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EX-23.1 - EXHIBIT 23.1 - SUNVALLEY SOLAR, INC. | ex23_1.htm |
Amendment # 4
Nevada
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1600
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20-8415633
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(State or other jurisdiction of incorporation or organization)
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(Primary Standard Industrial Classification Code Number)
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(I.R.S. Employer Identification Number)
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398 Lemon Creek Dr., Suite A
Walnut, CA 91789
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(Address of principal executive offices)
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Registrant's telephone number, including area code: (909) 598-0618
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Val-U-Corp Services, Inc.
1802 North Carson St., Ste. 108
Carson City, NV 89701
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(Name and address of agent for service of process)
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Telephone number of agent for service of process: (775) 887-8853
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
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CALCULATION OF REGISTRATION FEE | ||||
TITLE OF EACH
CLASS OF
SECURITIES
TO BE
REGISTERED
|
AMOUNT TO BE
REGISTERED(2)
|
PROPOSED
MAXIMUM
OFFERING
PRICE PER
SHARE (3)
|
PROPOSED
MAXIMUM
AGGREGATE
OFFERING
PRICE (4)
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AMOUNT OF
REGISTRATION
FEE(1)
|
Common Stock
|
106,666,663
|
$0.01395
|
$1,488,000
|
$172.76
|
(1) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) under the Securities Act. |
(2) | Representing shares of the Company to be offered through an equity financing arrangement and shares to be sold by the Selling Shareholder. |
(3) | Based on Rule 457 under the Securities Act |
(4) |
This amount is equal to approximately one-third of the current publicly traded common stock of the Company, and is less than the maximum aggregate value of common stock which may be drawn from the Underwriter by the registrant pursuant to the terms and conditions of a Drawdown Equity Financing Agreement between the Underwriter and the registrant.
In the event that the market price of our common stock decreases in value, the offering price per share will, pursuant to the terms of a Drawdown Equity Financing Agreement between the Underwriter and the registrant, be correspondingly decreased resulting in a lower aggregate offering price than the figure listed. |
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Because our auditor has raised substantial doubt about our ability to continue as a going concern, our business has a high risk of failure. | 8 |
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Our auditors have issued a going concern opinion and have raised substantial doubt about our ability to continue as a going concern. When an auditor issues a going concern opinion, the auditor has substantial doubt that the company will continue to operate indefinitely and not go out of business and liquidate its assets. This is a significant risk to investors who purchase shares of our common stock because there is an increased risk that we may not be able to generate and/or raise enough resources to remain operational for an indefinite period of time.
The proceeds of our transaction with Auctus, as detailed below, will be used to fund the development and expansion of our business plan. In order to move forward with our complete business development plan as set forth in this Prospectus, we will require additional financing in the approximate amount of $4,500,000, to be allocated as follows:
Initiate OEM Manufacturing | $ | 2,000,000 |
R &D Commercialization Costs | $ | 500,000 |
Expansion of Installation Business (3 new branches) | $ | 1,500,000 |
Additional working capital and general corporate | $ | 500,000 |
Total capital needs | $ | 4,500,000 |
We intend to execute the business expansion plans described herein over the course of the next 2-3 years. In order for us to do so, however, we will require additional financing, including the financing available under our transaction with Auctus.
In connection with the DEFA, we have agreed to issue and sell to Auctus, and Auctus has committed to purchase from us, up to $10,000,000 worth of our common stock (“Shares”), par value $0.001 per share over a three year period. At the date of filing, we may not obtain the full $10,000,000 in funding as our average trading price is too low. The DEFA specifies that $10,000,000 is the total amount of available funding in the DEFA. Currently, we anticipate that our total capital needs for our planned business development and expansion are approximately $4.5 million. The DEFA recites $10,000,000 because this is the maximum amount of funding that Auctus is prepared to offer our company. The $10,000,000 is not a reflection of our total capital needs at this time, and we currently do not anticipate accessing the entire available equity line. There is no assurance that the market price of our common stock will increase substantially in the near future. The number of commons shares that remains issuable is lower than the number of common shares we may need to issue in order to have access to the full amount under the DEFA. Therefore, we may not have access to the remaining commitment under the equity line unless we amend our Articles of Incorporation to increase the number of authorized common shares and/or the market price of our common stock increases substantially. Based on our stock price as of January 20, 2011, the registration statement covers the offer and possible sale of only approximately $1,488,000 worth of our shares at current discounted market price of $0.01395 or approximately 93% of $0.015 (our market price at January 20, 2011.) There are no fees or commissions payable in connection with any future sale of common stock to Auctus. We paid a one-time, non-refundable origination fee of $15,000 to Auctus in connection with the DEFA. We are authorized to issue 1,500,000,000 shares of common stock and have 803,068,420 shares issued and outstanding as of January 24, 2011. The number of common shares that remains issuable is lower than the number of common shares we need to issue in order to have access to the full amount under the DEFA. In order to access the entire $10,000,000 in available equity funding at a price of $0.01395 per share, would need to issue a total of 716,845,878 shares, which would constitute a total of approximately 47.26% of our issued and outstanding common stock when issued. This figure would, however, exceed the total number of authorized common shares issuable under our Articles of Incorporation. Therefore, we may not have access to the remaining commitment under the equity line unless we amend our Articles of Incorporation to increase the number of authorized common shares and/or the market price of our common stock increase substantially. The 106,666,663 shares being offered in this Prospectus would, upon issuance, constitute approximately 11.76% of our issued and outstanding common stock.
The maximum amount that we shall be entitled to request from each advance (“Advance”) shall be equal to, at the Company’s election, either (i) $500,000 or (ii) 200% of the average daily volume (U.S. market only) of the common stock based on the ten (10) trading days preceding the Drawdown Notice Date (as defined in the DEFA), whichever is larger. The purchase price of the common stock shall be set at ninety-three percent (93%) of the lowest closing bid price of the common stock during the pricing period. The pricing period shall be the five (5) consecutive trading days immediately after the Drawdown Notice Date.
A total of 106,666, 663 shares are being offered under this Prospectus. At a price of $0.01395, a sale of all of these shares to Auctus would represent total proceeds to us of $1,488.000. Our actual sale prices to Auctus, however, will be determined by reference to the trading price of our common stock in the market, with Auctus receiving a discount from the market trading price as indicated above. Because market prices of our common stock are subject to constant fluctuations, the actual amount to be received by us upon sale of the 106,666,663 shares being offered could vary substantially from the listed offering amount of $1,488,000. If our stock price were to decrease, the total proceeds available to us upon sale of the shares being offered under this Prospectus could correspondingly decrease substantially.
The table below illustrates a range of proceeds which may be received by us upon sale of the 106,666.663 shares being offered, assuming a range of different market prices for our common stock:
Market price | $.005 | $0.01 | $0.015 | $0.02 |
Price to Auctus | $0.00465 | $0.0093 | $0.01395 | $0.0186 |
Proceeds upon sale of all 106,666,663 shares to Auctus |
$496,000 | $992,000 | $1,488,000 | $1,984,000 |
In addition to decreasing the proceeds available to us upon sale of the shares being offered under this Prospectus, a decline in our stock trading price would also substantially increase the total amount of shares that we would be required to issue in order to access the entire $10,000,000 available under the equity line.
The table below illustrates a range of the total shares that would need to be issued in order for us to access the entire $10,000,000 equity line, assuming a range of different market prices for our common stock:
Market price | $.005 | $0.01 | $0.015 | $0.02 |
Price to Auctus | $0.00465 | $0.0093 | $0.01395 | $0.0186 |
Total shares issuable to receive $10,000,000 | 2,150,537,634 | 1,075,268,817 | 716,845,878 | 537,634,409 |
During the five trading days following a drawdown request, we will calculate the amount of shares we will sell to Auctus and the purchase price per share. The purchase price per share of common stock will be based on the lowest closing bid prices of our common stock during the five trading days immediately following the drawdown date, less a discount of 7%. There shall be a minimum of five (5) Trading Days between each Drawdown Notice Date. Under the DEFA, Auctus shall immediately cease selling any shares within a Drawdown Notice if the price falls below a fixed-price floor provided by the Company or seventy-five percent (75%) of the average closing bid price of the common stock over the preceding ten (10) trading days prior to the Drawdown Notice Date (the “Floor”). Under the DEFA, the floor price restriction applies during the five day trading period following our issuance of a draw-down notice. Notwithstanding, we may, in our sole and absolute discretion, waive its right with respect to the Floor and allow Auctus to sell any shares below the Floor Price. In the event that we do not waive its right with respect to the Floor, Auctus shall immediately cease selling any shares within the Drawdown Notice if the price falls below the Floor Price. If we do waive the floor price it could cause the share price to fall substantially. The floor price restriction only applies to the five day trading period then the transaction is closed. In the event that we chose to waive the Floor Price restriction, this action could cause the market value of our common stock to decrease, resulting in a larger number of shares issuable pursuant to the drawdown request to increase.
In addition, there is an ownership limit of 4.99% under the DEFA. This means that the number of shares issuable to Auctus pursuant to any equity advance under the DEFA may not cause the aggregate amount of our common stock owned by Auctus to exceed 4.99% of our total issued and outstanding common stock. As discussed above, the number of shares that must be issued in order to receive a given amount of funding under the equity line will increase if the market price of our common stock declines. If the average trading in our common stock is too low, it is possible that we may not be permitted to draw the full amount of proceeds of the drawdown of $500,000, which may not provide adequate funding for our planned operations.
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The shares delivered to Auctus must be done so through a Deposit/Withdrawal at Custodian (DWAC) from a Deposit Trust Company and shares must have proof that they are free of restrictive legends.
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·
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Our Registration Statement with respect to the resale of the shares of Common Stock delivered in connection with the Advance shall have been declared effective.
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·
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We shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the Registrable Securities..
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·
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We shall have filed with the SEC in a timely manner all reports, notices and other documents required.
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·
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All fees set forth in Section 12.4 of the DEFA shall have been paid or withheld.
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·
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Our transfer agent is DWAC eligible.
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Payments for Each
Number of Days Overdue
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For each $10,000
Worth of Common Stock
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1 | $ | 100 | |
2 | $ | 200 | |
3 | $ | 300 | |
4 | $ | 400 | |
5 | $ | 500 | |
6 | $ | 600 | |
7 | $ | 700 | |
8 | $ | 800 | |
9 | $ | 900 | |
10 | $ | 1000 | |
Over 10
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$1000 + $200 for each Business Day beyond the tenth day
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Securities Being Offered
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Up to 106,666,663 shares of our common stock.
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Securities Issued and to be Issued
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803,068,420 shares of our common stock are issued and outstanding as of the date of this prospectus. 909,735,083 shares will be issued and outstanding after completion of this offering.
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Use of Proceeds
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We will not receive any proceeds from the sale of the shares of common stock offered by Auctus. However, we will receive proceeds from Auctus under the DEFA. See “Use of Proceeds”.
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Summary Financial Information | ||||||||
Balance Sheet Data
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Three
Months Ended
March
31, 2011
(unaudited)
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Fiscal
Year Ended
December
31, 2009
(derived
from audited financial information)
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Fiscal
Year Ended December 31, 2010
(derived
from audited financial information)
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|||||
Cash
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$ | 429,054 | $ | 309,453 | $ | 546,164 | ||
Total Assets | $ | 3,114,096 | $ | 4,090,291 | $ | 3,186,456 | ||
Liabilities | $ | 3,251,124 | $ | 3,796,595 | $ | 3,068,599 | ||
Total Stockholder’s Equity (Deficit) | $ | (137,028) | $ | 293,696 | $ | 117,857 | ||
Statement
of Operations
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||||||||
Revenue
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$ | 797,810 | $ | 4,413,033 | $ | 4,634,140 | ||
Net Income (Loss) for Reporting Period | $ | (202,504) | $ | (587,859) | $ | (375,839) |
Because our auditor has raised substantial doubt about our ability to continue as a going concern, our business has a high risk of failure.
The audit report of Sadler, Gibb & Associates, LLC includes a going concern opinion and raises substantial doubt as to our ability to continue as a going concern. When an auditor issues a going concern opinion, the auditor has substantial doubt that the company will continue to operate indefinitely and not go out of business and liquidate its assets. This is a significant risk to investors who purchase shares of our common stock because there is an increased risk that we may not be able to generate and/or raise enough resources to remain operational for an indefinite period of time.
The long term success of our business operations will depend upon our ability to achieve profitable operations on a consistent basis through sales of our solar energy products and services. In order to fund our working capital needs and business expansion plans, we are seeking additional financing. There can be no assurance that such additional financing will be available to us on acceptable terms or at all. It is not possible at this time for us to predict with assurance the outcome of these matters. If we are not able to successfully complete the development of our business plan and attain sustainable profitable operations, then our business will fail.
§
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Deliver to the customer, and obtain a written receipt for, a disclosure document;
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§
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Disclose certain price information about the stock;
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§
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Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
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§
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Send monthly statements to customers with market and price information about the penny stock; and
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§
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In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.
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If the market price of our common stock declines, we may be unable to receive the full $1,488,000 in funding being sought under this Prospectus.
