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Travel:
Travel and associated expenses were $158,503 for the fiscal year ended September 30, 2007. This represents an increase of $116,680 as compared to the same period in 2006 and an increase of $30,589 for fiscal year 2006 as compared to the same period in 2005. These increases are due to increased travel directed at sales and business development efforts.
Other Operating Expenses:
Additionally, advertising expenses were $47,573 for the fiscal year 2007, an increase of $38,523 for the same period in 2006, an increase of $5,071 for the same period in 2005. This increase resulted from the Companys increased efforts to generate sales.
Insurance expenses were $66,856 for the fiscal year ended September 30, 2007, an increase of $64,151 from the prior period. This increase was primarily caused by increased coverage and the addition of a directors and officers insurance package. The increase of $1,947 between the fiscal years 2006 and 2005 was primarily driven by increase coverage levels.
For the fiscal year ended September 30, 2007, the Companys consolidated net loss was $(1,289,497) as compared to $(3,441,940) for the same period ended September 30, 2006 and $(1,400,839) for the same period ended September 30, 2005. The decreased net loss in 2007 was primarily related to i) $1,100,000 non-operating settlement of an asset purchase agreement which resulted in cash inflow and a non-operating income ii) a decreased operating expenses of $731,728 as discussed above, iii) increased interest income of $164,699 resulting for the loan to Sencera and iv) decreased interest expense with the conversion of outstanding debentures into
equity in 2006. This resulted in a net loss per was of $(0.01) for the twelve months ended September 30, 2007.
The increase of $ 2,041,101 between the 2006 and 2005 periods resulted from a one time non-cash warrant issuance expense of $951,250 for warrant expenses accounted for in the period ended September 30, 2006, and a net increase of $486,833 in loan fee expenses associated with the sale by the Company of convertible dentures. Excluding the one time non-cash warrant expense and net loan fee expenses, in the comparative analysis between the periods, results in an increase of $578,017 in net loss for the period ended September 30, 2006 as compared to the same period 2005. The net loss per share was less than $(0.02) for the twelve month period ended
September 30, 2006 and $(0.01) for the same period in 2005.
Due to the Companys change in primary business focus in October 2003 and the developing nature of its business opportunities these historical results may not necessarily be indicative of results to be expected for any future period. As such, future results of the Company may differ significantly from previous periods. Since inception in 1997 the Company has an accumulated deficit totaling ($10,460,850) at September 30, 2007.
Liquidity and Capital Resources
Working Capital at September 30, 2007 was $1,515,437 as compared to $4,065,524 for the same period in 2006 and as compared to a working capital (deficit) of $(718,380) at September 30, 2005. There were insignificant operating cash flows totaling $6,880 during the twelve months ended September 30, 2007 and $8,000 in the same period in 2006 and zero in the same period in 2005.
Cash and cash equivalents at September 30, 2007 were $1,828,125 a decrease of $(2,826,098) from the same period in 2006. Cash and cash equivalents at September 30, 2006 were $4,654,223, an increase of $4,398,370 from September 30, 2005.
During the year ended, September 30, 2007, the Company used $1,289,497 net cash in operating activities as compared to $1,942,278 net cash in operating activities for the year ending September 30, 2006 and compared to using $1,049,650 net cash for the year ended, September 30, 2005.
The Company used $843,416 for operating activities during the year ended September 30, 2007 as compared to $1,942,278 for the same period in 2006. The decrease of $1,098,862 resulted primarily from a reduced net loss of $2,152,443 offset by warrant expense and issuance of common stock for interest of $867,330, change in pre-paid expenses of $563,871 and to accounts payable of $826.293.
TABLE OF CONTENTS
The increase of $892,628 in use of cash for operating activities between the 2006 and 2005 periods resulted from onetime non-cash expenses for a warrant issuance expense of $951,250, an expense of $31,500 for the issuance of stock in lieu of cash for services, and $241,383 in expenses for the issuance of stock in lieu of cash for the payment of accrued interest associated with the sale of debentures by the Company accounted for in the period ended September 30, 2006. Excluding these one time non-cash expenses, in the comparative analysis between the periods, results in a decrease of $331,505 in net cash used in operations for the period ended
September 30, 2006 compared to the same period 2005.This decrease of net cash used in operations was primarily due to a decrease in consulting expenses of $273,094 in the 2006 period.
For the twelve months ended, September 30, 2007, the Companys capital needs have primarily been met from the proceeds of (i) the issuance of Common Stock for Debenture conversion and; (ii) the issuance of Common Stock for warrant conversion. Total cash provided by financing activities for the period ended September 30, 2007 decreased to $135,000. For the period ended September 30, 2006 total cash provided by financing activity increased to $8,171,250 from $1,380,170 for the same period ended September 30, 2005. The decrease of $8,036,250 is a result of financing activity in fiscal year 2006 that was not required to execute on the business plan
in 20007. Additionally, $135,000 was received by the Company for 900,000 warrants that were exercised by a consultant. The increase of $6,791,080 between the 2006 and 2005 periods was mainly attributable to an increase of $5,000,000 from the conversion of a debenture into common stock and $3,171,250 in the conversion of warrants for common stock.
On November 1, 2007, XsunX signed a $21 million common stock purchase agreement with Fusion Capital Fund II, LLC, an Illinois limited liability Company. Upon signing the agreement, XsunX received $1,000,000 from Fusion Capital as an initial purchase under the $21 million commitment in exchange for 3,333,332 shares of our common stock. The shares were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. Concurrently with entering into the common stock purchase agreement, we entered into a registration rights agreement with Fusion Capital. Under the registration rights agreement, we agreed to file a
registration statement related to the transaction with the SEC covering the shares that have been issued or may be issued to Fusion Capital under the common stock purchase agreement. After the SEC has declared effective the registration statement related to the transaction we have the right over a 25-month period to sell our shares of common stock to Fusion Capital, from time to time, in amounts up to $1 million per sale, depending on certain conditions as set forth in the agreement, up to the full aggregate commitment of $21 million.
The purchase price of the shares related to the $20 million balance of future funding will be based on the prevailing market prices of the Companys shares at the time of sales without any fixed discount, and the Company will control the timing and amount of any sale of shares to Fusion Capital. There are no upper limits to the price Fusion Capital may pay to purchase our common stock. However, Fusion Capital shall not be obligated to purchase any shares of our common stock on any business day that the price of our common stock is below $0.20. There are no negative covenants, restrictions on future funding(s), penalties or liquidated damages in
the agreement. The common stock purchase agreement may be terminated by us at any time at our discretion without any cost to us.
In consideration for entering into the $21 million agreement we agreed to issue to Fusion Capital 3,500,000 shares of our common stock as financing commitment shares which Fusion Capital has agreed to hold for the term of the common stock purchase agreement. Additionally, under the stock purchase agreement we granted Fusion Capital common stock purchase warrants to purchase 1,666,666 shares of our common stock at $0.50, and 1,666,666 shares of our common stock at $0.75. The shares underlying the warrant grants do not carry mandatory registration requirements under the terms of the common stock purchase agreement and registration rights agreement.
The proceeds received by the Company under the common stock purchase agreement are expected to be used to build an initial base production system delivering full size commercial quality solar modules, and initiate the manufacture of the first of four (4) planned 25 megawatt systems under the Companys planned 100 megawatt thin film solar module production facility. Proceeds may also be used to lease and prepare manufacturing facilities with the necessary support systems for the manufacturing line, inventory, staff, and general working capital.
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TABLE OF CONTENTS
Contractual Obligations are shown in the following table.
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|
|
|
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Contractual Obligations
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|
Payments Due by Period
|
|
|
Total
|
|
Less Than
1 Year
|
|
1 3 Years
|
|
3 5 Years
|
|
More Than
5 Years
|
Long Term Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Capital Lease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease
(1)
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|
|
37,118
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|
|
|
21,008
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|
|
|
16,110
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|
|
|
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|
|
|
|
|
Purchase Obligations
(2)
(3)
|
|
|
492,345
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|
|
|
492,345
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|
|
|
|
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|
|
|
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|
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Other Long Term Liabilities Reflected on the Registrants Balance Sheet Under GAAP
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|
|
|
|
|
|
|
|
|
|
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|
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|
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Total
|
|
|
529,463
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|
|
|
513,353
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|
|
|
16,110
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|
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(1)
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Operating Lease Obligations consist of the lease on the Companys Administrative and Sales facility in Golden, CO.
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(2)
|
Remaining accounts payable associated with the production a roll to roll cassette cluster tool providing plasma enhanced chemical vapor deposition (PECVD) and sputtering system of $353,000.
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(3)
|
Estimated remaining amount due a third party research and development provider of $139,345.
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The estimated contract cost in item (2) and (3) above may be higher or lower based on final costs. The Company has not booked any contingency for cost overruns.
During the year ended, September 30, 2007, we used $1,822,942 for investing activities as compared to $2,099,736 for the same period ended September 30, 2006. This represents a decrease of $276,794 primarily related to the purchase of fewer fixed assets in 2007 than in the previous year and the purchase of the marketable manufacturing tool in 2006 which reduced 2007 expenditures. This difference was offset by the investment of $1,500,000 and associated accrued interest income in the Sencera Note. During the year ended, September 30, 2006, we used $2,099,736 for investing activities as compared to $191,995, for the year ended, September 30, 2005. The
increased use of cash for investing activities resulted from an increase in the acquisition of assets in the form of a marketable manufacturing tool and additional equipment.
We had, at September 30, 2007, working capital of $1,515,437. The Company has announced plans to build its manufacturing facility which we anticipate will lead to revenue after the close of fiscal year 2008. However the cash flow requirements associated with the transition to revenue recognition may exceed cash generated from operations in the current and future periods. We may seek to obtain additional financing from equity and/or debt placements. We have been able to raise capital in a series of equity and debt offerings in the past. While there can be no assurances that we will be able to obtain such additional financing, on terms acceptable to us
and at the times required, or at all, we believe that sufficient capital can be raised in the foreseeable future if necessary.
Net Operating Loss
For federal income tax purposes, we have net operating loss carry forwards of approximately $10,960,721 as of September 30, 2007. These carry forwards will begin to expire in 2010. The use of such net operating loss carry forwards to be offset against future taxable income, if achieved, may be subject to specified annual limitations.
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TABLE OF CONTENTS
Quantitative and Qualitative Discolsures About Market Risk
The Company maintains interest bearing deposits in the form of U.S. Treasury Notes in various amounts and maturity periods that allow us to maintain access to necessary capital to fund operations. These investments in Treasury Notes earn varied interest rates and upon maturity are subject to market risks associated with the increase or decrease for the then available rates comparative to the expiring rates. These investments in U.S Treasury Notes are underwritten by the United States Government and are brokered through our association with a U.S. based and Federally insured bank. We do not believe that these investments are subject to foreign
currency risks.
Our products are quoted for sale and licensure in United States dollars and as our business development efforts progress we anticipate the sale and/or licensure of our products to foreign entities. To the extent that we may be exposed to foreign currency risks related to the rise and/or fall of foreign currencies against the U.S. dollar we will report in United States dollars.
DESCRIPTION OF PROPERTY
As of January 17, 2008, the Company leases administrative office facilities located at 65 Enterprise, Aliso Viejo CA 92656 for approximately $3,800 per month.
In April 2006 the Company entered into a three year lease for technical and marketing operations facilities in Golden, CO. The Company provided a $2,615 security deposit and expensed $79,867 in costs associated with tenant improvements to the facilities in preparation for occupancy. The following is a schedule, by years, of the minimum base payments required under this operating lease for facilities. An additional $905 monthly is also due as a pro rata share equaling 4.12% of the operating costs for real estate taxes, assessments, and the expenses of operating and maintaining common areas within the commercial grounds surrounding the leased
facilities.
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Annual Rent Schedule
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Annualized
Rate/sf
|
|
Monthly
Rent
|
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Rent
|
7/1/06 6/30/07
|
|
$
|
6.75
|
|
|
$
|
20,250.00
|
|
|
$
|
1,687.50
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7/1/07 6/30/08
|
|
$
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6.95
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|
|
$
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20,850.00
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|
|
$
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1,737.50
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7/1/08 6/30/09
|
|
$
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7.16
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|
$
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21,480.00
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|
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$
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1,790.00
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The Company owns no real property.
To support the Companys plans to prepare TFPV solar module manufacturing capabilities, we plan to lease suitable facilities of approximately 60,000 to 75,000 square feet in the 2008 fiscal year. We have selected the area surrounding the Portland, Oregon area as the location of our facilities and we are working to complete site selection and lease negotiations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No officer or director of the Company has or proposes to have any direct or indirect material interest in any asset proposed to be acquired by the Company through security holdings, contracts, options, or otherwise.
The Company has adopted a policy under which any consulting or finders fee that may be paid to a third party for consulting services to assist management in evaluating a prospective business opportunity would be paid in stock, stock purchase options or in cash. Any such issuance of stock or stock purchase options would be made on an ad hoc basis. Accordingly, the Company is unable to predict whether or in what amount such a stock issuance might be made.
