UNITED STATES
SECURITIES EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2011
Commission File Number 000-29621
XSUNX, INC.
(Exact Name of Registrant as Specified in Its
Charter)
Colorado
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84-1384159
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(State of Incorporation)
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(I.R.S. Employer
Identification No.)
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65 Enterprise, Aliso Viejo, CA 92656
(Address of Principal Executive Offices) (Zip
Code)
(949) 330-8060
(Registrant’s Telephone Number)
Securities registered pursuant to Section 12(b)
of the Act: Title of each class:
None
Name of Each Exchange on which Registered:
N/A
Securities registered pursuant to Section 12(g)
of the Act:
Title of each class:
Common Stock, no
par value per share
Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
o
NO
x
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
o
NO
x
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes
o
NO
o
Check if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
o
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
(Check one)
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£
Large accelerated filer
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£
Accelerated filer
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£
Non-accelerated filer
|
S
Smaller reporting company
|
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act.) (Check one): Yes
o
NO
x
As of March 31, 2011, the aggregate market
value of the registrant’s common stock held by non-affiliates of the registrant was approximately $16,378,994 million based
on the closing price as reported on the OTCBB.
As of December 29, 2011, there were 231,998,637 shares of the
registrant’s company stock outstanding.
XSUNX, INC.
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Annual Report on
Form 10-K contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and the Securities Act of 1933, as amended (the “Securities Act”)which are subject to risks, uncertainties
and assumptions that are difficult to predict. All statements in this Annual Report on Form 10-K, other than statements of historical
fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The forward-looking statements include statements, among other things, concerning our
business strategy, including anticipated trends and developments in and management plans for, our business and the markets in which
we operate; future financial results, operating results, revenues, gross margin, operating expenses, products, projected costs
and capital expenditures; research and development programs; sales and marketing initiatives; and competition. In some cases, you
can identify these statements by forward-looking words, such as “estimate”, “expect”, “anticipate”,
“project”, “plan”, “intend”, “believe”, “forecast”, “foresee”,
“likely”, “may”, “should”, “goal”, “target”, “might”, “will”,
“could”, “predict” and “continue”, the negative or plural of these words and other comparable
terminology. The forward-looking statements are only predictions based on our current expectations and our projections about future
events. All forward-looking statements included in this Annual Report on Form 10-K are based upon information available to us as
of the filing date of this Annual Report on Form 10-K. You should not place undue reliance on these forward-looking statements.
We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or
achievements to differ materially from those expressed or implied by these statements. These factors include the matters discussed
in the section entitled “Item 1A: Risk Factors” and elsewhere in this Form 10-K. You should carefully consider the
risks and uncertainties described under this section.
For further information
about these and other risks, uncertainties and factors, please review the disclosure included in this report under Item 1A “Risk
Factors.”
PART I
Item 1. Business.
In this Report, we
use the terms “Company,” “XsunX,” “we,” “us,” and “our,” unless otherwise
indicated, or the context otherwise requires, to refer to XsunX, Inc.
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 name change to XsunX, Inc.
Business Overview
XsunX,
Inc. is developing and has begun to market a hybrid manufacturing solution to produce high performance Copper Indium Gallium
(di) Selenide (CIGS) thin film solar cells. Our patent pending processing technology, which we call
CIGSolar™, focuses on the mass production of individual thin-film CIGS solar cells that match silicon solar cell
dimensions and can be offered as a non-toxic, high-efficiency and lowest-cost alternative to the use of silicon solar cells.
We intend to offer licenses for the use of the CIGSolar™ process technology thereby generating revenue streams through
licensing fees and manufacturing royalties for the use of the technology.
Technology Overview
Our
efforts have been focused on the development and customization of a series of specialized processing tools that when combined provide
a turn-key high-throughput manufacturing system to produce CIGS solar cells.
Core
attributes to our process method are the use of small area thermal co-evaporation techniques coupled with state-of-the-art sputter
deposition technologies to improve manufacturing output, increase cell efficiency, production yields, and lower the costs for the
production of high efficiency CIGS cells.
There
are five (5) core process tools that when combined will produce 156mm format (about 6” square) solar cells. We believe
that it will be the ability of our system to minimize processing defects while maintaining exceptional per hour production
rates that will provide superior commercial opportunities. CIGSolar™ cells will be manufactured on stainless steel
squares sized to match silicon solar cells currently used in nearly 75% of all solar modules manufactured today.
This
innovative approach bridges the gap between inexpensive thin-film and costly high efficiency silicon wafer technologies to produce
a new breed of solar cell combining what we believe are the best attributes of each technology. The mass production of individual,
high performance CIGS solar cells – like solar building blocks – we believe will allow solar power to finally compete
effectively against other sources of electrical energy.
CIGS Thin Film Solar Devices
Copper
Indium Gallium (di) Selenide (CIGS) exceeds all other thin film solar cell performance to date delivering nearly
20% conversions in laboratory environments. It is this high efficiency low cost potential for CIGS, and its wide array
of potential uses and applications, that we believe provides the basis to drive the cost of energy production for
alternative sources to unprecedented new lows. For this reason many major research institutes and agencies worldwide view
CIGS as a significant solar technology and support continuous development and research efforts related to CIGS thin
films.
We
believe that through the successful combination of small area co-evaporation processing techniques with the high rate sputter
processing techniques, overall factory yields (total watts of production per
day) can be increased thereby resulting in lower production costs while still delivering the full energy and low cost
potential that CIGS based devices can offer.
CIGS Experience
Our staff experience includes
nearly 17years of thin film and CIGS experience in successful technology development, equipment design, and production of several
million square feet CIGS products in a commercial production setting. Our Chief Technology Officer has worked side by side with
leading researchers at NREL and in fact shares an R&D 100 award with NREL staff for efforts related to CIGS technology development.
In June 2011 the
National Renewable Energy Laboratory (NREL) certified the peak efficiency conversion of 16.36% achieved by XsunX for
Copper-Indium-Gallium-(di)selenide (CIGS) photovoltaic devices. Overall efficiency of tested samples ranged from 15.3% to
16.36% producing an average efficiency of 15.91%. The samples provided to NREL was part of a 125mm substrates which after
deposition were sub-divided into quadrants to produce NREL device test structures and analytical equipment test structures.
The purpose was to provide a statistically significant body of data in support of XsunX’s continuous process
improvement efforts.
Sales and Marketing
We have developed
and have begun to implement a plan to offer CIGSolar™ technology to existing manufacturers of solar products in the
renewable energy industry. Although XsunX focuses on the development of solar technology and products, we are not a systems
or a machine manufacturer. We have and intend to continue to develop relationships with equipment manufacturers that can
build systems to our specifications thereby allowing us to offer turn-key manufacturing solutions to enable our licensees to
manufacturer CIGS cells quickly and inexpensively.
We anticipate that
at the conclusion of the initial development of our CIGS technology, that we will generate revenue from an array of services
and license fees from manufacturers that utilize our technologies. These revenue fees may include inception license fees and
royalty streams based upon the efficiencies our unique CIGS technology, guidance for the conversion of new or existing
facilities, production line equipment and systems design and markups, training and implementation, as well as R&D
support, and product reliability expertise.
Intellectual Property
We plan to market license
opportunities for our technology and not directly manufacture the solar technologies and related products that may employ the use
of our thin film technologies. This business model requires that we develop and maintain intellectual property that includes both
patented and proprietary technologies. We have licensed certain patented and patent pending technologies, and we are developing
with the intent to file for patent protection certain other thin film manufacturing technologies. The following is an outline of
certain patents and technologies we are developing, have acquired,or licensed:
The Company
is developing a hybrid manufacturing solution to produce high performance Copper Indium Gallium (di) Selenide (CIGS) thin
film solar cells. Our system and processing technology, which we call CIGSolar™, focuses on the mass production
of individual thin-film CIGS solar cells that match silicon solar cell dimensions and can be offered as a
non-toxic, high-efficiency and lowest-cost alternative to the use of silicon solar cells. We have designed a proprietary
system for a process known as co-evaporation used in the manufacture of the solar absorbing material CIGS. Certain key
features related to this system we believe may qualify for patent protection. In November 2010 we filed provisional patent
application with the United States Patent and Trademark Office identifying five (5) claims that through continued system and
process design revisions we have subsequently modified and for which we have elected to forego the filing of utility patent
applications at this time, and in July 2011 we filed three (3) additional claims related to our thermal effusion source design.
As we continue to refine our designs and process technologies we may elect to abandon, modify, or file additional
applications and we may
we have elected to forego the filing of utility patent
applications at this time, and in July 2011 we filed three (3) additional claims related to our thermal effusion source design.
As we continue to refine our designs and process technologies we may elect to abandon, modify, or file additional
applications and we may seek to enforce our claims through filing of
utility patents.
In
September 2003, the Company was assigned the rights to three patents as part of an Asset Purchase Agreement with Xoptix Inc., a
California corporation. The patents acquired were 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. We do not currently employ the use of the above named patents in the
development or commercialization of our
CIGSolar™ technology.
As we continue to develop
these new technologies, we may actively seek patent protection for certain aspects related to methods and apparatus we develop.
We can give no assurance that any such patent(s) will be granted for any process and manufacturing technology that we may develop
individually or in conjunction with third parties.
We rely on trademark and
copyright law, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others
to protect our proprietary rights.
We have not been subject to any intellectual property claims.
Company History
XsunX 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
of common stock (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.
Government Contracts
There are no government contracts as of the
fiscal year ended September 30, 2011.
Competitive Conditions
A number of thin film
solar cell technologies have and are being developed by other companies. Such technologies include amorphous silicon, cadmium telluride,
copper-indium-gallium-selenide (CIGS), and copper indium selenide as well as advanced concepts in thin film crystalline silicon,
and the use of organic materials. Given the benefit of time, investment, and advances in manufacturing technologies any of these
competing technologies may be offered in formats delivering power similar or greater to technologies developed that may be developed
by us, and they may also achieve manufacturing costs per watt lower than cost per watt to manufacture technologies developed by
us.
In accessing the principal
competitive factors in the market for solar electric power products, we use price per watt, stability and reliability, conversion
efficiency, diversity in use applications, and other performance metrics such as scalability of manufacturing processes and the
ability to adapt new technologies into cell designs and the manufacturing process without antiquation of existing infrastructure.
If we do not compete successfully with respect to these or other factors, it could materially and adversely affect our business,
results of operations, and financial condition.
A number of large companies
are actively engaged in the development, manufacturing and marketing of solar electric power products. Several of the larger TFPV
cell suppliers are Q-Cells, Shell Solar, Sharp Corporation, BP Solar, Kyocera Corporation, First Solar, and Energy Conversion Devices,
which together supply the significant portion of the current TFPV market. All of these companies have greater resources to devote
to research, development, manufacturing and marketing than we do.
Other competitive factors
lie in the current use of other clean, renewable energy technologies such as wind, ocean thermal, ocean tidal, and geo-thermal
power sources and conventional fossil fuel based technologies for the production of electricity. We expect our primary competition
will be within the solar cell marketplace itself. Barriers to entering the solar cell manufacturing industry include the technical
know-how required to produce solar cells that maintain acceptable efficiency rates, the design of efficient and scalable manufacturing
processes, and access to necessary manufacturing infrastructure.
Compliance with Environmental Laws and Regulations
The operations of the
Company are subject to local, state and federal laws and regulations governing environmental quality and pollution control. Compliance
with these regulations by the Company has required that we retain the use of consulting firms to assist in the engineering and
design of systems related to equipment operations, management of industrial gas storage and delivery systems, and occupancy fire
and safety construction standards to deal with emergency conditions. We do not anticipate that these costs will have a material
effect on the Company’s operations or competitive position, and the cost of such compliance has not been material. The Company
is unable to assess or predict at this time what effect additional regulations or legislation could have on its activities.
Employees and Consultants
As of the fiscal
year ended September 30, 2011 we had 4 salaried employees. This represents a decrease of 2 employees over the same period
ended 2010. The Company also engages consultants when needed to perform specific functions that otherwise would require an
employee. We have not experienced any work stoppages and we consider relations with our employees to be good.
Available Information
Our website address is
www.xsunx.com. We make available on our website access to our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to these reports that we have filed with the U.S. Securities and Exchange Commission (“SEC”).
The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.
Item 1A. Risk Factors
An investment in our common
stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information
in this Annual Report on Form 10-K, in evaluating XsunX and our business. If any of the following risks occur, our business, financial
condition and results of operations could be materially and adversely affected. Accordingly, the trading price of our common stock
could decline and you may lose all or part of your investment in our common stock. The risks and uncertainties described below
are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial
may also impair our business operations.
We Have Not Generated
Any Significant Revenues and Our Financial Statements Raise Substantial Doubt About Our Ability to Continue As A Going Concern.
We
are a development stage company and, to date, have not generated any significant revenues. The accompanying
consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate our continuation as a going concern. Net loss for the years ended September 30,
2011 and 2010 was $(1,117,654) and $(2,210,603), respectively. Net cash used for operations was
$(1,117,818)
and
$(1,347,395) for the years ended September 30, 2011 and 2010, respectively.
At September 30, 2011, we had a
working capital deficit of $(654,041).
From inception through September 30, 2011, we had an
accumulated deficit of $(35,037,459) at September 30, 2011.
The items discussed above
raise substantial doubt about our ability to continue as a going concern. We cannot assure you that we can achieve or sustain profitability
in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise.
There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors,
including whether our product development can be completed, whether our products will achieve market acceptance and whether we
obtain additional financing. We may not achieve our business objectives and the failure to achieve such goals would have a materially
adverse impact on us.
We expect that we
will need to obtain additional financing to continue to operate our business, including capital expenditures to complete the development
of marketable thin film manufacturing technologies, and financing may be unavailable or available only on disadvantageous terms
which could cause the Company to curtail its business operations and delay the execution of its business plan.
We
have in the past experienced substantial losses and negative cash flow from operations and have required financing, including equity
and debt financing, in order to pursue the commercialization of products based on our technologies. We expect that we will continue
to need significant financing to operate our business.
Although the Company entered into a financing arrangement with Lincoln
Park Capital Fund, LLC pursuant to which the Company has the right over a 25-month period to receive $50,000 every two business
days under such financing arrangement unless our stock price equals or exceeds $0.20, in which case we can sell greater amounts
to Lincoln Park as the price of our common stock increases, Lincoln Park shall not have the right or the obligation to purchase
any shares of our common stock on any business day that the market price of our common stock is less than $0.08. The registration
statement is currently not available for use for sales to Lincoln Park.
Furthermore, there can be no
assurance that additional financing will be available or that the terms of such additional financing, if available, will be acceptable
to us. If additional financing is not available or not available on terms acceptable to us, our ability to fund our operations,
complete the development of
marketable technologies, develop a sales network,
maintain our research and development efforts or otherwise respond to competitive pressures may be significantly impaired. We could
also be forced to curtail our business operations, reduce our investments, decrease or eliminate capital expenditures and delay
the execution of our business plan, including, without limitation, all aspects of our operations, which would have a material adverse
effect on our business.
We may be required
to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which
could adversely affect the market price of our shares of common stock and our business.
We will require additional
financing to fund future operations, including expansion in current and new markets, development and acquisition, capital costs
and the costs of any necessary implementation of technological innovations or alternative technologies. We may not be able to obtain
financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of
our current stockholders will be reduced, and the holders of the new equity securities may have rights superior to those of the
holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock.
If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights
senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations
and create a significant interest expense for us which could have a materially adverse effect on our business.
If future products
based on technologies we are developing cannot be developed for manufacture and sold commercially or our products become obsolete
or noncompetitive, we may be unable to recover our investments or achieve profitability which will have a materially adverse effect
on our business.
