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EX-32.2 - CERTIFICATION - Solar Energy Initiatives, Inc.solar_10k-ex3202.htm
EX-32.1 - CERTIFICATION - Solar Energy Initiatives, Inc.solar_10k-ex3201.htm
EX-31.2 - CERTIFICATION - Solar Energy Initiatives, Inc.solar_10k-ex3102.htm
EX-31.1 - CERTIFICATION - Solar Energy Initiatives, Inc.solar_10k-ex3101.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
FORM 10-K
 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 2011
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number:  333-148155
 
Solar Energy Initiatives, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
 
Delaware   
 
20-5241121
(State or other jurisdiction of Incorporation)
 
(I.R.S. Employer Identification No.)
   
  
119 Milliken Drive
Kingstree, SC 29556
 (Address of principal executive offices including zip code)
 
(904) 644-6090
Registrant’s telephone number, including area code:
Copies to:
Stephen M. Fleming, Esq.
Fleming PLLC
49 Front Street, Suite #206
Rockville Centre, New York 11570
516-833-5034
516-977-1209 (fax)
 
Securities registered under Section 12(b) of the Exchange Act:  None
Securities registered under Section 12(g) of the Exchange Act:  None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No x
  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x
 
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
  
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not  contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
 
Indicate by a check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x
    
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company x
    
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 10, 2011, the Company had outstanding 702,171,901 shares of its common stock, par value $0.001.
 


 
 
 
    
SOLAR ENERGY INITIATIVES, INC.
Form 10-K for the Fiscal Year Ended July 31, 2011
Index
 
   
PAGE NO.
 
PART I
 
     
Item 1.
Business.
4
     
Item 1A.
Risk Factors.
     
Item 1B.
Unresolved Staff Comments
17
     
Item 2.
Properties.
18
     
Item 3.
Legal Proceedings.
18
     
Item 4.
Submission of Matters to a Vote of Security Holders.
18
     
 
PART II
18
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and issuer purchase of Equity securities.
18
     
Item 6.
Selected Financial Data.
19
     
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation.
19
     
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
26 
     
Item 8.
Financial Statements and Supplementary Data.
26
     
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
26
     
Item 9A(T).
Controls and Procedures.
26
     
Item 9B.
Other Information.
27
     
 
PART III
 
     
Item 10.
Directors, Executive Officers, and Corporate Governance.
27
     
Item 11.
Executive Compensation.
28
     
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
32
     
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
36
     
Item 14.
Principal Accountant Fees and Services.
38
     
  PART IV  
     
Item 15. Exhibits and Financial Statement Schedules 39
     
Signatures   40
   
 
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Cautionary Statement Regarding Forward-Looking Statements
 
This Annual Report on Form 10-K contains forward-looking statements. Forward-looking statements are statements that do not represent historical facts. We use words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “continue” and similar expressions to identify forward-looking statements. Forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, those discussed in the section entitled "Management's Discussion and Analysis or Plan of Operation”, our plans and expectations regarding future financial results, operating results, business strategies, projected costs, products, competitive positions, management’s plans and objectives for future operations, and industry trends. These forward-looking statements are based on information available to us as of the date of this Annual Report on Form 10-K and current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond our control. Please see “Item 1A: Risk Factors” and our other filings with the Securities and Exchange Commission for additional information on risks and uncertainties that could cause actual results to differ. These forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we are under no obligation to, and expressly disclaim any responsibility to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
 
The following information should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Our fiscal year ends on July 31 of the applicable calendar year. All references to fiscal periods apply to our fiscal quarters or year which ends on the last day of the calendar month end.
 
Estimates of Future Financial Results are Inherently Unreliable.
 
From time to time, representatives of Solar Energy Initiatives, Inc. ("Solar Energy,” the ”Company," “we,” “our,” or “us”) may make public predictions or forecasts regarding the Company's future results, including estimates regarding future revenues, expense levels, earnings or earnings from operations. Any forecast regarding the Company's future performance reflects various assumptions. These assumptions are subject to significant uncertainties, and, as a matter of course, many of them will prove to be incorrect. Further, the achievement of any forecast depends on numerous factors (including those described in this discussion), many of which are beyond the Company's control. As a result, there can be no assurance that the Company's performance will be consistent with any management forecasts or that the variation from such forecasts will not be material and adverse. Investors are cautioned not to base their entire analysis of the Company's business and prospects upon isolated predictions, but instead are encouraged to utilize the entire available mix of historical and forward-looking information made available by the Company, and other information affecting the Company and its products, when evaluating the Company's prospective results of operations.  In addition, representatives of the Company may occasionally comment publicly on the perceived reasonableness of published reports by independent analysts regarding the Company's projected future performance. Such comments should not be interpreted as an endorsement or adoption of any given estimate or range of estimates or the assumptions and methodologies upon which such estimates are based. Undue reliance should not be placed on any comments regarding the conformity, or lack thereof, of any independent estimates with the Company's own present expectations regarding its future results of operations. The methodologies employed by the Company in arriving at its own internal projections and the approaches taken by independent analysts in making their estimates are likely different in many significant respects. Although the Company may presently perceive a given estimate to be reasonable, changes in the Company's business, market conditions or the general economic climate may have varying effects on the results obtained through the use of differing analyses and assumptions. The Company expressly disclaims any continuing responsibility to advise analysts or the public markets of its view regarding the current accuracy of the published estimates of outside analysts. Persons relying on such estimates should pursue their own independent investigation and analysis of their accuracy and the reasonableness of the assumptions on which they are based.
   
 
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PART I
   
ITEM 1.  BUSINESS
 
Recent Developments
 
In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
On January 19, 2011 the Company completed a distribution of 21,326,912 shares it held with Solar Park Initiatives, Inc. (SPI) to the Company’s shareholders, reducing its current ownership in SPI to approximately 22%.
 
 The Company sold its Solar EOS unit, dedicated to the education and continuous improvement of solar energy trade professionals, during the 3rd quarter of 2011 for a Note of  $165,450 payable over three years annual payments and the assumption of company debt for a total value of $200,000.
 
During the second quarter and continuing through the fourth quarter, the Company continues to experience cash flow difficulties that were exacerbated by the economy, the long development cycle of project development and lack of private capital investment.  As a result, the Company has reduced portions of its operations although it continues to pursue its business model.
 
The Company has moved its operations from Ponte Vedra Beach, Florida to its current address at its Kingstree, South Carolina plant facility.  The Company holds a lease until March 2013.
 
The Company is currently negotiating a solar project development in North Carolina of over 2 MW’s but there is no guarantee that such negotiation will be successful.
 
Throughout this Report, Solar Energy Initiatives, Inc. Solar Energy, Inc., SNRY Solar, Inc. and SNRY Power, Inc. may be individually and collectively hereafter referred to as: the “Company”, “Solar Energy”, “we”, or “us”.
  
Company Description and Overview
 
Solar Energy Initiatives, Inc. (OTCBB: SNRY), is a diversified provider of solar solutions focused on large-scale projects and distribution of solar products.
 
The SNRYPower subsidiary as a developer and manager of municipal and commercial scale solar projects.
   
The SNRYSolar Inc subsidiary as a wholesale distributor of branded photovoltaic and thermal (water heating) systems selling via a network of dealers throughout the United States and the Caribbean.
 
Solar Energy Initiatives, Inc. was formed on June 20, 2006 and is a Delaware Corporation.  On August 20, 2008, Solar Energy, Inc., a Florida corporation, was formed as a wholly owned subsidiary of Solar Energy Initiatives, Inc. to operate acquired solar assets, which includes the World Wide Web domain name  www.solarenergy-us.com , and the relationship management of an independent solar equipment dealer network.  In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
The Company sold its interests in SolarEnergy.com, a domain name and digital property back to its original owner during the 4th quarter of 2010 for cancellation of $400,000 of debt.
 
In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
On January 19, 2011 the Company completed a distribution of 21,326,912 shares it held with Solar Park Initiatives, Inc. (SPI) to the Company’s shareholders, reducing its current ownership in SPI to approximately 22%.
 
The Company sold its business for Solar EOS, dedicated to the education and continuous improvement of solar energy trade professionals, during the 3rd quarter of 2011 for Note of $165,450 over three years annual payments and payment of debts of the Company for a total value of $200,000.
     
 
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During the second quarter and continuing through the fourth quarter of the current fiscal year, the Company continues to experience cash flow difficulties that were exacerbated by the economy, the long development cycle of project development and lack of private capital investment.  As a result, the Company has reduced portions of its operations although it continues to pursue its business model.
 
The Company has also pursued plans to acquire the assets of an Internet marketing firm. The company has signed a definitive agreement and the close of the acquisition is scheduled for November 30, 2011. The Company is intending to restructure its debt and attempt to negotiate settlements on all of its debt holders and seek additional capital. There is no guarantee that we will be able to close the acquisition or the restructuring of the debt.
 
Through its diversified portfolio of solar businesses, Solar Energy is committed to restoring the nation’s economy through a grassroots campaign called ‘Renew the Nation’.  Renew the Nation brings together a broad alliance of public and private sector interests focused on workforce development, job creation and economic growth through solar energy. For more information please visit www.solarenergy-us.com.
 
We are primarily focusing our sales efforts in regions where electricity prices and government incentives are attractive and have accelerated solar power adoption.  The business segments we have identified to pursue can require a significant level of expertise and capital.  Currently the Company has found a very good working business model, working with many states and counties and banks that understand how to make the solar projects successful.  The executive management has currently been focusing on this working business model to improve profit margins, identify viable and bankable projects of significant size, and too install using all efforts towards those financially viable projects. We have obtained the expertise, and continue to seek the necessary capital to further develop our plan and focus on this improved business model.  The management has found the necessary expertise focusing on these strategies, however if we are unable to continue to acquire or develop such expertise or capital, we may not be able to fully develop our planned business and ultimately may be required to cease operations.  We anticipate that the end customers of our sales processes will be homeowners, owners of large commercial and industrial buildings and facilities, municipalities and owners of large tracts of undeveloped land.
   
Business Focus
 
Our business is to market and sell solar power products, systems and services. Specifically, we are engaged in the following:
 
 
1)
Support and continue to expand a dealer network that sells solar components and systems to residential and commercial customers, and
 
2)
Develop commercial projects, as the owner and operator, and sell power to the municipality, building owner or tenant
 
3)
Develop its South Carolina plant facility into a solar assembly, warehouse and distribution facility.
 
We offer solar power products including solar panels, inverters and balance of system which convert sunlight into utility quality electricity, and solar thermal systems which utilizes the sun’s radiation to heat water for homes and commercial applications.  Installation and maintenance of these solar power products is performed by either the dealer network or 3rd party vendors identified by us. Our initial solar installation sales efforts are focused on supporting our dealer network’s sales to residential, commercial customers and the sale of solar systems to owner/operators where the energy generated will be sold to municipal customers.
 
In 2009 we entered into a contract with a Western United States municipality where we agreed to build, own and operate a solar electric system we contracted for installation on buildings identified by the municipality.  The successful funding, construction and commissioning of the 800 kilowatt solar electric system has verified this vertical of our business plan. In 2010 we entered into several Letters of Intent to build, own and operate solar arrays on property owned by municipalities in North Carolina, Georgia and Pennsylvania. Although project and term funding were not provided during fiscal year 2010, the Company obtained project funding in October, 2010 to construct 500 KW’s of a 1 MW project in North Carolina for a municipality and sold the project in February 2011. The Company is currently in negotiations with various third parties to provide funding to build out several of its pipeline projects in North Carolina for a combined 2.0 MW’s, as well as, a 1MW project in Pennsylvania and 3.5 MW’s of projects in South Carolina.
 
In connection with our solar park development business, we intend to provide solar power systems to end customers on a turn-key, whole-solution basis by identifying and developing the project, and procuring financing, permits, equipment, construction and operational resources.  As our business matures we may also provide engineering, manage construction, and provide monitoring, operations and maintenance services to the projects.
 
We buy products for our solar sales activities from manufacturers and vendors around the world.  We buy products at wholesale prices based on market rates, and have relationships within the distribution and supply trade. 
   
The Energy Industry
 
The production of electrical power is one of the world's largest industries.  The demand and cost for electricity is expected to increase in the coming years.
   
 
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Fossil fuels are non-renewable resources, meaning that at some point the world will exhaust all known oil and natural gas reserves.  We believe the electrical utility industry and traditional oil and gas companies face many challenges in meeting the growing worldwide demand for energy, including the following:
   
  Fossil Fuel Supply Constraints:   A large portion of the world's electricity is generated from fossil fuels such as coal, oil and natural gas. Limited fossil fuel supply and escalating demand for electricity should continue to drive up wholesale electricity prices, creating a need to develop new technologies for power generation.
     
  Infrastructure Constraints:   In many parts of the world, the existing electricity generation and transmission infrastructure is insufficient to meet projected demand. Developing and building a centralized power supply and delivery infrastructure is capital intensive. This has left the electricity supply insufficient to meet demand in some areas, resulting in both scheduled and unscheduled blackouts.
     
  Desire for Energy Security:   Given the political and economic instability in the major oil and gas producing regions of the world, governments are trying to reduce their dependence on foreign sources of fossil fuels.
   
An underlying consideration concerning the delivery of electricity is the location of the generation source relative to the location of the end-use consumption. Over the past century, the economics of power plant construction supported larger and larger central station sites linked to transmission lines spanning great distances to reach the ultimate consumer. These economic considerations have been altered by the advent of smaller scale technologies that can provide electricity at competitive prices near the place of consumption. The combination of economic factors and of advances in generation technologies opens the market to an opportunity for "distributed generation" of electricity in combination with traditional grid resources. Distributed generation in its simplest configuration is energy generation at the source of consumption (solar and thermal panels on the roof or contiguous to the user’s location).  Our products and services, including solar parks, are directed at this renewable distributed generation environment as well as specific application power solutions.
 
Environmental Issues and Regulations
 
We are subject to a variety of foreign, federal, state and local governmental laws and regulations related to generation and delivery of electricity and the purchase, storage, use and disposal of hazardous materials. In some cases, these laws provide local utilities with “monopoly” rights, adversely constraining our ability to easily penetrate economically attractive markets.  In other cases, if we fail to comply with present or future environmental laws and regulations, we could be subject to fines, suspension of production or a cessation of operations.  In addition, under some foreign, federal, state and local statutes and regulations, a governmental agency may seek recovery and response costs from operators of property where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for the release or otherwise was not at fault.
 
In addition to those we have identified, we continue to seek markets that allow for the generation and sale of electricity by “third party developers”.  We also believe that we will apply for and receive all environmental permits necessary to conduct our business.  We are not aware of any pending or threatened environmental investigation, proceeding or action by foreign, federal, state or local agencies, or third parties involving our current facilities. Any failure by us to control the use of or to restrict adequately the discharge of, hazardous substances could subject us to substantial financial liabilities, operational interruptions and adverse publicity, any of which could materially and adversely affect our business, results of operations and financial condition.
 
Dependence on Government Subsidies and Incentives
Various subsidies and tax incentive programs exist at the federal, state and local level to encourage the adoption of solar power including capital cost rebates, performance-based incentives, feed-in tariffs, tax credits and net metering. Capital cost rebates provide funds to customers based on the cost or size of a customer’s solar power system. Government policies, in the form of regulation and incentives, have accelerated the adoption of solar technologies by businesses and consumers.
 
Performance-based incentives provide funding to a customer based on the energy produced by their solar system. Under a feed-in tariff subsidy, the government sets prices that regulated utilities are required to pay for renewable electricity generated by end-users. The prices are set above market rates and may be differentiated based on system size or application. Feed-in tariffs pay customers for solar power system generation based on kilowatt-hours produced, at a rate generally guaranteed for a period of time. Tax credits reduce a customer’s taxes at the time the taxes are due. Net metering programs allow a customer, who generates more energy than used, to “sell” electricity back to the utility which will spin the meter backwards. During these periods, the customer “lends” electricity to the grid, retrieving an equal amount of power at a later time. Net metering programs enable end-users to sell excess solar electricity to their local utility in exchange for a credit against their utility bills. Net metering programs are usually combined with rebates, and do not provide cash payments if delivered solar electricity exceeds their utility bills.
 
Renewable Energy Certificates
In addition, several states have adopted renewable portfolio standards (“RPS”), which mandate that a certain portion of electricity delivered to customers come from a set of eligible renewable energy resources. Under a renewable portfolio standard, the government requires regulated utilities to supply a portion of their total electricity in the form of renewable electricity. Some programs further specify that a portion of the renewable energy quota must be from solar electricity.  A utility can receive “credit” for renewable energy produced by a 3rd party by either purchasing the electricity directly from the producer or paying a fee to obtain the right to renewable energy generated but used by the generator or sold to another party.  This Renewable Energy Credit allows the utility to add this electricity to its RPS requirement total without actually expending the capital for generating facilities.
   
 
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Despite the benefits of solar power, there are also certain risks and challenges faced by solar power. Solar power is currently dependent on government subsidies to promote acceptance by mass markets. We believe that the near-term growth in the solar energy industry depends significantly on the continued availability and size of these government subsidies and on the ability of the industry to reduce the cost of generating solar electricity. The market for solar energy products is, and will continue to be, heavily dependent on public policies that support growth of solar energy. There can be no assurances that such policies will continue. Decrease in the level of rebates, incentives or other governmental support for solar energy would have an adverse affect on our ability to sell our products.
 
Challenges Facing Solar Power
The solar power industry must overcome the following challenges to achieve widespread commercialization of its products:
   
  Decrease Per Kilowatt-hour Cost to Customer.     In most cases, the current cost of solar electricity is greater than the cost of retail electricity from the utility network. While government programs and consumer preference have accelerated the use of solar power for on-grid applications, product cost remains one of the largest impediments to growth. To provide an economically attractive alternative to conventional electricity network power, the solar power industry must continually reduce manufacturing and installation costs.
     
  Achieve Higher Conversion Efficiencies.     Increasing the conversion efficiency of solar cells reduces the material and assembly costs required to build a solar panel with a given generation capacity. Increased conversion efficiency also reduces the amount of rooftop space required for a solar power system, thus lowering the cost of installation per consumer.
     
  Improve Product Appearance.     We believe that aesthetics are a barrier to wider adoption of solar power products particularly among residential consumers. Historically, residential and commercial customers have resisted solar power products, in part, because most solar panels are perceived as unattractive.
     
Ultimately, federal and state government, and locally sponsored, support for the solar industry is expected to reduce or stop.  At or before that time, solar technologies must be priced, as a function of purchase price and performance, to compete cost effectively with traditional electricity generating technologies.
 
Competition
 
The market for solar power products is competitive and continually evolving. We expect to face increased competition, which may result in our inability to develop sustaining revenue. We will compete with companies large and small, public and private, and some will be suppliers as well as competitors and well known such as; First Solar, groSolar, Sunpower, Sunwize, BP Solar, Evergreen Solar and GE Solar. Chinese companies have made significant inroads in manufacturing and are the leaders in the production of solar panels or modules.  Many of our competitors have established a stronger market position than ours and have larger resources and recognition than we have. In addition, the solar power market in general competes with other sources of renewable energy and conventional power generation.
   
We believe that the key competitive factors in the market for solar products include:
   
 
power efficiency and performance;
 
price;
 
quality, and warranty coverage and length;
 
aesthetic appearance of solar installations;
 
strength of distribution relationships; and
  knowledgeable sales and installation personnel.
       
Our Distributed Products
 
Solar Panels
Solar panels are solar cells electrically connected together and encapsulated in a weatherproof package. We purchase solar panels from manufacturers that provide excellent component quality, aggressive pricing per watt of output and strong warranties.  We purchase panels from Suntech, GE Solar, BP Solar and other vendors in the U.S. and off-shore.
 
One of the important considerations, in addition to price, is the length and terms of the product warranty.  Today, typical warranties call for 25-years of performance at a minimum of 80% of the rated, maximum output of the panel.  Other additional warranty coverage is also provided by manufacturers including; minimum warranted power, per watt PVUsa Test Conditions rating (“PTC”), efficiency rating of the solar panels, etc.
  
 
7

 
  
Inverters
Inverters transform direct current (“DC”), electricity produced by solar panels into the more common form of alternating current (“AC”), electricity used in homes and businesses.  Inverters are used in virtually every on-grid solar power system and typically feed power either directly into the structure’s electrical circuit or into the utility grid.  In North America, we will sell branded inverters specifically designed for use in residential and commercial systems. Inverters we will source include models spanning a power range of 2.5 to 500 kilowatts. Our packaged system designs optimize performance through the appropriate combination of these inverters with our solar panels. The units are highly efficient, possessing above-average DC to AC conversion efficiency compared to other commercially available units in their class, according to comparisons of information on other systems provided by the California Energy Commission. Our inverters are manufactured for us by Solectria, Xantrex, SMA Technologies, AG and PV Powered.
 
Solar Thermal Systems
Solar thermal systems typically include a solar collector, which gathers solar radiation to heat air or water for domestic, commercial or industrial use, piping and/or pump(s) to move heated water and a tank for storage. The solar panel is usually a flat plate collector that consists of a metal box with a glass or plastic cover and a black absorber plate at the bottom.  Absorber plates are usually painted with selective coatings that absorb and retain heat better than ordinary black paint. They are normally made of metal, typically copper or aluminum, because they are good conductors of heat. Copper is more expensive, but it is a better conductor and is less prone to corrosion than aluminum. The sides and bottom of the collector are usually insulated to minimize heat loss. The solar collector is usually mounted on the roof and is usually connected to a circuit that flows heated water by a pump to the main hot water tank.  Components for solar thermal systems are typically manufactured, domestically and abroad, by smaller, private companies unlike the large public and recognizable names often associated with solar PV.
 
We provide our dealers and customers with a variety of services, including system design, energy efficiency, financial consulting and analysis, construction management and maintenance and monitoring.
 
System Design
Solar electric and solar thermal systems are designed to take into account the customer’s location, site conditions and energy needs.  During the preliminary design phase, a site audit and building assessment are conducted for onsite generation feasibility and to identify energy efficiency savings opportunities. Performance of a proposed system design is “modeled” taking into account variables such as local weather patterns, utility rates and other relevant factors at the customer’s location. The necessary permits are identified systems designed to comply with applicable building codes and other regulations.
 
Financial Consulting and Analysis
The financial attributes of solar systems are calculated using the applicable federal, state and local incentives and the cost of energy currently and expected to be paid by the customer.  The anticipated economic benefits of including solar system(s) to a customer’s home or facility are calculated.  We are planning to pursue partnerships with one or more financial companies and organizations to provide project development financing, bonding and end financing for residential and commercial customers.
 
Construction Management
We intend to offer general contracting services and project management to oversee all aspects of system installation, including securing necessary permits and approvals.  Subcontractors, typically electricians, plumbers and roofers, usually provide the construction labor, tools and heavy equipment for solar system installation. We plan to develop relationships with general and subcontractors in many target markets, and will require these contractors to be licensed, carry appropriate insurance and adhere to the local labor and payroll requirements. Our construction management services would include system testing, commissioning and management of utility network interconnection.
 
Maintenance and Monitoring
Typically, our dealers will provide post-installation services in support of solar power systems they install to their residential and small commercial customers.  As we pursue 3rd party owned and operated solar systems and solar park projects, we intend to provide the on-going system repair, maintenance and monitoring, including:
   
 
Operations and Maintenance: Solar systems have a design life in excess of 25 years. We anticipate offering to our customers a series of maintenance services that can include; continuous remote monitoring of system performance, quick turnaround on-site response to any system problem through a qualified local service technician and periodic preventive maintenance as well as certain forms of system testing
     
 
Monitoring: We will acquire monitor system performance technology used in most of the commercial systems installed. The monitoring technology continuously scans system performance
    
Sales and Marketing
 
Our sales and marketing program incorporates a mix of print and web as well as participation in industry trade shows and individual consultations with prospective customers. In addition, we rely heavily on the independent dealer network and we intend to work with and grow this network. We have trained many in the dealer network to design a system that best meets a customer’s needs, taking into account the unique installation and economic requirements for each location, and provide technical support to the dealers as necessary and needed. Commercial sales take a more consultative, long-term selling approach to meet the varying needs of larger customers. The sales process typically includes, a determination that a potential customer’s site has the required exposure for solar power, a site visit and a survey with our proprietary software that analyzes current utility rate options, current electric rates, system performance, tax rate scenarios, equipment costs, installation costs, incentives and other factors applicable to a specific customer’s circumstances.
      