The common stock to be issued to Auctus pursuant to the Drawdown Equity Financing Agreement (“DEFA”) will be purchased at a seven percent (7%) discount to the lowest closing “best bid” price of the common stock during the five consecutive trading days immediately following the date of our notice to Auctus of our Drawdown Notice. A total of 106,666, 663 shares are being offered under this Prospectus. At a price of $0.01395, a sale of all of these shares to Auctus would represent total proceeds to us of $1,488.000. Our actual sale prices to Auctus, however, will be determined by reference to the trading price of our common stock in the market, with Auctus receiving a discount from the market trading price as indicated above. Because market prices of our common stock are subject to constant fluctuations, the actual amount to be received by us upon sale of the 106,666,663 shares being offered could vary substantially from the listed offering amount of $1,488,000. If our stock price were to decrease, the total proceeds available to us upon sale of all of the shares being offered under this Prospectus could correspondingly decrease substantially.
In addition to decreasing the proceeds available to us upon sale of the shares being offered under this Prospectus, a decline in our stock trading price would also substantially increase the total amount of shares that we would be required to issue in order to access all or part of the $10,000,000 in total funding available under the equity line. The lower our stock price is at the time we exercise our put option, the more shares of our common stock we will have to issue to Auctus in order to drawdown on the facility. We may be required to issue a substantial number of additional shares in order to access each additional Advance from Auctus if our market price declines. If our stock price decreases, our existing shareholders would experience greater dilution upon each advance made under the equity line.
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Amount Assuming
Maximum Offering |
Percent of
Maximum
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|||||
GROSS OFFERING
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$ | 1,488,000 | 100.0 | % | |||
Offering expenses 1
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$ | 8,000 | 0.5 | % | |||
Net Proceeds
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$ | 1,480,000 | 99.5.0 | % | |||
USE OF NET PROCEEDS
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|||||||
OEM
panel manufacturing 2
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500,000 | 33.78 | % | ||||
Working
capital 3
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280,000 | 18.92 | % | ||||
Advanced
Solar Technology Development 4
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200, 000 | 13.51 | % | ||||
Installation
Business Expanding 5
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500,000 | 33.78 | % | ||||
TOTAL APPLICATION OF NET PROCEEDS
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$ | 1,480,000 | 99.50 | % |
1 Offering expenses: A portion of the gross offering proceeds will be used to pay certain expenses related to the offering, including, legal, accounting, and transfer agent fees.
2 OEM Panel Manufacturing: Our planned investment in OEM panel manufacturing will be used 1) to register and certify OEM panels with the Sunvalley brand, and 2) for inventory to be used in marketing promotions of the new panels, marketing costs, and OEM management and other related costs, such as warehouse rental and warehouse equipment, conference, and business travel.
3 Working Capital: To expand our business, we need to increase our employee numbers, field equipment, office space, and related resources. The additional working capital will be used for salary and benefits for additional employees, additional office equipments, other additional operational costs (including traveling, conference, etc) and an expanded marketing and advertising budget.
4 Advanced Solar Technology Development; In order to commercialize our patent-pending advanced technology into PV panel manufacturing,an initial $200,000 is needed. These funds would be used for equipment leasing for design and fabrication trials, purchasing for sample panels and inverters, additional patent applications, conference and publication, manufacturing product line and equipment usage costs, and costs for manufacturer collaboration.
5 Installation Business Expanding: To expand our installation business in California and other states, we are planning to establish new facilities in Northern California, San Diego and Nevada on a step-by-step basis. The cost for each new branch would be approximately $500,000, including salary and benefits for new employees, office, equipment and other facility costs, marketing and advertising in the new location, as well as other operational costs and professional fees (such as acquisition, license, insurance, etc).
A total of 106,666, 663 shares are being offered under this Prospectus. At a price of $0.01395, a sale of all of these shares to Auctus would represent total proceeds to us of $1,488.000. Our actual sale prices to Auctus, however, will be determined by reference to the trading price of our common stock in the market, with Auctus receiving a discount from the market trading price as indicated above. Because market prices of our common stock are subject to constant fluctuations, the actual amount to be received by us upon sale of the 106,666,663 shares being offered could vary substantially from the listed offering amount of $1,488,000. If our stock price were to decrease, the total proceeds available to us upon sale of the shares being offered under this Prospectus could correspondingly decrease substantially.
The table below illustrates a range of proceeds which may be received by us upon sale of the 106,666.663 shares being offered, assuming a range of different market prices for our common stock, and our intended use of proceeds under each alternative scenario:
Market price | $.005 | $0.01 | $0.015 | $0.02 |
Price to Auctus | $0.00465 | $0.0093 | $0.01395 | $0.0186 |
Gross Offering Proceeds | $496,000 | $992,000 | $1,488,000 | $1,984,000 |
Offering expenses 1 | $8,000 | $8,000 | $8,000 | $8,000 |
Net Proceeds | $488,000 | $984,000 | $1,480,000 | $1,976,000 |
OEM panel manufacturing2 | 0 | $500,000 | $500,000 | |
Working capital3 | $288,000 | $284,000 | $280,000 | $280,000 |
Advanced Solar Technology Development4 | $200,000 | $200,000 | $200, 000 | $200,000 |
Installation Business Expanding5 | 0 | $500,000 | $500,000 | $996,000 |
TOTAL APPLICATION OF NET PROCEEDS | $488,000 | $984,000 | 1,480,000 | $1,976,000 |
Name of Selling Shareholder
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Shares Owned Prior to this Offering(1)
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Total Number of Shares to be Offered for Selling Shareholder Account
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Total Shares to be Owned Upon Completion of this Offering
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Percent Owned Upon Completion of this Offering
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Auctus Private Equity Fund, LLC(2)
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0
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106,666,663
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0
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0
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Auctus may sell some or all of the common stock it owns or may acquire under the DEFA in one or more transactions, including block transactions:
1. | on such public markets or exchanges as the common stock may from time to time be trading; |
2. | in privately negotiated transactions; |
3. | through the writing of options on the common stock; or |
4. | in any combination of these methods of distribution. |
Regulation M
During such time as it may be engaged in a distribution of any of the shares we are registering by this registration statement, Auctus is required to comply with Regulation M. In general, Regulation M precludes any selling security holder, any affiliated purchasers and any broker-dealer or other person who participates in a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire distribution is complete. Regulation M defines a "distribution" as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence of special selling efforts and selling methods. Regulation M also defines a "distribution participant" as an underwriter, prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution.
Regulation M under the Exchange Act prohibits, with certain exceptions, participants in a distribution from bidding for or purchasing, for an account in which the participant has a beneficial interest, any of the securities that are the subject of the distribution. Regulation M also governs bids and purchases made in order to stabilize the price of a security in connection with a distribution of the security. We have informed Auctus that the anti-manipulation provisions of Regulation M may apply to the sales of their shares offered by this prospectus, and we have also advised Auctus of the requirements for delivery of this prospectus in connection with any sales of the common stock offered by this prospectus.
We may request a drawdown by sending a drawdown notice to Auctus, stating the amount of the advance requested. During the five trading days following a drawdown request, we will calculate the amount of shares we will sell to Auctus and the purchase price per share. The purchase price per share of common stock will be based on the lowest closing bid prices of our common stock during the five trading days immediately following the drawdown date, less a discount of 7%. The number of shares of Common Stock that Auctus shall purchase pursuant to each advance shall be determined by dividing the amount of the advance by the purchase price. There shall be a minimum of five (5) Trading Days between each Drawdown Notice Date.
1.
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a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;
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2.
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a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);
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3.
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a transaction from which the director derived an improper personal profit; and
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4.
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willful misconduct.
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1.
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such indemnification is expressly required to be made by law;
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2.
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the proceeding was authorized by our Board of Directors;
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3.
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such indemnification is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or
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4.
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such indemnification is required to be made pursuant to the bylaws.
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We are currently party to two Convertible Promissory Notes, each in the amount of $100,000, owing to Asher Enterprises, Inc. The first of these $100,000 Notes is due on October 7, 2011 and the second Note is due on or before January 4, 2012. Both Notes bear interest at a rate of 8% per year and are convertible at a conversion price equal to 61% of the Market Price of our common stock on the conversion date. For purposes of the Notes, “Market Price” is defined as the average of the 3 lowest closing prices for our common stock on the 10 trading days immediately preceding the conversion date. The number of shares issuable upon conversion of the Notes is limited so that the holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares. This condition may be waived at the option of the holder upon not less than 61 days notice.
Cane Clark LLP, our independent legal counsel, has provided an opinion on the validity of our common stock. Cane Clark LLP’s address is 3273 E. Warm Springs Rd., Las Vegas, NV 89120.
We were incorporated as “Western Ridge Minerals, Inc.” on August 16, 2007, in the State of Nevada for the purpose of engaging in mineral exploration. On June 24, 2010, we entered into a Share Exchange Agreement with Sunvalley Solar, Inc. (“Sunvalley”) a California-based solar power technology and system integration company founded in January of 2007. Under the Share Exchange Agreement, we acquired all of the issued and outstanding common stock of Sunvalley. Following the share exchange with Sunvalley, we changed our name to “Sunvalley Solar, Inc.” As a result of entering into the Exchange Agreement, we abandoned our mineral exploration plans and continued with Sunvalley’s existing business of solar power technology, system design and integration.
We are focused on developing its expertise and proprietary technology to install residential, commercial and governmental solar power systems. We offer turnkey solar system solutions for owners, builders and architecture firms that include designing, building, operating, monitoring and maintaining solar power systems. We develop advanced solar technology and deploy to solar power application. Our customers range from small private residences to large commercial solar power users. We have the necessary licenses and expertise to design and install large scale solar power systems. We hold a C-46 Solar License from CBCL (California Board of Contractor License). Some of the large scale commercial solar power systems that we have designed and installed include large office buildings, manufacturing facilities and warehouses. Our proprietary technologies in solar installation provide our customers with a high quality and flexible solar power system solutions at a competitive cost.
We seek to develop as an end-to-end solar energy solution provider by providing system solution, post-sale service, customer technical support, solar system design and field installation.
In 2007 and 2008, Sunvalley’s revenues came from its solar system design and installation business, including both residential and commercial projects. In 2008, Sunvalley produced $2.63M in revenue from solar system design and installation. Starting in November 2008, Sunvalley expanded its business to include solar equipment distribution. Sunvalley established distribution partnerships with Canadian Solar Inc, CEEG SST, Taiwei Solarfilms and PV Powered Inc., to distribute solar panels, solar inverters and other solar equipments to its clients in the U.S.. In 2009 and 2010, Sunvalley achieved $4.413M and $4.634M in revenues respectively, from its installation and distribution business. Meanwhile, since 2007, the company has spent considerable amount of resources on new solar technology research and development. We have a patent-pending technology that we believe is able to increase the efficiency of a solar panel while barely increasing the cost. Further development of this technology is needed in order to apply it in commercialized mass production of solar panels.
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Glossary of Terminology Used In The Solar Power Industry
The following is a glossary of terms commonly used in the solar power industry in order to describe the functioning of solar power products, related technologies, and technological developments:
Absorber — In a photovoltaic device, the material that readily absorbs photons to generate charge carriers (free electrons or holes).
Alternating Current (AC) — A type of electrical current, the direction of which is reversed at regular intervals or cycles. In the United States, the standard is 120 reversals or 60 cycles per second. Electricity transmission networks use AC because voltage can be controlled with relative ease.
Acceptor — A dopant material, such as boron, which has fewer outer shell electrons than required in an otherwise balanced crystal structure, providing a hole, which can accept a free electron.
Ambient Temperature — The temperature of the surrounding area.
Amorphous Silicon — A thin-film, silicon photovoltaic cell having no crystalline structure. Manufactured by depositing layers of doped silicon on a substrate.
Ampere (amp) — A unit of electrical current or rate of flow of electrons. One volt across one ohm of resistance causes a current flow of one ampere.
Angle of Incidence — The angle that a ray of sun makes with a line perpendicular to the surface. For example, a surface that directly faces the sun has a solar angle of incidence of zero, but if the surface is parallel to the sun (for example, sunrise striking a horizontal rooftop), the angle of incidence is 90°.
Antireflection Coating — A thin coating of a material applied to a solar cell surface that reduces the light reflection and increases light transmission.
Cell efficiency – The percentage of electrical energy that a solar cell produces (under optimal conditions) as compared to the total amount of energy from the sun falling on the cell.
Cell Junction — The area of immediate contact between two layers (positive and negative) of a photovoltaic cell. The junction lies at the center of the cell barrier or depletion zone.
Clean Technology— Renewable energy and energy efficiency technologies plus other technologies that make use of resources more environmentally benign and/or reduce carbon emissions.
Conversion efficiency – The percentage of electricity that is created by a solar cell as compared to the amount of energy needed to generate that electricity.
Converter — A unit that converts a direct current (dc) voltage to another dc voltage.
Crystalline Silicon — A type of photovoltaic cell made from a slice of single-crystal silicon or polycrystalline silicon.
Current – The flow of electricity between two points. Measured in amps.
Direct Current (DC) — A type of electricity transmission and distribution by which electricity flows in one direction through the conductor, usually relatively low voltage and high current. To be used for typical 120 volt or 220 volt household appliances, DC must be converted to alternating current, its opposite.
Distributed Power — Generic term for any power supply located near the point where the power is used. Opposite of central power. See stand-alone systems.
Distributed Systems — Systems that are installed at or near the location where the electricity is used, as opposed to central systems that supply electricity to grids. A residential photovoltaic system is a distributed system.
Donor — In a photovoltaic device, an n-type dopant, such as phosphorus, that puts an additional electron into an energy level very near the conduction band; this electron is easily exited into the conduction band where it increases the electrical conductivity over than of an undoped semiconductor.
