10-Q 1 reap_10q.htm FORM 10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

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

 

¨

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 000-55237

 

RENEWABLE ENERGY AND POWER, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

46-1294868

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

3395 Cheyenne Ave. #111

N. Las Vegas, NV.

 

89032

(Address of principal executive offices)

 

(Zip Code)

 

Telephone: (702) 685-9524

(Registrant’s telephone number, including area code)

 

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 ¨

 

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 ¨

 

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

 

Large accelerated filer

¨

Accelerated filer

¨

       

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

The number of outstanding shares of the registrant’s common stock was 74,521,720 as of May 20, 2015.

 

 

 

RENEWABLE ENERGY AND POWER, INC. FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2015

 

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION

   

ITEM 1.

FINANCIAL STATEMENTS.

   

 

 

     

CONDENSED BALANCE SHEETS AS OF MARCH 31, 2015 AND SEPTEMBER 30, 2014 (UNAUDITED)

    5  

 

     

CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2015 AND 2014 (UNAUDITED)

    6  

 

     

CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 2015 AND 2014 (UNAUDITED)

    7  

 

     

NOTES TO CONDENSED FINANCIAL STATEMENTS

    8  

 

     

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

    13  
       

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

    22  
       

ITEM 4.

CONTROLS AND PROCEDURES.

    22  
       

PART II OTHER INFORMATION

       

ITEM 1.

LEGAL PROCEEDINGS.

    23  
       

ITEM 1A.

RISK FACTORS.

    23  
       

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

    23  
       

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

    23  
       

ITEM 4.

MINE SAFETY DISCLOSURES.

    23  
       

ITEM 5.

OTHER INFORMATION.

    23  
       

ITEM 6.

EXHIBITS.

       

 

 
2

  

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, and financial results, our plans and objectives for future operations, growth or initiatives, strategies, plans to repurchase shares of our common stock, or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

 

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. For the discussion of these risks and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2014 ("Annual Report"), filed with the Securities and Exchange Commission (“SEC”) on February 5, 2015, and "Part II - Item 1A. Risk Factors" of this Quarterly Report. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as otherwise required by law.

 

 

·

changes in or new government regulations or increased enforcement of the same,

     
 

·

unavailability of desirable acquisitions, inability to complete them or inability to integrate them,

     
 

·

increased costs, including from increased raw material or energy prices,

     
 

·

changes in general worldwide economic or political conditions,

     
 

·

adverse publicity or negative consumer perception regarding solar investments,

     
 

·

issues with obtaining raw materials of adequate quality or quantity,

     
 

·

litigation and claims, including product liability, intellectual property and other types,

     
 

·

disruptions from or following acquisitions, including the loss of customers,

     
 

·

increased competition,

 

 
3

  

 

·

slow or negative growth in the solar power industry,

     
 

·

the loss of key personnel or the inability to manage our operations efficiently,

     
 

·

problems with information management systems, manufacturing efficiencies and operations,

     
 

·

insurance coverage issues,

     
 

·

the volatility of the stock market generally and of our stock specifically,

     
 

·

increases in the cost of borrowings or unavailability of additional debt or equity capital, or both, or fluctuations in foreign currencies and

     
 

·

interruption of business or negative impact on sales and earnings due to acts of God, acts of war, terrorism, bio-terrorism, civil unrest and other factors outside of our control.

 

 
4

  

PART I – FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS.

 

Renewable Energy and Power, Inc.
Condensed Balance Sheets

 

    March 31,     September 30,  
    2015     2014  
    (Unaudited)      
Assets
         
Current Assets:        
Cash   $ 77     $ 447  
Accounts receivable from MDI (Note 4)     1,175,900       930,900  
Inventories     250,000       337,296  
Total current assets     1,425,977       1,268,643  
               
Property and equipment, net of                 
accumulated depreciation of $110,522 and $85,971     339,978       364,529  
Intangibles, net of accumulated amortization                 
of $128,361 and $104,235      163,649       187,775  
Other assets (security deposit)     5,000       5,000  
  $ 1,934,604     $ 1,825,947  
               
Liabilities and Shareholders' Equity
               
Current Liabilities:                
Accounts payable to MDI (Note 4)   $ 1,183,823     $ 1,018,831  
Accounts payable     2,941       44,800  
Accrued interest payable to MDI (Note 4)     48,333       38,333  
Payable to shareholder     25,000       25,000  
Consulting fees payable to officers     156,506       129,506  
Total current liabilities     1,416,603       1,256,470  
               