 
8

 
   
Employees
 
At the end of our fiscal year, we have two contracted staff in sales, and administrative positions
 
ITEM 1A.  RISK FACTORS
 
Although not required to include risk factors as the Company is a Smaller Reporting Company, the Company is voluntarily providing risk factors.   This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the value of our stock could decrease. This means you could lose all or a part of your investment.
 
We have a limited operating history, there is no certainty that we will ever generate revenue and achieve profitability.
 
We generated revenue of $1,285,770 for our fiscal year ended July 31, 2011.  We have incurred significant losses from development and operations. As shown in our financial statements, as of the periods ended July 31, 2011 and July 31, 2010, we have incurred a cumulative net loss of $15,751,165 and $11,002,334, respectively, from operations.  We will continue to incur operating losses in the future, primarily due to the cost of our operations. Negative cash flow from operations may also continue into future. Our ability to achieve profitability depends upon our ability to; continue to restructure our debt and increase our cash flow for our business, significantly expand the solar component and system sell-through to our dealer network, convert opportunities to sell large municipal and commercial projects, and successfully complete development of one or more solar project(s).  If we are unable to generate positive cash flows or reduce our debt, we will be required to cease operations.
 
We may be unable to manage our growth or implement our expansion strategy.
 
We may not be able to implement our proposed product and service offerings, develop an active dealer network base and markets, or implement the other features of our business strategy at the rate or to the extent presently planned.  Our projected growth will place a significant strain on our administrative, operational and financial resources. If we are unable to successfully manage our future growth, establish and continue to upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially and adversely affected.
 
We have a significant amount of outstanding debt and if we are unable to restructure this debt we will cease operations.  We currently have a significant amount of debt including outstanding payables.  If we are unable to restructure such debt/payable, we will cease operations.
 
Additional financing will be necessary for the implementation of our growth and restructuring debt strategy.
 
We will require additional equity and/or debt financing to pursue our growth strategy. Given our limited operating history and existing losses, there can be no assurance that we will be successful in obtaining additional financing. Lack of additional funding could force us to curtail substantially our growth plans. Furthermore, the issuance by us of any additional securities pursuant to any future fundraising activities undertaken by us would dilute the ownership of existing shareholders and may reduce the price of our common stock.
 
Debt and/or project financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business, development of projects and operations.  If we do not raise additional capital, we will be required to cease operations in the next 30 days.
 
The loss of our current directors and executive officers or our inability to attract and retain the necessary personnel could have a material adverse effect upon our business, financial condition or results of operations
 
Our success is heavily dependent on the continued active participation of our current directors and officers listed under “Directors and Management.” Loss of the services of our directors and officers could have a material adverse effect upon our business, financial condition or results of operations. Further, our success and achievement of our growth plans depend on our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among companies in the technology industry is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the expansion of our activities, could have a materially adverse effect on us. The inability on our part to attract and retain the necessary personnel and consultants and advisors could have a material adverse effect on our business, financial condition or results of operations.  Finally, we need to identify and engage independent directors to join the board and serve on the Audit Committee, including one that qualifies as an “accounting expert” to meet the public company listing qualifications of Sarbanes-Oxley, section 301.  Without the addition of directors and an accounting expert, we will not be able to be listed on the National Association of Securities Dealers Automated Quotations (NASDAQ) exchange or other primary stock exchange.
 
We are influenced by current officers, directors and principal stockholders.
 
Our directors, executive officers and principal five percent stockholders and their affiliates beneficially own approximately 25.8% of the outstanding shares of Common Stock. Accordingly, our executive officers, directors, principal stockholders and certain of their affiliates will have the ability to significantly influence the election of our Board of Directors of the Company and the outcome of issues submitted to our stockholders.
  
 
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If there is a shortage of components and/or key components rise significantly in price, that may constrain our revenue growth.  The market for photovoltaic installations has slowed recently, the result of world-wide financial and economic problems.  The introduction of significant production capacity, however, has continued increasing supply and reducing the cost of solar panels.  If demand increases and supply contracts, the resulting likely price increase could adversely affect sales and profitability.  Additionally, we may not have sufficient financial resources to take advantage of supply opportunities as they may arise.
 
During 2010 and into 2011, there was a tremendous increase in the capacity to produce solar modules, primarily from China, which in the face of the most severe, world-wide, economic downturn in nearly a century, significantly reduced the price of solar panels.  As demand for solar panels will likely increase with an economic recovery, demand and pricing for solar modules on a per watt basis could increase, potentially limiting access to solar modules and reducing our selling margins for panels.
  
Our dependence on a limited number of third party suppliers for components could prevent us from delivering our proposed products to our customers within required timeframes, which could result in order cancellations and substantial harm to our business.
 
We purchase our products using materials and components procured from a limited number of third-party suppliers.  If we fail to establish or maintain our relationships with these suppliers, or to secure additional supply sources from other suppliers, we may be unable to provide our products or our products may be available only at a higher cost or after a long delay, which could prevent us from delivering our products to our customers within required timeframes, and we may experience order cancellations and our business may fail. We currently have supply agreements with suppliers to allow us to buy products at market rates and procure sufficient product quantities to assemble and sell our products on acceptable commercial terms. The failure of a supplier to supply materials and components in a timely manner, or to supply materials and components that meet our quality, quantity and cost requirements could impair our ability to purchase our products or increase their costs, particularly if we are unable to obtain substitute sources of these materials and components on a timely basis or on terms acceptable to us.  In order to obtain required supplies, we may need to make large inventory purchases on short notice, and prior to having purchase orders or deposits from our customers for product using the full amount of silicon required to be purchased. We may not have sufficient financial resources to make these purchases, which may exacerbate supply shortages.
 
Our business depends on the implementation of our current and future agreements with foreign and domestic manufacturers, securing contracts with other suppliers and orders with customers and ensuring products to sell.
 
To date, we have worked with suppliers to accept best price offers with solar panel suppliers.  We intend to pursue other competitive price offer arrangements with component and balance of system suppliers to attempt to manage the cost of materials and supply allocations.  If we are unable to maintain our supply relationships, establish competitive additional supply sources or we are unable to develop adequate sales, we may be forced to cease operations.
 
Our operating results will be subject to fluctuations and are inherently unpredictable; if we fail to meet the expectations of securities analysts or investors, our stock price may decline significantly.
 
Our quarterly revenue and operating results will be difficult to predict from quarter to quarter. It is possible that our operating results in some quarters will be below market expectations. Our quarterly operating results will be affected by a number of factors, including:
   
 
the average selling price of the solar products that we purchase including  PV and Thermal systems;
 
the availability, pricing and timeliness of delivery of third party sources products,  components and systems, particularly solar panels and balance of systems components, including steel, necessary for solar power products to function;
 
the rate and cost at which we are able to expand to meet customer demand, including costs and timing of adding personnel;
 
the amount and timing of sales of our  systems, especially medium and large-scale projects, which may individually cause severe fluctuations in our revenue;
 
our ability to meet project completion schedules and the corresponding revenue impact under such contractual devises as percentage-of-completion method of recognizing revenue for projects which may apply;
 
construction cost overruns, including those associated with the introduction of new products;
 
incentives play a major roll in the buying/decision making process for our potential customers, significant changes in regulation or incentives may adversely effect our business;
 
the impact of seasonal variations in demand and/or revenue recognition linked to construction cycles and weather conditions;
 
unplanned additional expenses such as manufacturing failures, defects or downtime;
 
acquisition and investment related costs;
 
unpredictable volume and timing of customer orders, some of which are not fixed by contract but vary on a purchase order basis;
 
unpredictable sales cycle time lines inherent with new solutions and products;
 
geopolitical turmoil within any of the countries in which we operate or sell products;
 
foreign currency fluctuations, particularly in the Euro or the Chinese Yuan;
  
 
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the effect of currency hedging activities;
 
our ability to establish and expand customer relationships;
 
changes in our manufacturing costs;
 
changes in the relative sales mix of our solar cells, solar panels and imaging detectors;
 
the availability, pricing and timeliness of delivery of other products, such as inverters necessary for our solar power products to function;
 
our ability to successfully procure and sell new or enhanced solar power products in a timely manner;
 
the timing of new product or technology affiliations or agreements by our competitors and other developments in the competitive environment;
 
the willingness of solar panel suppliers to continue product sales to us;
 
increases or decreases in electric rates due to changes in fossil fuel prices or other factors; and
 
labor shortages, expertise shortages, shipping and other factors causing business delays.
          
We plan to base our operating expenses in part on our expectations of future revenue, and a significant portion of our expenses will be relatively fixed in the short term. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would harm our operating results for that quarter. This may cause us to miss discussed future expectations, current analysts’ guidance or any future guidance announced by us. If we fail to meet or exceed analyst or investor expectations or our own future guidance, even by a small amount, our stock price could decline, perhaps substantially.
 
Existing regulations and policies and changes to these regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products.
 
The market for electricity generation products is heavily influenced by foreign, U.S. federal, state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the U.S. and in a number of other countries, these regulations and policies are being modified and may continue to be modified. Customer purchases of, or further investment in the research and development of, alternative energy sources, including solar power technology, could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for the solar power products of Solar Energy Initiatives, Inc.. For example, without certain major incentive programs and or the regulatory mandated exception for solar power systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility network. These fees could increase the cost to our customers of using our solar power products and make them less desirable, thereby harming our business, prospects, results of operations and financial condition.
 
We anticipate that our solar power products and their installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. It is difficult to track the requirements of individual states and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to our solar power products may result in significant additional expenses to us and our resellers and their customers and, as a result, could cause a significant reduction in demand for our solar power products.
 
The reduction or elimination of government economic incentives could prevent us from achieving sales and market share.
 
We believe that the near-term growth of the market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, depends in large part on the availability and size of government and economic incentives. Because a significant portion of our sales are expected to involve the on-grid market, the reduction or elimination of government and economic incentives may adversely affect the growth of this market or result in increased price competition, both of which could cause our revenue to decline.
 
Today, the cost of solar power exceeds retail electric rates in many locations. As a result, federal, state and local government bodies in many countries, most notably Canada, Germany, Japan, Spain, Italy, Portugal, South Korea and the United States, have provided incentives in the form of feed-in tariffs, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. These government economic incentives could be reduced or eliminated altogether. For example, Germany has been a strong supporter of solar power products and systems and political changes in Germany could result in significant reductions or eliminations of incentives, including the reduction of feed-in tariffs more rapidly than required by current law. Some solar program incentives expire, decline over time, are limited in total funding or require renewal of authority. Net metering and other operational policies in California, Japan or other markets could limit the amount of solar power installed there. Reductions in, or eliminations or expirations of, governmental incentives could result in decreased demand for and lower revenue from our products. Changes in the level or structure of a renewable portfolio standard could also result in decreased demand for and lower revenue from our products.
   
 
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Problems with product quality or product performance we distribute could result in a decrease in customers and revenue, unexpected expenses and loss of market share.
 
The solar products we plan to purchase are complex and must meet stringent quality requirements. Products this complex may contain undetected errors or defects, especially when first introduced. For example, solar panels may contain defects that are not detected until after they are shipped or are installed because we cannot test for all possible scenarios. These defects could cause us to, or may cause us to request that suppliers incur significant re-engineering costs, divert the attention of our personnel from product selling efforts and significantly affect our customer relations and business reputation. If we deliver solar panels with errors or defects, or if there is a perception that such solar panels contain errors or defects, our credibility and the market acceptance and sales of its solar power systems could be harmed.
 
The possibility of future product failures could cause us to incur substantial expense to repair or replace defective products. Furthermore, widespread product failures may damage our market reputation and reduce our market share and cause sales to decline. We may need to indemnify dealers in the network and customers in some circumstances against liability from defects in our solar products. A successful indemnification claim against us could require us to make significant damage payments, which would negatively affect our financial results.
 
Since the solar products we plan to purchase and sell cannot be tested for the duration of their standard multi-year warranty period, we may be subject to unexpected warranty expense; if we are subject to installation, warranty and product liability claims, such claims could adversely affect our business and results of operations.
 
The current standard product warranty for the solar products we intend to sell includes a warranty period (up to ten-years) for defects in material and workmanship and a warranty period (up to twenty five-years) for declines in power performance as well as a typically one-year warranty on the functionality of solar cells (for electricity producing solar products).  Due to the long warranty period and even though we intend to pass through the warranty from the manufacturer, we may bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. Any warranty claims that the manufacturer does not cover would cause us to increase the amount of warranty reserves and have a corresponding negative impact on our results. Although the manufacturers represent that they conduct accelerated testing of their solar cells, our solar panels have not and cannot be tested in an environment simulating the full warranty period. As a result of the foregoing, we may be subject to unexpected warranty expense, which in turn would harm our financial results.
 
Like other retailers, distributors and manufacturers of products that are used by consumers, we face an inherent risk of exposure to product liability claims in the event that our solar products cause or their use result in injury. Our business may be subject to warranty and product liability claims in the event that its solar power systems fail to perform as expected or if a failure of its solar power systems results, or is alleged to result, in bodily injury, property damage or other damages. Since our planned solar energy products are electricity and heat producing devices, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. Moreover, we may not have adequate resources in the event of a successful claim against us. We have evaluated the potential risks we face and believe that we can obtain appropriate levels of insurance for product liability claims. We will rely on our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. However, a successful warranty or product liability claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages. In addition, quality issues can have various other ramifications, including delays in the recognition of revenue, loss of revenue, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and reputation, which could also adversely affect our business and operating results. Our business’ exposure to warranty and product liability claims is expected to increase significantly in connection with its planned expansion into the new home market.
 
Warranty and product liability claims may result from defects or quality issues in certain third party technology and components that we or our suppliers incorporate into their/our solar power systems, particularly solar cells and panels, over which we have no control. While our agreements with our suppliers would generally include warranties, such provisions may not fully compensate us for any loss associated with third-party claims caused by defects or quality issues in such products. In the event we seek recourse through warranties, we will also be dependent on the creditworthiness and continued existence of the suppliers to our business.
 
We anticipate that our current standard warranty will differ by geography and end-customer application and will include such instruments as one-, two- or five-year comprehensive parts and workmanship warranties, after which the customer may typically extend the period covered by its warranty for an additional fee. Due to the warranty period, our business bears the risk of extensive warranty claims long after it has completed a project and recognized revenues. Future product failures could cause our business to incur substantial expenses to repair or replace defective products. While our business generally passes through manufacturer warranties it receives from its suppliers to its customers, it is responsible for repairing or replacing any defective parts during its warranty period, often including those covered by manufacturers warranties. If the manufacturer disputes or otherwise fails to honor its warranty obligations, our  business may be required to incur substantial costs before it is compensated, if at all, by the manufacturer. Furthermore, the ‘business’ warranties may exceed the period of any warranties from our suppliers covering components included in its systems, such as inverters.
  
 
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The products we intend to distribute may not gain market acceptance, which would prevent us from achieving sales and market share.
 
The development of a successful market for the products we intend to distribute may be adversely affected by a number of factors, some of which are beyond our control, including:
   
 
our failure to offer products that compete favorably against other solar power products or providers on the basis of cost, quality and performance;
 
our failure to offer products that compete favorably against conventional energy sources and alternative distributed-generation technologies, such as wind, biomass and solar thermal, on the basis of cost, quality and performance;
 
our failure to develop and maintain successful relationships with vendors, distributors, systems integrators and other resellers, as well as strategic partners.
          
If the products we intend to distribute fail to gain market acceptance, we will be unable to achieve sales and market share.
 
Technological changes in the solar power industry could render the products we intend to distribute uncompetitive or obsolete, which could prevent us from achieving market share and sales.
 
Our failure to seek new technologies and to be at the forefront of new product offerings could cause us to become uncompetitive promoting less competitive or obsolete systems, which could prevent us from achieving market share and sales. The solar power industry is rapidly evolving and highly competitive. We may need to invest significant financial resources to keep pace with technological advances in the solar power industry and to compete in the future and we may be unable to secure such financing. We believe that a variety of competing solar power technologies may be under development by many companies that could result in lower manufacturing costs or higher product performance than those products selected by us. These development efforts may render obsolete the products we have selected to offer, and other technologies may prove more advantageous for the commercialization of solar power products.
 
If solar power technology is not suitable for widespread adoption or sufficient demand for solar power products does not develop or takes longer to develop than we anticipate, we would be unable to achieve sales and market share.
 
The market for solar power products is emerging and rapidly evolving, and its future success is uncertain. If solar power technology proves unsuitable for widespread commercial deployment or if demand for solar power products fails to develop sufficiently, we would be unable to achieve sales and market share. In addition, demand for solar power products in the markets and geographic regions we target may not develop or may develop more slowly than we anticipate. Many factors will influence the widespread adoption of solar power technology and demand for solar power products, including:
   
 
cost-effectiveness of solar power technologies as compared with conventional and competitive alternative energy technologies;
 
performance and reliability of solar power products as compared with conventional and non-solar alternative energy products;
 
success of alternative distributed generation technologies such as hydrogen fuel cells, wind turbines, bio-diesel generators and large-scale solar thermal technologies;
 
fluctuations in economic and market conditions that impact the viability of conventional and competitive alternative energy sources;
 
increases or decreases in the prices of oil, coal and natural gas;
 
capital expenditures by customers, which tend to decrease when the domestic or foreign economies slow;
  continued deregulation of the electric power industry and broader energy industry; and
  availability and or effectiveness of government subsidies and incentives.
         
We face intense competition from other companies producing solar power, system integrators and other energy generation products. If we fail to compete effectively, we may be unable to increase our market share and sales.
 
The mainstream power generation market and related product sectors are well established and we are competing with power generation from more traditional process that can generate power at lower costs than most renewable or environmentally driven processes.  Further, within the renewable power generation and technologies markets we face competition from other methods of producing renewable or environmentally positive power. Then, the solar power market itself is intensely competitive and rapidly evolving. Our competitors have established market positions more prominent than ours, and if we fail to attract and retain customers and establish a successful distribution network for our solar products, we may be unable to achieve sales and market share. There are a number of major multi-national corporations that produce solar power products, including; Suntech, Sunpower, FirstSolar, BP Solar, Kyocera, Sharp, GE, Mitsubishi, Solar World AG and Sanyo. Also established integrators are growing and consolidating, including groSolar, Sunwize, Sunenergy and Real Goods Solar and we expect that future competition will include new entrants to the solar power market. Further, many of our competitors are developing and are currently producing products based on new solar power technologies that may have costs similar to, or lower than, our projected costs.
 
Most of our competitors are substantially larger than we are, have longer operating histories and have substantially greater financial, technical, manufacturing and other resources than we do. Our competitors' greater sizes in some cases provides them with competitive advantages with respect to manufacturing costs due to their ability to allocate fixed costs across a greater volume of production and purchase raw materials at lower prices. They also have far greater name recognition, an established distribution network and an installed base of customers. In addition, many of our competitors have well-established relationships with current and potential resellers, which have extensive knowledge of our target markets. As a result, our competitors will be able to devote greater resources to the research, development, promotion and sale of their products and may be able to respond more quickly to evolving industry standards and changing customer requirements than we can.
   
 
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We may not address successfully the problems encountered in connection with any potential future acquisitions.
 
We expect to consider future opportunities to acquire or make investments in other technologies, products and businesses that could enhance our capabilities, complement our products, or expand the breadth of our markets or customer base. We have limited experience in acquiring other businesses and technologies. Potential and completed acquisitions and strategic investments involve numerous risks, including:
   
 
problems assimilating the purchased technologies, products or business operations;
 
problems maintaining uniform standards, procedures, controls and policies;
 
problems arising from non-performance of acquired entities or assets;
 
problems arising from overvaluation or with securing the required financing to close and/or make the acquisition operational;
 
unanticipated costs associated with an acquisition;
 
diversion of management's attention from our core business;
 
adverse effects on existing business relationships with suppliers and customers;
 
risks associated with entering new markets in which we have no or limited prior experience;
 
potential loss of key employees of acquired businesses; and
 
increased legal and accounting costs as a result of the newly adopted rules and regulations related to the Sarbanes-Oxley Act of 2002 and other such regulation such as increased internal control and reporting requirements.
          
We are subject to corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.
 
Under the current rules, an attestation report on our internal controls from our independent registered public accounting firm is not required as part of our annual report for the fiscal year ending in 2011. Additionally, we well be required to file our first 10-Q subsequent to June 15, 2011 on an XBRL basis, or the October 31, 2011 filing.  We currently review and maintain on a regular basis a process of evaluating our control structure to help ensure that we will be able to comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules and regulations is expected to be substantial. We cannot assure you that we will be able to fully comply with these laws, rules and regulations that address corporate governance, internal control reporting and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition and the value of our securities.
 
Because the markets in which we compete are highly competitive and many of our competitors have greater resources than us, we may not be able to compete successfully and we may lose or be unable to gain market share.
 
Our solar business competes with a large number of competitors in the solar power market, including integrators such as groSolar, Sunwize, Sunenergy and Real Goods Solar, and manufacturers that may also directly supply projects at costs we cannot compete with, including Suntech, BP Solar, FirstSolar, SolarWorld AG and others. In addition, alternative technologies such as thin films and concentrators, which may compete with our technology in certain applications, continue to make market penetration. We expect to face increased competition in the future. Further, many of our competitors are developing and are currently producing products based on new solar power technologies that may ultimately have costs similar to, or lower than, our projected costs.
 
Our solar power products and services compete against other power generation sources including conventional fossil fuels supplied by utilities, other alternative energy sources such as wind, biomass, concentrated solar power “CSP” and emerging distributed generation technologies such as micro-turbines, sterling engines and fuel cells. In the large-scale on-grid solar power systems market, we will face direct competition from a number of companies that manufacture, distribute, or install solar power systems.  Our primary competitors in the United States include Arizona Public Service Company, BP Solar International, Inc., a subsidiary of BP p.l.c., Conergy Inc., Dome-Tech Group, Eastwood Energy, EI Solutions, Inc., Florida Power and Light, GE Energy, a subsidiary of General Electric Corporation, Global Solar Energy, Inc., a subsidiary of Solon, groSolar, Power-Fab, Real Goods Solar, Schott Solar, Inc., Solar Integrated Technologies, Inc., SPG Solar, Inc., Sun Edison LLC, Suntech, SunTechnics Installation & Services, Inc., Sunwize, Sunenergy, Thompson Technology Industries, Inc. and WorldWater & Power Corporation. Our primary competitors in Europe include BP Solar, Conergy (through its subsidiaries AET Alternitive Energie Technik GmbH, SunTechnics Solartechnik GmbH and voltwerk AG), PV-Systemtechnik Gbr, SAG Solarstrom AG, Solon AG and Taufer Solar GmbH. Additionally, our business will occasionally compete with distributed generation equipment suppliers such as Caterpillar, Inc. and Cummins Inc. Other existing and potential competitors in the solar power market include universities and research institutions. We also expect that future competition will include new entrants to the solar power market offering new technological solutions. As we enter new markets and pursue additional applications for our products and services, we expect to face increased competition, which may result in price reductions, reduced margins or loss of market share.
 
Competition is intense, and many of our competitors have significantly greater access to financial, technical, manufacturing, marketing, management and other resources than we do. Many also have greater name recognition, a more established distribution network and a larger installed base of customers. In addition, many of our competitors have well-established relationships with our potential suppliers, resellers and their customers and have extensive knowledge of our target markets. As a result, these competitors may be able to devote greater resources to the research, development, promotion and sale of their products and respond more quickly to evolving industry standards and changing customer requirements than we will be able to. Consolidation or strategic alliances among such competitors may strengthen these advantages and may provide them greater access to customers or new technologies. To the extent that government funding for research and development grants, customer tax rebates and other programs that promote the use of solar and other renewable forms of energy are limited, we will compete for such funds, both directly and indirectly, with other renewable energy providers and their customers.
  
 
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If we cannot compete successfully in the solar power industry, our operating results and financial condition will be adversely affected. Furthermore, we expect competition in the targeted markets to increase, which could result in lower prices or reduced demand for our product and service offerings and may have a material adverse effect on our business and results of operations.
 
The demand for products requiring significant initial capital expenditures such as our solar power products and services are affected by general economic conditions.
 