There can be no assurance
that such research and development efforts will be successful or that we will be able to develop commercial applications for our
products and technologies. Further, the areas in which we are developing technologies and products are characterized by rapid and
significant technological change. Rapid technological development may result in our products becoming obsolete or noncompetitive.
If future products based on our technologies cannot be developed for manufacture and sold commercially or our products become obsolete
or noncompetitive, we may be unable to recover our investments or achieve profitability. In addition, the commercialization schedule
may be delayed if we experience delays in meeting development goals, if products based on our technologies exhibit technical defects,
or if we are unable to meet cost or performance goals. In this event, potential purchasers of products based on our technologies
may choose alternative technologies and any delays could allow potential competitors to gain market advantages.
There is no assurance
that the market will accept our products once development has been completed which could have an adverse effect on our business.
There can be no assurance
that products based on our technologies will be perceived as being superior to existing products or new products being developed
by competing companies or that such products will otherwise be accepted by consumers. The market prices for products based on our
technologies may exceed the prices of competitive products based on existing technologies or new products based on technologies
currently under development by competitors. There can be no assurance that the prices of products based on our technologies will
be perceived by consumers as cost-effective or that the prices of such products will be competitive with existing products or with
other new products or technologies. If consumers do not accept products based on our technologies, we may be unable to recover
our investments or achieve profitability.
Other companies,
many of which have greater resources than we have, may develop competing products or technologies which cause products based on
our technologies to become noncompetitive which could have an adverse effect on our business.
We will be competing with
firms, both domestic and foreign, that perform research and development, as well as firms that manufacture and sell solar products.
In addition, we expect additional potential competitors to enter the markets for solar products in the future. Some of these current
and potential competitors are among the largest industrial companies in the world with longer operating histories, greater name
recognition, access to larger customer bases, well-established business organizations and product lines and significantly greater
resources and research and development staff and facilities. There can be no assurance that one or more such companies will not
succeed in developing technologies or products that will become available for commercial sale prior to our products, that will
have performance superior to products based on our technologies or that would otherwise render our products noncompetitive. If
we fail to compete successfully, our business would suffer and we may lose or be unable to gain market share.
The loss of strategic
relationships used in the development of our thin film manufacturing technologies and products could impede our ability to complete
the development of our products and have a material adverse effect on our business.
We have established a
plan of operations under which a portion of our operations rely on strategic relationships with third parties, to provide systems
design, assembly and support. A loss of any of our third party relationships for any reason could cause us to experience difficulties
in implementing our business strategy. There can be no assurance that we could establish other relationships of adequate expertise
in a timely manner or at all.
We may suffer the loss of key personnel
or may be unable to attract and retain qualified personnel to maintain and expand our business which could have a material adverse
effect on our business.
Our success is highly
dependent on the continued services of a limited number of skilled managers, scientists and technicians. The loss of any of these
individuals could have a material adverse effect on us. In addition, our success will depend upon, among other factors, the recruitment
and retention of additional highly skilled and experienced management and technical personnel. There can be no assurance that we
will be able to retain existing employees or to attract and retain additional personnel on acceptable terms given the competition
for such personnel in industrial, academic and nonprofit research sectors.
We may not be successful in protecting
our intellectual property and proprietary rights and may be required to expend significant amounts of money and time in attempting
to protect these rights. If we are unable to protect our intellectual property and proprietary rights, our competitive position
in the market could suffer.
Our intellectual property
consists of patents, trade secrets, and trade dress. Our success depends in part on our ability to obtain patents and maintain
adequate protection of our other intellectual property for our technologies and products in the U.S. and in other countries. The
laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the U.S., and many companies
have encountered significant problems in protecting their proprietary rights in these foreign countries. These problems may be
caused by, among other factors, a lack of rules and methods for defending intellectual property rights.
Our future commercial
success requires us not to infringe on patents and proprietary rights of third parties, or breach any licenses or other agreements
that we have entered into with respect to our technologies, products and businesses. The enforceability of patent positions cannot
be predicted with certainty. We intend to apply for patents covering both our technologies and our products, if any, as we deem
appropriate. Patents, if issued, may be challenged, invalidated or circumvented. There can be no assurance that no other relevant
patents have been issued that could block our ability to obtain patents or to operate as we would like. Others may develop similar
technologies or may duplicate technologies developed by us.
We are not currently a
party to any litigation with respect to any of our patent positions or trade secrets. However, if we become involved in litigation
or interference proceedings declared by the United States Patent and Trademark Office, or other intellectual property proceedings
outside of the U.S., we might have to spend significant amounts of money to defend our intellectual property rights. If any of
our competitors file patent applications or obtain patents that claim inventions or other rights also claimed by us, we may have
to participate in interference proceedings declared by the relevant patent regulatory agency to determine priority of invention
and our right to a patent of these inventions in the U.S. Even if the outcome is favorable, such proceedings might result in substantial
costs to us, including, significant legal fees and other expenses, diversion of management time and disruption of our business.
Even if successful on priority grounds, an interference proceeding may result in loss of claims based on patentability grounds
raised in the interference proceeding. Uncertainties resulting from initiation and continuation of any patent or related litigation
also might harm our ability to continue our research or to bring products to market.
An adverse ruling arising
out of any intellectual property dispute, including an adverse decision as to the priority of our inventions would undercut or
invalidate our intellectual property position. An adverse ruling also could subject us to significant liability for damages, prevent
us from using certain processes or products, or require us to enter into royalty or licensing agreements with third parties. Furthermore,
necessary licenses may not be available to us on satisfactory terms, or at all.
Confidentiality agreements with employees
and others may not adequately prevent disclosure of trade secrets and other proprietary information.
To protect our proprietary
technologies and processes, we rely on trade secret protection as well as on formal legal devices such as patents. Although we
have taken security measures to protect our trade secrets and other proprietary information, these measures may not provide adequate
protection for such information. Our policy is to execute confidentiality and proprietary information agreements with each of our
employees and consultants upon the commencement of an employment or consulting arrangement with us. These agreements generally
require that all confidential information developed by the individual or made known to the individual by us during the course of
the individual’s relationship with us be kept confidential and not be disclosed to third parties. These agreements also generally
provide that technology conceived by the individual in the course of rendering services to us shall be our exclusive property.
Even though these agreements are in place there can be no assurances that that trade secrets and proprietary information will not
be disclosed, that others will not independently develop substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets, or that we can fully protect our trade secrets and proprietary information. Violations by others
of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive
position and cause our sales and operating results to decline as a result of increased competition. Costly and time-consuming litigation
might be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret
protection might adversely affect our ability to continue our research or bring products to market.
Downturns in general economic conditions
could adversely affect our profitability.
Downturns in general economic
conditions can cause fluctuations in demand for our products, product prices, volumes and
margins. Future economic conditions may not
be favorable to our industry. A decline in the demand for our products or a shift to lower-margin products due to deteriorating
economic conditions could adversely affect sales of our intended products and our profitability and could also result in impairments
of certain of our assets.
Standards for compliance
with section 404 of The Sarbanes-Oxley Act Of 2002 are uncertain, and if we fail to comply in a timely manner, our business could
be harmed and our stock price could decline.
This annual report does
not include an attestation report of the company's registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules
of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
The
standards that must be met for management to assess the internal control over financial reporting as effective are new and complex,
and require significant documentation, testing and possible remediation to meet the detailed standards and will impose significant
additional expenses on us. We may encounter problems or delays in completing activities necessary to make an assessment of our
internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor
confidence and share value may be negatively impacted.
Our common stock
is considered a “Penny Stock” and as a result, related broker-dealer requirements affect its trading and liquidity.
Our common stock is considered
to be a “penny stock” since it meets one or more of the definitions in Rules 15g-2 through 15g-6 promulgated under
Section 15(g) of the Exchange Act. These include but are not limited to the following: (i) the common stock trades at
a price less than $5.00 per share; (ii) the common stock is not traded on a “recognized” national exchange; (iii) the
common stock is not quoted on the NASDAQ Stock Market, or (iv) the common stock is issued by a company with average revenues
of less than $6.0 million for the past three (3) years. The principal result or effect of being designated a “penny
stock” is that securities broker-dealers cannot recommend our Common Stock to investors, thus hampering its liquidity.
Section 15(g) and
Rule 15g-2 require broker-dealers dealing in penny stocks to provide potential investors with documentation disclosing the
risks of penny stocks and to obtain a manually signed and dated written receipt of the documents before effecting any transaction
in a penny stock for the investor’s account. Potential investors in our Common Stock are urged to obtain and read such disclosure
carefully before purchasing any of our shares.
Moreover, Rule 15g-9
requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any
penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning
his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that
information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and
experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with
a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive
a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial
situation, investment experience and investment objectives.
The trading market in our common stock
is limited and may cause volatility in the market price.
Our common stock is currently
traded on a limited basis on the OTCBB. The OTCBB is an inter-dealer, over-the-counter market that provides significantly less
liquidity than the NASDAQ Stock Market and the other national markets. Quotes for stocks included on the OTCBB are not listed in
the financial sections of newspapers as are those for the NASDAQ Stock Market. Therefore, prices for securities traded solely on
the OTCBB may be difficult to obtain.
The quotation of our common
stock on the OTCBB does not assure that a meaningful, consistent and liquid trading market currently exists, and in recent years
such market has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller
companies like us. Thus, the market price for our common stock is subject to volatility and holders of common stock may be unable
to resell their shares at or near their original purchase price or at any price. In the absence of an active trading market:
|
·
|
investors may have difficulty buying and selling or obtaining market quotations;
|
|
·
|
market visibility for our common stock may be limited; and
|
|
·
|
a lack of visibility for our common stock may have a depressive effect on the market for our common stock.
|
Due to the low price of
the securities, many brokerage firms may not be willing to effect transactions in the securities. Even if a purchaser finds a broker
willing to effect a transaction in these securities, the combination of brokerage commissions, state transfer
taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not permit the use of such securities as collateral for any
loans. Such restrictions could have a materially adverse effect on our business.
We may have difficulty
raising necessary capital to fund operations as a result of market price volatility for our shares of common stock.
The market price of our
common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which
are beyond our control, including:
|
•
|
technological innovations or new products and services by us or our competitors;
|
|
•
|
additions or departures of key personnel;
|
|
•
|
sales of our common stock;
|
|
•
|
our ability to integrate operations, technology, products and services;
|
|
•
|
our ability to execute our business plan;
|
|
•
|
operating results below expectations;
|
|
•
|
loss of any strategic relationship;
|
|
•
|
economic and other external factors; and
|
|
•
|
period-to-period fluctuations in our financial results.
|
Because we have a limited
operating history with limited revenues to date, you may consider any one of these factors to be material. Our stock price may
fluctuate widely as a result of any of the above listed factors. In recent years, the securities markets in the United
States have experienced a high level of price and volume volatility, and the market price of securities of many companies have
experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or
prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject to volatility resulting
from purely market forces over which we will have no control. If our business development plans are successful, we may require
additional financing to continue to develop and exploit existing and new technologies and to expand into new markets. The exploitation
of our technologies may, therefore, be dependent upon our ability to obtain financing through debt and equity or other means.
Item 1B. Unresolved Staff Comments
As of the date of this Annual Report on Form
10-K, there are no unresolved staff comments regarding our previously filed periodic or current reports under the Securities Exchange
Act of 1934, as amended.
Item 2. Properties
California Corporate Office Lease
The Company leases facilities
in Aliso Viejo, CA. At the lease rate of approximately $1,000 per month. The Company plans to continue to lease these facilities
for the foreseeable future.
Proposed California Facilities Lease
The Company has located
and negotiated a month to month proposed sub-lease for facilities located in Irvine California to be used for the final assembly,
calibration, and marketing of the Company’s multi-chamber CIGSolar thermal coevaporation system which is currently under
construction. The Company intends to commence the lease at the time that system major components are ready for delivery by vendors
engaged in its production for final assembly by XsunX. We intend to operate in this facility for up to one year prior to locating
to larger and permanent facilities.
The Company owns no real property.
Item 3. Legal Proceedings
In
the ordinary conduct of our business,
we may become involved in various lawsuits and legal proceedings, which arise in
the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims
that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or
operating results
except as set forth below.
None
Item 4. (Removed and Reserved)
PART II
Item 5. Market for Registrant’s Common Equity and Related
Stockholder Matters and Issuer Purchases of Equity Securities
Price Range of Common Stock
The Company’s common stock trades on
the OTC Bulletin Board under the symbol “XSNX”. The range of high, low and close quotations for the Company’s
common stock by fiscal quarter within the last two fiscal years, as reported by the OTC Bulletin Board, was as follows:
Year Ended September 30, 2011
|
|
High
|
|
|
Low
|
|
|
Close
|
|
First Quarter ended December 31, 2010
|
|
|
0.12
|
|
|
|
0.07
|
|
|
|
0.07
|
|
Second Quarter ended March 31, 2011
|
|
|
0.11
|
|
|
|
0.07
|
|
|
|
0.08
|
|
Third Quarter ended June 30, 2011
|
|
|
0.10
|
|
|
|
0.06
|
|
|
|
0.07
|
|
Fourth Quarter ended September 30, 2011
|
|
|
0.09
|
|
|
|
0.05
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter ended December 31, 2009
|
|
|
0.26
|
|
|
|
0.13
|
|
|
|
0.16
|
|
Second Quarter ended March 31, 2010
|
|
|
0.21
|
|
|
|
0.11
|
|
|
|
0.13
|
|
Third Quarter ended June 30, 2010
|
|
|
0.15
|
|
|
|
0.10
|
|
|
|
0.11
|
|
Fourth Quarter ended September 30, 2010
|
|
|
0.12
|
|
|
|
0.07
|
|
|
|
0.10
|
|
The market price for our
common stock, like that of other technology companies, is highly volatile and is subject to fluctuations in response to variations
in our operating results, announcements related to technological innovation or business development, or other events and factors.
Our stock price may also be affected by broader market trends unrelated to our performance.
The above quotations reflect
inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
Number of Holders
As of September 30, 2011,
there were approximately 280 record holders of the Company’s common stock, not counting shares held in “street name”
in brokerage accounts which is unknown. As of September 30, 2011, there were 224,998,637 shares of common stock outstanding on
record with the Company’s stock transfer agent, Mountain Share Transfer. On September 30, 2011 the last reported sales price
of our common stock on the OTCBB was approximately $0.06 per share.
Transfer Agent
Our transfer agent is Mountain Share Transfer,
Inc. located at 1625 Abilene Drive, Broomfield, CO 80020, 303-460-1149 Telephone, 303-438-9243 Fax.
Dividends
The Company has not declared or paid any cash
dividends on its common stock and does not anticipate paying dividends for the foreseeable future.
Stock Option Plan
On
January 5, 2007, the Board of Directors of XsunX resolved to establish the 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.
Options granted under the Plan may be either Incentive Options or Nonqualified Options
and shall be administered by the Company's Board of Directors ("Board"). Each Option shall be exercisable to the nearest
whole share, in installments or otherwise, as the respective Option agreements may provide. Notwithstanding any other provision
of the Plan or of any Option agreement, each Option shall expire on the date specified in the Option agreement.
A
total of 20,000,000 shares of common stock are authorized under the plan.
Stock Compensation, Issuance of Stock Purchase Options
During the fiscal year ended September 30,
2011 eleven million options were granted.
