Form 10-Q for WELWIND ENERGY INTERNATIONAL CORP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
This discussion and analysis should be read in conjunction with the accompanying
Financial Statements and related notes. Our discussion and analysis of our
financial condition and results of operations are based upon our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of any contingent
liabilities at the financial statement date and reported amounts of revenue and
expenses during the reporting period. On an on-going basis we review our
estimates and assumptions. Our estimates are based on our historical experience
and other assumptions that we believe to be reasonable under the circumstances.
Actual results are likely to differ from those estimates under different
assumptions or conditions, but we do not believe such differences will
materially affect our financial position or results of operations. Our critical
accounting policies, the policies we believe are most important to the
presentation of our financial statements and require the most difficult,
subjective and complex judgments, are outlined below in ''Critical Accounting
Policies,'' and have not changed significantly.
In addition, certain statements made in this report may constitute
"forward-looking statements". These forward-looking statements involve known or
unknown risks, uncertainties and other factors that 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 the
forward-looking statements. Specifically, 1) our ability to obtain necessary
regulatory approvals for our products; and 2) our ability to increase revenues
and operating income, is dependent upon our ability to develop and sell our
products, general economic conditions, and other factors. You can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continues" or the negative of these terms or other
comparable terminology. Although we believe that the expectations reflected-in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements.
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Overview
Our Corporate History
The Acquisition of Welwind Energy International Corporation
Projects
The Zhanjiang Project
The Yangxi Project
Funding the Projects
Supply
Our Strategy
Our Industry
Wind Energy Industry Participants
Distribution
Trademarks
Governmental Regulation
Employees
Change in Reporting Currency
Available Information
Period Ended September 30, 2008 Compared to Period Ended September 30, 2007
General and Administrative Expenses
Net Loss
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity
Sources of Liquidity
Cash Requirements
Future Financings
ABOUT WELWIND
Overview
We see wind power becoming an efficient power source globally. Welwind's current
projects focus is in the wind energy sector with future renewable energy
applications under consideration. Renewable energy is power that comes from
renewable resources such as the sun, wind and organic matter. These resources
are constantly replenished by nature and are a cleaner source of energy.
Welwind's goal is to add more renewable energy globally, resulting in cleaner
air and a more stable energy supply for our future.
Welwind Energy International was founded to build, own and operate wind farms on
an international scale. Our current project focus is to bridge the North
America-China link by building wind farms in China. Concurrently with the
development of the wind farm projects, the Company intends to continue to
operate the retail bakery and food store and its manufacturing and distribution
of specialty health food products.
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Our Corporate History
The Company was incorporated on December 18, 1997, pursuant to the laws of the
State of Delaware under the name of Autoeye Inc. On February 25, 2000, as part
of an acquisition of The Forest Industry Online Inc., we changed our name to
forestindustry.com, Inc. Prior to this acquisition, our Company was inactive. On
October 25, 2002, we entered into a share exchange agreement with GolfLogix,
Inc., a British Columbia, Canada corporation ("GolfLogix Canada") that was
incorporated in February 2000, as West Coast Electric Vehicle Distributors, Inc.
Under the terms of the Share Exchange Agreement, we acquired all of the
outstanding shares of GolfLogix Canada in exchange for 2,500,000 shares of our
common stock. As a result, GolfLogix Canada was a wholly owned subsidiary of our
Company.
Prior to the acquisition of Golflogix Canada, our business activities included
designing web sites and operating and maintaining a computer internet web site
for companies associated with the forest and wood product industries. However,
subsequent to the acquisition of this business we failed to generate
profitability and incurred negative cash flows from operations. GolfLogix
Canada, a distributor of golfing merchandise and has entered into an agreement
to purchase a licensing right to market and distribute the GolfLogix System in
Canada.
After our acquisition of GolfLogix Canada, on November 30, 2002, we entered into
a stock purchase agreement with Cherry Point Consulting, resulting in a
divestiture of the assets of Forest Industry Online. Under the agreement, Cherry
Point Consulting purchased shares of Forest Industry Online and assumed all of
the related assets and liabilities of the same. On January 7, 2003, we changed
our name to Global Golf Holdings, Inc.
