 (b)
Powin Manufacturing
Corporation
Manufacturing
 
Powin Manufacturing Corporation
Manufacturing
 
Powin Energy
Corporation
Energy
 
Powin Energy
Corporation
Energy
 
Powin Product and
Service Corporation
Product and service
 
Powin Wooden Product Service, Inc.
Warehousing
(a)(b)
     
Channel Partner Program
CPP
(a)
Powin Industries
S.A. de C.V.
Mexico
 
Powin Industries S.A. de C.V.
Mexico
 

 
(a)
Effective January 1, 2014, the business segments formerly known as Warehousing and CPP were combined into a legal entity that was renamed Powin Product and Service Corporation. The corresponding business segment is named Product and Service and currently has limited operations and no employees.
 
  (b)
Effective January 1, 2015, the business segment known as Powin Product and Service Corporation was merged into Powin Contract Manufacturing Corporation.
 
 
19

 
 
Results of Operations

The following table presents the Company’s revenues by business segment, for the three months ended March 31, 2015 and 2014:
 
   
Three months ended March 31,
       
   
2015(Unaudited)
   
2014(Unaudited)
   
$ Change
   
%
Change
 
Revenue
                       
Contract manufacturing
 
$
                 1,392,701
   
$
1,299,123
     
          93,578
     
7.2
%
Manufacturing
   
                   1,255,943
     
1,129,688
     
            126,255
     
11.2
%
Energy
   
                      22,746
     
72,360
     
              (49,614
)
   
(68.6)
%
Mexico
   
                        38,878
     
33,588
     
            5,290
     
15.7
%
Consolidated
 
$
                 2,710,268
   
$
2,534,759
     
          175,509
     
6.9
%

Consolidated net sales for the three months ended March 31, 2015, increased approximately $176,000 or 6.9% from the same period of 2014. The increase was substantially in the contract manufacturing segment, which experienced a revenue increase of approximately $94,000 or 7.2%and in the manufacturing segment, which experienced a revenue increase of approximately $126,255 or 11.2% compared to the first quarter of 2014. The primary reason for the increase was a stronger seasonality for serveral existing customers of Powin Manufacturing and favorable economic environment in US.

Manufacturing sales increased approximately $126,000 or 11% as the relationship with the segment’s primary customer, Daimler Trucks North America, improved during the three months ended March 31, 2015 compare to the same period last year. 

The Energy sales decreased approximately $50,000 or 69% primarily due to pause of our electrical vehicle charge station sales, which is lumpy in nature. Powin Energy has been focusing on the commercialization of its electricity storage products andand expects to book orders in 2015.

Mexico sales increased approximately $5,000 or 16% as Powin Mexico Starts ramping its contracted manufacturing business for local customers. We expect Powin Mexico continue to sign up more local customers and substantially reduce its operation loss in 2015.

Consolidated operating expenses for the three months ended March 31, 2015, increased approximately $36,000 or 1.9%, from $1.9 million in the same period of 2014 to $2.0 million. The increase is primarily in professional fees in Energy to prepare the segment for the launch of new products in the third half of 2014.

For the three months ended March 31, 2015, the Company had net loss of approximately $1.4 million or $0.09 per share, compared to net loss of approximately $1.4 million or $0.09 per share for the same period of 2014. As reported above the net loss increased is primarily due to increased operating expenses.
 
 
20

 

2015 Outlook

We expect 2015 to be a transitional year for Powin Corporation, with the traditional manufacturing segment stabilized in 2014 and poised to returning to growth in 2015, and the energy segment entering commercialization stage. In addition, we have established a new strategic direction for Powin Mexico factory and aligned its cost structure with the new strategy. We believe our investment made in the past several years in Powin Energy has paved a solid foundation for us in the fast growing energy storage market, with competitive products and a growing sales pipeline. For 2015, Powin management has identified following initiatives for each business segment.

Powin OEM business revenue has stabilized in 2014 with no client attrition in the second half of 2014. OEM segment gross margin slightly improved in 2014 compared to 2013 due to a better mixture. In 2015, we have identified several new products to be growth drivers; including one product which is well received by customers shortly after its introduction to the market and for which Powin has exclusive manufacturing right.

Powin manufacturing business experienced a modest improvement in both top line and profitability in 2014 as we focused on key accounts, like Daimler Freightliner, in 2014. Entering 2015, we are investing in our sales force to seek additional key accounts. Our long term track record in operation and extensive experience in manufacturing with relentless focus on quality and cost are our key leverage to win new key accounts.

