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 December 31, 2014

[  ]	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934  for the transition period from _________ to ________

Commission File Number:  333-150692

Sunvalley Solar, Inc.

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Yes [   ]   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 [   ]   No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 [     ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 [    ]   No [X]

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 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. [X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]

Accelerated filer [  ]

Non-accelerated filer   [  ] (Do not check if a smaller reporting company)

Smaller reporting company [X]

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

Yes [  ]   No [ X ]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. Approximately $1,653,632 as of June 30, 2014, using an average of bid and asked prices of $0.0192 per share.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date of 87,156,979 as of April 13, 2015.

TABLE OF CONTENTS

                                                                   Page No.                                                             

PART I

Item 1.

Business

    3

Item 2.  

Properties

    9

Item 3.  

Legal Proceedings

    9

Item 4.  

Mine Safety Disclosures

    9

PART II

Item 5.  

Market for Registrant’s Common Equity, Related Stockholder Matters

and Issuer Purchases of Equity Securities

    9

Item 6.  

Selected Financial Data

  11

Item 7.

Management's Discussion and Analysis of Financial Condition and

Results of Operations

  13

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

  16

Item 8.  

Financial Statements and Supplementary Data

F-1

Item 9.  

Changes in and Disagreements with Accountants on Accounting

         

and Financial Disclosure

  17

Item 9A.

Controls and Procedures

  17

Item 9B.

Other Information

  18

PART III

Item 10.   

Directors, Executive Officers and Corporate Governance

  18

Item 11.

Executive Compensation

  21

Item 12.

Security Ownership of Certain Beneficial Owners and

         

Management and Related Stockholder Matters

  24

Item 13.

Certain Relationships and Related Transactions, and Director

Independence

  26

Item 14.

Principal Accounting Fees and Services

  27

PART IV

Item 15.

Exhibits, Financial Statement Schedules

  28

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PART I

Item 1. Business

Sunvalley Solar, Inc. (the “Company”’ “we”, “our”) is a California-based solar power technology and system integration company founded in January of 2007. We are focused on developing our expertise and proprietary technology to install residential, commercial and governmental solar power systems. We offer turnkey solar system solutions for owners, builders and architecture firms that include designing, building, operating, monitoring and maintaining solar power systems. Our customers range from small private residences to large commercial solar power users. We have the necessary licenses and expertise to design and install large scale solar power systems. We hold a C-46 Solar License from CBCL (California Board of Contractor License). Some of the large scale commercial solar power systems that we have designed and installed include large office buildings, farming and manufacturing facilities and warehouses. Our proprietary technologies in solar installation provide our customers with a high quality, low cost and flexible solar power system solutions.

We are working to develop as an end-to-end solar energy solution provider by providing system solution, post-sale service, customer technical support, solar system design and field installation.

Operating Subsidiary

In December 2014 we formed a wholly-owned subsidiary known as Sunvalley Solar Tech, Inc., a California corporation.  Effective December 31, 2014, we transferred substantially all of our assets and liabilities to our wholly-owned subsidiary.  We now conduct our operations through our wholly-owned subsidiary, Sunvalley Solar Tech, Inc.

Failed Sale

On February 11, 2015, we and our wholly owned subsidiary, Sunvalley Solar Tech, Inc., entered into an Agreement for Sale and Purchase of Sunvalley Solar Tech, Inc., pursuant to which we agreed to sell 100% of the stock ownership of Sunvalley Solar Tech, Inc. to Sungold Holdings, a Nevada limited liability company (the “Buyer”).  The agreement provided that the subsidiary would be sold for Two Million Five Hundred Thousand Dollars ($2,500,000) plus five percent (5.0%) of all of Sunvalley Solar Tech, Inc.’s gross sales during 2015 through 2018, which could have increased the sale price to a maximum of Four Million Five Hundred Thousand Dollars ($4,500,000). A copy of the Agreement for Sale and Purchase of Sunvalley Solar Tech, Inc. is attached hereto as an Exhibit.  The Buyer was not able to obtain the necessary financing to complete the sale by the agreed upon closing date of March 20, 2015, so the agreement expired.

Principal Products and Services

Our philosophy is to “provide solar electricity directly from the sun in a technology innovation-centric and cost effective way”.  Since inception, we have concentrated on serving the solar power needs of residential and commercial customers tied to the electric power grid.  Our business plans are focused in three specific areas:

- Solar Systems Design and Installation- Solar Technology Research and Development- Solar Equipment Manufacturing and Distribution

Our Solar Technology Research and Development business is in the development stage and has not yet generated revenue.

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The scope of our solar systems design and installation business includes:

- Designing solar systems for commercial, residential, governmental and non-profit customers- Installing solar power systems and related constructional systems for solar power end users- Providing technical support and service to solar power end users- Providing system performance monitoring services to solar power end users- Providing government permit/incentives application services to solar power end users

Since our founding in 2007, we have focused on solar system design and installation. Installation is our core business, and it also provides the company with a platform for solar product supply, new technology development, and other lines of business. Our gross revenues to date have come mostly from the solar systems installation business. Our installation business is focused primarily in California.  

We are one of a few companies in California that has the permit and expertise to install large commercial solar systems (over 250K watts). Design and installation of a solar power system, especially a large commercial solar power system, requires proper licenses, design capabilities in electrical systems and solar systems, and constructional (ground or roof) implementation ability, as well as experienced project management and an understanding of industry regulations. In addition, the ability to procure proper solar equipment is critical to large commercial solar system projects.

We have obtained a C-46 Solar License from CBCL (California Board of Contractor License). We have been focusing on developing our expertise and proprietary technology to install large commercial and governmental solar power systems since 2010. We are also able to procure the necessary equipment and supplies through our distribution partnerships. Some of large scale commercial solar power systems that we has designed and installed include large office buildings, farming and manufacturing facilities, warehouses and hotels.

Our installation business generated all of our revenues in 2007 and 2008, and it remains a significant component of our total revenue structure. Our development efforts in this area focus on the installation of large commercial and governmental solar power systems, as well as residential solar power systems. Our customers in this line of business run the gamut from small private residences to large commercial solar power projects.

Our current systems installation resources, which consist of two installation worker teams, one engineer/design team, and certain installation equipment, provide us with the capacity to install solar systems totaling over 4.0 million watts on an annual basis.

One problem with photovoltaics is that the amount of electrical energy generated by each one of the PV panels in a distributed plurality or array of PV panels depends on uncertain environmental factors (e.g., weather) which can cause undesirable fluctuations in the voltage of the power grid (voltage fluctuations unfavorably affect the deliverability of grid loads and overall manageability of the power grid). For example, the electrical production of a plurality of PV panels under moving clouds can change from very little to very large amounts in a short time period, which change will correspondingly cause a voltage fluctuation in the associated power grid. The identified voltage fluctuation problem is exacerbated by the uncertainty of draws on the electrical energy within the power grid, for instance, whenever high power consumption by households accessing the grid coincides with low power production from the PV panels or whenever low power consumption coincides with high power production. Accordingly, there is a need for systems and methods of converting solar energy into electrical energy without resulting in unfavorable voltage fluctuations in the power grid.

One attempt to reduce voltage fluctuations in the power grid is embodied by the advanced metering infrastructure (AMI) employed by the Sacramento Municipal Utility District (SMUD) in California. The AMI is a control system that predicts draws on the grid based on historical electricity consumption and power generation. With reference to photovoltaics, the AMI is suited for reducing the exacerbating effects of uncertain energy draws on the grid but the

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AMI does nothing to combat the environmental and other uncertainties associated with photovoltaic production of electrical energy. Accordingly, a need remains for systems and methods of converting solar energy into electrical energy without resulting in unfavorable voltage fluctuations in the power grid.

Another attempt to reduce voltage fluctuations in the power grid caused by photovoltaic production of electrical energy is numerical simulation. Numerical simulation uses historical data to predict electrical energy inputs to the power grid (electrical energy sources may include a plurality or array of PV panels). While better than nothing, this approach cannot accurately account for environmental and other uncertainties associated with photovoltaic production of electrical energy.

In view of the foregoing, we set a target finding systems and methods producing electricity without the need for high capacity or long batteries and without resulting in unfavorable voltage fluctuations in the power grid.

To meet this objective, we designed a system of networked PV panels, wherein each panel is coupled to a small capacity battery capable of storing electricity produced by the panels, wherein each battery is configured to randomly and isolated (relative to other batteries coupled to the other panels) discharge its stored electricity into the power grid at a time before the battery reaches its capacity. Within said system, the randomized and delayed discharge of electricity may reduce voltage fluctuations when compared with other systems since (1) each panel only isolated contributes a small amount of electricity relative to the inherent electricity load of the grid so that the associated voltage fluctuation may be nominal or otherwise easy to manage, (2) the delayed discharge provides an opportunity for data to be collected so that the delayed discharge provides an opportunity for data to be collected so that the load of the power grid can be managed for the associated influx of electricity (like, e.g., in a feed-forward controlled system), and (3) the randomized discharge of electricity disrupts weather effects (e.g., the sudden drop in electricity generation of a solar panel may not be displayed by all affected solar panels simultaneously so that the system can accommodate and adapt to the change more easily).

Panels/Batteries within the system may communicate (i.e., be networked) with each other or a controller wirelessly or with wires to accomplish the isolated and delayed discharge, including the communication of energy production information

To meet this objective, the networked PV panel system may be distributed pluralities of solar panels, wherein each plurality of solar panels is coupled to a small capacity battery capable of storing electricity produced by the plurality of panels, wherein each battery is configured to randomly and isolated (relative to the other distributed pluralities of panels) discharge its stored electricity into the power grid at a time before the battery reaches its capacity (preferably every approximately zero to thirty minutes). Said distributed pluralities of panels and their respective batteries within the system may communicate (i.e., be networked) with each other or a controller wirelessly or with wires to accomplish the isolated and delayed discharge, including the communication of energy production information.

