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 March 31, 2012
 
or
 
o    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION FROM _______ TO ______
 
Commission File Number: 000-52402
 
SavWatt USA Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 (State or other Jurisdiction of Incorporation or Organization)
 
1100 Wicomico Street, Baltimore MD 21230
 (Address of principal executive offices)
 
(646) 545-6870
(Registrant's telephone number)
 
27-2478133
(I.R.S. Employer Identification No.)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
 
As of May 15, 2012, there were 4,923,471 outstanding shares of the Registrant's Common Stock, $0.0001 par value.

 
 
 
 
OTHER PERTINENT INFORMATION
 
When used in this report, the terms "SavWatt." the Company", " we", "our", and "us" refers to SavWatt USA, Inc., a Delaware corporation. The information which appears on our web site is not part of this report.
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 
Certain statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to raise sufficient capital to fund our ongoing operations and satisfy our obligations as they become due, our ability to generate any meaningful revenues, our ability to compete within our market segment, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, as well as our annual report on Form 10-K for the year ended December 31, 2011 including the risks described in Part I. Item 1A. Risk Factors of that report. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.
 
 
2
 
 
INDEX
 
     
PAGE
 
PART I - FINANCIAL INFORMATION
         
Item 1.
Financial Statements
       
           
 
Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011
   
4
 
           
 
Statements of Operations for the Three Months ended March 31, 2012 and 2011 (Unaudited)
   
5
 
           
 
Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011 (Unaudited)
   
6
 
           
 
Notes to Financial Statements as of March 31, 2012 (Unaudited)
   
7
 
           
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
   
21
 
           
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
   
23
 
           
Item 4.
Controls and Procedures
   
24
 
           
PART II - OTHER INFORMATION
           
Item 1.
Legal Proceedings
   
25
 
           
Item 1A.
Risk Factors
   
25
 
           
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
   
25
 
           
Item 3.
Defaults Upon Senior Securities
   
25
 
           
Item 4.
Mine Safety Disclosures
   
25
 
           
Item 5.
Other Information
   
25
 
           
Item 6.
Exhibits
   
26
 
           
 
SIGNATURES
   
27
 
 
 
3
 
 
SavWatt USA, Inc.
BALANCE SHEETS
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
ASSETS
       
 Current assets:
           
 Cash
 
$
-
     
979
 
 Accounts receivable
   
15,244
     
14,194
 
 Inventory
   
57,331
     
53,502
 
 Other current assets
   
49,663
     
80,830
 
 Total current assets
   
122,339
     
149,504
 
                 
 Computer equipment, net
   
166,563
     
161,207
 
 Leasehold Improvements, net
   
420,929
     
432,391
 
             Intangible
   
1,100,000
     
1,100,000 
 
 Total assets
 
$
1,809,731
   
$
1,843,102
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
         
                 
 Current liabilities:
               
 Cash overdraft
 
$
1,909
   
$
-
 
 Accounts payable and accrued expenses
   
1,551,012
     
1,066,793
 
 Due to related party, net
   
96,327
     
59,039
 
 Derivative liability
   
273,851
     
300,312
 
 Related party convertible loan payable, net
   
200,000
     
363,798
 
 Convertible notes payable, net
   
876,630
     
1,110,450
 
 Total current liabilities
   
2,999,730
     
2,900,392
 
                 
 Accounts payable, long-term
   
750,0000
     
800,000
 
 Total liabilities
   
3,749,730
     
3,700,392
 
                 
 Stockholders' deficit
               
 Common stock, $0.0001 par value, 9,800,000,000 shares
               
authorized, 3,592,769 and 1,621,000 shares issued and
               
outstanding, respectively
   
359
     
162
 
 Preferred stock, $.0001 par value, 200,000,000 authorized,
               
16,000,000 and 10,000,000, issued and outstanding, respectively
   
1,600
     
1,000
 
 Additional paid-in capital
   
47,067,811
     
45,645,665
 
 Accumulated deficit during development stage
   
(49,009,769
)
   
(47,504,317
)
 Total stockholders' deficit
   
(1,939,999
)
   
(1,857,489
)
                 
 Total liabilities and stockholders' deficit
 
$
1,809,731
   
$
1,843,102
 
 
See accompanying notes to unaudited financial statements.
 