The United States and countries world wide have recently experienced a period of declining economies and unprecedented turmoil in financial markets. A sustained economic recovery is uncertain. In particular, terrorist acts and similar events, continued unrest in the Middle East or war in general could contribute to a slowdown of the market demand for products that require significant initial capital expenditures, including demand for solar power systems and new residential and commercial buildings. In addition, increases in interest rates may increase financing costs to customers, which in turn may decrease demand for our solar power products. If an economic recovery is slowed as a result of the recent economic, political and social events, or if there are further terrorist attacks in the United States or elsewhere, we may experience decreases in the demand for our solar power products, which may harm our operating results.
 
We will rely primarily upon copyright and trade secret laws and contractual restrictions to protect our proprietary rights, and, if these rights are not sufficiently protected, our ability to compete and generate revenue could suffer.
 
We will seek to protect our proprietary supplier and operational processes, documentation and other written materials primarily under trade secret and copyright laws. We also typically require employees and consultants with access to our proprietary information to execute confidentiality agreements. The steps taken by us to protect our proprietary information may not be adequate to prevent misappropriation of our technology. In addition, our proprietary rights may not be adequately protected because:
   
 
people may not be deterred from misappropriating our operational assets despite the existence of laws or contracts prohibiting it;
 
policing unauthorized use of our intellectual property may be difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use; and
  the laws of other countries in which we access and or market our solar cells, such as some countries in the Asia/Pacific region, may offer little or no protection for our proprietary technologies.
   
Unauthorized copying or other misappropriation of our proprietary assets could enable third parties to benefit from our property without paying us for doing so. Any inability to adequately protect our proprietary rights could harm our ability to compete, to generate revenue and to grow our business.
 
We rely on suppliers to comply with intellectual property, copywrite, hazardous materials and processes and trade secrecy laws and regulations and, if such laws and regulations are not sufficiently followed, our business could suffer substantially.
 
We endeavor to comply with all law and regulation regarding intellectual property law manufacturing process law and regulation, however, in many cases it is our supplier that must comply with such regulations and laws.  While we make efforts to ensure that products sourced from third parties comply with required regulation and law and that the operation of our suppliers do as well, our business could suffer if a supplier was, or suppliers were, found to be non compliant with regulation and law in our, our customers’ or our suppliers’ jurisdictions.
 
Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines for us.
 
We are required to comply with all foreign, U.S. federal, state and local laws and regulations regarding pollution control and protection of the environment. In addition, under some statutes and regulations, a government agency, or other parties, may seek recovery and response costs from operators of property where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for such release or otherwise at fault. In the course of future business we may use, generate and discharge toxic, volatile and otherwise hazardous chemicals and wastes in our operations or related research and development and manufacturing activities. Any failure by us to control the use of, or to restrict adequately the discharge of, hazardous substances could subject us to potentially significant monetary damages and fines or suspensions in our business operations. In addition, if more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial. If we fail to comply with present or future environmental laws and regulations we may be required to pay substantial fines, suspend production or cease operations.
   
 
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There are restrictions on the transferability of the securities.
 
Until registered for resale, investors must bear the economic risk of an investment in the Shares for an indefinite period of time. Rule 144 promulgated under the Securities Act (“Rule 144”), which provides for an exemption from the registration requirements under the Securities Act under certain conditions, requires, among other conditions, a six month holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act and that the Company is current in its filings.  There is no guarantee that we will continue to maintain our public filings.
 
If we violated certain securities laws, we may not now be able to privately offer our equity securities for sale.
 
Any offering of our equity securities in or from the United States must be registered with the SEC or be exempt from registration. If our prior offers and sales were not exempt from registration, it is likely that they would be deemed integrated with future offerings unless we do not offer equity securities for at least six months. In the event of such integration, we would only be permitted to offer and sell equity securities after we file one or more new registration statements with the SEC and the registration statements have become effective. The registration process is both expensive and can be expected to take at least several months and would substantially hinder our efforts to obtain funds.
 
If the Company uses its stock in acquisitions of other entities there may be substantial dilution at the time of a transaction.
 
If the price of our common stock used for an acquisition is less than the amount paid by our shareholders, substantial dilution may be experienced.  Additional dilution may be experienced by the sale of additional shares of common stock or other securities, or if the Company’s shares are issued to purchase other entities assets.
 
Our common stock is subject to the “Penny Stock” rules of the SEC.
 
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
   
 
that a broker or dealer approve a person's account for transactions in penny stocks; and   the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
  
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
   
 
obtain financial information and investment experience objectives of the person; and   make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
    
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
   
 
sets forth the basis on which the broker or dealer made the suitability determination; and
 
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
       
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
 
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
 
If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
 
Companies trading on the Over-The-Counter Bulletin Board, and must be current in their reports with the Securities and Exchange Commission, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.   In addition, we may be unable to get re-listed on the OTC Bulletin Board, which may have an adverse material effect on our Company.
     
 
16

 
   
Our common stock may be adversely affected by limited trading volume and the market price may fluctuate significantly, which may negatively affect our stockholders’ ability to sell their shares.
 
While the trading time and average stock volumes have increased over time, there can be no assurance that an active trading market will be sustained. An absence of an active trading market can be expected to adversely affect our stockholders’ ability to sell their shares. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market from time to time in the belief that our share price will decline. We cannot predict whether the market for our shares will be stable or appreciate over time.
 
Because of the concentration of ownership of our common stock by a small number of stockholders, it is unlikely that any other holder of common stock will be able to affect our management or direction.
 
On October 28, 2011, our directors, officers and certain of their affiliates were deemed to beneficially own approximately 25.8% of our outstanding common stock.  Accordingly, if these stockholders act together as a group, they would most likely be able to control the outcome of stockholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our certificate of incorporation and bylaws and the approval of significant corporate transactions. The existence of ownership concentrated in a few persons may have the effect of delaying or preventing a change in management or voting control. Furthermore, the interests of our controlling stockholders could conflict with those of our other stockholders.
 
Because each of our executive officers may voluntarily terminate his employment with us at any time on at least 30 days prior written notice to us, we can not be sure if any of them will maintain their position with us for the foreseeable future.
 
In the event any of our executive officers terminate their employment with us, we may not be able to find suitable replacements on similar terms, if at all.
 
Although we plan on maintaining commercial insurance to reduce some operating hazard risks, such insurance may not be available to us at economically feasible rates, if at all.
 
In the absence of suitable insurance, we may be exposed to claims and litigation which we will not be financially able to defend or we may be subject to judgments which may be for amounts greater than our ability to pay.
 
Future sales by our stockholders may adversely affect our stock price and our ability to raise funds in future equity offerings.
 
Sales of our common stock in the public market, including sales made by the selling stockholders identified in the registration statement we have filed with the SEC, may lower the market price of our common stock. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable or at all. Of the 511,154,557 shares held by persons who are not our affiliates on July 31, 2011 approximately 176,084,642 shares were freely tradable without restriction or further registration under the Securities Act of 1933. In addition, approximately 2,496,000 additional shares were sold in accordance with Rule 144 under that Act and approximately 47,828,099 more shares will be able to be sold within the ensuing twelve month period.
 
Anti-takeover provisions could make a third-party acquisition of us difficult which may adversely affect the market price and the voting and other rights of the holders of our common stock.
 
Certain provisions of the Delaware General Corporation Law may delay, discourage or prevent a change in control. The provisions may discourage bids for our common stock at a premium over the market price. Furthermore, the authorized but unissued shares of our common stock are available for future issuance by us without our stockholders' approval. These additional shares may be utilized for a variety of corporate purposes including but not limited to future public or direct offerings to raise additional capital, corporate acquisitions and employee incentive plans. The issuance of such shares may also be used to deter a potential takeover of us that may otherwise be beneficial to our stockholders. A takeover may be beneficial to stockholders because, among other reasons, a potential suitor may offer stockholders a premium for their shares above the then market price.
 
The existence of authorized but unissued and unreserved shares may enable the Board of Directors to issue shares to persons friendly to current management which would render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of our management.
 
ITEM 1B.  UNRESOLVED STAFF COMMENTS
 
The Company, as a smaller reporting company, is not required to provide the information required by this item.
  
 
17

 
    
 
ITEM 2.  DESCRIPTION OF PROPERTY
  
In March, 2010 the Company signed a 3-year lease agreement, with option to purchase, with the Williamsburg County Development Corporation for the use of a building in Kingstree, SC.  Currently the address of the Company is at 119 Milliken Drive, Kingstree, SC 29556.  Approximately 6,000 sq. ft. of the building will be used for technical and dealer training of solar applicants.  The remaining 230,000 sq. ft. of building space will be used as a distribution and light manufacturing facility.  The annual lease rate for the building is $5.00 per year.  If the Company creates 200 or more permanent jobs as a result of its activities in South Carolina, it will be able to purchase the building for $1.00 at the end of the 3-year lease term.
 
ITEM 3.  LEGAL PROCEEDINGS
 
Other than routine litigation arising in the ordinary course of business that we do not expect, individually or in the aggregate, to have a material adverse effect on us, and except as noted below, as far as we are aware, no governmental authority is contemplating any proceeding to which we may be a party or to which any of our properties is subject.
 
We have received notice of a claim from a previous employee based on compensation matters in the amount of $892,500 plus interest from 2009.  The matter is being reviewed by our legal staff and no determination has been made as to is merits.  Offer for settlement has been made for an amount of $100,000 consistent with discussions with claimant.  Currently the Company has reserved for these amounts and will continue to work toward a settlement.
 
There have been judgments on the Company in the amounts of approximately $11,000, which have been reserved for within the financial statements as of July 31, 2011.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
There were the following matters submitted to a vote of security holders during the third quarter of the fiscal year covered by this Report.
   
On March 28, 2011, the Company amended its certificate of incorporation to increase its authorized shares of common stock from 100,000,000 to 750,000,000 (the “Increase Amendment”).  In addition, the Company authorized 10,000,000 shares of blank check preferred stock (the “Preferred Shares”).  The Increase Amendment and the Preferred Shares were approved by the board of directors as well as the shareholders holding a majority of the issued and outstanding shares of common stock pursuant to a written consent dated March 16, 2011.  The Board of Directors may determine to issue Preferred Shares.  If issued, the Preferred Shares may be created and issued in one or more series and with such designations, rights, preferences and restrictions as shall be stated and expressed in the resolution(s) providing for the creation and issuance of such Preferred Shares.  If Preferred Shares are issued and the Company is subsequently liquidated or dissolved, the preferred stockholders may have preferential rights to receive a liquidating distribution for their shares prior to any distribution to common shareholders.  Although we have no present intent to do so, we could issue Preferred Shares with such terms and privileges that a third party acquisition of the Company could be difficult or impossible.
 
PART II
 
ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES
  
From July 15, 2008 through August 23, 2008, our common stock was quoted on the OTC Bulletin Board under the trading symbol “NPCX,” and since August 24, 2008, our trading symbol has been “SNRY”.
 
The following table sets forth quarterly high and low bid prices of a share of our common stock as reported by the OTC Bulletin Board for the years 2011 and 2010. Prior to July 15, 2008, there was no active market for our common stock.  The quotations listed below reflect inter-dealer prices, without mark-ups, mark-downs or commissions and may not necessarily reflect actual transactions.
 

   
Price
 
   
High $
   
Low $
 
             
2011
           
Fourth quarter ended July 31, 2011
 
$
0.005
   
$
0.002
 
Third quarter ended April 30, 2011
 
$
0.03
   
$
0.002
 
Second quarter ended January 31, 2010
 
$
0.13
   
$
0.03
 
First quarter ended October 31, 2010
 
$
0.19
   
$
0.10
 
2010
           
Fourth quarter ended July 31, 2010
 
$
0.14
   
$
0.14
 
Third quarter ended April 30, 2010
 
$
0.22
   
$
0.20
 
Second quarter ended January 31, 2010
 
$
0.21
   
$
0.18
 
First quarter ended October 31, 2009
 
$
0.36
   
$
0.33
 
2009
           
Fourth quarter ended July 31, 2009
 
$
0.70
   
$
0.25
 
Third quarter ended April 30, 2009
 
$
0.56
   
$
0.17
 
Second quarter ended January 31, 2009
 
$
0.52
   
$
0.13
 
First quarter ended October 31, 2008
 
$
1.00
   
$
0.15
 
2008
               
Fourth quarter ended July 31, 2008
 
$
0.57
   
$
0.55
 
Third quarter ended April 30, 2008
   
NA
     
NA
 
Second quarter ended January 31, 2008
   
NA
     
NA
 
First quarter ended October 31, 2007
   
NA
     
NA
 
 
 
 
18

 
 
On July 30, 2008, the authorized number of shares of the Company was increased from 15,000,000 to 100,000,000.
 
On March 28, 2011, the authorized number of shares of the Company was increased from 100,000,000 to 750,000,000.
 
The closing price of our common stock on the OTC Bulletin Board on November 10, 2011 was $.001 per share.
 
On November 10, 2011, our common stock was held of record by approximately 2,869 shareholders.
 
Dividends
 
We have not previously paid any cash dividends on our common stock and do not anticipate or contemplate paying dividends on our common stock in the foreseeable future. We currently intend to use all available funds to develop our business. We can give no assurances that we will ever have excess funds available to pay dividends.
 
Equity Compensation Plan Information
 
The Company does not have a formal equity compensation plan.  Any equity that is issued as compensation is based upon Board of Director approval.
 
ITEM 6.  SELECTED FINANCIAL DATA
 
Pursuant to Item 301(c) of Regulation S-K. the Company, as a smaller reporting company, is not required to provide the information required by this item.
 
ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
This discussion should be read in conjunction with our consolidated financial statements included in this Annual Report on Form 10-K and the notes thereto, as well as the other sections of this Annual Report on Form 10-K , including “Certain Risks and Uncertainties” and “Description of Business” sections thereof. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Annual Report. Our actual results may differ materially.
 
Limited Operating History
 
There is limited historical financial information about our Company upon which to base an evaluation of our future performance.  Our Company generated $1,142,070 in revenues for the fiscal year ended July 31, 2011.  We cannot guarantee that we will be successful in our business.  We are subject to risks inherent in a fast growing company, including limited capital resources, possible delays in developing our sales channels, and possible margin reductions due to pricing inefficiencies and competition.  There is no assurance that future financing will be available to our Company on acceptable terms. Additional equity financing could result in dilution to existing shareholders.
 
Company Description and Overview
 
The Company was formed on June 20, 2006.  We market, sell and design solar power systems for residential and commercial customers, market, sell, design, own and operate solar power systems for municipal and commercial customers and design, develop and manage solar parks.  We intend to initially serve customers in states that have high cost of electricity, and/or attractive incentive programs for solar installations.  For the fiscal year just ended, we generated more than $1.1 Million in revenues and had a ($2.5 Million) loss from operations.   We source solar components from third party manufacturers for solar electric power products and technologies that directly convert sunlight into electricity and thermal (heat) energy.  The originating founders, directors and officers of our company were Paul Cox, David Fann and Michael Dodak who served as the President, Chief Executive Officer/Secretary and Treasurer, respectively.
 
In July 2006, we entered into a convertible debenture with a waste to energy development company, Envortus Inc. As such time, we intended to develop a business in the waste to energy market and this was our initial foray in to the market.  The officers and board members of The Company had ownership, officer positions and board positions in Envortus Inc. Under the terms of the convertible debenture, the Company could invest $250,000 in Envortus Inc over a period of time. The Company forwarded a total of $134,500 to Envortus Inc before deciding to continue its focus specifically in the solar area of the renewable energy market instead of waste to energy. The Company utilized funds raised from the sale of common stock and convertible debentures in order to fund the loan to Envortus Inc.
 
 
19

 
  
In March 2007, the Company entered into an agreement to sell the convertible debenture for $152,500, with discounts if paid early, to 0784655 B.C. LTD (“B.C.”), a company controlled by Paul Cox, a shareholder and a former officer and board member of the Company. Mr. Cox remains a shareholder, officer and board member of Envortus Inc. In July 2007, the sale of the convertible debenture was completed with a payment of $55,000 to the Company and the receipt of a promissory note in the amount of $97,500 (the “Note”), from B.C. for the balance.  The principal amount of the Note was immediately discounted to $90,800.  In addition, if the Note was paid within the first 270 days of issuance, additional discounts could be available.
 
To account for the Note the Company determined the fair value of the Note on a discounted basis to be equal to $68,100, which represented the discounted balance to be paid by B.C. assuming early payments made within 90 days from closing as provided in the Note.  Based on the fair value of the note of $68,100, a loss totaling $11,405 was recorded for the year ended July 31, 2008 as reflected in the table below:
 
Consideration for sale of debenture:
     
Cash
 
$
55,000
 
Note receivable
   
97,500
 
Total consideration
   
152,500
 
         
Immediate discount
   
(6,700
)
Bank fee
   
(5
)
Expected early payment discount
   
(22,700
)
         
Total net consideration
   
123,095
 
         
Investment in convertible debenture
   
134,500
 
         
Loss on sale of investment
 
$
(11,405
)
  
The Company had originally invested $134,500 in a convertible debenture with Envortus.  The Company then took back a Note for $97,500 and cash paid back of $55,000.  The Company reviewed the fair value of the $97,500 Note, which had an immediate discount of $6,700 and an early expected payment discount of $22,700.  The Company decided to take a valuation allowance on the $22,700 and the $6,700 during July 2007, leaving a balance on the Note of $68,100.  Comparing the consideration received of $55,000 and the remaining value of the Note at $68,100 or $123,095, net of a $5 fee, this resulted in a loss on sale of the original investment in convertible debenture of $11,405.   The Company has allowed for the remaining balance of the Note and recorded bad debt related to note receivable, related party, in the amount of $68,100, due to concerns of collectability and non-payment of the scheduled payments.  Per the terms of the Note, B.C. was required to pay principal in the amount of $10,000 in January 2008 and additional payments of $17,240 in July 2008, $31,780 in January 2009 and $31,780 in July 2009, together with interest, according to the payment schedule as defined by the Note when the early payments are not received.  As of the date hereof, B.C. has not made the required principal and interest payment.  The Company is pursuing legal action against the Note’s obligor for nonpayment.
 
On August 21, 2008, the Company entered into and closed a Website Purchase Agreement (the “WPA”) with Solar Energy, Inc. (“SEI”) and the shareholders of SEI pursuant to which the Company acquired the Domain Name, www.solarenergy.com , the web site that uses the domain name, the name Solar Energy, Inc. and all trade rights associated with these assets (collectively, the “SEI Assets”).  In consideration for the purchased SEI Assets, the Company made a cash payment of $160,000 at closing, issued the seller a secured note collateralized by a lien on the assets referenced in the Website Purchase Agreement in the principal amount of $840,000 with 7.5% interest that is payable over a period of 21 months with principal payments of $40,000 per month and issued the seller 1,000,000 shares of common stock of the Company valued at $650,000.
 
In December 2009, the Company filed for arbitration against David H Smith revocable trust, and David Smith regarding potential violations of his website purchase agreement and consulting agreement.  Interest has continued to accrue as per the agreement.  
 
As of July 15, 2010 the Company transferred the ownership of the Domain Name back to original seller for full payment of the outstanding principal and accrued interest of the Note in the amount of $400,000 and $28,750, respectfully.  The Company settled with the seller and impaired the $1,650,000 value of the Domain Name against the remaining value of the note payable of $400,000, for a net other expense of $1,250,000.  Per the terms of the settlement agreements we have returned the website domain name and have impaired the remaining value of the asset of $1,650,000 netting against the remaining value of the loan of $400,000 for a loss of $1,250,000.
   
 
20

 
    
On September 25, 2009 the Company formed Solar Park Initiatives Inc, (“SPI”) at that time a wholly owned subsidiary. In October 2009, the Company announced that it was planning to spin-off SPI, to its shareholders of record as of October 15, 2009, and that it hired Mr. Michael Gorton as the CEO of the new company.  The Company’s shareholders of record, as of October 15, 2009, were to receive one common share of SPI stock for every two common shares of the Company owned.    The distribution of such shares was contingent upon SPI making the required filings with the Securities and Exchange Commission.
   
In November 2009 SPI issued a total of 51,133,737 shares of common stock, of which 16,804,889 shares were issued to officers, employees and board members for services valued at $6,040.   34,996,769 shares were issued to the Company for services and cash of the initial share issuance by SPI, which has been eliminated upon consolidation.
   
During the period ended April 30, 2010, SPI closed a private placement for the sale of units at $0.15 per unit made up of one share of common stock and one common stock purchase warrant with an exercise price of $0.40.  In December 2009, 667,921 units of common stock were issued in this private placement for $100,000. In addition, in March 2010 SPI closed a second private placement whereby it raised $200,000 on identical terms.  During the period as part of an ongoing reverse merger SPI forward split shares of common stock on a 1:1.5812 and increased all shareholders on a pro-rata basis.  SPI also granted 1,550,984 stock options exercisable at $0.40 with a five year vesting schedule.  Value of these options:  using a Black-Scholes valuation, with an exercise price of $0.40, a volatility based on public industry companies of 80% and with an average of a  2.5 year life, was $297,450.
   
On July 13, 2010, (the “Closing Date”), Critical Digital Data, Inc. (“CDD”) acquired SPI pursuant to an Agreement and Plan of Merger and Reorganization (the “Agreement”) with SPI and Solar Park Acquisition Corp., a Nevada corporation (“Acquisition Subsidiary”) (the “Merger”).  SPI was organized under the laws of the State of Nevada on September 25, 2009.  Acquisition Subsidiary was a wholly-owned subsidiary of SPI and on the Closing Date, merged with and into SPI and CDD acquired the business of SPI pursuant to the Merger and will continue the existing business operations of SPI, as a publicly- traded Nevada corporation under the name “Solar Park Initiatives, Inc.”
  
On the Closing Date, CDD acquired all of the issued and outstanding shares of common stock, $0.001 par value per share, of SPI from the holder’s of SPI (the “Solar Park Shareholders”) in exchange for an aggregate of 53,137,500 (post-split) newly issued shares (the “Exchange or Merger Shares”) of common stock, $0.001 par value per share (the “Common Stock”).  As a result of the Merger, SPI Shareholders surrendered all of their issued and outstanding common stock of SPI in consideration for the Merger Shares and SPI became a wholly-owned subsidiary of the Registrant.  The Agreement contains customary representations, warranties and covenants of the Registrant, SPI and the Acquisition Subsidiary, for like transactions.  Breaches of representations and warranties are secured by customary indemnification provisions.
 
On July 13, 2010 in conjunction with the Exchange and Merger Shares the Registrant was issued 487,500 shares and valued at the then estimated fair value of $0.15 per share and expensed the value of $73,125 in the period ended July 31, 2010.
 
The parties have taken all actions necessary to ensure the Merger is treated as a “tax free exchange” under Section 368 of the Internal Revenue Code of 1986, as amended.
 
During 2010 and as of December 1, 2010 the Company announced a distribution of shares of common stock (the “Distribution”) of Solar Park Initiatives, a partially owned subsidiary of the Company (“Solar Park”).  The Company held 34,996,769 shares of common stock of Solar Park, representing an estimated 66.8% of Solar Park.  Following the Distribution, the Company retained 13,669,857 shares of common stock of Solar Park representing approximately 22% of Solar Park.
 
As of January 31, 2010 due to the Spin-Off and Distribution of Solar Park shares held by the Company, Solar Park is accounted for under the Equity Method and not as a Controlled Interest.  As of July 31, 2011 the Company owned 11.5%
 
As of January 26, 2011, the Company initiated distribution of 21,326,911 shares of common stock, par value $0.001 (the “Shares”) of Solar Park and the S-1/A Registration Statement for distribution of shares from the spin-off has been declared effective.  All Solar Energy Initiatives (SNRY.OB) shareholders of record as of December 1, 2010 received one share of Solar Park for every two shares they own of Solar Energy Initiatives.
 
On February 15, 2011, the Company entered into and closed an Asset Purchase Agreement (the “APA”) with Solar Park Initiatives, Inc. (“SPI”) pursuant to which the Company sold to SPI certain assets relating to the Solar EOS program including course and instructional materials, vendor contract information, funding information for state programs and a rental agreement in Kingstree, South Carolina (collectively, the “SPI Assets”).  Further, SPI has agreed to pay the Company 10% of the adjusted gross profit derived from the operation of the education program for a period of three years ending February 14, 2014.
 