Table of Equity Compensation
The following table sets
forth summary information, as of September 30, 2011, concerning securities authorized for issuance under all equity compensation
plans and agreements for the fiscal years ended September 30, 2011, and 2010 is as follows:
Risk free interest rate
|
1.67% to 2.77%
|
Stock volatility factor
|
90.56% to 104.73%
|
Weighted average expected option life
|
5 years
|
Expected dividend yield
|
None
|
A summary of the Company’s
stock option activity and related information follows:
|
|
9/30/2011
|
|
9/30/2010
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
of
|
|
exercise
|
|
of
|
|
exercise
|
|
|
Options
|
|
price
|
|
Options
|
|
price
|
Outstanding, beginning of year
|
|
|
10,180,000
|
|
|
$
|
0.27
|
|
|
|
10,180,000
|
|
|
$
|
0.27
|
|
Granted
|
|
|
11,000,000
|
|
|
$
|
0.10
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Expired
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding, end of year
|
|
|
21,180,000
|
|
|
$
|
0.18
|
|
|
|
10,180,000
|
|
|
$
|
0.27
|
|
Exercisable at the end of year
|
|
|
8,544,159
|
|
|
$
|
0.27
|
|
|
|
6,858,328
|
|
|
$
|
0.29
|
|
Weighted average fair value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options granted during the year
|
|
|
|
|
|
$
|
0.10
|
|
|
|
|
|
|
$
|
—
|
|
The weighted average remaining
contractual life of options outstanding issued under the plan as of September 30, 2011 was as follows:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Stock
|
|
Stock
|
|
Remaining
|
Exercisable
|
|
Options
|
|
Options
|
|
Contractual
|
Prices
|
|
Outstanding
|
|
Exercisable
|
|
Life (years)
|
$0.46
|
|
|
1,150,000
|
|
|
|
950,000
|
|
|
|
0.32 years
|
|
$0.53
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
0.40 years
|
|
$0.45
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
0.56 years
|
|
$0.41
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
0.91 years
|
|
$0.36
|
|
|
2,500,000
|
|
|
|
1,500,000
|
|
|
|
1.07 years
|
|
$0.36
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
1.12 years
|
|
$0.36
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
1.16 years
|
|
$0.36
|
|
|
115,000
|
|
|
|
115,000
|
|
|
|
2.03 years
|
|
$0.16
|
|
|
5,115,000
|
|
|
|
4,679,159
|
|
|
|
1.50 years
|
|
$0.10
|
|
|
11,000,000
|
|
|
|
—
|
|
|
|
4.05 years
|
|
|
|
|
21,180,000
|
|
|
|
8,544,159
|
|
|
|
|
|
Stock-based compensation
expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected
to vest. Stock-based compensation expense recognized in the financial statements of operations during the year ended September
30, 2011, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of September
30, 2011 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent
to September 30, 2011, based on the grant date fair value estimated. We account for forfeitures as they occur. The stock-based
compensation expense recognized in the statement of operations during the years ended September 30, 2011 and 2010 was $186,016
and $273,133, respectively.
Warrants
A summary of the Company’s
warrants activity and related information follows:
|
|
9/30/2011
|
|
9/30/2010
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
of
|
|
exercise
|
|
of
|
|
exercise
|
|
|
Options
|
|
price
|
|
Options
|
|
price
|
Outstanding, beginning of year
|
|
|
4,195,332
|
|
|
$
|
0.61
|
|
|
|
4,195,332
|
|
|
$
|
0.61
|
|
Granted
|
|
|
10,000,000
|
|
|
$
|
0.04
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
|
|
(5,000,000
|
)
|
|
$
|
(0.04
|
)
|
|
|
—
|
|
|
$
|
—
|
|
Expired
|
|
|
(612,000
|
)
|
|
$
|
(0.73
|
)
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding, end of year
|
|
|
8,583,332
|
|
|
$
|
0.32
|
|
|
|
4,195,332
|
|
|
$
|
0.61
|
|
Exercisable at the end of year
|
|
|
8,583,332
|
|
|
$
|
0.32
|
|
|
|
4,047,332
|
|
|
$
|
0.64
|
|
Weighted average fair value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrants granted during the year
|
|
|
|
|
|
$
|
0.04
|
|
|
|
|
|
|
$
|
—
|
|
At September 30, 2011,
the weighted average remaining contractual life of warrants outstanding:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Remaining
|
Exercisable
|
|
Warrants
|
|
Warrants
|
|
Contractual
|
Prices
|
|
Outstanding
|
|
Exercisable
|
|
Life (years)
|
$0.20
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
0.25 years
|
|
$0.50
|
|
|
1,666,666
|
|
|
|
1,666,666
|
|
|
|
1.09 years
|
|
$0.75
|
|
|
1,666,666
|
|
|
|
1,666,666
|
|
|
|
1.09 years
|
|
$0.04
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
4.30 years
|
|
$0.04
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
4.46 years
|
|
|
|
|
8,583,332
|
|
|
|
8,583,332
|
|
|
|
|
|
Recent Sales of Securities (Registered and Unregistered)
The
authorized Common stock of the Company was established at 500,000,000 shares with no par value.
The Company is also
authorized to issue 50,000,000 shares of preferred stock with a par value of $0.01 per share. The rights, preferences and privileges
of the holders of the preferred stock will be determined by the Board of Directors prior to issuance of such shares.
The
following represents a detailed analysis of the fiscal year ended September 30, 2011 Common stock transactions.
During the year
ended September 30, 2011, pursuant to an S-1 Registration Statement declared effective by the SEC on June 30, 2010, and a
Post-Effective Amendment No. 1 registration declared effective by the Securities and Exchange Commission on April 4, 2011 the
Company sold to Lincoln Park Capital Group, LLC (LPC) a total of approximately 6,853,376 shares for a total investment of
$575,000. These shares were sold at various pricing between $0.08 and $0.0888 per share. An additional 159,720 of the
remaining pool of 1,236,112 commitment shares were issued on a pro rata basis to LPC as LPC has purchased additional shares
pursuant to the effective S-1 Registration Statement. The registration statement is currently not available for use for sales
to Lincoln Park.
During the year ended
September 30, 2011, the Company also issued 5,000,000 units composed of one share of restricted common stock and a five year warrant
exercisable to purchase two shares of Common Stock at $0.04 per share for cash of $200,000; 1,250,000 shares of restricted common
stock at a price of $0.04 per share for cash of $50,000; a holder of warrants exercised all available 5,000,000 warrants utilizing
a cashless exercise provision resulting in the net issuance of 2,680,204 shares of the Company’s restricted common stock.
The above shares were issued in a transactions exempt from registration pursuant to Section 4(2) of the Securities Act.
Lincoln Park Capital Fund, LLC Transaction
On March 30,
2010, XsunX signed a $5 million stock purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”), an
Illinois limited liability company. Upon signing the agreement, XsunX received $500,000 from LPC as an initial purchase under
the $5 million dollar commitment in exchange for 5,000,000 shares of our common stock. We also entered into a registration
rights agreement with LPC whereby 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 LPC
under the purchase agreement. On April 30, 2010, XsunX, Inc. filed a Form S-1 with the Securities and Exchange Commission
seeking to register 27,500,000 shares related to our financing agreements with LPC. The registration was declared effective
by the Securities and Exchange Commission on June 30, 2010. On March 29, 2011 we filed a Post-Effective Amendment No. 1 Form
S-1 with the Securities and Exchange Commission seeking to maintain the registration for the 27,500,000 shares related to
our financing agreements with LPC. The Post-Effective Amendment No. 1 registration was declared effective by the Securities
and Exchange Commission on April 4, 2011. Subject to the effective registration statement related to the transaction, we have
the right over a 25-month period to sell our shares of common stock to LPC in amounts up to $500,000 per sale, depending
on certain conditions as set forth in the purchase agreement, up to the aggregate commitment of $5 million.
There are no upper
limits to the price LPC may pay to purchase our common stock, and the purchase price of the shares related to the $4.5
million 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. The Company will control the timing and amount of any sales of shares to LPC. LPC shall not have
the right or the obligation to purchase any shares of our common stock on any business day that the price of our common stock
is below $0.08.
In consideration for entering
into the $5 million agreement which provides for an additional $4.5 million of future funding, we issued to LPC 1,250,000 shares
of our common stock as a financing inception commitment and shall issue an equivalent amount of shares pro rata as LPC purchases
the additional $4.5 million. The common stock purchase agreement may be terminated by us at any time at our discretion without
any cost to us. Except for a limitation on variable priced financings, there are no negative covenants, restrictions on future
funding’s, penalties or liquidated damages in the agreement. The proceeds received by the Company under the common stock
purchase agreement are expected to be used in the development of thin film manufacturing equipment and technologies, general and
administrative costs, and general working capital.
Pursuant
to the stock purchase agreement with LPC and the S-1 Registration Statement declared effective by the SEC on June 30, 2010, the
Company has sold to Lincoln Park Capital Fund, LLC through September 30, 2011, approximately 12,410,184 shares for a total investment
of $1,125,000 including the initial $500,000 and 5,000,000 shares. These shares were sold at various pricing between $0.08 and
$0.10 per share. Including 1,250,000 shares provided to LPC as financing inception commitment shares, and an additional 173,608
commitment shares issued pro rata as LPC has purchased additional shares, as of September 30, 2011 13,666,208 registered shares
remain available for future sales pursuant to the effective S-1 Registration Statement.
The registration statement is currently
not available for use for sales to Lincoln Park.
Issuance of Shares for Services
None
Use of Proceeds from the Sale of Securities
The proceeds from the
above sales of securities were and are being used primarily to fund efforts by the Company to develop marketable technologies for
the manufacture of thin film solar technologies, and in the day-to-day operations of the Company and to pay the accrued liabilities
associated with these operations.
Item 6. Selected Financial Data
N/A
Item 7. Management’s Discussion and Analysis or Plan of
Operations
Cautionary and Forward-Looking Statements
The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated
financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties
and assumptions as described under the “Cautionary Note Regarding Forward-Looking Statements” that appears earlier
in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated by these forward-looking
statements as a result of many factors, including those discussed under “Item 1A: Risk Factors” and elsewhere in this
Annual Report on Form 10-K.
The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully
review the factors described in other documents the Company files from time to time with the Securities and Exchange Commission,
including the Quarterly Reports on Form 10-Q and Annual Report on Form 10-K filed and any Current Reports on Form 8-K filed by
the Company.
Business Overview
XsunX,
Inc. is developing and has begun to market a hybrid manufacturing solution to produce high performance Copper Indium Gallium
(di) Selenide (CIGS) thin film solar cells. Our patent pending processing technology, which we call
CIGSolar™, focuses on the mass production of individual thin-film CIGS solar cells that match silicon solar cell
dimensions and can be offered as a non-toxic, high-efficiency and lowest-cost alternative to the use of silicon solar cells.
We intend to offer licenses for the use of the CIGSolar™ process technology thereby generating revenue streams through
licensing fees and manufacturing royalties for the use of the technology.
Our
efforts have been focused on the development and customization of a series of specialized processing tools that when
combined provide a
turn-key high-through put manufacturing system to produce CIGS solar cells.
Core
attributes to our process method are the use of small area thermal co-evaporation techniques coupled with state-of-the-art sputter
deposition technologies to improve manufacturing output, increase cell efficiency, production yields, and lower the costs for the
production of high efficiency CIGS cells.
There
are five (5) core process tools that when combined will produce 156mm format (about 6” square) solar cells. We believe that
it will be the ability of our system to minimize processing defects while maintaining exceptional per hour production rates that
will provide superior commercial opportunities. CIGSolar™ cells will be manufactured on stainless steel squares sized to
match silicon solar cells currently used in nearly 75% of all solar modules manufactured today.
This
innovative approach bridges the gap between inexpensive thin-film and costly high efficiency silicon wafer technologies to produce
a new breed of solar cell combining what we believe are the best attributes of each technology. The mass production of individual,
high performance CIGS solar cells – like solar building blocks – we believe will allow solar power to finally compete
effectively against other sources of electrical energy.
Plan of Operations
For
the fiscal year ending September 30, 2012, the Company has developed a plan of operations
focused on the assembly of a
multi-chamber CIGSolar™ thermal co-evaporation system to provide hands-on access to interested customers of a
production-sized multi-chamber CIGSolar™ system. We plan to add support systems necessary to establish limited scale
pilot
CIGS solar cell production capabilities to enhance marketing and sales efforts, continued
CIGSolar™
process
improvement, and to support general business development efforts related to the commercialization of our CIGS solar cell
manufacturing technology.
Our
Plan of Operations, based upon the aforementioned activities, requires $1.03 million for general and administrative activities,
$239 thousand to support increased sales and marketing efforts, and $1.48 million to establish a limited scale production system
for use in marketing and sales efforts through the use of the system to demonstrate the
CIGSolar™
technologies,
continued process development and improvement under our technology license model, and for support purposes of the systems that
may be placed in the field as we work to commercialize our
CIGSolar™
manufacturing technology.
The Company may change
any or all of the budget categories in the execution of its business attempts. None of the items is to be considered fixed or unchangeable.
Management believes the
summary data and audit presented herein is a fair presentation of the Company’s results of operations for the periods presented.
Due to the Company’s change in primary business focus and new business opportunities these historical results may not necessarily
be indicative of results to be expected for any future period. As such, future results of the Company may differ significantly
from previous periods.
Results of Operations for the Fiscal Year Ended September
30, 2011Compared to Fiscal Year Ended September 30, 2010.
Revenue and Cost of Sale
s:
The Company generated
no revenues in the fiscal years ended September 30, 2011, and 2010. There were no associated costs of goods sold in any of the
fiscal periods represented above. The Company to date has had minimal revenue and cost of sales, and is still in the development
stage.
Selling, General and Administrative Expenses:
Selling,
General and Administrative (SG&A) expenses decreased by $(524,272) during the fiscal year ended September 30, 2011 to
$946,459 as compared to $1,470,731 for the fiscal year ended September 30, 2010. The decrease in SG&A expenses was
related primarily to a general reduction to salaries, staffing, and operating expenses under the Company’s re-focused
plan of operations for the development of a new CIGSolar™ thin film solar manufacturing technology. We anticipate that
expenditures associated with the commercial development and sales of our thin-film solar manufacturing technologies will
increase SG&A expenditures in the future. However, we plan to offer our technology as a licensable process to existing
solar product manufacturers which we anticipate will mitigate future expenditures that would normally be associated with our
need to establish direct large scale manufacturing capabilities and the associated facility infrastructure.
Research and Development:
Research and development
decrease slightly by $(10,507) during the fiscal year ended September 30, 2011 to $282,492 as
compared to $292,999 for the fiscal
year ended September 30, 2010. The decrease was primarily due to a reduction in research related employees used in the period on
the development of our new cross-industry thin film solar manufacturing technology CIGSolar™.
During portions of the fiscal year research
and development efforts included the use of third party equipment vendors whose equipment we may use as part of our integrated
CIGSolar™ manufacturing system. These vendors assist with access to equipment and technologies that we are working to customize
for use in our manufacturing processes. During the fiscal year while reducing direct research and development costs we prepared
plans and began efforts to establish each of the various system capabilities necessary for our technology within our own facilities
for use in continued process improvement, marketing efforts, and future systems sales support. We anticipate that future R&D
expense will again increase as we complete this process establishing each of the various system capabilities within our own facilities.
Net Loss:
For the
fiscal year ended September 30, 2011, our net loss was $(1,117,654) as compared to a net loss of $(2,210,603) for the fiscal
year ended September 30, 2010. This decrease in Net Loss of $(1,092,949) compared to the fiscal year ended September 30,
2010was primarily due to a decrease in write down of assets, which resulted in an expense of $313,671. Also, the decrease in
net loss was due to the Company’s overall decrease in operating expenses. The Company anticipates the trend of losses
to continue in future periods until the Company can recognize sales of significance of which there is no assurance.
Liquidity and Capital Resources
We had a
working capital deficit at September 30, 2011 of $(654,041), as compared to a working capital deficit of $(727,848) as of
September 30, 2010. The increase of $73,807 in working capital was the result of a decrease in accounts payable, with a
similar decrease in cash. There was no revenue producing activities for the fiscal year ended September 30, 2011.