 
4
 
 
SavWatt USA, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three months Ended
   
Three months Ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
 
             
             
 REVENUES
 
$
27,386
   
$
3,784
 
 COST OF REVENUES
   
5,625
     
-
 
 GROSS PROFIT
   
21,761
     
-
 
 EXPENSES
               
 General and administrative
   
513,137
     
292,143
 
 Professional fees
   
135,103
     
170,965
 
 Stock based compensation
   
270,100
     
62,250
 
 Total Expenses
   
918,340
     
525,358
 
                 
 LOSS FROM OPERATIONS
   
(896,579
)
   
(521,574
)
                 
 OTHER INCOME (EXPENSE)
               
 Interest expense
   
(40,133
)
   
(34,109
)
 Interest expense – stockholder
   
-
     
(44,956
) 
  Change in fair value of derivative liability
   
116,461
     
-
 
 Loss on settlement of related party debt
   
-
     
(10,000
) 
 Gain on settlement of debt
   
29,050
     
-
 
 Amortization of debt discount
   
(506,181
)
   
(359,000
) 
 Debt Conversion Expense
   
(208,070
)
   
(359,066
) 
 Total other income (expense)
   
(843,677
)
   
(843,131
)
                 
 NET LOSS
   
(1,505,452
)
   
(1,364,705
)
 
               
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
   
-
     
41,408
 
                 
NET LOSS ATTRIBUTABLE TO SAVWATT USA, INC.
 
$
(1,505,452
)
 
$
(1,323,297
)
 
               
 NET LOSS PER SHARE, BASIC AND DILUTED
 
$
(0.57
)
 
$
(12.14
)
                 
 WEIGHTED AVERAGE NUMBER OF COMMON
               
 SHARES OUTSTANDING, BASIC AND DILUTED
   
2,628,736
     
112,409
 
 
See accompanying notes to unaudited financial statements.
 
 
5
 
 
SavWatt USA, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
For the three months ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(1,505,452
)
 
$
(1,323,297
)
Adjustments to reconcile net loss to net cash
               
     used in operating activities:
               
   Net loss attributable to non controlling interest
           
(41,408
) 
Depreciation expense
   
12,425
     
-
 
Stock issued for services
   
100
     
62,250
 
Stock issued for interest
   
2,000
     
14,000
 
Stock based compensation
   
270,000
     
-
 
Gain on debt forgiveness
   
(29,050
)
   
-
 
Loss on settlement of related party debt
   
-
     
10,000
 
Amortization of debt discount
   
506,181
     
359,000
 
Debt modification expense
   
208,070
     
395,066
 
Loss on fair value of derivative
   
(116,461
)
   
-
 
Increase (decrease) in cash flows as a result of changes in asset and liability account balances:
               
Accounts receivable
   
(1,050
)
   
 (1,214
) 
Inventory
   
(3,829
)
   
 -
 
Other current assets
   
31,167
     
(53,541
)
Accounts payable and accrued expenses
   
446,043
     
59,665
 
    Due to related party
   
37,288
     
436,653
 
Accrued interest-stockholder
   
-
     
44,956
 
Total adjustments
   
1,362,884
     
1,285,220
 
                 
Net cash used in operating activities
   
(142,568
)
   
(38,077
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of computer equipment
           
(12,182
)
Purchase of machinery
   
(6,320
)
   
-
 
Net cash used in investing activities
   
(6,320
)
   
(12,182
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Cash overdraft
   
1,909
     
-
 
Proceeds from issuance of convertible debt
   
146,000
     
75,000
 
Net cash provided by financing activities
   
147,909
     
75,000
 
                 
NET INCREASE (DECREASE)  IN CASH
   
(979
)
   
24,741
 
                 
CASH, BEGINNING OF PERIOD
   
979
     
2,422
 
                 
CASH, END OF PERIOD
 
$
-
   
$
27,163
 
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Interest paid
 
$
-
   
$
-
 
Income taxes paid
 
$
-
   
$
-
 
Stock issued for repayment of shareholder loan
 
$
-
   
$
35,000
 
Beneficial conversions feature related to convertible debt
 
$
329,500
   
$
475,000
 
Loan assignments to convertible note holders
 
$
70,000
   
$
-
 
Stockholder loan assigned
 
$
-
   
$
580,000
 
Common stock issued as a result of debt conversion
 
$
309,050
   
$
368,654
 
Common stock issued for accrued interest
 
$
4,023
   
$
475,000 
 
 
See accompanying notes to unaudited financial statements.
 
 
6
 
 
SavWatt USA, Inc.
Notes to Financial Statements
(Unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

SavWatt USA, Inc. (“SavWatt”) (hereinafter "the Company") was incorporated on October 20, 2006 under the laws of the State of Delaware under the name Ludvik Capital, Inc. for the purpose of becoming a successor corporation by way of merger with Patriot Advisors, Inc. (“Patriot”) and Templar Corporation (“Templar”), pursuant to a plan of reorganization and merger approved by the United States Bankruptcy Court, District of Maine in Case No. 04-20328 whereby Ludvik Capital is the continuing entity.

Following approval of the plan of reorganization and merger, the Company's business plan consisted of investing in public and private companies, providing long term equity and debt investment capital to fund growth and acquisitions and recapitalizations of small and middle market companies in a variety of industries primarily located in the United States.

Since inception, the Company has had minimal operations and minimal revenues earned. On April 5, 2010, the Company amended its articles of incorporation and changed its name to SavWatt USA, Inc.

