UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 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 June 30, 2011





 ̈
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:   333-103647





3Power Energy Group Inc.


(Exact Name of Registrant as Specified in its Charter)





Nevada

98-0393197(State or other jurisdiction of

(IRS Employerincorporation or organization)

Identification No.)





100 Wall Street, 21st Floor


New York, NY  10005


(Address of principal executive offices)





011 44 203 318 2995


(Registrant’s Telephone Number, Including Area Code)





N/A


(Former Name, Former Address and Former Fiscal Year,


if Changed Since Last Report)





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  ̈ No x





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 (Sec.323.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such files).  Yes  ̈   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. (Check one):





Large Accelerated Filer
 ̈
Accelerated Filer
 ̈Non-Accelerated Filer
 ̈
Smaller reporting company
x





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


Yes  ̈ No x





As of August 30, 2011, the Issuer had 107,127,408 shares of its Common Stock outstanding.





TABLE OF CONTENTS





PART I: FINANCIAL INFORMATION


4Item 1: Financial Statements


4Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operation


12Item 3: Quantitative and Qualitative Disclosures about Market Risk


17Item 4: Controls and Procedures


17PART II: OTHER INFORMATION


18Item 1: Legal Proceedings


18Item 1A: Risk Factors


18Item 2: Unregistered Sales of Equity Securities and Use of Proceeds


18Item 3: Defaults Upon Senior Securities


18Item 4: Reserved


18Item 5: Other Information


18Item 6: Exhibits


19SIGNATURES


20


2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS





The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in forward-looking statements made in this Quarterly Report on Form 10-Q (this “Report”) and in other reports and documents published by us from time to time. Any statements about our beliefs, plans, objectives, expectations, assumptions, future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intend,” “plan,” “projection,” “outlook” and the like, constitute “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 (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned to carefully read all “Risk Factors” set forth under Item 1A and not to place undue reliance on any forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act. New factors emerge from time to time, and it is not possible for us to predict which will arise or to assess with any precision the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.





Unless otherwise provided in this Report, references to the “Company,” the “Registrant,” the “Issuer,” “we,” “us,” and “our” refer to 3Power Energy Group Inc. (formerly known as Prime Sun Power Inc.).


3


PART I                   FINANCIAL INFORMATION




3POWER ENERGY GROUP, INC.
 FORMALLY KNOW AS PRIME SUN POWER, INC.
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 
 June 30, 2011


March 31, 2011ASSETSCurrent assets:Cash and cash equivalents

$
70,111


$
12,734Account receivable net of allowance for doubtful accounts


953,754



478,080Inventories


-



130,246Prepaid expenses and other sundry current assets


127,606



1,602Due from related parties


896,007



835,231Taxes receivable


465,593



535,852Total current assets


2,513,071



1,993,745Property and equipment, net


424



565424



565Total Assets

$
2,513,495


$
1,994,310LIABILITIES AND SHAREHOLDERS' DEFICIENCYCurrent liabilities:Account payable


2,024,514



1,636,236Accrued expenses and other sundry current liabilities


1,509,414



1,421,453Note payable - Finance company


660,073



660,073Notes payable - Shareholders


310,848



937,500Accrued interest - related party


88,983



83,122Due to related party


1,041,666



250,600Total current liabilities


5,635,498



4,988,984Shareholders' DeficiencyCommon stock, $.0001 par value, 300,000,000 shares authorized, 99,722,743 issued and  outstanding at June 30, 2011, 1,000 issued and outstanding at March 31,2010, respectively


9,972



9,972Additional paid-in capital


-



-Accumulated other comprehensive income (loss)


70,452



(111,589
)Retained Earnings


(3,202,427
)


(2,893,057
)Total shareholders' deficiency


(3,122,003
)


(2,994,674
)Total liabilities and shareholders' deficiency

$
2,513,495


$
1,994,310
  4
  3POWER ENERGY GROUP, INC.
 FORMALLY KNOW AS PRIME SUN POWER, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE (LOSS)
 (Unaudited)
 
 Three Months Ended June 30,2011


2010Sales

$
476,701


$
2,615,204Cost of sales


207,413



2,376,768Gross profit


269,288



238,436Operating Expenses:General and adminstrative expenses


442,783



238,870Faciliation fee


1,000,000



-Depreciation expense


144



131Total Operating Expenses


1,442,927



239,001Income from operations


(1,173,639
)


(565
)Interest expense


(18,068
)