Cash flow used
by operating activities was $(1,117,818) for the fiscal year ended September 30, 2011, as compared to cash flow used by operating
activities of ($1,347,395) for the fiscal year ended September 30, 2010. The decrease in cash flow used of $(229,577) by operating
activities was primarily due to a decrease in stock option expense and accounts payable, and an increase in other assets and accrued
expenses.
Cash flow provided
by investing activities was $158,972 for the fiscal year ended September 30, 2011, as compared to cash flow provided in investing
activities of $14,100 during the fiscal year ended September 30, 2010. The net increase in investing activities was primarily due
to proceeds received of $17,000 from the sale of certain assets, and a deposit refunded due to cancellation of a purchase order
in the amount of $230,000, offset by a payment made on a purchase order of $81,975, compared to the prior fiscal year.
Cash flow
provided by financing activities was $825,000 for the fiscal year ended September 30, 2011, as compared to cash provided by
financing activities of $1,003,000 during the fiscal year ended September 30, 2010. The decrease in cash flow provided by
financing activities was the result of a reduction to cash provided through equity financing. Our capital needs have
primarily been met from the proceeds of private placements, as we are currently in the development stage and had no
revenues.
The Company
is currently engaged in efforts to develop a cross-industry thin film solar manufacturing technology that we believe provides an
opportunity for XsunX to establish a competitive advantage within the solar industry. However the cash flow requirements
associated with the completion of these development efforts, and the transition to revenue recognition will exceed cash
generated from operations in the current and future periods. We will need to seek to obtain additional financing from equity
and/or debt placements. We have been able to raise capital in a series of equity and debt offerings in the past. While there
can be no assurances that we will be able to obtain such additional financing, on terms acceptable to us and at the times
required, or at all, we believe that sufficient capital can be raised in the foreseeable future as necessary.
Off-Balance Sheet Arrangements
We do not have any relationships
with unconsolidated entities or financial partnerships such as entities often referred to as structured finance or special purpose
entities that would have been established for the purpose of facilitating off-balance-sheet arrangements or for other contractually
narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if
we had engaged in such relationships.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Our products will be quoted
for sale and licensure in United States dollars and as our business development efforts progress we anticipate the sale and/or
licensure of our products to foreign entities. To the extent that we may be exposed to foreign currency risks related to the rise
and/or fall of foreign currencies against the U.S. dollar we will report in United States dollars.
Item 8. Financial Statements and Supplementary Data
All financial information
required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.
All financial information
required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.
Item 9. Changes in and Disagreements on Accounting and Financial
Disclosure
Effective as of July 17,
2009, the board of directors of the Company approved the engagement of HJ Associates& Consultants, LLP (“HJ”) as
its principal independent registered public accounting firm to audit the Company’s financial statements. During the Company’s
two (2) most recent fiscal years, as well as the subsequent interim period through the Effective Date, there were no disagreements
between the Company and HJ on any matter of accounting principles or practices, financial statement disclosure, or auditing scope
or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference to the subject
matter of the disagreement in connection with HJ’s report. During the Company’s most recent two (2) fiscal years, as
well as the subsequent interim period through the Effective Date, HJ did not advise the Company of any of the matters identified
in Item 304(a)(v)(A) - (D) of Regulation S-K.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our Chief Executive Officer
and Chief Operating Officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. The evaluation included
certain control areas in which we have made, and are continuing to make, changes to improve and enhance controls. A material weakness
is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively
low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements
being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned
functions. Based on such evaluation, our Chief Executive Officer and Chief Operating Officer have concluded that, as of the end
of such period, our disclosure controls and procedures were effective, and we have discovered no material weakness.
Internal Control over Financial Reporting
Management is responsible
for establishing and maintaining adequate internal control structure and procedures over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f)) under the Exchange Act. The SEC rule making for the Sarbanes-Oxley Act of 2002 Section 404 requires that a company's
internal controls over financial reporting be based upon a recognized internal control framework. Our management conducted an assessment
of the effectiveness of our internal control over financial reporting as of September 30, 2011 based on the framework set forth
in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) that has been modified to more appropriately reflect the current limited operational scope of the Company
as a Development Stage company. The Company used the COSO guide - The Internal Control over Financial Reporting - Guidance for
Smaller Public Companies to implement the Company’s internal control framework. Additionally, the limited scope of operations
of the Company means that traditional separation of duties controls are not used by the Company as a result of the limited staffing
within the Company. The Company relies on alternative procedures to overcome this non-material control weakness.
During the Company's fiscal
year ended September 30, 2011, management continued to assess the Company's internal and controls procedure documents basing any
need for revision upon additional guidance for implementing the model framework created by COSO as is appropriate to our operations
and operations of smaller public entities. This framework is entitled Internal Control-Integrated Framework. The COSO Framework,
which is the common shortened title, was published in 1992 and has been updated, and we believe will satisfy the SEC requirements
of Section 404 of the Sarbanes-Oxley Act of 2002. As the Company expands operations, additional staff will be added to implement
separation of duties controls as well.
Based on that evaluation,
our Chief Executive Officer and our Chief Operating Officer concluded that our internal control over financial reporting as of
September 30, 2011 was effective. Internal control over financial reporting cannot provide absolute assurance
of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a
process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.
Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by
internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
Except as noted above, there have not been
any changes in our internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our
fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Auditors Report on Internal Control over Financial Reporting
This annual report does
not include an attestation report of the company's registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
Item 9B. Other Information
As part of the
Company’s operating plans, and efforts to maximize the use of its capital resources towards the assembly of its initial
baseline multi-chamber CIGSolar™ thermal co-evaporation system, the Company’s CEO, COO, and CTO agreed effective
October 2011 to salary reductions under which each executive would receive an annualized salary of $120,000.
On October 24, 2011,
in exchange for a promissory note (the “Note”) of $456,921 plus accrued interest of $98,645 that had become due
at September 1, 2011, the Company issued 7,000,000 restricted shares of common stock as payment for the reduction of $205,565
of principal and accrued interest balance under the Note, and exchanged the Note for and issued a new unsecured promissory
exchange note (the “Exchange Note”) in the amount of $350,000. The note bears interest at 10% per annum and
matures on September 30, 2012.
On October 27, 2011,
and again on December 7, 2011 XsunX, Inc. (the "Company") consummated a Securities Purchase Agreement (the
"Purchase Agreements") providing for the sale by the Company of 8% unsecured Convertible Notes in the aggregate
principal amount of $53,000 and $42,500 respectively (the “Note”) which amounts were advanced immediately at the
time of each sale. The October 27, 2011 Note matures on July 31, 2012, and the December 7, 2011 Note matures on September 12,
2012. The Company has the right to redeem a portion or all amounts outstanding under the either Note prior to one hundred and
eighty one days from issuance of the Note under a variable redemption rate premium. After one hundred and eighty days the
holder may convert into shares of common stock at a conversion price of sixty percent of the average lowest five closing bid
prices for the common stock, during the ten trading day period ending on the latest complete trading day prior to the
conversion date. The holder has certain rights of first refusal related to financings of less than seventy five thousand
dollars by the Company, and in the event of certain default conditions the Company may be subject a default premium of fifty
percent.
Issuance of Stock Purchase Options
In October 2010, the Board
of Directors authorized the grant of stock option agreements to the named employees listed below as follows:
|
Date
Issued
|
|
Number
Issued
|
|
|
Exercise
Price
|
|
Expiration
Date
|
|
Consideration
|
Joseph Grimes
|
October 18, 2010
|
|
|
1,000,000
|
|
|
$
|
0.10
|
|
18-Oct-15
|
|
Future key deliverables within the scope of the employees influence
|
Robert G. Wendt
|
October 18, 2010
|
|
|
10,000,000
|
|
|
$
|
0.10
|
|
18-Oct-15
|
|
Future key deliverables within the scope of the employees influence
|
The vesting schedule for Mr. Grimes is as follows:
The option shall become
exercisable in the following amounts upon the delivery and/or achievement by the optionee(s) of the following performance milestones:
(a)
|
|
The Option shall become exercisable in the amount of
1,000,000 shares upon Optionee’s management of the assembly and operation of initial baseline CIGSolar process equipment
contemplated under the Company’s CIGS solar cell equipment and technology plan, and the subsequent production of 1,000 full
size solar cells (dimension of 125 or 156 mm square) that achieve a minimum of >10% conversion efficiency over a five (5) day
operating period in which the system operates at the designed through-put speed range delivering a cell yield of >80%. Cells
measured at AM1.5 using a light source and tester calibrated to NIST standards.
|
(b)
|
|
In the event of a sale or merger of all or substantially
all of the Company’s assets to an acquiring party following which the Company would not be a surviving operating entity,
the Company will provide Optionee a fifteen (15) day prior notice of such proposed event providing for immediate vesting of all
remaining unvested Options under this Agreement.
|
The vesting schedule for Mr. Wendt is as follows:
The option shall
become exercisable in the following amounts upon the delivery and/or achievement by the optionee(s) of the following
performance milestones:
(a)
|
|
The Option shall become exercisable in the amount of 1,000,000 shares upon the award
to the Company of atleast one patent issued by the United States Patent and Trademark Office protecting a
key element to the Company’s CIGSolar manufacturing approach in which Optionee had an instrumental involvement in
either the design, development, prosecution, or inception of the intellectual property.
|
(b)
|
|
The Option shall become exercisable in the amount of 4,000,000 shares upon
Optionee’s assembly and/or management of the assembly and operation of initial baseline CIGSolar process equipment
contemplated under the Company’s CIGS solar cell equipment and technology plan, and the subsequent production of 1,000
full size solar cells (dimension of 125 or 156 mm square) that achieve a minimum of >10% conversion efficiency over a five
(5) day operating period in which the system operates at the designed through-put speed range delivering a cell yield of
>80%. Cells measured at AM1.5 using a light source and tester calibrated to NIST standards.
|
(c)
|
|
The Option shall become exercisable in the amount of 5,000,000 shares upon Optionee’s
assembly and/or management of the assembly and operation of commercial CIGSolar production equipment prepared for use by the Company,
or for delivery to a third party by the Company for use in a commercial setting, and the subsequent production of 2,000 full size
solar cells (dimension of 125 or 156 mm square) that achieve a minimum of > 12% conversion efficiency while operating over
a five (5) day operating period in which the system operates at the designed through-put speed range delivering a cell yield of
>85%. Cells measured at AM1.5 using a light source and tester calibrated to NIST standards.
|
(d)
|
|
Achievement of each milestone to be reviewed and determined by the Company’s
Board of Directors prior to the Company acknowledgment of any vesting rights by Optionee. Determination by the Board of Directors
will be provided within ten (10) business days from notice to the Company by Optionee of milestone achievement. Notice by Optionee
shall contain all relevant information necessary for the Board of Directors to review and make a determination.
|
Additionally, in October 2010, the Board
of Directors authorized amendments to prior option grants issued to the named employee listed below as follows:
Grant Number
|
Optionee Name
|
Amended Terms
|
07-016
|
Robert Wendt
|
Section 3(i) (b) Exercise of Option was amended as follows; This Option shall become exercisable in the amount of 100,000 shares upon production by Optionee of a >10% NREL CIGS device produced on glass substrate. Device measured at AM1.5 using a light source and tester calibrated to NIST standards
|
07-023
|
Robert Wendt
|
Section 3(i) (a,b,c) Vesting Schedule
was amended as follows;
(a) This Option shall become exercisable
in the amount of 250,000 shares upon production by Optionee of a >10% NREL CIGS device produced on stainless steel substrate.
Device measured at AM1.5 using a light source and tester calibrated to NIST standards.”
“(b) This Option shall become
exercisable in the amount of 250,000 shares upon production by Optionee of one >10% full size 125 mm pseudo square cell on stainless
steel (SS). Device measured at AM1.5 using a light source and tester calibrated to NIST standards.”
“(c) Intentionally Omitted”
|
34-2009
|
Robert Wendt
|
Section 3(i) (a) Exercise of Option was
amended as follows; All remaining unvested Options under this Agreement shall vest and become exercisable upon production by Optionee,
and third party validation, of functioning >10% full size 125 mm pseudo square cells on stainless steel (SS) – minimum
20 cells. Cells measured at AM1.5 using a light source and tester calibrated to NIST standards.”
|
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The following table lists the executive offices
and directors of the Company during the fiscal year ended September 30, 2011:
Name
|
|
Age
|
|
Position Held
|
|
Tenure
|
Tom Djokovich
|
|
54
|
|
CEO, Director, Secretary, and acting Principal Accounting Officer
|
|
CEO and Director since October 2003, Secretary and PAO since September 2009
|
Joseph Grimes
|
|
54
|
|
President, COO, Director
|
|
President since March 2009, COO since April 2006, and as a director Since August 2008
|
Robert Wendt
|
|
49
|
|
CTO
|
|
Since March 2009
|
Thomas Anderson
|
|
46
|
|
Director
|
|
Since August 2001
|
Oz Fundingsland
|
|
68
|
|
Director
|
|
Since November 2007
|
Michael Russak
|
|
64
|
|
Director
|
|
Since November 2007
|
The above listed directors
will serve until the next annual meeting of the stockholders or until their death, resignation, retirement, removal, or disqualification,
and until their successors have been duly elected and qualified. Vacancies in the existing Board of Directors are filled by majority
vote of the remaining Directors. There are no agreements or understandings for any officer or director to resign at the request
of another person and no officer or director is acting on behalf of or will act at the direction of any other person. There is
no family relationship between any of our directors.
The directors of the Company
will devote such time to the Company’s affairs on an “as needed” basis, but typically less than 20 hours per
month. As a result, the actual amount of time which they will devote to the Company’s affairs is unknown and is likely to
vary substantially from month to month.
Biographical Information
Mr. Tom Djokovich, age 54, Chief Executive Officer and a Director
as of October 2003,acting Principal Accounting Officer as of September 2009;
Mr. Djokovich was the
founder and served from 1995 to 2002 as the Chief Executive Officer of Accesspoint Corporation, a vertically integrated provider
of electronic transaction processing and e-business solutions for merchants. Under Mr. Djokovich’s guidance, Accesspoint
became a member of the Visa/MasterCard association, the national check processing association NACHA, and developed one of the payment
industry’s most diverse set of network based transaction processing, business management and CRM systems for both Internet
and conventional points of sale. Prior to Accesspoint, Mr. Djokovich founded TMD Construction and Development in 1979. TMD provided
management for multimillion-dollar projects incorporating at times hundreds of employees, subcontractors and international material
acquisitions for commercial, industrial and custom residential construction services as a licensed building and development firm
in California. In 1995 Mr. Djokovich developed an early Internet based business-to-business ordering system for the construction
industry.
Mr. Joseph Grimes, age 54, Chief Operating Officer as of April
2006, a Director as of August 2008, and President as of March 2009;
Mr. Grimes brings to XsunX more than eight
years direct experience in thin-film technology and manufacturing. He was most recently Vice President, Defense Solutions, for
Envisage Technology Company, where he directed and managed the defense group business development process, acquisition strategies
and vision for next generation applications from October 2005 to March 2006. Previously he was Co-Founder, President and CEO of
ISERA Group, where he established the company infrastructure and guided five development teams, finally selling the company to
Envisage from 1993 to 2005. His direct experience in thin-film technology came with Applied Magnetics Corporation from 1985 to
1993 as manager for thin-film prototype assembly. Mr. Grimes holds a Bachelor’s degree in business economics and environmental
studies, and a Master’s in computer modeling and operation research applications, both from the University of California
at Santa Barbara.
Mr. Robert Wendt, age 49, Chief Technology Officer as of March
2009;
Mr.