The Company plans to capitalize on the largely unaddressed commercial and consumer market for energy-efficient LED lighting by investing in product and corporate marketing. With public relations and advertising throughout the media, the Company’s goal is to establish a recognized, popular consumer LED brand, spearheading and establishing a leading market share in the growing energy-efficient bulb sector during the next three to five years.

The Company's year end is December 31st .

The Company's corporate headquarters were originally located in Virginia but are currently located in Baltimore MD

GOING CONCERN AND BASIS OF PRESENTATION

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company incurred net losses of $1,505,452 for the three months ended March 31, 2012. In addition, the Company has incurred an accumulated deficit amounting to $49,009,769. The Company has generated minimal revenues and has minimal cash resources.

 
7
 
 
These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's efforts have been directed towards the development and implementation of a plan to generate sufficient revenues to cover all of its present and future costs and expenses.

Management is taking steps to address this situation. The Company has determined that it cannot continue with its business operations as outlined in its original business plan because of a lack of financial resources; therefore, management has redirected their focus towards identifying and pursuing options regarding the development of a new business plan and direction. The Company intends to explore various business opportunities that have the potential to generate positive revenue, profits and cash flow in order to financially accommodate the costs of being a publicly held company. The Company is in the process of raising capital by implementing its business plan in LED lighting and expects to generate sufficient revenue by the 3rd quarter of 2012 with a positive cash flow. Until then, the Company will not have the required capital resources or credit lines available that are sufficient to fund operations.

The Company has operating costs and expenses at the present time for development of its business activities. The Company, however, will be required to raise additional capital over the next twelve months to meet its current administrative expenses, and it may do so in connection with or in anticipation of possible acquisition transactions. This financing may take the form of additional sales of its equity securities and/or loans from its directors. There is no assurance that additional financing will be available, if required, or on terms favorable to the Company.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

The foregoing unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2011. In the opinion of management, the unaudited interim financial statements furnished herein include adjustments, all of which are of a normal recuing nature, necessary for a fair statement of the results for all the interim periods presented. Operating results for the three month period ending March 31, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding the accompanying financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

ACCOUNTING METHOD

The Company's financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 
8
 
 
DEVELOPMENT STAGE ACTIVITIES

For all periods prior to December 31, 2011, the Company considered itself a development stage enterprise. During the year ended December 31, 2011, the Company has generated approximately $61,000 in revenue and made significant progress toward achieving its intended business plan of producing, marketing and selling Light Emitting Diode ("LED") lighting. As a result of the generation of revenue as well as a result of the Company development the Company no longer consider itself a development stage enterprise.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all short-term debt with original maturities of three months or less to be cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments may include cash, accounts receivable, inventory, other assets, loans payable and related accrued interest, and accounts payable. All such instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at March 31, 2012 and December 31, 2011.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are stated at the amount the Company expects to collect. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company's estimate of the allowance for doubtful accounts will change.

As of March 31, 2012 accounts receivable are presented net of an allowance for doubtful accounts of $15,244.

As of December 31, 2011 accounts receivable are presented net of an allowance for doubtful accounts of $14,194.

 
9
 
 
PROPERTY AND EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.

Depreciation is provided for over the estimated useful lives of the related asset using the straight-line method. As of March 31, 2012 property and equipment consists of primarily computer equipment.

Included in leasehold improvements are costs related to the construction of the manufacturing facility in Baltimore Maryland. The leasehold improvements are being amortized using the straight-line method.

The estimated useful lives for significant equipment categories are from 3 to 5 years and for leasehold improvements the useful life is 10 years.

INVENTORY

The Company's inventory consists of entirely of finished goods, and is valued at lower of cost or market price. Cost is determined on a first-in, first-out ("FIFO") basis. To ensure inventory is carried at the lower of cost or market, the Company periodically evaluates the carrying value and also periodically performs an evaluation of inventory for excess and obsolete items. Such evaluations are based on management's judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.

REVENUE RECOGNITION

Revenue is recognized when all of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller's price to the buyer is fixed and determinable; and, (4) collectability is reasonably assured. The Company has earned minimal revenue since inception.

USE OF ESTIMATES

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

 
10
 
 
PROVISION FOR TAXES

Income taxes are provided based upon the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the "more likely than not" standard to allow recognition of such an asset.

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

The Company utilizes the guidance per FASB Codification “ASC 260 "Earnings Per Share". Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive. Such securities, shown below, presented on a common share equivalent basis and outstanding as of March 31, 2012 has been excluded from the per share computations as their effect would be anti-dilutive:

   
March 31, 2012
 
Convertible Preferred Stock
    25,000,000  
Convertible Bridge Notes and Notes Payable
    4,801,673  

The average number of common shares outstanding through March 31, 2012 has been retroactively adjusted for the 1 for 1,918 reverse stock split effective May 14, 2012. AS OF THE DATE OF THIS FILING, THE COMPANY HAS EFFECTED THE SCHEDULED MAY 14, 2012 REVERSE SPLIT OF 1 FOR 1918 COMMON SHARES INCLUDING FILING AN AMENDMENT WITH THE STATE OF DELAWARE AND THE NOTIFICATION OF FINRA.  THE COMPANY HAS NOT YET RECEIVED FINRA APPROVAL OF THE REVERSE.
 