(16,059
)Income before provision for income taxes


(1,191,707
)


(16,624
)Provision for income taxesNet loss


(1,191,707
)


(16,624
)Net loss

$
(1,191,707
)

$
(16,624
)Other Comprehensive Income (Loss)Foreign Currency Translation AdjustmentComprehensive loss

$
(1,191,707
)

$
(16,624
)Other Comprehensive lossForeign currency translation adjustment


(45,222
)


(113,665
)Comprehensive loss

$
(1,236,929
)

$
(130,289
)Basic Loss per common share

$
(0.012
)

$
(0.00
)Weighted average common share outstanding


53,041,830



40,114,900
  5
 
 3POWER ENERGY GROUP, INC.
 FORMALLY KNOW AS PRIME SUN POWER, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 3 Months Ended June 30,2011


2010Cash flows from operating activitiesNet loss

$
(1,191,707
)

$
(16,624
)Adjustments to reconcile net loss to net cash provided by operating activities:Accrued fees to related party


104,166



104,167Stock issued for facilitation fee


1,000,000



-Accrued interest to related party


5,861



3,852Depreciation and Amortization


141



133Changes in assets and liabilities:(Increase) decrease in -Account receivable-trade


(475,674
)


(10,925
)Inventories


130,246



212,866Prepaid expenses and other current assets


707,625



(444,236
)Taxes receivable


(463,991
)


32,223Account payable


388,278



2,464,080Accrued expenses


87,961



25,169Net cash provided by operating activities


292,906



2,370,705Cash flows from financing activitiesAdvance to related parties


(360,155
)


562,569Advance from related party


60,249Advance from (payment to) shareholder






(1,382,249
)Advance from (payment to) related partyNet cash used in financing activities


(299,906
)


(819,680
)Effect of exchange rate changes on cash and cash equivalents


64,378



(75,679
)Net increase in cash and cash equivalents


57,377



1,475,345Cash and cash equivalents, beginning of period


12,734



970,227Cash and cash equivalents, end of period

$
70,111


$
2,445,572Supplemental disclosures of cash flow information:Interest paid

$
-


$
-Income taxes paid

$
-


$
-


6


3 POWER ENERGY GROUP INC.


Formerly known as PRIME SUN POWER, INC.





NOTES TO FINANCIAL STATEMENTS





JUNE 30, 2011





The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2011 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended June 30, 2011 are not necessarily indicative of the operating results for the full fiscal year or any future period.





1.
BUSINESS DESCRIPTION





Basis of Consolidation





The consolidated financial statements include the accounts of 3 Power Energy Group, Inc.  and its subsidiaries, all of which are wholly owned.  All intercompany balances and transactions have been eliminated in consolidation.





Organization and Business Description





3Power Energy Group Inc. (the “Company”) was incorporated in the State of Nevada on December 18, 2002.  On March 30, 2011, the Company changed its name from Prime Sun Power Inc. to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000 shares.  The Company plans to pursue a business model producing renewable generated electrical power and other alternative energies.





Going Concern





As shown in the accompanying financial statements, the Company has incurred a net loss of $1,191,707 for the three months ended  June 30, 2011 and has a shareholders’ deficiency of $3,122.003 at June 30, 2011.  The ability of the Company to continue as a going concern is dependent upon, among other things, its successful execution of its plan of operations and ability to raise additional financing or capital.  There is no guarantee that the Company will be able to raise additional financing capital or sell any of services or products at a profit.  These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.





Basis of Preparation





On May 13, 2011 the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Seawind Energy Limited and its subsidiaries (“Seawind Energy”), pursuant to which the Company acquired 100% of the issued and outstanding common stock of Seawind Energy, in exchange for the issuance of 40,000,000 restricted shares of the Company’s common stock .  The acquisition was accounted for as a reverse merger and , accordingly, the Company is the legal survivor and Seawind Energy is the accounting survivor.


7


The Seawind Companies have become wholly owned subsidiaries of the Company.  The Stock Purchase Agreement contains conventional provisions for restricted share transactions, including customary representations and warranties given by the Seawind Group Shareholders regarding the authority to execute the Stock Purchase Agreement, valid ownership and transferable title to their shares which are unencumbered, free and clear of third party claims or conflicts contingent or otherwise, and that no consent of any party is necessary or required to effectuate the transfer.  In addition, the Seawind Group Shareholders made representations and warranties which the Company has relied upon for purposes of assessing and determining the validity of the exemption of the share issuances from registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.