Efficiency – The ratio of output energy to input energy.
Electrical grid – A large distribution network that delivers electricity over a wide area.
Electrode — A conductor that is brought in conducting contact with a ground.
Electron — An elementary particle of an atom with a negative electrical charge and a mass of 1/1837 of a proton; electrons surround the positively charged nucleus of an atom and determine the chemical properties of an atom. The movement of electrons in an electrical conductor constitutes an electric current.
Energy — The capability of doing work; different forms of energy can be converted to other forms, but the total amount of energy remains the same.
Frequency — The number of repetitions per unit time of a complete waveform, expressed in Hertz (Hz).
Gigawatt (GW) — A unit of power equal to 1 billion Watts; 1 million kilowatts, or 1,000 megawatts.
Greenhouse effect – When heat from the sun becomes trapped in the Earth's atmosphere due to certain gases.
23 |
Grid – A distribution network, including towers, poles, and wires that a utility uses to deliver electricity.
Grid-connected PV system – A solar system that is tied in to the utility's network. When generating more power than necessary, the system supplies the surplus to the grid. At night, the system draws power from the grid.
Heterojunction — A region of electrical contact between two different materials.
Hole — The vacancy where an electron would normally exist in a solid; behaves like a positively charged particle.
Homojunction — The region between an n-layer and a p-layer in a single material, photovoltaic cell.
Incident Light — Light that shines onto the face of a solar cell or module.
Interconnect — A conductor within a module or other means of connection that provides an electrical interconnection between the solar cells.
Inverter — A device that converts direct current electricity to alternating current either for stand-alone systems or to supply power to an electricity grid.
Irradiance — The direct, diffuse, and reflected solar radiation that strikes a surface. Usually expressed in kilowatts per square meter. Irradiance multiplied by time equals insolation.
Kilowatt (kW) — A standard unit of electrical power equal to 1000 watts, or to the energy consumption at a rate of 1000 joules per second.
Kilowatt-Hour (kWh) — 1,000 thousand watts acting over a period of 1 hour. The kWh is a unit of energy. 1 kWh=3600 kJ.
Megawatt (MW) — 1,000 kilowatts, or 1 million watts; standard measure of electric power plant generating capacity.
Monocrystalline solar cell – A type of solar cell made from a thin slice of a single large crystal silicon.
Multicrystalline — A semiconductor (photovoltaic) material composed of variously oriented, small, individual crystals. Sometimes referred to as polycrystalline or semicrystalline.
Multijunction Device — A high-efficiency photovoltaic device containing two or more cell junctions, each of which is optimized for a particular part of the solar spectrum.
24 |
Net metering – A practice used in conjunction with a solar electric system where your electric meter tracks your net power usage, spinning forward when you use electricity from the utility, and spinning backward when your system is generating more electricity than you need.
Orientation — Placement with respect to the cardinal directions, N, S, E, W; azimuth is the measure of orientation from north.
Photoelectric Cell — A device for measuring light intensity that works by converting light falling on, or reach it, to electricity, and then measuring the current; used in photometers.
Photon — A particle of light that acts as an individual unit of energy.
Photovoltaic(s) (PV) — Pertaining to the direct conversion of light into electricity.
Photovoltaic (PV) Array — An interconnected system of PV modules that function as a single electricity-producing unit. The modules are assembled as a discrete structure, with common support or mounting. In smaller systems, an array can consist of a single module.
Photovoltaic (PV) Cell — The smallest semiconductor element within a PV module to perform the immediate conversion of light into electrical energy (direct current voltage and current). Also called a solar cell.
Photovoltaic (PV) Conversion Efficiency — The ratio of the electric power produced by a photovoltaic device to the power of the sunlight incident on the device.
Photovoltaic (PV) Device — A solid-state electrical device that converts light directly into direct current electricity of voltage-current characteristics that are a function of the characteristics of the light source and the materials in and design of the device. Solar photovoltaic devices are made of various semiconductor materials including silicon, cadmium sulfide, cadmium telluride, and gallium arsenide, and in single crystalline, multicrystalline, or amorphous forms.
Photovoltaic (PV) Effect — The phenomenon that occurs when photons, the "particles" in a beam of light, knock electrons loose from the atoms they strike. When this property of light is combined with the properties of semiconductors, electrons flow in one direction across a junction, setting up a voltage. With the addition of circuitry, current will flow and electric power will be available.
Photovoltaic (PV) Module — The smallest environmentally protected, essentially planar assembly of solar cells and ancillary parts, such as interconnections, terminals, [and protective devices such as diodes] intended to generate direct current power under unconcentrated sunlight. The structural (load carrying) member of a module can either be the top layer (superstrate) or the back layer (substrate).
Photovoltaic (PV) Panel — often used interchangeably with PV module (especially in one-module systems), but more accurately used to refer to a physically connected collection of modules (i.e., a laminate string of modules used to achieve a required voltage and current).
25 |
Photovoltaic (PV) System — A complete set of components for converting sunlight into electricity by the photovoltaic process, including the array and balance of system components.
P/N — A semiconductor photovoltaic device structure in which the junction is formed between a p-type layer and an n-type layer.
Polycrystalline — See Multicrystalline.
Polycrystalline Silicon — A material used to make photovoltaic cells, which consist of many crystals unlike single-crystal silicon.
Power Conversion Efficiency — The ratio of output power to input power of the inverter.
Semiconductor — Any material that has a limited capacity for conducting an electric current. Certain semiconductors, including silicon, gallium arsenide, copper indium diselenide, and cadmium telluride, are uniquely suited to the photovoltaic conversion process.
Silicon (Si) — A semi-metallic chemical element that makes an excellent semiconductor material for photovoltaic devices. It crystallizes in face-centered cubic lattice like a diamond. It's commonly found in sand and quartz (as the oxide).
Solar Energy — Electromagnetic energy transmitted from the sun (solar radiation). The amount that reaches the earth is equal to one billionth of total solar energy generated, or the equivalent of about 420 trillion kilowatt-hours.
Solar-Grade Silicon — Intermediate-grade silicon used in the manufacture of solar cells. Less expensive than electronic-grade silicon.
Solar Resource — The amount of solar insolation a site receives, usually measured in kWh/m2/day, which is equivalent to the number of peak sun hours.
Solar Spectrum — The total distribution of electromagnetic radiation emanating from the sun. The different regions of the solar spectrum are described by their wavelength range. The visible region extends from about 390 to 780 nanometers (a nanometer is one billionth of one meter). About 99 percent of solar radiation is contained in a wavelength region from 300 nm (ultraviolet) to 3,000 nm (near-infrared). The combined radiation in the wavelength region from 280 nm to 4,000 nm is called the broadband, or total, solar radiation.
Stand-Alone System — An autonomous or hybrid photovoltaic system not connected to a grid. May or may not have storage, but most stand-alone systems require batteries or some other form of storage.
Standard Test Conditions (STC) — Conditions under which a module is typically tested in a laboratory.
26 |
Storage Battery — A device capable of transforming energy from electric to chemical form and vice versa. The reactions are almost completely reversible. During discharge, chemical energy is converted to electric energy and is consumed in an external circuit or apparatus.
Thin Film — A layer of semiconductor material, such as copper indium diselenide or gallium arsenide, a few microns or less in thickness, used to make photovoltaic cells.
Thin Film Photovoltaic Module — A photovoltaic module constructed with sequential layers of thin film semiconductor materials. See amorphous silicon.
Tilt Angle — The angle at which a photovoltaic array is set to face the sun relative to a horizontal position. The tilt angle can be set or adjusted to maximize seasonal or annual energy collection.
Volt (V) — A unit of electrical force equal to that amount of electromotive force that will cause a steady current of one ampere to flow through a resistance of one ohm.
Voltage — The amount of electromotive force, measured in volts, that exists between two points.
Wafer — A thin sheet of semiconductor (photovoltaic material) made by cutting it from a single crystal or ingot.
Watt — The rate of energy transfer equivalent to one ampere under an electrical pressure of one volt. One watt equals 1/746 horsepower, or one joule per second. It is the product of voltage and current (amperage).
Waveform — The shape of the phase power at a certain frequency and amplitude.
Principal Products and Services
In 2007 and 2008, 100% of our revenues were generated from our Solar Systems Design and Installation business. In 2009, 87.9% ($3.879 million) of our revenues were generated from our Solar Equipment Distribution business and 12.1% ($0.534 million) were generated from our Solar Systems Design and Installation business. In 2010, 89.23% ($4.135 million) of our revenues were generated from our Solar Equipment Distribution business and 10.77% ($0.499 million) from our Solar Equipment Distribution business. Our Solar Technology Research and Development and our Distributed Power Plant Projects businesses are in the development stage and have not yet generated revenue.
We are not currently dependent on one or a few major customers for
our revenues. Instead, our total revenues for the last fiscal year were generated from over one hundred different customers.
27 |
Sunvalley has obtained a C-46 Solar License
from CBCL (California Board of Contractor License). We use engineers and project managers that have Certification of Solar Power
System Design and Installation from SEI (Solar Energy International Training School). We have been focusing on developing our expertise
and proprietary technology to install large commercial and governmental solar power systems since 2007. We are also able to procure
the necessary equipment and supplies through our distribution partnerships. Some of large scale commercial
solar power systems that we has designed and installed include large office buildings, manufacturing facilities, warehouses and
hotels. In 2008, we were positioned in the top twenty
solar installation companies in terms of total installed solar system size in a list compiled by the California Energy Commission
(CEC). Over 3,000 listed companies had installed solar power systems, and over 90% of these companies were doing residential or
small size commercial solar systems installation. Only a few companies in the list, including Sunvalley, had designed or installed
solar power system projects over 100,000 watts. Our installation business generated all of our revenues in 2007
and 2008, and it remains a significant component of our total revenue structure. Our development efforts in this area focus on
the installation of large commercial and governmental solar power systems, as well as residential solar power systems. Our customers
in this line of business run the gamut from small private residences to large commercial solar power projects. Some of large scale
commercial solar power systems that we have designed and installed include large office buildings, manufacturing facilities, warehouses,
and hotels. Our current systems installation resources, which consist of two
installation worker teams, one engineer/design team, and certain installation equipment, provide us with the capacity to install
solar systems totaling approximately 1 million watts to 1.2 million watts on an annual basis. As of mid-June of 2011, we have
completed, are currently working on, or are scheduled to work on, solar system installation projects that will total 1.1 million
watts for calendar year 2011. Our projects in 2011 consist of some large commercial solar installation contracts, including our
recently-executed contract for a 336 kilowatt project for Diamond Wipes Int’l (filed herewith as Exhibit 10.9), as well
as several smaller commercial and residential solar installation projects. Our engineer/design team and installation worker teams
are now fully booked to capacity for the remainder of 2011. Our sales and marketing team is currently negotiating installation
contracts for 2012. Under the contract with Diamond Wipes Int’l, we have been
engaged to install a 336,000 kW photovoltaic solar power system for an estimated total price of $1,562,400 to be paid as follows: In addition, we have agreed to provide certain warranties to the
customer regarding workmanship, minimum nominal power outputs of the system, and other matters. We expect to begin
work on the system in July of 2011.
We are one of a few companies in California
that has the permit and expertise to install large commercial solar systems (over 150K watts). Design
and installation of a solar power system, especially a large commercial solar power system, requires proper licenses, design capabilities
in electrical systems and solar systems, and constructional (ground or roof) implementation ability, as well as experienced project
management and an understanding of industry regulations. In addition, the ability to procure proper solar equipment is critical
to large commercial solar system projects.
·
5% down payment of $78,120, with $28,120 due upon signature of the Contract,
$20,000 due two months after signature of the Contract, and $30,000 due when the system is placed into service
·
A lump sum payment of $468,720 to be paid within five business days after
the customer receives an anticipated cash grant for the project from the U.S. Treasury Department
·
A stream of monthly payments estimated to total $394,434. These
monthly payments will commence when the customer begins to receive incentive payments related to the project from Southern California
Edison. The actual monthly payments will be equal to the monthly incentive payments received by the customer.
·
A stream of monthly payments totaling $621,126, to be paid in 84 equal
installments of $7,394.36, with payments to begin within five days after the system is approved by the local utility company.
To improve the efficiency of the solar cell without adding more cost to it, we are developing a new metallic sub-wavelength design to realize the combination of the electrodes as SPP generators. A typical PV solar cell operates by receiving sun light on an electric conversion unit or active layer. Active layers have typically been a semi-conductor having a p-n junction to produce electron-hole pairs or excitions whenever illuminated with light. In operation, each electron and hole of produced excition pairs are pulled in opposite directions by the internal electric field of the p-n junction resulting in an electric current. The same effect in organic cells is accomplished via either a bi-layer of acceptor and donor materials or a bulk hetero-junction of an acceptor and donor material. The resultant electric current may be extracted by electrodes and delivered to an electric circuit to an electricity storage device.
Despite this successful development and implementation, PV solar cell technologies have not yet been completely satisfactory for their intended purpose since manufacturing costs are high and efficiencies are too low for PV solar technologies to compete with non-renewable energies in terms of costs per energy watt produced.
As one of potential solutions, it has been discovered that surface plasmon polariton (SPP) assisted solar technologies may be developed to result in enhanced electricity production due to surface resonant excitation or surface Plasmon resonance (SPR). SPP assisted PV cells have heretofore operated by using the enhanced electrical fields produced by the SPR to either be directly converted to electricity or concentrate the light onto an active layer. With this technology, the efficiency of the solar cell can be increased, therefore the cost of solar power per watt will be reduced also.