STOCK BASED COMPENSATION

The Company accounts for stock based compensation transactions with employees under the provisions of ASC Topic No. 718, "Compensation, Stock Compensation" ("Topic No. 718"). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income. The fair value of the Company's equity instruments are estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of Topic No. 718.

 
11
 
 
The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, "Equity-Based Payments to Non-Employees" ("Topic No. 505-50"). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of the equity instrument is estimated using the Black- Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to receive cash for the goods or services instead of paying with or using the equity instrument.

REVERSE STOCK SPLIT

All references to the Company's outstanding shares, and options, have been adjusted to give effect to the 1 for 1,918 reverse stock split effective May 14, 2012. On May 10, 2012, the Company filed an amendment to its certificate of incorporation with the Secretary of State of Delaware to effect a 1 for 1,918 reverse split of its common stock effective May 14, 2012. The Company has submitted notification of the reverse split to FINRA. The reverse split notification is under review by FINRA, which has not yet announced the reverse split.
 
Derivative Liabilities

The Company assessed the classification of its derivative financial instruments as of March 31, 2012 and December 31, 2011, which consist of convertible instruments and rights to shares of the Company’s common stock, and determined that such derivatives meet the criteria for liability classification under ASC 815.
 
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.

The Company believes that certain conversion features embedded in its convertible notes payable and rights to the Company’s common stock are not clearly and closely related to the economic characteristics of the Company’s stock price. The Company does not have a sufficient amount of authorized shares to satisfy its obligations under the convertible notes payable and rights to the shares of common stock. Accordingly, the Company has recognized derivative liabilities in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter. The Company uses judgment in determining which valuation is most appropriate for the instrument (e.g., Black Scholes), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate. Upon issuance the fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions, and methodologies:
 
   
March 31,
2012
   
December 31, 2011
 
             
Fair value of Company’s common stock
  $ 0.3836     $ 0.959  
Volatility
    150%-245 %     171%-250 %
Exercise price
  $ 0.1918-0.3452     $ 0.5754-0.959  
Estimated life
 
1 year
   
1 year
 
Risk free interest rate (based on 1-year treasury rate)
    .19 %     .15 %

 
12
 
 
The fair value of our financial instruments at March 31, 2012 and December 31, 2011 are as follows:
 
   
Fair Value Measurements at Reporting Date Using
 
   
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
   
Significant Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
 
December 31, 2011:
                 
Derivative Liabilty
 
$
—
   
$
—
   
$
300,312
 
 
                       
March 31, 2012:
                       
Derivative Liability
 
$
—
   
$
—
   
$
273,851
 
 
Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, or ASC 820, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:
Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2:
Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3:
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company did not have any Level 2 or Level 3 assets or liabilities as of March 31, 2012 and December 31, 2011, with the exception of its convertible notes payable and derivative liability. The carrying amounts of these liabilities at March 31, 2012 and December 31, 2011, approximate their respective fair value based on the Company’s incremental borrowing rate.

Cash is considered to be highly liquid and easily tradable as of March 31, 2012 and December 31, 2011, and therefore classified as Level 1 within our fair value hierarchy.

In addition, FASB ASC 825-10-25 Fair Value Option, or ASC 825-10-25, was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior periods’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or the sum of stockholders’ deficit.

 
13
 
 
INTANGIBLE ASSETS

License Agreements

License agreements acquired by the Company are reported at acquisition value less accumulated amortization and impairments.

Amortization

Amortization is reported in the income statement straight-line over the estimated useful life of the intangible assets, unless the useful life is indefinite. Amortizable intangible assets are amortized from the date that they are available for use. The estimated useful life of the license agreement is five years which is the term of the underlying license agreement. The license is not yet in use as such the Company has not yet begun amortizing the asset.

Assessment of an intangible asset’s residual value and useful life is performed annually.

As stated in FASB 142 paragraph 11, the accounting for a recognized intangible asset is based on its useful life to the reporting entity. The Company has yet to use the license and as such has not begun amortizing the asset. When the Company does begin the amortization it will be over a 5 year period at $220,000 per year.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
The Company has evaluated recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC and we have not identified any that would have a material impact on the Company’s financial position, or statements.
 
 
14
 
 
NOTE 3 – PROPERTY AND EQUIPMENT
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
             
Computer Equipment
 
$
19,305
   
$
12,985
 
Leasehold Improvements
   
459,722
     
459,722
 
Machinery
   
151,593
     
151,593
 
Accumulated depreciation
   
(43,128
)
   
(30,703
)
Total
 
$
587,492
   
$
593,598
 

In 2011 the Company purchased machinery for $151,593 which is not yet in use. Therefore the Company has yet to depreciate the machine.