Convertible note payable to MDI (Note 4)     250,000       250,000  
Total liabilities     1,666,603       1,506,470  
               
Commitments and Contingencies (Note 4)                
               
Shareholders' Equity:                
Common stock, 200,000,000 shares authorized, par value $.001                
per share, 74,521,720 shares issued and outstanding     74,522       74,522  
Additional paid-in capital     798,530       798,530  
Accumulated deficit   (605,051 )   (553,575 )
Total shareholders' equity     268,001       319,477  
  $ 1,934,604     $ 1,825,947  

 

 
5

 

Renewable Energy and Power, Inc.

Condensed Statements of Operations

For the Three and Six Months Ended March 31, 2015 and 2014

(Unaudited)

 

    For the Three Months Ended     For the Six Months Ended  
    March 31,     March 31,  
    2015     2014     2015     2014  
                 

Revenues (Note 4)

 

$

120,000

   

$

112,500

   

$

245,000

   

$

242,452

 
                               

Cost of revenues

   

86,400

     

90,235

     

176,630

     

194,445

 
                               

Gross profit

   

33,600

     

22,265

     

68,370

     

48,007

 
                               

Operating expenses:

                               

General and administrative

   

12,570

     

14,876

     

26,169

     

45,708

 

Amortization

   

11,625

     

12,501

     

24,126

     

25,002

 

Depreciation

   

13,601

     

10,950

     

24,551

     

21,900

 

Consultants

   

17,000

     

11,000

     

35,000

     

54,002

 
   

54,796

     

49,327

     

109,846

     

146,612

 
                               

Loss from operations

 

(21,196

)

 

(27,062

)

 

(41,476

)

 

(98,605

)

                               

Interest expense

 

(5,000

)

 

(5,000

)

 

(10,000

)

 

(10,000

)

                               

Loss before federal income taxes

 

(26,196

)

 

(32,062

)

 

(51,476

)

 

(108,605

)

                               

Federal income taxes

   

-

     

-

     

-

     

-

 
                               

Net loss

 

$

(26,196

)

 

$

(32,062

)

 

$

(51,476

)

 

$

(108,605

)

                               

Loss per share, basic and dilutive

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

                               

Weighted average shares outstanding

   

74,521,720

     

74,521,720

     

74,521,720

     

60,021,900

 

 

 
6

 

Renewable Energy and Power, Inc.

Condensed Statements of Cash Flows

For the Six Months Ended March 31, 2015 and 2014

(Unaudited)

 

    2015     2014  
         

Cash flows from operating activities:

       

Net loss

 

$

(51,476

)

 

$

(108,605

)

Adjustments to reconcile net loss to net cash used in

               

operating activities:

               

Depreciation and amortization

   

48,677

     

46,902

 

Changes in operating assets and liabilities:

               

Accounts receivable from MDI

 

(245,000

)

 

(242,452

)

Inventories

   

87,296

   

(44,582

)

Accounts payable to MDI

   

164,992

     

269,168

 

Account payable to others

 

(41,859

)

   

20,000

 

Accrued interest payable to MDI

   

10,000

     

10,000

 

Consulting fees payable to officers

   

27,000

     

49,500

 

Net cash used in operating activities

 

(370

)

 

(69

)

               

Cash flows from investing activities

   

-

     

-

 
               

Cash flows from financing activities

   

-

     

-

 
               

Net decrease in cash

 

(370

)

 

(69

)

Cash at beginning of period

   

447

     

533

 

Cash at end of period

 

$

77

   

$

464

 
               

Supplemental Cash Flow Disclosures

Interest paid

 

$

-

   

$

-

 

Taxes paid

 

$

-

   

$

-

 

 

 
7

 

Renewable Energy and Power, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Note 1 – Nature of Business

 

Renewable Energy and Power (the Company or REAP) was incorporated on October 15, 2012, under the laws of the State of Nevada, for the purpose of conducting all legal business.

 

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), as amended for interim financial information.

 

These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s 2014 Annual Report on Form 10-K. The accompanying unaudited financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results for any subsequent quarter or the entire year ending September 30, 2015.

 

Certain information or foot note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the three and six months ended March 31, 2015 are not necessarily indicative of results for the full fiscal year.