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TABLE OF CONTENTS
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Companys common stock trades on the OTC Bulletin Board under the symbol XSNX. The range of high, low and close trade quotations for the Companys common stock by fiscal quarter within the last two fiscal years, as reported by the National Quotation Bureau Incorporated, was as follows:
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|
|
Year Ended September 30, 2007
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High
|
|
Low
|
|
Close
|
First Quarter ended December 31, 2006
|
|
|
0.68
|
|
|
|
0.34
|
|
|
|
0.38
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|
Second Quarter ended March 31, 2007
|
|
|
0.64
|
|
|
|
0.40
|
|
|
|
0.49
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|
Third Quarter ended June 30, 2007
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|
|
0.51
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|
|
|
0.41
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|
|
|
0.42
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Fourth Quarter ended September 30, 2007
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|
|
0.44
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|
|
|
0.30
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|
|
|
0.39
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|
|
|
|
|
|
|
|
Year Ended September 30, 2006
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|
|
|
|
|
|
First Quarter ended December 31, 2005
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|
|
0.59
|
|
|
|
0.53
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|
|
|
0.58
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Second Quarter ended March 31, 2006
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|
|
2.24
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|
|
|
2.08
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|
|
|
2.13
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Third Quarter ended June 30, 2006
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|
|
1.06
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|
|
|
1.04
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|
|
|
1.05
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|
Fourth Quarter ended September 30, 2006
|
|
|
0.55
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|
|
|
0.52
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|
|
|
0.54
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|
The above quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
Number of Holders
As of January 16, 2008, there were approximately 1,456 record holders of the Companys common stock, not counting shares held in street name in brokerage accounts which is unknown. As of January 16, 2008, there were approximately 173,402,188 shares of common stock outstanding on record with the Companys stock transfer agent, Mountain Share Transfer. On January 16, 2008 the last reported sales price of our common stock on the OTCBB was $.48 per share.
Dividends
The Company has not declared or paid any cash dividends on its common stock and does not anticipate paying dividends for the foreseeable future.
Stock Option Plan
On January 5, 2007, the Board of Directors of XsunX resolved to establish the Companys 2007 Stock Option Plan to enable the Company to obtain and retain the services of the types of employees, consultants and directors who could contribute to the Companys long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all stockholders of the Company. A total of 20,000,000 shares of common stock are authorized under the plan.
Stock Compensation, Issuance of Stock Purchase Options
During the fiscal year ended September 30, 2007, the board of directors authorized the grant of options to purchase an aggregate of 2,200,000 shares of the Companys common stock of which 1,950,000 remain authorized. The options are exercisable at prices ranging from $.41 to $.53 per share, and expire at various times through August 2012.
Consulting Incentive Options: In connection with entering into a Consulting and Advisory Agreement effective January 26, 2007 with Dr. John Moore for two years service as Chairman of the Companys Scientific Advisory Board, the Company issued to Dr. Moore 150,000 options under the terms of a Stock Option Agreement, with an exercise price of $.46 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest under the following provisions:
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(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of April 26, 2007. Thereafter, the Option shall vest become exercisable at the rate of 18,750 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
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TABLE OF CONTENTS
Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Jeff Huitt for two years service as Chief Financial Officer, the Company issued to Mr. Huitt 500,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest under the following provisions:
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(a)
|
The Option became exercisable in the amount of 50,000 shares upon the First Vesting Date of April 1, 2007. Thereafter, the Option shall vest and become exercisable at the rate of 50,000 Shares per calendar quarter up to a total of 400,000 shares.
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(b)
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This Option shall also become exercisable in the amount of 50,000 shares for each of the first two sales/licensure of an XsunX system.
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Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Robert Wendt for two years service as Vice President of Engineering, the Company issued to Mr. Wendt 500,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest under the following provisions:
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(a)
|
The Option became exercisable in the amount of 50,000 shares upon the First Vesting Date of April 1, 2007. Thereafter, the Option shall vest and become exercisable at the rate of 50,000 Shares per calendar quarter up to a total of 400,000 shares.
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(b)
|
This Option shall also become exercisable in the amount of 50,000 shares for each of the first two sales/licensure of an XsunX system.
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Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Kurt Laetz for two years service as Vice President of Sales, the Company issued to Mr. Laetz 250,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. As of September 30, 2007 Mr. Laetz no longer worked for the Company and the above referenced option grant was terminated and the available options were returned to the pool of
available options under the XsunX 2007 Stock Option Plan.
Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Joseph Grimes for two years service as Chief Operating Officer, the Company issued to Mr. Grimes 500,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest under the following provisions:
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(a)
|
The Option became exercisable in the amount of 50,000 shares upon the First Vesting Date of April 1, 2007. Thereafter, the Option shall vest and become exercisable at the rate of 50,000 Shares per calendar quarter up to a total of 400,000 shares.
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(b)
|
This Option shall also become exercisable in the amount of 50,000 shares for each of the first two sales/licensure of an XsunX system.
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TABLE OF CONTENTS
Consulting Incentive Options: In conjunction with entering into a Consulting and Advisory Agreement effective February 22, 2007 with Dr. Edward Yu for two years service as a member of the Companys Scientific Advisory Board, the Company issued to Dr. Yu 100,000 options under the terms of a Stock Option Agreement, with an exercise price of $.53 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest under the following provisions:
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(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of May 23, 2007. Thereafter, the Option shall vest become exercisable at the rate of 12,500 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
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Consulting Incentive Options: In conjunction with entering into a Consulting and Advisory Agreement effective April 23, 2007 with Dr. Richard Ahrenkiel for two years service as a member of the Companys Scientific Advisory Board, the Company issued to Dr. Yu 100,000 options under the terms of a Stock Option Agreement, with an exercise price of $.45 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest under the following provisions:
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(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of July 24, 2007. Thereafter, the Option shall vest become exercisable at the rate of 12,500 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
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Consulting Incentive Options: In conjunction with entering into a Consulting and Advisory Agreement effective August 28, 2007 with Dr. Michael Russak for two years service as a member of the Companys Scientific Advisory Board, the Company issued to Dr. Russak 100,000 options under the terms of a Stock Option Agreement, with an exercise price of $.41 per share. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest under the following provisions:
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(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of November 29, 2007. Thereafter, the Option shall vest become exercisable at the rate of 12,500 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
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TABLE OF CONTENTS
Table of Equity Compensation
The following table sets forth summary information, as of September 30, 2007, concerning securities authorized for issuance under all equity compensation plans and agreements for the fiscal yeas ended September 30, 2005, 2006 and 2007 is as follows:
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|
|
|
|
|
|
|
|
|
Number of
Options/
Warrants
|
|
Weighted-
Average
Exercise
Price
|
|
Accrued
Options/
Warrants
Exercisable
|
|
Weighted-
Average
Exercise Price
|
Outstanding, September 30, 2004
|
|
|
8,000,000
|
|
|
$
|
0.15
|
|
|
|
5,500,000
|
|
|
$
|
0.15
|
|
Granted 2005
|
|
|
7,125,000
|
|
|
$
|
0.17
|
|
|
|
6,708,334
|
|
|
$
|
0.17
|
|
Exercisable from 2004 in 2005
|
|
|
|
|
|
|
|
|
|
|
1,200,000
|
|
|
|
0.15
|
|
Outstanding, September 30, 2005
|
|
|
15,125,000
|
|
|
$
|
0.16
|
|
|
|
13,408,334
|
|
|
$
|
0.16
|
|
Granted 2006
|
|
|
11,987,000
|
|
|
$
|
0.36
|
|
|
|
5,543,000
|
|
|
$
|
0.46
|
|
Exercised 2006
|
|
|
(4,375,000
|
)
|
|
$
|
0.48
|
|
|
|
(4,375,000
|
)
|
|
$
|
0.48
|
|
Exercised from 2004 in 2006
|
|
|
(100,000
|
)
|
|
$
|
0.15
|
|
|
|
(100,000
|
)
|
|
$
|
0.15
|
|
Exercised from 2005 in 2006
|
|
|
(6,375,000
|
)
|
|
$
|
0.17
|
|
|
|
(6,375,000
|
)
|
|
$
|
0.17
|
|
Exercisable from 2004 in 2006
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
$
|
0.15
|
|
Exercisable from 2005 in 2006
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
$
|
0.20
|
|
Outstanding, September 30, 2006
|
|
|
16,262,000
|
|
|
|
|
|
|
|
8,701,334
|
|
|
|
|
|
Granted 2007
|
|
|
1,950,000
|
|
|
$
|
0.46
|
|
|
|
554,167
|
|
|
$
|
0.46
|
|
Exercised 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised from 2004 in 2007
|
|
|
(900,000
|
)
|
|
$
|
0.15
|
|
|
|
(900,000
|
)
|
|
$
|
0.15
|
|
Exercised from 2005 in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised from 2006 in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable from 2004 in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable from 2005 in 2007
|
|
|
|
|
|
|
|
|
|
|
116,666
|
|
|
$
|
0.20
|
|
Exercisable from 2006 in 2007
|
|
|
|
|
|
|
|
|
|
|
296,000
|
|
|
$
|
0.51
|
|
Outstanding, September 30, 2007
|
|
|
17,312,000
|
|
|
$
|
0.33
|
|
|
|
8,768,167
|
|
|
$
|
0.22
|
|
At September 30, 2007, the range of warrant/option prices for shares under warrants/options not exercised and the weighted-average remaining contractual life is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/Warrants Outstanding
|
|
Options/Warrants Exercisable
|
Range of Option/
Warrant Prices
|
|
Number of
Options/
Warrants
|
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Remaining
Contractual
Life(yr)
|
|
Number of
Options/
Warrants
|
|
Weighted-Average
Exercise Price
|
$ 0.15
|
|
|
7,000,000
|
|
|
$
|
0.15
|
|
|
|
1.9
|
|
|
|
6,000,000
|
|
|
$
|
0.15
|
|
$ 0.20
|
|
|
750,000
|
|
|
$
|
0.20
|
|
|
|
0.3
|
|
|
|
750,000
|
|
|
$
|
0.20
|
|
$ 0.25
|
|
|
7,000,000
|
|
|
$
|
0.25
|
|
|
|
3.0
|
|
|
|
1,000,000
|
|
|
$
|
0.25
|
|
$ 0.41
|
|
|
100,000
|
|
|
$
|
0.41
|
|
|
|
4.9
|
|
|
|
4,167
|
|
|
$
|
0.41
|
|
$ 0.45
|
|
|
100,000
|
|
|
$
|
0.45
|
|
|
|
4.6
|
|
|
|
20,833
|
|
|
$
|
0.45
|
|
$ 0.46
|
|
|
1,650,000
|
|
|
$
|
0.46
|
|
|
|
4.3
|
|
|
|
500,000
|
|
|
$
|
0.46
|
|
$ 0.51
|
|
|
500,000
|
|
|
$
|
0.51
|
|
|
|
3.8
|
|
|
|
352,000
|
|
|
$
|
0.51
|
|
$ 0.53
|
|
|
100,000
|
|
|
$
|
0.53
|
|
|
|
4.4
|
|
|
|
29,167
|
|
|
$
|
0.53
|
|
$ 1.69
|
|
|
112,000
|
|
|
$
|
1.69
|
|
|
|
3.5
|
|
|
|
112,000
|
|
|
$
|
1.69
|
|
|
|
|
17,312,000
|
|
|
|
|
|
|
|
|
|
|
|
8,768,167
|
|
|
|
|
|
48
TABLE OF CONTENTS
Sales or Transactions of Securities
The authorized capital stock of the Company was established at 500,000,000 shares with no par value.
In the fiscal year ended September 30, 2005, the Company issued a total of 9,818,631 shares of common stock as follows: 6,735,137 shares of common stock were issued pursuant to Regulation S promulgated under the Securities Act, raising gross proceeds of $531,396; 474,231 shares of common stock were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, for consulting services valued at $40,000; and 2,609,263 shares of common stock were issued pursuant to an exemption under Section 4(2) of the Act, in connection with the sale of an $850,000 secured convertible debenture by the Company.
In the fiscal year ended September 30, 2006, the Company issued a total of 33,293,217 shares of common stock as follows: 33,120,851 shares of common stock registered pursuant to an effective registration statement were issued pursuant to the conversion of secured convertible debentures, raising gross proceeds of $9,294,133; 72,366 shares of common stock were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, for consulting services valued at $31,500; and 100,000 shares of common stock were issued pursuant to an exemption under Section 4(2) of the Act, in connection with the exercise of 100,000
warrants bearing an exercise price of $.15 each.
The following represents a detailed analysis of the 2007 capital stock transactions.
In December 2006, the Company entered into a settlement agreement with a service provider in which the service provider returned to the Company 150,000 of the 300,000 shares of common stock issued to the service provider in the period ended March 31, 2005. The shares were originally issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The returned shares were received and cancelled effective January 2007. As a result of the return and cancellation of these shares, the Company recorded a credit to expenses in the amount of $12,000 and a debit to paid in capital of $12,000 for the period ending March
31, 2007.The $12,000 represents one half of the monetary value expensed by the Company in the period in which the shares were issued.
In conjunction with the sale of convertible debentures in the amount of $850,000 and $5,000,000 in the fiscal periods ended December 31, 2005 and 2006 respectively, the Company issued and deposited into escrow 26,798,418 shares of common stock as part of a security structure for the above referenced obligations. As of September 30, 2006 the principal balance of the debentures had been reduced to $0.0. Subsequently the holder of the debentures provided the Company with a notice of release of its security interests and returned the security shares to the Company for cancellation. On January 18, 2007 the above shares were cancelled on the Companys
books.