On April 15, 2004, the Company filed a Form 8-K announcing that due to lack of
success in executing the Company's business plan and considerable under funding
of the same, that the Board of Directors had determined that it was no longer
viable to continue operations under the current business plan.
On November 23, 2004 the Registrant closed on the Agreement with Low Carb Centre
and affiliates (hereinafter "LCC"). LCC is a privately held company organized
under the laws of British Columbia, Canada with its primary business being the
retail sales and distribution of gourmet low carbohydrate food products through
its traditional brick-and-mortar retail stores and the World Wide Web at
www.lowcarbcentre.com. The Low Carb Bakery ("LCB") is a privately held company
organized under the laws of British Columbia, Canada with its primary business
being the manufacturing of food products for the LCC retail market. McNabb &
Associates ("MNA") is a privately held company organized under the laws of
British Columbia, Canada with its primary business being the management and
supervision of the business operations of both LCC and LCB.
Under the terms of the LCC Transaction, the Registrant acquired substantially
all of the assets of LCC, including, but not limited to, LCC's suppliers,
customer and vendor lists and records pertaining thereto, the trade names "Low
Carb Centre," "Low Carb Bakery" and "McNabb and Associates," all registered and
unregistered trademarks, service marks, sales marks, colors, names and slogans
relating to the business, and all applications for any of the foregoing,
together with all of the Sellers' rights to use all of the foregoing forever,
and all goodwill associated with the foregoing, the existing phone number(s) and
websites of the business, all assets referred to or referenced within any
audited financial statements of the business in preparation or consideration of
the closing of the LCC Transaction and any and all recipes, trade secrets, trade
practices, d�cor, goodwill, clients, equipment, furniture, assets, machinery,
trade fixtures, miscellaneous supplies, inventory, existing contracts and
tangible personal property.
Consideration for the LCC Transaction was 14,743,199 newly issued shares of the
Registrant post-reverse split. The terms and conditions of the Agreement were
determined in arm's length negotiations between the Registrant and LCC.
The terms and conditions of the Asset Purchase Agreement were determined in
arm's length negotiations between the Company and LCC.
Since the LCC Transaction effectively constituted a reverse purchase with the
management and shareholders of LCC essentially assuming the same positions in
Vitasti, reverse purchase accounting principles were utilized by the Company in
accounting for that transaction.
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The Acquisition of Welwind Energy International Corporation.
On April 11, 2006, the Company and Welwind Energy International Corporation, a
corporation duly incorporated under the laws of the Province of Alberta, Canada,
and the shareholders of Welwind Energy International Corporation (the
"Shareholders"), entered into a Share Exchange Agreement (the 'Agreement"). The
Agreement was closed on the 17th of August 2006. Per the Agreement, the Company
acquired 100% of Welwind Energy International Corporation ("WEIC") in exchange
for 11,000,000 unregistered shares of Vitasti, which were distributed to the
Shareholders as required by the terms of the Agreement. The Shareholders are
subject to the resale provisions of Rule 144.
On October 26, 2006, the Company filed in the office of the Secretary of State
for the State of Delaware a Certificate of Amendment to the Company's
Certificate of Incorporation, causing the name of the Company to be changed from
Vitasti, Inc. to Welwind Energy International Corp.
WEIC was founded in 2005 to build, own and operate wind farms on an
international scale. Our current project is to bridge the North America-China
link by building wind farms in China beginning along the South China Sea.
During 2006, Company representatives took several trips to China where two
contracts were signed with the cities of Yangxi and Zhanjiang in the Province of
Guangdong. The signed contracts allow the Company to build up to 1000 Megawatts
("MW") of wind power in Guangdong Province. The company has also been in
negotiations for a 50 year purchase price agreement ("PPA") as well. The
engineering, procurement and Construction (EPC) contractor, China Machine
International Building Corp., has agreed to provide the engineering, procurement
and construction on the projects along with performance bonds.
In June 2006, Representatives of the Company attended the Renewable Energy
Finance Asia Conference in Hong Kong. The investment forum brought together
International Industry leaders and presented networking discussions from Carbon
markets and alternative energy. Investors, Fund managers, Utilities Government,
Asian Development Banks, The World Bank and the United Nations were among those
in attendance, providing experience and perspective to this growing market. The
event clearly solidifies the confidence of renewable energy in Asia and provided
us with numerous networking opportunities.