In consideration for the purchase and sale of the SPI Assets, SPI assumed a liability in the amount of approximately $25,000, made a cash payment of $10,000 at closing and issued the Company a Promissory Note in the principal amount of $165,244 with 7.5% interest that is payable over a period of 36 months payable in three equal installments annually.
    
 
21

 
  
Fiscal Years Ended July 31, 2011 and 2010
Results of Operations
 
The following table sets forth our statements of operations data for the years ended July 31, 2011, and 2010.
 
Summary Income Statement
                                        
     
 July 31, 2011  
     
 July 31, 2010
 
                 
Revenues, net
 
$
1,285,770
   
4,643,974
 
Gross profit (loss)
   
243,505
     
718,088
 
Selling, general and administrative expenses
   
3,294,179
     
5,572,818
 
                 
Total operating expenses
   
3,294,179
     
5,572,818
 
Loss from operations
   
(3,050,671
)
   
(4,854,729
)
Other Income (Expense)
   
(1,863,843
)
   
(1,379,361
)
Loss from operations before income taxes
   
(4,914,514
)
   
(6,234,090
)
Income tax provision
   
-
     
-
 
Net loss
   
(4,914,514
)
   
(6,234,090
)
Loss attributable to non-controlling interest
   
165,683
     
342,766
 
Loss attributable to Solar Energy Initiatives, Inc.
 
$
(4,748,831
)
 
$
(5,891,324
)
  
Revenues
 
For the years ending July 31, 2011 and 2010, we had revenues of $1,285,770 and $4,643,974, respectively.    The changes in revenues are due to reduction of the training of our new dealers and the decreased sale of distributed products.
 
Cost of sales
 
For the years ending July 31, 2011 and 2010, we had cost of sales of $1,042,262 and $3,925,886, respectively.   The changes in cost of sales are due to the cost of training of our new dealers and the increased cost of product.
 
Selling, general and administrative
 
Selling, general and administrative expenses for the year ended July 31, 2011 and July 31, 2010 were $3,294,179 and $5,572,818, respectively.  Cash-based management fees, wages and salaries were $909,624 for fiscal 2011 and $1,104,155 for fiscal 2010, the decrease is due to the reduction of employees.  Stock based compensation was 1,936,579 for fiscal 2011 and $1,623,465 for fiscal 2010, travel and entertainment was $38,898 for fiscal 2011 and $283,588 for fiscal 2010, and consulting, legal and professional costs totaled $266,152 for fiscal 2010 and $217,081 for fiscal 2010, of which the increases primarily relate to our acquisition costs, selling activities, financing activities, the preparation of audited and reviewed financial statements and SEC reporting.
 
Other income (expense)
 
In fiscal 2011 other expenses was $1,863,843 of which $346,583 was interest expense, consisting of interest for the notes payable, loan fees and loans from related parties.    In fiscal 2010 other expenses was $1,363,913 of which $98,381 was interest expense, consisting of interest for the note payable, loan fees and loans from related parties   During the year the Company also settled with shareholders on ratchet pricing increases for $1,271,455; other expenses of $211,307 and gain on sale of Solar EOS assets of $205,000 for a net of other expenses of $1,863,843.
 
Net Loss
 
Our net loss attributable to Solar Energy Initiatives, Inc. was $4,748,831 for the year ended July 31, 2011 compared to $5,891,324 for the year ended July 31, 2010.  The net loss primarily reflects our expenses relating to business activities that have been incurred ahead of our ability to recognize material revenues from our business plan.
      
 
22

 
   
Loss from non-controlling interest in Solar Park Initiatives, Inc was $0 for the year ended July 31, 2011 and $342,766 for the year ended July 31, 2010. These expenses have been incurred ahead of our ability to recognize sufficient revenues from our business activities to generate a profit.
 
Liquidity and Capital Resources
 
As of July 31, 2011, we had cash of $8,703, and working capital deficit of $1,245,096 compared with $30,153 and $1,129,552 in cash and working capital, respectively, in 2010.  During the years ended July 31, 2011 and 2010, we primarily funded our operations from private sales of equity securities and convertible debt.
 
For the year ended July 31, 2011, we used $545,667 of cash in operations.  Investing activities used $12,782 of cash during the year and financing activities provided $537,000 of net cash during the year, which resulted primarily from private placement subscription, conversions of notes payable and notes payable proceeds.  For the year ended July 31, 2010, we used $3,017,143 of cash in operations.  Investing activities used $5,892 of cash during the year and financing activities provided $2,047,560 of net cash during the year, which resulted primarily from private placement subscription, warrant calls and notes payable proceeds.  
 
As we continue to review our financial restructuring of the Company, we will need to execute on our business plans which include positive cash flow operations, and/or acquire additional financing to supplement cash flows.  Unless we can attain sufficient levels of revenues, and restructure our current debt, we will need to raise additional funds during the next twelve month period.  For the fiscal year ended July 31, 2011 we have been able to obtain approximately $325,000 of capital through equity financing and $212,000 of debt financing.  We may require approximately $1,250,000 of additional capital funding, to allow us to continue the execution of our business plan through July 31, 2012.  If we are not successful in raising the required capital, or begin one or more of the projects in our business pipeline, or restructure our debt, we will need to reduce the breadth of our business.
 
We have reduced staff throughout the current fiscal year and have curtailed most of the operations of the Company.  We are currently restructuring the Company’s debt to work with vendors and ongoing consultants to provide for an ongoing business operation.  We need additional capital in order to continue operations.
 
Since inception, our operations have primarily been funded through private equity financing, and convertible debt.  We expect to continue to seek additional funding through private or public equity and debt financing as our business expands, and potentially seek a larger funding round to quickly drive the business forward.
 
However, there can be no assurance that our plans discussed above will materialize and/or that we will be successful in funding our estimated cash shortfalls through additional debt or equity capital and/or any cash generated by our operations. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.
 
In September 2009 the Company added $100,000 of related party debt with interest rates at 12%.  In January 2010 the Company added $100,000 of related party debt with interest rates of 12%. In July 2010 the Company has added $250,000 of  debt with interest rates ranging from 8% to 12% with due dates within one year.  Subsequent to year end the Company added an additional $53,000 of debt with interest of 8% due within one year.
 
On June 29, 2010, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $100,000 (the "Note"). The financing closed on July 2, 2010.
 
The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on June 30, 2011. The Note is convertible into common stock, at Asher's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Note contains a prepayment option whereby the Company may make a payment to Asher equal to 150% of all amounts owed under the Note during the 90 day period beginning on the date of issuance of the Note and expiring on the 90 date anniversary.
 
Asher has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from this Offering on July 2, 2010 was $97,000.
 
In addition, the Company compensated $3,000 to Naidich, Wurman, Birnbaum & Maday, LLP for services to complete the Note and Purchase Agreement.
  
 
23

 
   
On July 15, 2010, the Company entered into a Securities Purchase Agreement with JDF Capital, Inc. ("JDF"), for the sale of a 12% convertible note in the principal amount of $150,000 (the "Note"). The financing closed on July 16, 2010.
 
The Note bears interest at the rate of 12% per annum. All interest and principal must be repaid on July 15, 2011. The Note is convertible into common stock, at JDF's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the twenty (20) trading day period prior to conversion. The Note contains a prepayment option whereby the Company may make a payment to JDF equal to 150% of all amounts owed under the Note during the one hundred fifty (150) day period beginning on the date of issuance of the Note and expiring on the 150 date anniversary.
 
JDF has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from this Offering on July 16, 2010 were $145,000 which is the gross proceeds less $5,000 paid to JDF's counsel.
 
Additionally, the Company recorded a beneficial conversion feature on both the Asher and JDF Capital notes, totaling $250,000 and a discount totaling $121,138, with a remaining note payable net of $144,310. The value of the beneficial conversion feature was recorded as a discount to the convertible debenture and $121,138 and was entered through additional paid-in-capital through July 31, 2009. The discount of $15,448 has been amortized during the period ended July 31, 2010.
 
On August 9, 2010, the Company entered into a Securities Purchase Agreement with Asher for the sale of 8% convertible note in the amount of $53,000.  The financing closed on August 15, 2010.  The value of the beneficial conversion feature was recorded as a discount to the convertible debenture of $25,260 and fully amortized during the year ended July 31, 2011.
 
On October 26, 2010, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $40,000 (the "Note"). The financing closed on October 26, 2010.
 
The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 28, 2011. The Note is convertible into common stock, at Asher's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Note contains a prepayment option whereby the Company may make a payment to Asher equal to 150% of all amounts owed under the Note during the 90 day period beginning on the date of issuance of the Note and expiring on the 90 date anniversary.
 
Asher has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The total gross proceeds the Company received from this Offering on October 26, 2010 was $40,000.  The value of the beneficial conversion feature was recorded as a discount to the convertible debenture of $18,100 and was fully amortized during the year ended July 31, 2010.
 
On November 2, 2010 the Company transferred and the related party lender assigned and Asher purchased a related party not payable of $50,000. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 28, 2011. The Note is convertible into common stock, at Asher's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
 
On December 2, 2010 the Company transferred and the related party lender assigned and Asher purchased a related party not payable of $50,000. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 28, 2011. The Note is convertible into common stock, at Asher's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
 
The beneficial conversion feature and discount amounted to $34,672 on both transferred notes assigned by related parties to Asher a non-related party. 
 
During the period an additional $100,000 of converted debt was transferred, with an amount of $38,586 representing a discount on the debt.  During the period $39,141 of total discount was amortized on all of the convertible debt.  
 
The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Asher is an accredited investor, Asher had access to information about the Company and their investment, Asher took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.
   
 
24

 
  
During February 2011, the Company also took on an additional $54,000 of debt with 8% annual interest to be paid within 12 months.
 
On May 25, 2011 and July 8, 2011, Solar Energy Initiatives, Inc. (the “Company”) entered into two Securities Purchase Agreements with Asher Enterprises, Inc. ("Asher"), for the sale of two 8% convertible notes each in the principal amount of $32,500 (the "Notes").  The Notes bear interest at the rate of 8% per annum.  The Notes were convertible into common stock, at Asher’s option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.    The value of the beneficial conversions feature was recorded as a discount to the convertible debenture of $34,946, and amortized $10,827 during the year ended July 31, 2010.
 
Total Loans as of July 31, 2011:
 
Convertible Debt   
 
$
65,000
 
Notes  
   
54,000
 
Total  
   
119,000
 
Discount
   
(20,306
)
Net Debt  
 
$
98,694
 
 
The Company received notice of conversion during the period totaling 123,826,314 shares for conversion prices ranging from $0.0013 to $0.069 per share, for the convertible notes.  Total value of the conversions was $629,425.
   
To operate our current business groups, we may need up to $1.25 million in funds over the next twelve months. Part of this funding may be needed as the time required to realize revenues and cash from large commercial projects can be lengthy, with costs to develop these projects incurred up front. As of July 31, 2011 we had approximately $8,703 in cash on hand, which means there will be an anticipated shortfall of $1.25 million as we project our current cash requirements for the next twelve months.  To sustain operations and continue development, we expect that will need to raise additional capital.  As of our fiscal year end, there were no known demands or commitments, other than the notes to the seller and consulting agreements, that will necessitate liquidation of the Company.  The current level of cash is not enough to cover the notes and consulting agreements for the next twelve months.
   
Assuming we are successful in our restructuring debt and new marketing development efforts we believe that we will be able to raise additional funds through the sale of our stock to either current or new shareholders. Of course there is no guarantee that we will be able to raise additional funds or to do so at an advantageous price.
 
Critical Accounting Policies
 
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain 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. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make. Estimates that are critical to the accompanying financial statements arise from our belief that we will secure an a d equate amount of cash to continue as a going concern, that our allowance for doubtful accounts is adequate to cover potential losses in our receivable portfolio, that all long-lived assets are recoverable.  The markets for our products are characterized by intense competition, rapid technological development, evolving standards, short product life cycles and price competition, all of which could impact the future realization of our assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term with respect to these matters.
 
Revenue Recognition - The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”. The Company generates revenue from training, the sale of photovoltaic panels, photovoltaic roofing systems, solar thermal products, balance of system products, and management system products to our dealer network or other parties. The Company anticipates it will not perform any installations. SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller's price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. Amounts billed or received from customers in advance of performance are recorded as deferred revenue.
 
Stock-Based Compensation - The Company issues stock as compensation for services at the current market fair value.
 
We account for equity instruments issued for services based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable. Stock based compensation was determined using the fair value of the services performed due to the lack of historical fair value of the equity instruments.
 
Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period.
      
 
25

 
    
Significant Capital Expenditures
 
During the year ended July 31, 2011, we acquired approximately $0 of furniture and equipment for office purposes.
 
Subsequent Events
 
On August 2, 2011, Everett Airington resigned as a director of Solar Energy Initiatives, Inc. (the “Company”)
 
On September 26, 2011, Mike Dodak resigned as President, acting Chief Financial Officer and Director of Solar Energy Initiatives, Inc. (the “Company”).  
 
On October 17, 2011, the Company entered into two Amendments to the Notes with Asher, pursuant to which the discount of the conversion price was increased to 65% of the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.  
 
During October and November the Company issued 10,000,000 Rule 144 restricted shares to Directors as compensation valued at approximately $10,000.
 
During November the Company issued 11,000,000 Rule 144 restricted shares to consultants as compensation for services valued at approximately $13,000.
 
During November, 2011 the Company has also pursued plans to acquire the assets of an Internet marketing firm.  The company has signed a definitive agreement and the close of the acquisition is scheduled for November 30, 2011.
  
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
Pursuant to Item 305(e) of Regulation S-K. the Company, as a smaller reporting company, is not required to provide the information required by this item.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Our Consolidated Financial Statements and related notes begin on Page F-1 of this Annual Report.
 
ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
ITEM 9A.  CONTROLS AND PROCEDURES
 
Not applicable
 
ITEM 9A(T).  CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
Under the supervision and with the participation of our management, including our principal executive officer and principal accounting officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of July 31, 2011 (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective. Disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
There were no changes in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date.
   
 
26

 
   
Management’s Report on Internal Control over Financial Reporting
 
We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Controls — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and the related guidance provided in Internal Control Over Financial Reporting — Guidance for Smaller Public Companies also issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Based on our evaluation under the framework in Internal Controls — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of the Evaluation Date.
 
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
 
ITEM 9B.  OTHER INFORMATION
 
No information is required to be disclosed in a report on Form 8-K during the fourth quarter of the fiscal year covered by this Form 10-K which has not been reported.
 
PART III
 
 
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
  
Directors, Executive Officers and Significant Employees
 
The following are our directors and executive officers and significant employees.  Each director holds office until the next annual meeting of shareholders and until the director’s successor is elected and qualified or until the director’s resignation or removal.  Each executive officer holds office for the term for which such officer is elected or appointed and until a successor is elected or appointed and qualified or until such officer’s resignation or removal.
 
NAME
AGE
POSITIONS
David Fann
56
 CEO and Director
     
Pierre Besuchet
73
Director
 
David Fann, CEO & Director, Mr. Fann is a founder of the Company and earlier served as the Chief Executive Officer, VP of Corporate Communications and Secretary.  Since January 2006, Mr. Fann has served as the President, Secretary and one of the founders and a member of the board of directors of FNDS3000 Corp. (f/k/a Fundstech Corp, a public company. Mr. Fann also served as a director on the board of Envortus, Inc. until July 2007.  Mr. Fann also served as President and Director of the Global Axcess Corp, a publicly traded company since January of 2002 until September of 2006. While at Global Axcess Corp Mr. Fann was responsible for equity and debt financings totaling over $17 million and was responsible for investor relations. Prior to joining Global Axcess Corp Mr. Fann was the Chief Executive Officer and Chairman of the Board of TeraGlobal, Inc., a publicly traded company, from September 1998 through September 2000. He was president of TechnoVision Communications, Inc., a subsidiary of TeraGlobal, from November of 1995 to September 2000. He co-founded Totally Automated Systems Communications, a Unix-based communications company, and acted as Vice President of that company.
       
Pierre Besuchet, Director, Mr. Besuchet has filled senior management positions with Geneva Switzerland; a former Director of Fiaisal Private Bank (Switzerland); and former Director of other European and U.S. companies
 
 
27

 
  
Audit Committee Expert
 
The Company has appointed the following Board Members on to the Audit Committee:
David Fann, independent financial expert
Pierre Besuchet
 
ITEM 11. EXECUTIVE COMPENSATION
 
There were two executives who received annual and/or long-term compensation for more than $100,000 per year at the end of the last completed fiscal year.  
 
Summary Compensation Table
 
The following table sets forth information with respect to compensation earned by our Chief Executive Officer, Chief Financial Officer and our other most highly compensated executive officers (our “named executive officers”) for the fiscal year ended July 31, 2011.
 
Summary Compensation Table
 
Name and Principal Position
 
Year
 
Salary
($)
   
Bonus
($)
   
 
Stock
Awards
($), (3)
   
 
Stock
Options
($), (4)
   
Non-equity
Incentive Plan
Compensation
($)
 
Non-Qualified
Deferred
Compensation
Earnings ($) 
 
All Other
Compensation
($)
   
Total
($)
 
                                                 
Michael J. Dodak
 
2011
   85,000       (1 )     196,037       -       -         -       281,037  
Former President & CFO & Director
 
2010 
    37,500               105,148                                 142,648  
David W. Fann
 
2011
    85,000       (2 )     196,037       -       -         -       281,037  
CEO & Director
 
2010 
    165,000               115,013                                 280,013  
   
(1) Mr. Dodak provided consulting services for which $10,000 per month until August 2009 when he rejoined the Company as an employee.  Compensation for salary, consulting services, and loan fees were paid in common stock of the Company at various times during the year.  Total shares issued are 47,778,807.  During the year ended July 31, 2011, Mr. Dodak was being compensated at an annual salary of $110,000.
 
(2) Prior to Feb 2009, Mr. Fann was compensated for consulting services. Mr. Fann’s starting salary was $150,000 annually. This was increased to $220,000 annually effective July 2009.  Compensation for consulting services and salary was paid in common stock of the Company at various times during the year.  Total shares issued are 47,778,807.   During the year ended July 31, 2011, Mr. Fann received a salary of $110,000
  
(3) Stock Awards were Company stock issued to the recipients in lieu of cash compensation for salary or consulting fees and valued at the lower of the bid price of the stock on the day of the award, or at the private placement issuance price of an open private placement at that time.
 
(4) Stock Options are awards from the 2008 and 2009 and 2010 Incentive Stock Option plans and valued using the Black Scholes model. 
  
 
28

 
  
GRANTS OF PLAN-BASED AWARDS
 
       
Estimated Future Payouts Under
 Non-Equity Incentive Plan Awards
 
Estimated Future Payouts Under
Equity Incentive Plan Awards
                     
Name
 
Grant Date
 
Threshold ($)
 
Target
($) 
 
Maximum ($)
 
Threshold
($) 
 
Target
($) 
 
Maximum
($) 
 
All Other Stock Awards: Number of Shares of Stocks or Units
(#) 
 
All Other Option Awards: Number of Securities Underlying Options
(#)
   
Exercise or Base Price of Option Awards
($/Sh) (1)
   
Grant Date Fair Value of Stock and Option Awards
 
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
   
(k)
      (2 )
                                                     
David Fann
 
2/2/09
                                1,000,000       0.32     $ 222,428  
   
8/8/08
                                1,400,000       0.50     $ 390,475  
Everett Airington
 
4/6/09
                                500,000       0.37     $ 82,500  
Michael Dodak
 
8/8/08
                                1,400,000       0.50     $ 390,475  
   
2/9/09
                                500,000       0.32     $ 111,214  
Pierre Besechut
 
2/2/09
                                500,000       0.32     $ 111,214  
                                                         
 
 
(1)  
The Exercise or Base Price of the Option Award was determined based on the lower of the bid price, or current private placement price of any offering open, at the date of the grant.
 
(2)  
The Grant Date Fair Value is generally the amount that the Company would expense in its financial statements over the award's service period, but does not include a reduction for forfeitures.
 
Outstanding equity awards at fiscal year-end
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
OPTION AWARDS
 
STOCK AWARDS
 
   
Number of Securities Underlying Unexercised Options
(#)
   
Number of Securities Underlying Unexercised Options
(#)
   
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
   
Option Exercise Price
 
Option Expiration
 
Number of Shares or Units of Stock That Have Not Vested
   
Market Value of Shares or Units of Stock That Have Not Vested
   
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
   
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
 
Name
 
Exercisable
   
Unexercisable
   
(#)
   
($)
 
Date
 
(#)
   
($)
   
(#)
   
(#)
 
(a)
 
(b)
   
(c)
   
(d)
   
(e)
 
(f)
 
(g)
   
(h)
   
(i)
   
(j)
 
                                                           
 Dodak
   
1,400,000
     
N/A
           
$
0.50
 
August-2011
                               
 Fann
   
1,400,000
     
N/A
           
$
0.50
 
August-2011
                               
 Besechut
   
     
330,000
     
330,000
   
$
0.32
 
February-2012
                   
330,000 
         
 Fann
   
55,000
     
945,000
     
1,000,000
   
$
0.32
 
February-2012
                   
945,000 
         
 Dodak
   
82,500
     
417,500
     
335,000
   
$
0.32
 
February-2012
                   
417,500 
         
 Airington
   
82,500
     
417,500
     
335,000
   
$
0.37
 
April-2012
                   
417,500 
         
                                                                   
 
  
 
29

 
  
Option exercises and stock vested table
 
OPTION EXERCISES AND STOCK VESTED
   
OPTION AWARDS
 
STOCK AWARDS
   
Number of
 
Value
 
Number of
 
Value
   
Shares
 
Realized
 
Shares
 
Realized
   
Aquired
 
on
 
Aquired
 
on
   
on Exercise
 
Exercise
 
on
 
Vesting
Name
 
(#)
 
($)
 
Vesting (#)
 
($)
(a)
 
(b)
 
(c)
 
(d)
 
(e)
Dodak
   
600,000
 
   390,475
         
Fann
   
600,000
 
390,475
         
                     
                     
 
DIRECTOR COMPENSATION
 
The following table summarizes the director fees paid for the year ended July 31, 2011
 
Director Compensation
 
                   
Name
         
Non-equity
Non-Qualified
   
Total ($)
 
Fees earned
       
Incentive Plan
Deferred
 
or paid in
 
Stock
 
Option
Compensation
Compensation
All Other
cash ($)
 
Awards ($)
 
Awards ($)
($)
Earnings ($)
Compensation ($)
Airington
    $
33,500
           
$
33,500
 
Besuchet
    $
17,500
           
$
17,500
 
Zwick
    $
30,000
           
$
30,000
 
Fann
    $
16,000
           
$
16,000
 
Dodak
    $
16,000
           
$
16,000
 
                           
   
Equity Compensation Plan Information
 
There is currently no stock option executive compensation plan in place.
 
Employment and Consulting Agreements
 
The Company has entered into a four year employment agreement with David W. Fann as CEO.  The terms of the contract include an initial salary of $150,000. The base salary will increase to $220,000 when the company receives a minimum of $1,000,000.  This increase took place in July 2009. The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and retainer fee of $7,500.
 
The Company entered into a five year employment agreement with Michael Dodak as VP of Corporate Development. The terms of the contract included an initial salary of $120,000 until specific performance measures are met, at which time the salary is to be increased to $150,000.  Per the agreement, Mr. Dodak elected to convert his contract to a consulting agreement whereby he was paid $10,000, monthly.  The consulting agreement runs thru December 2012. There is an 18-month severance if terminated early.  In August 2009 the agreement was amended as follows:
   
 
30

 
   
The Company has requested that the Executive become the “President and Interim CFO”.  At that time the Agreement was extended for an additional one year period.
 
1. Executive agrees to become the President and Interim CFO for a period of time not to exceed one year.
 
His compensation will increase to $18,333 per month.  Upon termination by Executive as President and Interim CFO his compensation will revert to the $10,000. Executive will receive certain bonuses for achieving certain milestones in developing the Solar Energy.  Executive will also receive new options in line with the other Executives of the Company.
 
The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and retainer fee of $7,500.
  
The Company has entered into a four year employment agreement with Gregory N. Bakeman as President and CFO. The terms of the contract include an initial salary $160,000. The base salary will increase to $220,000 when the company receives a minimum of $1,000,000 of capital funding.  This increase took place in July 2009. There is an 18 month severance if terminated early.  The Company and Mr. Bakeman severed its relationship in March 2010, and all options were expired 90days after not being exercised.
 