Wendt holds a B.S. and M.S. in Metallurgical Engineering and Material Science from the Colorado School of Mines. His responsibility
encompasses technical specification of the facilities, equipment, and manufacturing processes for XsunX. Prior to joining XsunX
in 2007, Mr. Wendt served at various times as Vice President of Sales, Product Development, and Engineering at Global Solar Energy
from May 1996 to 2005. At Global Solar, Mr. Wendt has led and directed several areas including copper indium
gallium di-selenide
(CIGS) technology development, equipment design and integration, facilities design and construction, engineering, production, and
operations
Prior
to Global Solar, Mr. Wendt was at ITN with responsibility for the development of thin-film deposition technologies, thin-film PV,
and development of charge controller/battery systems for portable solar cell powered systems. Prior to joining ITN, Mr. Wendt spent
eight years with Lockheed Marietta Astronautics, Denver Division. While in this position, Mr. Wendt was program manager/principal
investigator on over 20 material-based programs. During 1994/1995, Mr. Wendt was the technical lead for thin-film PV research at
the Denver Division.
Independent Directors
Mr. Thomas Anderson, age 46, became a director of the Company
in August 2001;
Mr. Anderson
presently works as the Director of Southwest Business Operations for American Capital Energy, a commercial and utility scale
solar integrator. He has been with American Capital Energy since October, 2008. He recently served as Managing Director
of the Environmental Science and Engineering Directorate of Qinetiq North America in Los Alamos, New Mexico. He was with
Qinetiq North America, formerly Apogen Technologies, from January, 2005, through September, 2008. Mr. Anderson worked for 19
years in the environmental consulting field, providing consulting services in the areas of environmental compliance,
characterization and remediation services to Department of Energy, Department of Defense, and industrial clients. He formerly
worked as a Senior Environmental Scientist at Concurrent Technologies Corp. from November 2000 to December 2004. He earned
his B.S. in Geology from Denison University and his M.S. in Environmental Science and Engineering from Colorado School of
Mines.
Mr. Oz Fundingsland as Director, age 68, became a director
of the Company in November 2007;
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.
Dr. Michael A. Russak as Director, age 64, became a director
of the Company in November 2007;
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. Michael A. Russak currently holds the position of
Executive Vice President of Business Development with Intevac, Inc. in Santa Clara, CA. He has been working as a
consultant in the hard disk drive and photovoltaic industries since Jan 2007. He is also currently the Executive Director of
IDEMA-U.S. (the hard disk drive industry trade association) and a member of the Board of Directors and Scientific Advisory
Board of XsunX, Inc. From 2001 to 2006 he was President and Chief Technical Officer of Komag, Inc., a manufacturer of hard
magnetic recording disks for hard disk drive applications. From 1993 to 2001 he was Chief Technical Officer of HMT
Technology, Inc. also a manufacturer of magnetic recording disks. From 1985 to 1993 he was a research staff member and
program manager in the Research Division of the IBM Corporation. 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. He has published over 90
technical papers, and holds 23 U.S. patents.
Involvement in Certain Legal Proceedings
None of the members of
the Board of Directors or other executives has been involved in any bankruptcy proceedings, criminal proceedings, any proceeding
involving any possibility of enjoining or suspending members of our Board of Directors or other
executives from engaging in any business, securities
or banking activities, and have not been found to have violated, nor been accused of having violated, any federal or state securities
or commodities laws.
Board Committees; Audit Committee
As of September 30, 2011,
the Company’s board was comprised of five directors, three of which are considered independent directors and the Company
did not have an audit committee. Further, none of the members of the board of directors is qualified as a financial expert. We
are a development stage company with limited resources and we are actively seeking a qualified financial expert for addition to
the board. The board of directors will appoint committees as necessary, including an audit committee as resources permit. In
the meantime, the Board serves as the Company’s audit committee utilizing business judgment rules and good faith efforts.
Section 16(A) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Exchange Act requires the Company’s officers and directors, and certain persons who own more than 10% of a
registered class of the Company’s equity securities (collectively, “Reporting Persons”), to file reports of
ownership and changes in ownership (“Section 16 Reports”) with the SEC. Reporting Persons are required by the SEC
to furnish the Company with copies of all Section 16 Reports they file.
Based on its review of the copies
of such forms received by it, or written representations from certain reporting persons, the Company believes that, during
the fiscal year ended September 30, 2011, all filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with the exception that one report, covering an aggregate of two
transactions were not timely filed by the chief executive officer
with the SEC via Form
4 or via year-end report on Form 5
.
Code of Ethics
The Company’s board of directors adopted
a Code of Ethics policy on January 7, 2008.
Item 11. Executive Compensation
Overview
We are a development stage
Company and we rely on our board of directors to evaluate compensation and incentive offerings made by the Company as it applies
to our executive officers, and efforts to attract and maintain qualified staff. To date, our compensation policy has been conducted
on a case by case basis with input from our chief executive officer, and focused on the following three primary areas; (a) salary
compensatory with peer group companies and peer position, (b) cash bonuses tied to sales and revenue attainment, and (c) long term
equity compensation tied to strategic objectives of establishing marketable solar technologies.
In this Compensation Discussion
and Analysis, the individuals in the Summary Compensation Table set forth below are referred to as the “named executive officers”.
Generally, the types of compensation and benefits provided to the named executive officers may be similar to what we intend to
provide to future executive officers.
Executive Compensation
The following table sets
forth information with respect to compensation earned by our chief executive officer, our chief operating officer, and our chief
technical officer (collectively, our “named executive officers”) for the fiscal years ended September 30, 2011, and
2010 respectively.
Summary Compensation Table
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
All Other Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tom Djokovich, CEO
(1)
|
|
|
2011
2010
|
|
|
|
165,000
165,000
|
|
|
|
0
0
|
|
|
|
0
0
|
|
|
|
0
0
|
|
|
|
4,800
4,800
|
|
|
|
169,800
169,800
|
|
Joe Grimes, COO
(2)
|
|
|
2011
2010
|
|
|
|
157,500
157,500
|
|
|
|
0
0
|
|
|
|
0
0
|
|
|
|
0
0
|
|
|
|
4,800
4,800
|
|
|
|
162,300
162,300
|
|
Robert Wendt, CTO
(3)
|
|
|
2011
2010
|
|
|
|
165,000
160,384
|
|
|
|
0
0
|
|
|
|
0
0
|
|
|
|
0
0
|
|
|
|
4,800
4,800
|
|
|
|
169,800
165,184
|
|
|
(1)
|
In addition to Mr. Djokovich’s base compensation the Company also provides Mr. Djokovich with a $400 monthly health insurance allowance.
|
|
(2)
|
In addition to Mr. Grimes base compensation the Company also provides Mr. Grimes with a $400 monthly health insurance allowance.
|
|
|
|
|
(3)
|
In addition to Mr. Wendt’s base compensation the Company also agreed to provide Mr. Wendt with a $400 monthly health insurance allowance.
|
No other compensation
not described above was paid or distributed during the listed fiscal years to the executive officers of the Company.
Grants of Plan-Based Awards Table
The following table sets
forth summary information regarding all grants of plan-based awards made to our named executive officers during the two years ended
September 30, 2011, and 2010 respectively.
Name
|
|
Grant
Date
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
Exercise or
Base Price
of Option
Awards
($/Sh)
|
|
|
Grant Date
Fair Value of
Stock and
Option Awards
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tom Djokovich, CEO
|
|
2011
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2010
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Grimes, COO
|
|
2011
|
|
|
1,000,000
|
|
|
|
0.10
|
|
|
|
80,000
|
|
|
|
2010
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Wendt, CTO
|
|
2011
|
|
|
10,000,000
|
|
|
|
0.10
|
|
|
|
800,000
|
|
|
|
2010
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Outstanding Equity Awards at Fiscal Year End Table
The following table sets
forth the outstanding equity awards with respect our named executive officers for the fiscal year ended September 30, 2011
OPTION
AWARDS
|
|
STOCK
AWARDS
|
Name
|
|
Number
of Securities Underlying Unexercised Options (#) Exercisable
|
|
Number
of Securities Underlying Unexercised Unearned Options (#) Unexercisable
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercisable Unearned Options (#)
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
|
Number
of Shares or Unites of Stock That Have Not Vested (#)
|
|
Market
Value of Shares or Unites of Stock that Have Not Vested ($)
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
Tom
Dhikovich, CEO
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Grimes, COO
|
|
|
400,000
|
|
|
|
100,000
|
|
|
|
500,000
|
|
|
$
|
0.46
|
|
|
|
1/26/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
0
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
$
|
0.36
|
|
|
|
10/23/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
2,500,000
|
|
|
|
0
|
|
|
|
2,500,000
|
|
|
$
|
0.16
|
|
|
|
4/1/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
0
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
$
|
0.10
|
|
|
|
10/18/2015
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Wendt, CTO
|
|
|
400,000
|
|
|
|
100,000
|
|
|
|
500,000
|
|
|
$
|
0.46
|
|
|
|
1/26/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
0
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
$
|
0.36
|
|
|
|
10/23/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
2,500,000
|
|
|
|
0
|
|
|
|
2,500,000
|
|
|
$
|
0.16
|
|
|
|
4/1/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
0
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
$
|
0.10
|
|
|
|
10/18/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Option Exercises
None
Pension Benefits
None
Nonqualified Defined Contribution and Other Nonqualified Deferred
Compensation Plans
None
Employment Agreements and Arrangements
Tom M. Djokovich
Mr. Djokovich serves
as our chief executive officer, acting principal accounting officer, and a director. We do not have an employment agreement
with Mr. Djokovich. He currently works at the discretion of the board of directors as he has since October 2003. His annual
base salary compensation for the 2011 fiscal period was $165,000, and he was provided a $400 per month allowance for use in
the payment of medical benefits. His total compensation is based solely on the annual base cash salary and we do not have any
equity based, cash bonus, or special compensation agreements or understanding in place with Mr. Djokovich. Mr. Djokovich
is also subject to confidentiality and non-solicitation provisions which provide that Mr. Djokovich will not divulge
information or solicit employees for 24 months after termination of his employment.
Joseph Grimes
Mr. Grimes serves as
our chief operating officer, president, and a director. As of January 2011 the employment agreement between the Company and
Mr. Grimes had expired and he currently works at the discretion of the board of directors. His annual base salary
compensation for the 2011 fiscal period was $157,500, and he was provided a $400 per month allowance for use in the payment
of medical benefits. Mr. Grimes is also subject to confidentiality and non-solicitation provisions which provide that
Mr. Grimes will not divulge information or solicit employees for 24 months after termination of his employment.
Robert Wendt
Mr. Wendt serves as
our chief technology officer. As of January 2011 the employment agreement between the Company and Mr. Wendt had expired and
he currently works at the discretion of the board of directors. His annual base salary compensation for the 2011 period was
$165,000, and he was provided a $400 per month allowance for use in the payment of medical benefits. Mr. Wendt is also
subject to confidentiality and non-solicitation provisions which provide that Mr. Wendt will not divulge information or
solicit employees for 24 months after termination of his employment.
Potential Payments Upon Termination or Change-In-Control
Terms of a two year Key
Employee Retention Agreement dated September 1, 2009, with Mr. Robert Wendt, our chief technical officer, provided that in the
event that Mr. Wendt’s employment was terminated by the Company without good cause, Mr. Wendt may have receive twelve months
salary at the then salary rate at time of termination, twelve months Company paid costs for actual costs incurred by Mr. Wendt
for medical benefits related to COBRA coverage, and a relocation payment up to $2,500. The agreement expired in September 2011
and the Company did not incur any costs associated with the agreement prior to its expiration.
Long Term Incentive Plans — Awards in Last Fiscal
Year
The following table and notes set forth the
incentive awards provided to named officers of the Company in 2011 fiscal period.
|
Date
Issued
|
|
Number
Issued
|
|
|
Exercise
Price
|
|
Expiration
Date
|
|
Consideration
|
Joseph Grimes
|
October 18, 2010
|
|
|
1,000,000
|
|
|
$
|
0.10
|
|
18-Oct-15
|
|
Future key deliverables within the scope of the employees influence
|
Robert G. Wendt
|
October 18, 2010
|
|
|
10,000,000
|
|
|
$
|
0.10
|
|
18-Oct-15
|
|
Future key deliverables within the scope of the employees influence
|
The vesting schedule for Mr. Grimes is as follows:
(a)
|
|
The Option shall become exercisable in the amount of
1,000,000 shares upon Optionee’s management of the assembly and operation of initial baseline CIGSolar process equipment
contemplated under the Company’s CIGS solar cell equipment and technology plan, and the subsequent production of 1,000 full
size solar cells (dimension of 125 or 156 mm square) that achieve a minimum of >10% conversion efficiency over a five (5) day
operating period in which the system operates at the designed through-put speed range delivering a cell yield of >80%. Cells
measured at AM1.5 using a light source and tester calibrated to NIST standards.
|
(b)
|
|
In the event of a sale or merger of all or substantially all of the Company’s
assets to an acquiring party following which the Company would not be a surviving operating entity, the Company will provide Optionee
a fifteen (15) day prior notice of such proposed event providing for immediate vesting of all remaining unvested Options under
this Agreement.
|
The vesting schedule for Mr. Wendt is as follows:
The option shall become
exercisable in the following amounts upon the delivery and/or achievement by the optionee(s) of the following performance milestones:
(a)
|
|
The Option shall become exercisable in the amount of 1,000,000 shares upon the award
to the Company of a least one patent issued by the United States Patent and Trademark Office protecting a key element to the Company’s
CIGSolar manufacturing approach in which Optionee had an instrumental involvement in either the design, development, prosecution,
or inception of the intellectual property.
|
(b)
|
|
The Option shall become exercisable in the amount of 4,000,000 shares upon Optionee’s
assembly and/or management of the assembly and operation of initial baseline CIGSolar process equipment contemplated under the
Company’s CIGS solar cell equipment and technology plan, and the subsequent production of 1,000 full size solar cells (dimension
of 125 or 156 mm square) that achieve a minimum of >10% conversion efficiency over a five (5) day operating period in which
the system operates at the designed through-put speed range delivering a cell yield of >80%. Cells measured at AM1.5 using
a light source and tester calibrated to NIST standards.
|
(c)
|
|
The Option shall become exercisable in the amount of 5,000,000 shares upon Optionee’s
assembly and/or management of the assembly and operation of commercial CIGSolar production equipment prepared for use by the Company,
or for delivery to a third party by the Company for use in a commercial setting, and the subsequent production of 2,000 full size
solar cells (dimension of 125 or 156 mm square) that achieve a minimum of > 12% conversion efficiency while operating over
a five (5) day operating period in which the system operates at the designed through-put speed range delivering a cell yield of
>85%. Cells measured at AM1.5 using a light source and tester calibrated to NIST standards.
|
(d)
|
|
Achievement of each milestone to be reviewed and determined by the Company’s
Board of Directors prior to the Company acknowledgment of any vesting rights by Optionee. Determination by the Board of Directors
will be provided within ten (10) business days from notice to the Company by Optionee of milestone achievement. Notice by Optionee
shall contain all relevant information necessary for the Board of Directors to review and make a determination.
|
Additionally, in October 2010, the Board
of Directors authorized amendments to prior option grants issued to the named employee listed below as follows:
Grant Number
|
Optionee Name
|
Amended Terms
|
07-016
|
Robert Wendt
|
Section 3(i) (b) Exercise of Option was amended as follows; This Option shall become exercisable in the amount of 100,000 shares upon production by Optionee of a >10% NREL CIGS device produced on glass substrate. Device measured at AM1.5 using a light source and tester calibrated to NIST standards
|
07-023
|
Robert Wendt
|
Section 3(i) (a,b,c) Vesting Schedule
was amended as follows;
(a) This Option shall become exercisable
in the amount of 250,000 shares upon production by Optionee of a >10% NREL CIGS device produced on stainless steel substrate.