Through this technology, it is able to address the undesirable fluctuations in the voltage of the power grid due to uncertain environmental impact to solar system. Commercializing this technology into mass production will involve cooperation and approval from utility companies. In addition, the networked PV panel concept will also need to demonstrate that panels using the technology will have a productive life-span and a tolerance to environmental conditions such as humidity, temperature, wind load that are sufficient for the panels to be used in real life application. Accordingly, there is no guarantee that we will be able to commercially produce and market solar panels using our new networked PV panel system technology.

We have not yet generated revenues from our new technology. With additional capital, however, we hope to commercialize our R&D outputs to our PV panels and installation applications. By combining our research and development capability with our existing installation business and planned panel manufacturing operation, we hope to establish a vertically integrated entity that can grow to become a premier supplier of solar panels in the United States.

Besides the new technology of Networked PV Panel System, our R&D team is also involving some other topics in the solar field.

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The main points of focus for our R&D operation are as follows:

- Keeping and developing a small but strong R&D team in San Diego- Collaborating with universities in the U.S. and panel manufacturers in China- Effectively using resources from research institutes and universities in China- Developing new solar technology and parts, focusing on application technologies

Our key current R&D topics include:

- Developing new coating technology to increase the efficiency of PV panel

- Developing solar PV application technology to reduce system level cost and increase installation flexibility                                                 

– Developing new networked PV panel

- Commercializing our new advanced solar technology.

Solar Equipment Manufacturing and Distribution

In recent years, we have built good relationships with some large solar panel and solar inverter producers. Our partnerships with these manufacturers in the solar power industry have allowed us to broaden our customer base and to provide our customers with more cost competitive and complete solar system solutions with multiple selective options on PV panels and inverters. In 2009 and 2010, our solar equipment distribution business grew to constitute the majority of our revenues.  Since 2011, due to the dynamic market price of solar equipment, our distribution business decreased to a small portion of distribution to our revenue.

On the other side, although we have not yet generated revenue from the manufacture of our solar panels, our R&D team is working on new technology which is able to increase the efficiency of our solar panels. With proper funding, the new technology could be commercialized and implemented in solar panel manufacture starting from OEM manufactured panels from reputable solar panel manufacturers in China. The manufactured solar panels would use our brand name with new technology. We would be responsible for quality control, certification applying, marketing, technical support and services in the United States. Our unique technology, if successfully commercialized and brought to market, would provide the solar panel market with a higher efficiency, lower cost unit than competing panels currently on the market. Our ability to provide after-sale services such as system maintenance, technical support, training, etc. for its customers could add another selling point for promotion of the new panel.

Competition and Market Overview

The solar power industry is at an early stage of its growth and is highly fragmented with many smaller companies. The prospect for long-term worldwide demand for solar power has attracted many new solar panel manufacturers, as well as a multitude of design/integration companies in our market segment, with no single competitor gaining market dominance. We expect the manufacturing segment of the industry to consolidate as more solar panel manufacturing capacity comes online. We also expect there to be consolidation in the design/integration segment of the industry based mostly on branding, development of new technology and business process improvements.

Distribution Methods and Marketing

The most important part in a solar power system is the solar panel (PV module). Photovoltaic (PV) devices generate electricity directly from sunlight via an electric process that occurs naturally in certain types of materials. Groups of PV cells are configured into modules and arrays, which can be used to power any number of electrical loads. Crystalline silicon - the same material commonly used by the semiconductor industry -is the material used in a large

6

portion of all PV modules today. PV modules generate direct current (DC) electricity. For residential use, the current is then fed through an inverter to produce alternating current (AC) electricity that can be used to power home appliances.

The majority of PV systems today are installed for homes and businesses that remain connected to the electric grid. Consumers use their grid-connected PV system to supply some of the power they need and use utility-generated power when their power usage exceeds the PV system output (e.g., at night). When the owner of a grid connected PV system uses less power than their PV system creates, they can sell the electricity back to their local utility, watch their meter spinning backwards, and receive a credit on their electric bill - a process referred as net metering. The electric grid thus serves as a “storage device” for PV-generated power.

The initial market focus for our commercial installation business has been the Chinese-American and broader Asian-American community of Southern California, with special emphasis on the Asian-American commercial market. We have been able to attract the attention of news media serving this market segment. Several newspapers (Chinese Daily News and World Journal), TV stations (Phoenix Satellite Television and DongSen Satellite Television), and local radio stations (AM1300), have had special reports on our company. These reports have generated positive reactions from readers, viewers, and listeners and have driven customer traffic to our office.

We plan to continue to pursue our media-based marketing and sales strategy in Southern California. In addition, we are working very closely with our solar panel suppliers and inverter supplier to bid on larger power plants, including government contracts.  

Principal Suppliers

We currently purchase solar panels primarily from three manufacturers, Canadian Solar, JS Solar and Hanwha SolarOne. We maintain good relationships with all of our suppliers, and especially with our primary and important suppliers. In addition, we are continuously adding new alternative suppliers to our supplier list. Due to the standardization of solar equipment, all materials we purchase from our suppliers are available from other sources and suppliers.

Our revenues currently derive from solar system design and installation as well as solar equipment distribution. In order to expand our installation business to states other than California, we will be required to comply with local license requirements by acquiring a local installer or by hiring locally-licensed contractors to serve as officers. For our solar equipment distribution business, no local licensures are required in California or other states.

As a result of continuing global development at all levels of solar equipment manufacturing, including in the area of raw materials supply, in 2009 and 2010, the risk of disruption in the supply of necessary raw materials for solar panels has been greatly reduced since 2011. In addition, we have established solid relationships with several large solar equipment suppliers, allowing us to access multiple sources. For the immediate future, we therefore believe that raw materials for our products will continue to be readily available.

Currently, we believe that the market for solar power in China is not yet mature enough, while the European market is overcrowded. As a result, we believe that Chinese manufacturers are looking for business opportunities in the United States. As an established technology and system integration company, Sunvalley maintains a unique position to act as the bridge between Chinese manufacturers. The partnership with these manufacturers in the solar power industry allows Sunvalley to provide its customers with a cost competitive, complete solar system solution with multiple selective options on PV panels and inverters.

7

Intellectual Property

Our patent “Networked Solar Panels and Related Methods,” was issued on February 24, 2015. This patent will last 20 years from the effective date of the original application, which was August 4, 2011.

Personnel

We have 11 employees, 7 of whom are full-time employees. Our current internal departments include the Administration Department, the Engineering Department, the Sales/Marketing Department and the New Technology Development Department. We are lead by a management team that includes a group of scientists, research/development engineers, a professional marketing/sales team, and an experienced supply chain management team. In addition, our team includes solar power system design engineers, solar power system installation engineers, electrical system design engineers and construction engineers.

Government Regulation

The market for solar energy systems is heavily influenced by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as policies adopted by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. For example, there currently exist metering caps in certain jurisdictions, which limit the aggregate amount of power that may be sold by solar power generators into the electric grid. These regulations and policies have been modified in the past and may be modified in the future in ways that could deter purchases of solar energy systems and investment in the research and development of solar energy technology. For example, without a mandated regulatory exception for solar energy systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. Such fees could increase the cost to our customers of using solar energy systems and make them less desirable, thereby harming our business, operating results and financial condition. Changes in net metering policies could also deter the purchase and use of solar energy systems. In addition, electricity generated by solar energy systems competes primarily with expensive peak hour electricity rates rather than with the less expensive average price of electricity. Modifications to the peak hour pricing policies of utilities, such as to a flat rate, would require solar energy systems to achieve lower prices in order to compete with the price of electricity.

The importation of some of the products we sell is subject to tariffs, duties and quotas imposed by the United States.  In addition, other restrictions on the importation of our products are periodically considered by the United States Congress, and may again be considered to protect against “Asian” deflation. No assurances can be given that tariffs or duties on such goods may not be raised, resulting in higher costs to us or that import quotas with respect to such goods will not be lowered. Deliveries of products from our foreign suppliers could be restricted or delayed by the imposition of lower quotas or increased tariffs. We may be unable to obtain similar quality products at equally favorable prices from domestic suppliers or from other foreign suppliers whose quotas have not been exceeded by the supply of goods to existing customers.

8

Item 2. Properties

We lease approximately 2,193 square feet of office space in the Walnut Tech Business Center located at 398 Lemon Creek Drive, Suite A, Walnut CA 91789 for $3,070 per month. Our old Lease expired  on November 30, 2014. We entered into a new Lease with the same landlord effective December 1, 2014 which has a term of one year until November 30, 2015.  The annual rent is $38,684.52 which is payable monthly at the rate of $3,223.71 per month.  In addition, there is a fee for monthly expenses and taxes of $241.23 per month.  The property is sufficient for our current business size.

Item 3. Legal Proceedings

We filed a contractual fraud case against one of our commercial installation customers, All Fortune Group LLC (All Fortune), during September 2013 for causes of action including breach of contract, common counts and fraudulent transfer. The relief claimed consists mainly of monetary damages and interest including punitive dames, costs of suits for no less than $1.2 million. As a result of the filing, All Fortune filed a lawsuit against us for causes of action including breach of contract, negligent misrepresentation, intentional misrepresentation and fraud. The relief claimed by All Fortune consists mainly of monetary damages including punitive damages, costs of suit and other recoverable fees and damages. The exact amount sought is unknown. It is not clear that these situations have given rise to liabilities, because we don't know if the situation will result in any future payments. Therefore, no accrued contingency liabilities were recorded as of December 31, 2014. On November 19, 2013, the court ruled that Case NC059003-Sunvalley Solar, Inc v. All Fortune Group, LLC is related to Case KC066248-All Fortune Group, LLC v. Sunvalley; Case NC059003 is deemed the lead case and all future hearing dates will be heard in Long Beach Superior Court. Sunvalley filed a motion for right to attach order and writ of attachment pursuant to Code of Civil Procedure section 483.010 on November 27, 2013, which was granted on February 4, 2014. The final status conference is set for May 1, 2015 and trial is set for May 11, 2015 at 8:30a.m. Sunvalley contracted Absolute Urethane to remodel All Fortune’s roof in order to install the solar system. Per the roofing contract, Absolute Urethane shall furnish all labor, materials and equipment and perform all operations required as specified and the company provide a 15 year warranty for this roofing project. Since All Fortune brought the law suits against Sunvalley and Absolute Urethane at the same time, Absolute Urethane filed a cross-complaint against Sunvalley.  