2.
SIGNIFICANT ACCOUNTING POLICIES





Use of 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.  The actual results experienced by the Company may differ materially from the Company’s estimates.  To the extent there are material differences between the estimates and the actual results, future results of operations will be affected and the effect could be material.





Cash and Cash equivalents





The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.





The Company maintains cash balances at various financial institutions.  Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000.  The Company’s accounts at these institutions may, at times, exceed the federally insured limits.  The Company has not experienced any losses in such accounts.





Property and equipment and depreciation policy





Depreciation is based on the estimated useful lives of the related assets and is computed using the straight-line method.  Equipment is recorded at cost and depreciation is provided over the useful lives of five years.





Income taxes





The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.





ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.


8


Impairment of long-lived assets





The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.  To determine if impairment exists, the Company compares the estimated future undiscounted cash flows from the related long-lived assets to the net carrying amount of such assets.  Once it has been determined that impairment exists, the carrying value of the assets is adjusted to the fair value.  Factors considered in the determination of the fair value.  Factors considered in the determination of the fair value include current operating results, trends and the present value of estimated expected future cash flows.





Revenue Recognition





We follow the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”.  Revenues from long term contracts are recognized on the percentage of completion method.





Accounts Receivable and Allowance for Doubtful Accounts Receivable





We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required.





We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.





Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.





Inventories





Inventories are stated at the lower of cost, determined using the weighted average cost method, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.





Stock based compensation





We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.


9


Fair value measurements





The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.





The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts and notes payable, and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.  The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.





ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:





Level 1 — quoted prices in active markets for identical assets or liabilities





Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable





Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)





Concentration of Credit Risk





Financial instruments that potentially expose us to concentrations of credit risk consist principally of cash and cash equivalents. We maintain our cash accounts at high quality financial institutions with balances, at times, in excess of federally insured limits. As of June 30, 2011, we had $1,589,683of balances in excess of federally insured limits. Management believes that the financial institutions that hold our deposits are financially sound and therefore pose minimal credit risk.





Loss per share





Loss per share is computed using the weighted average number of shares outstanding during the period. Diluted loss per share is equivalent to basic loss per share.





Property and Equipment





Property and equipment consists of office equipment, is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets, generally 5 years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.





Recently Issued Accounting Standards





From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.


10


3.
NOTE PAYABLE – FINANCE COMPANY





On March 2, 2010, the Company entered into a Financing Agreement (the “Financing Agreement”) with CRG Finance AG (“CRG Finance”).  Pursuant to the Financing Agreement, CRG Finance loaned the Company a total of 470,000 Euros ($660,073 as of June 30, 2011).  In further consideration for the making of this loan, the Company shall transfer 20% of the Company’s rights to its net profits to be made in the sale of PSP Italian S.r.l. to GPR (the “Net Profit Rights”).





CRG Finance has agreed that upon receipt of its Net Profit Rights, CRG Finance will reinvest at least 50% of such Net Profit Rights into either new projects of the Company or shares of the Company, at a purchase price to be mutually agreed upon.  The Company has issued a senior promissory note to CRG Finance in the amount of 470,000 Euros ($660,073) as of June 30, 2011).  The principal of the note, along with interest at an annual rate of seven and one half percent, is due within thirty days of demand.  CRG has made a demand for payment of the Note which has not been paid by the Company.





4.
INCOME TAXES





The Company has available approximately $$3,895,000_ of net operating loss carry forwards to offset future taxable income, if any.  The carry forwards expire as follows:





2022

$
22,0002023

$
24,0002024

$
13,0002025

$
19,0002026

$
16,0002027

$
56,0002028

$
695,0002029 and after

$
3,050,000





Utilization of these carryforwards may be limited due to the changes in ownership referred to in Note 1.  The Company has a deferred tax asset of approximately $$1,350,000 relating to available net operating loss carry forwards for which 100% valuation allowance has been provided.





