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 Company’s
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 Company’s 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 Company’s 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 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
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
Fair
Value of Financial Instruments
The
Company’s 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 Company’s 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 Company’s common stock
equivalents were excluded from the calculation of diluted loss per common share
because they were anti-dilutive, due to the Company’s 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.
Stock
Based Compensation
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,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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 Company’s
historical data and future estimates for stock option forfeitures. There are
17,312,000 options and warrants issued of which 8,768,167 are vested. The
exercise price range for the Company’s options and warrants are $0.15 to $1.69.
The weighted average remaining life of the option and warrant grants range
from
.3 years to 4.9 years. We have based our expected volatility on the historical
performance of our stock adjusted for extreme periods of volatility that
resulted from unusual events. The range of volatility for our options and
warrants is 53 to 86 based on the specific grant. The risk free interest rate
used in our calculation was 3.54%. 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.
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 Company’s 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. The approximate tax effect
used
in these calculations is 40%. Deferred tax assets are recognized if it is
more
likely than not that the future tax benefit will be realized. The Company
is a
Development Stage Company and the likelihood of its ability to utilize the
deferred tax asset that arises from the operating loss carry forwards can’t be
reasonably estimated. The company has created a valuation allowance equal
to
100% of the deferred tax asset arising from the operating loss carryforwards
as
a result of this inability to estimate whether or not the asset can be utilized
in future periods.
Significant
components of the Company’s deferred tax liabilities and assets are as follows:
The deferred tax assets are composed of the Company’s net operating loss carry
forwards of approximately $10,960,721 at the approximate tax effect of 40%.
There are no other material deferred tax assets or liabilities of the Company
as
of September 30, 2007.
|
|
2007
|
|
2006
|
|
2005
|
|
Deferred
Tax Assets
|
|
$
|
4,384,288
|
|
$
|
3,858,490
|
|
$
|
2,291,714
|
|
Deferred
Tax Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s Scientific Advisory
Board. The Company compensates Dr. Moore $1,000 per month for his
services.
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
Note
6 - Stock Options and Warrants
Stock
Option Plan
On
January 5, 2007, the Board of Directors of XsunX resolved to establish the
Company’s 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 Company’s 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 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 Company’s
historical data and future estimates for stock option forfeitures. There are
17,312,000 options and warrants issued of which 8,768,167 are vested. The
exercise price range for the Company’s options and warrants are $0.15 to $1.69.
The weighted average remaining life of the option and warrant grants range
from
.3 years to 4.9 years. We have based our expected volatility on the historical
performance of our stock adjusted for extreme period of volatility that resulted
from unusual events. The range of volatility for our options and warrants is
53
to 86 based on the specific grant. The risk free interest rate used in our
calculation was 3.54%. 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 Company’s 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.
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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 Company’s 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:
|
(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 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 Company’s 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:
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
|
(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.
|
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 Company’s 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 Company’s 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.
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(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
|
|
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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
|
|
|
|
|
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 demonstrating certain thin film
solar cell
manufacturing technology
for
commercial viability
.
As
of
September 30, 2007 the machine was substantially assembled and was in
the
process of validating operating software, systems operation, and general
testing
to ascertain functionality, suitability for intended use, and safety.
Upon
completion of these operations the machine will undergo an acceptance
testing
procedure prior to final certification and the ability to market the
machine.
During this period of testing and pre-sale
,
the
production machine is being depreciated over five years using the straight
line
method. Depreciation on this production machine began in mid September
2007.
Upon completion of this phase of the production machine usage, 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. Upon the sale of the production machine, the asset
will be
treated as inventory at the depreciated asset value at the time of the
sale. The
valuation of this asset is based on the contracted delivery price in
the
Expanded Use License Agreement dated October 12, 2005. The valuation
is reviewed
quarterly using replacement cost and estimated potential sales price
estimates.
It is the policy of the Company to write down the value of this asset
if these
estimates are less than the current book value.
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
Company’s 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.
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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.
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.
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.
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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 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 Company’s 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 Company’s 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.
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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 Company’s 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 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 Officer
|
|
$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
|
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 Company’s 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 Company’s 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:
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
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 Company’s 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 Company’s
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 Company’s phased build out plan for a solar module manufacturing
facility.