While at the conference, Company representatives spent time with representatives
of the International Finance Corporation/World Bank to discuss international
developments and economic growth of the company.
In 2006, while in China, Company representatives formally signed the commitment
for a land lease pertaining to the Zhanjiang wind farm. We plan to build
forty-nine (49) MW in the first phase of a six hundred (600) MW wind farm on
this property.
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Projects
The Zhanjiang Project
The Zhanjiang Project will see the instillation of a six hundred (600) MW wind
farm on the subject property. Through a cooperative agreement with Guangzhou
Engga Wind Energy Co. Ltd ("Engga"), the first turbine produced by Engga for the
Company rolled-off the production line in February 2007. During this Phase 1,
the Company expects to build forty-nine (49) MWs.
Installation of the 750 KW test turbine was completed in May 2007. ENGAA, the
turbine manufacturer, immediately commenced monitoring the data from this first
turbine. By July 2007, ENGAA had completed its commissioning stage of the
Zhanjiang Turbine and had begun to assess and analyze the data from that
turbine.
A Project Feasibility Study Report and Grid Connection Report were finalized in
November 2007 by the Guandong Electric Power Design Institute, and subsequently
submitted to the Guangdong Power Grid Corporation for review in anticipation of
finalizing a Power Purchase Agreement ("PPA").
However, certain unexpected issues arose late in 2007 related to the Zhanjiang
Windfarm. During the due diligence period for the PPA, an issue with the local
Port Authority arose requiring meetings with various levels of the Zhanjiang
Government and the Port Authority. In a meeting during January 2008 between
Welwind representatives and high ranking officials of the Port Authority and
Government, all outstanding issues were resolved and the PPA due diligence
process has been completed.
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The Yangxi Project
The base of the Yangxi Wind Farm Project was completed, along with the
installation of the 100 meter meteorological tower, in June of 2006. At that
time, we began to collect data necessary to provide the information required to
build out the wind farm. Phase 1 of the Yangxi wind farm will consist of a 49 MW
project. We anticipate that the Yangxi project will consist of a total of 400
MWs once fully completed.
In January 2008, after 16 months of collecting date from the tower at the Yangxi
location, a formal Project Proposal was submitted to the Yangxi Government. All
data collected to date shows promising results for the future build out of this
wind farm.
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Funding the Projects
In January 2008, the Company also completed a $500,000 financing, which will be
used to fund the two projects and as general working capital. The Company
believes that these funds will be sufficient to meet our working capital
requirements until the signing of the PPAs and subsequent completion of the
financing for the projects.
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Supply
The Company and Guangzhou Engga Wind Energy Co. Ltd. ("ENGGA") have a
cooperative relationship where by the Company and ENGGA will work together on
the technology and future supply of all Welwind turbines. The agreement gives
Welwind priority for all turbines to be manufactured by ENGGA. ENGGA is the
sino-joint enterprise with the shareholders by Britain ENGGA Power Generator
Co., Ltd. and Hong Kong ENGGA Investment Co., Ltd. with the registered capital
reaching RMB30 million and specializing in making, selling and installing wind
power generation equipments, as well as selling parts of wind power generation
equipments.
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Our Strategy
During 2007, we successfully completed several important milestones that we
believe were fundamental to our being able to achieve growth from our business
model for project developments in the alternative energy market and continued
growth in our health and wellness operations.
In addition to those described herein, the Company announced the following in
2007:
(1) Begin a study to expand into the Peace River Region of British Columbia; and
(2) The Company retained Wall Street Transfer Agents, Inc. as its transfer
agent.
In November 2007, the Company was announced that Acterra Group signed a letter
of commitment to fund Phase 1 of the Zhanjiang Wind Farm Project, which we
anticipate will expedite the PPA with the Zhanjiang Government. A second
announcement was made early 2008 for a letter of commitment to fund Phase 1 of
the Yangxi Wind Farm Project with Acterra.
As a result of the achievements of these milestone and our ongoing marketing and
business development efforts, we have set the ground work for promising results
for the organization. Our current focus in the alternative energy market will be
our only focus in our business moving forward for 2008. The capital currently
available to us and future financings will be for the development and operation
of wind farms in China and continued expansion of wind projects globally. The
company sees additional growth via acquisitions of additional wind farm
projects.