The computed credit for income taxes for the years ended December 31, 2010 and 2009 differs from the expected Federal tax rate as follows:





2011


2010Computed expected tax rate


35
%


35
%Valuation allowance


35
%


35
%Income tax credit


0



0





5.
FACILITATION AGREEMENT





The Company has arranged with Viewpoint Investments Corp. (“Viewpoint”) to pay a $1,000,000 fee, to be paid in Company Common Stock, payable upon the closing of the acquisition of the Seawind Companies (the “Facilitation Agreement”) which occurred on May 13, 2011.  Pursuant to the Facilitation Agreement, the Company has issued 19,607,843 restricted shares of the Company’s common stock to Viewpoint in consideration for services rendered to the Company. Viewpoint assisted and advised the Company with respect to identifying, negotiating and closing the transaction with the Seawind Group of Companies.  The consideration paid to Viewpoint by the Company was deemed to be fair and reasonable by our Board of Directors with respect to the creation and enhancement of share value for all shareholders responsive to the acquisition of Seawind Energy and Seawind Services due to the efforts of Viewpoint.  The number of shares issued to Viewpoint was calculated by reference to 85% of the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.


11





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





The Company's Operations





The following discussion of the financial condition and results of operations of 3Power Energy Group Inc. should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Report. This Report contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words “believes”, “anticipates,” “expects” and the like, constitute “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 (the “Exchange Act”). However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act.





We were incorporated in the State of Nevada on December 18, 2002, as ATM Financial Corp.  On April 1, 2008, we changed our name from “ATM Financial Corp.” to “Prime Sun Power Inc.”  On April 15, 2008, the Company changed its stock symbol from “AFIC” to “PSPW.” On March 30, 2011, the Company changed its name to 3Power Energy Group Inc. The Company’s common stock is traded on the Financial Industry Reporting Authority over-the-counter bulletin board.





The Company address is 100 Wall Street, 21st Floor, New York, NY 10005.  The Company’s telephone number is 011 44 203 318 2995.





The Company’s activities during the period covered by this Report included negotiating the acquisition of Seawind Energy Services and Seawind Energy Limited which closed on May 13, 2011.  As a result of the Seawind Acquisition, the Company is no longer a “shell company” as such term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.





The Company’s subsidiary Seawind Energy Limited has changed its name to 3Power Energy Limited.  This subsidiary continues to await the final payment for the sale of its project in Texas to Sany, a Chinese company.  Such payment is not expected until the final quarter of 2011.





The Company’s subsidiary Seawind Services Limited changed its name to 3Power Project Services Limited.  3Power Project Services Limited continued to make progress on its engineering and supply contracts with its two Chinese customers as those projects approached completion. The first shipment of prototype components for the new 2MW wind turbine were despatched from Germany, and the close out of the detailed design phase continued. 3Power Project Services Limited also commenced work under the Project Management engagement with 3Power Energy Inc. on the ongoing development of the first 18MW of wind projects in Chile. Activities have included finalising interconnection options to grid, contractor prequalification and negotiation of power purchase agreements. Additionally, minor works were undertaken in relation to the ongoing operating and maintenance engagement for Barrick Gold in Argentina. No new work was approached or contracted, the emphasis for the company now being the successful close out of the Chinese venture and consolidation of the work being undertaken on development of the 3Power project portfolio.


12


Stock Purchase Agreement





On May 13, 2011, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Seawind Energy Limited (“Seawind Energy”), Seawind Services Limited (“Seawind Services,” and together with Seawind Energy, the “Seawind Companies”) and the shareholders of Seawind Energy (the “Seawind Group Shareholders”).  The Company has acquired Seawind Energy, and its wholly owned subsidiary Seawind Services, from the Seawind Group Shareholders in exchange for the issuance of 40,000,000 restricted shares of the Company’s common stock (such acquisition is referred to herein as the “Seawind Acquisition”).  The valuation for purposes of such acquisition was determined to be $2,400,000 on the basis of an understanding between the Company and the representatives of the Seawind Companies as of January 25, 2011, with the number of shares to be issued thereof calculated by reference to the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.





The Seawind Companies have become wholly owned subsidiaries of the Company.  The Stock Purchase Agreement contains conventional provisions for restricted share transactions, including customary representations and warranties given by the Seawind Group Shareholders regarding the authority to execute the Stock Purchase Agreement, valid ownership and transferable title to their shares which are unencumbered, free and clear of third party claims or conflicts contingent or otherwise, and that no consent of any party is necessary or required to effectuate the transfer.  In addition, the Seawind Group Shareholders made representations and warranties which the Company has relied upon for purposes of assessing and determining the validity of the exemption of the share issuances from registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.





In anticipation of the closing of the Stock Purchase Agreement, the Company changed its name to 3Power Energy Group Inc. and increased its authorized share capital to 300,000,000 shares.