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 Company’s 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
Company’s 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 Company’s phased build out plan for a solar module
manufacturing facility.
|
Board
of
Directors Incentive Option Grants - In furtherance of the Company’s 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:
Thomas
Anderson
|
October
23, 2007
|
1,500,000
Option Shares (*)
|
Oz
Fundingsland
|
November
11, 2007
|
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.
|
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
|
(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:
|
(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.
|
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:
|
(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:
|
(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.
|
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
|
XSUNX,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
(CONTINUED)
|
(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.
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 entity’s 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.
JASPERS
+ HALL, PC
CERTIFIED
PUBLIC ACCOUNTANTS
9175
E. Kenyon Avenue, Suite 100
Denver,
CO 80237
303-796-0099
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors
XSUNX,
INC.
Aliso
Viejo, CA
We
have
reviewed the accompanying balance sheet of XSUNX, INC. (a development stage
company) as of December 31, 2007, and the related statements of operations,
stockholders’ equity (deficit), and cash flows for the three-month period then
ended. These financial statements are the responsibility of the Company’s
management.
We
conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). The review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the
consolidated financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based
on
our review, we are not aware of any material modifications that should be
made
to the accompanying financial statements for them to be in conformity with
accounting principles generally accepted in the United States.
Jaspers
+
Hall, PC
Denver,
CO
February
14, 2008
/s/
Jaspers + Hall, PC
Jaspers
+ Hall, PC
Denver,
Colorado
February
14, 2008
XSUNX,
INC.
(A
Development Stage Company)
Balance
Sheets
|
|
(Unaudited)
|
|
(Audited)
|
|
|
|
December
31,
|
|
September
30,
|
|
|
|
2007
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
|
$
|
2,188,260
|
|
$
|
1,773,748
|
|
Prepaid
Expenses
|
|
|
6,481
|
|
|
54,377
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
2,194,741
|
|
|
1,828,125
|
|
|
|
|
|
|
|
|
|
Fixed
assets:
|
|
|
|
|
|
|
|
Office
& Misc. Equipment
|
|
|
39,450
|
|
|
39,437
|
|
Research
and Development Equipment
|
|
|
634,907
|
|
|
532,795
|
|
Leasehold
Improvement
|
|
|
89,825
|
|
|
89,825
|
|
Total
Fixed Assets
|
|
|
764,182
|
|
|
662,057
|
|
Less
Depreciation
|
|
|
(292,147
|
)
|
|
(162,189
|
)
|
|
|
|
|
|
|
|
|
Total
fixed assets
|
|
|
472,035
|
|
|
499,868
|
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
|
Patents/Trade
Marks
|
|
|
|
|
|
-
|
|
Security
Deposit
|
|
|
5,815
|
|
|
5,815
|
|
Accrued
Interest Receivable
|
|
|
234,192
|
|
|
143,452
|
|
Note
Receivable
|
|
|
1,500,000
|
|
|
1,500,000
|
|
Marketable
Prototype
|
|
|
1,765,000
|
|
|
1,765,000
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
|
3,505,007
|
|
|
3,414,267
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
6,171,783
|
|
$
|
5,742,260
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
238,897
|
|
$
|
259,652
|
|
Accrued
Expenses
|
|
|
55,077
|
|
|
53,036
|
|
Current
Portion of Note Payable
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
293,974
|
|
|
312,688
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
|
|
December
31,
|
|
September
30,
|
|
|
|
2007
|
|
2007
|
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;
164,753,188
shares issued and outstanding at December 31, 2007 and
157,919,856
shares were issued and outstanding at September 30, 2007
|
|
|
15,669,169
|
|
|
13,563,869
|
|
Paid
in Capital - Common Stock Warrants & Fees
|
|
|
3,635,418
|
|
|
2,326,553
|
|
Deferred
Stock Compensation
|
|
|
(1,051,000
|
)
|
|
|
|
Deficit
accumulated during the development stage
|
|
|
(12,375,778
|
)
|
|
(10,460,850
|
)
|
Total
stockholders’ profit (deficit)
|
|
|
5,877,809
|
|
|
5,429,572
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
6,171,783
|
|
$
|
5,742,260
|
|
See
Accountants’ Review Report.
XSUNX,
INC.