Depreciation expense amounted to $12,425 and $0 for the three months ended March 31, 2012 and 2011 respectively.

NOTE 4 - RELATED PARTY TRANSACTIONS
 
Due to Sutton Global Associates:

During the year ending December 31, 2011, the Company received approximately $953,860 in short term net funding from Sutton Global Associates, Inc, a Company 100% owned by Ike Sutton, the Company’s President. Additionally, $300,000 of the loan balance was assigned to a stockholder, $600,000 was rolled over into convertible debt instruments and $500,000 was converted into 10 million shares of Preferred A shares.

During the three months ending March 31, 2012 the Company made net payments of approximately $22,000 to Sutton Global.  Additionally the Company has accrued $60,000 related to consulting fees in accordance with Mr. Suttons employment agreement dated december 1, 2011.

As of March 31, 2012 and December 31, 2011, the balance due to Sutton Global Associates amounted to $96,327 and $59,039, respectively.

Convertible debenture Sutton Global Associates:
 
As mentioned above, in 2011, Sutton Global Associates converted $600,000 of its short term funding into two Notes. The Notes bear interest at a rate of 6 % per annum and are convertible into common stock of the Company at the discretion of the holder. The notes are due in April and June of 2012. The Company recorded a $600,000 discount on these convertible notes, related to their beneficial conversion features, and amortized $463,798 for the year ended December 31, 2011. The net note payable, inclusive of unamortized discount was $363,798 as of December 31, 2011. The note has accrued interest of  $24,247 and $21,107 included in accrued expenses, at March 31, 2012 and December 31, 2011 respectively.

In January 2012 Sutton Global Associates converted $300,000 of amounts owed to them into 6,000,000 shares of Preferred A shares. In addition the Company has recognized amortization expense amounting to $132,202. As of March 31, 2012, the convertible loan balance amounted to $200,000.
 
 
15
 
 
NOTE 5 – DEBT

Short term Convertible Debt

In 2011, entities related to the Company’s current President and sole director assigned $300,000 in payables to a shareholder in the form of convertible debt.

In 2011, this stockholder assigned $1,759,893 of the convertible loan payable to investors and converted $66,927 into 15,481 shares of common stock.

In 2011 the Company converted $251,971 in accrued expenses and accounts payable into debt. During this period this liability was assigned to other debt holders

With respect to some of these assigned convertible notes, some of the terms conversion were modified thereby resulting in the Company recording a beneficial conversion with respect to the modifications.

During the year ended December 31, 2011, the Company entered into several short-term convertible notes with a total face amount of $1,755,500. These notes bear interest rates ranging from 5% to 18% payable in full in twelve months or less and which were convertible into shares of Company's common stock at discounts to market on their dates of conversion ranging from 30% to 70% from the market price. These notes have minimum conversion floors ranging from $19.18 to $0.1918 per share.

With respect to the convertibility feature of the assigned convertible notes and the convertible notes entered into during the year ended December 31, 2011 the Company recorded a total beneficial conversion of $2,784,162 (which includes $213,913 resulting from transactions that required derivative accounting). Total amortization amounted to $2,436,190, recorded as other expense during the year ended December 31, 2011.

During the year ended December 31, 2011 the Company has converted a total of $2,395,865 of debt and $13,647 in accrued interest into 1,401,679 shares of common stock. In addition to debt the Company has recorded $1,707,573 of modification expense with respect to the conversion.
 
 
16
 

As of December 31, 2011 the balance of the Company’s short term convertible notes amounted to $1,110,449. The interest on these debentures is accrued and due at the end of the notes term. As of December 31, 2011 the accrued interest amounted to approximately $95,886 and is included in accounts payable and accrued expenses.

During the three months ended March 31, 2012, the Company entered into several short-term convertible notes with a total face amount of $146,000. These notes bear interest rates ranging from 8% to 12% payable in full in twelve months or less and which were convertible into shares of Company's common stock at discounts to market on their dates of conversion ranging from 30% to 70% from the market price. These notes have a minimum conversion floors ranging from $0.04795 to $0.1918 per share.

With respect to the convertibility feature of the assigned convertible notes and the convertible notes entered into during the period ended March 31, 2012 the Company recorded a total beneficial conversion of $419,500 (which includes $90,000 resulting from transactions that required derivative accounting). Total amortization amounted to $369,979, recorded as other expense during the period ended March 31, 2012.

During the period ended March 31, 2012 the Company has converted a total of $309,050 of debt and $4,023 in accrued interest into 1,979,329 shares of common stock. In addition to debt the Company has recorded $208,070 of modification expense with respect to the conversion.
 
As of March 31, 2012 the balance of the Company’s short term convertible notes amounted to $876,630. The interest on these debentures is accrued and due at the end of the notes term. As of March 31, 2012 the accrued interest amounted to approximately $127,496 and is included in accounts payable and accrued expenses.