Our agent for service of process in Nevada is Cane Clark Agency, LLC, 3273 East Warm Springs Rd., Las Vegas, NV 89120.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is quoted under the symbol “SSOL” on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting. Our reporting is presently current and, since inception, we have filed our SEC reports on time.

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The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Fiscal Year Ended December 31, 2014

Quarter Ended	High $	Low $
December 31, 2014	$0.022	$0.011
September 30, 2014	$0.0235	$0.0125
June 30, 2014	$0.0185	$0.013
March 31, 2014	$0.018	$0.0097

Fiscal Year Ended December 31, 2013

Quarter Ended	High $	Low $
December 31, 2013	$0.0410	$0.0166
September 30, 2013	$0.0358	$0.0100
June 30, 2013	$0.0020	$0.0050
March 31, 2013	$0.0200	$0.0029

On March 27, 2015, the last sales price per share of our common stock was $0.02.

Penny Stock

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

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These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

Holders of Our Common Stock

As of April 13, 2015, we had 87,156,979 shares of our common stock issued and outstanding, held by fifty-seven (57) shareholders of record.

Dividends

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:

1.  we would not be able to pay our debts as they become due in the usual course of business, or;

2.  our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

Item 6. Selected Financial Data

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 Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Business Development Plan

The primary components of our growth strategy are as follows:

•

Developing and commercializing our proprietary solar technologies including our coating and focusing technologies, networked PV panel system. By deploying these new technologies into our PV panels and solar installation business, we hope to enhance the value provided to our customers and increase our profitability.

•

Promoting and enhancing our company’s brand and reputation in solar design and integration and expanding our installation business.

•

Developing a PV panel manufacturing capability to provide high efficiency and low cost solar panels to US market. This will complement our installation business and provide an implementation platform for our R&D.

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We are planning to expand our installation business. We will continue to execute our marketing and sales strategy in Southern California and, with additional capital, will be able to expand our business to cover Northern California, Arizona or other states. The planned expansion is expected to occur through acquiring smaller installation companies in these regions and/or through the establishment of subsidiaries in these states and boost our installation profits. Our current intention is to establish two new offices located in Northern California or other states and in San Diego. The estimated start-up cost for each new branch would be approximately $500,000.

If we are able to expand our installation business, it will assist us in gaining favorable terms from OEM international manufacturers of our planned solar panel manufacturing operation. In addition, an expanded installation business would allow us to accelerate the introduction of our new technologies and solar parts and would generate additional revenue to fund initial investment in our planned Distributed Power Plant business and to further fund our investments in R&D.

Prior to initiating our planned OEM manufacturing of Sunvalley-branded solar panels, we will need to commercialize our advanced panel technology through the design, fabrication, and characterization of a prototype solar cell. The total expense for planned commercialization of our research and development will be approximately $500,000.

Initiate OEM Manufacturing of Solar Panels

By leveraging our solar panel installation business and R&D, we plan to procure OEM solar panels from selected Chinese manufacturers and to market them in the U.S. under our brand name. We will be responsible for R&D, quality control, customer service, sales and marketing activities, as well as panel certification in U.S.

The estimated OEM panel cost is less than $0.50 per watt. As a reference, currently, the lowest panel price is around $0.70 per watt (Mono-crystalline, Polycrystalline). We can use our own sales and installation platform to showcase the new panels and drive sales of the new panels in the U.S market. Meanwhile, we will continue our R&D effort on panel coating and other advanced technologies and apply the results to its panel manufacturing business. The goal will be to further improve the efficiency, lower the cost of solar panels with our proprietary technologies, and to grow our market share.

Our marketing strategy for its planned OEM solar panels is as follows:

 •

Set-up a platform to showcase our innovative solar panel technologies and make Sunvalley solar panels a household name.

Unlike other merchandise, a solar panel is very unique in that it requires very high level of quality assurance and customer satisfaction. Providing satisfactory customer service and technical support is absolutely vital in solar panel sales. As the first step, we will strive to make its brand a household name. The Sunvalley solar panel will be used by our installation business as well as several other installation companies which have partnerships with us. We do not currently have partnerships with other solar installation companies, but we plan to pursue them after introducing the panels to the market through our own installation business. A marketing campaign aimed at other solar installation companies will help to achieve this goal. We will use our own installation business as the platform to showcase the product quality and build up consumer awareness of its brand.

 •

Penetrate into the main stream distribution network

By leveraging early successes and customer trust earned from our initial installations, we plan to penetrate into the mainstream distribution network with our OEM solar panels.

 •

Further sale activities

12

Once our brand name solar panels become well known, our sales team will begin an aggressive marketing campaign to connect the individual sales points (distributors and venders) to form a distribution network. The marketing campaigns will also include attending trade shows, advertising in the media (TV commercials and newspaper advertisement) and designating local representatives to boost the market share and brand awareness.

 •

Offer a low cost, high efficiency solar panel derived from advanced research

To boost our solar panel market share, our R&D team will work with our OEM partner to apply selective coating technique and other cutting edge technologies to further reduce the manufacturing cost and improve the panel efficiency.

The total capital required to initiate our planned panel manufacturing business would be approximately $2,000,000 which can be categorized into three parts:

•

Registration and Certification of OEM panels with our brand – $300,000, including UL certification fees, CEC registration fees, and lab testing fees.

•

Initial Inventory – $1,500,000. We will need to keep 4-5 containers of PV panels in the warehouse in order to support sales of 5~10M watts per year, which means we will need to have over $1,000,000 in inventory for PV panels only. An additional $300,000 in inventory would be needed in order to keep the requisite amount of inverters and racking and panel cleaning systems. In addition, we anticipate providing variable payment terms to different customers based on their creditworthiness; this will add additional cash flow pressure.

•

OEM Management costs – $200,000

We are among the few companies in California that has the permit and expertise to install large-scale commercial and/or government solar power systems, together with roof constructional design and building interior/exterior electrical designs. We believe additional advantages are provided by our experience in filing solar power system permit applications and rebate applications and our expertise gained through our experience with governments and utility companies.

Results of Operations for the Years Ended December 31, 2014 and 2013

During the year ended December 31, 2014, we generated gross revenues of $3,317,039. Total cost of sales was $2,660,806, resulting in gross profit of $656,233. Total operating expenses were $1,916,511, and consisted of salary and wage expenses of $497,416, selling, general and administrative expenses of $274,947, professional fees of $141,096 and bad debt expense of $1,003,052. We experienced interest expense of $4,670, a loss on impairment of inventory of $21,593, other income of $1,713, and a gain on sale of equipment of $500. Our net loss for the year ended December 31, 2014 was therefore $1,284,328.

By comparison, during the year ended December 31, 2013, we generated gross revenues of $4,095,907. Total cost of sales was $3,895,091, resulting in gross profit of $200,816. Total operating expenses were $1,234,359, and consisted of salary and wage expenses of $422,609, selling, general and administrative expenses of $262,919, professional fees of $142,620 and bad debt expense of $406,211. We experienced a net interest expense of $14,806, a gain of $52,100 on a derivative liability, a default penalty on convertible notes of $5,000, a loss on impairment of inventory of $57,523, other income of $976, and a gain on legal settlement of $1,822,171. Our net income for the year ended December 31, 2014 was therefore $764,375.

Our revenues decreased in 2014 as compared to 2013.  Our gross profit increased significantly due to a lower cost of sales. The reason for the lower cost of sales is that contracts we completed in 2014 were a few larger scale

13

commercial projects, and we implemented these projects by using internal resources to design and manage these projects, but sub-contracting field construction works to some local companies and workers to reduce construction cost.  During 2014, our expenses for salary and wages increased by approximately $74,807 and our selling, general, and administrative expenses increased approximately $12,028. During 2014, our bad debt expense increased significantly from $406,211 to $1,003,052. This amount consists primarily of accounts receivable from All Fortune Group, LLC, which has ceased payment as the resulting of pending litigation (refer to Item 3. Legal Proceedings).  In the prior year, on September 8, 2013, we settled a legal dispute with Canadian Solar, Inc. (CSI). Under the settlement, CSI agreed to release claims against us for trade payables. As a result, we recognized a net gain on the settlement of $1,822,171.  We had no gain or loss on any settlement of litigation during the year ended December 31, 2014.

We are currently working on six major installation projects with contract prices totaling approximately $3.8 million. These contracts are expected to be substantially completed by the second quarter of 2015. In addition, we have signed installation contracts with installation customers for aggregate contract prices totaling approximately $7.3 million.  We expect to complete these projects by the end of 2015 or no later than second quarter of 2016.

Liquidity and Capital Resources

As of December 31, 2014, we had current assets in the amount of $4,401,429, consisting of cash and cash equivalents in the amount of $822,444, accounts receivable of $2,167,580, inventory in the amount of $1,051,669, costs in excess of billings on uncompleted contracts of $318,734, prepaid expenses and other current assets of $16,002, and restricted cash of $25,000. As of December 31, 2014, we had current liabilities in the amount of $6,863,410. These consisted of accounts payable and accrued expenses in the amount of $4,740,648, customer deposits of $1,900,928, accrued warranty of $97,654, advances from contractors of $103,389, the current portion of long term debt in the amount of $16,774, and the current portion of a capital lease in the amount of $4,017. Our working capital deficit as of December 31, 2014 was therefore $2,461,981.

Our accounts payable and accrued expenses as of December 31, 2014 consisted of the following:

Accounts Payable

$4,522,293

Credit Card payable

      20,255

Accrued vacation

      18,619

Other accrued expense

      60,511

Payroll liabilities

      91,067

Sales tax payable

      27,903

Total $4,740,648

As of December 31, 2014, our long-term liabilities were $16,443, which consisted of a loan owing to East West Bank with a balance of $29,680 (long term portion $12,906) and the remaining obligations of a capital lease in the amount of $7,554 (long term portion $3,537). The principal amount outstanding on the East West Bank loan accrues annual interest at the bank's variable index rate. The East West Bank loan is collateralized by all business assets.