Facilitation Agreement





The Company has arranged with Viewpoint Investments Corp. (“Viewpoint”) to pay a $1,000,000 fee, to be paid in Company Common Stock, payable upon the closing of the acquisition of the Seawind Companies (the “Facilitation Agreement”) which occurred on May 13, 2011.  Pursuant to the Facilitation Agreement, the Company has issued 19,607,843 restricted shares of the Company’s common stock to Viewpoint in consideration for services rendered to the Company. Viewpoint assisted and advised the Company with respect to identifying, negotiating and closing the transaction with the Seawind Group of Companies.  The consideration paid to Viewpoint by the Company was deemed to be fair and reasonable by our Board of Directors with respect to the creation and enhancement of share value for all shareholders responsive to the acquisition of Seawind Energy and Seawind Services due to the efforts of Viewpoint.  The number of shares issued to Viewpoint was calculated by reference to 85% of the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.





Change in Fiscal Year End





On May 13, 2011 the Board approved a change in the Company’s fiscal year end from December 31st to March 31st.





Amendment to By-Laws





Effective as of May 13, 2011, the Board approved the following amendment to the Company’s By-Laws:





Article I, Section 10 of the Company’s By-Laws is deleted in its entirety and replaced with the following:





Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action to be taken, shall be signed by shareholders holding a majority of the shares entitled to vote with respect to the subject matter thereof.


13


Special Meeting of Shareholders for Election of Director





On April 14, 2011, the Company held a Special Meeting of Shareholders (the “Special Meeting”).  At the Special Meeting, Mr. Toby Durrant was elected to the Company’s Board of Directors.  Mr. Durrant has served as the Company’s Chief Investment Officer since January 26, 2011, and had served as the Company’s Acting Chief Executive Officer and Chief Financial Officer since February 25, 2011.  At the record date of April 1, 2011, the Company had 40,114,900 issued and outstanding shares, of which 20,498,638 shares, representing 51.1% of the Company’s issued and outstanding shares, were represented at the Special Meeting and voted for the election of Mr. Durrant to the Company’s Board of Directors.





Officer and Director Transitions





On May 13, 2011, Riccardo Valentini, Dimitris Kazantzis and Antonio Conte were appointed to the Company’s Board of Directors.  Effective June 2, 2011, Mr. Valentini was appointed as the Chief Executive Officer and Chief Financial Officer of the Company.   Mr. Valentini resigned from his positions as an officer and director of the Company on August 10, 2011.  Mr. Conte resigned as a director of the Company on August 10, 2011.





Plan of Operation





The Company is planning to develop, construct and operate wind energy power plants, solar photovoltaic power plants, biomass power plants and other renewable technologies. The Company expects to sell the electrical power produced to private and utility customers.   In regard to our wind energy power plant business, we intend to commence operations in South America with wind energy projects in Chile.  We intend to acquire the development rights to build two wind energy projects, with a total capacity of 58MW and expect that first power-to-grid will be achieved in the first quarter of 2012.  We intend to enter into sub-contractor arrangements with high quality and expert Chilean companies and organizations to provide the engineering, construction, procurement, installation and commissioning of the projects.  We intend to enter into long term operating and maintenance agreements with the wind turbine equipment supplier.  Our Company will sell the energy under power purchase agreements to private customers, in the public spot-price market, or a combination of both.  We intend to increase our wind energy project portfolio in Chile further by acquiring the development rights to build other attractive projects and in parallel expect to undertake project development of green-field sites.  We intend to expand our wind energy operations in other Latin American countries by entering into strategic alliances with local partners to create a strong local presence in countries such as Peru, Ecuador and Argentina, and create a wind energy portfolio through a combination of acquiring the development rights to wind energy projects, and carrying out project development of green-field sites.  We anticipate expanding our wind energy operations into Asia through strategic alliances with local partners and by acquiring the development rights to build suitable wind energy projects.





We anticipate that our solar energy power plant business will do business mainly in Europe.  We expect our Company will operate photovoltaic energy production parks in which solar electrical power is produced for sale to local electrical grids. We intend to enter into strategic alliances and sub-contractor arrangements with other companies and organizations with respect to engineering, construction, procurement and installation as well as companies engaged in the manufacture and/or assembly of solar modules.





The Company presently faces a number of challenges, including raising additional capital, indentifying commercially viable qualified projects, obtaining rights and licenses for development, interacting with local governments, indentifying and entering into agreements with appropriate subcontractors for the development and operation of our energy production facilities, and hiring and retaining qualified staff.


14


Project Acquisition Agreement





Enerserve Ltd.