 

The Company is engaged in the business of new and retrofit applications for LED lighting and innovative solar electrical generation. The LED products will lower the use of electrical power, lower maintenance costs for users and extend the useful life of lighting fixtures.

 

The solar process will greatly increase the conversion of heat to electricity, and is patterned after technology that has been used in space exploration for many years.

 

Management knows of no material adjustments needed in these financial statements to conform to Generally Accepted Accounting Principles.

 

Note 2 – Going Concern

 

These financial statements for the three and six months ending March 31, 2015 were prepared assuming the Company will continue as a going concern. During the three months ending March 31, 2015, the Company has incurred a loss of $26,196 and has an accumulated deficit of $605,051. The Company will need to generate significant revenue in order to achieve profitability and may never become profitable.

 

The Company has begun principal operations and, as is common with a start-up company, the Company has had recurring losses during its early stage. The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash or other material assets, nor does it have an established source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern. In the interim, shareholders of the Company have committed to meeting its minimal operating expenses.

 

 
8

 

Renewable Energy and Power, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Note 3 – Summary of Significant Accounting Policies

 

Basis of presentation

 

The Company reports revenues and expenses using the accrual method of accounting for financial and tax reporting purposes. These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.

 

Management estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Revenue recognition

 

The Company recognizes revenue from sales at the time the products are shipped, the price is determinable, the customers are invoiced and payment is reasonably assured. Invoices are due on a net 30 day basis. Shipping and handling costs are billed to customers and netted against shipping and handling expenses incurred by the Company, which are included in cost of revenues. All of the Company’s sales are to Multichip Display, Inc. (MDI), a shareholder of the Company. See Note 4.

 

Accounts receivable

 

The Company grants credit, generally without collateral. The Company performs periodic credit evaluations of its customers’ financial condition and believes that its customer acceptance, billing and collection policies are adequate to minimize potential credit risk. The Company has not incurred any credit losses to date. The Company provides an allowance for doubtful accounts that is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. The allowance for bad debt is $0 at December 31, 2014 and $0 at March 31, 2015. Normal accounts receivable past due more than 30 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. All of the Company’s receivables are from MDI, a related party. (See Note 4.)

 

Inventories

 

Inventories are carried at the lower of cost (first-in, first-out, FIFO) or market (net realizable value) and include primarily Silicon wafers and displays with drivers. The inventories, which were purchased from two related parties during 2013 and 2014, consist of parts and supplies. (See Note 4.)

 

 
9

 

Renewable Energy and Power, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Note 4 – Related Party Transactions with Multichip Display, Inc. (MDI)

 

MDI is owned by a minority shareholder (2,000,000 shares or 2.7%) of the Company as of December 31, 2014 and March 31, 2015. In addition, MDI became a minority shareholder (4,330,000 shares or 5.7%) through debt conversion (see below). The total direct and indirect ownership of REAP by MDI is 8.6% at December 31, 2014 and March 31, 2015.

 

The Company has an exclusive contract to manufacture products under contract from MDI. MDI will be the sales agent for certain government and private company contracts; REAP manufactures products based on bid prices as agreed between the parties. The Company has also agreed to purchase parts from MDI. As part of the agreement, MDI has agreed to support the operations of the Company through December 31, 2015. MDI is both a significant customer and significant vendor of the Company. For the three months ending March 31, 2014 and 2015, all of the Company’s sales resulted from transactions with MDI. The Company had the following related party transactions through March 31, 2015 for the time periods shown in the tables below. 

 

    For the Three Months Ending
March 31,
 

Income & Expense Transactions

  2015     2014  
         

Sales to MDI

 

$

120,000

   

$

112,500

 

Inventory purchases from MDI*

   

86,400

     

90,235

 

Rent expense paid to MDI

   

7,500

     

7,500

 

Interest expense

   

5,000

     

5,000

 

 

Balance Sheet Accounts as of:

  March 31,
2015
    September 30,
2014
 
         

Receivable from MDI

 

$

1,175,900

   

$

930,900

 

Accounts payable to MDI

   

1,183,823

     

1,018,831

 

Accrued interest payable to MDI

   

48,333

     

38,333

 

Convertible note payable to MDI

   

250,000

     

250,000

 

 

* Includes borrowings to pay for direct labor.

 

The agreement with MDI includes an offset clause for accounts receivable from MDI and accounts payable to MDI. Neither party has requested to offset the balance.