In September 2011, we entered a lease- to- own purchase agreement. We evaluated the lease at the time of purchase and determined that the agreement contained a beneficial by-out option wherein we have the option to buy the equipment for $1 at the end of the lease term. Under the guidance in ASC 840, we have classified the lease as a capital lease. We used the discounted value of future payments as the fair value of this asset and have recorded the discounted value of the remaining payments as a liability. As of December 31, 2014 the capital lease payable outstanding was $7,554, with $4,017 due within the next year.

14

On August 14, 2012 we entered into a funding agreement with a contractor to receive funding to complete various projects. During the year ended December 31, 2012, the Company received advances under said funding agreement of $247,175. The advances bear no interest and are due on demand. During the year ended December 31, 2013 the Company made payments of $143,786 on these advances. The outstanding balance of the advances at December 31, 2014 and 2013 was $103,389 and $103,389, respectively.

In order to move forward with our business development plan set forth above, we will require additional financing in the approximate amount of $4,500,000, to be allocated as follows:

Initiate OEM Manufacturing

$ 2,000,000

R&D Commercialization Costs

$    500,000

Expansion of Installation Business (3 new branches)

$ 1,500,000

Additional working capital and general corporate

$    500,000

Total capital needs

$ 4,500,000

We will require substantial additional financing in the approximate amount of $4,500,000 in order to execute our business expansion and development plans and we may require additional financing in order to sustain substantial future business operations for an extended period of time. We currently do not have any firm arrangements for financing and we may not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible.

 

We are currently seeking additional financing. If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.

Off Balance Sheet Arrangements

As of December 31, 2014, there were no off balance sheet arrangements.

Going Concern

We have experienced recurring losses from operations and had an accumulated deficit of $3,728,310 as of December 31, 2014. To date, we have not been able to produce sufficient sales to become cash flow positive and profitable on an ongoing basis. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. For these reasons, our auditor has raised substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not believe that any accounting policies currently fit this definition.

Accounts Receivable  The Company’s trade accounts receivable consist primarily of accounts due from wholesale customers, and accounts due from installation customers, with the most significant amounts arising from installation contracts. Trade receivables are due within 30 days on wholesale contracts, while receivables on installation contracts are due in installments over terms ranging from five to seven years. The Company performs periodic credit evaluations of its customers’ respective financial conditions and does not require collateral. Credit losses have consistently been within management’s expectations. An allowance for doubtful accounts is recorded when it is

15

probable that all or a portion of a trade receivables balance will not be collected. The Company’s allowance for doubtful accounts totals $1,171,305 and $272,686, as of December 31, 2014 and 2013, respectively.

Long-Lived Assets In accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Based on this analysis, the Company believes that no impairment of the carrying value on its long-lived assets existed at December 31, 2014 and 2013.

Product Warranties  The Company warrants its products for various periods against defects in material or installation workmanship. The manufacturers of the solar panels and the inverters provide a warranty period of generally 25 years and l0 years, respectively. The Company will assist its customers in the event that the manufacturers’ warranty needs to be used to replace a defective solar panel or inverter. The Company provides for a l0-year warranty on the installation of a system and all equipment and incidental supplies other than solar panels and inverters that are recovered under the manufacturers’ warranty. Maintenance services such as cleaning the solar panels and checking the systems are offered to customers twice a year for five years without a separate service charge.

The Company records a provision for the installation warranty, an expense included in cost of sales, based on management's best estimate of the probable cost to be incurred in honoring its warranty commitment. The Company's accrued warranty provision was $97, 654 and $73,538 at December 31, 2014 and 2013, respectively.

Revenue Recognition The completion of a solar installation project ranges from six to eighteen months; therefore, the Company recognizes revenue from a system installation under the completed contract method of accounting, pursuant to ASC 605. Revenue from system installations and sales of solar panels is recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable and (4) collection of the related receivable is reasonably assured. The Company defines its services as having been substantially completed upon passing inspection by the Fire Department and obtaining the City’s Building Department’s approval after its final inspection of the installed system. Wholesale revenues are recognized pursuant to the same criteria; however, with wholesale arrangements the Company defines its delivery as having been completed at such time the customer takes possession of the Company’s product.

Recently Issued Accounting Pronouncements

Our management has considered all recent accounting pronouncements issued since the last audit of our financial statements. Our management believes that these recent pronouncements will not have a material effect on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

16

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Reports of Sadler, Gibb & Associates, LLC, Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders' Equity (Deficit)	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Financial Statements	F-7

 

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Sunvalley Solar, Inc.

We have audited the accompanying consolidated balance sheet of Sunvalley Solar, Inc. (“the Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.   

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sunvalley Solar, Inc. as of December 31, 2014 and 2013, and the results of its operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

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 an accumulated deficit of $3,645,645, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sadler, Gibb & Associates, LLC

 

 

Salt Lake City, UT

April 15, 2015

SUNVALLEY SOLAR, INC.
Consolidated Balance Sheets
ASSETS
				December 31,			December 31,
				2014			2013
CURRENT ASSETS
	Cash and cash equivalents			$	822,444		$	368,796
	Restricted cash				25,000			25,000
	Accounts receivable, net				2,167,580			2,026,696
	Inventory				1,051,669			380,155
	Costs in excess of billings on uncompleted contracts				318,734			29,696
	Prepaid expenses and other current assets				16,002			11,263
		Total current assets			4,401,429			2,841,606
PROPERTY AND EQUIPMENT, NET					26,957			49,871
OTHER ASSETS
	Long-term accounts receivable, net				3,042,976			4,883,685
	Other assets				3,870			3,870
		Total other assets			3,046,846			4,887,555
		TOTAL ASSETS		$	7,475,232		$	7,779,032
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable and accrued expenses			$	4,740,648		$	5,573,200
	Customer deposits				1,900,928			93,713
	Accrued warranty				97,654			73,539
	Advances from contractors				103,389			103,389
	Current portion of long-term debt				16,774			15,797
	Current portion of capital lease				4,017			3,342
		Total current liabilities			6,863,410			5,862,980
LONG-TERM LIABILITIES
	Capital leases				3,537			7,554
	Notes payable				12,906			29,626
		Total long-term liabilities			16,443			37,180
		TOTAL LIABILITIES			6,879,853			5,900,160
STOCKHOLDERS' EQUITY
	Preferred stock, $0.001 par value, 1,000,000 Class A shares
	authorized, 1,000,000 and 950,000 shares issued
	and outstanding, respectively				1,000			950
	Common stock, $0.001 par value, 90,000,000 shares
	authorized, 87,156,979 and 87,156,979 shares
	issued and outstanding, respectively				87,157			87,157
	Additional paid-in capital				4,152,867			4,152,082
	Accumulated deficit				(3,645,645)			(2,361,317)
		Total Stockholders' Equity			595,379			1,878,872
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	7,475,232		$	7,779,032
The accompanying notes are an integral part of these consolidated financial statements.

SUNVALLEY SOLAR, INC.
Consolidated Statements of Operations
				For the Years Ended
				December 31,
				2014			2013
REVENUES				$	3,317,039		$	4,095,907
COST OF SALES					2,660,806			3,895,091
GROSS PROFIT					656,233			200,816
OPERATING EXPENSES
	Salary and wage expense				497,416			422,609
	Bad debt expense				1,003,052			406,211
	Professional fees				141,096			142,620
	Selling, general and
	administrative expenses				274,947			262,919
	Total Operating Expenses				1,916,511			1,234,359
INCOME (LOSS) FROM OPERATIONS					(1,260,278)			(1,033,543)
OTHER INCOME (EXPENSES)
	Gain on sale of equipment				500			-
	Gain (loss)on derivative liability				-			52,100
	Default penalty on convertible notes				-			(5,000)
	Gain on settlement of litigation				-			1,822,171
	Other income				1,713			976
	Loss on impairment of inventory				(21,593)			(57,523)
	Interest expense				(4,670)			(14,806)
	Total other income (expenses)				(24,050)			1,797,918
INCOME (LOSS) BEFORE TAXES					(1,284,328)			764,375
	Provision for income taxes				-			-
NET INCOME (LOSS)				$	(1,284,328)		$	764,375
BASIC INCOME (LOSS) PER SHARE				$	(0.01)		$	0.01
DILUTED INCOME (LOSS) PER SHARE				$	(0.01)		$	0.01
BASIC WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING					87,156,979			70,410,482
DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING					87,156,979			71,360,482
The accompanying notes are an integral part of these consolidated financial statements.

SUNVALLEY SOLAR, INC.
Consolidated Statements of Cash Flows
			For the Years Ended
			December 31,
			2014			2013
OPERATING ACTIVITIES:
	Net income (loss)		$	(1,284,328)		$	764,375
	Adjustments to reconcile net income (loss) to net cash
	provided by operating activities:
		Depreciation and amortization		22,914			25,872
		(Gain) loss on re-measurement of derivative		-			(52,100)
		Gain on sale of equipment		(500)			-
		Preferred stock issued for services		835			-
		Bad debt expense		1,003,052			174,899
		Loss on impairment of inventory		21,593			57,523
		Penalty for default on convertible note		-			5,000
	Changes in operating assets and liabilities:
		Accounts receivable		696,773			(1,650,488)
		Inventory		(693,107)			(79,070)
		Prepaid expenses and other assets		(4,739)			(4,937)
		Other assets		-			9,500
		Costs in excess of billings on uncompleted contracts		(289,038)			109,541
		Accounts payable and accrued expenses		998,778			1,755,876
		Accrued warranty expenses		-			(4,514)
		Customer deposits		-			(95,502)
		Net Cash Provided by Operating Activities		472,233			1,015,975
INVESTING ACTIVITIES:
	Sale of equipment			500			-
		Net Cash Provided By Investing Activities		500			-
FINANCING ACTIVITIES:
	Proceeds from related party notes payable			-			160,000
	Repayment of related party notes payable			-			(160,000)
	Repayment of advances from contractor			-			(143,786)
	Repayments of long term debt			(15,743)			(14,875)
	Repayment of capital lease			(3,342)			(2,781)
	Repayment of factoring line			-			(571,508)
		Net Cash (Used in) Financing Activities		(19,085)			(732,950)
NET INCREASE (DECREASE) IN CASH				453,648			283,025
CASH AT BEGINNING OF YEAR				368,796			85,771
CASH AT END OF YEAR			$	822,444		$	368,796
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	CASH PAID FOR:
		Interest	$	4,670		$	7,099
		Income taxes	$	-		$	-
	NON-CASH INVESTING AND FINANCING ACTIVITIES:
		Common stock issued for debt	$	-		$	492,244
The accompanying notes are an integral part of these consolidated financial statements.