2014 was a busy year for Powin Energy as we focused on product research and development as well as getting strategic investment from outside investors. On August 7, 2014, the Company’s subsidiary Powin Energy Corporation (“Powin Energy”) signed a Share Subscription Agreement (“the Agreement”) for an investment of $25,000,000 from SF Suntech, Inc., a Delaware corporation (“SF Suntech”), a wholly-owned subsidiary of Shunfeng Photovoltaic International Limited (“Shunfeng”). Pursuant to the terms of the Agreement, $5,200,000 of the $25,000,000 will be used by Powin Energy to pay off a loan owing to the Company and the balance will be used by Powin Energy for working capital and other purposes. The Agreement also granted SF Suntech an option to acquire an additional 30% of Powin Energy for $37,500,000 which options are exercisable within two years from the grant date. Pursuant to a related Shareholder Agreement, SF Suntech will appoint four directors from a seven-person board of Powin Energy upon completing the $25,000,000 investment. The Company will pay a 6% finder’s fee to an unrelated party in connection with this transaction.

On January 15, 2015, the Company, Powin Energy and SF Suntech signed an amendment for the Agreement (“the Amendment”). The Amendment redefined the closing date to February 27, 2015. The amendment also redefined first deposit to be $3,000,000 and request second deposit of $2,000,000 to be deposited by January 16, 2015.  SF Suntech made the $2,000,000 deposit on January 16, 2015 but did not make an additional payment by February 27th, 2015.

Subsequently, SF Suntech wired additional $50,000 refundable (in the event of an extension agreement is not entered into by the parties) good faith deposit to Powin Energy’s new Wells Fargo bank account set up in conformance with SF Suntech’s instructions.

Effective April 2, 2015, Powin Corporation and its wholly-owned subsidiary, Powin Energy Corporation (collectively “Powin”) and SF Suntech, Inc. (“Suntech”) signed a Fourth Supplemental Agreement (“Supplement”) to the Share Subscription Agreement dated August 8, 2014 (“Subscription Agreement”).
 
 
21

 

Under the Supplement, the First Closing Date of the Subscription Agreement was April 2, 2015 (“First Closing”) at which time Suntech made a payment to Powin in the amount of $7,450,000. That payment plus the previous payments of $3,000,000 on August 29, 2014; $2,000,000 on January 15, 2015 and $50,000 on March 2, 2015 represent a total $12,500,000 paid toward the full $25,000,000 owing under the Subscription Agreement.  Powin issued 2,143 shares of Powin Energy Common Stock to Suntech for the $12,500,000 made investment to date.

The Supplement further establishes the Second Closing Date of the Subscription Agreement as May 31, 2015 (“Second Closing”) when the balance of $12,500,000 is to be paid. If that payment is made, Powin will issue to Suntech an additional 2,143 shares of Powin Energy Common Stock.  In the event Suntech is unable or unwilling to pay the remaining subscription balance, Powin will be free to sell the 2,143 shares to another purchaser for the same price per share as paid by Suntech.

Powin Energy Corporation is authorized by Suntech to make a payment of $1,500,000 to Powin Corporation from the proceeds of the First Closing as an additional payment against the remaining $4,000,000 outstanding obligation owing by Powin Energy to Powin Corporation. This will leave a balance owing by Powin Energy to Powin Corporation of approximately $2,500,000 which will be repaid from the proceeds of the Second Closing, if Suntech is able to complete its subscription commitment, or from the proceeds of a subscription commitment from another purchaser of Powin Energy’s Common Stock.

We expect Powin Energy to enter its commercialization stage in 2015 based on our existing sales pipeline. We have established a hardware research & development center in YangZhou China and a software development team in Taiwan. Both teams are fully ramped by the end of 2014 and executing well on their R&D roadmap. We expect several new products or functions to be released in 2015, to increase Powin Energy's competitiveness in the energy storage market. We expect to record revenue from commercial sales or leasing of Powin energy storage products in the second half of 2015.

