UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
report (Date of earliest event reported): September
11,
2008
(September 9, 2008)
PREMIER
POWER RENEWABLE ENERGY, INC.
(Exact
name of registrant as specified in Charter)
|
Delaware
|
|
333-
140637
|
|
13-4343369
|
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
File No.)
|
|
(IRS
Employer Identification
No.)
|
4961
Windplay Drive, Suite 100
El
Dorado Hills, CA 95762
(Address
of Principal Executive Offices)
(916)
939-0400
(Registrant’s
telephone number, including area code)
HARRY’S
TRUCKING, INC.
15981
Yarnell Street, #225
Sylmar,
CA 91342
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
Forward-Looking
Statements
This
Current Report on Form 8-K (“Form 8-K”) and other reports filed by us from time
to time with the Securities and Exchange Commission (collectively, the
“Filings”) contain or may contain forward-looking statements and information
that are based upon management’s beliefs of, and information currently available
to management, as well as estimates and assumptions made by management. When
used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,”
“future,” “intend,” “plan,” or the negative of these terms and similar
expressions as they relate to the us or management identify forward-looking
statements. Such statements reflect our current view with respect to future
events and are subject to risks, uncertainties, assumptions and other factors
(including the risks contained in the section of this report entitled “Risk
Factors”) relating to our industry, our operations and results of operations and
any businesses that we may acquire. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
Although
we believe that the expectations reflected in the forward-looking statements
are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results. The following
discussion should be read in conjunction with our pro forma financial statements
and the related notes filed with this Form 8-K.
In
this Form 8-K, references to “we,” “our,” “us,” “Premier Power,” the “Company,”
or the “Registrant” refer to Premier Power Renewable Energy, Inc., a Delaware
corporation.
|
Item
1.01
|
Entry
into a Material Definitive Agreement
|
On
September 9, 2008, Premier Power Renewable Energy, Inc., a Delaware corporation
(“Premier Power” or the “Company”), in a share exchange transaction, acquired a
solar power business that specializes in solar integration, by executing a
Share
Exchange Agreement (“Exchange Agreement”) by and among the Company, the
Company’s majority stockholder, Premier Power
Renewable
Energy, Inc
.,
a
California corporation (“Premier Power California”), and the stockholders of
Premier Power California, consisting of four individuals and one entity, who,
immediately prior to the closing of the transactions contemplated by the
Exchange Agreement, collectively held 100% of Premier Power California’s issued
and outstanding share capital (the “PPG Owners”). Hereinafter, this share
exchange transaction is described as the “Share Exchange.”
As
a
result of the Share Exchange, the PPG Owners became our controlling
stockholders, and Premier Power California became our wholly owned subsidiary.
In connection with Premier Power California becoming our wholly owned
subsidiary, we acquired the business and operations of Premier Power California,
and Premier Power California’s wholly owned subsidiaries, Bright Future
Technologies, LLC, a Nevada limited liability company (“Bright Future”) and
Premier Power Sociedad Limitada, a limited liability company formed in Spain
(“Premier Power Spain,” and together with Premier Power California and Bright
Future, referred to herein as the “Premier Power Group”), became our indirect
wholly owned subsidiaries.
Concurrently
with the Exchange Agreement, we also entered into a Securities Purchase
Agreement (the “Purchase Agreement”) pursuant to which we agreed to issue and
sell a total of 3,500,000 units (the “Units”) to one accredited investor (the
“Investor”) for an aggregate purchase price of $7,000,000 (the “Financing”).
Each Unit consists of one share of our Series A Convertible Preferred Stock
(“Series A Preferred Stock”), one-half of one Series A Warrant (the “Series A
Warrants”), and one-half of one Series B Warrant (the “Series B Warrants”). Each
one share of Series A Preferred Stock will be convertible into one share of
our
common stock, par value $0.0001 per share (“Common Stock”) at any time at the
holder’s option, and each share of Series A Preferred Stock will automatically
convert in the event that the Company completes an underwritten secondary public
offering with minimum gross proceeds of $25,000,000 and at a minimum price
per
share of $4.00 or upon listing on NASDAQ. We are required to register the Common
Stock underlying each of the Series A Preferred Stock, Series A Warrants, and
Series B Warrants issued in the Financing with the Securities and Exchange
Commission (the “SEC”) for resale by the Investor. Each Series A Warrant and
each Series B Warrant entitles the holder to purchase a share of Common Stock
at
an exercise price of $2.50 and $3.00 per share, respectively, of Common Stock
for a period of four years. Thus, at the Closing, we issued 3,500,000 shares
of
Series A Preferred Stock, Series A Warrants for the
purchase
of an aggregate 1,750,000 shares of Common Stock, and Series B Warrants for
the
purchase of an aggregate 1,750,000 shares of Common Stock to the Investor.