F-6

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

Sunvalley Solar, Inc. (the Company) was incorporated on August 16, 2007 under the laws of the State of Nevada as Western Ridge Minerals, Inc. Sunvalley Solar Inc. ("Sunvalley"), was incorporated on January 30, 2007 as West Coast Solar Technologies Corporation in the State of California.

 

On June 24, 2010, in accordance with the Exchange Agreement dated June 24, 2010, the Company acquired all of the issued and outstanding shares of the Sunvalley, which resulted in Sunvalley merging with the Company.  In exchange for all of the issued and outstanding shares of Sunvalley, the shareholders of the Sunvalley received a total of 960,082 shares of the Company’s common stock, which represented approximately 60% of the Company’s outstanding common stock following the acquisition. There were 2,098,543 shares of the Company’s common stock outstanding before giving effect to the stock issuances in the acquisition and the cancellation of 1,458,488 shares by certain shareholders resulted in there being 1,600,137 shares outstanding post acquisition. As a result, the shareholders of the Sunvalley became the controlling shareholders of the combined entity. In connection with the acquisition, $400,000 was contributed to the Company from a Company shareholder.

 

Accordingly, the transaction is accounted for as a recapitalization Sunvalley was deemed to be the accounting acquirer and the Company the legal acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of Sunvalley prior to the Merger are reflected in the financial statements and are recorded at the historical cost basis of Sunvalley.

On December 15, 2015, the Company formed a wholly owned subsidiary, Sunvalley Solar Tech, Inc. to hold all of its operations. The Company’s financial statements are consolidated beginning as of December 31, 2015 with all significant intercompany transactions eliminated in the consolidation.

 

Description of Business

The Company markets, sells, designs and installs solar panels for residential and commercial customers. The Company’s primary market is in the state of California, however the Company may sell anywhere in the United States.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Going Concern

As reflected in the accompanying financial statements, the Company has experienced recurring losses from operations through December 31, 2014 and has an accumulated deficit of $3,645,645 as of December 31, 2014. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

Management plans to raise additional operating capital through a private placement of the Company’s common stock. Management believes that with sufficient working capital the Company can produce sufficient sales to become cash flow positive and profitable which will allow it to continue as a going concern. There is no assurance that the Company will be successful in its plans.

 

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made in preparing the financial statements include the allowance for doubtful accounts, accrued warranty, convertible debt derivative liabilities and discount expenses. To the extent there are material differences between estimates and the actual results, future results of operations will be affected.

F-7

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Operating Segments

The Company operates in one operating segment.

 

Cash and Cash Equivalents

Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits. The Company has not experienced any losses related to this concentration of risk. As of December 31, 2014, the Company had $822,444 in cash in bank deposits that exceeded the $250,000 federally insured limits.

 

Accounts Receivable

The Company’s trade accounts receivable consist primarily of accounts due from wholesale customers, and accounts due from installation customers, with the most significant amounts arising from installation contracts. Trade receivables are due within 30 days on wholesale contracts, while receivables on installation contracts are due in installments over terms ranging from five to seven years. The Company performs periodic credit evaluations of its customers’ respective financial conditions and does not require collateral. Credit losses have consistently been within management’s expectations. An allowance for doubtful accounts is recorded when it is probable that all or a portion of a trade receivables balance will not be collected. The Company’s allowance for doubtful accounts totals $1,171,305 and $272,686, as of December 31, 2014 and 2013, respectively. The allowance for doubtful accounts’ amount of $1,171,305 for 2014 consisted of $31,600 as the current portion while $1,139,705 constituted the long term portion. The allowance for doubtful accounts’ amount of $272,686 for 2013 consisted of $250,192 as the current portion while $22,494 constituted the long term portion.

 

Customer Deposits

Customer deposits represent advance payments received for installation projects. Typically the Company will receive five to fifteen percent of a contract total at the commencement of the installation project. These amounts are recorded as liabilities until such time that the Company has performed the majority of its contractually agreed-upon work, at which time the deposits are recognized as revenue in accordance with the Company’s revenue recognition policy.

 

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is determined on an average cost basis; and the inventory is comprised of raw materials and finished goods. Raw materials consist of fittings and other components necessary to assemble the Company’s finished goods. Finished goods consist of solar panels ready for installation and delivery to customers.

 

At each balance sheet date, the Company evaluates its ending inventory for excess quantities and obsolescence. This evaluation includes an analysis of sales levels by product type. Among other factors, the Company considers current product configurations, historical and forecasted demand, market conditions and product life cycles when determining the net realizable value of the inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventory. The Company’s reserve for excess and obsolete inventory amounted to $-0- and $-0- as of December 31, 2014 and 2013.

The Company’s inventory consisted of the following at December 31, 2014 and December 31, 2013:

 

		2014								2013
Raw materials	$		912,272						$		244,460
Work in Progress				25,070								1,326
Finished goods				114,327								134,369
TOTAL		$		1,051,669						$		380,155

 

The Company revalued its inventory at the lower of cost or net realizable value as of December 31, 2014 and 2013 and recorded impairment of inventory of $21,593 and $57,523, respectively.

F-8

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets.  Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions.

 

Maintenance and repairs are charged to expense as incurred; additions and betterments are capitalized. Upon retirement or sale, the cost and related accumulated depreciation of the disposed assets are removed, and any resulting gain or loss is recorded. Fully depreciated assets are not removed from the accounts until physical disposition. The estimated useful lives are as follows:

	Useful Life
Automobile		5 Years
Furniture		7 Years
Software		3 Years
Office Equipment		5 Years
Machinery		5-7 Years

 

Long-Lived Assets

In accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Based on this analysis, the Company believes that no impairment of the carrying value on its long-lived assets existed at December 31, 2014 and 2013.

Fair Value of Financial Instruments

For certain financial instruments, including accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their relatively short maturities. In the case of the Notes Payable, the interest rate on the notes approximates the market rate of interest for similar borrowings. Consequently the carrying value of the Notes Payable also approximates the fair value. It is not practicable to estimate the fair value of the Notes Payable to Related Party due to the relationship of the counterparty.

Revenue Recognition

The completion of a solar installation project ranges from six to eighteen months; therefore, the Company recognizes revenue from a system installation under the completed contract method of accounting, pursuant to ASC 605. Revenue from system installations and sales of solar panels is recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable and (4) collection of the related receivable is reasonably assured. The Company defines its services as having been substantially completed upon passing inspection by the Fire Department and obtaining the City’s Building Department’s approval after its final inspection of the installed system. Wholesale revenues are recognized pursuant to the same criteria; however, with wholesale arrangements the Company defines its delivery as having been completed at such time the customer takes possession of the Company’s product.

F-9

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cost of Sales

Cost of sales is comprised primarily of the cost of purchased product, as well as direct labor, inbound freight costs and other material costs required to complete products and installation projects. For installation projects, the direct labor costs are recorded as work-in-progress inventory and other installation project costs incurred by the Company are recorded as costs in excess of billings on uncompleted contracts before the project’s revenue is recognized. When the Company uses contractors for installation projects, if the contractor provides progress billings to the Company, then those costs will be recorded as work-in-progress inventory. However, if the contractor doesn’t provide progress billings to the Company, then the Company will record the costs to cost of sales once the contractor bills the Company.

 

Product Warranties

The Company warrants its products for various periods against defects in material or installation workmanship. The manufacturers of the solar panels and the inverters provide a warranty period of generally 25 years and l0 years, respectively. The Company will assist its customers in the event that the manufacturers’ warranty needs to be used to replace a defective solar panel or inverter. The Company provides for a l0-year warranty on the installation of a system and all equipment and incidental supplies other than solar panels and inverters that are recovered under the manufacturers’ warranty. Maintenance services such as cleaning the solar panels and checking the systems are offered to customers twice a year for five years without a separate service charge.

 

The Company records a provision for the installation warranty, an expense included in cost of sales, based on management's best estimate of the probable cost to be incurred in honoring its warranty commitment. The Company's accrued warranty provision was $97,654 and $73,539 at December 31, 2014 and 2013, respectively.

 

Advertising Expenses

Advertising expenses are expensed as incurred. Total advertising expenses amounted to $1,688 and $1,738 for the years ended December 31, 2014 and 2013, respectively.

 

Research and Development

Research and development costs are expensed as incurred and amounted to approximately $-0- and $-0- for the years ended December 31, 2014 and 2013, respectively. These costs are included in selling, general and administrative expenses in the accompanying statements of operations.

Income Taxes

The Company applies ASC 740, which requires the asset and liability method of accounting for income taxes.  The asset and liability method requires that the current or deferred tax consequences of all events recognized in the financial statements are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years. Deferred tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that all or some portion of the deferred tax assets will not be recovered.

 

The Company adopted ASC 740, at the beginning of fiscal year 2008. This interpretation requires recognition and measurement of uncertain tax positions using a “more-likely-than-not” approach, requiring the recognition and measurement of uncertain tax positions. The adoption of ASC 740 had no material impact on the Company’s financial statements. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will to be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

F-10

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basic and Diluted Earnings and Loss Per Common Share

Basic earnings per common share is computed by dividing the net earnings by the weighted average number of outstanding common shares (restricted and free trading) during the periods presented. Basic loss per share and diluted loss per share are the same amount because the impact of additional common shares that might have been issued under the Company’s outstanding and exercisable stock options would be anti-dilutive. Dilutive instruments include 1,000,000 and 950,000 shares at December 31, 2014 and 2013, respectively to be issued upon the conversion of the Series A Convertible Preferred Stock. These dilutive shares were included in the computation of diluted earnings per share. Accordingly, there were 950,000 such dilutive shares included as of December 31, 2013.  The 1,000,000 preferred shares were excluded from the weighted average share calculation at December 31, 2014 as they were anti-dilutive

 

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of the financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

 

NOTE 3  - RESTRICTED CASH

 

In order to comply with the State of California's licensing requirement or contract bonds as of December 31, 2014 and 2013 the Company maintains a certificate of deposit in the amount of $25,000 and $25,000, respectively, with a financial institution.