(A
Development Stage Company)
Statement
of Operations
(Unaudited)
|
|
|
|
|
|
Feb. 25, 1997
|
|
|
|
|
|
|
|
(Inception)
to
|
|
|
|
Three Months Ended December 31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
Revenue:
|
|
|
|
|
|
|
|
Service
Income
|
|
$
|
-
|
|
$
|
-
|
|
$
|
14,880
|
|
Other
Income
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
|
|
-
|
|
|
-
|
|
|
14,880
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
4,530
|
|
|
16,747
|
|
|
65,132
|
|
Bank
Charges
|
|
|
531
|
|
|
25
|
|
|
4,411
|
|
Conferences
& Seminars
|
|
|
3,715
|
|
|
9,271
|
|
|
29,707
|
|
Consulting
|
|
|
27,277
|
|
|
35,982
|
|
|
1,537,861
|
|
Depreciation
|
|
|
129,958
|
|
|
27,047
|
|
|
311,760
|
|
Directors’
Fees
|
|
|
|
|
|
|
|
|
11,983
|
|
Due
Diligence
|
|
|
|
|
|
|
|
|
45,832
|
|
Dues
and Subscriptions
|
|
|
|
|
|
|
|
|
-
|
|
Equipment
Rental
|
|
|
|
|
|
|
|
|
1,733
|
|
Filing
Fees
|
|
|
|
|
|
|
|
|
8,610
|
|
Impairment
loss
|
|
|
|
|
|
|
|
|
923,834
|
|
Insurance
|
|
|
22,164
|
|
|
3,535
|
|
|
92,483
|
|
Legal
& Accounting
|
|
|
59,039
|
|
|
77,418
|
|
|
797,419
|
|
Licenses
& Fees
|
|
|
618
|
|
|
20
|
|
|
7,163
|
|
Commitment
and Loan Fees
|
|
|
89,300
|
|
|
|
|
|
831,134
|
|
Meals
& Entertainment
|
|
|
|
|
|
|
|
|
4,119
|
|
Miscellaneous
|
|
|
100
|
|
|
2,135
|
|
|
7,478
|
|
Office
Expenses
|
|
|
3,794
|
|
|
6,229
|
|
|
45,294
|
|
Patent
Fees
|
|
|
|
|
|
1,181
|
|
|
2,469
|
|
Postage
& Shipping
|
|
|
1,375
|
|
|
688
|
|
|
16,203
|
|
Printing
|
|
|
408
|
|
|
6,911
|
|
|
28,878
|
|
Public
Relations
|
|
|
68,674
|
|
|
26,630
|
|
|
558,035
|
|
Recruitment
Expenses
|
|
|
1,403
|
|
|
|
|
|
48,467
|
|
Research
& Development
|
|
|
6,406
|
|
|
209,945
|
|
|
2,022,328
|
|
Rent
|
|
|
17,208
|
|
|
14,860
|
|
|
129,731
|
|
Salaries
|
|
|
235,585
|
|
|
140,615
|
|
|
1,994,707
|
|
Subscription
Reports
|
|
|
|
|
|
10
|
|
|
9,858
|
|
Taxes
|
|
|
1,666
|
|
|
|
|
|
10,503
|
|
Telephone
|
|
|
4,987
|
|
|
7,162
|
|
|
79,910
|
|
Transfer
Agent Expense
|
|
|
|
|
|
283
|
|
|
20,365
|
|
Travel,
Meals & Entertainment
|
|
|
31,376
|
|
|
29,829
|
|
|
305,869
|
|
Utilities
|
|
|
2,408
|
|
|
|
|
|
10,511
|
|
|
|
|
|
|
|
Feb. 25, 1997
|
|
|
|
|
|
|
|
(Inception)
to
|
|
|
|
Three Months Ended December 31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
Abandoned
Equipment
|
|
|
|
|
|
|
|
|
808
|
|
Option
/ Warrant Expense
|
|
|
1,308,865
|
|
|
|
|
|
3,785,418
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
2,021,387
|
|
|
616,523
|
|
|
13,750,013
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(Income) Expense
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
395
|
|
|
|
|
|
248,955
|
|
Interest
Income
|
|
|
(106,854
|
)
|
|
(32,843
|
)
|
|
(448,536
|
)
|
Legal
Settlement
|
|
|
|
|
|
|
|
|
(1,100,000
|
)
|
Other
|
|
|
|
|
|
|
|
|
-
|
|
Forgiveness
of Debt
|
|
|
|
|
|
|
|
|
(59,773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income/Expense
|
|
|
(106,459
|
)
|
|
(32,843
|
)
|
|
(1,359,354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$
|
(1,914,928
|
)
|
$
|
(583,680
|
)
|
$
|
(12,375,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Per
Share Information:
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
163,724,263
|
|
|
157,169,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss per Common Share
|
|
$
|
(0.01
|
)
|
$
|
(0.004
|
)
|
|
|
|
See
Accountants’ Review Report.