 

 Note 5 – Related Party Transactions with Initial Shareholder Group

 

Consulting fees payable to officers and shareholder

 

During the six months ended March 31, 2015 and 2014, the Company incurred $35,000 and $54,002, respectively, of consulting fees which are payable to two officers and to one shareholder of the Company. Total consulting fees payable to these officers and shareholder as of March 31, 2015 and September 30, 2014 were $156,506 and $129,506 respectively.

 

 
10

 

Renewable Energy and Power, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Note 6 – Share Capital

 

We are authorized to issue 200,000,000 shares of common stock and no preferred stock. Upon formation, 42,010,000 shares were issued to the founders of the Company in exchange for rights to an extensive design of a solar generating process and a prototype of a final product. On October 31, 2012, 2,000,000 shares were issued for $10,000. In February 2013, 4,330,000 shares were issued in a debt conversion for the equipment of MDI Industries, Inc. In March 2013, 25,000,000 shares were issued in a debt conversion. In June 2013, 1,181,720 restricted common shares were issued for unpaid wages. Major shareholders of the Company have donated $4,370 to capital and received no additional shares.

 

Note 7 – Income Taxes

 

The difference between the expected income tax expense (benefit) and the actual tax expense (benefit) computed by using the Federal statutory rate of 34% is as follows:

 

    For the Six Months Ended
March 31,
 
    2015     2014  

Expected income tax benefit at statutory rate of 34%

 

$

17,500

   

$

36,900

 

Change in valuation allowance

 

(17,500

)

 

(36,900

)

Income tax expense (benefit)

 

$

0

   

$

0

 

 

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset, are as follows:

 

Deferred tax assets:

  March 31,
2015
    September 30,
2014
 

Tax benefit of net operating loss carry-forward

 

$

178,600

   

$

166,000

 

Book and tax difference for amortization of intangibles

   

27,100

     

22,200

 

Less: valuation allowance

 

(205,700

)

 

(188,200

)

Net deferred tax asset

 

$

0

   

$

0

 

 

The Company had a federal net operating tax loss carry-forward of approximately $525,000 as of March 31, 2015. The tax loss carry-forwards are available to offset future taxable income with the federal carry-forwards beginning to expire in 2033.

 

 
11

 

Renewable Energy and Power, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

At March 31, 2015 the deferred tax valuation allowance increased by $17,500 from September 30, 2014. The realization of the tax benefits is subject to the sufficiency of taxable income in future years. The deferred tax assets represent the amounts expected to be realized before expiration. The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits. As of March 31, 2015 and September 30, 2014, the Company established valuation allowances equal to the full amount of the net deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

 

During the six months ended March 31, 2015 and 2014, no amounts have been recognized for uncertain tax positions and no amounts have been recognized related to interest or penalties related to uncertain tax positions. The Company has determined that it is not reasonably likely for the amounts of unrecognized tax benefits to significantly increase or decrease within the next twelve months. The Company is currently subject to a three year statute of limitations by major tax jurisdictions.

 

 
12

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following management discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed financial statements and related notes thereto included elsewhere in this Report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended September 30, 2014.

 

Cautionary Notice Regarding Forward Looking Statements

 

Readers are cautioned that the following discussion contains certain forward-looking statements and should be read in conjunction with the “Special Note Regarding Forward-Looking Statements” appearing at the beginning of this Annual Report.

 

The information contained in Item 7 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

 

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements, which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

 

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forwardlooking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our Annual Report on form 10-K and in the press releases and other co mmunications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 
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Overview

 

We were incorporated in Nevada in October 15, 2012 and maintain our principal executive offices at 3395 W. Cheyenne Ave, North Las Vegas, NV 89032. For convenience in this report, the terms "Company," "Renewable," “REAP,” “we" and "us" may be used to refer to Renewable Energy and Power, Inc. except where indicated otherwise. Our telephone number is (702) 685-9524.

 

Company Overview

 

Mission Statement of Renewable Energy and Power Inc.: Provide investors with products expanding markets.

 

Renewable Energy and Power Inc. plans to provide renewable energy that is competitive with fossil fuels by employing proprietary new technologies, and combining them with existing solar and wind power generation and LED lighting. At this time, all solar and wind power energy products are in development and none have been delivered to a customer.

 

Renewable Energy and Power is a combination of two synergistic, wholly-owned operating divisions:

 

1.