NOTE 4 - PROPERTY AND EQUIPMENT

 

The following is a summary of property and equipment at December 31, 2014 and 2013:

 

	2014								2013
Computer and equipment		$		75,268						$		75,268
Furniture			16,655								16,655
Software			2,368								2,368
Vehicles			86,339								92,174
Gross Property and Equipment			180,630								186,465
Less: accumulated depreciation			(153,673		)						(136,594		)
Net Property and Equipment	$		26,957						$		49,871

 

Depreciation expense for the years ended December 31, 2014 and 2013 was $22,912 and $25,872, respectively.

                                                                                   

NOTE 5 - RELATED PARTY TRANSACTIONS

 

During the year ended December 31, 2013, the Company borrowed $160,000 from two officers of the Company. These notes accrue interest at 6.5 percent per annum, are unsecured and due on demand. The related party payables were repaid during May and June 2013.

 

The interest expense incurred on the related party payables was $-0- and $3,384, for the years ended December 31, 2014 and 2013, respectively.

 

 

F-11

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 6 – COSTS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS

 

The Company is currently involved in certain major short-term solar panel installation projects. The Company is accounting for revenue and expenses associated with these contracts under the completed contract method of accounting in accordance with ASC 605. Under ASC 605, income is recognized on when the contracts are completed or substantially completed and billings and others costs are accumulated on the balance sheet. Under the completed contract method, no profit or income is recorded before completion of substantial completion of the work.

 

As of December 31, 2014 and December 31, 2013, the Company has capitalized $318,734 and $29,696 of costs incurred in relation to installation projects.

NOTE 7 - NOTES PAYABLE

 

Notes payable outstanding as of December 31, 2014 and 2013 consisted of the following:

 

		2014								2013
Notes payable (1)
Current portion	$		16,774						$		15,797
Long-term portion				12,906								29,626
Total Notes Payable		$		29,680						$		45,423

 

(1) Arrangement with a bank having a maximum borrowing of $100,000; is collateralized by all business assets. Any principal amounts outstanding accrue interest at the bank's variable index rate (currently 6.00% as of December 31, 2014).

Future maturities of notes payable are as follows:

 

	2015			$	16,774
	2016				12,906
	Total			$	29,680

 

NOTE 8 - CAPITAL LEASE

 

In September 2011, the Company entered a lease-to-own purchase agreement. The Company evaluated the lease at the time of purchase and determined that the agreement contained a beneficial by-out option wherein the Company has the option to buy the equipment for $1 at the end of the lease term. Under the guidance in ASC 840, the Company has classified the lease as a capital lease.  The Company used the discounted value of future payments as the fair value of this asset and has recorded the discounted value of the remaining payments as a liability.

Capital leases payable outstanding as of December 31, 2014 and 2013 consisted of the following:

                                                                            

F-12

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 8 - CAPITAL LEASE (CONTINUED)

 

		2014								2013
Forklift lease	$		7,554						$		10,896
Total Capital Leases		$		7,554						$		10,896

 

Future maturities of capital leases are as follows:

 

2015	$	4,017
2016		3,537
Total minimum lease payments		9,408
Less executory costs		505
Net minimum lease payments		8,903
Less amount representing interest		1,349
Present value of minimum lease payments	$	7,554

 

NOTE 9 - DERIVATIVE LIABILITY

 

Effective July 31, 2009, the Company adopted ASC Topic No. 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. These debts are convertible at the holder’s option at 61% of the average of the lowest three trading prices during the 10 days prior to conversion. The number of shares issuable upon conversion of these debts are limited so that the Holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares.

 

The exercise price of these warrants are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

                                                                                               

ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the above convertible debts. During the year ended December 31, 2013 the convertible debt was fully converted to common stock.

 

NOTE 10 - CONVERTIBLE DEBT

 

On October 28, 2011, the Company borrowed $200,000 in the form of a convertible note. The note is convertible at the holder’s option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion feature, the Company recorded a discount on debt in the amount of $200,000 on the note date. The convertible debt is due on July 18, 2012, is unsecured and bears an interest rate of 8%. The Company defaulted on the note and as a result, the interest rate on the outstanding balance increased to 22% per annum and the Company incurred a default penalty in the amount of $144,125, however, the Company entered into an agreement with the lender to amend the note agreement to reduce the default penalty by $55,000 from $144,125 to $89,125. In addition the amendment adjusted the conversion factor from 61% to 50%. On September 14, 2012 the lender and the Company agreed to amend the agreement to extend the maturity date to December 6, 2013 and increase the outstanding balance of the note by $5,000 for legal fees. During the year ended December 31, 2013 the Company incurred a default penalty in the amount of $5,000. During the year ended December 31, 2013 the

F-13

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 10 - CONVERTIBLE DEBT (CONTINUED)

Company recorded $1,590 in interest expense on the note. As of June 30, 2012 the Company had amortized the entire $200,000 of the debt discount to interest expense, leaving $-0- in unamortized debt discount at December 31, 2013. During the year ended December 31, 2013 the Company issued 28,249,555 shares of common stock upon conversion of $72,836 of the note and accrued interest payable. As of December 31, 2014 and December 31, 2013 the outstanding note balance was $-0- and $-0-, respectively.

 

On February 22, 2012, the Company borrowed $78,500 of convertible debt. On May 24, 2012 the Company and the lender amended the agreement wherein the debt was convertible at the holder’s option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion to 40% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion feature, the Company recorded a discount on debt in the amount of $78,500 on the note date. The convertible debt is due on August 24, 2013, is unsecured and bears an interest rate of 8%. During the year ended December 31, 2013 the Company issued 39,095,127 shares of common stock upon conversion of $62,729 of the note and accrued interest payable. As of December 31, 2014 and December 31, 2013 the outstanding note balance was $-0- and $-0-, respectively.

 

As of December 31, 2013 all of the convertible debts were fully converted into shares of the Company’s common stock and the Company recognized a gain on the derivative liability of $52,100.

NOTE 11 - FACTORING LINE PAYABLE

 

During the year ended December 31, 2013, the Company repaid its factoring provider in full including all fees and accrued interest.

 

NOTE 12 - COMMON STOCK

 

During the year ended December 31, 2013 the Company issued 67,344,681 shares of the Company’s common stock upon conversion of $127,686 of its debt plus $7,879 of accrued interest. The Company also recorded $424,899 to additional paid in capital as a result of the conversion of the debt.

NOTE 13 – PREFERRED STOCK

 

On August 28, 2012, the Company’s Board of Directors voted to designate a class of preferred stock entitled Class A Convertible Preferred Stock, consisting of up to one million (1,000,000) shares, par value $0.001. The rights of the holders of Class A Convertible Preferred will participate on an equal basis per-share with holders of the Company’s common stock in any distribution upon winding up, dissolution, or liquidation.

 

Holders of Class A Convertible Preferred Stock are entitled to vote together with the holders of the Company’s common stock on all matters submitted to shareholders at a rate of one hundred (100) votes for each share held. Holders of Class A Convertible Preferred Stock are also entitled, at their option, to convert their shares into shares of the Company’s common stock on a 1 for 1 basis. The Class A Convertible Preferred shares were valued at the trading price of the common shares into which they are convertible.

 

During the year ended December 31, 2012, the Board of Directors approved the incentive issuance of 950,000 shares of the Company’s Class A Convertible Preferred shares to its executives and key employees and Restricted Stock Award Agreements were signed with such individuals for their shares will vest in full after two years from the date of grant with certain restrictions. The issuance of such preferred shares were valued as stock-based compensation of $68,400 based on the fair market value of the Company’s common stock on August 28, 2012.

During the year ended December 31, 2014, the Board of Directors approved the incentive issuance of 50,000 shares of the Company’s Class A Convertible Preferred shares as an incentive.  The issuance of such preferred shares was valued as stock-based compensation of $835 based on the fair market value of the Company’s common stock on October 10, 2014.

F-14

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 14 - ADVANCES FROM CONTRACTORS

On August 14, 2012 the Company entered into a funding agreement with a contractor to receive funding to complete various projects. During the year ended December 31, 2012, the Company received advances under said funding agreement of $247,175. The advances bear no interest and are due on demand. During the year ended December 31, 2013 the Company made payments of $143,786 on these advances. The outstanding balance of the advances at December 31, 2014 and 2013 was $103,389 and $103,389, respectively.

NOTE 15 - INCOME TAXES

 

The FASB has issued FASB ASC 740-10 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position.  If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.  As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 34% to pretax income from continuing operations for the years ended December 31, 2014 and 2013. The components of income tax expense are as follows:

	2014							2013
Operating loss carry forwards	$	1,239,519						$		802,848
Stock/options issued for services		(284	)						-
Gain on derivative liability		(117,486)							(117,486		)
Allowance for bad debts		(341,037)							-
Amortization of discount		(147,164)							(147,164		)
Loss on debt conversion		(239,236)							(239,236		)
Valuation allowance		(394,312	)						(298,952		)
	$	—					$		—

The Company currently has no issues creating timing differences that would mandate deferred tax expense. Net operating losses would create possible tax assets in future years. Due to the uncertainty of the utilization of net operating loss carry forwards, an evaluation allowance has been made to the extent of any tax benefit that net operating losses may generate. A provision for income taxes has not been made due to net operating loss carry-forwards of $1,239,519 and $802,848 as of December 31, 2014 and 2013, respectively, which may be offset against future taxable income through 2034. No tax benefit has been reported in the financial statements.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2014				2013
Federal statutory rate (34%)	$	(436,670	)		$	(259,888	)
Stock/options issued for services		284				-
Non-deductible expenses		341,037				8,918
State tax benefit, net of federal tax effect		—				—
Change in valuation allowance		95,349				250,970
Provision for income taxes	$	—			$	—

F-15

SUNVALLEY SOLAR, INC.