Other Debt

In October 2010, the Company entered into a secured promissory note for $50,000. The note was payable within 90 days and bears an interest rate of 5%. In connection with this note the Company issued 500,000 shares of its common stock as additional consideration valued at $21,249, and accounted for as interest expense during the year ended December 31, 2010. This note was fully satisfied as of December 31, 2011.

 
17
 
 
NOTE 6 - EQUITY TRANSACTIONS

In Apri1 2010, the Company amended its Articles of Incorporation changing the name of the Company to SavWatt USA, Inc. and increasing their authorized capital shares from 100,000,000 shares to 2,200,000,000 shares designating 2,000,000,000 as common stock and 200,000,000 shares as preferred stock. In September 2011 the Company increased the total capital to 5,000,000,000 shares authorized designating 4,800,000,000 as common stock and 200,000,000 shares as preferred stock. In 2011 the Company designated 25,000,000 shares of the preferred shares to be Series A Cumulative Preferred Stock ("Preferred Series A"). Each share of Preferred Series A is convertible into ten shares of common stock. The Preferred Series A shares vote a single class with the common stock and are entitled to two hundred votes for each share of Preferred Series A.

In January 2012, the Company increased the authorized capital stock to 9,800,000,000 of common stock.

In May 2012, the Company's outstanding shares, and options, have been adjusted to give effect to the 1 for 1,918 reverse stock split.

In January 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.

In July 2011, Sutton Global converted $250,000 of debt into 5,000,000 shares of Preferred Series A stock.

In January 2012, Sutton Global converted $300,000 of debt into 6,000,000 shares of Preferred Series A stock.

The issuance of common stock from January 1, 2011 through December 31, 2011 is summarized in the table below:

   
Number of shares of common stock
   
Fair Value
at Issuance
   
Per Share Value at Issuance
 
                         
Stock issued for related party debt settlement
   
1,303
    $
35,000
    $
26.85
 
Stock issued for services
   
104,921
     
306,671
     
0.959 -26.85
 
Fair value of common stock issued for interest
   
521
     
14,000
     
26.85
 
Common stock issued pursuant to note holder debt conversion – principal
   
1,417,160
     
2,462,792
     
0.1918 - 19.18
 
Common stock issued pursuant to note holder debt conversion – interest
   
9,747
     
13,647
     
.1918-19.18
 
     
1,533,653
     
2,832,110
         

 
18
 
 
The issuance of common stock from January 1, 2012 through March 31, 2012 is summarized in the table below:

   
Number of shares of common stock
   
Fair Value
at Issuance
   
Per Share Value at Issuance
 
Stock issued for services
   
261
   
$
100
   
$
0.5754
 
Cancellation of shares
   
(13,034
)
   
-
     
0.1918
 
Fair value of common stock issued for interest
   
5,214
     
2,000
     
0.3836
 
Common stock issued pursuant to note holder debt conversion – principal
   
1,956,809
     
309,050
     
0.0959-0.3165
 
Common stock issued pursuant to note holder debt conversion – interest
   
22,520
     
4,023
     
0.1343-0.2244
 
     
1,971,769
     
315,173
         

NOTE 7 - COMMITMENTS AND CONTINGENCIES

On July 1, 2010, the Company entered into an employment agreement with Michael Haug, as the Company's CEO, which responsibilities include running the daily operations of SavWatt USA, Inc. The term of the agreement is for one year at a salary of $84,000, and may be renewed upon mutual agreement by the Company and the employee.

The employment agreement with Michael Haug was not renewed and in October 2011, Mr. Haug was appointed Executive Vice President of Sale. Mr. Haug tendered his resignation in March 2012.

On February 11, 2011, the Company entered into a lease for approximately 24,561 square feet at 1100 Wicomico Street, Suite 700, Baltimore, Maryland, under a written lease for a term of ten years. This new facility will be the Company's new principal executive offices, as well as a manufacturing and assembly facility. The Company will not have to pay rent on this facility until February 1, 2012. In accordance with ASC 840 Leases, the Company has recorded a $74,280 liability in recognition of this rent holiday as of September 30, 2011. Thereafter, the Company will pay rent as follows:
 
February 1, 2012 - January 31, 2013
$ 9,926.74 per month
February 1, 2013 - January 31, 2016
$ 11,564.14 per month
February 1, 2016 - January 31, 2019
$ 12,526.11 per month
February 1, 2019 - January 31, 2021
$ 13,549.49 per month

In December 2011, The Company entered in to a new lease for approximately 2,886 square feet at 7927 Jonas Brench Drive, Suite 3300, McClean, VA, under a written lease for a term of 2 years. Under the terms of the lease the annual base rent is approximately $ 58,000. This new facility will be used by the Company for sales.