The innovative design will also consider the variant spectral and angles, to guarantee excitation of the SPP at any angle around the bang gap, or absorption region of the solar cell unit. With the successful development of our new PV cells, we are expecting the efficiency of the organic thin-film-based solar cells to be over 10%, which is close to double that of the current commercially available thin film solar cells.
A typical PV solar cell operates by receiving sun light on an electric conversion unit or active layer. Active layers have typically been a semiconductor having a p-n junction to produce an electric current. The efficiency of the conversion depends on purity of the semiconductor, structure of the solar cell, insight spectrum, angle, and power directly to the solar cell, as well as temperature and other environmental conditions.
Our patent-pending technology uses Surface Plasmon Polariton (SPP) assisted solar technologies to enhance electricity production due to surface resonant excitation or Surface Plasmon Resonance (SPR). It will provide an apparatus and related method for efficiently converting solar radiation into electricity wherein the conversion efficiency in thin film active layers is measurable increased.
We believe that deployment of our new technology to increase the panel efficiency will reduce solar panel cost per watt as well as the total system cost. As an example, in the current U.S. market, the cost of thin-film solar panel (a-Si) is approximately $1.1/w. The efficiency of the module is around 7% only. For instance, a-Si thin film solar module TW-SF 95W produced by the Tianwei Soalrfilm is rated 95 watts output power. The market price for this module is $104. With the commercialization and implementation of new solar technologies, such as our patent-pending technology, the efficiency of this module can be increased from 7% to 10%, which in turn will increase the module output power from 95W to 135W with the same module size. So the solar panel cost per watt will be reduced to $0.77/w compared to $1.1/w before. The customer could save $3,300 for a 10,000 watt solar power system based on reduced solar panel cost only. Plus, with higher efficiency solar panels, the racking and electrical accessory cost of the system will be also reduced because fewer panels will be used for the same system size. The total system cost could be reduced over 30%. We expect that implementation of our new technology will reduce the overall cost of the solar power system to a level that is less than or at least comparable with fossil fuel energy sources in the near future.
Though our patent-pending technology is able to increase the efficiency of thin-film-based solar cells to over 10%, commercializing this technology into mass production will involve a trade-off between manufacturing cost per-panel and increased per-panel efficiency. In addition, our new PV cell concept will also need to demonstrate that panels using the technology will have a productive life-span and a tolerance to environmental conditions such as humidity, temperature, wind load that are sufficient for the panels to be used in real life application. Accordingly, there is no guarantee that we will be able to commercially produce and market solar panels using our new PV technology.
We have not yet generated revenues from our patent-pending new technology. With additional capital, however, we hope to commercialize our R&D outputs to our PV panels and installation applications. By combining our research and development capability with our existing installation business and planned panel manufacturing operation, we hope to establish a vertically integrated entity that can grow to become a premier supplier of solar panels in the United States.
·
|
Keeping and developing a small but strong R&D team in San Diego
|
·
|
Collaborating with universities in the U.S. and panel manufacturers in China
|
·
|
Effectively use resources from research institutes and universities in China
|
·
|
Developing new solar technology and parts, focusing on application technologies
|
We are working together with UCSD (University of California, San Diego) to develop Surface Plasmon Polariton (SPP) assisted solar technologies. The equipment and facilities needed to fabricate the device is accessed from University of California, San Diego. The nano- clean room facilities in the School of Engineering at UCSD are equipped with many state of the art micro and nano- fabrication equipment and facility. The interference pattern that will be recorded in the solar cells will be obtained using an Argon laser operating at 362nm. This laser and its associated equipment, is available to us through special arrangement with the administration of the University of California, San Diego, as well as the Ultrafast and Nano- scale Optics lab in the Department of Electrical and Computer Engineering at UCSD. We are also working together with some panel manufacturers in China to get product line supports to commercialize the patented technology in the panel manufacturing. The panel manufacturers are also providing us some raw materials for lab testing. We are also collaborating with Haerbin Industrial University in China and Shenyang Mechanical Research Institute to develop and prototype a new solar micro-inverter.
·
|
Developing new coating technology to increase the efficiency of PV panel
|
·
|
Develop solar PV application technology to reduce system level cost and increase installation flexibility – racking and panel cleaning system
|
·
|
Commercializing our patented advanced solar technology.
|
In 2009, we had R&D expenses of $35,000 for the development of advanced solar technologies, not including regular salary payment to our research engineers. In 2010, we incurred no R&D expenses except salary payment to our research engineers. None of our R&D costs have been borne directly by our customers.
In recent years, we have signed distribution agreements with three of the largest solar panel producers in the world and one large solar inverter suppliers. Our partnerships with these manufacturers in the solar power industry have allowed us to broaden our customer base and to provide our customers with more cost competitive and complete solar system solutions with multiple selective options on PV panels and inverters. In 2009 and 2010, our solar equipment distribution business has grown to constitute the majority of our revenues.
Although we have not yet generated revenue from the manufacture of our own solar panels, our R&D team has developed a new type of nano-structured solar cell and filed for patent protection in the U.S. as “New Solar Cell Structure with Increased Efficiency” on March 22, 2010, application number 12/729,201. We are currently applying for a Phase-I grant from Department of Energy, entitled "Surface Plasmon Enhanced Solar Cells,” in order to fund additional development of its proprietary solar cell. With proper funding, the new technology could be commercialized and implemented in solar panel manufacture starting from OEM manufactured panels from reputable solar panel manufacturers in China. The manufactured solar panels would use our brand name with its patented technology. We would be responsible for quality control, certification applying, marketing, technical support and services in the United States. Our unique technology, if successfully commercialized and brought to market, would provide the solar panel market with a higher efficiency, lower cost unit than competing panels currently on the market. Our ability to provide after-sale services such as system maintenance, technical support, training, etc. for its customers could add another selling point for promotion of the new panel.
We are in the development stage for a new line of business based on the installation of distributed solar power plants. Although we are not currently generating revenue from the installation of distributed solar power plants, this area is a focus of our ongoing business development. Currently, most proposed solar power plants are stand-alone large scale power plants. Currently, all completed or proposed stand-alone large scale solar power plants were proposed or implemented by large solar panel manufacturers (such as First Solar, Solar Power, etc.) as well as investment bankers, utility companies or large installation companies as a group. We do not have sufficient funds and resources to build stand-alone large scale solar power plant, and we do not intend to develop stand-alone large scale power plants in the near future. Such plants are either solar thermal power plants (using solar panels to generate heat and then using thermal electrical methods to generate electricity) or photovoltaic farms (using PV panels to generate electrical power directly). Stand-alone power plants need to deploy high-voltage transformers, high-voltage power transmission lines, etc. Also, the limiting factor of solar power is that it generates little electricity when skies are cloudy and none at night. Excess power must therefore be produced during sunny hours and stored for use during dark hours. Most energy storage systems such as batteries are expensive or inefficient. Pressurized caverns and hot salt technologies are commonly used right now for these solar power plants, but they will require larger storage room and more complex technology. Due to these reasons, stand-alone power plants naturally are large scale (generally more than 15M Watts), and most of them are built on open public land, such as in a hot desert, due to large installation physical space required and cost of the land.
In year 2009, we designed and installed one 170KW and one 165KW solar power system for a logistic company and a food & oil manufacturer respectively. These two systems will have saved around $900,000 for customers in the first five years in the form of reduced ongoing energy bills. End to end solutions included design and construction of mental shielding frame, roof reconstruction, and solar power system design/installation. These two systems are expected to reduce CO2 emissions by 3,830,067 pounds and 3,736,567 pounds which is the equivalent to planting around 900 acres of trees or removing around 350 cars from the road.
We currently purchase solar panels primarily from two manufacturers, Canadian Solar Inc., and CEEG SST (which was acquired by China Energy in 2010.) For the year ended December 31, 2009, these vendors accounted for approximately 92% of our total inventory purchases. We are the preferred distributor in the USA and the exclusive distributor in Southern California, Nevada and New Mexico of Canadian Solar Inc., which is a top-10 PV manufacturer in the world.
We maintain good relationships with all of our suppliers, and especially with our primary and important suppliers. In addition, we are continuously adding new alternative suppliers to our supplier list. Due to the standardization of solar equipment, all materials we purchase from our suppliers are available from other sources and suppliers.
We are the preferred distributor in the USA and the exclusive distributor in Texas, Nevada and Arizona of CEEG SST (acquired by CSUN in year 2010), one of a few PV panel manufacturers in the world that is able to provide high efficiency mono-crystalline solar panels. We are also the preferred distributor in the USA and the exclusive distributor in Texas, Nevada and Florida of Tianwei Solarfilm, one of the few manufactures in the world that is able to provide high efficiency thin film panels.
Our revenues currently derive from solar system design and installation as well as solar equipment distribution. In order to expand our installation business to states other than California, we will be required to comply with local license requirements by acquiring a local installer or by hiring locally-licensed contractors to serve as officers. For our solar equipment distribution business, no local licensures are required in California or other states.
As a result of continuing global development at all levels of solar equipment manufacturing, including in the area of raw materials supply, in 2009 and 2010, the risk of disruption in the supply of necessary raw materials for solar panels has been greatly reduced in 2011. In addition, we have established solid relationships with several large solar equipment suppliers, allowing us to access multiple sources. For the immediate future, we therefore believe that raw materials for our products will continue to be readily available.
Currently, we believe that the market for solar power in China is not yet mature, while, the European market is overcrowded. As a result, we believe that Chinese manufacturers are looking for business opportunities in the United States. As an established technology and system integration company, Sunvalley maintains a unique position to act as the bridge between Chinese manufacturers and their North American end customers while providing superior value-added services to these customers. Sunvalley has established strategic partnerships with several solar equipment manufacturers, solar power technology companies, and research institutes in China. We have signed a distribution agreement with Canadian Solar, Inc., which is a top-10 PV manufacturer. To further broaden our product coverage and provide its customers with more options on solar panels and inverters, We have also signed distribution agreements with CEEG SST (acquired by CSUN in year 2010) and Taiwei Solarfilms. This will allow us to extend our product coverage from low cost PV panels to high efficiency PV panels and up to thin-film panels. We have also established partnerships with inverter supplier PV Powered, as well as solar racking manufacturers and solar electrical wires providers. The partnership with these manufacturers in the solar power industry allows Sunvalley to provide its customers with a cost competitive, complete solar system solution with multiple selective options on PV panels and inverters.
The specific patent application info is as follows:
EFS ID | 7261431 |
Application Number | 12729201 |
Confirmation Number | 6760 |
Title | A Surface Plasmon Resonance Enhanced Solar Cell Structure with Broad Spectral and Angular Bandwidth and Polarization Insensitivity |
Receipt Date | 22-MAR-2010 |
Application Type | Utility under 35 USC 111(a) |
We lease approximately 2,193 sq ft of office space in the Walnut Tech Business Center located at 398 Lemon Creek Drive, Suite A, Walnut CA 91789 for $3,211 per month. This lease will terminate on May 31, 2011. The property is sufficient for our current business size. We plan to extend our lease for another three years after May 31, 2011.