Notes to Financial Statements

December 31, 2014 and December 31, 2013

NOTE 15 - INCOME TAXES (CONTINUED)

The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes.  As of December 31, 2014 and 2013, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by major taxing jurisdictions are for the years ended December 31, 2014, 2013, 2012, 2011, and 2010.

NOTE 16 - CONCENTRATIONS OF RISK

 

Supplier Concentrations

The Company purchased solar panels from two and three manufacturer(s) during the years ended December 31, 2014 and 2013, respectively. For the years ended December 31, 2014 and 2013, these vendors accounted for approximately 63% and 90%, respectively, of total inventory purchases.

 

Customer Concentrations

For the years ended December 31, 2014 and 2013, three customers represented more than 10% of the Company’s sales for these two years. This translates to approximately 99% of the Company's annual net revenues.

 

NOTE 17 – SIGNIFICANT EVENTS

 

The Company and Canadian Solar, Inc. (CSI) resolved and settled by the agreement dated September 8, 2013 by which CSI agreed not to enforce any claims in the amount of approximately $1,862,671 owed by the Company to CSI.  In return, the Company agreed to dismiss the lawsuit brought against CSI. Accordingly, the Company recognized a gain on the settlement of litigation in the amount of $1,822,170 during the year ended December 31, 2013.

Effective December 31, 2014, the Company, transferred substantially all of its assets and liabilities to its wholly-owned subsidiary, Sunvalley Solar Tech, Inc

NOTE 18 – COMMITMENTS AND CONTINGENCIES

 

Office Lease –

The Company leases an office under an operating lease that expires on November 30, 2015. Total rent expense amounted to $38,173 and $36,929 for the fiscal years ended December 31, 2014 and 2013, respectively.

 

Minimum base lease payments required to be made during 2015 total $35,461.

 

Stock Buy Back

On October 10, 2014, the Company’s Board of Directors approved a stock buyback from executives and key employees in the amount of $834,848 and cash bonuses of $75,000.  The Company’s buyback is conditioned upon the following events: (a) the completion of an acquisition of, or merger with, another company that is approved by the Company’s Board of Directors; and (b) the completion by the Company of at least $900,000 in funding on terms which will have been approved by the Company’s Board of Directors.  The stock buyback and bonuses may be terminated by the Board of Directors if they have not been completed by September 1, 2015. The conditions for this purchase of treasury stock have not been met as of April 15, 2015.

F-16

NOTE 18 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Legal Proceedings

The Company filed a contractual fraud case against one of its commercial installation customers, All Fortune Group LLC (All Fortune), during September 2013 for causes of action such as breach of contract, common counts and fraudulent transfer. The reliefs claimed by the Company mainly are monetary damages and interest including punitive dames, costs of suits for no less than $1.2 million. As a result of the filing by the Company, All Fortune filed a lawsuit against the Company for causes of action which are breach of contract, negligent misrepresentation, intentional misrepresentation and fraud in All Fortune’s compliant. The reliefs claimed by All Fortune are mainly monetary damages including punitive damages, costs of suit and other recoverable fees and damages. The exact amount sought is unknown. It is not clear that these situations have given rise to liabilities, because the Company doesn't know if the situation will result in any future payments. Therefore, no accrued contingency liabilities were recorded as of December 31, 2014. Sunvalley contracted Absolute Urethane to remodel All Fortune’s roof in order to install the solar system. Per the roofing contract, Absolute Urethane shall furnish all labor, materials and equipment and perform all operations required as specified and the company provide a 15 year warranty for this roofing project. Since All Fortune brought the law suits against Sunvalley and Absolute Urethane at the same time, Absolute Urethane filed a cross-complaint against Sunvalley

NOTE 19 – SUBSEQUENT EVENTS

On February 11, 2015, the Company and its wholly owned subsidiary, Sunvalley Solar Tech, Inc., a California corporation, entered into an Agreement for Sale and Purchase of Sunvalley Solar Tech, Inc., pursuant to which the Company has agreed to sell 100% of the stock ownership of Sunvalley Solar Tech, Inc. to Sungold Holdings, a Nevada limited liability company (the “Buyer”). The Company’s sale of Sunvalley Solar Tech, Inc. will be for a sale price of Two Million Five Hundred Thousand Dollars ($2,500,000) plus five percent (5.0%) of all of Sunvalley Solar Tech, Inc.’s gross sales during 2015 through 2018, which could increase the sale price to a maximum of Four Million Five Hundred Thousand Dollars ($4,500,000).  The Buyer failed to close on the transaction as required by March 20, 2015.  Accordingly, the Company has determined that the transaction is cancelled.

In accordance with ASC 855, Company management reviewed all material events through the date of this report and there are no material subsequent events to report.

F-17

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

No events occurred requiring disclosure under Item 307 and 308 of Regulation S-K during the fiscal year ending December 31, 2014.

Item 9A. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal year ended December 31, 2014. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2014, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii)_are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

17

Item 9B. Other Information

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following information sets forth the names, ages, and positions of our current directors and executive officers as of March 27, 2015.

Name

 Age

Office(s) held

Zhijian James Zhang

48

President, CEO, Director

Mandy Chung

46

Chief Financial Officer, Secretary, Treasurer

Hangbo (Henry) Yu

61

General Manager, Director

Fang Xu

49

Chief Technology Officer

Shirley Liao

46

Director of Administration

Robert Dyskant

89

Director

Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.

Zhijian (James) Zhang – Dr. Zhang is our President, CEO, and a member of our board of directors. He has held these positions since January of 2007. Dr. Zhang graduated from Tsinghua University with a Ph.D. in opto-electronics. He has over 15 years of experience in opto-electronics and the semiconductor industry. From 2006 to 2008, he held the position of senior manager at Motorola, a leading telecommunication equipment provider. From 2004 to 2006, he held the position of Director at ZTE San Diego, also a leading telecommunication equipment provider.

Dr. Zhang has a strong reputation as an executive in the opto-electronics/semiconductor industry, including the solar energy field. Dr. Zhang has quality leadership experience in business operations, especially in product and program development, product development procedures, milestone setting and enforcement, and R&D team building.

Mandy Chung – Ms. Chung is our Chief Financial Officer, Secretary, and Treasurer. She has held these positions since August of 2008. Ms. Chung co-founded Chung & Chung Accountancy Corporation, CPAs (CCAC) in 2004 and she is licensed as a Certified Public Accountant in California. Ms. Chung is one of the partners in CCAC and she provides audit, review, compilation, consulting, tax services and financial planning to various clients. Ms. Chung has been working for CCAC for more than the past ten years since its establishment.

Ms. Chung graduated from Texas A&M University (College Station) with a Master’s degree in Finance and a Bachelor’s degree in Accounting. Ms. Chung has over 15 years of public accounting experience in providing auditing, accounting, business consulting and tax services to a wide range of industries. She has extensive experience in performing reviews and audits for various organizations, including publicly reporting companies. In addition, Ms. Chung helped the former founder of Dietrich Coffee to prepare a ten-year business and financial plan to establish a new series of coffee stores. Ms. Chung also conducted various incurred costs audits for MGM Mirage, Los Angeles County Metropolitan Transportation Authority and Caltrans. On a daily basis, Ms. Chung is

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responsible for the accounting operations and record keeping of Sunvalley Solar Inc.  Her duties include customer deposits and check payments recording, accounts receivable, accounts payable and inventory recording, customers’ credit evaluation, employees hiring and termination issues, sales tax filing, payroll tax filing, monthly bank reconciliation, preparing financial statements, performing preparation for annual audit, quarterly review and income tax return filing. Approximately 50% of Ms.Chung’s time is used to perform her job as the CFO of Sunvalley Solar Inc.

Hangbo (Henry) Yu – Mr. Yu is our General Manager and a member of our Board of Directors. He has served in these positions since January of 2007 and was the founder of our business. From 2004 through 2006, Mr. Yu was the General Manager and a board member of International Transportation Corp., Canada. He graduated from Beijing University of Aeronautics and Astronautics with a Bachelor’s degree in Structure Design. He has run several startup companies in China and Canada, respectively. Over the past 12 months, Mr. Yu has been working to establish relationships with major solar power equipment manufacturers in China. Mr. Yu is an experienced business and operations manager. He has over 20 years of experience in import-export, logistics, international transportation, solar business operation and solar power system project planning and field managing.

Fang Xu – Dr. Xu is our Chief Technology Officer. He has served in this position since July of 2008. From 2005 through June of 2008, he was a staff design engineer at Via Telecom, Inc. He graduated from the Electrical Department of Beijing University in China, has a Masters Degree in Electronics from the University of Alabama, and a PhD in Photonics from the University of California, San Diego. Dr. Xu is currently in charge of our research and development efforts . Dr. Xu has over 13 years of experience in both in academic and industrial environments. Dr. Xu has extensive knowledge in photonics, and optics, as well as micro and nano-scale device processing technologies. In addition, Dr. Xu has hands on experience in making the nano-scale structure that modifies the effective dielectric properties of optical materials. Dr. Xu has been a pioneer in the use polarization selective materials to construction micro and nanoscale diffractive optical elements.

Shirley Liao – Mrs. Liao is our Director of Administration. She has served Sunvalley Solar, Inc. in this position since January of 2007. She graduated from Guangxi University in Art and Financial Management. Before moving to the United States, Shirley Liao worked in an international trading company (Audio & Video Company of Guangxi) as an executive management member. While working there, Mrs. Liao acquired experience in international trade as well as general sales management. From 1997 through 1998, she worked at Trust Bank as a Loan Officer. She has also worked at Coldwell Banker George Realty since 2000 as a real estate broker. Through the real estate sales business, she established good relationships with local societies, business owners, banks, builders and government agencies. Her excellent market and sales experiences as well as connections to customers bring an exceptional value to the company. Currently, Mrs. Liao does not spend working hours at Coldwell Banker George Realty. She is a full time employee devoting forty hours per week to Sunvalley Solar, Inc.