Warrant Conversion In September 2007, a consultant exercised the remaining 900,000 of the 1,000,000 $.15 cent warrants granted to the consultant in September 2004. The amount of $135,000 dollars was paid to XsunX by the consultant and 900,000 shares of unregistered common stock were issued. The shares were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
Use of Proceeds from the Sale of Securities
The proceeds from the above sales of securities were used primarily to fund the product developments efforts and day-to-day operations of the Company and to pay the accrued liabilities associated with these operations.
49
TABLE OF CONTENTS
EXECUTIVE COMPENSATION
Director Compensation
In the fiscal period ended September 30, 2007 Directors received no cash compensation for their service to the Company as directors, but were reimbursed for expenses actually incurred in connection with attending meetings of the Board of Directors.
Summary Compensation Table of Directors
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Annual
Retainer Fees
($)
|
|
Meeting Fees
($)
|
|
Consulting
Fees/Other
Fees
($)
|
|
Number of
Shares
(#)
|
|
Number of
Securities
Underlying
Options SARS
(#)
|
Director, Tom Djokovich
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Director, Thomas Anderson
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Executive Officer Compensation
The annual compensation for the executive officers of the Company for the post reorganization operations has not yet been determined, but is expected to be established by a resolution of the Companys Board of Directors in the future.
The following table and notes set forth the annual cash compensation paid to officers of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name & Principal Position
|
|
Fiscal Year
|
|
Annual
Salary
($)
|
|
Annual
Bonus
($)
|
|
Awards Other
Annual
Compensation
($)
|
|
Restricted
Stock
Award(s)
($)
|
|
Securities
Underlying
Options/SARS
(#)
|
Tom Djokovich, President
(1)
|
|
|
2007
|
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2006
|
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Joseph Grimes, COO
(2)
|
|
|
2007
|
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
500,000
|
|
|
|
2006
|
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,000
|
|
|
|
2005
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Jeff Huitt, CFO
(3)
|
|
|
2007
|
|
|
$
|
135,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
500,000
|
|
|
|
2006
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(1)
|
In the fiscal period ended September 30, 2007, the Company agreed to pay Mr. Djokovich an annual salary of $150,000 for services provided as Chief Executive Officer up to and until the Company determines executive compensation pursuant to an employment agreement as determined by the Board. In addition to Mr. Djokovichs base compensation the Company also provides Mr. Djokovich with a $400 monthly health insurance allowance. Effective November 2007 the Company agreed to increase Mr. Djokovich annual salary to $220,000. When necessitated by the Companys adverse financial condition Mr. Djokovich has agreed to the deferment of his monthly salary up to and until such time that the Company can repay any such deferred amounts.
|
|
(2)
|
The Company has agreed to pay Mr. Grimes an annual salary of $150,000 for services provided as Chief Operating Officer under the terms of an employment agreement effective January 1, 2007. In addition to Mr. Grimes base compensation the Company also provides Mr. Grimes with a $400 monthly health insurance allowance. Effective November 2007, the Company agreed to increase Mr. Grimes annual salary to $210,000.
|
|
(3)
|
The Company has agreed to pay Mr. Huitt an annual salary of $135,000 for services provided as Chief Financial Officer under the terms of an employment agreement effective January 1, 2007. In addition to Mr. Huitts base compensation the Company also provides Mr. Huitt with a $400 monthly health insurance allowance. Effective November 2007, the Company agreed to increase Mr. Huitts annual salary to $155,000.
|
50
TABLE OF CONTENTS
Option/SAR Grants Table
(None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)
Long Term Incentive Plans Awards in Last Fiscal Year
The following table and notes set forth the incentive awards provided to officers of the Company in 2007 fiscal period.
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
Issued
|
|
Number Issued
|
|
Exercise
Price
|
|
Expiration
Date
|
|
Consideration
|
Joseph Grimes
(1)
|
|
|
5-Apr-06
|
|
|
|
112,000
|
|
|
$
|
1.69
|
|
|
|
5-Apr-11
|
|
|
|
As part of an employment incentive agreement
|
|
Joseph Grimes
(2)
|
|
|
20-Jul-06
|
|
|
|
500,000
|
|
|
$
|
0.51
|
|
|
|
20-Jul-11
|
|
|
|
As part of an employment incentive agreement
|
|
Joseph Grimes
(3)
|
|
|
26-Jan-07
|
|
|
|
500,000
|
|
|
$
|
0.46
|
|
|
|
26-Jan-12
|
|
|
|
As part of an employment incentive agreement
|
|
Jeff Huitt
(4)
|
|
|
26-Jan-07
|
|
|
|
500,000
|
|
|
$
|
0.46
|
|
|
|
26-Jan-12
|
|
|
|
As part of an employment incentive agreement
|
|
|
(1)
|
Employment Incentive Options In connection with the issuance of an employment agreement to Joseph Grimes in April 2006, the Company granted 500,000 options at the then market price of $1.69. On July 20, 2006 the Company and Mr. Grimes mutually agreed to the cancellation of the remaining 388,000 unvested balance of this option.
|
|
(2)
|
Employment Incentive Options In connection with the issuance of an employment agreement to Joseph Grimes in April 2006, the Company granted 500,000 options on July 20, 2006 at the then market price of $0.51. The warrant vested at the rate of 28,000 shares per month up to and through the first nine months of employment, 100,000 shares became exercisable upon delivery of a marketing plan by Mr. Grimes to the Board of Directors, 148,000 shares will become exercisable upon the first sale or licensure of an XsunX technology under the marketing plan.
|
|
(3)
|
Employment Incentive Options In connection with the issuance of an employment agreement to Joseph Grimes in January 2007, the Company granted 500,000 options effective January 1 at the then market price of $0.46. The option began vesting at the rate of 50,000 shares per calendar quarter up to a total of 400,000 shares. Another 50,000 shall vest and become exercisable upon each of the first two sales/licensure of an XsunX system.
|
|
(4)
|
Employment Incentive Option In connection with the issuance of an employment agreement to Jeff Huitt in January 2007, the Company granted 500,000 options effective January 1 at the then market price of $0.46. The option began vesting at the rate of 50,000 shares per calendar quarter up to a total of 400,000 shares. Another 50,000 shall vest and become exercisable upon each of the first two sales/licensure of an XsunX system.
|
No other compensation not described above was paid or distributed during the last fiscal year to the executive officers of the Company. There are no compensatory plans or arrangements, with respect to any executive office of the Company, which result or will result from the resignation, retirement or any other termination of such individuals employment with the Company or from a change in control of the Company or a change in the individuals responsibilities following a change in control.
51
TABLE OF CONTENTS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
AVAILABLE INFORMATION
We have filed a Registration Statement on Form S-1 under the Securities Act the SEC with respect to the shares of our Common Stock offered through this Prospectus. This Prospectus is filed as a part of that Registration Statement and does not contain all of the information contained in the registration statement and exhibits. We refer you to our registration statement and each exhibit attached to it for a more complete description of matters involving us, and the statements we have made in this Prospectus are qualified in their entirety by reference to these additional materials. You may inspect the registration statement and exhibits and schedules
filed with the SEC at the SECs principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the SEC, Room 1580, 100 F Street NE, Washington DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the SEC. In addition, we will file electronic versions of our annual and quarterly reports on the SECs Electronic Data Gathering Analysis and Retrieval, or EDGAR System.
52
TABLE OF CONTENTS
FINANCIAL STATEMENTS
XSUNX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 2007, 2006 and 2005
TABLE OF CONTENTS
JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
9175 E. Kenyon Avenue, Suite 100
Denver, CO 80237
303-796-0099
REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
Board of Directors
XSUNX, INC.
Aliso Viejo, CA
We have audited the accompanying balance sheets of XSUNX, Inc., (formerly Sun River Mining, Inc). (A Development Stage Company) as of September 30, 2005, 2006, and 2007, and the related statements of operations, cash flows, and stockholders equity for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of XSUNX, INC., (formerly Sun River Mining, Inc.) at September 30, 2005, 2006, and 2007 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
The financial statements for the period February 25, 1997 (inception) to September 30, 2004, were audited by other accountants, whose report dated May 5, 2005 expressed an unqualified opinion on those statements. They have not performed any auditing procedures since that date.
Denver, CO
December 28, 2007
/s/ Jaspers + Hall, PC
Jaspers + Hall, PC
Denver, Colorado
December 28, 2007
F-1
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
September 30,
2007
|
|
September 30,
2006
|
|
September 30,
2005
|
|
|
(Audited)
|
|
(Audited)
|
|
(Audited)
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,773,748
|
|
|
$
|
4,305,105
|
|
|
$
|
175,869
|
|
Prepaid Expenses
|
|
|
54,377
|
|
|
|
349,118
|
|
|
|
79,984
|
|
Total current assets
|
|
|
1,828,125
|
|
|
|
4,654,223
|
|
|
|
255,853
|
|
Fixed assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Office & Misc. Equipment
|
|
|
39,437
|
|
|
|
9,774
|
|
|
|
2,270
|
|
Research and Development Equipment
|
|
|
532,795
|
|
|
|
392,301
|
|
|
|
181,995
|
|
Leasehold Improvement
|
|
|
89,825
|
|
|
|
80,492
|
|
|
|
|
|
Total Fixed Assets
|
|
|
662,057
|
|
|
|
482,567
|
|
|
|
184,265
|
|
Less Depreciation
|
|
|
(162,189
|
)
|
|
|
(84,941
|
)
|
|
|
(18,434
|
)
|
Total fixed assets
|
|
|
499,868
|
|
|
|
397,626
|
|
|
|
165,831
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents/Trade Marks
|
|
|
|
|
|
|
40,000
|
|
|
|
20,000
|
|
Security Deposit
|
|
|
5,815
|
|
|
|
2,615
|
|
|
|
|
|
Accrued Interest Receivable
|
|
|
143,452
|
|
|
|
|
|
|
|
|
|
Note Receivable
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
Marketable Prototype
|
|
|
1,765,000
|
|
|
|
1,765,000
|
|
|
|
|
|
Total other assets
|
|
|
3,414,267
|
|
|
|
1,807,615
|
|
|
|
20,000
|
|
Total Assets
|
|
$
|
5,742,260
|
|
|
$
|
6,859,464
|
|
|
$
|
441,684
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
259,652
|
|
|
$
|
582,161
|
|
|
$
|
78,377
|
|
Accrued Expenses
|
|
|
53,036
|
|
|
|
6,538
|
|
|
|
45,856
|
|
Current Portion of Note Payable
|
|
|
|
|
|
|
|
|
|
|
850,000
|
|
Total current liabilities
|
|
|
312,688
|
|
|
|
588,699
|
|
|
|
974,233
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized; no shares issued and outstanding Treasury Stock, no par value; no shares where issued or outstanding Common Stock, no par value; 500,000,000 shares authorized; 157,919,856 shares issued and outstanding at September 30, 2007 and 157,019,856 shares were issued and outstanding at September 30, 2006
|
|
|
13,563,869
|
|
|
|
13,290,869
|
|
|
|
3,996,735
|
|
Paid in Capital Common Stock Warrants
|
|
|
2,326,553
|
|
|
|
2,151,250
|
|
|
|
1,200,000
|
|
Deficit accumulated during the development stage
|
|
|
(10,460,850
|
)
|
|
|
(9,171,354
|
)
|
|
|
(5,729,284
|
)
|
Total stockholders profit (deficit)
|
|
|
5,429,572
|
|
|
|
6,270,765
|
|
|
|
(532,549
|
)
|
Total Liabilities and Stockholders Equity
|
|
$
|
5,742,260
|
|
|
$
|
6,859,464
|
|
|
$
|
441,684
|
|
F-2
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30th
|
|
Feb. 25, 1997
(Inception) to
September 30,
2007
|
|
|
2007
|
|
2006
|
|
2005
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Income
|
|
$
|
6,880