Solar Hybrid (Sol-Hy) (All products in development at this time)

 

2.

LED Lites USA (All products sold through MDI)

 

These two divisions operating together within REAP create a synergistic effect for providing green energy. Both companies will function in international markets that are in vigorous growth stages of development, with long-term prospects in both the USA and international markets such as Germany, Spain and possibly South America. Within the USA, solar components are driven by federal and state legislation with tax incentives which vary by state and time.

 

Solar Hybrid (Sol-Hy)

 

The primary technology of Solar Hybrid, trade name Sol-Hy, is in solar energy concentration and conversion to electricity. A proprietary holographic lens structure, optical light guide, multi-junction semiconductor, and licensing of patented interconnect technology enables Sol-Hy to offer more efficient collection of solar energy than most existing conventional technologies. These patented processes increase solar cell interconnect reliability, providing higher electrical efficiency and significant production cost savings while conserving expensive semiconductor materials. The Company has licensed a number of patents for this process, and will file proprietary patents on developing technology as well as trademarks, trade names and copyrights.

 

 
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Sol-Hy’s competitive advantages in this field include:

 

 

 

A product in development in multi-junction solar panel that uses a technology developed for space satellites which outputs twice the power in the same amount of space as multi-crystalline silicon solar panel competitors. The core technology has been proven for years in space satellites and is now ready for wide-spread general power generation. REAP is actively developing a solar panel utilizing this technology and expects to be in limited production by 4th quarter 2015.

 

Solar cell efficiencies vary from 6% for amorphous silicon-based solar cells to 44.0% with multiple-junction production cells and 44.4% with multiple dies assembled into a hybrid package.[11][12] Solar cell energy conversion efficiencies for commercially available multi-crystalline Si solar cells are around 15%.

 

[11] - "Solar Junction Breaks Concentrated Solar World Record with 43.5% Efficiency". Cnet.com.

 

[12] - Green, M.A. (2003).Third Generation Photovoltaics. Springer-Verlag. ISBN3-540-26562-7.

 

 

 

The foundational intellectual property is protected and will continue to be built upon to maintain a competitive edge. REAP has licensed the patents listed below to enable it to produce multi-junction solar cell products and feels that the purchased and licensed technologies are important in providing a secure basis for this development effort.

 

 

 

U.S. Patent Number 7,215,025

 

 

 

U.S. Patent Number 7,205,635

 

 

 

U.S. Patent Number 7,205,181

 

 

 

U.S. Patent Number 6,982,475

 

 

 

U.S. Patent Number 6,753,208

 

 
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The key to Solar Hybrid’s success will be the performance and reliability of its panels. All of our products and their components will be rigorously tested to stringent industry standards. Our products are being designed to meet or exceed reliability and life-cycle viability for industry approval under the Energy Star criteria; however these products have not been tested or approved by the authorized agencies at this time. Certification by Underwriter Labs (UL) and other certification organizations are in process and the corporate ground work for ISO 9001:2008 and ISO 14001:2004 certifications are underway. These certification guarantees and underwriting will allow worldwide product distribution and installation once completed. Time for initial completion of UL and ISO is currently set for fourth quarter of 2015.

 

LED Lites USA

 

LED Lites USA is in the business of producing and marketing LED (Light Emitting Diode) light fixtures and components for both the residential and commercial markets. LED lighting is a green technology that consumes far less energy and requires much less maintenance than competing lighting technologies, making it highly competitive for both retrofit and new lighting systems.

 

Federal and State Legislation and Federal and State Tax Benefits are driving the LED lighting market not just in the United States but all over the world.

 

Federal Legislation includes the Energy Independence and Security Act of 2007 passed December 2007, confirmed July 15, 2011, requiring phasing out low efficiency incandescent lighting starting in the year 2012 in favor of CFL (Compact Fluorescent Light) bulbs and other high Lumen per Watt technologies. But CFL is at best an interim solution, far less efficient and more toxic (using mercury) than LED lighting which can be expected to be the lighting of choice as costs come down with the expansion of the market.

 

The Federal Energy Policy Act of 2005 offers tax incentives to energy-efficient commercial buildings. Any building that can cut its lighting power density by 25-50 percent is eligible to receive a tax reduction of 60 cents per square foot. By converting to LED bulbs, companies can reduce their light electric output by 80 percent. Not only do LED users see immediate reductions in their energy bills, they also receive government endorsed tax incentives for making their buildings more energy efficient.