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Our Industry
On February 2, 2007, the Global Wind Energy Council ("GWEC") announced that the
wind energy markets around the world exceeded expectations in 2006. GWEC is the
industry's global trade organization, with a combined membership of over 1,500
organizations involved in hardware manufacture, project development, power
generation, finance and consultancy, as well as researchers, academics and
associations. More information can be viewed on their web site which is
www.gwec.org and it contains much information on the industry and its markets.
The GWEC report further states that in terms of economic value, the wind energy
sector has now become firmly installed as one of the important players in the
energy markets, with the total value of new generating equipment installed in
2006 reaching �18 billion, or USD$23 billion. Outside of Europe, Asia has
experienced the largest growth in the industry, in 2006 the continent accounted
for 24% of new instillations of wind power facilities.
Specifically, according to the GWEC release, China more than doubled its total
installed capacity by installing 1,347 MW of wind energy in 2006, a 70% increase
from last year's figure. This brings China up to 2,604 MW of capacity, making it
the sixth largest market worldwide. The Chinese market was boosted by the
country's new Renewable Energy Law, which entered into force on 1 January 2006.
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Wind Energy Industry Participants
As wind energy technology gains wider acceptance, competition may increase as
large, well-capitalized companies enter the business. As previously stated, wind
energy is the fastest growing source of energy worldwide for three consecutive
years. Energy companies such as British Petroleum, Shell Oil Company's Wind
Energy arm, Siemens and other major companies in the energy sector, see
opportunities in wind power development. Additionally, there are many smaller
companies that are seeking out opportunities in the wind energy sector.
In some cases, competitors may have longer operating histories, more customers,
greater financial strength, more name recognition, and larger technical
staffs. These competitors may be able to more readily identify and acquire
suitable locations to exploit the growth in the wind energy sector more easily
because of their financial resources and awareness in the market. Our larger
competitors can also devote substantially more resources to business development
and may adopt more aggressive pricing policies.
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Distribution
The Company continually analyzes population growth and both national and
international economic factor, in determining energy demands in identified
areas. Should the Company make the determination and successfully identify
suitable property or properties, the Company would test the site to determine
whether sufficient wind energy resources are available to effectively and
efficiently displace current electricity sources, thus reducing pollution from
fossil fuel. Upon completion of the analysis, the Company would attempt, if
conditions were favorable, to obtain land right and apply for permits to install
and operate a wind power generating plant.
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Trademarks
The Company currently holds no Trademarks.
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Governmental Regulation
We do not use, generate or discharge toxic, volatile or otherwise hazardous
chemicals and wastes in our research and development and manufacturing
activities. However, we are subject to a variety of foreign, federal, state and
local governmental regulations. At this time, we believe that we have all
permits necessary to conduct our business.
We are not aware of any environmental investigation, proceeding or action by
foreign, federal or state agencies involving our current facilities or
operations. If we fail to comply with present or future environmental
regulations, we could be subject to fines, suspension of production or a
cessation of operations. Any failure by us to adequately comply with existing
and future regulations could subject us to financial liabilities, operational
interruptions and adverse publicity, any of which could materially and adversely
affect our business, results of operations and financial condition.
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Employees
As of November 14, 11 full time employees.
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Change in Reporting Currency
Effective January 1, 2005, the Company changed its reporting currency from the
U.S. dollar to the Canadian dollar. The reason for this change was because a
majority of the Company's assets and operations are located in Canada. All
amounts set forth in this filing are in Canadian Dollars, unless otherwise
indicated.
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Available Information
We file electronically with the Securities and Exchange Commission our annual
reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on
Form 8-K, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934. You may obtain a free copy of our reports and amendments to those reports
on the day of filing with the SEC by going to http://www.sec.gov.
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Period Ended September 30, 2008 Compared to Period Ended September 30, 2007
The following table summarizes the Company's results of operations. The table
and the discussion below should be read in conjunction with the audited
financial statements and the notes thereto appearing elsewhere in this report.