|
|
|
$
|
8,000
|
|
|
|
|
|
|
$
|
14,880
|
|
Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
6,880
|
|
|
|
8,000
|
|
|
|
|
|
|
|
14,880
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
47,573
|
|
|
|
9,050
|
|
|
|
3,979
|
|
|
|
60,602
|
|
Bank Charges
|
|
|
973
|
|
|
|
294
|
|
|
|
500
|
|
|
|
3,880
|
|
Conferences & Seminars
|
|
|
14,725
|
|
|
|
11,267
|
|
|
|
|
|
|
|
25,992
|
|
Consulting
|
|
|
117,751
|
|
|
|
47,850
|
|
|
|
320,944
|
|
|
|
1,510,584
|
|
Depreciation
|
|
|
77,248
|
|
|
|
82,941
|
|
|
|
18,435
|
|
|
|
181,802
|
|
Directors Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,983
|
|
Due Diligence
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,832
|
|
Equipment Rental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,733
|
|
Filing Fees
|
|
|
2,185
|
|
|
|
4,625
|
|
|
|
1,800
|
|
|
|
8,610
|
|
Impairment loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923,834
|
|
Insurance
|
|
|
66,856
|
|
|
|
2,705
|
|
|
|
758
|
|
|
|
70,319
|
|
Legal & Accounting
|
|
|
302,478
|
|
|
|
140,293
|
|
|
|
107,249
|
|
|
|
738,380
|
|
Licenses & Fees
|
|
|
90
|
|
|
|
20
|
|
|
|
25
|
|
|
|
6,545
|
|
Loan Fees
|
|
|
|
|
|
|
628,834
|
|
|
|
115,000
|
|
|
|
741,834
|
|
Meals & Entertainment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,119
|
|
Miscellaneous
|
|
|
1,691
|
|
|
|
1,882
|
|
|
|
1,675
|
|
|
|
7,378
|
|
Office Expenses
|
|
|
15,086
|
|
|
|
4,581
|
|
|
|
2,634
|
|
|
|
41,500
|
|
Patent Fees
|
|
|
1,181
|
|
|
|
625
|
|
|
|
663
|
|
|
|
2,469
|
|
Postage & Shipping
|
|
|
8,327
|
|
|
|
1,123
|
|
|
|
2,161
|
|
|
|
14,828
|
|
Printing
|
|
|
9,860
|
|
|
|
8,730
|
|
|
|
4,300
|
|
|
|
28,470
|
|
Public Relations
|
|
|
79,831
|
|
|
|
182,151
|
|
|
|
116,413
|
|
|
|
489,361
|
|
Recruitment Expenses
|
|
|
47,064
|
|
|
|
|
|
|
|
|
|
|
|
47,064
|
|
Research & Development
|
|
|
435,534
|
|
|
|
949,472
|
|
|
|
501,423
|
|
|
|
2,015,922
|
|
Rent
|
|
|
66,702
|
|
|
|
19,858
|
|
|
|
9,000
|
|
|
|
112,523
|
|
Salaries
|
|
|
828,711
|
|
|
|
275,089
|
|
|
|
155,236
|
|
|
|
1,759,122
|
|
Subscription Reports
|
|
|
6,103
|
|
|
|
2,895
|
|
|
|
860
|
|
|
|
9,858
|
|
Taxes
|
|
|
4,180
|
|
|
|
|
|
|
|
|
|
|
|
8,837
|
|
Telephone
|
|
|
22,301
|
|
|
|
12,318
|
|
|
|
5,489
|
|
|
|
74,923
|
|
Transfer Agent Expense
|
|
|
|
|
|
|
411
|
|
|
|
3,628
|
|
|
|
20,365
|
|
Travel, Meals & Entertainment
|
|
|
158,503
|
|
|
|
41,823
|
|
|
|
11,234
|
|
|
|
274,493
|
|
Utilities
|
|
|
8,103
|
|
|
|
|
|
|
|
|
|
|
|
8,103
|
|
Abandoned Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
808
|
|
Option/Warrant Expense
|
|
|
325,303
|
|
|
|
951,250
|
|
|
|
|
|
|
|
2,476,553
|
|
Total Operating Expenses
|
|
|
2,648,359
|
|
|
|
3,380,087
|
|
|
|
1,383,406
|
|
|
|
11,728,626
|
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
1,197
|
|
|
|
158,333
|
|
|
|
17,433
|
|
|
|
248,560
|
|
Interest Income
|
|
|
(253,179
|
)
|
|
|
(88,480
|
)
|
|
|
|
|
|
|
(341,682
|
)
|
Legal Settlement
|
|
|
(1,100,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,100,000
|
)
|
Forgiveness of Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59,773
|
)
|
Total Other Income/Expense
|
|
|
(1,351,982
|
)
|
|
|
69,853
|
|
|
|
17,433
|
|
|
|
(1,252,895
|
)
|
Net (Loss)
|
|
$
|
(1,289,497
|
)
|
|
$
|
(3,441,940
|
)
|
|
$
|
(1,400,839
|
)
|
|
$
|
(10,460,850
|
)
|
Per Share Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
156,680,076
|
|
|
|
138,005,964
|
|
|
|
123,854,733
|
|
|
|
|
|
Net Loss per Common Share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
F-3
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
September 30, 2007
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock
|
|
Common Stock
|
|
Paid in
Capital
Common
Stock
Warrants
|
|
Deficit
Accumulated
During the
Exploration
Stage
|
|
Totals
|
|
|
# of
Shares
|
|
Amount
|
|
# of
Shares
|
|
Amount
|
Inception February 25, 1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for cash
|
|
|
|
|
|
|
|
|
|
|
15,880
|
|
|
|
217,700
|
|
|
|
|
|
|
|
|
|
|
|
217,700
|
|
Issuance of stock to Founders
|
|
|
|
|
|
|
|
|
|
|
14,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for consolidation
|
|
|
|
|
|
|
|
|
|
|
445,000
|
|
|
|
312,106
|
|
|
|
|
|
|
|
|
|
|
|
312,106
|
|
Net Loss for Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(193,973
|
)
|
|
|
(193,973
|
)
|
Balance September 30, 1997
|
|
|
|
|
|
|
|
|
|
|
474,990
|
|
|
|
529,806
|
|
|
|
|
|
|
|
(193,973
|
)
|
|
|
335,834
|
|
Issuance of stock for services
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
Issuance of stock for cash
|
|
|
|
|
|
|
|
|
|
|
50,200
|
|
|
|
204,000
|
|
|
|
|
|
|
|
|
|
|
|
204,000
|
|
Consolidation stock cancelled
|
|
|
|
|
|
|
|
|
|
|
(60,000
|
)
|
|
|
(50,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(50,000
|
)
|
Net Loss for Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(799,451
|
)
|
|
|
(799,451
|
)
|
Balance September 30, 1998
|
|
|
|
|
|
|
|
|
|
|
466,690
|
|
|
|
713,806
|
|
|
|
|
|
|
|
(993,424
|
)
|
|
|
(279,618
|
)
|
Issuance of stock for cash
|
|
|
|
|
|
|
|
|
|
|
151,458
|
|
|
|
717,113
|
|
|
|
|
|
|
|
|
|
|
|
717,113
|
|
Issuance of stock for services
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
|
|
463,500
|
|
|
|
|
|
|
|
|
|
|
|
463,500
|
|
Net Loss for Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,482,017
|
)
|
|
|
(1,482,017
|
)
|
Balance September 30, 1999
|
|
|
|
|
|
|
|
|
|
|
753,148
|
|
|
|
1,894,419
|
|
|
|
|
|
|
|
(2,475,441
|
)
|
|
|
(581,022
|
)
|
Issuance of stock for cash
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
27,000
|
|
|
|
|
|
|
|
|
|
|
|
27,000
|
|
Net Loss for year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(118,369
|
)
|
|
|
(118,369
|
)
|
Balance September 30, 2000
|
|
|
|
|
|
|
|
|
|
|
768,148
|
|
|
|
1,921,419
|
|
|
|
|
|
|
|
(2,593,810
|
)
|
|
|
(672,391
|
)
|
Extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
337,887
|
|
|
|
|
|
|
|
|
|
|
|
337,887
|
|
Net Loss for year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,402
|
)
|
|
|
(32,402
|
)
|
Balance September 30, 2001
|
|
|
|
|
|
|
|
|
|
|
768,148
|
|
|
|
2,259,306
|
|
|
|
|
|
|
|
(2,626,212
|
)
|
|
|
(366,906
|
)
|
Net Loss for year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,297
|
)
|
|
|
(47,297
|
)
|
Balance September 30, 2002
|
|
|
|
|
|
|
|
|
|
|
768,148
|
|
|
|
2,259,306
|
|
|
|
|
|
|
|
(2,673,509
|
)
|
|
|
(414,203
|
)
|
Issuance of stock for Assets
|
|
|
|
|
|
|
|
|
|
|
70,000,000
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Issuance of stock for Cash
|
|
|
|
|
|
|
|
|
|
|
9,000,000
|
|
|
|
225,450
|
|
|
|
|
|
|
|
|
|
|
|
225,450
|
|
Issuance of stock for Debt
|
|
|
|
|
|
|
|
|
|
|
115,000
|
|
|
|
121,828
|
|
|
|
|
|
|
|
|
|
|
|
121,828
|
|
Issuance of stock for Expenses
|
|
|
|
|
|
|
|
|
|
|
115,000
|
|
|
|
89,939
|
|
|
|
|
|
|
|
|
|
|
|
89,939
|
|
Issuance of stock for Services
|
|
|
|
|
|
|
|
|
|
|
31,300,000
|
|
|
|
125,200
|
|
|
|
|
|
|
|
|
|
|
|
125,200
|
|
Net Loss for year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(145,868
|
)
|
|
|
(145,868
|
)
|
Balance September 30, 2003
|
|
|
|
|
|
|
|
|
|
|
111,298,148
|
|
|
|
2,821,726
|
|
|
|
|
|
|
|
(2,819,377
|
)
|
|
|
2,350
|
|
Issuance of stock for cash
|
|
|
|
|
|
|
|
|
|
|
2,737,954
|
|
|
|
282,670
|
|
|
|
|
|
|
|
|
|
|
|
282,670
|
|
Issuance of Common Stock Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
1,200,000
|
|
Net Loss for Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,509,068
|
)
|
|
|
(1,509,068
|
)
|
Balance September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
114,036,102
|
|
|
|
3,104,396
|
|
|
|
1,200,000
|
|
|
|
(4,328,445
|
)
|
|
|
(24,049
|
)
|
Issuance of stock for cash
|
|
|
|
|
|
|
|
|
|
|
6,747,037
|
|
|
|
531,395
|
|
|
|
|
|
|
|
|
|
|
|
531,395
|
|
Issuance of stock for services
|
|
|
|
|
|
|
|
|
|
|
3,093,500
|
|
|
|
360,945
|
|
|
|
|
|
|
|
|
|
|
|
360,945
|
|
Issuance of stock for
collateral
|
|
|
26,798,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,400,839
|
)
|
|
|
(1,400,839
|
)
|
Balance September 30, 2005
|
|
|
26,798,418
|
|
|
|
|
|
|
|
123,876,639
|
|
|
|
3,996,735
|
|
|
|
1,200,000
|
|
|
|
(5,729,284
|
)
|
|
|
(532,549
|
)
|
Issuance of stock for services
|
|
|
|
|
|
|
|
|
|
|
72,366
|
|
|
|
31,500
|
|
|
|
|
|
|
|
|
|
|
|
31,500
|
|
Issuance of Common Stock Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
951,250
|
|
|
|
|
|
|
|
951,250
|
|
Issuance of stock for
debenture conversion
|
|
|
|
|
|
|
|
|
|
|
21,657,895
|
|
|
|
5,850,000
|
|
|
|
|
|
|
|
|
|
|
|
5,850,000
|
|
Issuance of stock for interest expense
|
|
|
|
|
|
|
|
|
|
|
712,956
|
|
|
|
241,383
|
|
|
|
|
|
|
|
|
|
|
|
241,383
|
|
Issuance of stock for warrant conversion
|
|
|
|
|
|
|
|
|
|
|
10,850,000
|
|
|
|
3,171,250
|
|
|
|
|
|
|
|
|
|
|
|
3,171,250
|
|
Net Loss for Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,441,940
|
)
|
|
|
(3,441,940
|
)
|
Balance September 30, 2006
|
|
|
26,798,418
|
|
|
|
|
|
|
|
157,169,856
|
|
|
|
13,290,869
|
|
|
|
2,151,250
|
|
|
|
(9,171,354
|
)
|
|
|
6,270,765
|
|
Cancellation of Stock for Services Returned
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
|
(12,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,000
|
)
|
Release of Security Collateral
|
|
|
(26,798,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Stock for Warrants
Jim Bentley
|
|
|
|
|
|
|
|
|
|
|
900,000
|
|
|
|
285,000
|
|
|
|
(150,000
|
)
|
|
|
|
|
|
|
135,000
|
|
Stock Option/Warrant Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,303
|
|
|
|
|
|
|
|
325,303
|
|
Net Loss for Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,289,497
|
)
|
|
|
(1,289,497
|
)
|
Balance September 30, 2007
|
|
|
|
|
|
$
|
|
|
|
|
157,919,856
|
|
|
$
|
13,563,869
|
|
|
$
|
2,326,553
|
|
|
$
|
(10,460,850
|
)
|
|
|
5,429,572
|
|
F-4
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30
|
|
Feb. 25, 1997
(Inception) to
September 30,
2007
|
|
|
2007
|
|
2006
|
|
2005
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,289,497
|
)
|
|
$
|
(3,441,940
|
)
|
|
$
|
(1,400,839
|
)
|
|
$
|
(10,460,850
|
)
|
Issuance of Common Stock for Services
|
|
|
(12,000
|
)
|
|
|
31,500
|
|
|
|
50,827
|
|
|
|
1,336,998
|
|
Issuance of Common Stock for Loan Inducement
|
|
|
|
|
|
|
|
|
|
|
310,117
|
|
|
|
310,117
|
|
Option/Warrant Expense
|
|
|
325,303
|
|
|
|
951,250
|
|
|
|
|
|
|
|
2,476,553
|
|
Issuance of Stock for Interest
|
|
|
|
|
|
|
241,383
|
|
|
|
|
|
|
|
241,383
|
|
Depreciation
|
|
|
77,248
|
|
|
|
82,941
|
|
|
|
18,435
|
|
|
|
162,189
|
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) in Deferred Financing Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Accounts Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Security Deposit
|
|
|
(3,200
|
)
|
|
|
(2,615
|
)
|
|
|
|
|
|
|
(5,815
|
)
|
(Increase) in Prepaid Expense
|
|
|
294,741
|
|
|
|
(269,133
|
)
|
|
|
(60,115
|
)
|
|
|
(54,377
|
)
|
(Decrease) in Accounts Payable
|
|
|
(322,509
|
)
|
|
|
503,784
|
|
|
|
(10,653
|
)
|
|
|
259,652
|
|
Increase (Decrease) in Accrued Liabilities
|
|
|
86,498
|
|
|
|
(39,448
|
)
|
|
|
42,578
|
|
|
|
53,036
|
|
Net Cash Flows Used for Operating Activities
|
|
|
(843,416
|
)
|
|
|
(1,942,278
|
)
|
|
|
(1,049,650
|
)
|
|
|
(5,681,114
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Fixed Assets
|
|
|
(179,490
|
)
|
|
|
(314,736
|
)
|
|
|
(181,995
|
)
|
|
|
(662,057
|
)
|
Purchase of Marktable Prototype and Patent
|
|
|
|
|
|
|
(1,785,000
|
)
|
|
|
(10,000
|
)
|
|
|
(1,765,000
|
)
|
Note Receivable
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,500,000
|
)
|
Accrued Interest earned
|
|
|
(143,452
|
)
|
|
|
|
|
|
|
|
|
|
|
(143,452
|
)
|
Net Cash Flows Used for Investing Activities
|
|
|
(1,822,942
|
)
|
|
|
(2,099,736
|
)
|
|
|
(191,995
|
)
|
|
|
(4,070,509
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Notes Payable Stockholder
|
|
|
|
|
|
|
|
|
|
|
3,775
|
|
|
|
|
|
Payment for Note Payable Stockholder
|
|
|
|
|
|
|
|
|
|
|
(5,000
|
)
|
|
|
|
|
Proceeds from Warrant Conversion
|
|
|
|
|
|
|
3,171,250
|
|
|
|
|
|
|
|
3,171,250
|
|
Proceeds from Debenture Conversion
|
|
|
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
5,000,000
|
|
Proceeds from Convertible Debt
|
|
|
|
|
|
|
|
|
|
|
850,000
|
|
|
|
|
|
Issuance of Common Stock for Warrants
|
|
|
135,000
|
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
Issuance of Common Stock for cash
|
|
|
|
|
|
|
|
|
|
|
531,395
|
|
|
|
3,219,121
|
|
Net Cash Flows Provided by Financing Activities
|
|
|