Powin Mexico factory entered large scale manufacturing of gun safes in 2014, though its profit margin has not been satisfactory. We have promptly adjusted our strategy, shifting toward to seek more local contract manufacturing work in 2015. We believe the new strategy can leverage our factory's physical proximity to its local customers compared to vendors in China, while reducing our working capital pressure. Accordingly, we have adjusted Powin Mexico cost structure to reduce operating loss. In the meantime, we continue to work on improvement of our factory productivity with better utilization of manufacturing automation software and better training for workers. We expect Powin Mexico factory to substantially reduce its operating loss in 2015 compared to 2014.

Liquidity and Capital Resources

Cash provided from operating activities were approximately $1.05 million for the three months ended March 31, 2015, compared to $1.15 million used in operating activitiesfor the same period in 2014. The increase of cash provided from operating activities is mainly due to more increase in accrued payroll and other liabilities, more increase of accounts payable, more decrease of accounts receivable, offset by an increased net loss, and more purchase of inventories.
 
 
22

 

Cash used in investing activities was $99,026 and $0 during the three months ended March 31, 2015 and 2014, respectively, as the Company acquire properties and equipment during the three months ended March 31, 2015.

Net cash provided from financing activities was $297,622 and $858,431 during the three months ended March 31, 2015 and 2014, respectively. The decrease is due to less proceeds from payables from related parties offset by decreased payments to line of credit.

During the three months ended March 31, 2015, the Company borrowed $200,000 from related parties for operating cash flows as follows:

Date of borrowing
Lender
Due Date
Interest rate
Amount
         
March 12, 2015
Joseph Lu
June 30, 2015
6%
  $  200,000

The Company’s management does not believe the current cash and cash flow from operations will be sufficient to meet anticipated cash needs, including cash for working capital and capital expenditures in the foreseeable future. The Company will likely require additional cash resources that will require the Company to sell additional equity securities or debt securities. The sale of convertible debt securities or additional equity securities could result in additional dilution to the company’s stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.
 
The Company’s ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties including: investors’ perception of, and demand for, securities of alternative manufacturing companies; conditions of the United States and other capital markets in which we may seek to raise funds; and future results of operations, financial condition and cash flow.  Therefore, the Company’s management cannot assure that financing will be available in amounts or on terms acceptable to the Company, if at all.  Any failure by the Company’s management to raise additional funds on terms favorable to the Company could have a material adverse effect on the Company’s liquidity and financial condition.
 
Powin Corporation expects Suntech to close the remaining half of the $25M equity investment into Powin Energy by the end of May 2015. And as previously agreed, 20% of the proceeds to Powin Energy will be paid to Powin Corporation. Powin Corporation plans to use some of this payment to pay for the outstanding debt. In addition, we expect Powin manufacturing to generate more operating profits in 2015 as Powin Mexico to substantially reduce its operating loss, thus Powin Corporation plans to use some of the operating profits from Powin manufacturing to pay for the outstanding debt.

 
23

 
 
Critical Accounting Policies
 
Our significant accounting policies are summarized in Note 1 of our consolidated financial statements.  While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical.  Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates.  Actual results may differ from those estimates.  Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company, as defined by Rule 229.10(f)(1) and is not required to provide the information required by this Item.

Item 4.  Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”).  Based on that evaluation, our principal executive and financial officers concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
 
    Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over 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.

 
24

 

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

None
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

Equity Compensation Plan Information

In three months ended March 31, 2015, we issued a total of 3,000 shares of Common Stock to our directors for their services on the Board of Director. The shares were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act of 1933, as amended ( “1933 Act”) , provided by Section 4(a)(2) of the 1933 Act.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not repurchase any of our Common Stock or other securities during the three-month period ended March 31, 2015.

Item 3.  Defaults Upon Senior Securities.

None

Item 4.  Mine Safety Disclosures.
 
 Not Applicable.

Item 5.  Other Information.

None

Item 6.  Exhibits.

31.1
Certification of the Chief Executive Officer  Pursuant to 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant  Section  302 of the Sarbanes-Oxley Act of 2002
   
31.2
Certification of the  Principal Financial Officer Pursuant to 13a-14 and 15d-14 of the Securities Exchange Act of 1934, , as adopted pursuant  Section  302 of the Sarbanes-Oxley Act of 2002
   
32
Certification of the Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
25

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Dated: May 12, 2015
By:
/s/ Joseph Lu
 
   
Joseph Lu
 
   
Chief Executive Officer and Interim
Chief Financial Officer
 
   
(Principal Executive Officer and
Principal Financial Officer)
 
 
 
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