Fiscal Year Ended December 31, 2010
|
||||
Quarter Ended
|
High $
|
Low $
|
||
December 31, 2010
|
$0.0479
|
$0.0044
|
||
September 30, 2010
|
$0.0802
|
$0.0310
|
||
June 30, 2010
|
$0.0016
|
$0.0016
|
||
March 31, 2010
|
n/a
|
n/a
|
||
Fiscal Year Ending December 31, 2009
|
||||
Quarter Ended
|
High $
|
Low $
|
||
December 31, 2009
|
n/a
|
n/a
|
||
September 30, 2009
|
$0.0003
|
$0.0003
|
||
June 30, 2009
|
n/a
|
n/a
|
||
March 31, 2009
|
n/a
|
n/a
|
36 |
ASSETS
|
||||||||
March
31,
|
December
31,
|
|||||||
2011
|
2010
|
|||||||
(unaudited)
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 429,054 | $ | 546,164 | ||||
Restricted
cash
|
12,500 | 12,500 | ||||||
Accounts
receivable, net
|
619,023 | 546,388 | ||||||
Inventory
|
1,451,056 | 1,925,233 | ||||||
Construction
in progress
|
231,905 | 56,004 | ||||||
Other
receivables
|
21,842 | 7,481 | ||||||
Prepaid
expenses and other current assets
|
242,467 | 15,792 | ||||||
Total
current assets
|
3,007,847 | 3,109,562 | ||||||
PROPERTY
AND EQUIPMENT, NET
|
100,563 | 71,208 | ||||||
OTHER
ASSETS
|
||||||||
Other
assets
|
5,686 | 18,186 | ||||||
Total
other assets
|
5,686 | 5,686 | ||||||
TOTAL
ASSETS
|
$ | 3,114,096 | $ | 3,186,456 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$ | 2,928,055 | $ | 2,883,316 | ||||
Customer
deposits
|
13,927 | 70,070 | ||||||
Accrued
warranty
|
26,867 | 27,688 | ||||||
Current
portion of long-term debt
|
18,719 | 13,256 | ||||||
Convertible
debt
|
100,000 | - | ||||||
Derivative
liability
|
68,234 | - | ||||||
Total
current liabilities
|
3,155,802 | 2,994,330 | ||||||
LONG-TERM
LIABILITIES
|
||||||||
Notes
payable
|
95,322 | 74,269 | ||||||
Total
long-term liabilities
|
95,322 | 74,269 | ||||||
Total
Liabilities
|
3,251,124 | 3,068,599 | ||||||
STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||
Common
stock, $0.001 par value, 1,500,000,000 shares authorized, 803,068,420 shares issued and
outstanding, respectively
|
803,068 | 800,068 | ||||||
Additional
paid-in capital
|
221,332 | 276,713 | ||||||
Accumulated
deficit
|
(1,161,428 | ) | (958,924 | ) | ||||
Total
Stockholders' Equity (Deficit)
|
(102,228 | ) | 117,857 | |||||
STOCKHOLDERS'
EQUITY
|
$ | (137,028 | ) | $ | 3,186,456 |
For
the Three Months Ended
|
||||||||
March
31,
|
||||||||
2011
|
2010
|
|||||||
REVENUES
|
$ | 797,810 | $ | 767,645 | ||||
COST
OF SALES
|
683,446 | 619,267 | ||||||
GROSS
PROFIT
|
114,364 | 148,378 | ||||||
OPERATING
EXPENSES
|
||||||||
Salary
and wage expense
|
142,902 | 127,647 | ||||||
Depreciation
and amortization
|
5,301 | 3,518 | ||||||
General
and administrative expenses
|
165,038 | 93,511 | ||||||
Total
operating expenses
|
313,241 | 224,676 | ||||||
LOSS
FROM OPERATIONS
|
(198,877 | ) | (76,298 | ) | ||||
OTHER
INCOME (EXPENSES)
|
||||||||
Interest
income
|
2,391 | - | ||||||
Interest
expense
|
(3,365 | ) | (354 | ) | ||||
Loss
on derivative liability
|
(2,653 | ) | - | |||||
Total
other income (expenses)
|
(3,627 | ) | (354 | ) | ||||
LOSS
BEFORE TAXES
|
(202,504 | ) | (76,652 | ) | ||||
Provision
for income taxes
|
- | - | ||||||
NET
LOSS
|
$ | (202,504 | ) | $ | (76,652 | ) | ||
LOSS
PER SHARE
|
||||||||
Basic
and diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
||||||||
Basic
and diluted
|
802,735,087 | 485,844,422 |
Common
Stock
|
Additional
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
Paid-In
Capital
|
Deficit
|
Total
|
||||||||||||||||
Balance
at December 31, 2009
|
485,151,406 | $ | 485,151 | $ | 391,630 | $ | (583,085 | ) | $ | 293,696 | ||||||||||
Repurchase
of common stock
|
(5,110,353 | ) | (5,110 | ) | (194,890 | ) | - | (200,000 | ) | |||||||||||
Recapiltalization
|
320,027,367 | 320,027 | (320,027 | ) | - | - | ||||||||||||||
Contributed
capital
|
- | - | 400,000 | - | 400,000 | |||||||||||||||
Net
loss for the year ended December 31, 2010
|
- | - | - | (375,839 | ) | (375,839 | ) | |||||||||||||
Balance
at December 31, 2010
|
800,068,420 | 800,068 | 276,713 | (958,924 | ) | 117,857 | ||||||||||||||
Common stock issued for services | 3,000,000 | 3,000 | 10,200 | - | 13,200 | |||||||||||||||
Adjustment
for derivative liability
|
- | - | (65,581 | ) | - | (65,581 | ) | |||||||||||||
Net
loss for the three months ended March 31, 2011 (unaudited)
|
- | - | - | (202,504 | ) | (202,504 | ) | |||||||||||||
Balance
at March 31, 2011 (unaudited)
|
803,068,420 | $ | 803,068 | $ | 221,332 | $ | (1,161,428 | ) | $ | (137,028 | ) |
For
the Three Months Ended
|
||||||||
March
31,
|
||||||||
2011
|
2010
|
|||||||
OPERATING
ACTIVITIES:
|
||||||||
Net
income (loss)
|
$ | (202,504 | ) | $ | (76,652 | ) | ||
Adjustments
to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Common stock issued for services | 13,200 | - | ||||||
Depreciation
and amortization
|
5,301 | 3,518 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(72,635 | ) | (55,430 | ) | ||||
Inventory
|
474,177 | (197,449 | ) | |||||
Prepaid
expenses and other assets
|
(226,674 | ) | 58,299 | |||||
Construction in Progress | (175,902 | ) | ||||||
Other
receivables
|
(14,361 | ) | (6,006 | ) | ||||
Accounts
payable and accrued warranty expenses
|
43,916 | 181,061 | ||||||
Customer
deposits
|
(56,143 | ) | (1,339 | ) | ||||
Loss
on derivative liability
|
2,653 | |||||||
Net
Cash Provided by (Used) in Operating Activities
|
(208,972 | ) | (93,998 | ) | ||||
INVESTING
ACTIVITIES:
|
||||||||
Purchase
in property and equipment
|
(34,655 | ) | (1,250 | ) | ||||
Net
Cash (Used) in Investing Activities
|
(34,655 | ) | (1,250 | ) | ||||
FINANCING
ACTIVITIES:
|
||||||||
Repayments
from notes payable
|
(3,573 | ) | (3,064 | ) | ||||
Proceeds
from notes payable
|
30,090 | |||||||
Proceeds
from convertible notes
|
100,000 | - | ||||||
Repurchase
of common stock
|
- | (30,000 | ) | |||||
Net
Cash Provided by Financing Activities
|
126,517 | (33,064 | ) | |||||
NET
INCREASE (DECREASE) IN CASH
|
(117,110 | ) | (128,312 | ) | ||||
CASH
AT BEGINNING OF PERIOD
|
546,164 | 309,453 | ||||||
CASH
AT END OF PERIOD
|
$ | 429,054 | 181,141 | |||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||
CASH
PAID FOR:
|
||||||||
Interest
|
$ | 1,545 | $ | 907 | ||||
Income
taxes
|
$ | - | $ | - | ||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES
|
||||||||
Derivative
liability
|
$ | 65,581 | $ | - |
The accompanying notes are an integral part of these financial statements.
2011
|
2010
|
|||||||
Raw
materials
|
$ | 113,842 | $ | 8 | ||||
Work
in Progress
|
47,692 | 6,741 | ||||||
Finished
goods
|
1,289,522 | 1,918,484 | ||||||
$ | 1,451,056 | $ | 1,925,233 |
F-7 |
SADLER, GIBB & ASSOCIATES, L.L.C.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Sunvalley Solar, Inc.
We have audited the accompanying consolidated balance sheets of Sunvalley Solar, Inc., as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Sunvalley Solar, Inc., as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company had losses from operations of $375,839 and accumulated deficit of $958,924, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
SADLER, GIBB AND ASSOCIATES, LLC
/s/ Sadler, Gibb and Associates, LLC
Salt Lake City, UT
March 25, 2011
F-8 |
Consolidated Balance Sheets
ASSETS | ||||||||||||
December 31, | December 31, | |||||||||||
2010 | 2009 | |||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | $ | 546,164 | $ | 309,453 | ||||||||
Accounts receivable, net | 546,388 | 295,278 | ||||||||||
Inventory | 1,925,233 | 3,344,866 | ||||||||||
Other receivables | 7,481 | 65,378 | ||||||||||
Prepaid expenses and other current assets | 71,796 | 1,527 | ||||||||||
Total current assets | 3,097,062 | 4,016,502 | ||||||||||
PROPERTY AND EQUIPMENT, NET | 71,208 | 56,853 | ||||||||||
OTHER ASSETS | ||||||||||||
Other assets | 18,186 | 16,936 | ||||||||||
Total other assets | 18,186 | 16,936 | ||||||||||
TOTAL ASSETS | $ | 3,186,456 | $ | 4,090,291 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
CURRENT LIABILITIES | ||||||||||||
Accounts payable and accrued expenses | $ | 2,883,316 | $ | 3,405,207 | ||||||||
Bank overdraft | — | — | ||||||||||
Accrued warranty | 27,688 | 22,833 | ||||||||||
Current portion of long-term debt | 13,256 | 8,178 | ||||||||||
Notes payable to related party | — | 175,000 | ||||||||||
Customer deposits | 70,070 | 93,555 | ||||||||||
Total current liabilities | 2,994,330 | 3,704,773 | ||||||||||
LONG-TERM LIABILITIES | ||||||||||||
Notes payable | 74,269 | 91,822 | ||||||||||
Total long-term liabilities | 74,269 | 91,822 | ||||||||||
TOTAL LIABILITIES | 3,068,599 | 3,796,595 | ||||||||||
STOCKHOLDERS' EQUITY | ||||||||||||
Common stock, $0.001 par value, 1,000,000,000 shares | ||||||||||||
authorized, 800,068,420 and 485,151,406 shares | ||||||||||||
issued and outstanding, respectively | 800,068 | 485,151 | ||||||||||
Additional paid-in capital | 276,713 | 391,630 | ||||||||||
Accumulated deficit | (958,924 | ) | (583,085 | ) | ||||||||
Total Stockholders' Equity | 117,857 | 293,696 | ||||||||||
TOTAL LIABILITIES AND | ||||||||||||
STOCKHOLDERS' EQUITY | $ | 3,186,456 | $ | 4,090,291 | ||||||||
The accompanying notes are an integral part of these financial statements
F-9 |
Consolidated Statements of Operations
For the Years Ended | |||||||
December 31, | |||||||
2010 | 2009 | ||||||
REVENUES | $ | 4,634,140 | $ | 4,413,033 | |||
COST OF SALES | 3,924,330 | 3,804,925 | |||||
GROSS PROFIT | 709,810 | 608,108 | |||||
OPERATING EXPENSES | |||||||
Salary and wage expense | 547,738 | 500,014 | |||||
Bad debt expense | 35,320 | 44,680 | |||||
General and administrative expenses | 497,847 | 675,211 | |||||
Total operating expenses | 1,080,905 | 1,219,905 | |||||
LOSS FROM OPERATIONS | (371,095 | ) | (611,797 | ) | |||
OTHER INCOME (EXPENSES) | |||||||
Interest income | — | — | |||||
Interest expense-related parties | — | — | |||||
Other income | 11,147 | 40,000 | |||||
Interest income (expense), net | (15,891 | ) | (16,062 | ) | |||
Total other income (expenses) | (4,744 | ) | 23,938 | ||||
LOSS BEFORE TAXES | (375,839 | ) | (587,859 | ) | |||
Provision for income taxes | — | — | |||||
NET LOSS | $ | (375,839 | ) | $ | (587,859 | ) | |
LOSS PER SHARE | |||||||
Basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | |||||||
Basic and diluted | 648,323,685 | 485,844,422 |
The accompanying notes are an integral part of these financial statements
F-10 |
Consolidated Statements of Stockholders' Equity (Deficit)
Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||
Shares | Amount | Capital | Deficit | Total | |||||||||||||||
Balance at December 31, 2008 | 488,984,171 | $ | 488,984 | $ | 387,797 | $ | 4,774 | $ | 881,555 | ||||||||||
Retirement of common stock | (3,832,765 | ) | (3,833 | ) | 3,833 | ||||||||||||||
Net loss for the year | |||||||||||||||||||
ended December 31, 2009 | — | — | — | (587,859 | ) | (587,859 | ) | ||||||||||||
Balance at December 31, 2009 | 485,151,406 | 485,151 | 391,630 | (583,085 | ) | 293,696 | |||||||||||||
Repurchase of common stock | (5,110,353 | ) | (5,110 | ) | (194,890 | ) | — | (200,000 | ) | ||||||||||
Recapiltalization | 320,027,367 | 320,027 | (320,027 | ) | — | — | |||||||||||||
Contributed captial | — | — | 400,000 | — | 400,000 | ||||||||||||||
Net loss for the year | |||||||||||||||||||
ended December 31, 2010 | — | — | — | (375,839 | ) | (375,839 | ) | ||||||||||||
Balance at December 31, 2010 | 800,068,420 | $ | 800,068 | $ | 276,713 | $ | (958,924 | ) | $ | 117,857 |
The accompanying notes are an integral part of these financial statements
F-11 |
Consolidated Statements of Cash Flows
For the Years Ended | |||||||
December 31, | |||||||
2010 | 2009 | ||||||
OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | (375,839 | ) | $ | (587,859 | ) | |
Adjustments to reconcile net income (loss) to net cash | |||||||
provided by operating activities: | |||||||
Depreciation and amortization | 14,148 | 15,355 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (251,110 | ) | (244,830 | ) | |||
Inventory | 1,419,633 | (2,848,324 | ) | ||||
Prepaid expenses and other assets | (70,269 | ) | 247,737 | ||||
Other receivable | 57,897 | (60,369 | ) | ||||
Deferred financing costs | — | 26,500 | |||||
Accounts payable and accrued warranty expenses | (517,036 | ) | 3,346,227 | ||||
Other assets | (1,250 | ) | — | ||||
Customer deposits | (23,484 | ) | (18,651 | ) | |||
Net Cash Provided by (Used) in Operating Activities | 252,690 | (124,214 | ) | ||||
INVESTING ACTIVITIES: | |||||||
Purchase in property and equipment | (28,504 | ) | (8,551 | ) | |||
Net Cash (Used) in Investing Activities | (28,504 | ) | (8,551 | ) | |||
FINANCING ACTIVITIES: | |||||||
Proceeds from related party notes payable | — | 285,000 | |||||
Repayment of related party notes payable | (175,000 | ) | (310,000 | ) | |||
Proceeds from notes payable | — | 158,000 | |||||
Repayments from notes payable | (12,475 | ) | (58,000 | ) | |||
Contributed capital | 400,000 | — | |||||
Repurchase of common stock | (200,000 | ) | — | ||||
Net Cash Provided by Financing Activities | 12,525 | 75,000 | |||||
NET INCREASE (DECREASE) IN CASH | 236,711 | (57,765 | ) | ||||
CASH AT BEGINNING OF YEAR | 309,453 | 367,218 | |||||
CASH AT END OF YEAR | $ | 546,164 | 309,453 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||
CASH PAID FOR: | |||||||
Interest | $ | 24,808 | $ | 8,021 | |||
Income taxes | $ | — | $ | — | |||
NON-CASH INVESTING AND FINANCING ACTIVITIES | $ | — | $ | — | |||
None | $ | — | $ | — | |||
Common stock issued for placement agent services | $ | — | $ | — |
The accompanying notes are an integral part of these financial statements
F-12 |
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
Sunvalley Solar, Inc. (the Company) was incorporated on August 16, 2007 under the laws of the State of Nevada as Western Ridge Minerals, Inc. Sunvalley Solar Inc. (the "Subsidiary"), formerly known as West Coast Solar Technologies Corporation, a California corporation, was incorporated on January 30, 2007.