135,000
|
|
|
|
8,171,250
|
|
|
|
1,380,170
|
|
|
|
11,525,371
|
|
Net Increase (Decrease) in Cash
|
|
|
(2,531,358
|
)
|
|
|
4,129,236
|
|
|
|
138,525
|
|
|
|
1,773,748
|
|
Cash and cash equivalents Beginning of period
|
|
|
4,305,105
|
|
|
|
175,869
|
|
|
|
37,344
|
|
|
|
|
|
Cash and cash equivalents End of period
|
|
$
|
1,773,748
|
|
|
$
|
4,305,105
|
|
|
$
|
175,869
|
|
|
$
|
1,773,748
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Paid During the Year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,197
|
|
|
|
|
|
|
|
|
|
|
$
|
72,543
|
|
Income Taxes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Non-Cash Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued (returned) in exchange for services
|
|
$
|
(12,000
|
)
|
|
$
|
31,500
|
|
|
$
|
50,827
|
|
|
$
|
1,336,998
|
|
Conversion of debt for Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued for Loan Inducement
|
|
|
|
|
|
|
|
|
|
$
|
310,117
|
|
|
$
|
310,117
|
|
Common Stock Issued for Interest
|
|
|
|
|
|
$
|
241,383
|
|
|
|
|
|
|
$
|
241,383
|
|
F-5
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 1 Organization:
XsunX, Inc. (XsunX, the Company or the issuer) is a Colorado corporation formerly known as Sun River Mining Inc. Sun River). The Company was originally incorporated in Colorado on February 25, 1997. Effective September 24, 2003, the Company completed a Plan of Reorganization and Asset Purchase Agreement (the Plan).
Pursuant to the Plan the Company acquired the following three patents from Xoptix, Inc., a California corporation for Seventy Million (70,000,000) shares (post reverse split one for twenty): No. 6,180,871 for Transparent Solar Cell and Method of Fabrication (Device), granted on January 30, 2001; No. 6,320,117 for Transparent Solar Cell and Method of Fabrication (Method of Fabrication), granted on November 20, 2001; and No. 6,509,204 for Transparent Solar Cell and Method of Fabrication (formed with a Schottky barrier diode and method of its manufacture), granted on January 21, 2003.
Pursuant to the Plan, the Company authorized the issuance of 110,530,000 (post reverse split) common shares. Prior to the Plan the Company had no tangible assets and insignificant liabilities. Subsequent to the Plan, the Company completed its name change from Sun River Mining, Inc. to XsunX, Inc. The transaction was completed on September 30, 2003.
XsunX, Inc. is a thin-film photovoltaic TFPV company that has spent the last three years in focused research with a photovoltaic material called Amorphous Silicon. During this time, the Company has developed the technical capabilities, qualified core staff, and market understanding that it believes will be necessary to complete the development of its products and establish product manufacturing infrastructure. The products that the Company intends to produce and market are amorphous silicon solar modules on glass panels.
Utilizing this experience and the collective body of intellectual property we have developed, or evaluated as suitable or advantageous for use, we have designed a 125 watt thin film amorphous silicon solar module and a proprietary semiconductor manufacturing system to produce these modules in commercial quantities. We anticipate the manufacture of our solar modules, employing the design of our high-throughput production lines in an automated continuous process, will provide manufacturing costs significantly less than those of traditional crystalline silicon solar module manufacturers, and be highly competitive with other thin film offerings.
Note 2 Summary of Significant Accounting Policies:
Basis of Presentation Development Stage Company
The Company has not earned any revenues from operations. Accordingly, the Companys activities have been accounted for as those of a Development Stage Enterprise as set forth in Financial Accounting Standards Board Statement No. 7 (SFAS 7). Among the disclosures required by SFAS 7 are that the Companys financial statements be identified as those of a development stage company, and that the statements of operations, stockholders equity (deficit) and cash flows disclose activity since the date of the Companys inception.
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.
Cash and Cash Equivalents:
For purposes of the statements of cash flows, cash and cash equivalents include cash in banks and money markets with an original maturity of three months or less.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates made in
F-6
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 2 Summary of Significant Accounting Policies: (continued)
preparing these financial statements include the estimate for the useful life of property and equipment, and the fair value of stock warrants. Actual results could differ from those estimates
Fair Value of Financial Instruments
The Companys financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which approximates their fair value, due to the relatively short maturity of these instruments. As of September 30, 2007, 2006 and 2005, the Companys notes payable have stated borrowing rates that are consistent with those currently available to the Company and, accordingly, the Company believes the carrying value of these debt instruments approximates their fair value.
Property and Equipment
Property and equipment are stated at cost, and are depreciated or amortized using the straight-line method over the following estimated useful lives:
|
|
|
Furniture, fixtures & equipment
|
|
5 years
|
Computer equipment
|
|
3 years
|
Commerce server
|
|
3 years
|
Computer software
|
|
3 years
|
Leasehold improvements
|
|
Length of the lease
|
The Company capitalizes property and equipment over $500. Property and equipment under $500 are expensed in the year purchased.
Net earnings (loss) per Share
Basic loss per share is computed on the basis of the weighted average number of common shares outstanding. For all periods, all of the Companys common stock equivalents were excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to the Companys net losses. There are 17,312,000 issued options / warrants outstanding as of September 30, 2007 that are potentially dilutive of which 8,768,167 are currently vested.
Advertising
Advertising costs are expensed as incurred. Total advertising costs were $47,573, $9,050 and $3,979 for the years ended September 30, 2007, 2006 and 2005, respectively.
Research and Development
Research and development costs are expensed as incurred. Total research and development costs were $435,534, $949,472 and $501,423 for the years ended September 30, 2007, 2006 and 2005, respectively.
Other Comprehensive Income
The Company has no components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
F-7
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 3 Federal Income Tax:
The Company accounts for income taxes under SFAS No. 109, which requires the asset and liability approach to accounting for income taxes. Under this approach, deferred income taxes are determined based upon differences between the financial statement and tax bases of the Companys assets and liabilities and operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized if it is more likely than not that the future tax benefit will be realized.
Significant components of the Companys deferred tax liabilities and assets are as follows:
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
Deferred Tax Liability
|
|
$
|
4,384,288
|
|
|
$
|
3,858,490
|
|
|
$
|
2,291,714
|
|
Deferred Tax Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Loss Carry forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
Book/Tax Differences in Bases of Assets
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Valuation allowance
|
|
$
|
4,384,288
|
|
|
$
|
3,858,490
|
|
|
$
|
2,291,714
|
|
Net Deferred tax assets
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
At September 30, 2007, the Company had net operating loss carry forwards of approximately, $10,960,721 for federal income tax purposes. These carry forwards if not utilized to offset taxable income will begin to expire in 2010.
Note 4 Capital Stock Transactions:
The authorized capital stock of the Company was established at 500,000,000 shares with no par value.
In the fiscal year ended September 30, 2005, the Company issued a total of 9,818,631 shares of common stock as follows: 6,735,137 shares of common stock were issued, raising gross proceeds of $531,396; 474,231 shares of common stock were issued in transactions for consulting services valued at $40,000; and 2,609,263 shares of common stock were issued in connection with the sale of an $850,000 secured convertible debenture by the Company.
In the fiscal year ended September 30, 2006, the Company issued a total of 33,293,217 shares of common stock as follows: 33,120,851 shares of common stock registered pursuant to an effective registration statement were issued pursuant to the conversion of secured convertible debentures, raising gross proceeds of $9,294,133; 72,366 shares of common stock were issued for consulting services valued at $31,500; and 100,000 shares of common stock were issued in connection with the exercise of 100,000 warrants bearing an exercise price of $.15 each.
The following represents a detailed analysis of the 2007 capital stock transactions.
Return of Shares for Services In December 2006, the Company entered into a settlement agreement with a service provider in which the service provider returned to the Company 150,000 of the 300,000 shares of common stock issued to the service provider in the period ended March 31, 2005. The returned shares were received and cancelled effective January 2007. As a result of the return and cancellation of these shares, the Company recorded a credit to expenses in the amount of $12,000 and a debit to paid in capital of $12,000 for the period ending March 31, 2007.The $12,000 represents one half of the monetary value expensed by the
Company in the period in which the shares were issued.
Return of Security Shares In conjunction with the sale of convertible debentures in the amount of $850,000 and $5,000,000 in the fiscal periods ended December 31, 2005 and 2006 respectively, the Company issued and deposited into escrow 26,798,418 shares of common stock as part of a security structure for the above referenced obligations. As of September 30, 2006 the principal balance of the debentures had been
F-8
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 4 Capital Stock Transactions: (continued)
reduced to $0.0. Subsequently the holder of the debentures provided the Company with a notice of release of its security interests and returned the security shares to the Company for cancellation. On January 18, 2007 the above shares were cancelled on the Companys books.
Issuance of Shares Warrant Conversion In September 2007, a consultant exercised the remaining 900,000 of the 1,000,000 $.15 cent warrants granted to the consultant in September 2004. The amount of $135,000 was paid to XsunX by the consultant and 900,000 shares of unregistered common stock were issued.
Note 5 Employment and Consulting Agreements:
Effective January 1, 2007, XSUNX, Inc. entered into two year Employment Agreements with the following individuals:
|
|
|
|
|
Joseph Grimes
|
|
|
Chief Operating Officer
|
|
|
$
|
150,000.00
|
|
Jeff Huitt
|
|
|
Chief Financial Officer
|
|
|
$
|
135,000.00
|
|
Robert Wendt
|
|
|
Vice President of Engineering
|
|
|
$
|
150,000.00
|
|
Kurt Laetz
|
|
|
Vice President of Global Sales
|
|
|
$
|
120,000.00
|
(1)
|
|
(1)
|
Effective September 2007 Kurt Laetz terminated his employment agreement and employment with the Company.
|
Effective January 26, 2007, XsunX entered into a two year Consulting and Advisory Agreement with Dr. John Moore to become the Chairman of the Companys Scientific Advisory Board. The Company compensates Dr. Moore $1,500 per month for his services.
Effective February 22, 2007, XsunX entered into a two year Consulting and Advisory Agreement with Dr. Edward Yu to become a member of the Companys Scientific Advisory Board. The Company compensates Dr. Moore $1,000 per month for his services.
Effective April 23, 2007, XsunX entered into a two year Consulting and Advisory Agreement with Dr. Richard Ahrenkiel to become a member of the Companys Scientific Advisory Board. The Company compensates Dr. Moore $1,000 per month for his services.