 

LED Lites USA has its background in power supply technology and thermal management having been a spin-off of Multichip Display, Inc. in late 2012. For more than 20 years, Multichip Display and its predecessor Multichip Assembly has engineered and manufactured power supplies and electronic circuits for demanding military and commercial applications. These power supplies use multi-output switchers, linear and ferro-resonant topologies for the aerospace, defense, telecom, networking and industrial markets, in both custom and standard (VME, PCI, etc.) form factors.

 

 
16

  

LED Lites USA will both leverage the technology of suppliers and develop technologies and intellectual properties of its own. Hundreds of millions of dollars have already been invested by component suppliers, for example in the LED chips themselves. Although, LED Lites USA has the flexibility to use several different suppliers of LED chips, they have developed special pricing contracts with primary suppliers. Flexibility of design will protect us from becoming someone else’s captive customer with high pricing.

 

Our design approach gives LED Lites USA a platform for the Sun Harvesting, Motion Detection and light level selection options. Sun Harvesting provides energy savings through the sensing of ambient light conditions to reduce power on fixtures located near windows or other well illuminated areas while maintaining full light intensity on other fixtures in the same room. Motion Detection adjusts the light intensity to Light Level Selected intensity (reduced levels) when no motion is detected in the room.

 

LED Lites USA will use its core skills in thermal management, system packaging and manufacturing to develop and advance technology for two key purposes:

 

 

To develop product solutions that maintain a leadership position over its competitors based upon superior cost-benefit to its customers, as well as greater product functionality.

 

 

To drive down unit cost while maintaining the key domestic work-force through the advancement of manufacturing and assembly technology and processes.

 

Federal Legislation

 

The new energy bill (passed December 2007, confirmed July 15, 2011) will begin phasing out sales of incandescent lighting beginning in 2012.

 

Tax Incentives

 

The Federal Energy Policy Act of 2005 offers tax incentives to energy-efficient commercial buildings. Any building that can cut its lighting power density by 25-50 percent is eligible to receive a tax reduction of 60 cents per square foot. By converting to LED bulbs, companies can reduce their light electric output by 80 percent. Not only do LED users see immediate reductions in their energy bills, they also receive government endorsed tax incentives for making their buildings more energy efficient.

 

"LED lighting is 70-80% more efficient than traditional lighting and can create some very dramatic lighting effects,” states Roger Hale, energy consultant and owner of Commercial LED Lighting in Florida, "but the real asset of LED technology is the length of time these lights last." "Conservatively, we estimate that LED lights will last for at least 12 to 15 years, giving them a clear advantage over halogen and compact fluorescent lighting, (CFL)".

 

 
17

  

Business Strategy

 

The immediate business strategy is to pursue contracts with customers with lighting needs for outdoor newly installed and retrofit of existing facilities. We are in negotiations with a highway billboard company to replace the existing lighting on the billboards with LED lights. We are in design stage of this process. We will continue to manufacture and deliver lighting products for MDI Industries, while the above negotiations are continuing. The solar component of our business is not presently operating awaiting funding.

 

Products

 

We presently produce lighting under subcontract for MDI Industries, Inc. These products are primarily for the aeronautical industry. We have access to a full line of lighting from both domestic and foreign sources to supply lighting for new installations and/or retrofit of additional lighting.

 

Marketing and Sales

 

We employ commissioned salesmen to sell our products to various business groups, including the outdoor advertising industry, parking lot lights and lighting of sales and inventory areas for car dealers.

 

When funding to begin operations in the solar power area are available, we will employ the sales force needed to pursue customers in this area.

 

Manufacturing

 

Our manufacturing process generally consists of the following operations: (i) sourcing parts for products, (ii) warehousing these parts, (iii) assembling these parts into the products according to the specifications of the customer involved (iv) testing the products to insure that the specifications of the customer are met. (v) shipping the products to the customer location.

 

The assembly process entails the use of various mechanical and electronic tools that are housed in our facility in North Las Vegas. We employ, as contractors, skilled and experienced engineers and technicians.

 

Management Information and Communication Systems

 

We use customized computer software systems, as well as commercially-packaged software, for handling order entry and invoicing, manufacturing, inventory management, shipping, warehouse operations, customer service inquiries, accounting operations and management information. We believe that these systems have improved operating efficiencies and customer service.