In April 2009 The Company hired Dean Leischow as Executive Vice President of Sales and Marketing.  Mr Leischow will be paid a salary of $120,000 per year, and received 100,000 shares of S-8 stock in lieu of cash for the first 90 days.   The stock was issued in July 2009 with a value of $120,000.  The entire amount was expensed as salaries for the period ending July 31, 2009. The Company and Mr. Leischow severed its relationship in January 2010, and all options were expired 90days after not being exercised.  Mr. Leischow has entered a claim for $892,500, of which the Company has reserved $100,000 based on mutual agreements.  The outstanding item is on whether it will be paid in cash or can be paid in stock of the Company.  See Part I- Item 3 - Legal Section for more information on this item.
 
Director and Officer Compensation
 
We have no formal director compensation or reimbursement policy, but rather the Compensation Committee or the board makes director compensation and reimbursement determinations on an ad hoc basis. Directors may be reimbursed for their expenses incurred for attending each board of directors meeting and may be paid a fixed sum for attendance at each meeting of the directors or a stated salary as director. No payment precludes any director from serving us in any other capacity and being compensated for the service. Members of special or standing committees may be allowed like reimbursement and compensation for attending committee meetings. During our fiscal years ended July 31, 2011 and 2010, none of our directors were paid any fees to attend director meetings.
 
The Company has employment agreements with its CEO, President/CFO, and consulting agreements with former Company officers.  The Company has entered into a four-year employment agreement with David W. Fann as CEO.  The terms of the contract include an initial salary of $150,000. The base salary will increase to $220,000 when the company receives a minimum of $1,000,000.  This increase took place in July 2008. There is an 18-month severance if terminated early. The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and retainer fee of $7,500.
   
The Company entered into a five-year employment agreement with Michael Dodak as VP of Corporate Development. The terms of the contract include an initial salary of $120,000 until specific performance measures are met, at which time the salary is to be increased to $150,000.  Per the agreement, Mr. Dodak elected to convert his contract to a consulting agreement whereby he was paid $10,000, monthly.  The consulting agreement runs thru December 2013. There is an 18-month severance if terminated early.
 
In August 2009, Mr. Dodak and the Company amended the agreement whereby Mr. Dodak become the “Director of Solar Park Development” and COO of the Company. His compensation increased to $15,416.66 per month.  Upon stepping down as COO of the Company, his compensation will revert to the $10,000 per month. Mr. Dodak will receive bonuses for achieving certain milestones in developing Solar Parks and new options in line with the other Company management.  On February 1, 2010, Mr. Dodak was appointed President of the company with a salary of $150,000 per year and then appointed as Interim CFO in March 2010, whereby his annual salary increased to $220,000 per year. The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and retainer fee of $7,500.
 
The Company entered into a five-year employment agreement with David Surette as President, and CFO. The terms of the contract include an initial salary of $160,000 effective January 15, 2008 until April 15, 2008, at which time the salary is to be increased to $220,000.  Other performance bonuses are available at the discretion of the board of directors. There is an 18-month severance if terminated early.  On September 3, 2008, the Company entered into a severance agreement with David Surette.  Mr. Surette will receive $36,000 in cash; $18,000 on September 20, 2008 and $3,000 per month, for six (6) months, beginning October 1, 2008.  In addition, Mr. Surette returned 25,000 shares of common stock he was issued in the form of consideration during his tenure as Chief Financial Officer.  The Company reengaged Mr. Surette for consulting services starting May 2010 through June 2010 at a rate of $10,000 per month.
 
The Company has entered into a four-year employment agreement with Gregory N Bakeman as President and CFO. The terms of the contract include an initial salary $14,000. The base salary will increase to $220,000 when the company receives a minimum of $1,000,000.  This increase took place in July 2009. There is an 18-month severance if terminated early. The Company and Mr. Bakeman severed its relationship in March 2010, and all options were expired 90days after not being exercised.
 
In April 2009 The Company hired Dean Leischow as Executive Vice President of Sales and Marketing.  Mr Leischow will be paid a salary of $120,000 per year, and received 100,000 shares of S-8 stock in lieu of cash for the first 90 days.   The stock was issued in July 2009 with a value of $120,000.  The entire amount was expensed as salaries for the period ending July 31, 2009. The Company and Mr. Leischow severed its relationship in January 2010, and all options were expired 90days after not being exercised. Mr. Leischow has entered a claim for $892,500, of which the Company has reserved $100,000 based on mutual agreements.  The outstanding item is on whether it will be paid in cash or can be paid in stock of the Company.  See Part I- Item 3 - Legal Section for more information on this item.
  
 
31

 
     
The Company entered into a five year employment agreement with Brad Holt as CEO. The terms of the contract included an initial salary of $120,000 until specific performance measures are met, at which time the salary is to be increased to $220,000.  On March 1, 2008 the salary was increased to the $220,000, annually. Other performance bonuses are available at the discretion of the board of directors.  There is an 18 month severance if terminated early.
 
In December 2008 Brad Holt resigned as CEO and assumed the Chairman of the Board position.  The employment agreement was cancelled, and the Company entered into a consulting agreement with Mr. Holt for a period of four years.   The final terms were resolved in August 2009.
    
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
   
The following tables set forth certain information, as of November 10, 2010, with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of our executive officers and directors; and (iii) our directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.
 
 
Table 1 – Current Stock Outstanding and Ownership
 
Title of Class
Name of Beneficial Owner
 
Number of Shares Beneficially Owned (1)
Percentage Ownership
         
Common Stock
David Fann
(2)(6)
59,360,018
8.2%
         
Common Stock
Michael Dodak
(3)
59,721,316
8.3%
         
Common Stock
Sidney Cole
(4) 
49,884,460
6.9%
         
Common Stock
Pierre Besechut 
(5)(6)
16,800,000
2.3%
         
Common Stock
  All Executive Officers and Directors as a Group (2 persons) (6)
 
76,160,018
10.5%
 
(1)   
Applicable percentage ownership is based on 702,171,901 shares of common stock outstanding as of November 10, 2011, together with 17,920,311 securities exercisable or convertible into shares of common stock within 60 days of November 10, 2011.   Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  
(2)   
Applicable percentage ownership is based on 58,505,018 shares of common stock outstanding as of November 10, 2011, together with 855,000 securities exercisable or convertible into shares of common stock within 60 days of November 10, 2011.   Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  
(3)   
Applicable percentage ownership is based on 58,838,816 shares of common stock outstanding as of November 10, 2011, together with 882,500 securities exercisable or convertible into shares of common stock within 60 days of November 10, 2011.   Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  
(4)   
Applicable percentage ownership is based on 45,584,461 of common stock outstanding as of November 10, 2011, of which 5,020,176 is in the name of Remi Holdings,  together with 4,299,999 securities exercisable or convertible into shares of common stock within 60 days of November 10, 2011.   Remi Holdings owns Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  
(5)   
Applicable percentage ownership is based on 15,900,000 shares of common stock outstanding as of November 10, 20110, together with 900,000 securities exercisable or convertible into shares of common stock within 60 days of November 10, 20110.   Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  
(6)   
Executive Officer and Director
    
 
32

 
   
Recent Sales and Distribution of Unregistered Securities.
 
Common Stock - On March 28, 2011, the shareholders of the Company voted to increase its authorized capital stock from 100,000,000 common shares to 750,000,000 common shares, $0.001 par value per share. 
 
Business consulting services - In August 2009 the Company issued 200,000 shares of common stock to a group engaged to provide business consulting and other services for the term of eighteen months, valued at $90,000. The Company recorded the stock issuance as deferred compensation, of which $55,000 has amortized for the period ended July 31, 2010.
 
In August 2009 the Company issued 100,000 shares of common stock to a group engaged to provide business consulting and other services for the term of three months, valued at $48,000. The Company recorded the stock issuance as deferred compensation, of which the entire amount has been amortized for the period ended July 31, 2010.
 
In September 2009 the Company issued 200,000 shares of common stock to a group engaged to provide international business consulting and other services for the term of eighteen months, valued at $70,000. The Company recorded the stock issuance as deferred compensation, of which $42,778 has amortized for the period ended July 31, 2010.
 
In October 2009 the Company issued 100,000 shares of common stock to a group engaged to provide business consulting and other services for the term of twelve months, valued at $30,000. The Company recorded the stock issuance as deferred compensation, of which $25,000 has amortized for the period ended July 31, 2010.
 
In October 2009 the Company issued 650,000 shares of common stock to a group engaged to provide international business consulting and other services for the term of twelve months, valued at $260,000. The Company recorded the stock issuance as deferred compensation, of which $216,666 has amortized for the period ended July 31, 2010.
 
In March 2010 the Company entered into consulting arrangements with three companies for business consulting and other services, and issued 15,000 shares of common stock, valued at $3,285.
 
In May 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 500,000 shares of common stock, for a term of 24 months, valued at $125,000, and 300,000 warrants valued at $38,379. The Company recorded the stock issuance as deferred compensation, of which $20,467 has amortized for the period ended July 31, 2010.
 
In May 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 25,000 shares of common stock, for a term of 12 months,  valued at $6,000. The Company recorded the stock issuance as deferred compensation, of which $1,500 has amortized for the period ended July 31, 2010.
 
In May 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 250,000 shares of common stock, for a term of 12 months, valued at $50,000. The Company recorded the stock issuance as deferred compensation, of which $ 12,500 has amortized for the period ended July 31, 2010.
 
In June 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 500,000 shares of common stock, for a term of 9 months, valued at $70,000. The Company recorded the stock issuance as deferred compensation, of which $11,666 has amortized for the period ended July 31, 2010.
 
In June 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 250,000 shares of common stock, for a term of 12 months, valued at $45,000. The Company recorded the stock issuance as deferred compensation, of which $5,625 has amortized for the period ended July 31, 2010.
 
In June 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 500,000 shares of common stock, for a term of 12 months, valued at $75,000. The Company recorded the stock issuance as deferred compensation, of which $8,333 has amortized for the period ended July 31, 2010.
 
In July 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 350,000 shares of common stock, for a term of 12 months, valued at $56,000. The Company recorded the stock issuance as deferred compensation, of which $2,333 has amortized for the period ended July 31, 2010.
   
In September 2009 122,222 shares valued at $47,666 were issued in lieu of payroll, and the full value recorded as salaries.
   
In September 2009 50,000 shares valued at $19,500 were issued for consulting fees to Michael Dodak in lieu of cash payment per his consulting agreement, and the full value recorded as consulting expense.
   
In September 2009 100,000 shares valued at $39,000 were issued for a loan to the Company from two related parties.  The entire amount was expensed and recorded as interest expense
   
 
33

 
  
In October 2009 the Company issued 9,000 shares of stock each to five Dealers, valued at $3,150 as part of a dealer incentive program.   The Company recorded the full value as an expense for the period ending July 31, 2010.
 
In October 2009 5,000 shares valued at $1,750 were issued as employee incentives, and the full value expensed.
 
In September 2009 the Company announced an offer to all holders of certain warrants that it would reduce the exercise price on the warrants to $0.30 per share for a temporary period.  During the temporary warrant exercise price reduction period, which ended October 15, 2009, 2,038,500 warrants were exercised at $0.30 into a corresponding number of shares of common stock totaling 2,038,500 for a total of $611,523. The restricted shares were issued on October 15, 2009. As a result of modification of terms the company recorded additional compensation totaling $163,080.
 
In October 2009 the company issued 28,125 shares valued at $11,250 as settlement for an outstanding account payable.
 
In October 2009 the Company received $125,000 from a shareholder as a deposit for 10% interest in a future subsidiary company or shares of the Company converted at .30 per share, depending on future events.  The deposit was returned and the funds were not converted.
 
In January 2010 the Company issued 100,000 shares as commission valued at $22,000 and the entire amount expensed as commission expense for the period ending April 30, 2010.
 
In January 2010 the Company issued 25,000 shares as employee incentives valued at $11,000 and the entire amount expensed in the period ending April 30, 2010.
 
In January 2010 the Company issued 6,464 shares as compensation valued at $2,308 and the entire amount expensed to salaries for the period ending April 30, 2010.
 
In January 2010 the Company issued 4,000 shares to four dealers valued at $1,400 and the entire amount expensed for the period ending April 30, 2010.
 
In March 2010 the Company issued 150,000 shares as loan fees to related parties valued at $32,000 and the entire amount expensed to interest expense for the period ending April 30, 2010.
 
In March 2010 the Company issued 746,434 shares as compensation valued at $160,648 and the entire amount expensed to salaries for the period ending April 30, 2010.
 
From March 10, 2010 through July 31, 2010 Solar Energy Initiatives, Inc. (the “Company”) completed a private equity offering (the “Offering”) of units (the “Units”) pursuant to securities purchase agreements (the “Purchase Agreements”) by and between the Company and various accredited investors.  Pursuant to the Offering, the Company sold an aggregate of 4,488,892 shares of common stock (the “Shares”) and common stock purchase warrants (the “Warrants”) to acquire 4,488,892 shares of common stock with an exercise price of $0.16 per share for aggregate net proceeds of $722,956.
 
The Warrants are exercisable on a cash or cashless basis for three years.   The investors received, among other rights, full ratchet anti-dilution rights for lower priced issuances of securities.  The Shares and the Warrants were issued in accordance with Rule 506 under Regulation D and, as a result, may only be resold in accordance with Rule 144, which provides a minimum holding period of six months.
 
In addition, the Company compensated four groups for assisting in the sale of Units by paying them commissions in the aggregate amount of $76,045 and issuing 429,111 Shares and Warrants to purchase 429,111 shares of the Company’s common stock.
 
The securities were offered and sold in connection with this Offering in reliance upon Section 4(2) of the Securities Act of 1933 or Regulation D promulgated there under. Each investor represented that they were acquiring the securities for investment only and not with a view toward resale or distribution. Neither we nor anyone acting on our behalf offered or sold these Units by any form of general solicitation or general advertising.
 
In May 2010 the Company issued 194,122 shares as compensation valued at $34,941 and the entire amount expensed to salaries for the period ending July 31, 2010.
 
In May 2010 the Company issued 200,000 shares as director compensation valued at $36,000 and the entire amount expensed to salaries for the period ending July 31, 2010.
 
In July  2010 the Company issued 345,098 shares as compensation valued at $58,667 and the entire amount expensed to salaries for the period ending July 31, 2010.
   
 
34

 
 
In October 2010 the Company issued 200,000 shares as compensation valued at $20,000 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In October 2010 the Company issued 277,778 shares as compensation valued at $50,000 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In December 2010 the Company issued 154,000 shares as reimbursement for expenses valued at $7,700 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In March 2011 the Company issued 8,000,000 shares as compensation valued at $46,000 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In April 2011 the Company issued 8,011,000 restricted shares as compensation valued at $56,077 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In May 2011 the Company issued 1,113,636 restricted shares as compensation valued at $2,339 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In May 2011 the Company issued 19,000,000 restricted shares as compensation valued at $64,066 and an amount of which is deferred compensation remaining of $14,567 and the remainder of $49,499 is expensed to stock based consulting services for the period ending July 31, 2011.
 
During September and October 2010 the Company issued 500,000 restricted shares as director compensation valued at $78,000 and the entire amount expensed to stock based employee expense for the period ending July 31, 2011.
 
During May 2011 the Company issued 105,357,614 restricted shares as director and officer compensation valued at $427,074 and the entire amount expensed to stock based employee expense for the period ending July 31, 2011.
 
The Company received notice of conversion during the period totaling 123,826,314 shares for conversion prices ranging from $0.0013 to $0.069 per share, for the convertible notes.  Total beneficial conversion value accounted for in interest expense was $286,424 during the year ended July 31, 2011.
 
During October 2010 the Company received notices for cashless warrant exercise of 154,320 restricted shares.
 
During May 2011 the Company issued 40,000,000 restricted shares for settlement of amounts payable in the amount of $140,000, however these shares have been subsequently cancelled.
 
From August 2010 through November 2010 Solar Energy Initiatives, Inc. (the “Company”) completed a private equity offering (the “Offering”) of units (the “Units”) pursuant to securities purchase agreements (the “Purchase Agreements”) by and between the Company and various accredited investors.  Pursuant to the Offering, the Company sold an aggregate of 2,997,412 shares of common stock (the “Shares”) and common stock purchase warrants (the “Warrants”) to acquire 2,997,412 shares of common stock with an exercise price of $0.13 per share for aggregate net proceeds of $305,000.
 
The Warrants are exercisable on a cash or cashless basis for three years.   The investors received, among other rights, full ratchet anti-dilution rights for lower priced issuances of securities.  The Shares and the Warrants were issued in accordance with Rule 506 under Regulation D and, as a result, may only be resold in accordance with Rule 144, which provides a minimum holding period of six months.
 
During August 2010 the Company issued a retroactive anti-dilutive rachet increase per the above securities for 1,495,744 shares.
 
During November the Company cancelled 484,615 shares attributable to private placement offering of which the funds were never received.
   
 
35

 
  
Private Placement Warrants
 
As of July, 2011, warrants to purchase 2,226,000, 2,226,000, 857,143, 100,000, 1,000,000, 1,000,000, 708,053, 694,386, 360,672, 1,536,667, 4,318,003 600,000 and 2,997,412 respectively, of our common stock were granted in connection with the private placements as discussed above and as follows:
   
Number of Shares
of Common Stock
   
 
Exercise Price
   
 
Expiration Date
             
2,226,000
   
$
0.75
   
December-10
2,226,000
   
$
1.50
   
June-11
857,143
   
$
0.75
   
March-11
100,000
   
$
0.50
   
June-11
1,000,000
   
$
0.50
   
November-11
1,000,000
   
$
1.00
   
November-12
708,052
   
$
0.60
   
April-12
694,386
   
$
0.60
   
May-12
360,672
   
$
0.60
   
June-12
1,536,667
   
$
0.60
   
July-12
4,318,003
   
$
0.16
   
March-2013
600,000
   
$
0.16
   
June-2013
2,997,412
   
$
0.16
   
Nov-2015
 
 
All of the above offerings and sales were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of the Company or executive officers of the Company, and transfer was restricted by the Company in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings.
   
ITEM 13.  CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
We believe that we have executed all of the transactions set forth below on terms no less favorable to us than terms we could have obtained from unaffiliated third parties. It is our intention to ensure that all future transactions between us and our officers, directors and principal stockholders and their affiliates, are approved by a majority of the board of directors, including a majority of the independent and disinterested members of the board of directors, and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties.
 
In July 2006, we entered into a convertible debenture with a waste to energy development company, Envortus Inc. As such time, we intended to develop a business in the waste to energy market and this was our initial foray in to the market.  The officers and board members of the Company had ownership, officer positions and board positions in Envortus Inc. Under the terms of the convertible debenture, the Company could invest $250,000 in Envortus Inc over a period of time. The Company forwarded a total of $134,500 to Envortus Inc before deciding to continue its focus specifically in the solar area of the renewable energy market instead of waste to energy. The Company utilized funds raised from the sale of common stock and convertible debentures in order to fund the loan to Envortus Inc.
  
In March 2007, the Company entered into an agreement to sell the convertible debenture for $152,500, with discounts if paid early, to 0784655 B.C. LTD (“B.C.”), a company controlled by Paul Cox, a shareholder and a former officer and board member of the Company.  Mr. Cox remains a shareholder, officer and board member of Envortus Inc. In July 2007, the sale of the convertible debenture was completed with a payment of $55,000 to the Company and the receipt of a promissory note in the amount of $97,500 (the “Note”), from B.C. for the balance.  The principal amount of the Note was immediately discounted to $90,800.  In addition, if the Note was paid within the first 270 days of issuance, additional discounts could be available.  Further, in the event that we do not commence trading on the OTC BB by January 2009, Paul Cox may return shares of common stock of our Company for cancellation in lieu of payment of the Note.  The price per share shall be the greater of $0.35 or the last price to raise funds from third parties.
      
 
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To account for the Note the Company determined the fair value of the Note on a discounted basis to be equal to $68,100, which represented the discounted balance to be paid by B.C. assuming early payments made within 90 days from closing as provided in the Note.  Based on the fair value of the note of $68,100, a loss totaling $11,405 was recorded for the year ended July 31, 2008 as reflected in the table below:
 
Consideration for sale of debenture:
     
Cash
 
$
55,000
 
Note receivable
   
97,500
 
Total consideration
   
152,500
 
         
Immediate discount
   
(6,700
)
Bank fee
   
(5
)
Expected early payment discount
   
(22,700
)
         
Total net consideration
   
123,095
 
         
Investment in convertible debenture
   
134,500
 
         
Loss on sale of investment
 
$
(11,405
)
   
The Company had originally invested $134,500 in a convertible debenture with Envortus.  The Company then took back a Note for $97,500 and cash paid back of $55,000.  The Company reviewed the fair value of the $97,500 Note, which had an immediate discount of $6,700 and an early expected payment discount of $22,700.  The Company decided to take a valuation allowance on the $22,700 and the $6,700 during July 2007, leaving a balance on the Note of $68,100.  Comparing the consideration received of $55,000 and the remaining value of the Note at $68,100 or $123,095, net of a $5 fee, this resulted in a loss on sale of the original investment in convertible debenture of $11,405.   The Company has allowed for the remaining balance of the Note and recorded bad debt related to note receivable, related party, in the amount of $68,100, due to concerns of collectability and non-payment of the scheduled payments.  Per the terms of the Note, B.C. was required to pay principal in the amount of $10,000 in January 2008 and additional payments of $17,240 in July 2008, $31,780 in January 2009 and $31,780 in July 2009, together with interest, according to the payment schedule as defined by the Note when the early payments are not received.  As of the date hereof, B.C. has not made the required principal and interest payment.  The Company is pursuing legal action against the Note’s obligor for nonpayment.
 
No related parties purchased securities during the private placement from August 1, 2007 to July 31, 2009.  During the private placement from March, 2010 to July 2010 one related party purchased securities of 600,000 shares.  During the period of August 1, 2010 to July 31, 2011 there were 961,539 shares purchased through private placements
  
During the fiscal year ended July 31, 2011, the following equity distributions were made as part of employment compensation:  
David Fann, CEO  (1)
   
47,778,807
 
Mike Dodak, President and Interim CFO (1)
   
47,778,807
 
 
(1) On March 6, 2008, we agreed to extend employment agreements to Messrs. Fann and Dodak pursuant to which they served as Executive officers and employees and receive annual base compensation of $200,000, $150,000 and $150,000, respectively. If Executive's employment with the Company is terminated by the Company without Cause at any time prior to January 1, 2013, Executive shall receive from the Company severance pay in an amount equal to the greater of his then-current Base Compensation in effect at the time of such termination through either December 31, 2013 or eighteen (18) months from the date of notice, whichever is greater, in a lump sum payable no later than the termination date and (ii) all unpaid benefits such as accrued vacation, and (iii) all outstanding expenses, (iv) any declared but unpaid Annual Bonus, and any and all unvested options or stock shall become fully vested.  If Executive's employment with the Company is terminated by the Company by virtue of the expiration of this Agreement on December 31, 2012, Executive shall be entitled to continue to receive from the Company severance pay in an amount equal to the greater of his then-current Base Compensation in effect at the time of such termination through December 31, 2013 in accordance with the Company's general payroll practices; and (ii) any declared but unpaid Annual Bonus. In the event of a Corporate Transaction, the amount of severance pay will be equal to his then current Base Compensation for twenty four (24) months plus any annual bonus due plus all PTO time in a lump sum payable no later than the closing date of the Corporate Transaction. Additionally, the Company will continue to pay the premiums for Executive’s health benefits and life insurance for twenty four months.  During any period in which Executive is receiving severance compensation, the Company shall use reasonable efforts to obtain reasonably and to pay for comparable medical, life and disability insurance and other benefits on the same terms and conditions and to the same extent as theretofore provided by the Company to Executive prior to the effective date of the termination of his employment.
 
       
 
37

 
 
If Executive is terminated without Cause (whether as an employee or as a consultant) within a twelve (12) month period following the consummation of a Corporate Transaction (i) Executive's right to receive any earned but unpaid Annual Bonus shall immediately vest, but not less than a pro rata amount of the immediately preceding year's Annual Bonus if no Annual Bonus shall have been earned for the then current year, (ii) the Company or its successor in interest shall use reasonable efforts to obtain reasonably comparable medical, life and disability insurance and other benefits on the same terms and conditions and to the same extent as immediately theretofore provided by the Company to Executive prior to the consummation of the Corporate Transaction for a period of two (2) years following such termination and (iii) all severance compensation provided for will be due and payable at time of termination.
 