Effective August 28, 2007, XsunX entered into a two year Consulting and Advisory Agreement with Dr. Michael Russak to become a member of the Companys Scientific Advisory Board. The Company compensates Dr. Moore $1,000 per month for his services.
Note 6 Stock Options and Warrants:
Stock Option Plan
On January 5, 2007, the Board of Directors of XsunX resolved to establish the Companys 2007 Stock Option Plan to enable the Company to obtain and retain the services of the types of employees, consultants and directors who could contribute to the Companys long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all stockholders of the Company. A total of 20,000,000 shares of common stock are authorized under the plan.
Stock-Based Compensation
Effective September 30, 2007, XsunX adopted SFAS No. 123(R), Share-Based Payment (SFAS No. 123(R)). This statement replaces SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123) and supersedes APB No. 25. SFAS No. 123(R) requires that all stock-based compensation be recognized as an expense in the financial statements and that such cost be measured at the fair value of the grant. This statement was adopted using the modified prospective method of application, which requires us to
F-9
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 6 Stock Options and Warrants: (continued)
recognize compensation expense on a prospective basis. Therefore, prior period financial statements have not been restated. Under this method, in addition to reflecting compensation expense for new share-based grants, expense is also recognized to reflect the remaining service period of grants that had been included in pro-forma disclosures in prior periods.
XsunX records the fair value of stock-based compensation grants as an expense. In order to determine the fair value of stock options on the date of grant, XsunX applies the Black-Scholes option-pricing model. Inherent in this model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield. While the risk-free interest rate and dividend yield are less subjective assumptions, typically based on factual data derived from public sources, the expected stock-price volatility and option life assumptions require a greater level of judgment.
XsunX uses an expected stock-price volatility assumption that is based on historical implied volatilities of the underlying stock which is obtained from public data sources. With regard to the weighted-average option life assumption, XsunX considers the exercise behavior of past grants and models the pattern of aggregate exercises. Patterns are determined on specific criteria of the aggregate pool of optionees. Forfeiture rates are based on the Companys historical data for stock option forfeitures. Total net stock-based compensation expense is attributable to the granting of and the remaining requisite service periods of stock options
previously granted. Compensation expense attributable to net stock-based compensation in fiscal 2007 was $325,303, increasing basic loss $.002 per share.
Warrant Grants
There were no Warrants issued by the Company in the year ended September 30, 2007.
Stock Option Plan Grants
During the year ended September 30, 2007 the board of directors authorized the grant of options to purchase an aggregate of 2,200,000 shares of the Companys common stock of which 1,950,000 remain authorized. Such options are exercisable at prices ranging from $.41 to $.53 per share, and expire at various times through August 2012.
The following represents a detailed analysis of the 2007 stock option grants.
Consulting Incentive Options: In connection with entering into a Consulting and Advisory Agreement effective January 26, 2007 with Dr. John Moore for two years service as Chairman of the Companys Scientific Advisory Board, the Company issued to Dr. Moore 150,000 options under the terms of a Stock Option Agreement, with an exercise price of $.46 per share. The options have a 5 year exercise term and vest under the following provisions:
|
(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of April 26, 2007. Thereafter, the Option shall vest become exercisable at the rate of 18,750 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
|
Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Jeff Huitt for two years service as Chief Financial Officer, the Company issued to Mr. Huitt 500,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. The options have a 5 year exercise term and vest under the following provisions:
|
(c)
|
The Option became exercisable in the amount of 50,000 shares upon the First Vesting Date of April 1, 2007. Thereafter, the Option shall vest and become exercisable at the rate of 50,000 Shares per calendar quarter up to a total of 400,000 shares.
|
F-10
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 6 Stock Options and Warrants: (continued)
|
(d)
|
This Option shall also become exercisable in the amount of 50,000 shares for each of the first two sales/licensure of an XsunX system.
|
Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Robert Wendt for two years service as Vice President of Engineering, the Company issued to Mr. Wendt 500,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. The options have a 5 year exercise term and vest under the following provisions:
|
(a)
|
The Option became exercisable in the amount of 50,000 shares upon the First Vesting Date of April 1, 2007. Thereafter, the Option shall vest and become exercisable at the rate of 50,000 Shares per calendar quarter up to a total of 400,000 shares.
|
|
(b)
|
This Option shall also become exercisable in the amount of 50,000 shares for each of the first two sales/licensure of an XsunX system.
|
Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Kurt Laetz for two years service as Vice President of Sales, the Company issued to Mr. Laetz 250,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. As of September 30, 2007 Mr. Laetz no longer worked for the Company and the above referenced option grant was terminated and the available options were returned to the pool of available options under the XsunX 2007 Stock Option Plan.
Employment Incentive Options In connection with entering into an Employment Agreement effective January 1, 2007 with Joseph Grimes for two years service as Chief Operating Officer, the Company issued to Mr. Grimes 500,000 options under the terms of a Stock Option Agreement effective January 26, 2007, with an exercise price of $.46 per share. The options have a 5 year exercise term and vest under the following provisions:
|
(a)
|
The Option became exercisable in the amount of 50,000 shares upon the First Vesting Date of April 1, 2007. Thereafter, the Option shall vest and become exercisable at the rate of 50,000 Shares per calendar quarter up to a total of 400,000 shares.
|
|
(b)
|
This Option shall also become exercisable in the amount of 50,000 shares for each of the first two sales/licensure of an XsunX system.
|
Consulting Incentive Options: In conjunction with entering into a Consulting and Advisory Agreement effective February 22, 2007 with Dr. Edward Yu for two years service as a member of the Companys Scientific Advisory Board, the Company issued to Dr. Yu 100,000 options under the terms of a Stock Option Agreement, with an exercise price of $.53 per share. The options have a 5 year exercise term and vest under the following provisions:
|
(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of May 23, 2007. Thereafter, the Option shall vest become exercisable at the rate of 12,500 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
|
F-11
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 6 Stock Options and Warrants: (continued)
Consulting Incentive Options: In conjunction with entering into a Consulting and Advisory Agreement effective April 23, 2007 with Dr. Richard Ahrenkiel for two years service as a member of the Companys Scientific Advisory Board, the Company issued to Dr. Yu 100,000 options under the terms of a Stock Option Agreement, with an exercise price of $.45 per share. The options have a 5 year exercise term and vest under the following provisions:
|
(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of July 24, 2007. Thereafter, the Option shall vest become exercisable at the rate of 12,500 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
|
Consulting Incentive Options: In conjunction with entering into a Consulting and Advisory Agreement effective August 28, 2007 with Dr. Michael Russak for two years service as a member of the Companys Scientific Advisory Board, the Company issued to Dr. Russak 100,000 options under the terms of a Stock Option Agreement, with an exercise price of $.41 per share. The options have a 5 year exercise term and vest under the following provisions:
|
(a)
|
The Option became exercisable in the amount of 12,500 shares upon the First Vesting Date of November 29, 2007. Thereafter, the Option shall vest become exercisable at the rate of 12,500 Shares per calendar quarter, or any apportioned amount thereof, during the term of engagement of the Optionee by XsunX.
|
The total charged in expense for the 2007 fiscal year was $325,303 for the issuance of the above described warrants and stock options.
F-12
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 6 Stock Options and Warrants: (continued)
A summary of option and warrant activity for the years ended September 30, 2007, 2006 and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Options/
Warrants
|
|
Weighted-
Average
Exercise
Price
|
|
Accrued
Options/
Warrants
Exercisable
|
|
Weighted-
Average
Exercise
Price
|
Outstanding, September 30, 2004
|
|
|
8,000,000
|
|
|
$
|
0.15
|
|
|
|
5,500,000
|
|
|
$
|
0.15
|
|
Granted 2005
|
|
|
7,125,000
|
|
|
$
|
0.17
|
|
|
|
6,708,334
|
|
|
$
|
0.17
|
|
Exercisable from 2004 in 2005
|
|
|
|
|
|
|
|
|
|
|
1,200,000
|
|
|
|
0.15
|
|
Outstanding, September 30, 2005
|
|
|
15,125,000
|
|
|
$
|
0.16
|
|
|
|
13,408,334
|
|
|
$
|
0.16
|
|
Granted 2006
|
|
|
11,987,000
|
|
|
$
|
0.36
|
|
|
|
5,543,000
|
|
|
$
|
0.46
|
|
Exercised 2006
|
|
|
(4,375,000
|
)
|
|
$
|
0.48
|
|
|
|
(4,375,000
|
)
|
|
$
|
0.48
|
|
Exercised from 2004 in 2006
|
|
|
(100,000
|
)
|
|
$
|
0.15
|
|
|
|
(100,000
|
)
|
|
$
|
0.15
|
|
Exercised from 2005 in 2006
|
|
|
(6,375,000
|
)
|
|
$
|
0.17
|
|
|
|
(6,375,000
|
)
|
|
$
|
0.17
|
|
Exercisable from 2004 in 2006
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
$
|
0.15
|
|
Exercisable from 2005 in 2006
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
$
|
0.20
|
|
Outstanding, September 30, 2006
|
|
|
16,262,000
|
|
|
|
|
|
|
|
8,701,334
|
|
|
|
|
|
Granted 2007
|
|
|
1,950,000
|
|
|
$
|
0.46
|
|
|
|
554,167
|
|
|
$
|
0.46
|
|
Exercised 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised from 2004 in 2007
|
|
|
(900,000
|
)
|
|
$
|
0.15
|
|
|
|
(900,000
|
)
|
|
$
|
0.15
|
|
Exercised from 2005 in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised from 2006 in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable from 2004 in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable from 2005 in 2007
|
|
|
|
|
|
|
|
|
|
|
116,666
|
|
|
$
|
0.20
|
|
Exercisable from 2006 in 2007
|
|
|
|
|
|
|
|
|
|
|
296,000
|
|
|
$
|
0.51
|
|
Outstanding, September 30, 2007
|
|
|
17,312,000
|
|
|
$
|
0.33
|
|
|
|
8,768,167
|
|
|
$
|
0.22
|
|
At September 30, 2007, the range of option/warrant prices for shares under options/warrants not exercised and the weighted-average remaining contractual life is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/Warrants Outstanding
|
|
Options/Warrants Exercisable
|
Range of
Option/Warrant
Prices
|
|
Number of
Options/Warrants
|
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Remaining
Contractual
Life(yr)
|
|
Number of
Options/Warrants
|
|
Weighted-Average
Exercise Price
|
$0.15
|
|
|
7,000,000
|
|
|
$
|
0.15
|
|
|
|
1.9
|
|
|
|
6,000,000
|
|
|
$
|
0.15
|
|
$0.20
|
|
|
750,000
|
|
|
$
|
0.20
|
|
|
|
0.3
|
|
|
|
750,000
|
|
|
$
|
0.20
|
|
$0.25
|
|
|
7,000,000
|
|
|
$
|
0.25
|
|
|
|
3.0
|
|
|
|
1,000,000
|
|
|
$
|
0.25
|
|
$0.41
|
|
|
100,000
|
|
|
$
|
0.41
|
|
|
|
4.9
|
|
|
|
4,167
|
|
|
$
|
0.41
|
|
$0.45
|
|
|
100,000
|
|
|
$
|
0.45
|
|
|
|
4.6
|
|
|
|
20,833
|
|
|
$
|
0.45
|
|
$0.46
|
|
|
1,650,000
|
|
|
$
|
0.46
|
|
|
|
4.3
|
|
|
|
500,000
|
|
|
$
|
0.46
|
|
$0.51
|
|
|
500,000
|
|
|
$
|
0.51
|
|
|
|
3.8
|
|
|
|
352,000
|
|
|
$
|
0.51
|
|
$0.53
|
|
|
100,000
|
|
|
$
|
0.53
|
|
|
|
4.4
|
|
|
|
29,167
|
|
|
$
|
0.53
|
|
$1.69
|
|
|
112,000
|
|
|
$
|
1.69
|
|
|
|
3.5
|
|
|
|
112,000
|
|
|
$
|
1.69
|
|
|
|
|
17,312,000
|
|
|
|
|
|
|
|
|
|
|
|
8,768,167
|
|
|
|
|
|
F-13
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 7 Marketable Production Machine Acquisition:
Subject to the terms of the Expanded Use License Agreement dated October 12, 2005 between XsunX and MVSystems, Inc. the parties are building a first run production machine for the purpose of proofing and demonstrating certain thin film solar cell manufacturing technology. The parties intend to sell this first machine and have agreed to a 50/50 split of the net proceeds of the sale of this machine excluding production costs and reasonable marketing expenses.
Note 8 Notes, Commitments, and Contingencies:
Trademark Transfer Agreement
In November 2007, the Company elected not to complete the trademark transfer agreement for POWER GLASS. The value of the Trademark is minimal given the Companys expanded focus on manufacturing. As a result, $40,000 previous recorded as an asset associated with this Trademark were written off effective September 30, 2007 and recorded in research and development expense.