The Company has entered into an exclusive worldwide license for LED lights with P2i Limited (“P2i”), a company incorporated in England, utilizing P2i's liquid repellent nano-coating technology.

Under the terms of The Technology Exclusivity Agreement (“P2i Agreement”) with P2i, the Company is granted an exclusive worldwide license to P2i patents for liquid repellent nano-coating technology (“repellent technology”) with respect to its application for LED lighting. The term of the P2i Agreement is for five years commencing July 14, 2011. The payment due under the agreement is $1,100,000 within an initial payment and additional payments on each of the four subsequent anniversary dates of the agreement. The P2i Agreement will be amortized over the life of the agreement.

 
19
 
 
In addition to the P2i Agreement, the Company also entered into an Equipment Purchase and Technology License Agreement (“P2i Equipment Agreement”) with P2i. This agreement runs a concurrent term with that of the p2i Agreement. Under the P2i Equipment Agreement, the Company is obligated to purchase an initial machine, during the first year, from P2i, that applies their repellent technology. The Company is also required to pay P2i a royalty for product made using their technology under the P2i Equipment Agreement.

The Company plans to initially perform this process in its Baltimore facility with future facilities to be established worldwide. In addition, the Company has the right to sub-license this technology to its worldwide partners.

NOTE 8 – SUBSEQUENT EVENTS

Since March 31, 2012, the Company recorded the following transactions:

-
Issued 549,680 shares of common stock pursuant to the conversion of $56,650 in short term loans
-
Issued 1,199,166 shares of common stock pursuant to the conversion of $115,000 in short term loans from a related party.
-
Issued 9,000,000 shares of preferred stock pursuant to the conversion of $90,000 in short term loans from a related party.
-
Received proceeds amounting to $27,500 related to the issuance of short term loans.
 
On April 11, 2012, the Company entered into a consulting agreement (the “Consulting Agreement”) with C&S Solar Holdings, LLC (the “Consultant”). Pursuant to the Consulting Agreement, for a term of three years, the Consultant was engaged by the Company to develop, manage and supervise the Company’s new renewable energy department, renewable energy projects, and provide related services. The Company agreed to pay Consultant (i) base compensation of $900,000, payable in the amount of $25,000 per month over 36 months, (ii) a commission fee equal to 2% of the gross contract price for each contract executed during the term of the Consulting Agreement in the renewable energy department, (iii) a sales commission equal to 3% of the contract price on all sales originated and consummated by Consultant or its representatives, and (iv) a sales commission equal to 1% of the contract price on all sales originated to the renewable energy department by any person or entity other than Consultant or its representatives. The Company further agreed to issue to Consultant 1% of the Company’s authorized shares of common stock annually for every $10,000,000 in sales contracted in the renewable energy department, up to an aggregate of 10% of the Company’s authorized shares of common stock, and an additional 400,000,000 shares of common stock upon the assignment of the Blue Energy & Solar NJ and Waldwick Solar, LLC contract, for the purchase and installation of a solar photovoltaic energy system at certain real property and premises in Waldwick, Bergen County, New Jersey. The Company also granted to Consultant the right to appoint one member of the Company’s board of directors, and Consultant appointed its chief executive officer, Chris Paphites, to the Company’s board of directors. The Company shall pay Mr. Paphites $1,000 per month for serving on the Company’s board of directors. The Company may terminate the Consulting Agreement in the event Consultant fails to book a minimum of $5,000,000 in renewable energy project revenue prior to December 31, 2012.

On April 23, 2012 the Company filed a Schedule 14C giving notice that the holders of more than a majority of the voting power of the shareholders of the “Company, have approved an amendment to the certificate of incorporation to effect a 1,918-to-1 reverse split of the common stock, par value $0.0001 (“Common Stock”). The Company filed the certificate of amendment with the Secretary of Delaware on May 10, 2012 with an effective date for the reverse split of May 14, 2012. The Company has submitted notification of the reverse split to FINRA. The reverse split notification is under review by FINRA, which has not yet announced the reverse split.

 
20
 
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY FORWARD - LOOKING STATEMENT

This Form 10-Q contains "forward-looking statements". Some of the statements contained in this Form 10-Q for SavWatt USA, Inc., ("Company"), discuss future expectations, contain projections of results of operation or financial condition or state other "forward-looking" information. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions.

Management expresses its expectations, beliefs and projections in good faith and believes the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, Management cannot assure current stockholders or prospective stockholders that these expectations, beliefs and projections will prove to be correct. Such forward-looking statements reflect the current views of Management with respect to the Company and anticipated future events.

Management cautions current stockholders and prospective stockholders that such forward-looking statements, including, without limitation, those relating to the Company's future business prospects, demand for its products, revenues, capital needs, expenses, development and operation costs, wherever they occur in this Form 10-Q, as well as in the documents incorporated by reference herein, are not guarantees of future performance or results, but are simply estimates reflecting the best judgment of Management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by such forward-looking statements.