On June 24, 2010, in accordance with the Exchange Agreement dated June 24, 2010, Western Ridge Minerals acquired all of the issued and outstanding shares of the Sunvalley, which resulted in Sunvalley becoming a wholly-owned subsidiary. In exchange for all of the issued and outstanding shares of Sunvalley, the shareholders of the Sunvalley received a total of 480,041,053 (2,514,600 pre-split) shares of Western Ridge Mineral’s common stock, which represented approximately 60% of the Company’s outstanding common stock following the acquisition. There were 1,049,271,312 (5,496,400 pre-split) shares of common stock outstanding before giving effect to the stock issuances in the acquisition and the cancellation of 729,243,944 (3,820,000 pre-split) shares by Mr. Marco Bastidas and certain other shareholders resulted in there being 800,068,420 (4,191,000 pre-split) shares outstanding post acquisition. As a result, the shareholders of the Subsidiary became the controlling shareholders of the combined entity. In connection with the acquisition, $400,000 was contributed to the Company from a Company shareholder.
Accordingly, the transaction is accounted for as a recapitalization with the Subsidiary deemed to be the accounting acquirer and the Company the legal acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of the Subsidiary prior to the Merger are reflected in the financial statements and are recorded at the historical cost basis of the Subsidiary. The Company’s consolidated financial statements after completion of the Acquisition include the assets and liabilities of both companies. Following the Acquisition the Company’s fiscal year-end has been changed from March 31 to December 31.
Description of Business
The Company markets, sells, designs and installs solar panel for residential and commercial customers. The Company primary market is in the state of California, however the Company may sell anywhere in the United States.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Going Concern
As reflected in the accompanying financial statements, the Company has experienced recurring losses from operations through December 31, 2010 and has an accumulated deficit of $958,924 as of December 31, 2010. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Management plans to raise additional operating capital through a private placement of the Company’s common stock. Management believes that with sufficient working capital the Company can produce sufficient sales to become cash flow positive and profitable which will allow it to continue as a going concern. There is no assurance that the Company will be successful in its plans.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
F-13 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles in the United States, 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 periods. Significant estimates made in preparing the financial statements include the allowance for doubtful accounts, sales returns, stock based compensation, inventory reserves, valuation allowances for property and equipment and intangible assets, deferred income tax valuation allowances and litigation. To the extent there are material differences between estimates and the actual results, future results of operations will be affected.
Operating Segments
The Company operates in one operating segment.
Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits. The Company has not experienced any losses related to this concentration of risk.
Accounts Receivable
The Company performs periodic credit evaluations of its customers’ financial condition and does not require collateral. Trade receivables generally are due in 30 days. Credit losses have consistently been within management’s expectations. An allowance for doubtful accounts is recorded when it is probable that all or a portion of trade receivables balance will not be collected. The Company’s allowance for doubtful accounts totals $80,000 and $44,680, as of December 31, 2010 and 2009.
Customer Deposits
Customer deposits represent advance payments received for products and are recognized as revenue in accordance with the Company’s revenue recognition policy.
Inventory
Inventory is stated at the lower of cost or net realizable value. Cost is determined on an average cost basis; and the inventory is comprised of raw materials and finished goods. Raw materials consist of fittings and other components necessary to assemble the Company’s finished goods. Finished goods consist of solar panels ready for installation and delivery to customers.
At each balance sheet date, the Company evaluates its ending inventory for excess quantities and obsolescence. This evaluation includes an analysis of sales levels by product type. Among other factors, the Company considers current product configurations, historical and forecasted demand, market conditions and product life cycles when determining the net realizable value of the inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventory. The Company’s reserve for excess and obsolete inventory amounted to $-0- and $-0- as of December 31, 2010 and 2009.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives used in determining depreciation are three to five years for tooling, five years for computers and vehicles, and five to seven years for furniture and equipment. Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions.
F-14 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Maintenance and repairs are charged to expense as incurred; additions and betterments are capitalized. Upon retirement or sale, the cost and related accumulated depreciation of the disposed assets are removed, and any resulting gain or loss is recorded. Fully depreciated assets are not removed from the accounts until physical disposition. The estimated useful lives are as follows:
Useful Life | |
Automobile | 5 Years |
Furniture | 7 Years |
Software | 5 Years |
Office Equipment | 5 Years |
Machinery | 5 Years |
Long-Lived Assets
In accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
Based on this analysis, the Company believes that no impairment of the carrying value on its long-lived assets existed at December 31, 2010 and 2009.
Fair Value of Financial Instruments
For certain financial instruments, including accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their relatively short maturities. In the case of the Notes Payable, the interest rate on the notes approximates the market rate of interest for similar borrowings. Consequently the carrying value of the Notes Payable also approximates the fair value. It is not practicable to estimate the fair value of the Notes Payable to Related Party due to the relationship of the counterparty.
Revenue Recognition
The completion of a solar installation project ranges from one to six months, thus the Company recognizes revenue of a system installation under the completed contract method of accounting. Revenue from installation of a system or sales of solar panels are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable and (4) collection of the related receivable is reasonably assured.
Cost of Sales
Cost of sales is comprised primarily of the cost of purchased product, as well as labor, inbound freight costs and other material costs required to complete products.
Product Warranties
The Company warrants its products for various periods against defects in material or installation workmanship. The manufacturers of the solar panels and the inverters provide a warranty period of generally 25 years and l0 years, respectively. The Company will assist its customers in the event that the manufacturers’ warranty needs to be used to replace a defective solar panel or inverter. The Company provides for a l0-year warranty on the installation of a system and all equipment and incidental supplies other than solar panels and inverters that are recovered under the manufacturers’ warranty. Maintenance services such as cleaning the solar panels and checking the systems are offered to customers twice a year without a separate service charge.
F-15 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company records a provision for the installation warranty, an expense included in cost of sales, based on management's best estimate of the probable cost to be incurred in honoring its warranty commitment. The Company's accrued warranty provision was $27,688 and $22,833 at December 31, 2010 and 2009, respectively.
Advertising Expenses
Advertising expenses are expensed as incurred. Total advertising expenses amounted to $27,210 and $20,478 for the years ended December 31, 2010 and 2009, respectively.
Research and Development
Research and development costs are expensed as incurred and amounted to approximately $-0- and $35,000 for the years ended December 31, 2010 and 2009, respectively. These costs are included in selling, general and administrative expenses in the accompanying statements of operations.
Income Taxes
The Company applies ASC 740, which requires the asset and liability method of accounting for income taxes. The asset and liability method requires that the current or deferred tax consequences of all events recognized in the financial statements are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years. Deferred tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that all or some portion of the deferred tax assets will not be recovered.
The Company adopted ASC 740, at the beginning of fiscal year 2008. This interpretation requires recognition and measurement of uncertain tax positions using a “more-likely-than-not” approach, requiring the recognition and measurement of uncertain tax positions. The adoption of ASC 740 had no material impact on the Company’s financial statements. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will to be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Loss Per Common Share
Basic net loss per common share is computed by dividing the net loss by the weighted average number of outstanding common shares (restricted and free trading) during the periods presented. Basic loss per share and diluted loss per share are the same amount because the impact of additional common shares that might have been issued under the Company’s outstanding and exercisable warrants would be anti-dilutive. There were no potentially dilutive shares that were excluded from the shares used to calculate diluted loss per share for the years ended December 31, 2010 and 2009.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3: RESTRICTED CASH
In order to comply with the State of California's licensing requirement or contract bonds as of December 31, 2010 and 2009 the Company maintains a certificate of deposit in the amount of $12,500 with a financial institution. The
restricted cash amount is included in other assets in the accompanying December 31 , 2010 and 2009 balance sheets.
F-16 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 4: INVENTORY
The Company’s inventory consisted of the following at December 31, 2010 and 2009:
2010 | 2009 | ||||||
Raw materials | $ | 8 | $ | 309,494 | |||
Work in Progress | 6,741 | 13,972 | |||||
Finished goods | 1,918,484 | 3,021,400 | |||||
Total Inventory | $ | 1,925,233 | $ | 3,344,866 |
NOTE 5: OTHER RECEIVABLES
The Company participates in the California Solar Initiative ("CSI") Program launched by Southern California Edison( "SCE"). Other receivables include the Expected Performance Based Buy-down ("EPBB") rebates under the CSI program. Once the Company completes the solar systems which are connected to SCE's power grid and the site passes inspection and all of the required information is submitted the Company will receive the EPBB rebates from SCE.
NOTE 6: PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31, 2010 and 2009:
2010 | 2009 | ||||||
Computer equipment | $ | 32,407 | $ | 31,253 | |||
Furniture | 16,065 | 16,065 | |||||
Software | 2,368 | 2,368 | |||||
Vehicles | 62,094 | 34,734 | |||||
Gross Property and Equipment | 112,934 | 84,420 | |||||
Less: accumulated depreciation | (41,726 | ) | (27,567 | ) | |||
Net Property and Equipment | $ | 71,208 | $ | 56,853 |
Depreciation expense for the years ended December 31, 2010 and 2009 was $14,159 and $15,355, respectively.
NOTE 7: RELATED PARTY TRANSACTIONS
The Company owes $-0- and $175,000 for short-term related party loans with maturity dates less than a year bearing an interest rate of 6.5% per annum to its stockholders as of December 31, 2010 and 2009, respectively. The interest expense incurred for these short-term loans was $9,014 and $15,542, for the years ended December 31, 2010 and 2009, respectively. $175,000 plus $19,147 of interest was paid during 2010. $310,000 plus $6,400 of interest was repaid during 2009.
F-17 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 8: NOTES PAYABLE
Notes payable outstanding as of December 31, 2010 and 2009 consisted of the following:
2010 | 2009 | ||||||
SBA loan payable (1) | $ | 87,525 | $ | 100,000 | |||
Total Notes Payable | $ | 87,525 | $ | 100,000 |
(1) The Company has a loan through a bank with a maximum borrowing of $100,000 is collateralized by all business assets. Any principal amounts outstanding accrue interest at the bank's variable index rate (approximately 6.00% as of December 31, 2010).
Future maturities of long-term debt are as follows:
2011 | $ | 13,256 | |
2012 | 14,072 | ||
2013 | 14,940 | ||
2015 | 15,861 | ||
2016 | 16,839 | ||
Thereafter | 12,557 | ||
Total | $ | 87,525 |
NOTE 9: EQUITY TRANSACTIONS
Common Stock Issuances
On June 24, 2010, in accordance with the Exchange Agreement dated June 24, 2010, Western Ridge Minerals acquired all of the issued and outstanding shares of the Sunvalley, which resulted in Sunvalley becoming a wholly-owned subsidiary. In exchange for all of the issued and outstanding shares of Sunvalley, the shareholders of the Sunvalley received a total of 480,041,053 (2,514,600 pre-split) shares of Western Ridge Mineral’s common stock, which represented approximately 60% of the Company’s outstanding common stock following the acquisition. There were 1,049,271,312 (5,496,400 pre-split) shares of common stock outstanding before giving effect to the stock issuances in the acquisition and the cancellation of 729,243,944 (3,820,000 pre-split) shares by Mr. Marco Bastidas and certain other shareholders resulted in there being 800,068,420 (4,191,000 pre-split) shares outstanding post acquisition. As a result, the shareholders of the Subsidiary became the controlling shareholders of the combined entity. In connection with the acquisition, $400,000 was contributed to the Company from a Company shareholder.
Accordingly, the transaction is accounted for as a recapitalization with the Subsidiary deemed to be the accounting acquirer and the Company the legal acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of the Subsidiary prior to the Merger are reflected in the financial statements and are recorded at the historical cost basis of the Subsidiary. The Company’s consolidated financial statements after completion of the Acquisition include the assets and liabilities of both companies. Following the Acquisition the Company’s fiscal year-end has been changed from March 31 to December 31.
During the year ended December 31, 2009, the Company cancelled a total of 3,832,765 common stock shares returned to it from shareholders.
During the year ended December 31, 2010, the Company entered into agreements to repurchase a total of 5,110,353 common stock shares from shareholders at a price of approximately $0.04 per share.