Operating Leases
In April 2006 the Company entered into a three year lease for operations facilities in Golden, CO. The Company provided a $2,615 security deposit and expensed $79,867 in costs associated with tenant improvements to the facilities in preparation for occupancy. The following is a schedule, by years, of the minimum base payments required under this operating lease for facilities. An additional $905 monthly is also due as a pro rata share equaling 4.12% of the operating costs for real estate taxes, assessments, and the expenses of operating and maintaining common areas within the commercial grounds surrounding the leased facilities.
|
|
|
|
|
|
|
Rent Schedule
|
|
Annual Rate/sf
|
|
Annualized Rent
|
|
Monthly Rent
|
7/1/06 6/30/07
|
|
$
|
6.75
|
|
|
$
|
20,250.00
|
|
|
$
|
1,687.50
|
|
7/1/07 6/30/08
|
|
$
|
6.95
|
|
|
$
|
20,850.00
|
|
|
$
|
1,737.50
|
|
7/1/08 6/30/09
|
|
$
|
7.16
|
|
|
$
|
21,480.00
|
|
|
$
|
1,790.00
|
|
Agreement for the Sale of Equipment
The Company has entered into agreements for the sale to a buyer of certain vacuum deposition technology equipment valued at $41,800,000, excluding royalty payments based on per watt annualized production totals. The agreements, consisting of a systems sale and a royalty based manufacturing license agreement, provide for thin film photovoltaic production equipment and two product development tools specializing in the fabrication of micro-crystalline and amorphous thin film silicon solar cells. Manufacture of the product development tools was scheduled to begin in June 2007 upon receipt of initial payments from the buyer. The Company extended the down
payment requirement by three months on July 17, 2007. The down payment was not received by the due date. As of the date of this report, the Company has notified the buyer of the termination of the purchase and license agreement.
Legal Proceedings
None
Note 9 Planned Expansion of Business Operations:
In March XsunX launched efforts to expand the scope of business development efforts to include the planned establishment of a solar energy module manufacturing facility to be located in Oregon, USA. The Company intends to finance the associated costs for the build out of new facilities in a series of debt and/or equity financings.
F-14
TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 10 Note Receivable:
On January 1, 2007, XSUNX, Inc. issued a secured, seven year, 10% note to Sencera, LLC in the amount up to $1,500,000. Under the terms, the Company provided Sencera, LLC with $400,000 at the time of signing and $137,500 per month for up to eight months. These funds are to be used to develop technology and obtain licenses in agreement with the Technology Development and License Agreement between Sencera and XsunX, Inc also signed on January 1, 2007. The note may be converted into a membership interest in Sencera, LLP and an extension of the license for a period of three years. The security consists of the license rights, the ability to exercise the
conversion and all other rights and remedies provided by law.
On September 7, 2007, XsunX initiated the final funding of disbursements under a Promissory Note and Loan Agreement dated January 1, 2007, between XsunX and a private technology development firm. Under the Promissory Note and Loan Agreement XsunX has funded and extended the principal amount of $1,500,000 dollars to the private firm.
Use of the licensed plasma technology by XsunX in any of its planned or future processes or products has and continues to be subject to completion of development by Sencera, LLC, substantiation of intended performance criteria under the agreements, and determination of commercial application suitability by XsunX.
As of September 30, 2007 the current balance of the note receivable was $1,500,000 plus accrued interest earned of $143,452.
Note 11 Other Income Legal Settlement:
Effective March 23, 2007 XsunX entered into a binding letter of intent (LOI) with a manufacturer (the Seller) of photovoltaic products for the purchase of certain net assets of the manufacturer for the amount of five million dollars ($5,000,000) USD in a cash transaction.
On or about April 27, 2007 the Company was notified by the Seller of a change in direction and decision not to complete the sale of assets under the LOI agreement. XsunX filed a complaint (Lawsuit) against the Seller and related entities in the United States District Court for the District of Massachusetts on May 10th, 2007, alleging breach of contract and other claims.
On August 23, 2007 the Seller and XsunX entered into a settlement agreement (Settlement). The Settlement became effective upon the transfer by the Seller to XsunX of one million one hundred thousand dollars USD ($1,100,000) on August 27, 2007.
Upon the effectiveness of the Settlement counsel for each of the parties filed with the United States District Court for the District of Massachusetts a Stipulation of Dismissal with Prejudice thereby dismissing the Lawsuit with prejudice. Each of the parties has unconditionally and irrevocably released, waived, and forever discharged each other from claims related to the LOI and the Lawsuit.
Note 12 Subsequent Events:
Financing
On November 1, 2007, XsunX signed a $21 million common stock purchase agreement with Fusion Capital Fund II, LLC, an Illinois limited liability Company (Fusion Capital). Upon signing the agreement, XsunX received $1,000,000 from Fusion Capital as an initial purchase under the $21 million commitment in exchange for 3,333,332 shares of our common stock. Concurrently with entering into the common stock purchase agreement, we entered into a registration rights agreement with Fusion Capital. Under the registration rights agreement, we agreed to file a registration statement related to the transaction with the U.S. Securities & Exchange
Commission (SEC) covering the shares that have been issued or may be issued to Fusion Capital under the common stock purchase agreement. After the SEC has declared effective the registration statement related to the transaction we have the right over a 25-month period to sell our shares of
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TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 12 Subsequent Events: (continued)
common stock to Fusion Capital, from time to time, in amounts up to $1 million per sale, depending on certain conditions as set forth in the agreement, up to the full aggregate commitment of $21 million.
The purchase price of the shares related to the $20 million balance of future funding will be based on the prevailing market prices of the Companys shares at the time of sales without any fixed discount, and the Company will control the timing and amount of any sale of shares to Fusion Capital. There are no upper limits to the price Fusion Capital may pay to purchase our common stock. However, Fusion Capital shall not be obligated to purchase any shares of our common stock on any business day that the price of our common stock is below $0.20. There are no negative covenants, restrictions on future funding(s), penalties or liquidated damages in
the agreement. The common stock purchase agreement may be terminated by us at any time at our discretion without any cost to us.
In consideration for entering into the $21 million agreement we agreed to issue to Fusion Capital 3,500,000 shares of our common stock as financing commitment shares which Fusion Capital has agreed to hold for the term of the common stock purchase agreement. Additionally, under the stock purchase agreement we granted Fusion Capital common stock purchase warrants to purchase 1,666,666 shares of our common stock at $0.50, and 1,666,666 shares of our common stock at $0.75. The shares underlying the warrant grants do not carry mandatory registration requirements under the terms of the common stock purchase agreement and registration rights agreement.
The proceeds received by the Company under the common stock purchase agreement are expected to be used to build an initial base production system delivering full size commercial quality solar modules, and initiate the manufacture of the first of four (4) planned 25 megawatt systems under the Companys planned 100 megawatt thin film solar module production facility. Proceeds may also be used to lease and prepare manufacturing facilities with the necessary support systems for the manufacturing line, inventory, staff, and general working capital.
Changes/Additions to the Board of Directors
On November 12, 2007, the Company announced the appointment of Mr. Oz Fundingsland as Director, effective November 12, 2007. Mr. Fundingsland brings over forty years of sales, marketing, executive business management, finance, and corporate governance experience to XsunX. His professional and business experience principally originated with his tenure, commencing in 1964, at Applied Magnetics Corp., a disk drive and data storage company. Prior to his retirement from Applied Magnetics in 1994, Mr. Fundingsland served as an Executive Officer and Vice President of Sales and Marketing for 11 years directing sales growth from $50 million to over $550
million. Commencing in 1993 through 2003 Mr. Fundingsland served as a member of the board of directors for the International Disk Drive Equipment Manufacturers Association IDEMA where he retired emeritus, and continues to serve as an advisor to the board. For the last 13 years, Mr. Fundingsland has provided consulting services assisting with sales, marketing, and management to a host of companies within the disk drive, optical, software, and LED industries.
On November 28, 2007, the Company announced the appointment of Dr. Michael A. Russak as a Director, effective November 26, 2007. Dr. Russak is also a member of the Companys Scientific Advisory Board. Dr. Russak has over thirty five years of industrial experience progressing from a research scientist to senior executive officer of two public companies. He has expertise in thin film materials and devices for magnetic recording, photovoltaic, solar thermal applications, semiconductor devices as well as glass, glass-ceramic and ceramic materials. He also has over twelve years experience at the executive management level of public companies with
significant off shore development and manufacturing functions. He received his B.S. in Ceramic Engineering in 1968 and Ph.D. in Materials Science in 1971, both from Rutgers University in New Brunswick, NJ. During his career, he has been a contributing scientist and program manager at the Grumman Aerospace Corporation, a Research Staff Member and technical manager in the areas of thin film
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TABLE OF CONTENTS
XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 12 Subsequent Events: (continued)
materials and processes at the Research Division of the IBM Corporation at the T.J. Watson Research Laboratories. In 1993, he joined HMT Technology, a manufacturer of thin film disks for magnetic storage, as Vice President of Research and Development. His responsibilities included new product design and introduction. Dr. Russak became Chief Technical Officer of HMT and held that position until 2000 when HMT merged with Komag Inc. Dr. Russak was appointed President and Chief Technical Officer of the combined company. He continued to set technical, operational and business direction for Komag until his retirement at the end of 2006. Dr. Russak is
currently Executive Director of IDEMA-US, the trade association for the Hard Disk Drive Industry. He has published over 90 technical papers, and holds 23 U.S. patents.
Executive Compensation
The Board of Directors of the Company Authorized Salary Increases effective November 6, 2007 for the following individuals:
|
|
|
|
|
Tom Djokovich
|
|
Chief Executive Office
|
|
$70,000.00 Increase to $220,000.00
|
Joseph Grimes
|
|
Chief Operating Officer
|
|
$60,000.00 Increase to $210,000.00
|
Jeff Huitt
|
|
Chief Financial Officer
|
|
$20,000.00 Increase to $155,000.00
|
Stock Option Plan Grants
As part of a plan for the Company to provide stock based incentives to employees and consultants, and attract new employees and members to its board of directors, the Company engages in a policy of providing stock option grants. Between the period beginning October 1, 2007 and the date of this report, the board of directors authorized the grant of options to purchase an aggregate of 3,800,000 shares of the Companys common stock. Such options are exercisable at the price of $.36 per share, and expire at various times through November 2012.
Employment Incentive Option Grants In connection with the start of the Companys efforts to prepare, install, and operate solar module manufacturing capabilities the Company authorized employment incentive option grants to the following employees on October 23rd 2007 at an exercise price per share of $0.36. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The options have a 5 year exercise term and vest in conjunction with a performance milestone based vesting schedule as described below:
|
|
|
Joseph Grimes
|
|
500,000 Option Shares
|
Robert G. Wendt
|
|
500,000 Option Shares
|
Dr. Guang Lin
|
|
300,000 Option Shares
|
The vesting schedule for Mr. Grimes and Mr. Wendt is:
The Option shall become exercisable in the following amounts upon the delivery and/or achievement by Optionee(s) of the following performance milestones as they may relate to the Companys phased build out plan for a solar module manufacturing facility:
|
(a)
|
100,000 shares upon the assembly and commissioning of the base line production system.
|
|
(b)
|
100,000 shares upon the production of a commercial size working sample of the Companys planned tandem junction amorphous silicon solar module.
|
|
(c)
|
300,000 shares upon the assembly and commissioning of the initial 25 mega watt production system as contemplated within the Companys phased build out plan for a solar module manufacturing facility.
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XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 12 Subsequent Events: (continued)
The vesting schedule for Dr. Guang is:
The Option shall become exercisable in the following amounts upon the delivery and/or achievement by Optionee of the following performance milestones as they may relate to the Companys phased build out plan for a solar module manufacturing facility:
|
(a)
|
100,000 shares upon the assembly and commissioning of the base line production system.
|
|
(b)
|
150,000 shares upon the production of a commercial size working sample of the Companys planned tandem junction amorphous silicon solar module.
|
|
(c)
|
50,000 shares upon the assembly and commissioning of the initial 25 mega watt production system as contemplated within the Companys phased build out plan for a solar module manufacturing facility.
|
Board of Directors Incentive Option Grants In furtherance of the Companys policy to compensate current members, and attract new members, to its Board of Directors, the Company authorized incentive option grants to the following Directors at an exercise price per share of $0.36. The options were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.The options carry 5 year exercise terms and vest as described below:
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|
|
|
Thomas Anderson
|
|
October 23, 2007
|
|
1,500,000 Option Shares(*)
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Oz Fundingsland
|
|
November 11, 2007
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|
500,000 Option Shares
|
Dr. Michael Russak
|
|
November 26, 2007
|
|
500,000 Option Shares
|
The vesting schedule for Mr. Anderson:
The Option shall become exercisable in the following amounts upon the delivery and/or achievement by Optionee of the following milestones:
|
(a)
|
The Option became exercisable in the amount of 1,000,000 shares upon the effective date of the grant for services rendered as a member of the Company Board of Directors from the period beginning October 1, 2003 through September 30, 2007.
|
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(b)
|
Beginning October 1, 2007, the Option shall vest and become exercisable at the rate of 62,500 Shares upon the anniversary of each calendar quarter of continuous service as a Director, or prorated portion thereof, for services rendered as a member of the Company Board of Directors up to a total of 250,000 shares.
|
The vesting schedule for Mr. Fundingsland is:
The Option shall become exercisable in the following amounts upon the delivery and/or achievement by Optionee of the following milestones:
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(a)
|
Beginning November 12, 2007, the Option shall vest and become exercisable at the rate of 62,500 Shares upon the anniversary of each calendar quarter of continuous service as a Director, or prorated portion thereof, for services rendered as a member of the Company Board of Directors up to a total of 500,000 shares.