The
following is a brief description of the terms and conditions of the Exchange
Agreement and Purchase Agreement, and the transactions contemplated thereunder
that are material to the Company.
Vision
Opportunity Master Fund, Ltd. was the only investor in the Financing, with
GT
Securities, Inc. serving as placement agent and financial advisor to the Premier
Power Group (the “Placement Agent”).
Share
Exchange
Under
the
Exchange Agreement, the Company completed the acquisition of all of the equity
interests of Premier Power California held by the PPG Owners through the
issuance of 24,218,750 restricted shares of common stock of the Company to
the
PPG Owners. Immediately prior to the Exchange Agreement transaction and taking
into account the cancellation of 25,448,000 shares of our common stock held
by
Vision Opportunity Master Fund concurrent with the closing of the Share
Exchange, the Company had 1,800,000 shares of common stock issued and
outstanding. Immediately after the issuance of the shares to the PPG Owners,
the
Company had 26,018,750 shares of common stock issued and outstanding.
Also
in
connection with the Closing, all of the Company’s directors and officers
resigned, designees of Premier Power California were appointed as new directors,
and the new directors appointed new officers of the Company following the
Closing.
The
foregoing description of the Exchange Agreement is qualified in its entirety
by
the contents of such Exchange Agreement, which is attached as Exhibit 2.1 to
this Form 8-K.
$7,000,000
Financing
Under
the
Purchase Agreement, the Company issued a total of 3,500,000 Units to the
Investor for an aggregate purchase price of $7,000,000, or $2.00 per Unit (the
“Financing”). The closing of the Financing coincided with the Closing of the
Share Exchange.
Pursuant
to the Exchange Agreement and in connection with the Financing, we entered
into
a registration rights agreement (the "Registration Rights Agreement") with
the
Investor and Genesis Capital Advisors, LLC. Pursuant to the Registration Rights
Agreement, we agreed to register for public re-sale all of the shares of Common
Stock underlying the Series A Preferred Stock, Series A Warrants, and Series
B
Warrants issued to the Investor in the Financing and the shares of Common Stock
held by Genesis Capital Advisors, LLC, except that if the SEC limits the number
of shares of Common Stock that may be registered on the Registration Statement,
then the number of shares to be registered shall be cutback according to the
following order of preference on a pro rata basis to each holder to comply
with
any such limitation imposed by the SEC: (i) shares of Common Stock underlying
the Series A Preferred Stock, (ii) shares of Common Stock underlying the Series
A Warrants, and (iii) share of Common Stock underlying the Series B Warrants.
(The shares we are required to register, as described above, are collectively
referred to hereinafter as the “Registrable Securities.”) The Registration
Rights Agreement provides that we must file a Registration Statement on Form
S-1
(the “Registration Statement”) relating to the resale of the Registrable
Securities within 90 calendar days following the Closing (the “Filing Deadline
Date”) and that we shall use best efforts to cause such Registration Statement
to become effective 180 calendar days after the Closing Date, (or, in the event
of a “full review” of the Registration Statement by the SEC, 240 calendar days
after the Closing Date) (the “Required Effective Date”). If the Registration
Statement is not filed on a timely basis or is not declared effective by the
SEC
for any reason on a timely basis, the Company will be required to issue
additional shares of Common Stock (the “Late Registration Shares”) to each
Investor in an amount equal to 1% of the total shares of Common Stock into
which
the total number of shares of Series A Preferred Stock then held by such
Investor is convertible for each 30 calendar day period, pro rata, until the
Registration Statement is filed or declared effective by the SEC, as the case
may be; provided, however, that in no event shall the Late Registration Shares,
if any, exceed in the aggregate, 12% of such shares purchased.
In
connection with the Purchase Agreement, the PPG Owners entered into a Lock-up
Agreement (the “Lock-up Agreement”) whereby they agreed not to transfer their
shares of Common Stock from the Closing Date until the earlier of (a) the 12
months after the initial registration statement associated with the Financing
is
declared effective (the “Effective Date”) and (b) the date that (i) the Common
Stock has a closing bid price of $4.00 or more for 20 consecutive trading days
and an average daily trading volume during such same period of at least 100,000
shares (such price and volume adjusted for any stock splits and similar
adjustments effected after the Closing Date) or (ii) the Common Stock is listed
on any tier of the Nasdaq Stock Market (such period, the “Restriction Period”).