 

Materials and Suppliers

 

We employ a purchasing staff that works with marketing, product development, formulations and quality control personnel to source raw materials for products as well as other items purchased by us. Raw materials are sourced principally from the United States, Europe and China. Raw materials used by us are available from a variety of suppliers. We seek to mitigate the risk of a shortage of parts and materials through our relationships with our principal suppliers, including identification of alternative suppliers for the same, or similar, parts and materials where available.

 

 
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Government Regulation

 

At this time there are no government regulations other than SEC,IRS and Nevada State corporate compliance rules that apply to the Company’s operations. The Company believes it is in compliance with all of these agencies rules and regulations.

 

Competition

 

We are engaged in industries with a high degree of competition. There are many Lighting companies pursuing the same customers. We have a history of excellent products with our present customer, MDI Industries, Inc. and have management with years of experience in our chosen areas of operation. We intend to compete based on price and quality of the products offered to customers.

 

Intellectual Property

 

We have exclusives licenses for six patents covering for the solar manufacturing activity when the funding to begin this activity is achieved. As we derive additional products they will be patented and trademarked as necessary. 

 

Employees

 

At March 31, 2015, we employed approximately 10 full-time and approximately 5 part-time employees. None of our employees is represented by a collective bargaining unit. We believe that we have a good relationship with our employees

 

RESULTS OF OPERATIONS

 

For the three months ended March 31, 2015 compared to the three months ended March 31, 2014:

 

Revenues 

 

Revenues at March 31, 2015 totaled $120,000 as compared to $112,500 at March 31, 2014 from MDI, a related party.

 

Gross Profit 

 

Gross profit increased by $11,335 to $33,600 for the three months ended March 31, 2015 from $22,265 for the three months ended March 31, 2014. This increase in gross profit was primarily attributable to some decreases in material costs which was purchased from MDI, better control over labor costs, and higher sales. As a percentage of net sales, gross profit was 28% for the three months ended March 31, 2015 and 20% for the three months ended March 31, 2014.

 

 
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General and Administrative Expenses 

 

General and administrative expenses decreased by $2,306, or 15%, to $12,570 for the three months ended March 31, 2015 from $14,876 for the three months ended March 31, 2014. As a percentage of net sales, G & A operating expense is 10.5% for fiscal 2015 compared to 13.2% for the three months ended March 31, 2014.

 

Amortization of Intangible Assets 

 

Amortization of intangible assets was $11,625 for the three months ended March 31, 2015 and $12,501 for the three months ended March 31, 2014. For each period, amortization expense was primarily related to intangible assets recorded in connection with the purchase of assets.

 

Depreciation of Property and Equipment

 

Depreciation of property and equipment totaled $13,601 and $10,950 for the three months ended March 31, 2015 and 2014, respectively.

 

Consultants

 

Consultants incurred from services provided by the officers of the Company totaled $17,000 and $11,000 for the three months ended March 31, 2015 and 2014, respectively. The increase in the expense was related to the addition of two sales and marketing personnel.

 

Interest Expense

 

Interest expense was $5,000 and $5,000 for the three months ended March 31, 2015 and 2014, respectively, and primarily consisted of interest expense on indebtedness under our convertible note payable to MDI.

 

For the six months ended March 31, 2015 compared to the six months ended March 31, 2014:

 

Revenues 

 

Revenues at March 31, 2015 totaled $245,000 as compared to $242,452 for fiscal 2014, from MDI, a related party.

 

Gross Profit 

 

Gross profit increased by $20,363 to $68,370 for the six months ended March 31, 2015 from $48,007 for the six months ended March 31, 2014. This increase in gross profit was primarily attributable to some decreases in material costs which were purchased from MDI and better control over labor costs. As a percentage of net sales, gross profit was 27.9% for the six months ended March 31, 2015 and 19.8% for the six months ended March 31, 2014.

 

 
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General and Administrative Expenses 

 

During the six months ended March 31, 2015, general and administrative expenses decreased by $19,539, or 42.7%, to $26,169 from $45,708 for the six months ended March 31, 2014. As a percentage of net sales, G & A operating expenses are 10.7% for fiscal 2015 compared to 18.9% for the six months ended March 31, 2014.

 

Amortization of Intangible Assets 

 

Amortization of intangible assets was $24,126 for the six months ended March 31, 2015 and $25,002 for the six months ended March 31, 2014. For each period, amortization expense was primarily related to intangible assets recorded in connection with the purchase of assets.