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XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 12 Subsequent Events: (continued)
The vesting schedule for Dr. Russak is:
The Option shall become exercisable in the following amounts upon the delivery and/or achievement by Optionee of the following milestones:
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(a)
|
Beginning November 26, 2007 the Option shall vest and become exercisable at the rate of 62,500 Shares upon the anniversary of each calendar quarter of continuous service as a Director, or prorated portion thereof, for services rendered as a member of the Company Board of Directors up to a total of 500,000 shares.
|
(*) Amendment to Stock Option Grant On November 12, 2007 the Company entered into an agreement amending the terms of a stock option grant dated October 23, 2007 between the Company and Mr. Thomas Anderson, a member of the XsunX Board of Directors. The amendment provided for an increase of 250,000 options to the pool of options available within the vesting provisions of the grant. All other provision of the stock option grant remained the same. The vesting schedule for item (b) was amended as follows:
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(b)
|
Beginning October 1, 2007 the Option shall vest and become exercisable at the rate of 62,500 Shares upon the anniversary of each calendar quarter of continuous service as a Director, or prorated portion thereof, for services rendered as a member of the Company Board of Directors up to a total of 500,000 shares.
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Note 13 Financial Accounting Developments:
Recently Issued Accounting Pronouncements
SFAS 155 Accounting for Certain Hybrid Financial Instruments an amendment of FASB Statements No. 133 and 140
This Statement, issued in February 2006, amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. This Statement:
|
(a)
|
Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation
|
|
(b)
|
Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133
|
|
(c)
|
Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation
|
|
(d)
|
Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives
|
|
(e)
|
Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.
|
This Statement is effective for all financial instruments acquired or issued after the beginning of our first fiscal year that begins after September 15, 2006.
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XSUNX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
Note 13 Financial Accounting Developments: (continued)
The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of our fiscal year, provided we have not yet issued financial statements, including financial statements for any interim period, for that fiscal year. Provisions of this Statement may be applied to instruments that we hold at the date of adoption on an instrument-by-instrument basis.
The Company is currently reviewing the effects of adoption of this statement but it is not expected to have a material impact on our financial statements.
SFAS 156 Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140
This Statement, issued in March 2006, amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:
|
(1)
|
Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations.
|
|
(2)
|
Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.
|
|
(3)
|
Permits an entity to choose either the amortization method or the fair value measurement method for each class of separately recognized servicing assets and servicing liabilities.
|
|
(4)
|
At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entitys exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.
|
|
(5)
|
Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.
|
Adoption of this Statement is required as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of this statement is not expected to have a material impact on our financial statements.
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We have not authorized any dealer, salesperson or other person to provide any information or make any representations about XSunX, Inc. except the information or representations contained in this Prospectus. You should not rely on any additional information or representations if made.
This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy any securities:
|
|
except the common stock offered by this prospectus;
|
|
|
in any jurisdiction in which the offer or solicitation is not authorized;
|
|
|
in any jurisdiction where the dealer or other salesperson is not qualified to make the offer or solicitation;
|
|
|
to any person to whom it is unlawful to make the offer or solicitation; or
|
|
|
to any person who is not a United States resident or who is outside the jurisdiction of the United States.
|
The delivery of this Prospectus or any accompanying sale does not imply that:
|
|
there have been no changes in the affairs of XSunX, Inc. after the date of this Prospectus; or
|
|
|
the information contained in this prospectus is correct after the date of this Prospectus.
|
Until
, 2008, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus when acting as underwriters.
48,650,000 Shares of Common Stock
XSUNX INC.
PROSPECTUS
January ___, 2008
TABLE OF CONTENTS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
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|
|
SEC registration fee
|
|
$
|
1,042
|
|
Printing Expenses
|
|
|
5,000
|
|
Accounting fees and expenses
|
|
|
20,000
|
|
Legal fees and expenses
|
|
|
35,000
|
|
Miscellaneous
|
|
|
9,143
|
|
Total
|
|
$
|
70,000
|
|
All amounts are estimates. We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the Selling Stockholder. The Selling Stockholder, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.
Item 14. Indemnification of Directors and Officers
The Colorado Statutes provide for the indemnification of officers, directors, employees, and agents. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person is liable or did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, or that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director,
officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities
In the fiscal year ended September 30, 2005, the Company issued a total of 9,818,631 shares of common stock as follows: 6,735,137 shares of common stock were issued pursuant to Regulation S promulgated under the Securities Act, raising gross proceeds of $531,396; 474,231 shares of common stock were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, for consulting services valued at $40,000; and 2,609,263 shares of common stock were issued pursuant to an exemption under Section 4(2) of the Act, in connection with the sale of an $850,000 secured convertible debenture by the Company.
In the fiscal year ended September 30, 2006, the Company issued a total of 33,293,217 shares of common stock as follows: 33,120,851 shares of common stock registered pursuant to an effective registration
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TABLE OF CONTENTS
statement were issued pursuant to the conversion of secured convertible debentures, raising gross proceeds of $9,294,133; 72,366 shares of common stock were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, for consulting services valued at $31,500; and 100,000 shares of common stock were issued pursuant to an exemption under Section 4(2) of the Act, in connection with the exercise of 100,000 warrants bearing an exercise price of $.15 each.
The following represents a detailed analysis of the 2007 capital stock transactions.
In December 2006, the Company entered into a settlement agreement with a service provider in which the service provider returned to the Company 150,000 of the 300,000 shares of common stock issued to the service provider in the period ended March 31, 2005. The shares were originally issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The returned shares were received and cancelled effective January 2007. As a result of the return and cancellation of these shares, the Company recorded a credit to expenses in the amount of $12,000 and a debit to paid in capital of $12,000 for the period ending March
31, 2007.The $12,000 represents one half of the monetary value expensed by the Company in the period in which the shares were issued.
In conjunction with the sale of convertible debentures in the amount of $850,000 and $5,000,000 in the fiscal periods ended December 31, 2005 and 2006 respectively, the Company issued and deposited into escrow 26,798,418 shares of common stock as part of a security structure for the above referenced obligations. As of September 30, 2006 the principal balance of the debentures had been reduced to $0.0. Subsequently the holder of the debentures provided the Company with a notice of release of its security interests and returned the security shares to the Company for cancellation. On January 18, 2007 the above shares were cancelled on the Companys
books.
Warrant Conversion - In September 2007, a consultant exercised the remaining 900,000 of the 1,000,000 $.15 cent warrants granted to the consultant in September 2004. The amount of $135,000 dollars was paid to XsunX by the consultant and 900,000 shares of unregistered common stock were issued. The shares were issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
Use of Proceeds from the Sale of Securities
The proceeds from the above sales of securities are used primarily to fund the product developments efforts and day-to-day operations of the Company and to pay the accrued liabilities associated with these operations.
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Item 16. Exhibits
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Exhibit
|
|
Description
|
3.1
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|
Articles of Incorporation
(1)
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3.2
|
|
Bylaws
(2)
|
5.1
|
|
Opinion re: Legality
(19)
|
10.1
|
|
XsunX Plan of Reorganization and Asset Purchase Agreement, dated September 23, 2003.
(3)
|
10.2
|
|
MVSystems, Inc. Technology License Agreement, dated September 2004.
(4)
|
10.3
|
|
MVSystems, Inc. Expanded Technology License Agreement, dated October 2005.
(5)
|
10.4
|
|
Sencera, LLC, Technology Development and License Agreement, dated January 1, 2007.
(6)
|
10.5
|
|
Sencera, LLC, 10% secured Promissory Note and Loan Agreement, dated January 1, 2007
(6)
|
10.6
|
|
XsunX 2007 Stock Option Plan, dated January 5, 2007.
(7)
|
10.7
|
|
Dr. John Moore, Scientific Advisory Board Consulting Agreement, dated January 26, 2007.
(8)
|
10.8
|
|
Dr. John Moore, Stock Option Grant, dated January 26, 2007.
(8)
|
10.9
|
|
Jeff Huitt, Employment Agreement, dated January 26, 2007.
(8)
|
10.10
|
|
Jeff Huitt, Stock Option Grant, dated January 26, 2007.
(8)
|
10.11
|
|
Robert Wendt, Employment Agreement, dated January 26, 2007.
(8)
|
10.12
|
|
Robert Wendt, Stock Option Grant, dated January 26, 2007.
(8)
|
10.13
|
|
Joseph Grimes, Employment Agreement, dated January 26, 2007.
(8)
|
10.14
|
|
Joseph Grimes, Stock Option Grant, dated January 26, 2007.
(8)
|
10.15
|
|
Dr. Edward Yu, Scientific Advisory Board Consulting Agreement, dated February 22, 2007.
(9)
|
10.16
|
|
Dr. Edward Yu, Stock Option Grant, dated February 22, 2007.
(9)
|
10.17
|
|
Binding Letter of Intent to purchase solar module manufacturing assets, dated March 23, 2007.
(10)
|
10.18
|
|
Details of $1.1 million dollar settlement received by XsunX, dated August 27, 2007.
(11)
|
10.19
|
|
Dr. Richard Ahrenkiel, Scientific Advisory Board Consulting Agreement, dated April 23, 2007.
(12)
|
10.20
|
|
Dr. Richard Ahrenkiel, Stock Option Grant, dated April 23, 2007.
(12)
|
10.21
|
|
Dr. Michael Russak, Scientific Advisory Board Consulting Agreement, dated August 28, 2007.
(13)
|
10.22
|
|
Dr. Michael Russak, Stock Option Grant, dated August 28, 2007.
(13)
|
10.23
|
|
Fusion Capital Fund II, LLC, Stock Purchase Agreement, dated November 1, 2007.
(14)
|
10.24
|
|
Fusion Capital Fund II, LLC, Registration Rights Agreement, dated November 1, 2007.
(14)
|
10.25
|
|
Fusion Capital Fund II, LLC, $.50 Warrant Agreement, dated November 1, 2007.
(14)
|
10.26
|
|
Fusion Capital Fund II, LLC, $.75 Warrant Agreement, dated November 1, 2007.
(14)
|
10.27
|
|
Oz Fundingsland, Stock Option Grant Agreement, dated November 12, 2007.
(15)
|
10.28
|
|
Dr. Michael Russak, Stock Option Grant Agreement, dated November 28, 2007.
(16)
|
10.29
|
|
Joseph Grimes, Incentive Stock Option Grant, dated October 23, 2007.
(17)
|
10.30
|
|
Robert Wendt, Incentive Stock Option Grant, dated October 23, 2007
(17)
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10.31
|
|
Dr. Guang Lin, Incentive Stock Option Grant, dated October 23, 2007
(17)
|
10.32
|
|
Thomas Anderson, Stock Option Grant, dated October 23, 2007.
(18)
|
10.33
|
|
Stock Purchase Agreement, dated January 16, 2008 by and between the Company and Cumorah Capital, Inc.
|
23.1
|
|
Consent of Jasper + Hall
(19)
|
23.2
|
|
Consent of Michael Littman (included in Exhibit 5.1)
|
II-3
TABLE OF CONTENTS
|
(1)
|
Incorporated by reference to Registration Statement Form 10SB12G #000-29621 dated February 18, 2000 and by reference to exhibits included with the Companys prior Report on Form 8-K/A filed with the Securities and Exchange Commission dated October 29, 2003.
|
|
(2)
|
Incorporated by reference to Registration Statement Form 10SB12G #000-29621 filed with the Securities and Exchange Commission dated February 18, 2000.
|
|
(3)
|
Incorporated by reference to exhibits included with the Companys prior Report on Form 8-K/A filed with the Securities and Exchange Commission dated October 29, 2003.
|
|
(4)
|
Incorporated by reference to exhibits included with the Companys prior Report on Form 10-KSB filed with the Securities and Exchange Commission dated January 18, 2005.
|
|
(5)
|
Incorporated by reference to exhibits included with the Companys prior Report on Form 10-KSB filed with the Securities and Exchange Commission dated January 11, 2006.
|
|
(6)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated January 3, 2007.
|
|
(7)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated January 5, 2007.
|
|
(8)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated February 13, 2007.
|
|
(9)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated February 28, 2007.
|
|
(10)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated March 28, 2007.
|
|
(11)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated August 28, 2007.
|
|
(12)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated April 25, 2007.
|
|
(13)
|
Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated August 23, 2007.
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(14)
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Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K/A filed with the Securities and Exchange Commission dated November 5, 2007.
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(15)
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Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated November 14, 2007.
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(16)
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Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated November 28, 2007.
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(17)
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Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated October 29, 2007.
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(18)
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Incorporated by reference to exhibits included with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission dated October 29, 2007.
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TABLE OF CONTENTS
Item 17. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(a) To include any Prospectus required by Section 10(a)(3) of the Securities Act;
(b) To reflect in the Prospectus any facts or events arising after the effective date of this Registration Statement, or most recent post-effective amendment, which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and
(c) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the securities being registered hereby which remain unsold at the termination of the offering.
4. For determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(a) Any preliminary Prospectus or Prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (Sec. 230.424);
(b) Any free writing Prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(c) The portion of any other free writing Prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or
controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
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