RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2015 COMPARED TO SIX MONTHS ENDED MARCH 31, 2014.
Revenue and Cost of Sales:
The Company generated revenues in the six months ended March 31, 2015 and 2014 of $617,757 and $144,925 respectively. The increase in revenue during the six months ended March 31, 2015 was a result of our efforts in the sale of commercial solar PV systems. These efforts included market and advertisement testing, sales presentation development, the development of financing alternatives for clients, vetting of qualified subcontractors to provide specialty services, and product supply chain development. The costs of goods sold for the six months ended March 31, 2015 and 2014 was $514,723[/b] and $109,220, respectively. The Company to date has had minimal revenue and cost of sales. Management expects to continue to generate revenues, and is working to increase sales as it matures the scope of the Company’s capabilities and brand awareness.
Selling, General and Administrative Expenses:
Selling, General and Administrative (SG&A) expenses decreased by $3,946 during the six months ended March 31, 2015 to $263,943 as compared to $267,888 for the six months ended March 31, 2014. The decrease in SG&A expenses was related primarily to an decrease in non-cash expense for outside services of $24,374, and an overall decrease in other SG&A expenses of $25,387, with an increase in salaries in the amount of $23,726, professional fees in the amount of $15,287, insurance in the amount of $10,748, resulting from the Company’s change in business and other expenses during the Company’s initial efforts in marketing and sales of commercial solar PV systems. Management expects SG&A expenses to increase in future periods as the Company continues to expand its marketing, sales, and service efforts.
Research and Development:
Research and development decreased by $2,566 during the six months ended March 31, 2015 to $0 as compared to $2,566 for the six months ended March 31, 2014. The decrease was primarily due to the elimination of research related employees used in the period. We anticipate this trend to continue as we do not have plans to devote resources towards additional testing, calibration, or enhancements to our CIGSolar® technology until such time that the market demand for thin film technologies warrants additional investments.
Other Income/(Expenses)
Other income and (expenses) decreased by $517,569 to $(670,610) for the six months ended March 31, 2015, compared to $(1,188,179) for the six months ended March 31, 2014. The decrease was the result of an increase in gain on forgiveness of debt in the amount of $58,273 associated with the write-off of the accounts payable, and penalties in the amount of $246, and an increase in commitment fees of $22,080 associated with extending a convertible note, with a decrease in non-cash loss in net change of fair value of the derivative instruments of $133,687, a decrease in amortization of debt discount in the amount of $326,139, interest expense in the amount of $16,436, loss on sale of assets in the amount of $5,360. The decrease in other income and (expenses) was due to the Company entering into debt financing through the issuance of convertible promissory notes.
Net Loss:
For the six months ended March 31, 2015, our net loss was $833,762 as compared to a net loss of $1,432,167 for the six months ended March 31, 2014. This decrease in net loss primarily stems from the increase in other income (expenses) associated with non-cash loss in net change of fair value of the derivative instruments, and a decrease in operating expenses, with an increase in gross profit due to the increase in sales. While management is working to increase sales and revenues as it matures the scope of the Company’s capabilities and brand awareness for its commercial solar PV systems, the Company anticipates the trend of losses may continue in future periods until the Company can recognize sales of significance of which there is no assurance.
Liquidity and Capital Resources
We had a working capital deficit at March 31, 2015 of $734,101, as compared to a working capital deficit of $912,699 as of September 30, 2014. The decrease of $178,598 in working capital deficit was the result of a decrease in cash, accounts payable, accrued expenses, deferred income, derivative liability, and note payable and convertible notes.
Cash flow used by operating activities was $188,111 for the six months ended March 31, 2015, as compared to cash flow used by operating activities of $226,741 for the six months ended March 31, 2014. The decrease in cash flow used by operating activities was primarily due to a net change in non-cash expenses, prepaid expenses, accrued expenses and deferred income, with an increase in accounts receivable, and accounts payable.
Cash flow used by investing activities was for the six months ended March 31, 2015 and 2014 were $0 and $21,400, respectively. The net change in investing activities was primarily due to proceeds received of $21,400 from the sale of certain assets in the prior period.
Cash provided by financing activities for the six months ended March 31, 2015 was $161,000, as compared to $218,000 for the six months ended March 31, 2014. Our capital needs have primarily been met from the proceeds of private placements, convertible notes, and initial revenues resulting from our change in business operations focused on the sale, design, and installation of Solar Photovoltaic (PV) Systems for commercial and industrial real-estate in in the period.
Our financial statements as of March 31, 2015 have been prepared under the assumption that we will continue as a going concern as of March 31, 2015. Our independent registered public accounting firm has issued their report dated May 18, 2015, that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
For the three months ended March 31, 2015, the Company's capital needs have been met from the use of working capital provided by the proceeds of (i) the Company’s working capital and (ii) the sale of debt proceeds totaling $161,000, and (iii) revenues in the amount of $617,757.
Short Term
On a short-term basis, while our revenues have begun to develop under our new plan of operations we do not generate revenues sufficient to cover operations at this time. Based on prior history, we may continue to have insufficient revenue to satisfy current and recurring expenses and liabilities. For short term needs we may continue to be dependent on receipt, if any, of offering proceeds and the growth of our revenue.
Capital Resources
We have only common and preferred stock as our capital resources. We have no material commitments for capital expenditures within the next year, however as we work to market and make sales of our commercial solar PV system services, substantial capital may be needed to expand and pay for these activities.
Need for Additional Financing
We do not have capital sufficient to meet our cash needs. We will have to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.