The Executive may select to become a consultant to the Company rather than be an employee. The Executive must provide the Company with a 60 day notice after which the Executive will become a consultant to the Company for the remaining term of this Agreement. The Executive will report to the then C.E.O. and will perform agreed upon services on a part-time basis (not to exceed 40 hours per month). The compensation paid will be Ten thousand dollars ($10,000) per month plus all expenses incurred on behalf of the Company. Any required travel in excess of three and one half hours will be business class.  Both Messrs. Fann and Dodak elected to convert their relationship with the Company to consultancy in July 2008.  Both Messrs. Fann and Dodak receive a salary of $220,000 per year as of July 31, 2010.  During fiscal year ended July 31, 2011 both Messrs. Fann and Dodak received a salary of $110,000 per year through April 30, 2011 at which time the Company made a settlement for stock for compensation due and restructuring the Company debt for go forward business totaling 47,678,807 shares each for total shares of  95,557,614 and value of $392, 074.
   
ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES
 
Accounting Fees
 
The following table shows the aggregate fees billed to us for professional services by L.L. Bradford & Company, LLC, our independent auditors, for the years ended July 31, 2011 and 2010.
 
   
2011
   
2010
 
Audit Fees
 
$
34,250
   
$
53,915
 
Audit-Related Fees
   
-
     
2,000
 
Tax Fees
   
4,000
     
5,900
 
All Other Fees
   
-
     
-
 
Total
 
$
38,250
   
$
61,815
 
 
Audit Fees.  Audit fees billed by L.L. Bradford were for professional services rendered for the annual audit of our consolidated financial statements, quarterly review of our consolidated financial statements, and other fees that are normally provided by the independent auditor in connection with statutory and regulatory filings or engagements.
 
Audit-Related Fees.  Audit-related fees billed by L.L. Bradford were for professional services rendered for assurance and related services that were reasonably related to the performance of the audit or review of our consolidated financial statements, other than those previously reported under “Audit Fees.” Audit-related fees for the years ended 2011 and 2010 related to professional services performed in connection with the Company’s regulatory filings on Forms S-1 and S-8 during each of those periods.
 
Tax Fees.  This category includes the aggregate fees billed in each of the last two fiscal years for professional services rendered by L.L. Bradford for tax compliance, tax planning and tax advice.  
 
All Other Fees.  L.L. Bradford did not bill us for professional services rendered, other than amounts reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees” above for the years ended 2011 and 2010.
 
 
38

 
 
ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 
(a)  Audited Financial Statements for fiscal year ended July 31, 2011.
 
(b)  Exhibits.
  
Exhibit Number
 
Description of Exhibit
3.1
 
Certificate of Incorporation.(1)
3.2
 
By-Laws. (1)
3.3
 
Certificate of Amendment dated August 2, 2006(1)
3.4
 
Certificate of Amendment dated February 2, 2007(1)
3.5
 
Certificate of Amendment to the Certificate of Incorporation (6)
3.6
 
Certificate of Amendment to the Certificate of Incorporation (8)
4.1
 
0784655 B.C. LTD Promissory Note with the Company.(2)
4.2
 
Amended Convertible Debenture Purchase and Sale Agreement between 0784655 B.C. LTD, Envortus and the Company. (2)
4.3
 
Agreement for distribution of solar panels between an Asian Solar Photovoltaic Manufacturer and the Company*(9)
4.4 
 
2009 Incentive Stock Plan (10)
4.5 
 
Form of Warrant issued to the April and May 2009 Investors (11)
4.6 
 
Form of Subscription Agreement entered into by the April and May 2009 Investors (11)
10.1
 
Employment Agreement by and between Brad Holt and the Company(4)
10.2  
 
Employment Agreement by and between David Fann and the Company(4)
10.3  
 
Employment Agreement by and between David Surette and the Company(4)
10.4  
 
Employment Agreement by and between Michael Dodak and the Company(4)
10.5
 
Website Purchase Agreement by and among NP Capital Corp, SEI Acquisition, Inc., Solar Energy, Inc., David H. Smith Revocable Trust dated June 16, 1993 and David Smith (7)
23.1
 
Consent of L.L. Bradford & Company, LLC
31.1
 
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
 
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.2
 
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
* Portions of this exhibit have been redacted pursuant to a request for confidential treatment submitted to the Securities Exchange Commission.  
(1) Incorporated by reference to the Form SB-2 Registration Statement filed with the Securities Exchange Commission on December 17, 2007.
(2) Incorporated by reference to the Form SB-2 Registration Statement filed with the Securities Exchange Commission on February 1, 2008.
(3) Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on March 6, 2008.
(4)  Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on April 1, 2008.
(5) Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on April 25, 2008.
(6) Incorporated by reference to the Form 8K Current Report filed with the Securities Exchange Commission on August 1, 2008.
(7) Incorporated by reference to the Form 8K Current Report filed with the Securities Exchange Commission on August 27, 2008.
(8) Incorporated by reference to the Form 8K Current Report filed with the Securities Exchange Commission on September 25, 2008.
(9) Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on May 21, 2008.
(10) Incorporated by reference to the Form S-8 Registration Statement filed with the Securities Exchange Commission on March 19, 2009.
(11) Incorporated by reference to the Form 8K Current Report filed with the Securities Exchange Commission on May 22, 2009.
   
 
39

 
   
Signatures
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  
 
Solar Energy Initiatives, Inc.
 
       
Date:  November 154, 2011
By:
/s/ David W. Fann  
    David W. Fann  
   
Chief Executive Officer, Chief Financial Officer and Director
(Principal Accounting, Financial and Executive Officer
       

  
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
  
 
Solar Energy Initiatives, Inc.
 
       
Date:  November 15, 2011
By:
/s/ David W. Fann  
    David W. Fann  
   
Chief Executive Officer and Director
(Principal Executive Officer)
       
 
  
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated.
 
Signature
 
Title
 
Date
         
/s/ David W. Fann
 
Chief  Executive Officer (Principal Executive Officer), Director
 
November 15, 2011
David W. Fann
       
         
/s Pierre Besuchet
 
Director
 
November 15, 2011
Pierre Besuchet
       
 
  
 
39

 
    
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Board of Directors and Stockholders
Solar Energy Initiatives, Inc.
Kingtree, South Carolina
 
 
We have audited the accompanying consolidated balance sheets of Solar Energy Initiatives, Inc. as of July 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity(deficit), and cash flows for each of the years in the two-year period ended July 31, 2011. Solar Energy Initiatives, Inc.’s management is responsible for these financial statements.  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 audit 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes 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 Solar Energy Initiatives, Inc. as of July 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the two-year period ended July 31, 2011 in conformity with accounting principles generally accepted in the United States.
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered losses from operations since inception and need additional capital to maintain operations and execute their business plan, all of which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 
 
 
/s/ L.L. Bradford & Company, LLC
November 15, 2011
Las Vegas, Nevada
   
 
F-1

 
 
 
Solar Energy Initiatives, Inc.
CONSOLIDATED BALANCE SHEETS
 
             
   
July 31, 2011
   
July 31, 2010
 
ASSETS
        As Restated  
             
Current assets
           
Cash and cash equivalents
  $ 8,703     $ 30,153  
Accounts receivable, net
    -       26,124  
Project development costs
    -       560,274  
Inventory
    6,692       208,417  
Prepaid and other current assets
    3,781       2,789  
Total current assets
    19,176       797,757  
                 
                 
Fixed assets, net
    17,509       25,369  
Deposits
    -       3,598  
Total assets
  $ 36,685     $ 856,726  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
                 
Current liabilities
               
Accounts payable
  $ 977,828     $ 1,158,588  
Accounts payable, related parties
    -       20,352  
Commissions payable
    -       1,882  
Due to related parties
    100,000       280,638  
Accrued expenses
    87,750       242,309  
Deferred revenue
    -       79,230  
Convertible debentures, net
    98,694       144,310  
Total current liabilities
    1,264,272       1,927,309  
                 
Commitments and contingencies
    -       -  
Stockholders' equity
               
Preferred stock, $0.001 par; 10,000,000 authorized
               
   0 and 0 issued and outstanding,
    -       -  
Common stock, $0.001 par; 750,000,000 authorized
               
   564,840,189 and 35,405,535 issued and outstanding,
               
   respectively
    564,841       35,406  
Paid-in capital
    14,206,188       10,564,804  
Deferred compensation
    (247,449 )     (582,535 )
Common stock subscription
    -       (20,000 )
Accumulated deficit
    (15,751,165 )     (11,002,334 )
Total Solar Energy Initiative Inc shareholder's equity (deficit)
    (1,227,586 )     (1,004,659 )
Non-controlling interest
    -       (65,923 )
Total stockholders' equity (deficit)
    (1,227,586 )     (1,070,583 )
Total liabilities and stockholders' equity (deficit)
  $ 36,685     $ 856,726  
                 
                 
                 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-2

 

Solar Energy Initiatives, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Audited)
 
             
   
For the Year Ended
   
For the Year Ended
 
   
July 31, 2011
   
July 31, 2010
 
             
Revenues, net
  $ 1,285,770     $ 4,643,974  
Cost of sales
    1,042,262       3,925,886  
Gross profit
    243,508       718,088  
                 
Operating expenses
               
Selling, general and administrative 
    3,294,179       5,572,818  
 Total operating expenses
    3,294,179       5,572,818  
                 
Loss from operations
    (3,050,671 )     (4,854,729 )
                 
Other income (expense)
    (1,506,431 )     (1,280,980 )
Interest expense
    (357,412 )     (98,381 )
 Total other income (expense)
    (1,863,843 )     (1,379,361 )
                 
Loss before provision for income taxes
    (4,914,514 )     (6,234,090 )
Provision for income taxes
    -       -  
Net loss
    (4,914,514 )     (6,234,090 )
                 
Loss attributable to non-controlling interest
    (165,683     (342,766 )
Loss attributable to Solar Energy Initiatives, Inc.
  $ (4,748,831 )   $ (5,891,324 )
                 
Net loss attributable to Solar Energy Initiatives, Inc.` per share – basic and diluted
  $ (0.03 )   $ (0.22 )
                 
Weighted average shares outstanding – basic and diluted
    176,933,160       27,887,439  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements.
 
                 
 

 
F-3

 

Solar Energy Initiatives, Inc.
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Audited)
 
               
Additional
          Common         Non-    
Total
 
   
Common Stock
   
Paid-in
   
Deferred
    Stock  
Accumulated
   
Controlling
   
Stockholders
 
   
Shares
   
Amount
   
Capital
   
Comp
    Subscription  
Deficit
   
Interest
   
Equity
 
Balances, July  31, 2009
    22,626,567     $ 22,627     $ 7,104,896     $ (446,166 )   $ (20,000 ) $ (5,111,011 )   $ -     $ 1,550,346  
                                                               
Shares issued for consulting
    1,300,000       1,300       516,200       (498,000 )           -       -       19,500  
                                                               
Shares issued for warrant call
    2,038,500       2,038       772,566       -             -       -       774,604  
                                                               
Shares issued for payment of services
    2,415,125       2,415       477,872       (465,739 )           -       -       14,548  
                                                               
Shares issued for dealer incentives
    13,000       13       4,537       -             -       -       4,550  
                                                               
Shares issued for employee incentives
    36,464       36       15,021       -             -       -       15,057  
                                                               
Shares issued for loan fees
    350,000       350       70,650       -             -       -       71,000  
                                                               
Shares issued for employee compensation
    1,707,876       1,708       364,112       -             -       -       365,821  
                                                               
Amortization of deferred compensation expense
    -       -               827,370             -       -       827,370  
                                                               
Shares issued for private placement, net of offering costs
    4,918,003       4,918       718,038       -             -       -       722,956  
                                                               
Discount on notes due to beneficial conversion feature
    -       -       121,138       -             -       -       121,138  
                                                               
Acquisition and ownership changes in subsidiary
    -       -       399,775       -             -       276,843       676,618  
                                                               
Net loss
    -       -       -       -             (5,891,323 )     (342,766 )     (6,234,090 )
                                                               
Balances, July 31, 2010
    35,405,535     $ 35,406     $ 10,564,804     $ (582,535 )     (20,000 ) $ (11,002,334 )   $ (65,923 )   $ (1,070,583 )
                                                               
Shares issued for cashless warrants
    154,320       154       (154 )     -             -       -       -  
                                                               
Shares issued for payment of services
    2,509,014       2,509       203,403       -             -       -       224,912  
                                                               
Shares issued for retroactive treatment of share price
    1,495,744       1,496       (1,496 )     -             -       -       -  
                                                               
Shares cancelled
    (524,615 )     (525 )     (29,476 )     -       (20,000 )   -       -       (10,000 )
                                                               
Shares issued for employee compensation
    105,857,614       105,858       399,216       -             -       -       505,074  
                                                               
Shares issued for deferred compensation
    32,163,600       32,164       171,673       (251,509 )           -       -       (47,672 )
                                                               
Amortization of deferred compensation expense
    -       -       -       726,595             -       -       726,595  
                                                               
Shares issued for private placement, net of offering costs
    3,482,027       3,482       321,518       -             -       -       325,000  
                                                               
Discount on notes due to beneficial conversion feature
    -       -       151,063       -             -       -       151,063  
                                                               
Acquisition and ownership changes in subsidiary
    -       -       436,252       (200,086 )           -       231,606       467,772  
                                                               
Shares issued for dealer incentives
    40,000,000       40,000       100,000       (140,000 )           -       -       -  
                                                               
Shares issued for convertible debt
    123,826,314       123,827       505,598       -             -       -       629,425  
                                                               
Rachet provisions and settlement with shareholders
    220,470,636       220,470       1,383,786       -             -       -       1,604,256  
                                                               
Net loss
    -       -       -       -             (4,748,831 )     (165,683     (4,414,514 )
                                                               
                                                               
Balances, July 31, 2011
    564,840,189     $ 564,849     $ 14,206,188     $ (247,449 )   $ (0 ) $ (15,751,165 )   $ (0 )   $ (1,227,586 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-4

 
 
Solar Energy Initiatives, Inc.
STATEMENTS OF CASH FLOWS
(Audited)
 
 
 
For the Year Ended
   
For the Year Ended
 
   
July 31, 2011
   
July 31, 2010
 
          As Restated  
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (4,914,514 )     (6,234,090 )
Adjustments to reconcile net loss to net cash used by operating activities: 
               
Depreciation and amortization
    7,860       8,468  
Stock based compensation
    1,936,579       1,623,465  
Provision for anti-dilutive rachet on purchased stock
    1,271,455       -  
Convertible Debenture Amortization
    420,373       15,448  
Impairment of intangible assets
    -       1,250,000  
Stock issued for retroacive treatment of common stock
    179,490       -  
Stock issued for loan fees
    -       71,000  
Changes in operating assets and liabilities:
               
Accounts receivable
    26,124       (3,934 )
Project costs
    560,274       (391,342 )
Inventory
    201,725       17,995  
Prepaid expenses and other current assets
    (992 )     500  
Deposits and other assets
    3,598       9,150  
Accounts payable
    (79,686 )     440,574  
Accounts payable, related party
    (20,352 )     20,352  
Commissions payable
    (1,882 )     (74,296 )
Accrued expenses
    (23,949 )     110,288  
Deferred revenue
    (79,230 )     27,033  
Due to related party
    (32,539 )     92,247  
Net cash used by operating activities
    (545,667 )     (3,017,143 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of fixed assets
    (8,178 )     (5,892 )
Investment in subsidiary assets
    (4,604 )     -  
Net cash used by investing activities
    (12,782 )     (5,892 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Net proceeds from private placements
    325,000       722,956  
Proceeds from warrant call
    -       774,604  
Proceeds received from subsidiary stock sales
    -       300,000  
Proceeds from notes
    212,000       250,000  
Net cash provided by financing activities
    537,000       2,047,560  
                 
Net increase (decrease) in cash and cash equivalents
    (21,450 )     (975,475 )
Net cash provided from non-controlling interest
    -       -  
Cash and cash equivalents at beginning of year
    30,153       1,005,628  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 8,703     $ 30,153  
 
 
F-5

 
 
   
For the Year Ended
   
For the Year Ended
 
   
July 31, 2011
   
July 31, 2010
 
SUPPLEMENTAL DISCLOSURES
           
Cash operating activities: 
           
Interest paid 
  $ 357,412     $ 22,625  
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
         
                 
Spin off of Solar Park:
               
Cash
  $ 4,604       -  
Other assets
    40,204       -  
Property and equipment
    8,178       -  
Accounts payable
    (64,738 )     -  
Accrued expenses
    (53,077 )     -  
Due to Solar Park
    51,901       -  
Notes payable
    (97,000 )     -  
Deferred compensation
    488,251       -  
Stock payable
    (268 )     -  
Additional paid in capital
    (378,056 )     -  
Total Spin -Off
  $ -     $ -  
                 
Stock issued for deferred compensation
  $ 1,072,549     $ 963,739  
Stock issued for loan fees
  $ -     $ 71,000  
Settlement on note payable
  $ -     $ 400,000  
Discounts from warrants and beneficial conversion feature
  $ 151,564     $ 121,138  
Subsidiary options granted for other assets
  $ 40,204     $ -  
Stock issued for accounts payable
  $ 36,333     $ -  
Stock issued for conversion of notes payable
  $ 629,425     $ -  
Common stock subscription cancelled
  $ (20,000 )   $ -  
Due to related parties purchased by third parties
  $ 200,000     $ -  
                 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 

 
F-6

 
 
Solar Energy Initiatives, Inc.
Notes to Consolidated Financial Statements
  
Note 1 – Nature of Operations
  
Solar Energy Initiatives, Inc. was formed on June 20, 2006 and is a Delaware Corporation.  On August 20, 2008, Solar Energy, Inc., a Florida corporation, was formed as a wholly owned subsidiary of Solar Energy Initiatives, Inc. to operate acquired solar assets, which includes the World Wide Web domain name  www.solarenergy-us.com , and the relationship management of an independent solar equipment dealer network.  In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
Throughout this Report, Solar Energy Initiatives, Inc., Solar Energy, Inc. and SNRY Solar, Inc and SNRY Power, Inc. may be individually and collectively hereafter referred to as: the “Company”, “Solar Energy”, “we”, or “us”.
 
Business Description
 
Solar Energy Initiatives, Inc. (OTCBB: SNRY), is a diversified provider of solar solutions with two principal wholly owned subsidiaries focused on large-scale projects, solar education and distribution of solar products.
 
The SNRYPower, Inc. subsidiary is a developer and manager of municipal and commercial scale solar projects.
   
The SNRYSolar Inc subsidiary as a wholesale distributor of branded photovoltaic and thermal (water heating) systems selling via a network of dealers throughout the United States and the Caribbean..
 
Solar Energy Initiatives, Inc. (the “Company”) was formed on June 20, 2006 and is a Delaware Corporation.  On August 20, 2008, Solar Energy, Inc., a Florida corporation, was formed as a wholly owned subsidiary of the Company to operate acquired solar assets, and the relationship management of an independent solar equipment dealer network.  On September 25, 2009, Solar Energy Initiatives, Inc. formed a wholly owned subsidiary Solar Park Initiatives, Inc. (SPI), a Nevada corporation, to develop large utility-scale solar projects.
 
The Company sold its interests in SolarEnergy.com, a domain name and digital property back to its original owner during the 4th quarter of 2010 for cancellation of $400,000 of debt.
 
In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
On January 19, 2011 the Company completed a distribution of 21,326,912 shares it held with Solar Park Initiatives, Inc. (SPI) to the Company’s shareholders, reducing its current ownership in SPI to approximately 11.5%.
 
The Company sold its business for Solar EOS, dedicated to the education and continuous improvement of solar energy trade professionals, during the 3rd quarter of 2011 for Note of$165,450 over three years annual payments and payment of debts of the Company for a total value of $200,000.
During the second quarter and continuing through the fourth quarter of the current fiscal year, the Company continues to experience cash flow difficulties that were exacerbated by the economy, the long development cycle of project development and lack of private capital investment.  As a result, the Company has reduced portions of its operations although it continues to pursue its business model.
 
Through its diversified portfolio of solar businesses, Solar Energy is committed to restoring the nation’s economy through a grassroots campaign called ‘Renew the Nation’.  Renew the Nation brings together a broad alliance of public and private sector interests focused on workforce development, job creation and economic growth through solar energy. For more information please visit www.solarenergy-us.com.
 
We are primarily focusing our sales efforts in regions where electricity prices and government incentives are attractive and have accelerated solar power adoption.  The business segments we have identified to pursue can require a significant level of expertise and capital.  Currently the Company has found a very good working business model, working with many states and counties and banks that understand how to make the solar projects successful.  The executive management has currently been focusing on this working business model to improve profit margins, identify viable and bankable projects of significant size, and too install using all efforts towards those financially viable projects. We have obtained the expertise, and continue to seek the necessary capital to further develop our plan and focus on this improved business model.  The management has found the necessary expertise focusing on these strategies, however if we are unable to continue to acquire or develop such expertise or capital, we may not be able to fully develop our planned business and ultimately may be required to cease operations.  We anticipate that the end customers of our sales processes will be homeowners, owners of large commercial and industrial buildings and facilities, municipalities and owners of large tracts of undeveloped land.
 
 
F-7

 
    
Business Focus
 
Our business is to market and sell solar power products, systems and services. Specifically, we are engaged in the following:
 
 
1) 
Support and continue to expand a dealer network that sells solar components and systems to residential and commercial customers, and
 
2) 
Develop commercial projects, as the owner and operator, and sell power to the municipality, building owner or tenant
 
3)
Develop its South Carolina plant facility into a solar assembly, warehouse and distribution facility.
 
We offer solar power products including solar panels, inverters and balance of system which convert sunlight into utility quality electricity, and solar thermal systems which utilizes the sun’s radiation to heat water for homes and commercial applications.  Installation and maintenance of these solar power products is performed by either the dealer network or 3rd party vendors identified by us. Our initial solar installation sales efforts are focused on supporting our dealer network’s sales to residential, commercial customers and the sale of solar systems to owner/operators where the energy generated will be sold to municipal customers.
 
In 2009 we entered into a contract with a Western United States municipality where we agreed to build, own and operate a solar electric system we contracted for installation on buildings identified by the municipality.  The successful funding, construction and commissioning of the 800 kilowatt solar electric system has verified this vertical of our business plan. In 2010 we entered into several Letters of Intent to build, own and operate solar arrays on property owned by municipalities in North Carolina, Georgia and Pennsylvania. Although project and term funding were not provided during fiscal year 2010, the Company obtained project funding in October, 2010 to construct 500 KW’s of a 1 MW project in North Carolina for a municipality and sold the project in February 2011. The Company is currently in negotiations with various third parties to provide funding to build out several of its pipeline projects in North Carolina for a combined 2.0 MW’s, as well as, a 1MW project in Pennsylvania and 3.5 MW’s of projects in South Carolina.
 
In connection with our solar park development business, we intend to provide solar power systems to end customers on a turn-key, whole-solution basis by identifying and developing the project, and procuring financing, permits, equipment, construction and operational resources.  As our business matures we may also provide engineering, manage construction, and provide monitoring, operations and maintenance services to the projects.
 
We buy products for our solar sales activities from manufacturers and vendors around the world.  We buy products at wholesale prices based on market rates, and have relationships within the distribution and supply trade.  
   
Note 2 – Going Concern
 
Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have incurred losses from operations since our inception, and at the present time will need additional capital to maintain operations and execute our business plan.  As such, our ability to continue as a going concern is contingent upon us being able to secure an adequate amount of debt or equity capital to enable us to meet our cash requirements.  In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets, the competitive environment in which we operate and the current credit shortage facing world wide markets.
 
Since inception, our operations have primarily been funded through private equity financing, and we expect to continue to seek additional funding through private or public equity and debt financing.
 
However, there can be no assurance that our plans discussed above will materialize and/or that we will be successful in funding our estimated cash shortfalls through additional debt or equity capital and/or any cash generated by our operations. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.
 