Device measured at AM1.5 using a light source and tester calibrated to NIST standards.”
|
|
|
“(b) This Option shall become
exercisable in the amount of 250,000 shares upon production by Optionee of one >10% full size 125 mm pseudo square cell on stainless
steel (SS). Device measured at AM1.5 using a light source and tester calibrated to NIST standards.”
“(c) Intentionally Omitted”
|
34-2009
|
Robert Wendt
|
Section 3(i) (a) Exercise of Option
was amended as follows; All remaining unvested Options under this Agreement shall vest and become exercisable upon production by
Optionee, and third party validation, of functioning>10% full size 125 mm pseudo square cells on stainless steel (SS) –
minimum 20 cells. Cells measured at AM1.5 using a light source and tester calibrated to NIST standards.”
|
Director Compensation
In
the fiscal
year
ended September 30, 2011, Directors received no additional cash or non-cash compensation
for their service to the Company as directors. All Directors were reimbursed for any expenses actually incurred in connection
with attending meetings of the Board of Directors.
SUMMARY COMPENSATION TABLE OF DIRECTORS
Name
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
Tom Djokovich
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Joseph Grimes
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Thomas Anderson
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Oz Fundingsland
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Dr. Michael Russak
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Compensation Committee Interlocks and Insider Participation
For the fiscal year ended September 30, 2011
no adjustments or additions to new or existing employment agreements were reviewed and deliberated by the five members of the Company’s
Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The following table sets
forth, as of September 30, 2011, the number of shares of common stock owned of record and beneficially by executive officers, directors
and persons who hold 5.0% or more of the outstanding common stock of the Company. Also included are the shares held by all executive
officers and directors as a group. Unless otherwise indicated, the address of each beneficial owner listed below is c/o XsunX,
Inc., 65 Enterprise, Aliso Viejo, California 92656.
Shareholders/Beneficial Owners
|
|
Number of
Shares
|
|
Ownership
Percentage
(1)
|
Tom Djokovich
(2)
President & Director
|
|
|
14,993,000
|
|
6.5%
|
Thomas Anderson
Director
|
|
|
1,500,000
|
|
< 1%
|
Oz Fundingsland
Director
|
|
|
500,000
|
|
< 1%
|
Mike Russak
Director
|
|
|
600,000
|
|
< 1%
|
Joseph Grimes
Chief Operating Officer
|
|
|
2,900,000
|
|
1.3%
|
Robert Wendt
Chief Technical Officer
|
|
|
3,000,000
|
|
< 1.3%
|
All directors and executive officers as a group
of (6 persons) account for ownership of 23,493,000 shares representing 10.13% of the issued and outstanding common stock. Each
principal shareholder has sole investment power and sole voting power over the shares.
|
(1)
|
Applicable percentage ownership is based on 231,998,637
shares of common stock issued and outstanding as of December 29, 2011. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to
securities. Shares of common stock that are currently exercisable or exercisable within 60 days of December 29, 2011 are
deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of
ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any
other person.
|
|
(2)
|
Includes 14,068,000 shares owned by the Djokovich Limited Partnership. Mr. Djokovich shares voting and dispositive power with respect to these shares with Mrs. Djokovich.
|
Item 13. Certain Relationships and Related Transactions, and
Director Independence
No officer, director,
or related person of the Company has or proposes to have any direct or indirect material interest in any asset proposed to be acquired
by the Company through securities holdings, contracts, options or otherwise or any transaction in which the amount involved exceeds
the lesser of $120,000 or one percent of the Company's total assets at year end
.
The Company has adopted
a policy under which any consulting or finder’s fee that may be paid to a third party for consulting services to assist management
in evaluating a prospective business opportunity can be paid in stock, stock purchase options or in cash. Any such issuance of
stock or stock purchase options would be made on an ad hoc basis. Accordingly, the Company is unable to predict whether or in what
amount such a stock issuance might be made.
The following directors are independent: Thomas
Anderson, Oz Fundingsland and Dr.Michael Russak.
The following directors are not independent: Tom
Djokovich and Joseph Grimes.
Item 14. Principal Accounting Fees and Services
Audit Fees 2011
For
the fiscal
year
ended September 30, 2011
HJ Associates & Consultants, LLP
had
incurred $28,600 for the following professional services: review of the interim financial statements included in
quarterly reports on Form 10-Q for the periods ended December 30, 2010, March 31, 2011, June 30, 2011 and for audit fees
related to the Company’s annual report on Form 10-K. No other fees were billed by
HJ Associates &
Consultants, LLP
in the fiscal
year
ended September 30,
2011.
Audit Fees 2010
For
the fiscal
year
ended September 30, 2010
HJ Associates & Consultants, LLP
had
incurred $51,000 for the following professional services: review of the interim financial statements included in quarterly reports
on Form 10-Q for the periods ended December 30, 2009, March 30, 2010, June 30, 2010, and for audit fees related to the Company’s
annual report on Form 10-K. No other fees were billed by
HJ Associates & Consultants, LLP
in
the fiscal
year
ended September 30, 2010.
PART IV
Item 15. Exhibits, Financial Statement Schedules
Exhibits:
Exhibit
|
|
Description
|
3.1
|
|
Articles of Incorporation
(1)
|
3.2
|
|
Bylaws
(2)
|
10.1
|
|
XsunX Plan of Reorganization and Asset Purchase Agreement, dated September 23, 2003.
(3)
|
10.2
|
|
XsunX 2007 Stock Option Plan, dated January 5, 2007.
(4)
|
10.3
|
|
Common Stock Purchase Agreement dated as of March 30, 2010, by and between the Company and Lincoln Park Capital Fund, LLC.
(5)
|
10.4
|
|
Registration Rights Agreement dated as of March 30, 2010, by and between the Company and Lincoln Park Capital Fund, LLC.
(5)
|
10.5
|
|
Form S-1 and S-1/A related to the filing of a registration statement by the Company
(6)(7)
|
10.6
|
|
Form S-1/A related to the filing of a Post-Effective Amendment
No. 1 registration statement by the Company.
(8)
|
10.7
|
|
Form of Security Purchase Agreement used in connection with the sale of equity to an accredited investor totaling 1,250,000 shares of restricted common stock.
(9)
|
10.8
|
|
Form of Security Purchase and Warrant Agreement used in
connection with the sale of equity to accredited investors of
5,000,000 units composed of one share of restricted
common stock and a five year warrant exercisable to purchase two shares of Common Stock, and the same
Warrant Agreement used in connection with the cashless exercise by a holder of 5,000,000 warrants.
(9)
|
10.9
|
|
Form of Exchange Agreement and Exchange Note used in connection with the exchange, partial repayment, and extension to a promissory note that had become due September 1, 2011.
(9)
|
10.10
|
|
Form of Securities Purchase Agreement and Convertible Promissory Note used in connection with the sale of two convertible promissory notes in the aggregate amount of $95,500.
(9)
|
10.11
|
|
Form of Stock Option Agreement used in connection with the issuance of Options to Joseph Grimes, October 2010
(10)
|
10.12
|
|
Form of Stock Option Agreement used in connection with the issuance of options to Robert Wendt, October 2010
(10)
|
16.1
|
|
Auditor Letter
(9)
|
31.1
|
|
Sarbanes-Oxley Certification
(9)
|
31.2
|
|
Sarbanes-Oxley Certification
(9)
|
32.1
|
|
Sarbanes-Oxley Certification
(9)
|
32.2
|
|
Sarbanes-Oxley Certification
(9)
|
(1)
|
Incorporated by reference to Registration Statement Form 10SB12G #000-29621dated February 18, 2000 and by reference to exhibits included with the Company’s prior Report on Form 8-K/A filed with the Securities and Exchange Commission dated October 29, 2003.
|
(2)
|
Incorporated by reference to Registration Statement Form 10SB12G #000-29621 filed with the Securities and Exchange Commission dated February 18, 2000.
|
(3)
|
Incorporated by reference to exhibits included with the Company’s Report on Form 8-K/A filed with the Securities and Exchange Commission dated October 29, 2003.
|
(4)
|
Incorporated by reference to exhibits included with the Company’s Report on Form 8-K filed with the Securities and Exchange Commission dated January 5, 2007.
|
(5)
|
Incorporated by reference to exhibits included with the Company’s Report on Form 8-K filed with the Securities and Exchange Commission dated April 1, 2010.
|
(6)
|
Incorporated by reference to exhibits included with the Company’s Report on Form S-1 filed with the Securities and Exchange Commission dated April 30, 2010.
|
(7)
|
Incorporated by reference to exhibits included with the Company’s Report on Form S-1/A filed with the Securities and Exchange Commission dated June 25, 2010.
|
(8)
|
Incorporated by reference to exhibits included with the Company’s Post-Effective Amendment No.1 Report on Form S-1/A filed with the Securities and Exchange Commission dated March 29, 2011.
|
(9)
|
Provided herewith.
|
(10)
|
Incorporated by reference to exhibits included with the Company’s Report on Form 10-K filed with the Securities and Exchange Commission dated December 29, 2010.
|
SIGNATURES
Pursuant to the requirements of Section 13
or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: December 29, 2011
|
XSUNX, INC.
|
|
|
|
|
By:
|
/s/ Tom Djokovich
|
|
Name:
|
Tom Djokovich
|
|
Title:
|
CEO and Principal Accounting Officer
|
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
/s/ Tom Djokovich
|
|
December 29, 2011
|
Tom Djokovich, Chief Executive Officer,
Principal Executive Officer, Principal
Financial and Accounting Officer, and Director
|
|
|
|
|
|
/s/ Joseph Grimes
|
|
December 29, 2011
|
Joseph Grimes, President, Chief Operating Officer and Director
|
|
|
|
|
|
/s/ Thomas Anderson
|
|
December 29, 2011
|
Thomas Anderson, Director
|
|
|
|
|
|
/s/ Oz Fundingsland
|
|
December 29, 2011
|
Oz Fundingsland, Director
|
|
|
|
|
|
/s/ Michael Russak
|
|
December 29, 2011
|
Michael Russak, Director
|
|
|
Report of Independent Registered Public Accounting
Firm
To the Board of Directors and Shareholders
XsunX, Inc. (A Development Stage Company)
Alisa Viejo, California
We have audited the accompanying balance sheets
of XsunX, Inc. (a development stage company) as of September 30, 2011 and 2010 and the related statements of operations, stockholders'
equity, and cash flows for the years then ended and for the period from February 25, 1997 (inception) to September 30, 2011. These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
The financial statements for the period from February 25, 1997 (inception)
to September 30, 2008 were audited by other auditors and our opinion, insofar as it relates to cumulative amounts included for
such prior periods, is based solely on the reports of such other auditors.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of XsunX, Inc. (a development stage company) as of September
30, 2011 and 2010, and the results of its operations and its cash flows for the years then ended and for the period from February
25, 1997 (inception) to September 30, 2011, in conformity with U.S. generally accepted accounting principles.
The accompanying financial
statements
have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 1
to the financial statements, the Company does not generate significant revenue and has negative cash flows from operations which
raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are
also described in
Note 1
. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ HJ Associates & Consultants, LLP
HJ Associates & Consultants, LLP
Salt Lake City, Utah
December 29, 2011
XSUNX, INC.
(A Development Stage Company)
Balance Sheets
|
|
September 30, 2011
|
|
September 30, 2010
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
66,576
|
|
|
$
|
200,422
|
|
Other receivable
|
|
|
—
|
|
|
|
2,500
|
|
Prepaid expenses
|
|
|
9,204
|
|
|
|
14,061
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
75,780
|
|
|
|
216,983
|
|
|
|
|
|
|
|
|
|
|
PROPERTY & EQUIPMENT
|
|
|
|
|
|
|
|
|
Office & miscellaneous equipment
|
|
|
29,841
|
|
|
|
28,942
|
|
Machinery & equipment
|
|
|
177,699
|
|
|
|
354,541
|
|
Total Property & Equipment
|
|
|
207,540
|
|
|
|
383,483
|
|
Less accumulated depreciation
|
|
|
(164,472
|
)
|
|
|
(307,995
|
)
|
|
|
|
|
|
|
|
|
|
Net Property & Equipment
|
|
|
43,068
|
|
|
|
75,488
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Manufacturing equipment in progress
|
|
|
81,975
|
|
|
|
230,000
|
|
Security deposit
|
|
|
3,200
|
|
|
|
3,200
|
|
|
|
|
|
|
|
|
|
|
Total Other Assets
|
|
|
85,175
|
|
|
|
233,200
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
204,023
|
|
|
$
|
525,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
167,420
|
|
|
$
|
418,288
|
|
Accrued expenses
|
|
|
8,740
|
|
|
|
8,945
|
|
Credit card payable
|
|
|
1,099
|
|
|
|
10,728
|
|
Accrued interest on note payable
|
|
|
95,641
|
|
|
|
49,949
|
|
Note payable
|
|
|
456,921
|
|
|
|
456,921
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
729,821
|
|
|
|
944,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
729,821
|
|
|
|
944,831
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value;
|
|
|
|
|
|
|
|
|
50,000,000 authorized preferred shares
|
|
|
—
|
|
|
|
—
|
|
Common stock, no par value;
|
|
|
|
|
|
|
|
|
500,000,000 authorized common shares
|
|
|
|
|
|
|
|
|
224,998,637 and 209,055,337 shares issued and outstanding, respectively
|
|
|
25,638,369
|
|
|
|
24,813,369
|
|
Additional paid in capital
|
|
|
5,238,213
|
|
|
|
5,238,213
|
|
Paid in capital, common stock warrants
|
|
|
3,635,079
|
|
|
|
3,449,063
|
|
Deficit accumulated during the development stage
|
|
|
(35,037,459
|
)
|
|
|
(33,919,805
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS' DEFICIT
|
|
|
(525,798
|
)
|
|
|
(419,160
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
$
|
204,023
|
|
|
$
|
525,671
|
|
The Accompanying Notes are an Integral Part of
These Financial Statements
XSUNX, INC.