Important factors that may cause actual results to differ from projections include, for example:
 
* the success or failure of management's efforts to implement their business strategy;
* the ability of the Company to raise sufficient capital to meet operating requirements;
* the uncertainty of consumer demand for our products, services and technologies;
* the ability of the Company to protect its intellectual property rights;
* the ability of the Company to compete with major established companies;
* the effect of changing economic conditions;
* the ability of the Company to attract and retain quality employees;
* the current global recession and financial uncertainty; and
* other risks which may be described in future filings with the SEC.

Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such forward-looking statements. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
 
 
21
 
 
GENERAL

The Company was incorporated on October 20, 2006, under the name of Ludvik Capital, Inc. We changed our name to SavWatt USA, Inc. on April 5, 2010. On January 12, 2007, we filed a Form 10 registration statement under section 12(g) of the Securities Exchange Act of 1934, as amended ("Exchange Act"). As a consequence of filing our Form 10, we became subject to the periodic reporting requirements of the Exchange Act and were required to file Annual Reports of Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements pursuant to Regulation 14A and Schedule 14C Information Statements pursuant to the Exchange Act.

The financial statements included in this Form 10-Q have been prepared in accordance with generally accepted accounting principles for financial information and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for smaller reporting companies. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the three month period ended March 31, 2012 have been reflected herein.

The results of operations for the period ended March 31, 2012 are not necessarily indicative of the results to be expected in the future. These statements should be read in conjunction with the audited financial statements for the year ended December 31, 2011 included in our previously filed Form 10-K.
 
AS OF THE DATE OF THIS FILING, THE COMPANY HAS EFFECTED THE SCHEDULED MAY 14, 2012 REVERSE SPLIT OF 1 FOR 1918 COMMON SHARES INCLUDING FILING AN AMENDMENT WITH THE STATE OF DELAWARE AND THE NOTIFICATION OF FINRA.  THE COMPANY HAS NOT YET RECEIVED FINRA APPROVAL OF THE REVERSE.
 
RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

The Company has generated minimal revenues since its inception on October 20, 2006.

The Company's operations for the three months ended March 31, 2012 and 2011 consist of General and administrative expenses incurred in the amount of $513,137 and $292,143 respectively and professional fees amounting to $135,103 and $170,965, respectively.

 
22
 
 
LIQUIDITY AND CAPITAL RESOURCES

We had minimal cash on hand as of March 31, 2012 and a working capital deficiency of $2,877,491. We will continue to need additional cash during the following twelve months and these needs will coincide with the cash demands resulting from implementing our business plan and remaining current with our Securities and Exchange Commission filings. There is no assurance that we will be able to obtain additional capital as required, or obtain the capital on acceptable terms and conditions.

GOING CONCERN
 
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has not begun generating significant revenues, and has experienced recurring net operating losses from operations and had a net loss from operations of $1,505,452 for the three months ended March 31, 2012. These factors raise substantial doubt about the Company's ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. We will need to raise funds or implement our business plan to continue operations.

OFF-BALANCE SHEET ARRANGEMENTS

We do 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 that is material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
Not applicable.

 
23
 
 
ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of March 31, 2012, that our disclosure controls and procedures were effective as of March 31, 2012.
 
(b) Changes in Internal Control over Financial Reporting during the quarter ended March 31, 2012, there has been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures provide our principal executive officer and principal financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

 
24
 
 
PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
 
The Company is currently involved in three lawsuits. The first lawsuit involves a former employee of the Company and is being resolved by the Company's insurance carrier and the other two involve breach of contract. The Company intends to defend itself vigoursly in these matters. At this time, the company is unable to ascertain the outcomes of these suits and has not made any provisions other than the amounts due and under dispute.
 
ITEM 1A. RISK FACTORS
 
Not applicable.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4. MINE SAFETY DISCLOSURES
 
Not applicable.
 
ITEM 5. OTHER INFORMATION
 
None.
 
 
25
 
 
ITEM 6. EXHIBITS
 
See Exhibit Index below for exhibits required by Item 601 of regulation S-K.
 
EXHIBIT INDEX
 
Exhibit
 
Description
     
31.1
 
Certification under Section 302 of Sarbanes-Oxley Act of 2002.
     
32.1
 
Certification under Section 906 of Sarbanes-Oxley Act of 2002.
 
101.INS **
 
XBRL Instance Document
     
101.SCH **
 
XBRL Taxonomy Extension Schema Document
     
101.CAL **
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
 
XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
26
 
 
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 hereunto duly authorized.
 
 
SavWatt USA, Inc.
 
       
Dated: May 21, 2012
By:
/s/ Isaac H.  Sutton
 
   
Isaac H.  Sutton,
 
   
Its: Chief Executive Officer, Interim Financial Officer
 
   
(Principal executive officer, Principal financial officer and Principal accounting officer)
 
 
 
 
 
 
 
27
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