Robert Dyskant, age 89, retired from the Dyskant Company, a company in which he was the Chief Executive Officer and owner for over 20 years.  The Dyskant Company was involved in the import, export and wholesale business.  Prior to establishing the Dyskant Company, Mr. Dyskant served as a senior sales manager in a precious jewelry business for over 10 years.

Term of Office

Our Directors are appointed for a one year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.

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Family Relationships

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers other than Shirley Liao and Hangbo (Henry) Yu who are wife and husband.

Involvement in Certain Legal Proceedings

To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Committees of the Board

We do not currently have a compensation committee, executive committee, or stock plan committee.

Audit Committee

We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K. Mandy Chung, our CFO, Secretary, and Treasurer, attends all meetings of the Board of Directors, including those meetings at which the board is performing those functions which would generally be performed by an audit committee. Mrs. Chung is licensed as a Certified Public Accountant in California. Mrs. Chung has over 15 years of public accounting experience in providing auditing, accounting, business consulting and tax services to a wide range of industries. She has extensive experience in performing reviews and audits for various organizations including publicly reporting companies. She also had prior audit experience in the filing process for a start-up company that filed with the SEC to become a publicly reporting company. We believe that Mrs. Chung’s accounting expertise and audit experience allows her to provide satisfactory counsel to the Board and that, at our current size and stage of development, the addition of a special audit committee financial expert to the Board is not necessary.

Nomination Committee

Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.

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When evaluating director nominees, our directors consider the following factors:

-The appropriate size of our Board of Directors;

-Our needs with respect to the particular talents and experience of our directors;

-The knowledge, skills and experience of nominees, including experience in finance, administration or

public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;

-Experience in political affairs;

-Experience with accounting rules and practices; and

-The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided

by new Board members.

Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.

Code of Ethics

As of December 31, 2014, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

Item 11.  Executive Compensation

Compensation Discussion and Analysis

We presently do not have employment or compensation agreements with any of our named executive officers and have not established any overall system of executive compensation or any fixed policies regarding compensation of executive officers. Currently, our executive officers receive fixed cash compensation as set forth below.

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended December 31, 2014 and 2013.

SUMMARY COMPENSATION TABLE
Name and principal position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Zhijian (James) Zhang, President, CEO, and Director	2014 2013	$106,800     74,400	-0-  -0-	$835  -0-	-0-  -0-	-0- -0-	-0- -0-	-0- -0-	$107,635   74,400
Mandy Chung, CFO, Secretary, and Treasurer	2014 2013	$52,500    48,000	-0- -0	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	$52,500   48,000
Hangbo (Henry) Yu, General Manager and Director	2014 2013	$100,800     72,000	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	$100,800   72,000
Fang Xu, CTO	2014 2013	-0-           -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0-   -0-
Shirley Liao, Director of Administration	2014 2013	$67,600  54,100	-0-  -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	$67,600   54,100

 

Narrative Disclosure to the Summary Compensation Table

Currently, our executive officers receive fixed cash compensation as set forth in the Summary Compensation Table. We presently do not have employment or compensation agreements with any of our named executive officers and have not established any overall system of executive compensation or any fixed policies regarding compensation of executive officers.

During the year ended December 31, 2012, we approved an incentive issuance of Class A Convertible Preferred Stock to our executives and certain key employees. Restricted Stock Award agreements were signed with each person issued Class A Convertible Preferred Stock. Ownership of these shares will fully vest in two years from the date of issue, and they are generally subject to forfeiture in the event the holder leaves the company prior to the vesting date. Each share of Class A Convertible Preferred Stock is convertible at the option of the holder into one (1) share of our common stock. In addition, holders of Class A Convertible Preferred Stock are entitled to cast 100 votes for each share held on all matters submitted to a vote of the holders of our common stock. The goals of the incentive issuances of Class A Convertible Preferred Stock to our executives in 2012 were (i) to provide a continuing incentive for such executives to remain with the company, and (ii) to give our management and key employees a greater voice in the governance of the corporation.  These stock awards vested two years later on August 28, 2014.

During the year ended December 31, 2014, the Board of Directors approved the incentive issuance of 50,000 shares of the Company’s Class A Convertible Preferred shares as an incentive to the Company’s CEO, Zhijian (James) Zhang.  The issuance of such preferred shares was valued as stock-based compensation of $835 based on the fair market value of the Company’s common stock on October 10, 2014.

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Stock Option Grants

We have not granted any stock options to the executive officers or directors since our inception.

Outstanding Equity Awards at Fiscal Year-End

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of December 31, 2014.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS						STOCK AWARDS
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options  (#) Unexercisable	Equity Incentive   Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise  Price ($)	Option Expiration Date	Number Of Shares or Shares of Stock That Have Not Vested (#)(1)	Market Value of Shares or Shares of Stock That Have Not Vested ($)	Equity Incentive Plan Awards:  Number of Unearned Shares, Shares or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Shares or Other Rights That Have Not  Vested (#)
Zhijian (James) Zhang, President, CEO, and Director	-	-	-	-	-	0	-0	-	-
Mandy Chung, CFO, Secretary, and Treasurer	-	-	-	-	-	0	-0	-	-
Hangbo (Henry) Yu, General Manager and Director	-	-	-	-	-	0	-0	-	-
Fang Xu, CTO	-	-	-	-	-	-0	-0	-	-
Shirley Liao, Director of Administration	-	-	-	-	-	0	-0	-	-

 

⁽¹⁾ All shares of Class A Convertible Preferred Stock issued on August 28, 2012 vested two years later on August 28, 2014. Each share of Class A Convertible Preferred Stock is convertible at the option of the holder into one (1) share of our common stock.

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Director Compensation

The table below summarizes all compensation of our directors for our last completed fiscal year.

DIRECTOR COMPENSATION
Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Non-Qualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Zhijian (James) Zhang	0	-0	-0	-0	-0	-0	-0
Hangbo (Henry) Yu	0	-0	-0	-0	-0	-0	-0
Robert Dyskant	0	-0	-0	-0	-0	-0	-0

 

Narrative Disclosure to the Director Compensation Table

We do not currently provide any set compensation to directors for their service as directors.

Employment Agreements with Current Management

On January 31, 2015, our subsidiary, Sunvalley Solar Tech, Inc., entered into employment agreements with Zhijian (James) Zhang, Hangbo (Henry) Yu, William Hsien and Mehmet Cercioglu.  The employment agreement with Mr. Zhang provides that he will be paid an annual salary of $108,000, and that he may be paid bonuses in the discretion of the Board of Directors.  The term of the employment agreement is for three years.  If the Company adopts any employee benefit plan or health and dental insurance plans, he is entitled to participate in those plans.  If the agreement is terminated by Mr. Zhang with just cause, Sunvalley Solar Tech, Inc. would be obligated to pay his salary for the duration of the agreement.  The terms of the employment agreement for Mr. Yu is similar to the agreement for Mr. Zhang except that Mr. Yu is paid an annual salary of $84,000.  The terms of the employment agreement for Mr. Hsien is similar to the agreement for Mr. Zhang except that Mr. Hsien is paid an annual salary of $120,000, his bonus shall not be less than 10% of his annual salary, and the term of his agreement is for two years.  .  The terms of the employment agreement for Mr. Cercioglu is similar to the agreement for Mr. Zhang except that Mr. Cercioglu is paid an annual salary of $96,000, and the term of his agreement is for two years.  We do not currently have any employment agreements in place with any of our other executive officers.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth the beneficial ownership of our capital stock by each executive officer and director, by each person known by us to beneficially own more than 5% of any class of stock and by the executive officers and directors as a group. Except as otherwise indicated, all Shares are owned directly and the percentage shown is based on 87,156,979 shares common stock issued and outstanding as of April 13, 2015 and 1,000,000 shares of Class A Convertible Preferred Stock issued and outstanding as of April 13, 2015.

 

 

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Item 13. Certain Relationships and Related Transactions, and Director Independence

Except as set forth below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us:

1.

On December 21, 2011, we borrowed the sum of $50,000 from James Zhang, our President, under the terms of a Private Loan Agreement. The loan was due within a year and bore interest at a rate of 6.50% per year. This note was converted to buy 410,906 shares of common stock on May 25, 2012.

2.

On December 21, 2011, we borrowed the sum of $50,000 from Hangbo (Henry) Yu, our General Manager, under the terms of a Private Loan Agreement. The loan was due within a year and bore interest at a rate of 6.50% per year. This note was converted to buy 410,906 shares of common stock on May 25, 2012

3.

On February 24, 2012, we borrowed the sum of $21,307.90 from Hangbo (Henry) Yu, our General Manager, under the terms of a Private Loan Agreement. The loan was due within a year and bore interest at a rate of 6.50% per year. The sum of $19,307.90 repaid on September 24, 2012. The remaining $2,000 was converted to common stock.

4.

On April 16, 2012, we borrowed the sum of $50,000 from James Zhang, our President, under the terms of a Private Loan Agreement. The loan was due within a year and bore interest at a rate of 6.50% per year. The sum of $48,000 was repaid on May 25, 2012, with the remaining balance added to another note.

5.

On January 24, 2013, we borrowed the sum of $90,000 from Hangbo (Henry) Yu, our General Manager, under the terms of a Private Loan Agreement. The loan was repaid in 2013.

6.

On February 20, 2013, we borrowed the sum of $20,000 from Hangbo (Henry) Yu, our General Manager, under the terms of a Private Loan Agreement. The loan was repaid in 2013.

7.

On April 4, 2013, we borrowed the sum of $50,000 from James Zhang, our President, under the terms of a Private Loan Agreement. The loan was repaid in 2013.

8.

On October 10, 2014, the Board of Directors of the Company approved conditional common stock repurchases from certain officers, directors and/or employees of the Company named below at $8 per common share:

Name			Number of Shares				Cash Repurchase Price
Zhijian Zhang			46,200			$	369,600
Hangbo Yu			41,200			$	329,600
Waiman Mandy Chung			6,250			$	50,000
Shirley Liao			5,000			$	40,000
Anyork Lee			1,900			$	15,200
Thomas L Louie			1,250			$	10,000
Dan Shi			2,556			$	20,448