XSUNX,
INC.
(A
Development Stage Company)
Statement
of Stockholders’ Equity (Deficit)
December
31, 2007
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in Capital
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
During the
|
|
|
|
|
|
Treasury Stock
|
|
Common Stock
|
|
Stock
|
|
Exploration
|
|
|
|
|
|
# of Shares
|
|
Amount
|
|
# of Shares
|
|
Amount
|
|
Warrants
|
|
Stage
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in Capital
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
During the
|
|
|
|
|
|
Treasury Stock
|
|
Common Stock
|
|
Stock
|
|
Exploration
|
|
|
|
|
|
# of Shares
|
|
Amount
|
|
# of Shares
|
|
Amount
|
|
Warrants
|
|
Stage
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in Capital
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
During the
|
|
|
|
|
|
Treasury Stock
|
|
Common Stock
|
|
Stock
|
|
Exploration
|
|
|
|
|
|
# of Shares
|
|
Amount
|
|
# of Shares
|
|
Amount
|
|
Warrants
|
|
Stage
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Stock for Cash
|
|
|
|
|
|
|
|
|
3,333,332
|
|
$
|
1,000,000
|
|
|
|
|
|
|
|
|
1,000,000
|
|
Issuance
of Common Stock for Services
|
|
|
|
|
|
|
|
|
3,500,000
|
|
$
|
1,105,300
|
|
$
|
1,308,865
|
|
|
|
|
|
2,414,165
|
|
Deferred
Stock Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,051,000
|
)
|
Net
Loss for the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,914,928
|
)
|
|
(1,914,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2007
|
|
|
-
|
|
$
|
-
|
|
|
164,753,188
|
|
$
|
15,669,169
|
|
$
|
3,635,418
|
|
$
|
(12,375,778
|
)
|
|
5,877,809
|
|
See
Accountants’ Review Report.
XSUNX,
INC.
(A
Development Stage Company)
Statement
of Cash Flows
(Unaudited)
|
|
|
|
|
|
Feb. 25, 1997
|
|
|
|
|
|
|
|
(Inception)
to
|
|
|
|
Three Months Ended December 31,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(1,914,928
|
)
|
$
|
(583,680
|
)
|
$
|
(12,375,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock for Services
|
|
|
|
|
|
|
|
|
1,336,999
|
|
Issuance
of Common Stock for Commitment Fee
|
|
|
|
|
|
|
|
|
310,117
|
|
Amortization
of Common Stock for Commitment Fee
|
|
|
54,300
|
|
|
|
|
|
54,300
|
|
Option
/ Warrant Expense
|
|
|
1,308,865
|
|
|
|
|
|
3,785,418
|
|
Issuance
of Stock for Interest
|
|
|
|
|
|
|
|
|
241,383
|
|
Depreciation
|
|
|
129,958
|
|
|
27,047
|
|
|
292,147
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
(Increase)
in Deferred Financing Costs
|
|
|
|
|
|
|
|
|
-
|
|
(Increase)
Accounts Receivable
|
|
|
|
|
|
|
|
|
-
|
|
(Increase)
Security Deposit
|
|
|
-
|
|
|
(1,700
|
)
|
|
(5,815
|
)
|
(Increase)
in Prepaid Expense
|
|
|
47,896
|
|
|
|
|
|
(6,481
|
)
|
(Decrease)
in Accounts Payable
|
|
|
(20,755
|
)
|
|
449,880
|
|
|
238,897
|
|
Increase
(Decrease) in Accrued Liabilities
|
|
|
2,041
|
|
|
(476,153
|
)
|
|
55,077
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Flows Used for Operating Activities
|
|
|
(392,623
|
)
|
|
(584,606
|
)
|
|
(6,073,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase
of Fixed Assets
|
|
|
(102,125
|
)
|
|
(28,360
|
)
|
|
(764,183
|
)
|
Purchase
of Marketable Prototype and Patent
|
|
|
-
|
|
|
|
|
|
(1,765,000
|
)
|
Note
Receivable
|
|
|
-
|
|
|
|
|
|
(1,500,000
|
)
|
Accrued
Interest earned
|
|
|
(90,740
|
)
|
|
|
|
|
(234,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Flows Used for Investing Activities
|
|
|
(192,865
|
)
|
|
(28,360
|
)
|
|
(4,263,375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from Warrant Conversion
|
|
|
|
|
|
|
|
|
3,171,250
|
|
Proceeds
from Debenture Conversion
|
|
|
|
|
|
|
|
|
5,000,000
|
|
Proceeds
from Convertible Debt
|
|
|
|
|
|
|
|
|
-
|
|
Issuance
of Common Stock for Warrants
|
|
|
|
|
|
|
|
|
135,000
|
|
Issuance
of Common Stock for cash
|
|
|
1,000,000
|
|
|
|
|
|
4,219,121
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Flows Provided by Financing Activities
|
|
|
1,000,000
|
|
|
-
|
|
|
12,525,371
|
|
|
|
|
|
|
|
Feb. 25, 1997
|
|
|
|
|
|
|
|
(Inception)
to
|
|
|
|
Three Months Ended December 31,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
414,512
|
|
|
(612,966
|
)
|
|
2,188,260
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - Beginning of period
|
|
|
1,773,748
|
|
|
4,305,105
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - End of period
|
|
$
|
2,188,260
|
|
$
|
3,692,139
|
|
$
|
2,188,260
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