F-18 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 9: EQUITY TRANSACTIONS (CONTINUED)
On July 20, 2010 the Company’s board of directors approved a 19.0885235 for 1 forward stock split of the Company’s common stock. On August 23, 2010 the Company’s board of directors approved a 10 for 1 forward stock split of the Company’s common stock. The Company’s authorized common stock was increased to 1,000,000,000. This forward splits have been retroactively applied and is reflected in the financial statements for the period ended September 30, 2010.
NOTE 10: SIGNIFICANT EVENTS
On December 31, 2010, the Company entered into a Drawdown Equity Financing Agreement (the “DEFA”) and an accompanying Registration Rights Agreement (the “RRA”) with Auctus Private Equity Fund, LLC, a Massachusetts limited liability company (“Auctus”). Under the DEFA, the Company has agreed to issue and sell up to $10,000,000 worth of the Company’s common stock, par value $0.001 per share, over a three year period.
The DEFA entitles the Company to request “Advances,” or draw-downs, under the agreement at our election from time to time. By delivery of a Drawdown Notice under the agreement, the Company can affect the sale of common stock to Auctus valued at a maximum of either (i) $500,000 or (ii) 200% of the average daily volume of the common stock based on the ten (10) trading days preceding the Drawdown Notice Date (as defined in the DEFA), whichever is larger. The purchase price of the common stock for an Advance shall be set at ninety-three percent (93%) of the lowest closing bid price of the common stock during the Pricing Period, which is defined as the five (5) consecutive trading days immediately after the Drawdown Notice Date. There must be a minimum of five (5) trading days between each Drawdown Notice Date.
Under the DEFA, Auctus shall immediately cease selling any shares of the Company’s common stock during a Pricing Period if a) the market price of the Company’s common stock falls below a fixed-price floor that the Company provide per Drawdown or b) the market price of the Company’s common stock falls below seventy-five percent (75%) of the average closing bid price of the common stock over the preceding ten (10) trading days prior to the Drawdown Notice Date (the "Floor"). In the Company’s sole discretion, the Company may waive its right with respect to the Floor and allow Auctus to sell any shares below the Floor Price. The floor price restriction only applies to the five (5) consecutive trading days immediately after the Drawdown Notice Date.
NOTE 11: INCOME TAXES
The FASB has issued FASB ASC 740-10 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
F-19 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 11: INCOME TAXES (CONTINUED)
Deferred tax assets and the valuation account are as follows:
2010 | 2009 | ||||||
Deferred tax assets: | |||||||
NOL carryover | $ | 127,786 | $ | 199,872 | |||
Valuation allowance | (127,786 | ) | (199,872 | ) | |||
Net deferred tax asset | $ | — | $ | — |
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 34% to pretax income from continuing operations for the years ended December 31, 2010 and 2009. The components of income tax expense are as follows:
2010 | 2009 | ||||||
Book income (loss) | $ | (327,658 | ) | $ | (199,872 | ) | |
Valuation allowance | 327,658 | 199,872 | |||||
$ | — | $ | — |
The Company currently has no issues creating timing differences that would mandate deferred tax expense. Net operating losses would create possible tax assets in future years. Due to the uncertainty of the utilization of net operating loss carry forwards, an evaluation allowance has been made to the extent of any tax benefit that net operating losses may generate. A provision for income taxes has not been made due to net operating loss carry-forwards of $963,699 and $587,859 as of December 31, 2009 and 2008, respectively, which may be offset against future taxable income through 2030. No tax benefit has been reported in the financial statements.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Years Ended | |||||||
2010 | 2009 | ||||||
Federal statutory rate | -25.00 | % | -25.00 | % | |||
State taxes - net of federal benefit | -9.00 | % | -9.00 | % | |||
Meals and entertainment | 0.00 | % | 0.00 | % | |||
Contributed Services | 0.00 | % | 0.00 | % | |||
Penalties | 0.00 | % | 0.00 | % | |||
Change in valuation allowance | 34.00 | % | 34.00 | % | |||
0.00 | % | 0.00 | % |
The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of December 31, 2010 and 2009, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by major taxing jurisdictions are for the years ended December 31, 2010, 2009, and 2008.
F-20 |
SUNVALLEY SOLAR, INC.
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
NOTE 12: COMMITMENTS AND CONTINGENCIES
The Company leases an office under an operating lease that expires on May 31, 2011. Total rent expense amounted to $38,000 and $37,000 for the fiscal years ended December 31, 2010 and 2009, respectively.
Future minimum base lease payments are as follows:
Year Ending December 31, | |||
2011 | $ | 16,000 | |
Total | $ | 16,000 |
Legal Proceedings
From time to time, the Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.
NOTE 13: CONCENTRATIONS OF RISK
Supplier Concentrations
The Company purchases solar panels from one manufacturer and one manufacturer during the years ended December 31, 2010 and 2009, respectively. For the years ended December 31, 2010 and 2009, these vendors accounted for approximately 97% and 97%, respectively, of total inventory purchases.
Customer Concentrations
For the years ended December 31, 2010 and 2009, one and two customers, respectively, represented more than 10% of the Company’s sales. This translates to approximately 19% and 29%, respectively, of the Company's annual net revenues.
NOTE 14: SUBSEQUENT EVENTS
On December 30, 2010, the board of directors approved the entry into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc. (“Asher”) and the issuance to Asher of a Convertible Promissory Note (the “Note”) under the SPA in the amount of $100,000. The SPA and the Note are effective January 7, 2011. The Note bears interest at an annual rate of 8%, with principal and interest coming due on October 7, 2011. The Note may be converted in whole or in part, at the option of the holder, to shares of our common stock, par value $0.001, at any time following 180 days after the issuance date of the Note. The conversion price under the Note is 61% of the Market Price of our common stock on the conversion date. For purposes of the Note, “Market Price” is defined as the average of the 3 lowest closing prices for our common stock on the 10 trading days immediately preceding the conversion date. The number of shares issuable upon conversion is limited so that the Holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares. This condition may be waived at the option of the holder upon not less than 61 days notice.
Upon conversion of the Note in whole or in part, the Company will be obligated to deliver the conversion stock to the holder within 3 business days of our receipt of notice of conversion. Failure to timely deliver conversion stock will cause us to incur daily penalties. The conversion price will be subject to adjustment in the event of certain dilutive issuances of securities, distributions of stock or assets to shareholders, mergers, consolidations, and certain other events. Pre-payment of the Note will result in certain penalties depending on the time of pre-payment, and will not be allowed after 180 days.
F-21 |
·
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Developing and commercializing our proprietary solar technologies including our coating and focusing technologies, racking and panel cleaning system. By deploying these new technologies into our PV panels and solar installation business, we hope to enhance the value provided to our customers and increase our profitability.
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Promoting and enhancing our company’s brand and reputation in solar design and integration and expanding our installation business from Southern California to Northern California, Arizona or other states.
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Developing a PV panel manufacturing capability to provide high efficiency and low cost solar panels to US market. This will complement our installation business and provide an implementation platform for our R&D.
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·
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Getting involved in the private power providing business (Distributed Power Plants). Developing this line of business will lead to higher profit margins and income to our business. In the future, this line of business could become one of our main income sources.
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·
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Set-up a platform to showcase our innovative solar panel technologies and make Sunvalley solar panels a household name.
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Unlike other merchandise, solar panel is very unique in that it requires very high level of quality assurance and customer satisfaction. Providing satisfactory customer service and technical support is absolutely vital in solar panel sales. As the first step, we will strive to make its brand a household name. The Sunvalley solar panel will be used by our installation business as well as several other installation companies which have partnerships with us. We do not currently have partnerships with other solar installation companies, but we plan to pursue them after introducing the panels to the market through our own installation business. A marketing campaign aimed at other solar installation companies will help to achieve this goal. We will use our own installation business as the platform to showcase the product quality and build up consumer awareness of its brand.
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Penetrate into the main stream distribution network
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·
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Further sale activities
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·
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Offer a low cost, high efficiency solar panel derived from advanced research
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·
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Registration and Certification of OEM panels with our brand – $300,000, including UL certification fees, CEC registration fees, and lab testing fees.
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·
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Initial Inventory – $1,500,000. We will need to keep at least 4 containers of PV panels in the warehouse in order to support sales of 5~10M watts per year, which means we will need to have over $1,000,000 in inventory for PV panels only. An additional $300,000 in inventory would be needed in order to keep the requisite amount of inverters and racking and panel cleaning systems. In addition, we anticipate providing variable payment terms to different customers based on their creditworthiness; this will add additional cash flow pressure.
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·
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OEM Management costs – $200,000
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Results of Operations for the three months ended March 31, 2011 and 2010
During the three months ended March 31, 2011, we generated gross revenues of $797,810. Total cost of sales was $683,446, resulting in gross profit of $114,364. Selling, general, and administrative expenses were $165,038. Salary and wage expenses were $142,902. Depreciation was $5,301. We experienced interest expense of $3,365 and other income of 2,391 and a loss due to the change in value of a derivative liability of $2,653. The net loss for the three months ended March 31, 2011 was therefore $202,504. By comparison, during the three months ended March 31, 2010, we generated gross revenues of $767,645. Total cost of sales was $619,267, resulting in gross profit of $148,378. Selling, general, and administrative expenses were $93,511. Salary and wage expenses were $127,647. Depreciation was $3,518. We experienced interest expense of $354 and no other income or loss on derivatives. The net loss for the three months ended March 31, 2010 was therefore $76,652.
We experienced a significant increase in selling, general, and administrative expenses for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. This increase was primarily due to increased professional fees incurred as a result of our becoming a public company by way of a merger with Western Ridge Minerals, Inc., in June of 2010. The increase in professional fees consisted of audit review fees and increased legal and consulting fees.
Results of Operations for the Years Ended December 31, 2010 and 2009.
During the fiscal year ended December 31, 2010, we generated gross revenues of $4,634,140. Total cost of sales was $3,924,330, resulting in gross profit of $709,810. Operating expenses were $1,080,905. We experienced other income in the amount of $11,147 and interest expense of $15,891. The net loss for the fiscal year ended December 31, 2010 was therefore $375,839.
By comparison, we generated gross revenues of $4,413,033 during the fiscal year ended December 31, 2009. Total cost of sales was $3,804,905, resulting in gross profit of $608,108. Operating expenses for 2009 were $1,219,905. We experienced other income in the amount of $40,000 and interest expense of 16,062. The net loss for the fiscal year ended December 31, 2009 was therefore $587,859.
In 2007 and 2008, the majority of our revenue came from our solar system design and installation business, including both residential and commercial projects. Specifically, in 2008, we produced $2.63 million in revenue from solar system design and installation. The gross profit margin of the solar installation business is approximately 20%.
Although we had expected to see an increase of over 150% in our solar installation business in 2009, our solar installation business and the solar industry as a whole was badly affected by the global economic crisis started in late 2008. During 2009 and 2010, because banks and investment institutes were very reluctant to loan money to solar customers, many potential solar power system customers suspended their plans to invest in new solar power systems. This development, in turn, had a negative impact on our solar installation business in 2009 and 2010. In order to reduce the risk to our business presented by these developments, we expanded our operations to include a new solar equipment distribution business beginning in November of 2008. We established distribution partnerships with Canadian Solar Inc., CEEG SST, Tainwei Solarfilms, and PV Powered Inc., to distribute solar panels, solar inverters and other solar equipments to their clients in the U.S. Although the gross margin for our distribution business is less than 10%, this line of business contributed to the majority of our gross revenues in 2009 and 2010.
Liquidity and Capital Resources
As of March 31, 2011, we had current assets in the amount of 3,007,847, consisting of cash in the amount of $429,054, accounts receivable of $619,023, inventory in the amount of $1,451,056, construction in progress of $231,905, prepaid expenses of $242,467, and other current assets of $34,342. As of March 31, 2011, we had current liabilities in the amount of $3,155,802. These consisted of accounts payable and accrued expenses in the amount of $2,928,055, accrued warranty in the amount of $26,867, customer deposits of $13,927, and the current portion of long term debt in the amount of $18,719. We also had convertible notes of $100,000 and a derivative liability of $68,234. Our working capital deficit as of March 31, 2011 was therefore $147,955.
Our accounts payable and accrued expenses as of March 31, 2011 consisted of the following:
Accounts Payable | $ | 2,812,167 | |
Credit Card payable | 38,315 | ||
Accrued vacation | 16,653 | ||
Other accrued expense | 15,441 | ||
Payroll liabilities | 36,277 | ||
Sales tax payable | 8,402 | ||
State Income tax payable | 800 | ||
Total | $ | 2,928,055 |
As of March 31, 2011,we had long-term liabilities of $114,041. The current portion due within the next year is $18,719. The principal amount outstanding accrues annual interest at the bank's variable index rate (approx. 6.00% as of December 31, 2010). The loans are collateralized by all business assets.
In addition, we are currently party to a Convertible Promissory Note, in the amount of $100,000, owing to Asher Enterprises, Inc. The Note is due on October 7, 2011. The Note bear interest at a rate of 8% per year and is convertible at a conversion price equal to 61% of the Market Price of our common stock on the conversion date. For purposes of the Note, “Market Price” is defined as the average of the 3 lowest closing prices for our common stock on the 10 trading days immediately preceding the conversion date. The number of shares issuable upon conversion of the Note is limited so that the holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares. This condition may be waived at the option of the holder upon not less than 61 days notice.
The Company has determined that the conversion feature of this note is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability. As of March 31, 2011 the value of the derivative liability is $68,234 and we recognized a loss on the change in the value of the derivative of $2,653.