The Company has entered into an acquisition agreement with Enerserve Ltd. (“Enerserve”), to acquire a wind energy project in Chile consisting of thirty two turbine locations (the “Enerserve Project”).   Enerserve has already obtained and/or is in the process of finalizing the necessary agreements, permits, wind measurement data, and all other requisites necessary for the Enerserve Project.  Enerserve has agreed to complete the development of the Enerserve Project through the stage where all required construction permits are obtained and in order.  Enerserve shall then provide support services to the Company throughout the construction stage in all matters related to permits and consents.  The Enerserve Project and all ancillary rights, agreements, permits, data and other requisites for the construction and connection to the electrical grid shall be vested in the Company by transferring the Enerserve Project to 3Power Energia S.A.





Project Acquisition Option Agreement





Power Andina Limited





The Company has entered into an option agreement with Power Andina Limited (“PAL”), to acquire a wind energy project in Chile consisting of six turbine locations (the “PAL Project”).   PAL has already obtained and/or is in the process of finalizing the necessary agreements, permits, wind measurement data, and all other requisites necessary for the PAL Project.  PAL has agreed to complete the development of the PAL Project through the stage where all required construction permits are obtained and in order.  PAL shall then provide support services to the Company throughout the construction stage in all matters related to permits and consents.  Upon exercise of the option by the Company under the PAL agreement, the PAL Project and all ancillary rights, agreements, permits, data and other requisites for the construction and connection to the electrical grid shall be vested in the Company by transferring the PAL Project to a new Company wholly-owned subsidiary, 3Power Energia S.A., which shall be a Chilean registered company.





Sales





During the three month periods ended June 30, 2011, the Company’s sales totaled $476,701, which was a decline from total sales of $2,615,204 as of June 30, 2010.  The Company’s cost of sales for the three months ended June 30, 2011 were $207,413, as opposed to $2,376,768 for the period ended June 30, 2010.  The Company’s gross profit for the period ended June 30, 2011 was $269,288, an increase from $238,436 for the period ended June 30, 2010.





Results of Operations





The Company has incurred an increase in operating expenses during this reporting period from the last comparative period.  Operating Expenses for the three months ended June 30, 2011 were $1,442,927, as compared to $239,001 for the three months ended June 30, 2010.  The largest component of the Company’s operating expenses during this period was a $1,000,000 facilitation fee paid to Viewpoint Investments Corp.  The Company’s general and administrative expenses for the three month period ended June 30, 2011 were $442,783, as compared to $238,870 for the three month period ended June 30, 2010.





Liquidity and capital resources





Our total cash and cash equivalents at June 30, 2011 was $70,111, which was more than the Company’s cash and cash equivalents at March 31, 2011 of $12,734.  As of June 30, 2011, our total assets were $2,513,495, which was an increase from $1,993,309 as of March 31, 2011.  Our total current liabilities were $5,635,498 as of June 30, 2011, which was a decrease from $4,988,983as of March 31, 2011.





Prior to the acquisition of the Seawind Companies, the Company relied on loans from Rudana Investment Group AG (“Rudana”), a former shareholder of the Company.  In addition, the Company received loans from CRG Finance AG, and the sale of rights to a power plant.   The Company has received loans from CRG Finance AG in the amount of 470,000 Euros (US$660,073) and proceeds from the sale of rights to a one-megawatt power plant in Italy during the first quarter of 2010 in the amount of 179,630 Euros (US$242,921).


15


To date, 3Power Energy Group has received loans from Rudana (the “Shareholder Loans”). The Shareholder Loans include amounts loaned by Rudana and invoices paid by Rudana.  3Power Energy Group has used the proceeds from the Shareholder Loans for general corporate purposes. The Shareholder Loans have an interest rate of seven and a half percent (7.5%) per annum, which together with the principal amount shall be repayable thirty (30) days after demand by Rudana. In connection with the Shareholder Loans, 3Power Energy Group intends to execute notes setting forth the terms thereof.  In addition, the Company’s accrued fees owed for management services received from Prime Asset Finance Limited, a subsidiary of Rudana, from inception through June 30, 2011 total $937,500.





Our activities to date have consumed substantial amounts of cash.  We will need to raise additional capital to implement our new business plan and continue operations for any length of time.  We are seeking alternative sources of financing, through private placement of securities and loans from our shareholders in order for us to maintain our operations.  We cannot guarantee that we will be successful in raising additional cash resources for our operations.