During the Restricted Period, the PPG Owners (except for Genesis) may sell
up to
20% of the number of shares they each received in the Share Exchange so long
as
the closing bid price on the trading day prior to such transfer is at least
$3.00 (adjusted for any stock splits and similar adjustments effected after
the
Closing Date). During the Restricted Period, Genesis is allowed to sell up
to
45% of the number of shares it received in the Share Exchange (the “45% Shares”)
so long as the closing bid price on the trading day prior to such transfer
is at
least $2.00 (adjusted for any stock splits and similar adjustments effected
after the Closing Date); provided further, that Genesis may not sell any
additional shares it received in the Share Exchange (other than the 45% Shares)
at any price less than $3.00 per share prior to the earlier of 12 months after
the Effective Date or the listing of the Common Stock on any tier of the Nasdaq
Stock Market.
The
Financing was subject to the completion of customary due diligence procedures,
and the Company made various representations and warranties in the Purchase
Agreement regarding its business, operations and corporate affairs.
GT
Securities, Inc. (the “Placement Agent”) acted as the placement agent in
connection with the Financing. For its services, the Placement Agent received
a
placement agent’s cash fee equal to 3% of the gross proceeds or approximately
$210,000 from the Financing. The Placement Agent will also receive 6% of the
gross proceeds from the exercise of the Series A Warrants and Series B
Warrants.
In
connection with the Financing, the Company agreed to place $300,000 of the
gross
proceeds from the Financing in an escrow account to be expended for investor
relations. Additionally, 7% of the gross proceeds from the exercise of the
Series A Warrants and Series B Warrants will be placed into the escrow account
for investor relations, unless the Company’s Common Stock gets listed on NASDAQ,
in which case any such unused funds will be returned to the Company.
As
a
result of the closing of the Share Exchange and Financing, the PPG Owners own
approximately 82.1%, and the Investor in the Financing owns approximately 11.9%,
of the outstanding common stock of the Company on a fully diluted basis (but
excluding warrants). The Closing of these transactions occurred on September
9,
2008 (the “Closing Date”). Following the Closing of the Share Exchange and
Financing, the Company had a total of 26,018,750 shares of its common stock
outstanding and 3,500,000 shares of its Series A Preferred Stock outstanding.
A
copy of the Exchange Agreement, the Purchase Agreement, and other material
agreements relating to the Financing such as the Certificate of Designation
of
Preferences, Rights and Limitations of the Series A Preferred Stock, Form of
Series A Warrant, Form of Series B Warrant, Registration Rights Agreement,
and
Lockup Agreement, are included as exhibits to this Form 8-K and are incorporated
herein by reference.
|
Item
2.01
|
Completion
of Acquisition or Disposition of Assets
|
On
September 9, 2008, we acquired a solar power business that specializes in solar
integration in a share exchange transaction, and simultaneously completed a
$7,000,000 private placement of shares of its Series A Preferred Stock, Series
A
Warrants, and Series B Warrants. Reference is made to Item 1.01, which is
incorporated herein, which summarizes the terms of the Share Exchange under
the
Exchange Agreement, and the terms of the Financing under the Purchase
Agreement.
From
and
after the Closing Date of the Exchange Agreement, our primary operations consist
of the business and operations of the Premier Power Group, which are conducted
in the United States and Spain. Therefore, we disclose information about the
business, financial condition, and management of Premier Power California in
this Form 8-K.
BUSINESS
Overview
The
Premier Power Group is a developer, designer, and integrator of solar energy
solutions. The Premier Power Group develops markets, sells, and maintains solar
energy systems for residential, commercial, and industrial customers in North
America and Spain. The Premier Power Group uses solar components from the
industry’s leading suppliers and manufacturers such as General Electric (“GE”),
Sharp, Fronius, Wattsun, SMA, Satcon, Xantrex, Schuco and SunPower Corporation.
The Premier Power Group was one of GE’s leading resellers and their number one
reseller in the United States in 2006 and 2007. Based on data tracked by the
California Energy Commission, the Premier Power Group consistently ranks among
the top solar power system installers in the United States, and it has
international operations headquartered in Spain. The Premier Power Group’s
clients have included utility companies such as Pacific Gas and Electric and
Sierra Pacific Power Company, home builders such as KB Homes, and numerous
agricultural clients such as leading wineries in Napa Valley, California. The
Premier Power Group’s sales have grown by 68% from 2006 to 2007, and it has
maintained profitability in each of its last two years of
operation.