We will require substantial additional financing in the approximate amount of $4,500,000 in order to execute our business expansion and development plans and we may require additional financing in order to sustain substantial future business operations for an extended period of time. We currently do not have any firm arrangements for financing and we may not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible.
We are currently seeking additional financing through the sale of common equity, including the sale of common equity to Auctus through the DEFA, and/or the issuance of debt convertible to common equity. If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.
Name
|
Age
|
Office(s) held
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Zhijian (James) Zhang
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42
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President, CEO, Director
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Mandy Chung
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41
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Chief Financial Officer, Secretary, Treasurer
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Hangbo (Henry) Yu
|
55
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General Manager, Director
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Fang Xu
|
43
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Chief Technology Officer
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Shirley Liao
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40
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Director of Administration
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Anyork Lee
|
59
|
Director
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Zhijian (James) Zhang – Dr. Zhang is our President, CEO, and a member of our board of directors. He has held these positions since January of 2007. Dr. Zhang graduated from Tsinghua University with a Ph.D. in opto-electronics. He has over 15 years of experience in opto-electronics and the semiconductor industry. From 2006 to 2008, he held the position of senior manager at Motorola, a leading telecommunication equipment provider. From 2004 to 2006, he held the position of Director at ZTE San Diego, also a leading telecommunication equipment provider.
Dr.Zhang has a strong reputation as an executive in the opto-electronics/semiconductor industry, including the solar energy field. Dr. Zhang has quality leadership experience in business operations, especially in product and program development, product development procedures, and milestone setting and enforcement, and R&D team building.
Mandy Chung -- Ms. Chung is our Chief Financial Officer, Secretary, and Treasurer. She has held these positions since August of 2008. Ms. Chung co-founded Chung & Chung Accountancy Corporation, CPAs (CCAC) in 2004 and she is licensed as a Certified Public Accountant in California. Ms. Chung is one of the partners in CCAC and she provides audit, review, compilation, consulting, tax services and financial planning to various clients. Ms. Chung has been working for CCAC for the past five years since its establishment.
Ms. Chung graduated from Texas A&M University (College Station) with a Master’s degree in Finance and a Bachelor’s degree in Accounting. Ms. Chung has over 15 years of public accounting experience in providing auditing, accounting, business consulting and tax services to a wide range of industries. She has extensive experience in performing reviews and audits for various organizations, including publicly reporting companies. In addition, Ms. Chung helped the former founder of Dietrich Coffee to prepare a ten-year business and financial plan to establish a new series of coffee stores. Ms. Chung also conducted various incurred costs audits for MGM Mirage, Los Angeles County Metropolitan Transportation Authority and Caltrans. On a daily basis, Ms. Chung is responsible for the accounting operations and record keeping of Sunvalley Solar Inc. Her duties include customer deposits and check payments recording, accounts receivable, accounts payable and inventory recording, customers’ credit evaluation, employees hiring and termination issues, sales tax filing, payroll tax filing, monthly bank reconciliation, preparing financial statements, performing preparation for annual audit, quarterly review and income tax return filing. Approximately 50% of Ms.Chung’s time is used to perform her job as the CFO of Sunvalley Solar Inc.
Hangbo (Henry) Yu -- Mr. Yu is our General Manager and a member of our Board of Directors. He has served in these positions since January of 2007 and was the founder of our business. From 2004 through 2006, Mr. Yu was the General Manager and a board member of International Transportation Corp., Canada. He graduated from Beijing University of Aeronautics and Astronautics with a Bachelor’s degree in Structure Design. He has run several startup companies in China and Canada, respectively. Over the past 12 months, Mr. Yu has been working to establish relationships with major solar power equipment manufacturers in China. Mr. Yu is an experienced business and operations manager. He has over 20 years of experience in import-export, logistics, international transportation, solar business operation and solar power system project planning and field managing.
Fang Xu -- Dr. Xu is our Chief Technology Officer. He has served in this position since July of 2008. From 2005 through June of 2008, he was a staff design engineer at Via Telecom, Inc. He graduated from the Electrical Department of Beijing University in China, has a Masters Degree in Electronics from the University of Alabama, and a PhD in Photonics from the University of California, San Diego. Dr. Xu is currently in charge of our research and development efforts . Dr. Xu has over 13 years of experience in both in academic and industrial environments. Dr. Xu has extensive knowledge in photonics, and optics, as well as micro and nano-scale device processing technologies. In addition, Dr. Xu has hands on experience in making the nano-scale structure that modifies the effective dielectric properties of optical materials. Dr. Xu has been a pioneer in the use polarization selective materials to construction micro and nanoscale diffractive optical elements.
Shirley Liao -- Mrs. Liao is our Director of Administration. She has served Sunvalley Solar, Inc. in this position since January of 2007. She graduated from Guangxi University in Art and Financial Management. Before moving to the United States, Shirley Liao worked in an international trading company (Audio & Video Company of Guangxi) as an executive management member. While working there, Mrs. Liao acquired experience in international trade as well as general sales management. From 1997 through 1998, she worked at Trust Bank as a Loan Officer. She has also worked at Coldwell Banker George Realty since 2000 as a real estate broker. Through the real estate sales business, she established good relationships with local societies, business owners, banks, builders and government agencies. Her excellent market and sales experiences as well as connections to customers bring an exceptional value to the company. Currently, Mrs. Liao does not spend working hours at Coldwell Banker George Realty. She is a full time employee devoting forty hours per week to Sunvalley Solar, Inc.
Anyork Lee -- Mr. Lee is a member of our Board of Directors. He
graduated from National Taiwan University, Taiwan and got his MBA from California State University, Stanislaus, in 1979. Mr. Lee
has extensive connections to various Chinese-American and other organizations and societies. Mr. Lee has been a Director of the
Board of Alhambra Medical University since 2005 and served as a Governing Board Member of Walnut Valley from 1997 to 2005. He is
the president of CAAM (California Alliance of Acupuncture Medicine), Chairman of Southern California Chapter of APIAPAA (Asian
Pacific Island American Public Affair Association), a Planning Committee Member of Susan Samueli Center for Integrative Medicine
at University of California, Irvine, a Board Member of the Chinese American Association of Diamond Bar, and a member of the Board
of Trustees of Walnut Valley Unified School District. Mr. Lee’s other affiliations include:
Jan. 2008 – present Council of Acupuncture & Oriental Medical Association, President
April 2007 – present Asian Pacific Island American Public Affair Association-
Southern California Chapter, Chair
Jan. 2007 – present Ca. Alliance of Acupuncture Medicine, President Emeritus
Aug. 2005 – present University of California, Irvine, Susan Samueli Center for Integrative Medicine, Planning Committee Member
Oct. 2004 – present DB 4Youth, member Asian American Acupuncture College, San Diego
For the past five years, Mr. Lee has worked as a licensed health practitioner at two private clinics, Dr. Lee Acupuncture and Alhambra Medical University.
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The appropriate size of our Board of Directors;
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Our needs with respect to the particular talents and experience of our directors;
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The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;
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Experience in political affairs;
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Experience with accounting rules and practices; and
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The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.
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SUMMARY COMPENSATION TABLE | |||||||||
Name and
principal position
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Year
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Salary
($)
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Bonus
($)
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Stock Awards
($)
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Option
Awards
($)
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Non-Equity
Incentive Plan
Compensation
($)
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Nonqualified
Deferred
Compensation
Earnings ($)
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All Other
Compensation
($)
|
Total
($)
|
Zhijian (James) Zhang, President, CEO, and Director
|
2010
2009
|
98,500
99,400
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
98,500 99,400 |
Mandy Chung, CFO, Secretary, and Treasurer
|
2010
2009
|
37,500
42,000
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
37,500 42,000 |
Hangbo (Henry) Yu, General Manager and Director
|
2010
2009
|
100,000
96,000
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
100,000 96,000 |
Fang Xu, CTO
|
2010
2009
|
9,300
7,200
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
9,300 7,200 |
Shirley Liao, Director of Administration
|
2010
2009
|
61,502
43,000
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
-0
-0
|
61,502 43,000 |
Marco Bastidas, former sole officer
|
2010
2009
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|||||||||
OPTION AWARDS
|
STOCK AWARDS
|
||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or Shares
of
Stock That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Shares
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Shares or
Other
Rights
That Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Shares or
Other
Rights
That
Have Not
Vested
(#)
|
Zhijian (James) Zhang, President, CEO, and Director
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Mandy Chung, CFO, Secretary, and reasurer
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Hangbo (Henry) Yu, General Manager and Director
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Fang Xu, CTO
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Shirley Liao, Director of Administration
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Marco Bastidas, former sole officer
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
DIRECTOR COMPENSATION
|
|||||||
Name
|
Fees Earned or
Paid in
Cash
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
Zhijian (James) Zhang
|
0
|
-0
|
-0
|
-0
|
-0
|
-0
|
-0
|
Hangbo (Henry) Yu
|
0
|
-0
|
-0
|
-0
|
-0
|
-0
|
-0
|
Anyork Lee
|
0
|
-0
|
-0
|
-0
|
-0
|
-0
|
-0
|
Marco Bastidas, former director
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Title of class
|
Name and address of beneficial owner (1)
|
Amount of
beneficial ownership
|
Percent of class
|
Current Executive Officers & Directors:
|
|||
Common Stock
|
Zhijian (James) Zhang
12161 Salix Way
San Diego CA 92129
|
88,075,400 shares
|
10.97%
|
Common Stock
|
Hangbo (Henry) Yu
3309 S. Gauntlet Dr.
West Covina, CA 91792
|
70,621,050 shares
|
8.79%
|
Common Stock
|
Anyork Lee
1050 Yorba Linda Blvd.
Placentia, CA 92870
|
30,664,190 shares
|
3.82%
|
Common Stock
|
Shirley Liao
3309 S Gauntlet Dr.
West Covina, CA 91792
|
17,734,000 shares
|
2.21%
|
Common Stock
|
Mandy Chung
1059 Moreno Way
Placentia, CA 92870
|
6,899,360 shares
|
0.86%
|
Common Stock
|
Fang Xu
11239 Vandemen Way
San Diego, CA 92131
|
127,700 shares
|
0.02%
|
Total of All Current Directors and Officers:
|
|||
Common Stock
|
214,124,700 shares
|
26.67%
|
|
More than 5% Beneficial Owners
|
|||
Common Stock
|
Haibo Yu
38499 Berkeley Common
Fremont CA 94536
|
59,888,520 shares
|
7.46%
|
(1)
|
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
|
1. We previously borrowed the sum of $100,000 from our President, James Zhang. This loan bore interest at a rate of 6.5% per annum. The principal of $100,000, plus interest of $9,941.44, was repaid in 2010.
2. We previously borrowed the sum of $75,000 from our General Manager, Hangbo (Henry) Yu. This loan also bore interest at a rate of 6.5% per annum. The principal of $75,000, plus interest of $9,205.68, was repaid in 2010.
Director Independence
We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we believe that Anyork Lee is our only independent director.
Securities and Exchange Commission registration fee
|
$ | 172.76 |
Federal Taxes
|
$ | 0 |
State Taxes and Fees
|
$ | 0 |
Listing Fees
|
$ | 0 |
Printing and Engraving Fees
|
$ | 0 |
Transfer Agent Fees
|
$ | 500 |
Accounting fees and expenses
|
$ | 1,000 |
Legal fees and expenses
|
$ | 7,000 |
Total
|
$ | 8,672.76 |
1.
|
a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;
|
2.
|
a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);
|
3.
|
a transaction from which the director derived an improper personal profit; and
|
4.
|
willful misconduct.
|
1.
|
such indemnification is expressly required to be made by law;
|
2.
|
the proceeding was authorized by our Board of Directors;
|
3.
|
such indemnification is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or;
|
4.
|
such indemnification is required to be made pursuant to the bylaws.
|
Exhibit Number | Description |
3.1 | Articles of Incorporation, as amended (2) |
3.2 | By-laws (2) |
3.3 | Certificate of Amendment filed June 22, 2010 (2) |
3.4 | Articles of Merger filed July 6, 2010 (2) |
3.5 | Certificate of Change filed August 12, 2010 (2) |
3.6 | Certificate of Amendment filed January 21, 2011 (2) |
5.1 | Opinion of Cane Clark LLP, with consent to use (2) |
10.1 | Drawdown Equity Financing Agreement(1) |
10.2 | Registration Rights Agreement(1) |
10.3 | Convertible Promissory Note to Asher Enterprises, Inc. (No. 1) (2) |
10.4 | Convertible Promissory Note to Asher Enterprises, Inc. (No. 2) (2) |
10.5 | Premises Lease (2) |
10.6 | Territory Distribution Contract -- Canadian Solar, Inc. (2) |
10.7 | Distribution Contract -- CEEG SST (2) |
10.8 | Distribution Contract -- TianWei SolarFilms Co. (2) |
10.9 | Photovoltaic System Contract with Diamond Wipes Int’l, Inc. (3) |
23.1 | Consent of Independent Registered Public Accounting Firm |
23.2 | Consent of Cane Clark LLP (please see Exhibit 5.1) (2) |
(1)Previously filed as an Exhibit to the Registration Statement on Form S-1 filed January 26, 2011.
(2) Previously filed as an Exhibit to the Registration Statement on Form S-1/A filed April 15, 2011.
(3) Previously filed as an Exhibit to the
Registration Statement on Form S-1/A filed June 22, 2011.
(a) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (§230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. ; and
(c) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.