Our future capital requirements will depend on a number of factors, including our ability to grow our revenues and manage our business. Our growth will depend upon our ability to raise additional capital, possibly through the issuance of long-term or short-term indebtedness or the issuance of our equity securities in private or public transactions. If we are successful in raising equity capital, because of the number and variability of factors that will determine our use of the capital, our ultimate use of the proceeds may vary substantially from our current plans.  Global financial market conditions will be relevant to the Company’s ability to raise funds and make sales in the particular markets in which we will be active. While the Company believes that the opportunity exists to proceed in spite of these factors, major market disruptions, recent adverse changes in global market conditions, and the regulatory climate may affect our business.





The Company will require no less than $2,000,000 in additional funding in order to conduct proposed operations for the next year.  Should the Company fail to raise such funds, the Company will not be able to commence construction of the solar power plants. In order to commence construction on all of the Company’s currently contemplated projects, the Company would be required to raise 15,000,000 Euros (approximately $19,220,000) to acquire definitive licenses to own and operate solar parks, and then organize construction bridge loans to pay for the construction of the solar parks.





Demand from CRG Finance AG





On March 2, 2010, the Company entered into a Financing Agreement (the “Financing Agreement”) with CRG Finance AG (“CRG Finance”).  Pursuant to the Financing Agreement, CRG Finance loaned the Company a total of 470,000 Euros ($660,073 as of June 30, 2011).  In further consideration for the making of this loan, the Company agreed to transfer 20% of the Company’s rights to its net profits to be made in the sale of PSP Italian S.r.l (the “Net Profit Rights”).  CRG Finance has agreed that upon receipt of its Net Profit Rights, CRG Finance will reinvest at least 50% of such Net Profit Rights into either new projects of the Company or shares of the Company, at a purchase price to be mutually agreed upon.  The Company has issued a senior promissory note to CRG Finance in the amount of 470,000 Euros ($660,073) as of June 30, 2011.  The principal of the note, along with interest at an annual rate of seven and one half percent, is due within thirty days of demand.  CRG has made a demand for payment of the Note which has not been paid by the Company.





Plant and Equipment





During the period covered by this Report, the Company did make any expenditure on plants and equipment.





Employees





As of June 30, 2011, the Company had 5 senior management employees.





Research and Development





The Company has not expended significant amounts on research and development.  The Company intends to assess prospective research and development undertakings during the foreseeable future and allocate a budget accordingly.


16


Off Balance Sheet Arrangements





As of June 30, 2011, we did not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.





Subsequent Events





Cancellation of Credit Facility





On March 10, 2011, the Company entered into a Financing and Security Agreement with CR&P Holding S.p.A., an Italian investment group, with respect to a $50 million credit facility.  The Company intended to use the credit facility to finance photovoltaic, wind and hydro power plant development projects and prospective acquisitions in Italy, France, Greece, Turkey, Albania and Chile.  On August 10, 2011, the Company and CR&P Holding S.p.A. mutually agreed to cancel this Financing and Security Agreement.





Officer and Director Transitions





On May 13, 2011, Riccardo Valentini, Dimitris Kazantzis and Antonio Conte were appointed to the Company’s Board of Directors.  Effective June 2, 2011, Mr. Valentini was appointed as the Chief Executive Officer and Chief Financial Officer of the Company.   Mr. Valentini resigned from his positions as an officer and director of the Company on August 10, 2011.  Mr. Conte resigned as a director of the Company on August 10, 2011.





ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not Applicable.





ITEM 4.
CONTROLS AND PROCEDURES





As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of our management, including our Acting Chief Executive Officer and Acting Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934 (the “Exchange Act”). In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our disclosure controls and procedures regarding a lack of adequate personnel and adequate segregation of duties.  Based on their evaluation of our disclosure controls and procedures as of June 30, 2011, the Company’s Acting Chief Executive Officer and Acting Chief Financial Officer have concluded that, as of that date, the Company’s disclosure controls and procedures were not effective for the purposes described above.





The material weakness identified by Management consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of the Company. The Company’s bookkeeping and accounting functions are overseen by a single individual who serves as a consultant to the Company, which prevents us from segregating duties within the Company’s disclosure control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. Accordingly, based on their evaluation of the Company’s disclosure controls and procedures as of June 30, 2011, the Company’s Acting Chief Executive Officer and its Acting Chief Financial Officer have concluded that, as of that date, the Company’s disclosure controls and procedures were not effective for the purposes described above. The Company intends to take steps to remediate such procedures as soon as reasonably possible.