Cash
Paid During the Period:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
395
|
|
|
|
|
$
|
72,938
|
|
Income
Taxes
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued (returned) in exchange for services
|
|
|
|
|
|
|
|
$
|
1,336,998
|
|
Conversion
of debt for Stock
|
|
|
|
|
|
|
|
$
|
-
|
|
Common
Stock Issued for Commitment Fee
|
|
$
|
54,300
|
|
|
|
|
$
|
364,417
|
|
Common
Stock Issued for Interest
|
|
|
|
|
|
|
|
$
|
241,383
|
|
See
Accountants’ Review Report.
XSUNX,
INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
(Unaudited)
Note
1 – Presentation of Interim Information
In
the
opinion of the management of XSUNX, Inc., (the “Company”) the accompanying
unaudited financial statements include all normal adjustments considered
necessary to present fairly the financial position as of December 31, 2007
and
the results of operations for the three months ended December 31, 2007 and
2006
and for the period February 25, 1997 (inception) to December 31, 2007, and
cash flows for the three-months ended December 31, 2007 and 2006 and for the
period February 25, 1997 (inception) to December 31, 2007. Interim results
are
not necessarily indicative of results for a full year.
The
financial statements and notes are presented as permitted by Form 10-Q, and
do
not contain certain information included in the Company’s audited financial
statements and notes for the fiscal year ended September 30, 2007.
Note
2 – Lease - Golden Suite
As
of
July 1, 2006 a new lease was signed for the Golden Office in the amount of
$1,687.50 per month plus a fee of $825.00 for utilities. The rent increased
to
$1,738 per month on July 1, 2007 and will increase to$1,790.00 per month on
July
1, 2008. The lease expires on June 30, 2009.
Note
3 – 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 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 common stock purchase
agreement, up to the full aggregate commitment of $21 million.
XSUNX,
INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
(Unaudited)
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 Company’s 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, valued at $1,105,300 or
approx. $0.32 per share as financing commitment shares which Fusion Capital
has
agreed to hold for the term of the common stock purchase agreement. This
commitment fee will be amortized ratably as the Company sells additional shares.
The commitment fee related to the first $1,000,000 sale is $54,300. Should
the
agreement be terminated, the remaining unamortized portion of the commitment
fee
will be expensed. 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 Company’s 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.
Note
4 – Technology Development and Licensing Agreement
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 License
Agreement provides XsunX with licensing rights to plasma deposition technologies
for future use by XsunX in solar product manufacturing technologies. 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.
XSUNX,
INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
(Unaudited)
On
September 7, 2007, XsunX initiated the final funding of disbursements under
the
Promissory Note and Loan Agreement dated January 1, 2007, between XsunX and
Sencera, LLC. Under the Promissory Note and Loan Agreement, XsunX has funded
and
extended the principal amount of $1,500,000 dollars to Sencera,
LLC.
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
December 31, 2007, the current balance of the note receivable was $1,500,000
plus accrued interest earned of $234,192.
Note
5 – Employment and Consulting Agreements
The
Company authorized employment incentive option grants to the following employees
on October 23rd 2007 at an exercise price per share of $0.36 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 Company’s 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
Company’s 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 Company’s phased build out plan for
a solar module manufacturing facility.
XSUNX,
INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
(Unaudited)
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 Company’s 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
Company’s 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 Company’s phased build out plan for
a solar module manufacturing facility.