 

Depreciation of Property and Equipment

 

Depreciation of property and equipment totaled $24,551 and $21,900 for the six months ended March 31, 2015 and 2014, respectively.

 

Consultants

 

Consultants incurred from services provided by the officers of the Company totaled $35,000 and $54,002 for the six months ended March 31, 2015 and 2014, respectively. The decrease in the expense was related to reduction of design related consulting due to completion of two new development programs in FY2014.

 

Interest Expense

 

Interest expense was $10,000 and $10,000 for the six months ended March 31, 2015 and 2014, respectively, and primarily consisted of interest expense on indebtedness under our convertible note payable to MDI.

 

Liquidity and Capital Resources

 

As of March 31, 2015, we had cash of $77. Net cash used in operating activities was $370 and $69 for the six months ended March 31, 2015 and 2014, respectively.

 

Our cash reserves will not be sufficient to meet our operational needs and we need to raise additional capital to pay for our operational expenses and provide for capital expenditures. Above the basic operational expenses, which are estimated at $20,000 per month. If we are not able to raise additional working capital, we may have to cease operations altogether.

 

Our future depends upon our relationship with MDI as well as MDI’s future relies upon us. MDI Corporation is a minority owned government contractor, which previously assembled all of the products that were being sold by MDI. The owner of MDI no longer wished to be engaged in the assembly and manufacture of the products, but to become only a sales organization. Renewable purchased the equipment, inventory and business knowledge to begin business as a separate entity. Not only is MDI the sole customer of Renewable, but Renewable is the sole assembly and manufacture provider for MDI. As part of the agreement, MDI has agreed to support the operations of the Company through November 1, 2015.

 

 
21

  

Summary

 

Our existing sources of liquidity will not provide cash to fund operations and make the required payments on our debt service for the next twelve months. Our ability to continue as a going concern is dependent entirely on raising funds through the sale of equity or debt. We will continue our attempt to raise additional capital. Some of the possibilities available to us are through private equity transactions, to develop a credit facility with a lender or the exercise of options and warrants. However, such additional capital may not be available to us at acceptable terms or at all. In the event that we are unable to obtain additional capital, we would be forced to cease operations altogether.

 

Off Balance Sheet Arrangements

 

During the six months ended March 31, 2015, we did not engage in any off balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE.

 

Quantitative and Qualitative Disclosures

 

Not Applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision of, and the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q 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 Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

 

Based on this evaluation and taking into account that certain material weaknesses existed as of September 30, 2014, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures were not effective. As a result of this conclusion, the financial statements for the period covered by this Quarterly Report on Form 10-Q were prepared with particular attention to the material weaknesses. Notwithstanding the material weaknesses in internal controls that continue to exist as of March 31, 2015, we have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, the financial position, results of operations and cash flows of the Company as required for interim financial statements.

 

Due to the small number of employees dealing with general administrative and financial matters and the expenses associated with increases to remediate the disclosure controls and procedures that have been identified, the Company continued to operate without changes to its internal controls over financial reporting for the period covered by this Quarterly Report on Form 10-Q while continuing to seek the expertise it needs to remediate the material weaknesses at an appropriate cost benefit basis.

 

 
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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A. RISK FACTORS.

 

In addition to the other information set forth in this Quarterly Report, careful consideration should be given to the following risk factors as well as the risk factors set forth in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2014, any of which could materially affect our business, operations, financial position, stock price, or future results. The risks described herein and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014 are important to an understanding of the statements made in this Quarterly Report, in our other filings with the SEC and in any other discussion of our business. These risk factors, which contain forward-looking information, should be read in conjunction with Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the unaudited consolidated financial statements and related notes included in this Quarterly Report.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

No sales of unregistered equity securities were made during the period.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

None.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

 
23

  

ITEM 6. EXHIBITS.

 

Exhibit

 

Description

31.1**

 

Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2**

 

Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

 

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     

** Filed herewith electronically

 

 
24

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

RENEWABLE ENERGY AND POWER, INC.

     

Date: May 20, 2015

By:

/s/ Donald MacIntyre

 

   

Donald MacIntyre

 

   

Chief Executive Officer

 

     
     
 

By:

/s/ Bruce Parsons

 

   

Bruce Parsons

 

   

Chief Financial Officer

 

 

 

 

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