(A Development Stage Company)
Statements of Operations
|
|
|
|
|
|
From Inception
|
|
|
|
|
|
|
Feb ruary 25, 1997
|
|
|
Years Ended
|
|
through
|
|
|
September 30, 2011
|
|
September 30, 2010
|
|
September 30, 2011
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
946,459
|
|
|
|
1,470,731
|
|
|
|
17,876,800
|
|
Research and development
|
|
|
282,492
|
|
|
|
292,999
|
|
|
|
3,163,954
|
|
Depreciation and amortization expense
|
|
|
38,472
|
|
|
|
86,948
|
|
|
|
687,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
1,267,423
|
|
|
|
1,850,678
|
|
|
|
21,728,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS BEFORE OTHER INCOME/(EXPENSE)
|
|
|
(1,267,423
|
)
|
|
|
(1,850,678
|
)
|
|
|
(21,713,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
—
|
|
|
|
44
|
|
|
|
445,537
|
|
Gain/(Loss) on sale of asset
|
|
|
17,000
|
|
|
|
(577
|
)
|
|
|
16,423
|
|
Impairment of assets
|
|
|
—
|
|
|
|
(253,671
|
)
|
|
|
(7,285,120
|
)
|
Write down of inventory asset
|
|
|
—
|
|
|
|
(60,000
|
)
|
|
|
(1,177,000
|
)
|
Gain on legal settlement
|
|
|
179,580
|
|
|
|
—
|
|
|
|
1,279,580
|
|
Loan fees
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,001,990
|
)
|
Forgiveness of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
592,154
|
|
Other, non-operating
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,215
|
)
|
Penalties
|
|
|
(596
|
)
|
|
|
—
|
|
|
|
(596
|
)
|
Interest expense
|
|
|
(46,215
|
)
|
|
|
(45,721
|
)
|
|
|
(187,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME/(EXPENSES)
|
|
|
149,769
|
|
|
|
(359,925
|
)
|
|
|
(13,323,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(1,117,654
|
)
|
|
$
|
(2,210,603
|
)
|
|
$
|
(35,037,459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED
|
|
|
218,617,564
|
|
|
|
204,441,056
|
|
|
|
|
|
The Accompanying Notes are an Integral Part of
These Financial Statements
XSUNX, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception February 25, 1997 to September
30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Stock Options/
|
|
|
|
during the
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Paid-in
|
|
Warrants
|
|
Treasury Stock
|
|
Development
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Paid-in-Capital
|
|
Shares
|
|
Stage
|
|
Total
|
Balance at September 30, 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 the year ended September 30, 1997
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(193,973
|
)
|
|
|
(193,973
|
)
|
Balance at September 30, 1997
|
|
|
—
|
|
|
|
—
|
|
|
|
474,990
|
|
|
|
529,806
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(193,973
|
)
|
|
|
335,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the year ended September 30, 1998
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(799,451
|
)
|
|
|
(799,451
|
)
|
Balance at 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 the year ended September 30, 1999
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,482,017
|
)
|
|
|
(1,482,017
|
)
|
Balance at 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 the year ended September 30, 2000
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(118,369
|
)
|
|
|
(118,369
|
)
|
Balance at September 30, 2000
|
|
|
—
|
|
|
|
—
|
|
|
|
768,148
|
|
|
|
1,921,419
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,593,810
|
)
|
|
|
(672,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
337,887
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
337,887
|
|
Net Loss for the year ended September 30, 2001
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(32,402
|
)
|
|
|
(32,402
|
)
|
Balance at September 30, 2001
|
|
|
—
|
|
|
|
—
|
|
|
|
768,148
|
|
|
|
2,259,306
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,626,212
|
)
|
|
|
(366,906
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for the year ended September 30, 2002
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(47,297
|
)
|
|
|
(47,297
|
)
|
Balance at 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 the year ended September 30, 2003
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(145,868
|
)
|
|
|
(145,868
|
)
|
Balance at September 30, 2003
|
|
|
—
|
|
|
|
—
|
|
|
|
111,298,148
|
|
|
|
2,821,726
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,819,377
|
)
|
|
|
2,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
2,737,954
|
|
|
|
282,670
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
282,670
|
|
Warrant expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
825,000
|
|
|
|
—
|
|
|
|
375,000
|
|
|
|
1,200,000
|
|
Net Loss for the year ended September 30, 2004
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,509,068
|
)
|
|
|
(1,509,068
|
)
|
Balance at September 30, 2004
|
|
|
—
|
|
|
|
—
|
|
|
|
114,036,102
|
|
|
|
3,104,396
|
|
|
|
—
|
|
|
|
825,000
|
|
|
|
—
|
|
|
|
(3,953,445
|
)
|
|
|
(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
|
|
Warrant expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
180,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
180,000
|
|
Beneficial conversion
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
400,000
|
|
Shares held as collateral for debentures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,798,418
|
|
|
|
—
|
|
|
|
—
|
|
Net Loss for the year ended September 30, 2005
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,980,838
|
)
|
|
|
(1,980,838
|
)
|
Balance at September 30, 2005
|
|
|
—
|
|
|
|
—
|
|
|
|
123,876,639
|
|
|
|
3,996,736
|
|
|
|
400,000
|
|
|
|
1,005,000
|
|
|
|
26,798,418
|
|
|
|
(5,934,283
|
)
|
|
|
(532,547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for services
|
|
|
—
|
|
|
|
—
|
|
|
|
72,366
|
|
|
|
31,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,500
|
|
Warrant expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
996,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
996,250
|
|
Beneficial conversion
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,685,573
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,685,573
|
|
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 the year ended September 30, 2006
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,112,988
|
)
|
|
|
(9,112,988
|
)
|
Balance at September 30, 2006 (restated)
|
|
|
—
|
|
|
|
—
|
|
|
|
157,169,856
|
|
|
|
13,290,869
|
|
|
|
6,085,573
|
|
|
|
2,001,250
|
|
|
|
26,798,418
|
|
|
|
(15,047,271
|
)
|
|
|
6,330,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of stock for services returned
|
|
|
—
|
|
|
|
—
|
|
|
|
(150,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Release of security collateral
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(26,798,418
|
)
|
|
|
—
|
|
|
|
(26,798,418
|
)
|
Issuance of stock for warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
900,000
|
|
|
|
135,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
135,000
|
|
Stock option and warrant expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
772,315
|
|
|
|
—
|
|
|
|
—
|
|
|
|
772,315
|
|
Net Loss for the year ended September 30, 2007
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,968,846
|
)
|
|
|
(1,968,846
|
)
|
Balance at September 30, 2007 (restated)
|
|
|
—
|
|
|
|
—
|
|
|
|
157,919,856
|
|
|
|
13,425,869
|
|
|
|
6,085,573
|
|
|
|
2,773,565
|
|
|
|
—
|
|
|
|
(17,016,117
|
)
|
|
|
(21,529,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fusion Equity common stock purchase
|
|
|
—
|
|
|
|
—
|
|
|
|
15,347,581
|
|
|
|
5,200,000
|
|
|
|
(55,300
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,144,700
|
|
Commitment fees
|
|
|
—
|
|
|
|
—
|
|
|
|
3,500,000
|
|
|
|
1,190,000
|
|
|
|
(1,190,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cumorah common stock purchase
|
|
|
—
|
|
|
|
—
|
|
|
|
8,650,000
|
|
|
|
2,500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,500,000
|
|
Wharton settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
875,000
|
|
|
|
297,500
|
|
|
|
(397,500
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(100,000
|
)
|
MVS warrant cancellation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
805,440
|
|
|
|
(805,440
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock options and warrant expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
673,287
|
|
|
|
—
|
|
|
|
—
|
|
|
|
673,287
|
|
Net Loss for the year ended September 30, 2008
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,058,952
|
)
|
|
|
(4,058,952
|
)
|
Balance at September 30, 2008
|
|
|
—
|
|
|
|
—
|
|
|
|
186,292,437
|
|
|
|
22,613,369
|
|
|
|
5,248,213
|
|
|
|
2,641,412
|
|
|
|
—
|
|
|
|
(21,075,069
|
)
|
|
|
(17,370,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in October 2008 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,000,000 common shares issued at $0.20 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
2,000,000
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in November 2008 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,000,000 common shares issued at $0.20 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000,000
|
|
|
|
200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in November 2008 for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50,000 common shares issued at a fair value of $0.22 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
11,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in August 2009 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,129,483 common shares issued at $0.062 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
1,129,483
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
70,000
|
|
The Accompanying Notes are an Integral Part
of These Financial Statements
XSUNX, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception February 25, 1997 to September
30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Stock Options/
|
|
|
|
during the
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Paid-in
|
|
Warrants
|
|
Treasury Stock
|
|
Development
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Paid-in-Capital
|
|
Shares
|
|
Stage
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in August 2009 for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(900,000 common shares issued at a fair value of $0.12 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
900,000
|
|
|
|
108,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
108,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in August 2009 for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76,976 common shares issued at a fair value of $0.1364 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
76,976
|
|
|
|
10,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in September 2009 for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,714 common shares issued at a fair value of $0.14 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
35,714
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in September 2009 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,000,000 common shares issued at $0.07 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000,000
|
|
|
|
350,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
534,518
|
|
|
|
—
|
|
|
|
—
|
|
|
|
534,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for the year ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,634,133
|
)
|
|
|
(10,634,133
|
)
|
Balance at September 30, 2009
|
|
|
—
|
|
|
|
—
|
|
|
|
6,012,690
|
|
|
|
473,500
|
|
|
|
—
|
|
|
|
534,518
|
|
|
|
—
|
|
|
|
(31,709,202
|
)
|
|
|
482,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in October 2009 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,556,818 common shares issued at $0.088 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
2,556,818
|
|
|
|
225,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in November 2009 for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,789 common shares issued at a fair value of $0.1859 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
53,789
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in December 2009 for subscription receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,000,000 common shares issued at $0.088 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000,000
|
|
|
|
88,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
88,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in March 2010 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,000,000 common shares issued at $0.075 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
2,000,000
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in March 2010 for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(139,424 common shares issued at $0.16137 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
139,424
|
|
|
|
22,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in March 2010 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,250,000 common shares issued at $0.10 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
6,250,000
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in September 2010 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(279,661 common shares issued at $0.09167 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
279,661
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in September 2010 for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(291,035 common shares issued at $0.088 per share )
|
|
|
—
|
|
|
|
—
|
|
|
|
291,035
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
273,133
|
|
|
|
—
|
|
|
|
—
|
|
|
|
273,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for the year ended September 30, 2010
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
(2,210,603
|
)
|
|
|
(2,210,603
|
)
|
Balance at September 30, 2010
|
|
|
—
|
|
|
|
—
|
|
|
|
209,055,337
|
|
|
|
24,813,369
|
|
|
|
5,238,213
|
|
|
|
3,449,063
|
|
|
|
—
|
|
|
|
(33,919,805
|
)
|
|
|
(419,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
13,263,096
|
|
|
|
825,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
825,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for a cashless exercise of warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
2,680,204
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
186,016
|
|
|
|
|
|
|
|
—
|
|
|
|
186,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended September 30, 2011
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,117,654
|
)
|
|
|
(1,117,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
|
—
|
|
|
$
|
—
|
|
|
|
224,998,637
|
|
|
$
|
25,638,369
|
|
|
$
|
5,238,213
|
|
|
$
|
3,635,079
|
|
|
$
|
—
|
|
|
$
|
(35,037,459
|
)
|
|
$
|
(525,798
|
)
|
The Accompanying Notes are an Integral Part
of These Financial Statements
XSUNX, INC.
(A Development Stage Company)
Statements of Cash Flows
|
|
|
|
|
|
From Inception
|
|
|
|
|
|
|
February 25,1997
|
|
|
For the Years Ended
|
|
through
|
|
|
September 30, 2011
|
|
September 30, 2010
|
|
September 30, 2011
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,117,654
|
)
|
|
$
|
(2,210,603
|
)
|
|
$
|
(35,037,459
|
)
|
Adjustment to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & amortization
|
|
|
38,472
|
|
|
|
86,948
|
|
|
|
687,826
|
|
Common stock issued for services and interest
|
|
|
—
|
|
|
|
32,500
|
|
|
|
1,996,634
|
|
Stock option and warrant expense
|
|
|
186,016
|
|
|
|
273,133
|
|
|
|
3,909,269
|
|
Beneficial conversion and commitment fees
|
|
|
—
|
|
|
|
—
|
|
|
|
5,685,573
|
|
Asset impairment
|
|
|
—
|
|
|
|
253,671
|
|
|
|
7,285,120
|
|
Write down of inventory asset
|
|
|
—
|
|
|
|
60,000
|
|
|
|
1,177,000
|
|
Gain on settlement of debt
|
|
|
(179,580
|
)
|
|
|
—
|
|
|
|
(466,961
|
)
|
(Gain)/Loss on sale of asset
|
|
|
(17,000
|
)
|
|
|
577
|
|
|
|
(16,423
|
)
|
Settlement of lease
|
|
|
—
|
|
|
|
—
|
|
|
|
59,784
|
|
Change in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
4,857
|
|
|
|
104,271
|
|
|
|
(9,204
|
)
|
Inventory held for sale
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,417,000
|
)
|
Other receivable
|
|
|
2,500
|
|
|
|
(2,500
|
)
|
|
|
—
|
|
Other assets
|
|
|
—
|
|
|
|
2,615
|
|
|
|
(3,200
|
)
|
Increase (Decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(80,916
|
)
|
|
|
28,995
|
|
|
|
2,370,101
|
|
Accrued expenses
|
|
|
45,487
|
|
|
|
22,998
|
|
|
|
115,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(1,117,818
|
)
|
|
|
(1,347,395
|
)
|
|
|
(13,663,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase/Refund of manufacturing equipment and facilities in process
|
|
|
148,025
|
|
|
|
(230,000
|
)
|
|
|
(5,906,604
|
)
|
Payments on note receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,500,000
|
)
|
Proceeds from sale of assets
|
|
|
17,000
|
|
|
|
244,100
|
|
|
|
261,100
|
|
Receipts on note receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
1,500,000
|
|
Purchase of marketable prototype
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,780,396
|
)
|
Purchase of fixed assets
|
|
|
(6,053
|
)
|
|
|
—
|
|
|
|
(597,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES
|
|
|
158,972
|
|
|
|
14,100
|
|
|
|
(8,023,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from warrant conversion
|
|
|
—
|
|
|
|
—
|
|
|
|
3,306,250
|
|
Proceeds from debentures
|
|
|
—
|
|
|
|
—
|
|
|
|
5,850,000
|
|
Proceeds for issuance of common stock, net
|
|
|
825,000
|
|
|
|
1,003,000
|
|
|
|
12,598,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
825,000
|
|
|
|
1,003,000
|
|
|
|
21,754,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
(133,846
|
)
|
|
|
(330,295
|
)
|
|
|
66,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF PERIOD
|
|
|
200,422
|
|
|
|
530,717
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
|
$
|
66,576
|
|
|
$
|
200,422
|
|
|
$
|
66,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
440
|
|
|
$
|
28
|
|
|
$
|
120,131
|
|
Taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended September 30, 2011, the Company issued 2,680,204 shares of common stock in a cashless exercise of stock purchase warrants
|
|
|
The Accompanying Notes are an Integral Part of
These Financial Statements
XSUNX, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2011 and 2010
-
ORGANIZATION AND LINE OF BUSINESS
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”).
Line of Business
In the year
ended September 30, 2010, XsunX modified its previous plans to directly establish product manufacturing infrastructure. We have
re-focused operations on the development of a cross-industry thin film solar manufacturing concept that we believed provides an
opportunity for XsunX to establish a competitive advantage within the industry. We have been developing and we have begun to market
a hybrid manufacturing solution to produce high performance Copper Indium Gallium (di) Selenide (CIGS) thin film solar cells. Our
patent pending system and processing technology, which we call CIGSolar™, focuses on the mass production of individual thin-film
CIGS solar cells that match silicon solar cell dimensions and can be offered as a non-toxic, high-efficiency and lowest-cost alternative
to the use of silicon solar cells. We intend to offer licenses for the use of the CIGSolar™ process technology thereby generating
revenue streams through licensing fees and manufacturing royalties for the use of the technology.
Going Concern
The accompanying financial statements
have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and
liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments
that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and
has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going
concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent
upon, among other things, additional cash infusion. The Company has obtained funds from its shareholders since its inception through
the year ended September 30, 2011. Management believes the existing shareholders and the prospective new investors will provide
the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core
of business.
-
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting
policies of XsunX, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements
and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements.
Development
Stage Activities and Operations
The Company has been in its initial
stages of formation and for the year ended September 30, 2011, had no revenues. A development stage activity as one in which all
efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues
are insignificant.
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include
the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options.
Actual results could differ from those estimates.
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.
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, 2011, and 2010, 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 using straight line over its estimated useful lives:
Leasehold improvements
|
|
Length of the lease
|
Computer software and equipment
|
|
3 Years
|
Furniture & fixtures
|
|
5 Years
|
Machinery & equipment
|
|
5 Years
|
XSUNX, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2011 and 2010
-
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company capitalizes property and
equipment over $500. Property and equipment under $500 are expensed in the year purchased. The depreciation expense for the years
ended September 30, 2011, and 2010, were $38,472 and $86,948, respectively.