Note
6 – Changes/Additions to the Board of Directors
Addition
- Mr. Oz Fundingsland as Director
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.
Addition
- Dr. Michael A. Russak as Director
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 Company’s 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 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.
XSUNX,
INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
(Unaudited)
Board
of
Directors Incentive Option Grants — In furtherance of the Company’s
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:
Thomas
Anderson
|
October
23, 2007
|
1,500,000
Option Shares (*)
|
Oz
Fundingsland
|
November
11, 2007
|
500,000
Option Shares
|
Dr.
Michael Russak
|
November
26, 2007
|
500,000
Option Shares
|
The
vesting schedule for Mr. Anderson is:
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.
|
(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’s Board of Directors up to a
total of 250,000 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:
(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.
|
XSUNX,
INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
(Unaudited)
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:
(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’s Board of Directors up to a
total of 500,000 shares.
|
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:
(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’s Board of Directors up to a
total of 500,000 shares.
|
Note
7 – Legal
On
December 7, 2007, the Company filed an action for breach of contract and
declaratory relief in the Superior Court of Orange County, California, against
Wharton Capital Partners, Ltd, Wharton Capital Markets LLC, and Capitoline
Financial Group LLC. The action is captioned XsunX, Inc. v. Wharton Capital
Partners, Ltd, et al., and is pending in the above Court as case no. 07CC12772
(“XsunX Action”). The XsunX Action was brought to seek a court determination
that the Company does not owe any fees to the above defendants by reason of
the
Fusion Capital transaction, (see Note. 3 - Financing). The Company believes
that
no agreement between Wharton and the Company was executed and therefore no
valid
agreement between the parties exists. The XsunX Action also seeks return of
confidential materials from the above defendants. On January 3, 2008, Wharton
Capital Partners, Ltd, and Wharton Capital Markets LLC, filed an action in
the
U.S. District Court for the Southern District of New York against the Company
stemming from the same matter. That action is captioned Wharton Capital Partners
Ltd, and Wharton Capital Markets LLC v. XsunX, Inc., and is pending in the
above
Court as case no. 080CV0056 (“Wharton Action”). The Wharton Action seeks fees in
an amount equal to 7% of the gross proceeds received by the Company under the
Fusion financing agreement. The Company asserts that no fees are owed to Wharton
Capital Partners, Ltd, Wharton Capital Markets LLC, or Capitoline Financial
Group LLC. The Company intends to vigorously prosecute the XsunX Action and
to
vigorously defend the Wharton Action. In the event that the Company does not
prevail we may be required to provide Wharton a payment of up to 7% of any
proceeds received by the Company under the Fusion financing
agreement.
XSUNX,
INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
(Unaudited)
Note
8 – Subsequent Events
Executive
Compensation
The
Board
of Directors of the Company Authorized Salary Increases in January 2008 for
the
following individuals:
Tom
Djokovich
|
Chief
Executive Office
|
$70,000
Increase to $220,000
|
Joseph
Grimes
|
Chief
Operating Officer
|
$60,000
Increase to $210,000
|
Jeff
Huitt
|
Chief
Financial Officer
|
$20,000
Increase to $155,000
|
Robert
Wendt
|
Vice
President of Engineering
|
$50,000
Increase to $200,000
|
Directors
Compensation
Beginning
October 2007, the Company elected to provide its Board of Directors with a
monthly stipend of $1,500. The decision was driven by the Company’s efforts to
attract and retain qualified members, and provide compensation during a period
of expansion of operations while the Company works to establish manufacturing
facilities.
Financing
On
January 16, 2008, Cumorah Capital purchased 8,650,000 shares of the Company’s
restricted common stock in a private transaction for total proceeds of
$2,500,000. The Company agreed to register the 8,650,000 shares purchased by
Cumorah Capital. Cumorah Capital is a Nevada corporation and an Accredited
Investor, as defined in Rule 501(a) of Regulation D as promulgated by the
SEC.
Form
S-1 Registration Statement
On
January 18, 2008, XsunX, Inc. filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission as required in our financing agreements
with Fusion Capital Fund II, LLC and Cumorah Capital.
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:
|
|
PROSPECTUS
48,650,000
Shares of Common Stock
XSUNX
INC.
|
·
there
have been no
changes in the affairs of XsunX, Inc. after the date of this
Prospectus; or
|
|
March
20, 2008
|
·
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.
|
|
|