Results of Operations
For the For the
Three Change Three Months
Months from Ended
Ended Prior September
September Period 30, 2007
30, 2008 % $
$
Operating Expenses 1,683,087 398% 338,344
Net Loss from (1,683,087) 398% (338,344)
Continuing Operations
Other Income (1,302,244) 100% -
(Expense)
Net Loss before
Discontinued (2,985,331) 782% (338,344)
Operations
Discontinued 1,367 102% (66,955)
Operations
Net Loss for the Year (2,983,694) 636% (405,299)
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General and Administrative Expenses
During the three month period ended September 30, 2008, the Company incurred
general and administrative expenses of $1,683,087 compared to $338,344 in the
same period in the previous year. The 398% increase of $1,344,743 in general and
administrative expenses was mainly attributable to a increase in consulting
expense during the period ended September 30, 2008 to the period ended September
30, 2007.
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Net Loss
During the three month period ended September 30, 2008, the Company incurred a
net loss of $2,983,694, compared to a net loss of $405,299 in the same period in
the previous year. The 636% increase of $2,578,395 in net loss was mainly
attributable to the increase in General and Administrative expenses due to
consulting and a loss on settlement of debt totaling 1,302,244 realized during
the period.
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LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2008, the Company had $12,147 in cash, total current assets
of $283,241, and current liabilities of $1,552,934. The Company may require
additional capital investments or borrowed funds to meet cash flow projections
and carry forward our future business objectives. There can be no assurance
that the Company will be able to raise capital from outside sources in
sufficient amounts to fund the business.
The failure to secure adequate outside funding would have an adverse affect on
our expansion plan of operation and results therefrom and a corresponding
negative impact on shareholder liquidity.
During the period ended September 30, 2008 the Company used $276,683 of net cash
flows in operating activities. However, the Company was able to fund operations
by receiving cash proceeds of $357,269 from common stock subscriptions.
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Uses of Liquidity
The Company's cash requirements through the end of fiscal 2008 are primarily to
fund operations and to complete the wind farm projects in China.
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Sources of Liquidity
The Company's primary source of liquidity for its short-term cash needs is
expected to be from cash and cash equivalents currently on hand. The Company
believes that will be able to borrow additional funds if needed.
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Cash Requirements
Our cash on hand as of September 30, 2008 is $12,147. We have sufficient cash on
hand to pay the costs of some of our operations as projected to twelve (12)
months or less and to fund our operations for that same period of time. However,
we will require additional financing in order to proceed with some or all of our
goals as projected over the next twelve (12) months. We presently do not have
any arrangements for potential lines of credit or sources of financing for the
purpose of proceeding with any of our goals projected over the next twelve (12)
months and beyond.
Any additional growth of the Company may require additional cash infusions. We
may face expenses or other circumstances such that we will have additional
financing requirements. In such event, the amount of additional capital we may
need to raise will depend on a number of factors. These factors primarily
include the extent of operating expenses, research and development expenses, and
capital expenditures. Given the number of programs that we have ongoing and not
complete, it is not possible to predict the extent or cost of these additional
financing requirements.
Notwithstanding the numerous factors that our cash requirements depend on, and
the uncertainties associated with each of the major revenue opportunities that
we have, we believe that our plan of operation can build long-term value if we
are able to demonstrate clear progress toward our objectives.
Progress in the development of our business plan will likely lend credibility to
our plan to maintain profitability. We hired several members to our sales,
marketing, research and development, regulatory and administrative staff during
the course of 2008 in order to fully implement our plans for growth.
The Company does not anticipate any contingency upon which it would voluntarily
cease filing reports with the SEC, even though it may cease to be required to do
so. It is in the compelling interest of this Registrant to report its affairs
quarterly, annually and currently, as the case may be, generally to provide
accessible public information to interested parties, and also specifically to
maintain its eligibility for the OTCBB.
The failure to secure any necessary outside funding would have an adverse affect
on our development and results there from and a corresponding negative impact on
shareholder liquidity.
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Future Financings
Our plan of operation calls for significant expenses in connection with the
implementation of our business plan over the course of the next 24 months. For
the next twelve months, management anticipates that the minimum cash
requirements to fund our proposed goals and our continued operations will be at
least $500,000. As such, we do not have sufficient funds on hand to meet our
planned expenditures over the next 24 months. Therefore, we may require and may
need to seek additional financing to meet our planned expenditures.
Obtaining additional financing would be subject to a number of factors,
. . .
Welwind Energy International Corp.