We anticipate our operations will be sufficient to provide adequate operating revenue to maintain the business.  Adding at least $1,250,000 in funds will allow us to quickly move forward with projects in hand which, if successful, should provide cash flow allowing for advantageous inventory purchases and the securing of additional projects, potentially increasing our growth and profitability.  With more capital, we would also add additional staff and start development of other projects. Currently we have approximately $8,000 in cash on hand.    The current level of cash is not enough to cover the fixed and variable obligations of the Company, so increased sales performance and the addition of more capital are critical to our success.
 
Assuming we are successful in our sales/development effort, we believe that we will be able to raise additional funds through the sale of our stock to either current or new shareholders. There is no guarantee that we will be able to raise additional funds or to do so at an advantageous price.
 
Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern
   
 
F-8

 
  
Note 3 – Summary of Significant Accounting Policies
 
Restatement for fiscal year end July 31, 2010 for amounts shown for Martins Creek NC, LLC property classified on a consolidated basis as Project development costs  of $560,274.  Previously the assets were categorized as an other receivable from equity method investee totaling $530,274 and an investment in equity method investee totaling $30,000.  Previously the Company accounted for the investment in Marlins Creek NC, LLC under the equity method.  Management later determined this investee should be consolidated as a variable interest entity.  All intercompany transactions were eliminated upon consolidation.
 
Basis of Presentation and principles of consolidation - The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All intercompany transactions are eliminated in final consolidation.
 
Financial Instruments - The Company's financial instruments consist primarily of cash, accounts receivable, accounts payable, and notes receivable and payable. These financial instruments are stated at their respective carrying values, which approximate their fair values.
 
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain 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. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make. Estimates that are critical to the accompanying financial statements arise from our belief that we will secure an a d equate amount of cash to continue as a going concern, that our allowance for doubtful accounts is adequate to cover potential losses in our receivable portfolio, that all long-lived assets are recoverable.  The markets for our products are characterized by intense competition, rapid technological development, evolving standards, short product life cycles and price competition, all of which could impact the future realization of our assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term with respect to these matters.
 
Revenue Recognition - The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”. The Company generates revenue from the sale of training, photovoltaic panels, photovoltaic roofing systems, solar thermal products, balance of system products, and management system products to our dealer network or other parties. The Company anticipates it will not perform any installations. SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller's price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. Amounts billed or received from customers in advance of performance are recorded as deferred revenue.
 
Allowance for Doubtful Accounts - The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts.   Management believes there were no uncollectible amounts as of July 31, 2010 and there were no accounts receivable balances at July 31, 2011.
 
Warranty Reserves - The Company purchases its products for sale from third parties.  The manufacturer warrants or guarantees the operating integrity, and performance of photovoltaic solar products at certain levels of conversion efficiency for extended periods, up to 25 years. The manufacturer also warrants or guarantees the functionality of inverters and balance of systems up to 10 years.  Therefore, the Company does not recognize warranty expense.
 
Shipping and Handling Fees and Costs - Shipping and handling fees, if billed to customers, are included in net sales. Shipping and handling costs associated with inbound freight are expensed as incurred. Shipping and handling costs associated with outbound freight are classified as cost of sales.
 
Cash and Cash Equivalents - Cash and cash equivalents consist primarily of cash on deposit, and money market accounts that are readily convertible into cash.
 
Investments in Companies Accounted for Using the Equity or Cost Method  and Non-Controlling Interest– Investments in equity method investees are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee.  Investments of this nature are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment.  When net losses from and investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero.  The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company’s share of that net income exceeds the share of the net losses not recognized during the period the equity method was suspended.  Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.  When an investment accounted for using the equity method issues its own shares, the subsequent reduction in the Company’s proportionate interest in the investee is reflected in income as a deemed dilution gain proportionate interest in or loss on disposition.  The Company evaluates its investments in companies accounted for the equity or cost method for impairment when there is evidence or indicators that a decrease in value may be other than temporary.
   
 
F-9

 
  
The Company’s investments in Solar Park Initiatives, Inc. are accounted for as a non-controlling interest due to the significant influence of the controlling ownership percentage during the year and similar ownership and therefore not accounting and not treating the transfer of assets as a sale (as stated below in Business Combinations and Consolidation).
 
However, due to the common stock distribution as of December 1, 2010, the Company no longer accounts for Solar Park Initiatives, Inc. on a consolidated basis and does not reflect the non-controlling interest amounts as of July 31, 2011.  Therefore as of July 31, 2011 the non-controlling interest was $0 and as of July 31, 2010 it was ($65,923)
 
Business Combinations and Consolidation
 
On January 31, 2010, the Company adopted new accounting guidance on business combinations and non-controlling interests in consolidated financial statements. The guidance on business combinations impacts the accounting for any business combinations completed after January 31, 2010. The nature and extent of the impact will depend upon the terms and conditions of any such transaction. The guidance on non-controlling interests changes the accounting and reporting for minority interests, which have been recharacterized as non-controlling interests and classified as a component of equity. Prior period financial statements and disclosures for existing minority interests have been restated in accordance with this guidance. All other requirements of this guidance will be applied prospectively. The adoption of the guidance on non-controlling interests did not have a material impact on the Company’s financial statements.
 
In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for transfers of financial assets. This amendment removes the concept of a qualifying special-purpose entity and requires that a transferor recognize and initially measure at fair value all assets obtained and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. This amendment also requires additional disclosures about any transfers of financial assets and a transferor’s continuing involvement with transferred financial assets. This amendment is effective for fiscal years beginning after November 15, 2009, and interim periods within those fiscal years. As of January 27, 2010, the Company has approximately $323 million of trade receivables associated with factoring and securitization programs that are not recognized on the balance sheet. The Company is currently evaluating these arrangements as well as any other potential impact of adopting this amendment on April 29, 2010, the first day of Fiscal 2011.
 
In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for variable interest entities. This amendment changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.  The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the purpose and design of the other entity and the reporting entity’s ability to direct the activities of the other entity that most significantly impact its economic performance. The amendment also requires additional disclosures about a reporting entity’s involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity will be required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. This amendment is effective for fiscal years beginning after November 15, 2009, and interim periods within those fiscal years.
 
The Company’s project costs in Martins Creek NC, LLC are accounted for under the Consolidation method, and as a special purpose entity, due to the significant influence of the controlling and similar ownership.  As of July 31, 2010 these project costs totaled  $560,274 and $0 as of July 31, 2011.
  
Inventory - Inventories consist of photovoltaic solar panels, solar thermal panels and components, other component materials for specific customer orders and spare parts, and are valued at lower of cost (first-in, first-out) or market. Management provides a reserve to reduce inventory to its net realizable value. Certain factors could impact the realizable value of inventory, so management continually evaluates the recoverability based on assumptions about customer demand and market conditions. The evaluation may take into consideration expected demand, new product development; the effect new products might have on the sale of existing products, product obsolescence, and other factors. The reserve or write - down is equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required. If actual market conditions are more favorable, reserves or write-downs may be reversed.    As of July 31, 2011 inventory was $6,692.  Inventory was not acquired during the four most recent quarters, therefore there is a write down of inventory of $15,000.   As of July 31, 2010 inventory was $208,418.
 
Fixed Assets - Fixed assets are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of equipment and improvements are provided over the estimated useful lives of the assets, or the related lease terms if shorter, by the straight-line method. Useful lives range as follows:
  
Category
 
Useful Lives
Computers and networks
 
3 years
Machinery and equipment
 
5-7 years
Furniture and fixtures
 
5-7 years
Office equipment
 
3-10 years
Leasehold improvements
 
Lesser of lease term or useful life of asset
   
 
F-10

 
  
Maintenance and repairs are expensed as incurred. Expenditures for significant renewals or betterments are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in current operations.
 
Domain Name - The domain name is determined to have an indefinite useful life, is not amortized, but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the domain name might be impaired. The impairment test for indefinite-lived domain name consists of a comparison of their fair value with the carrying amount.  During the year the original domain name purchased in August 2008, was transferred back to the original owner.  All rights and ownership of the URL www.solarenergy.com was transferred back.  See the description of the transaction in the Notes below.
 
Long-Lived Assets and Impairment - Statement of Financial Accounting Standards (SFAS) 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" requires that long-lived assets, including certain identifiable intangibles, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets in question may not be recoverable. We had Long Lived Assets primarily consisting of the domain name acquired in our recent transaction and we believe that this asset is fairly valued as of July 31, 2011 and 2010.  As of July 31, 2010 there were no long lived assets.  
 
Stock-Based Compensation - We recognize stock-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest over the requisite service period of the award.   The Company issues stock as compensation for services at the current market fair value.
 
We account for equity instruments issued for services based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable. Stock based compensation was determined using the fair value of the services performed due to the lack of historical fair value of the equity instruments.
 
Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period.
 
Income Taxes - Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.   We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We measure the tax benefits recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to our subjective assumptions and judgments which can materially affect amounts recognized in our consolidated financial statements.
 
Foreign Currency - Gains and losses from foreign exchange transactions will be included in the statements of operations. Currently there are none.
 
Basic and Diluted Net Loss per Share - Basic net loss per share is computed by dividing the loss for the period by the weighted average number of common shares outstanding for the period. Fully diluted loss per share reflects the potential dilution of securities by including other potential issuances of common stock, including shares to be issued upon exercise of stock options and warrants, in the weighted average number of shares of common stock outstanding for a period and is not presented where the effect is anti-dilutive.
 
Concentrations of Credit Risk
 
Cash and cash equivalents - The Company maintains cash balances at a financial institution in Ponte Vedra Beach, Florida. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation up to $250,000. At times, balances may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes that the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.
  
 
F-11

 
  
Vendors - The following three vendors make up the majority of our COS:
 
Sharp
22%
Solectria
13%
Suniva
11%
Unirac
10%
   
The following vendors make up the majority of our Accounts Payable at July 31, 2011:
 
Canadian Solar 
22%
Sharp
10%
 
The remaining vendors all account for less than 10% of total Accounts Payable.
 
Customers - 42% of our revenues are from the sale of our 1MW solar project and the other 58% is evenly distributed amongst our dealers.
   
Note 4 – Recent Accounting Pronouncements
 
In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU, however, management does not expect the adoption of this ASU to have a material impact on the financial statements.
 
In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010. The Company is currently evaluating the impact of this ASU, however, management does not expect the adoption of this ASU to have a material impact on the financial statements.
 
On December 21, 2010, the FASB issued Accounting Standards Update ("ASU") 2010-29, which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010. The Company is currently evaluating the impact of this ASU, however, management does not expect the adoption of this ASU to have a material impact on the financial statements.
  
Note 5 – Inventory
 
Inventories consist of photovoltaic solar panels, solar thermal panels and components, other component materials for specific customer orders and spare parts, and are valued at lower of cost (first-in, first-out) or market. Management provides a reserve to reduce inventory to its net realizable value.    Inventory consisted of the following as of July 31, 2009 and 2008.
 
   
2011
   
2010
 
Photovoltaic Solar panels and components
 
$
-0-
     
166,024
 
Thermal Solar panels and components
   
6,692
     
42,393
 
Other components and materials 
   
-
     
-
 
Total Inventory as of July 31
 
$
6,692
   
$
208,417
 
  
 
F-12

 
  
Note 6 – Fixed Assets
   
Fixed assets consisted of the following as of July 31, 2011 and 2010:
 
Category
Useful Lives
 
2011
   
2010
 
               
Furniture fixtures and equipment
5-7 years
 
$
39,414
   
$
39,414
 
Less accumulated depreciation
     
21,905
     
14,045
 
Net fixed assets
   
$
17,509
   
$
25,369
 
 
During the years ended July 31, 2011, and July 31, 2010 depreciation, totaling $7,860 and $8,468, respectively, was charged to selling, general and administrative expenses.
  
Note 7 –Acquisition and Transfer of Domain Name
 
On July 8, 2008, the Company provided a non-refundable deposit of $25,000 to Solar Energy, Inc. in anticipation of completing the acquisition of certain assets of the company.  On August 21, 2008, the Company entered into and closed a Website Purchase Agreement (the “WPA”) with Solar Energy, Inc. (“SEI”) and the shareholders of SEI pursuant to which the Company acquired the Domain Name, www.solarenergy.com , the web site that uses the domain name, the name Solar Energy, Inc. and all trade rights associated with these assets (collectively, the “SEI Assets”).  In consideration for the purchase and sale of the SEI Assets, the Company assumed various liabilities, made a cash payment of $160,000 at closing, issued the seller a secured note collateralized by a lien on the assets referenced in the Website Purchase Agreement in the principal amount of $840,000 with 7.5% interest that is payable over a period of 21 months with payments of $40,000 per month and issued the seller 1,000,000 shares of common stock of the Company.
 
As of July 15, 2010 the Company transferred the ownership of the Domain Name back to original seller for full payment of the outstanding principal and accrued interest of the Note in the amount of $400,000 and $28,750, respectfully.  The Company settled with the seller and impaired the $1,650,000 value of the Domain Name against the remaining value of the note payable of $400,000, for a net other expense of $1,250,000.
 
Note 8 – Accrued Expenses
 
Accrued expenses consist of the following as of July 31:
   
    2011     2010  
Interest for notes and convertible debentures
 
$
14,291
   
$
1,408
 
Salaries and taxes payable
   
-
     
156,385
 
Supplies
   
73,459
     
25,182
 
Capital development costs
   
-
     
13,270
 
Legal and Professional Expenses
   
-
     
46,064
 
   
$
87,750
   
$
424,309
 
 
Note 9 – Convertible Debentures
 
In November 2008, the Company entered into a convertible debenture agreement for $325,000 with four private investors.  The debenture is convertible into 1,300,000 shares of common stock at $0.25 per share.  In addition, we issued 1,000,000 “A” Warrants and 1,000,000 “B” warrants exercisable on a cash basis equal to $0.50 and $1.00 respectively.  The A warrants can be exercised for cash and will survive for two years from the closing date.  The “B” warrants can be exercised for cash and will survive three years from the Closing Date.  The Company shall have the right to call the “A” warrants if its stock trades at or is otherwise valued at, or above $1.00 per share for 10 consecutive days.   The Company shall have the right to call the “B” warrants if its stock trades at, or is otherwise valued at, or above $1.50 per share for 10 consecutive days.  The Company shall have the right, upon written notice to the holder  to reduce the exercise period of the Warrants to a period of 15 days beginning on the date of the written notice.    Each of the four private investors were issued convertible debentures with an interest rate of 12% per annum based on the number of days the debt has been outstanding, from the date of the loan through the date of repayment.    The warrant component of the promissory notes was valued at $144,493 using the Black- Sholes Method.   Additionally, the Company recorded a beneficial conversion feature totaling $180,507.  The value of the warrants and the beneficial conversion feature was recorded as a discount to the convertible debenture and $325,000 was expensed through July 31, 2009.   The debentures were converted to stock as of July 21, 2009 and   1,300,000 shares were issued, and accrued interest of $28,093 was paid in August 2009
 
On June 29, 2010, Solar Energy Initiatives, Inc. (the “Company”) entered into  a  Securities   Purchase   Agreement   with  Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $100,000 (the "Note").  The financing closed on July 2, 2010.  
 
The Note bears interest at the rate of 8% per annum.  All interest and principal must be repaid on June 30, 2011.  The Note is convertible into common stock, at Asher’s option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.  The Note contains a prepayment option whereby the Company may make a payment to Asher equal to 150% of all amounts owed under the Note during the 90 day period beginning on the date of issuance of the Note and expiring on the 90 date anniversary.  
  
 
F-13

 
  
Asher has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received from this Offering on July 2, 2010 was $97,000.
 
In addition, the Company compensated $3,000 to Naidich, Wurman, Birnbaum & Maday, LLP for services to complete the Note and Purchase Agreement.
 
On July 15, 2010, the Company entered into a Securities Purchase Agreement with JDF Capital, Inc. (“JDF”), for the sale of a 12% convertible note in the principal amount of $150,000 (the "Note").  The financing closed on July 16, 2010.  
 
The Note bears interest at the rate of 12% per annum.  All interest and principal must be repaid on July 15, 2011.  The Note is convertible into common stock, at JDF’s option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the twenty (20) trading day period prior to conversion.  The Note contains a prepayment option whereby the Company may make a payment to JDF equal to 150% of all amounts owed under the Note during the one hundred fifty (150) day period beginning on the date of issuance of the Note and expiring on the 150 date anniversary.  
 
JDF has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.  The total net proceeds the Company received from this Offering on July 16, 2010 were $145,000 which is the gross proceeds less $5,000 paid to JDF’s counsel.
 
Additionally, the Company recorded a beneficial conversion feature on both the Asher Enterprises and JDF Capital notes, totaling $250,000 and a discount totaling $121,138, with a remaining note payable net of $144,310.  The value of the beneficial conversion feature was recorded as a discount to the convertible debenture and $121,138 and was entered through additional paid-in-capital  through July 31, 2009.  The discount of $15,448 has been amortized during the period ended July 31, 2010. 
 
On August 9, 2010, the Company entered into a Securities Purchase Agreement with Asher for the sale of 8% convertible note in the amount of $53,000.  The financing closed on August 15, 2010.  The value of the beneficial conversion feature was recorded as a discount to the convertible debenture of $25,260 and fully amortized during the year ended July 31, 2011.
 
On October 26, 2010, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $40,000 (the "Note"). The financing closed on October 26, 2010.
 
The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 28, 2011. The Note is convertible into common stock, at Asher's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Note contains a prepayment option whereby the Company may make a payment to Asher equal to 150% of all amounts owed under the Note during the 90 day period beginning on the date of issuance of the Note and expiring on the 90 date anniversary.
 
Asher has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The total gross proceeds the Company received from this Offering on October 26, 2010 was $40,000.  The value of the beneficial conversion feature was recorded as a discount to the convertible debenture of $18,100 and was fully amortized during the year ended July 31, 2010.
 
On November 2, 2010 the Company transferred and the related party lender assigned and Asher purchased a related party not payable of $50,000. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 28, 2011. The Note is convertible into common stock, at Asher's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
 
On December 2, 2010 the Company transferred and the related party lender assigned and Asher purchased a related party not payable of $50,000. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 28, 2011. The Note is convertible into common stock, at Asher's option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
 
The beneficial conversion feature and discount amounted to $34,672 on both transferred notes assigned by related parties to Asher a non-related party. 
 
During the period an additional $100,000 of converted debt was transferred, with an amount of $38,586 representing a discount on the debt.  During the period $39,141 of total discount was amortized on all of the convertible debt. 
 
The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Asher is an accredited investor, Asher had access to information about the Company and their investment, Asher took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.
   
 
F-14

 
  
During February 2011, the Company also took on an additional $54,000 of debt with 8% annual interest to be paid within 12 months.
 
On May 25, 2011 and July 8, 2011, Solar Energy Initiatives, Inc. (the “Company”) entered into two Securities Purchase Agreements with Asher Enterprises, Inc. ("Asher"), for the sale of two 8% convertible notes each in the principal amount of $32,500 (the "Notes").  The Notes bear interest at the rate of 8% per annum.  The Notes were convertible into common stock, at Asher’s option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.    The value of the beneficial conversions feature was recorded as a discount to the convertible debenture of $34,946, and amortized $10,827 during the year ended July 31, 2010.
 
Total Loans as of July 31, 2011:
 
Convertible Debt   
 
$
65,000
 
Notes  
   
54,000
 
Total  
   
119,000
 
Discount
   
(20,306
)
Net Debt  
 
$
98,694
 
 
The Company received notice of conversion during the period totaling 123,826,314 shares for conversion prices ranging from $0.0013 to $0.069 per share, for the convertible notes.  Total value of the conversions was $629,424.
  
Note 10 – Stockholders’ Equity
 
Common Stock - On March 28, 2011, the authorized number of shares of the Company was increased from 100,000,000 to 750,000,000, $0.001 par value per share. 
  
Agreements for business consulting services - In August 2009 the Company issued 200,000 shares of common stock to a group engaged to provide business consulting and other services for the term of eighteen months, valued at $90,000. The Company recorded the stock issuance as deferred compensation, of which $55,000 has amortized for the period ended July 31, 2010.
 
In August 2009 the Company issued 100,000 shares of common stock to a group engaged to provide business consulting and other services for the term of three months, valued at $48,000. The Company recorded the stock issuance as deferred compensation, of which the entire amount has been amortized for the period ended July 31, 2010.
 
In September 2009 the Company issued 200,000 shares of common stock to a group engaged to provide international business consulting and other services for the term of eighteen months, valued at $70,000. The Company recorded the stock issuance as deferred compensation, of which $42,778 has amortized for the period ended July 31, 2010.
 
In October 2009 the Company issued 100,000 shares of common stock to a group engaged to provide business consulting and other services for the term of twelve months, valued at $30,000. The Company recorded the stock issuance as deferred compensation, of which $25,000 has amortized for the period ended July 31, 2010.
 
In October 2009 the Company issued 650,000 shares of common stock to a group engaged to provide international business consulting and other services for the term of twelve months, valued at $260,000. The Company recorded the stock issuance as deferred compensation, of which $216,666 has amortized for the period ended July 31, 2010.
 
In March 2010 the Company entered into consulting arrangements with three companies for business consulting and other services, and issued 15,000 shares of common stock, valued at $3,285.
 
In May 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 500,000 shares of common stock, for a term of 24 months, valued at $125,000, and 300,000 warrants valued at $38,379. The Company recorded the stock issuance as deferred compensation, of which $20,467 has amortized for the period ended July 31, 2010.
 
In May 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 25,000 shares of common stock, for a term of 12 months,  valued at $6,000. The Company recorded the stock issuance as deferred compensation, of which $1,500 has amortized for the period ended July 31, 2010.
 
In May 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 250,000 shares of common stock, for a term of 12 months, valued at $50,000. The Company recorded the stock issuance as deferred compensation, of which $ 12,500 has amortized for the period ended July 31, 2010.
   
 
F-15

 
  
In June 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 500,000 shares of common stock, for a term of 9 months, valued at $70,000. The Company recorded the stock issuance as deferred compensation, of which $11,666 has amortized for the period ended July 31, 2010.
 
In June 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 250,000 shares of common stock, for a term of 12 months, valued at $45,000. The Company recorded the stock issuance as deferred compensation, of which $5,625 has amortized for the period ended July 31, 2010.
 
In June 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 500,000 shares of common stock, for a term of 12 months, valued at $75,000. The Company recorded the stock issuance as deferred compensation, of which $8,333 has amortized for the period ended July 31, 2010.
 
In July 2010 the Company entered into a consulting arrangement with one company for business consulting and other services, and issued 350,000 shares of common stock, for a term of 12 months, valued at $56,000. The Company recorded the stock issuance as deferred compensation, of which $2,333 has amortized for the period ended July 31, 2010.
   
In September 2009 122,222 shares valued at $47,666 were issued in lieu of payroll, and the full value recorded as salaries.
 
In September 2009 50,000 shares valued at $19,500 were issued for consulting fees to Michael Dodak in lieu of cash payment per his consulting agreement, and the full value recorded as consulting expense.
 
In September 2009 100,000 shares valued at $39,000 were issued for a loan to the Company from two related parties.  The entire amount was expensed and recorded as interest expense
 
In October 2009 the Company issued 9,000 shares of stock each to five Dealers, valued at $3,150 as part of a dealer incentive program.   The Company recorded the full value as an expense for the period ending July 31, 2010.
 
In October 2009 5,000 shares valued at $1,750 were issued as employee incentives, and the full value expensed.
 
In September 2009 the Company announced an offer to all holders of certain warrants that it would reduce the exercise price on the warrants to $0.30 per share for a temporary period.  During the temporary warrant exercise price reduction period, which ended October 15, 2009, 2,038,500 warrants were exercised at $0.30 into a corresponding number of shares of common stock totaling 2,038,500 for a total of $611,523. The restricted shares were issued on October 15, 2009. As a result of modification of terms the company recorded additional compensation totaling $163,080.
 
In October 2009 the company issued 28,125 shares valued at $11,250 as settlement for an outstanding account payable.
 
In October 2009 the Company received $125,000 from a shareholder as a deposit for 10% interest in a future subsidiary company or shares of the Company converted at .30 per share, depending on future events.  The deposit was returned and the funds were not converted.
 
In January 2010 the Company issued 100,000 shares as commission valued at $22,000 and the entire amount expensed as commission expense for the period ending April 30, 2010.
 