There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended June 30, 2011 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.


17


PART II.
OTHER INFORMATION







ITEM 1.
LEGAL PROCEEDINGS





Not Applicable.





ITEM 1A.
RISK FACTORS





Not Applicable.





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





Seawind Acquisition





On May 13, 2011, the Company acquired Seawind Energy, and its wholly owned subsidiary Seawind Services from the Seawind Group Shareholders in exchange for the issuance of 40,000,000 restricted shares of the Company’s common stock.  The valuation for purposes of such acquisition was determined to be $2,400,000 on the basis of an understanding between the Company and the representatives of the Seawind Companies as of January 25, 2011, with the number of shares to be issued thereof calculated by reference to the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.  The Seawind Acquisition was made in reliance upon the exemption from Securities Act registration provided by Section 4(2) of the U.S. Securities Act, and the rules and regulations promulgated thereunder, including Rule 903 of Regulation S.  The Seawind Group Shareholders are not a U.S. person (as such term is defined in Rule 902(k) of Regulation S).





Facilitation Agreement Share Issuance





The Company arranged with Viewpoint Investments Corp. (“Viewpoint”) to pay a $1,000,000 fee, to be paid in Company Common Stock, payable upon the closing of the acquisition of the Seawind Companies (the “Facilitation Agreement”) which occurred on May 13, 2011.  Pursuant to the Facilitation Agreement, the Company has issued 19,607,843 restricted shares of the Company’s common stock to Viewpoint in consideration for services rendered to the Company. Viewpoint assisted and advised the Company with respect to identifying, negotiating and closing the transaction with the Seawind Group of Companies.  The consideration paid to Viewpoint by the Company was deemed to be fair and reasonable by our Board of Directors with respect to the creation and enhancement of share value for all shareholders responsive to the acquisition of Seawind Energy and Seawind Services due to the efforts of Viewpoint.  The number of shares issued to Viewpoint was calculated by reference to 85% of the publicly quoted closing price of the Company’s Common Stock on January 25, 2011.  The transaction described above was made in reliance upon the exemption from Securities Act registration provided by Section 4(2) of the U.S. Securities Act, and the rules and regulations promulgated thereunder, including Rule 903 of Regulation S.  Falak Investments AG is not a U.S. person (as such term is defined in Rule 902(k) of Regulation S) and this transaction was entered into outside of the United States.





ITEM 3:
DEFAULTS UPON SENIOR SECURITIES





Not Applicable.





ITEM 4:
RESERVED





Not Applicable.





ITEM 5:
OTHER INFORMATION





Not Applicable.


18


ITEM 6.          EXHIBITS





Exhibit

Description3.4

By-Laws, as amended, incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2011.10.26

Financing & Security Agreement, by and between the Company and CR&P Holding S.p.A., dated as of March 10, 2011, incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 13, 2011.10.27

Stock Purchase Agreement, by and between the Company, Seawind Energy, Seawind Services and the Shareholders of Seawind Energy, dated as of May 13, 2011, incorporated by reference to Exhibit 10.27 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 13, 2011.10.28

Services Agreement, by and between the Company and Seawind Services Limited, dated as of May 9, 2011, incorporated by reference to Exhibit 10.28 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 13, 2011.10.29

Services Agreement, by and between Seawind Services Limited and Seawind International Limited, dated as of May 9, 2011, incorporated by reference to Exhibit 10.29 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 13, 2011.10.30

Wind Energy Project Purchase Agreement, by and between the Company and Power Andina Limited, dated as of May 5, 2011, incorporated by reference to Exhibit 10.30 to the Company’s Current Report on Form 8-K/A, filed with the Securities and Exchange Commission on May 19, 2011.*10.31

Wind Energy Project Purchase Agreement, by and between the Company and Enerserve Ltd., dated as of May 16, 2011, incorporated by reference to Exhibit 10.31 to the Company’s Current Report on Form 8-K/A, filed with the Securities and Exchange Commission on May 19, 2011.*31.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of the Principal 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.





*
Portions of those exhibits marked with an asterisk have been omitted and filed separately with the Commission pursuant to a request for confidential treatment.


19


SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





3POWER ENERGY GROUP INC.By:
/s/ Toby DurrantName:
Toby DurrantTitle:
Acting Chief Executive Officer,Acting Principal Financial Officer andActing Principal Accounting Officer





Dated:      September 2, 2011




20