Loss per Share Calculations
Loss per Share is the calculation
of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available
to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar
to basic earnings per share except that the denominator is increased to include the number of additional common shares that would
have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s
diluted loss per share is the same as the basic loss per share for the years ended September 30, 2011 and 2010 as the inclusion
of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Revenue Recognition
The Company recognizes revenue when
services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk
of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.
To date the Company has had minimal revenue and is still in the development stage.
Advertising
Advertising costs are expensed as incurred. Total advertising
costs were $6,622, and $8,515 for the years ended September 30, 2011 and 2010, respectively.
Research and Development
Research and development costs are expensed as incurred.
Total research and development costs were $282,492 and $292,999 for the years ended September 30, 2011, and 2010, respectively.
Stock-Based Compensation
Share-based Payment applies to
transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity
may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair
value approach using an option-pricing model, such as the Black Scholes option valuation model, at the date of a stock option
grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period
of the stock option. This has not had a material impact on our results of operations.
Income Taxes
Deferred income taxes are
provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is
highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit
of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management
believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or
litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is
more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized
tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing
authorities upon examination.
Recent Accounting
Pronouncements
Management reviewed accounting pronouncements
issued during the three months ended September 30, 2011, and no pronouncements were adopted during the period.
-
CAPITAL
STOCK
At September 30, 2011, the Company’s
authorized stock consisted of 500,000,000 shares of common stock, with no par value. The Company is also authorized to issue 50,000,000
shares of preferred stock with a par value of $0.01 per share. The rights, preferences and privileges of the holders of the preferred
stock will be determined by the Board of Directors prior to issuance of such shares.
XSUNX, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2011 and 2010
-
CAPITAL
STOCK (continued)
During the year ended September
30, 2011, pursuant to an S-1 Registration Statement declared effective by the SEC on June 30, 2010,
and
a Post-Effective Amendment No. 1 registration declared effective by the Securities and Exchange Commission on April 4, 2011
the
Company sold to Lincoln Park Capital Group, LLC (LPC) a total of approximately 7,013,096 shares for a total investment of
$575,000. These shares were sold at various pricing between $0.08 and $0.0888 per share, and included 159,720 of the
remaining pool of 1,236,112 commitment shares were issued on a pro rata basis to LPC as LPC has purchased additional shares
pursuant to the effective S-1 Registration Statement.
During the year ended September 30,
2011, the Company also issued 5,000,000 units composed of one share of restricted common stock and a five year warrant exercisable
to purchase two shares of Common Stock at $0.04 per share for cash of $200,000; 1,250,000 shares of restricted common stock at
a price of $0.04 per share for cash of $50,000; a holder of warrants exercised all available 5,000,000 warrants utilizing a cashless
exercise provision resulting in the net issuance of 2,680,204 shares of the Company’s restricted common stock. The above
shares were issued in a transactions exempt from registration pursuant to Section 4(2) of the Securities Act.
During the year ended September 30,
2010, the Company issued 2,556,818 shares of common stock at a price of $0.088 per share for cash of $225,000; issued 193,213 shares
of common stock at fair values between $0.16137 and $0.1859 per share for services; issued 1,000,000 shares of common stock at
a price of $0.088 for a subscription payable; issued 2,000,000 shares of common stock at a price of $0.08 per share for cash of
$150,000; Also, through an equity offering the Company received $550,000 in cash, and issued 6,820,696 shares of common stock,
which included 1,263,888 commitment shares. The shares were issued at prices between $0.088 and $0.10 per share.
-
STOCK OPTIONS AND WARRANTS
The Company adopted a Stock Option
Plan for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and
sets aside for the granting of Options for Twenty Million (20,000,000) shares of Common Stock. Options granted under the Plan may
be either Incentive Options or Nonqualified Options and shall be administered by the Company's Board of Directors ("Board").
Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective Option agreements
may provide. Notwithstanding any other provision of the Plan or of any Option agreement, each Option shall expire on the date specified
in the Option agreement. During the year ended September 30, 2011, the Company granted 11,000,000 incentive stock options to employees
that will vest upon completion of various milestones. 1,000,000 of the shares were part of the Company’s 2007 Stock Option
Plan. The stock options are exercisable for a period of five years from the date of grant at an exercise price between $0.10 and
$0.53 per share and expire at various times through October 2015.
Risk free interest rate
|
1.67% to 2.77%
|
Stock volatility factor
|
90.56% to 104.73%
|
Weighted average expected option life
|
5 years
|
Expected dividend yield
|
None
|
A summary of the Company’s stock
option activity and related information follows:
|
|
9/30/2011
|
|
9/30/2010
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
of
|
|
exercise
|
|
of
|
|
exercise
|
|
|
Options
|
|
price
|
|
Options
|
|
price
|
Outstanding, beginning of year
|
|
|
10,180,000
|
|
|
$
|
0.27
|
|
|
|
10,180,000
|
|
|
$
|
0.27
|
|
Granted
|
|
|
11,000,000
|
|
|
$
|
0.10
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Expired
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding, end of year
|
|
|
21,180,000
|
|
|
$
|
0.18
|
|
|
|
10,180,000
|
|
|
$
|
0.27
|
|
Exercisable at the end of year
|
|
|
8,544,159
|
|
|
$
|
0.27
|
|
|
|
6,858,328
|
|
|
$
|
0.29
|
|
Weighted average fair value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options granted during the year
|
|
|
|
|
|
$
|
0.10
|
|
|
|
|
|
|
$
|
—
|
|
XSUNX, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2011 and 2010
-
STOCK OPTIONS AND WARRANTS (continued)
The weighted average remaining contractual life of options
outstanding issued under the plan as of September 30, 2011 was as follows:
|
|
|
|
|
|
Average
|
|
|
Stock
|
|
Stock
|
|
Remaining
|
Exercisable
|
|
Options
|
|
Options
|
|
Contractual
|
Prices
|
|
Outstanding
|
|
Exercisable
|
|
Life (years)
|
$0.46
|
|
|
1,150,000
|
|
|
|
950,000
|
|
|
|
0.32 years
|
|
$0.53
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
0.40 years
|
|
$0.45
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
0.56 years
|
|
$0.41
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
0.91 years
|
|
$0.36
|
|
|
2,500,000
|
|
|
|
1,500,000
|
|
|
|
1.07 years
|
|
$0.36
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
1.12 years
|
|
$0.36
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
1.16 years
|
|
$0.36
|
|
|
115,000
|
|
|
|
115,000
|
|
|
|
2.03 years
|
|
$0.16
|
|
|
5,115,000
|
|
|
|
4,679,159
|
|
|
|
2.50 years
|
|
$0.10
|
|
|
11,000,000
|
|
|
|
—
|
|
|
|
4.05 years
|
|
|
|
|
21,180,000
|
|
|
|
8,544,159
|
|
|
|
|
|
Stock-based compensation expense recognized
during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based
compensation expense recognized in the financial statements of operations during the year ended September 30, 2011, included compensation
expense for the stock-based payment awards granted prior to, but not yet vested, as of September 30, 2011 based on the grant date
fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to September 30, 2011, based
on the grant date fair value estimated. We account for forfeitures as they occur. The stock-based compensation expense recognized
in the statement of operations during the years ended September 30, 2011 and 2010 was $186,016 and $273,133, respectively.
Warrants
A summary of the Company’s warrants
activity and related information follows:
|
|
9/30/2011
|
|
9/30/2010
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
of
|
|
exercise
|
|
of
|
|
exercise
|
|
|
Options
|
|
price
|
|
Options
|
|
price
|
Outstanding, beginning of year
|
|
|
4,195,332
|
|
|
$
|
0.61
|
|
|
|
4,195,332
|
|
|
$
|
0.61
|
|
Granted
|
|
|
10,000,000
|
|
|
$
|
0.04
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
|
|
(5,000,000
|
)
|
|
$
|
(0.04
|
)
|
|
|
—
|
|
|
$
|
—
|
|
Expired
|
|
|
(612,000
|
)
|
|
$
|
(0.73
|
)
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding, end of year
|
|
|
8,583,332
|
|
|
$
|
0.32
|
|
|
|
4,195,332
|
|
|
$
|
0.61
|
|
Exercisable at the end of year
|
|
|
8,583,332
|
|
|
$
|
0.32
|
|
|
|
4,047,332
|
|
|
$
|
0.64
|
|
Weighted average fair value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrants granted during the year
|
|
|
|
|
|
$
|
0.04
|
|
|
|
|
|
|
$
|
—
|
|
At September 30, 2011, the weighted
average remaining contractual life of warrants outstanding:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Remaining
|
Exercisable
|
|
Warrants
|
|
Warrants
|
|
Contractual
|
Prices
|
|
Outstanding
|
|
Exercisable
|
|
Life (years)
|
$0.20
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
0.25 years
|
|
$0.50
|
|
|
1,666,666
|
|
|
|
1,666,666
|
|
|
|
1.09 years
|
|
$0.75
|
|
|
1,666,666
|
|
|
|
1,666,666
|
|
|
|
1.09 years
|
|
$0.04
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
4.30 years
|
|
$0.04
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
4.46 years
|
|
|
|
|
8,583,332
|
|
|
|
8,583,332
|
|
|
|
|
|
-
INCOME TAXES
The Company files income tax returns in the U.S. Federal jurisdiction,
and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S.
income tax examinations by tax authorities for years before 2008.
Included in the balance at September
30, 2011, are no tax positions for which the ultimate deductibility is highly certain, but for which
XSUNX, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2011 and 2010
-
INCOME TAXES (continued)
there is uncertainty about the timing
of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of
the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the
taxing authority to an earlier period.
The Company's policy is to recognize
interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the period
ended September 30, 2011, the Company did not recognize interest and penalties.
-
DEFERRED TAX BENEFIT
At September 30, 2011, the
Company had net operating loss carry-forwards of approximately $19,390,000 that may be offset against future taxable income
from the year 2011 through 2030. No tax benefit has been reported in the September 30, 2011 financial statements since the
potential tax benefit is offset by a valuation allowance of the same amount.
The income tax provision differs
from the amount of income tax determined by applying the U.S. federal and state income tax rate of 40% to pretax income from continuing
operations for the years ended September 30, 2011 and 2010 due to the following:
|
|
9/30/2011
|
|
9/30/2010
|
Book Income
|
|
$
|
(447,062
|
)
|
|
$
|
(884,241
|
)
|
State Income Taxes
|
|
|
—
|
|
|
|
—
|
|
Nondeductible Stock Compensation
|
|
|
74,406
|
|
|
|
109,253
|
|
Nondeductible Penalties
|
|
|
238
|
|
|
|
—
|
|
Asset Impairment
|
|
|
—
|
|
|
|
125,468
|
|
Meals & Entertainment
|
|
|
530
|
|
|
|
682
|
|
Depreciation
|
|
|
11,339
|
|
|
|
24,225
|
|
Loss on disposal of assets
|
|
|
(6,494
|
)
|
|
|
13,931
|
|
NOL Carryover
|
|
|
—
|
|
|
|
—
|
|
Valuation Allowance
|
|
|
367,043
|
|
|
|
610,682
|
|
Income Tax Expense
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred
tax assets consist of the following components as of September 30, 2011 and 2010:
|
|
9/30/2011
|
|
9/30/2010
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
NOL Carryforward
|
|
$
|
7,755,958
|
|
|
$
|
7,269,868
|
|
Depreciation
|
|
|
—
|
|
|
|
—
|
|
Contribution Carryforward
|
|
|
40
|
|
|
|
40
|
|
Section 179 Expense Carry-forward
|
|
|
73,406
|
|
|
|
90,686
|
|
R&D Carryforward
|
|
|
37,407
|
|
|
|
19,045
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
—
|
|
|
|
—
|
|
Depreciation
|
|
|
(15,280
|
)
|
|
|
(10,058
|
)
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
(7,851,531
|
)
|
|
|
(7,369,581
|
)
|
Net Deferred Tax Asset
|
|
$
|
—
|
|
|
$
|
—
|
|
-
PROMISSORY
NOTE
During the year ended September 30,
2009, the Company converted accounts payable to a promissory note in the amount of $456,921. The note accrues interest at 10% per
annum. The note, including all principal and interest were due September 1, 2011. The interest expense for the years ended September
30, 2011 and 2010 was $45,692 and $45,721. Merix Corporation (the original holder) of the note sold, assigned and conveyed all
of its right, title and interest in the note to a third party during the 2011 calendar year. At the time the promissory note matured
the Company was engaged in negotiations to re-pay and/or alter the terms of the note with the new holder.
-
SALE
AND DISPOSITION OF ASSETS
On April 21, 2011 the Company received payment in the amount of
$17,000 for an offer it accepted on April 14, 2011 for the sale of equipment no longer in use by the Company. The book value of
the asset was zero and the Company recognized a gain of $17,000.
XSUNX, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2011 and 2010
-
COMMITMENTS AND CONTINGENCIES
In February 2010, the Company elected
to negotiate a settlement related to a dispute over a re-stocking fee on certain equipment with a vendor, Airgas Corp., agreeing
to pay $114,641 in 12 equal monthly payments of $9,553, which commenced on March 1, 2010. As of September 30, 2011, the debt was
paid in full.
On March 31, 2011 we entered
into a settlement agreement with Billco Manufacturing Inc. agreeing to pay $30,000 in the form of 3 equal monthly payments of
$10,000 commencing April 15, 2011 as full and final settlement for an open book account balance of $340,568 purportedly owed
to the vendor by XsunX. XsunX completed all payments and on June 22, 2011 we received a full release from the vendor. The
accounts payable liability of $209,580 which the Company booked while working to settle this claim was reduced to $30,000 and
the Company recognized $179,580 gain on settlement of debt.
The Company continues to lease a corporate office facility
located in Aliso Viejo. The lease is month to month at a monthly rate of $1,000 per month.
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SUBSEQUENT EVENTS
Management has evaluated subsequent events as of the financial
statement date according to the requirements of ASC TOPIC 855 and has reported the following:
As part of the Company’s operating
plans, and efforts to maximize the use of its capital resources towards the assembly of its initial baseline multi-chamber CIGSolar™
thermal co-evaporation system, the Company’s CEO, COO, and CTO agreed effective October 2011 to salary reductions under which
each executive would receive an annualized salary of $120,000.
On October 24, 2011, in exchange
for a promissory note (the “Note”) of $456,921 plus accrued interest of $98,645 that had become due at
September 1, 2011, the Company issued 7,000,000 restricted shares of common stock as payment for the reduction of $205,565 of
principal and accrued interest balance under the Note, and exchanged the Note for and issued a new unsecured
promissory exchange note (the “Exchange Note”) in the amount of $350,000. The note bears interest at 10% per
annum and matures on September 30, 2012.
On October 27, 2011, and again on
December 7, 2011 XsunX, Inc. (the "Company") consummated a Securities Purchase Agreement (the "Purchase Agreements")
providing for the sale by the Company of 8% unsecured Convertible Notes in the aggregate principal amount of $53,000 and $42,500
respectively (the “Note”) which amounts were advanced immediately at the time of each sale. The October 27, 2011 Note
matures on July 31, 2012, and the December 7, 2011 Note matures on September 12, 2012. The Company has the right to redeem a portion
or all amounts outstanding under the either Note prior to one hundred and eighty one days from issuance of the Note under a variable
redemption rate premium. After one hundred and eighty days the holder may convert into shares of common stock at a conversion price
of sixty percent of the average lowest five closing bid prices for the common stock, during the ten trading day period ending on
the latest complete trading day prior to the conversion date. The holder has certain rights of first refusal related to financings
of less than seventy five thousand dollars by the Company, and in the event of certain default conditions the Company may be subject
a default premium of fifty percent.
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