In January 2010 the Company issued 25,000 shares as employee incentives valued at $11,000 and the entire amount expensed in the period ending July 31, 2011.
 
In January 2010 the Company issued 6,464 shares as compensation valued at $2,308 and the entire amount expensed to salaries for the period ending July 31, 2011.
 
In January 2010 the Company issued 4,000 shares to four dealers valued at $1,400 and the entire amount expensed for the period ending July 31, 2011.
 
In March 2010 the Company issued 150,000 shares as loan fees to related parties valued at $32,000 and the entire amount expensed to interest expense for the period ending April 30, 2010.
 
In March 2010 the Company issued 746,434 shares as compensation valued at $160,648 and the entire amount expensed to salaries for the period ending April 30, 2010.
 
From March 10, 2010 through July 31, 2010 Solar Energy Initiatives, Inc. (the “Company”) completed a private equity offering (the “Offering”) of units (the “Units”) pursuant to securities purchase agreements (the “Purchase Agreements”) by and between the Company and various accredited investors.  Pursuant to the Offering, the Company sold an aggregate of 4,488,892 shares of common stock (the “Shares”) and common stock purchase warrants (the “Warrants”) to acquire 4,488,892 shares of common stock with an exercise price of $0.16 per share for aggregate net proceeds of $722,956.
  
 
F-16

 
  
The Warrants are exercisable on a cash or cashless basis for three years.   The investors received, among other rights, full ratchet anti-dilution rights for lower priced issuances of securities.  The Shares and the Warrants were issued in accordance with Rule 506 under Regulation D and, as a result, may only be resold in accordance with Rule 144, which provides a minimum holding period of six months.
 
In addition, the Company compensated four groups for assisting in the sale of Units by paying them commissions in the aggregate amount of $76,045 and issuing 429,111 Shares and Warrants to purchase 429,111 shares of the Company’s common stock.
 
The securities were offered and sold in connection with this Offering in reliance upon Section 4(2) of the Securities Act of 1933 or Regulation D promulgated there under. Each investor represented that they were acquiring the securities for investment only and not with a view toward resale or distribution. Neither we nor anyone acting on our behalf offered or sold these Units by any form of general solicitation or general advertising.
 
In May 2010 the Company issued 194,122 shares as compensation valued at $34,941 and the entire amount expensed to salaries for the period ending July 31, 2010.
 
In May 2010 the Company issued 200,000 shares as director compensation valued at $36,000 and the entire amount expensed to salaries for the period ending July 31, 2010.
 
In July  2010 the Company issued 345,098 shares as compensation valued at $58,667 and the entire amount expensed to salaries for the period ending July 31, 2010.
 
In October 2010 the Company issued 200,000 shares as compensation valued at $20,000 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In October 2010 the Company issued 277,778 shares as compensation valued at $50,000 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In December 2010 the Company issued 154,000 shares as reimbursement for expenses valued at $7,700 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In March 2011 the Company issued 8,000,000 shares as compensation valued at $46,000 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In April 2011 the Company issued 8,011,000 restricted shares as compensation valued at $56,077 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In May 2011 the Company issued 1,113,636 restricted shares as compensation valued at $2,339 and the entire amount expensed to stock based consulting services for the period ending July 31, 2011.
 
In May 2011 the Company issued 19,000,000 restricted shares as compensation valued at $64,066 and an amount of which is deferred compensation remaining of $14,567 and the remainder of $49,499 is expensed to stock based consulting services for the period ending July 31, 2011.
 
During September and October 2010 the Company issued 500,000 restricted shares as director compensation valued at $78,000 and the entire amount expensed to stock based employee expense for the period ending July 31, 2011.
 
During May 2011 the Company issued 105,357,614 restricted shares as director and officer compensation valued at $427,074 and the entire amount expensed to stock based employee expense for the period ending July 31, 2011.
 
The Company received notice of conversion during the period totaling 123,826,314 shares for conversion prices ranging from $0.0013 to $0.069 per share, for the convertible notes.  Total beneficial conversion value accounted for in interest expense was $286,424 during the year ended July 31, 2011.
 
During October 2010 the Company received notices for cashless warrant exercise of 154,320 restricted shares for  a value of $24,691.
 
During May 2011 the Company issued 40,000,000 restricted shares for settlement of amounts payable in the amount of $140,000, however these shares have been subsequently cancelled.
  
 
F-17

 
  
From August 2010 through November 2010 Solar Energy Initiatives, Inc. (the “Company”) completed a private equity offering (the “Offering”) of units (the “Units”) pursuant to securities purchase agreements (the “Purchase Agreements”) by and between the Company and various accredited investors.  Pursuant to the Offering, the Company sold an aggregate of 2,997,412 shares of common stock (the “Shares”) and common stock purchase warrants (the “Warrants”) to acquire 2,997,412 shares of common stock with an exercise price of $0.13 per share for aggregate net proceeds of $305,000.
 
The Warrants are exercisable on a cash or cashless basis for three years.   The investors received, among other rights, full ratchet anti-dilution rights for lower priced issuances of securities.  The Shares and the Warrants were issued in accordance with Rule 506 under Regulation D and, as a result, may only be resold in accordance with Rule 144, which provides a minimum holding period of six months.
 
During August 2010 the Company issued a retroactive anti-dilutive rachet increase per the above securities for 1,495,744 shares.
 
During November the Company cancelled 484,615 shares attributable to private placement offering of which the funds were never received.
  
Private Placement Warrants
 
As of July, 2011, warrants to purchase 2,226,000, 2,226,000, 857,143, 100,000, 1,000,000, 1,000,000, 708,053, 694,386, 360,672, 1,536,667, 4,318,003 600,000 and 2,997,412 respectively, of our common stock were granted in connection with the private placements as discussed above and as follows:
 
Number of Shares
of Common Stock
   
 
Exercise Price
   
 
Expiration Date
             
2,226,000
   
$
0.75
   
December-10
2,226,000
   
$
1.50
   
June-11
857,143
   
$
0.75
   
March-11
100,000
   
$
0.50
   
June-11
1,000,000
   
$
0.50
   
November-11
1,000,000
   
$
1.00
   
November-12
708,052
   
$
0.60
   
April-12
694,386
   
$
0.60
   
May-12
360,672
   
$
0.60
   
June-12
1,536,667
   
$
0.60
   
July-12
4,318,003
   
$
0.16
   
March-2013
600,000
   
$
0.16
   
June-2013
2,997,412
   
$
0.13
   
Nov-2015
  
Following is a summary of the warrants outstanding as of July 31, 2011 and 2010 and the related activity:
 
   
2011
   
2011
Weighted Average Exercise Price
   
2010
   
2010
Weighted Average Exercise Price
 
Outstanding at beginning of year
    16,568,305     $ 1.01       13,688,802     $ 1.01  
Warrants issued
    2,997,412       0.13       4,918,003       0.16  
Warrants exercised
    (154,320     -       (2,038,500     -  
Warrants forfeited
    -       -       -       -  
Warrants expired
    -       -       -       -  
                                 
Outstanding at end of year
    19,411,397     $ 0.88       16,568,305     $ 0.88  
                                 
Exercisable at end of year
    19,411,397     $ 0.88       16,568,305     $ 0.88  
 
Stock Options - The Company has estimated the fair value of its option awards granted after January 1, 2008 using a modified Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
   
 
F-18

 
 
Modified Black-Scholes-Based Option Valuation Assumptions
 
2011
   
2010
 
Fair value of options granted during the period
 
$
-
   
$
5,897
 
Expected term (in years)
   
-
     
3
 
Expected volatility
   
-
%
   
113.3
Weighted average volatility
   
-
 %
   
113.3
 %
Expected dividend yield
   
-
     
-
 
Risk-free rate
   
-
   
1.5
 %
 
Stock Option Plans - The Company adopted the following plans the fiscal years ending July 31, 2009 and July 31, 2010.
 
The purpose of these plans is to encourage selected officers and key employees to accept or continue employment with the Company, increase the interest of selected officers, directors, key employees and consultants in the Company's welfare through the participation in the growth in value of the common stock of the Company. As of August 8, 2008, 3,500,000 shares have been authorized for option grants   During March 2009, the Company authorized an additional 2,000,000.   During 2009 and 2008, the Company granted 8,900,000 and 0 options, respectively.   As of July 31, 2009, outstanding options total 7,800,000. In September 2009, the Company authorized an additional 5,000,000 options.  As of July 31, 2011 the outstanding total was 3,743,334.
 
A summary of the status of these plans as of July 31, 2010 and changes during the period is presented in the following table:
 
   
Shares Authorized
for Grant
   
Options
 Outstanding
   
Weighted
Average
Exercise
Price
 
                   
Authorized, August 8, 2008
   
3,500,000
     
-
         
Authorized, March 19, 2009
   
(2,000,000
               
Granted
   
(10,300,000
   
10,300,000
   
$
0.37
 
Forfeited
   
     
     
 
Cancelled
   
1,300,000
     
(1,300,000
)
 
$
0.63
 
Exercised
   
     
(1,200,000
)
 
$
0.50
 
Balance, July 31, 2009
   
(3,500,000
   
7,800,000
   
$
0.35
 
 
Authorized, September, 2009
   
5,000,000
                 
Granted
   
(2,522,000
   
2,522,000
   
$
0.37
 
Forfeited
                       
Cancelled
   
6,578,666,
     
(6,578,666
)
 
$
0.37
 
Exercised
   
     
-
     
-
 
Balance, July 31, 2010
   
5,556,666
     
3,743,334
   
$
0.33
 
Granted
   
-
     
-
     
-
 
Exercised
   
-
     
-
     
-
 
Balance, July 31, 2011
   
5,556,666
     
3,743,334
   
$
0.33
 
 
The following table summarizes information about the stock options outstanding as of July 31, 2011:
 
Range of Exercise Prices
Number
Outstanding
as of
7/31/2011
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Number
Exercisable
as of
7/31/2011
Weighted
Average
Exercise
Price
           
.30-.50
2,934,334
0.5
0.33
796,389
0.33
 
Total stock compensation expense recognized by the Company during the years ended July 31, 2011 and 2010 under these plans  was $1,095,028 and $5,897, respectively.
     
 
F-19

 
  
Note 11 – Commitments and Contingencies
 
Operating Leases
  
The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year.
 
Fiscal year ending July 31, 2012
   
-0-
 
         
Thereafter
   
-0-
 
Total
 
$
-0-
 
 
In March, 2010 the Company signed a 3-year lease agreement, with option to purchase, with the Williamsburg County Development Corporation for the use of a building in Kingstree, SC.  Approximately 6,000 sq. ft. of the building will be used for technical and dealer training of solar applicants.  The remaining 230,000 sq. ft. of building space will be used as a distribution and light manufacturing facility.  The annual lease rate for the building is $5.00 per year.  If the Company creates 200 or more permanent jobs as a result of its activities in South Carolina, it will be able to purchase the building for $1.00 at the end of the 3-year lease term.
 
Rent expense was $136,198, and $131,468 for the year ending July 31, 2011 and twelve months ending July 31, 20010, respectively.
    
Management services - The Company has consulting agreements with its CEO, President/CFO.
 
The Company has employment agreements with its CEO, President/CFO, and consulting agreements with former Company officers.  The Company has entered into a four year employment agreement with David W. Fann as CEO.  The terms of the contract include an initial salary of $150,000. The base salary will increase to $220,000 when the company receives a minimum of $1,000,000.  This increase took place in July 2008. There is an 18 month severance if terminated early. The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and  retainer fee of $7,500.
  
The Company entered into a five year employment agreement with Michael Dodak as VP of Corporate Development. The terms of the contract include an initial salary of $120,000 until specific performance measures are met, at which time the salary is to be increased to $150,000.  Per the agreement, Mr. Dodak elected to convert his contract to a consulting agreement whereby he was paid $10,000, monthly.  The consulting agreement runs thru December, 2013. There is an 18 month severance if terminated early.
 
In August 2009, Mr. Dodak and the Company amended  the agreement whereby Mr. Dodak become the “Director of Solar Park Development” and COO of the Company. His compensation increased to $15,416.66 per month.  Upon stepping down as COO of the Company, his compensation will revert to the $10,000 per month. Mr. Dodak will receive bonuses for achieving certain milestones in developing Solar Parks and new options in line with the other Company management.  On February 1, 2010, Mr. Dodak was appointed President of the company with a salary of $150,000 per year and then appointed as Interim CFO in March 2010, whereby his annual salary increased to $220,000 per year. The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and retainer fee of $7,500.
  
The Company entered into a five year employment agreement with David Surette as President, and CFO. The terms of the contract include an initial salary of $160,000 effective January 15, 2008 until April 15, 2008, at which time the salary is to be increased to $220,000.  Other performance bonuses are available at the discretion of the board of directors. There is an 18 month severance if terminated early.  On September 3, 2008, the Company entered into a severance agreement with David Surette.  Mr. Surette will receive $36,000 in cash; $18,000 on September 20, 2008 and $3,000 per month, for six (6) months, beginning October 1, 2008.  In addition, Mr. Surette returned 25,000 shares of common stock he was issued in the form of consideration during his tenure as Chief Financial Officer.  The Company reengaged Mr. Surette for consulting services starting May 2010 through June 2010 at a rate of $10,000 per month.
 
The Company has entered into a four year employment agreement with Gregory N Bakeman as President and CFO. The terms of the contract include an initial salary $14,000. The base salary will increase to $220,000 when the company receives a minimum of $1,000,000.  This increase took place in July 2009. There is an 18 month severance if terminated early. The Company and Mr. Bakeman severed its relationship in March 2010, and all options were expired 90 days after not being exercised.
  
In April 2009 The Company hired Dean Leischow as Executive Vice President of Sales and Marketing.  Mr Leischow will be paid a salary of $120,000 per year, and received 100,000 shares of S-8 stock in lieu of cash for the first 90 days.   The stock was issued in July 2009 with a value of $120,000.  The entire amount was expensed as salaries for the period ending July 31, 2009. The Company and Mr. Leischow severed its relationship in January 2010, and all options were expired 90days after not being exercised. Mr. Leischow has entered a claim for $892,500, of which the Company has reserved $100,000 based on mutual agreements.  The outstanding item is on whether it will be paid in cash or can be paid in stock of the Company.
 
We have received notice of a claim from a previous employee based on compensation matters in the amount of $892,500 plus interest from 2009.  The matter is being reviewed by our legal staff and no determination has been made as to is merits.  Offer for settlement has been made for an amount of $100,000 consistent with discussions with claimant.  Currently the Company has reserved for these amounts and will continue to work toward a settlement.
 
The Company entered into a five year employment agreement with Brad Holt as CEO. The terms of the contract included an initial salary of $120,000 until specific performance measures are met, at which time the salary is to be increased to $220,000.  On March 1, 2008 the salary was increased to the $220,000, annually. Other performance bonuses are available at the discretion of the board of directors.  There is an 18 month severance if terminated early.
   
 
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In December, 2008 Brad Holt resigned as CEO and assumed the Chairman of the Board position.  The employment agreement was cancelled, and the Company entered into a consulting agreement with Mr. Holt for a period of four years.   The final terms were resolved in August 2009.
 
Supply of Materials - There is currently an abundant supply of solar panels and adequate supply of other components..  Reduced cost of materials may affect planned revenues and could adversely affect gross margins, based on the potential of increased competition and pricing pressures, and results of operations.
 
Dependence on Limited Number of Suppliers - The Company intends to buy the majority of certain components or systems used to install its products from a limited number of suppliers. The loss of one of these suppliers or a significant reduction in product availability from a principal supplier could have a material adverse effect on the Company's results of operations.
 
Note 12 – Non-Controlling Interest
  
On September 25, 2009 the Company formed Solar Park Initiatives Inc, at that time a wholly owned subsidiary. In October 2009, the Company announced that it was planning to spin-off SPI, to its shareholders of record as of October 15, 2009, and that it hired Mr. Michael Gorton as the CEO of the new company.  The Company’s shareholders of record, as of October 15, 2009, were to receive one common share of SPI stock for every two common shares of the Company owned.    The distribution of such shares was contingent upon SPI making the required filings with the Securities and Exchange Commission.  The Company is currently evaluating other options with respect to the proposed spin off of SPI.  The tax implications for shareholders of the company are uncertain at this time.
 
In November 2009 SPI issued a total of 51,133,737 shares of common stock, of which 16,804,889 shares were issued to officers, employees and board members for services valued at $6,040.   34,996,769 shares were issued to Solar Energy Initiatives, Inc. for services and cash of the initial share issuance by SPI, which has been eliminated upon consolidation.
 
During the period ended April 30, 2010, SPI closed a private placement for the sale of units at $0.15 per unit made up of one share of common stock and one common stock purchase warrant with an exercise price of $0.40.  In December 2009, 667,921 units of common stock were issued in this private placement for $100,000. In addition, in March 2010 SPI closed a second private placement whereby it raised $200,000 on identical terms.  During the period as part of an ongoing reverse merger SPI forward split shares of common stock on a [ 1 ]:[ 1.5812 ]  and increased all shareholders on a pro-rata basis.  SPI also granted 1,550,984 stock options excercisable at $0.40 with a five year vesting schedule.  Value of these options:  using a Black-Scholes valuation, with an exercise price of $0.40, a volatility based on public industry companies of 80% and with an average of a  2.5 year life, was $297,450.
 
On July 13, 2010 (the “Closing Date”), the Critical Digital Data, Inc. (CDD)acquired Solar Park Initiatives, Inc., a privately owned Nevada corporation (“Solar Park”), pursuant to an Agreement and Plan of Merger and Reorganization (the “Agreement”) with Solar Park and Solar Park Acquisition Corp., a Nevada corporation (“Acquisition Subsidiary”) (the “Merger”).  Solar Park was organized under the laws of the State of Nevada on September 25, 2009.  Acquisition Subsidiary was a wholly-owned subsidiary of Solar Park and on the Closing Date, merged with and into Solar Park and CDD acquired the business of Solar Park pursuant to the Merger and will continue the existing business operations of Solar Park, as a publicly- traded Nevada corporation under the name “Solar Park Initiatives, Inc.”
 
On the Closing Date, the CDD acquired all of the issued and outstanding shares of common stock, $0.001 par value per share, of Solar Park from the holder’s of Solar Park (the “Solar Park Shareholders”) in exchange for an aggregate of 53,137,500 (post-split) newly issued shares (the “Exchange or Merger Shares”) of common stock, $0.001 par value per share (the “Common Stock”).  As a result of the Merger, Solar Park Shareholders surrendered all of their issued and outstanding common stock of Solar Park in consideration for the Merger Shares and Solar Park became a wholly-owned subsidiary of the Registrant.  The Agreement contains customary representations, warranties and covenants of the Registrant, Solar Park and the Acquisition Subsidiary, for like transactions. Breaches of representations and warranties are secured by customary indemnification provisions.
     
 
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On July 13, 2010 in conjunction with the Exchange and Merger Shares the Registrant (Summerton) was issued 487,500 shares and valued at the then estimated fair value of $0.15 per share and expensed the value of $73,125 in the period ended July 31, 2010.
   
The parties have taken all actions necessary to ensure the Merger is treated as a “tax free exchange” under Section 368 of the Internal Revenue Code of 1986, as amended.
  
As of October 31, 2010, the Company retained ownership of 64.8% as the controlling interest in SPI, as reflected in our financials.   In addition, SPI negotiated the spin-off of SPI during the three months ended October 31, 2010.  During September 2010, SPI renegotiated the stock issuances with shareholders of SPI, including the Company.  There were 7,427,972 shares cancelled during the renegotiation.
   
As of July 31, 2011, the Company retains ownership in 11.5% and no longer a controlling interest in SPI.
   
Note 13 – Special Purpose Entity and VIE treatment
 
During June 2010 the Company initiated a subsidiary to hold the project costs of a 1MW solar project in Cherokee County, NC.  The Company invested $30,000 of its funds into the project and also either paid cash or used accounts payable to fund the project.  As of July 31, 2010 the investment in the project is classified as Project Development Costs in the amount of  $560,274, with the offsetting liability in accounts payable.   The Company sold this project during February, 2011 and accounted the sale as booking revenue of $479,838 and cost of sales $483,986, with $76,288 of losses going through financing costs.  All intercompany accounts have been eliminated as of July 31, 2011 and 2010.
 
Note 14 – Related Party Transactions
 
In March 2007, NP Capital entered into an agreement to sell the convertible debenture for $152,500, with discounts if paid early, to 0784655 B.C. LTD (“B.C.”), a company controlled by Paul Cox, a shareholder and a former officer and board member of NP Capital. Mr. Cox remains a shareholder, officer and board member of Envortus Inc. In July 2007, the sale of the convertible debenture was completed with a payment of $55,000  to NP Capital and the receipt of a promissory note in the amount of $97,500 (the “Note”), from B.C. for the balance.  The principal amount of the Note was immediately discounted to $90,800.  In addition, if the Note was paid within the first 270 days of issuance, additional discounts could be available.  Further, in the event that we do not commence trading on the OTC BB by January 2009, Paul Cox. may return shares of common stock of our Company for cancellation in lieu of payment of the Note.  The price per share shall be the greater of $0.35 or the last price to raise funds from third parties. To account for the Note the Company determined the fair value of the Note on a discounted basis to be equal to $68,100, which represented the discounted balance to be paid by B.C. assuming early payments made within 90 days from closing as provided in the Note.  Based on the fair value of the note of $68,100, a loss totaling $11,405 was recorded for the year ended July 31, 2007 as reflected in the table below:
 
Consideration for sale of debenture:
     
Cash
 
$
55,000
 
Note receivable
   
97,500
 
Total consideration
   
152,500
 
         
Immediate discount
   
(6,700
)
Bank fee
   
(5
)
Expected early payment discount
   
(22,700
)
         
Total net consideration
   
123,095
 
         
Investment in convertible debenture
   
134,500
 
         
Loss on sale of investment
 
$
(11,405
)
 
The Company had originally invested $134,500 in a convertible debenture with Envortus.  The Company then took back a Note for $97,500 and cash paid back of $55,000.  The Company reviewed the fair value of the $97,500 Note, which had an immediate discount of $6,700 and an early expected payment discount of $22,700.  The Company decided to take a valuation allowance on the $22,700 and the $6,700 during July 2007, leaving a balance on the Note of $68,100.  Comparing the consideration received of $55,000 and the remaining value of the Note at $68,100 or $123,095, net of a $5 fee, this resulted in a loss on sale of the original investment in convertible debenture of $11,405.   The Company has allowed for the remaining balance of the Note and recorded bad debt related to note receivable, related party, in the amount of $68,100, due to concerns of collectibility and non-payment of the scheduled payments.  Per the terms of the Note, B.C. was required to pay principal in the amount of $10,000 in January 2008 and additional payments of $17,240 in July 2008, $31,780 in January 2009 and $31,780 in July 2009, together with interest, according to the payment schedule as defined by the Note when the early payments are not received.  As of the date hereof, B.C. has not made the required principal and interest payment.
   
 
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The Company is pursuing legal action against the Note’s obligor for non-payment
 
There is no continuing obligation on the Company under the terms of the Convertible Note.
 
As of July 31, 2011 and July 31, 2010, the Company has obligations to related parties for loans and related services totaling $100,000 and  $279,947, respectively.   Interest on both loans and convertible debt during the fiscal year ended July 31, 2011 was $346,583.
  
Note 15 – Income Taxes
 
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.  The Company has provided a full valuation of deferred taxes as of July 31, 2011.
 
Note 16 – Subsequent Events
 
 On August 2, 2011, Everett Airington resigned as a director of Solar Energy Initiatives, Inc. (the “Company”)
 
On September 26, 2011, Mike Dodak resigned as President, acting Chief Financial Officer and Director of Solar Energy Initiatives, Inc. (the “Company”).  
 
On October 17, 2011, the Company entered into two Amendments to the Notes with Asher, pursuant to which the discount of the conversion price was increased to 65% of the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.  
During October and November the Company issued 10,000,000 Rule 144 restricted shares to Directors as compensation valued at approximately $10,000.
 
During November the Company issued 11,000,000 Rule 144 restricted shares to consultants as compensation for services valued at approximately $13,000.
 
During November, 2011 the Company has also pursued plans to acquire the assets of an Internet marketing firm.  The company has signed a definitive agreement and the close of the acquisition is scheduled for November 30, 2011.

 
 
 
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