Corporate
History
The
Company was originally incorporated as “Harry’s Trucking, Inc.” in Delaware on
September 1, 2006, and had business operations as a third-party logistics
provider for supply chain management through a wholly owned subsidiary, “Harry’s
Trucking, LLC,” which was formed on April 2, 2004 as a limited liability company
in California. In connection with the closing of the Share Exchange, the Company
sold 100% of its interest in Harry’s Trucking, LLC to Haris Tajyar and Omar
Tajyar. Effective September 5, 2008, we changed our name to “Premier Power
Renewable Energy, Inc.”
As
discussed more fully above, on September 9, 2008, we consummated the Exchange
Transaction with Premier Power California. As a result, Premier Power California
became our wholly owned subsidiary, and, together with its subsidiaries, the
Premier Power Group became our operating solar energy business.
Premier
Power
California
History and Organization
In
2001,
Premier Homes Properties, Inc. (“Premier Homes”) formed a solar power systems
design and integration division (the “Solar Division”) in order to meet its
internal mandate to make one out of every three homes Premier Homes developed,
into a solar home. On April 22, 2003, in order to meet the growing demand for
commercial and residential retrofit solar power system installations, the Solar
Division was spun-off from Premier Homes by the formation of Premier Power
California, which was established as a California corporation. Immediately
prior
to share exchange transaction with the Company, Dean R. Marks, Premier Power
California’s founder and President, owned approximately 50.1% of the issued
capital shares and equity ownership of Premier Power California, Miguel de
Anquin, Premier Power California’s Vice President, owned approximately 28.4%
equity ownership interest in Premier Power California, and 3 other stockholders
owned the remaining 21.5% equity ownership interest in Premier Power California,
all of which was acquired by the Company at the Closing of the Exchange
Agreement in exchange for 24,218,750 shares of the Company’s common stock. As a
result, Premier Power California became a wholly owned subsidiary of the
Company.
Bright
Future
Bright
Future is a wholly owned subsidiary of Premier Power California, operating
as a
trading company that allows Premier Power California and Premier Power Spain
to
consolidate its purchases from suppliers of solar
energy
products in order to achieve advantageous trade terms. Bright Future was
formed as a Nevada limited liability company on December 13, 2006.
Premier
Power Spain
Premier
Power Spain is a wholly owned subsidiary of Premier Power California, and is
the
base of Premier Power California’s European operations. Premier Power Spain was
formed on July 7, 2006 as a Spanish limited liability company by the principals
of Premier Power California
(Messrs.
Marks and de Anquin) in order to conduct design, sales and installation
operations in Spain and other parts of Europe. Premier Power Spain has two
offices in Spain, its headquarters in Pamplona and a satellite office in Madrid.
Offices
and Website
Premier
Power California maintains offices across Southern and Northern California,
as
well as Pamplona and Madrid in Spain. Premier Power California’s headquarters
are located at 4961 Windplay Drive, Suite 100, El Dorado Hills, California
95762, near Sacramento. Premier Power California also operates informational
websites located at www.premierpower.com and www.mysolarexperience.com. The
information on these websites is not incorporated herein by reference.
Industry
Overview
Energy
markets are seeing dramatic use demands and price increases. According to
the
California Public Utility Commission, California electric rates have increased
6.7% per year on average from 1970 to 1995. In 1996, deregulation began and
rates temporarily froze. The 2001 adjustment realigned average rates with
the
historical 6.7% rate increase curve. Commercial rates have grown by 5.5%
year-over-year. Electric power used to operate businesses and industries
provides the power needed for homes and offices and provides the power for
our
communications, entertainment, transportation and medical needs. On the
residential side, growth in population and disposable income leads to increase
demand of popular new electronic items ranging from large screen plasma
televisions and sound systems to a greater number of domestic appliances.
Population shifts to warmer regions also increase the need for cooling.
Electricity is now more commonly used for local transportation (electric
vehicles) and space/water heating needs.
Due
to
continuously increasing energy demands, we believe the electric power industry
faces the following challenges:
|
|
●
|
Limited
Fossil Fuel Supplies and Cost Pressures.
Supplies
of fossil fuels that are used to generate electricity such as oil,
coal
and natural gas are limited, and yet worldwide demand for electricity
continues to increase. The increasing demand for electricity and
a finite
supply of fossil fuels may result in increased fossil fuel prices,
which,
in turn, will likely result in a continuation of increases in long-term
average costs for electricity.
|
|
|
●
|
Stability
of Suppliers.
Many
of the world’s leading suppliers of fossil fuels are located in unstable
regions of the world where political instability, labor unrest, war
and
terrorist threats may disrupt oil and natural gas production. Purchasing
oil and natural gas from these countries may increase the risk of
supply
shortages and may increase costs of fossil
fuels.
|
|
|
●
|
Generation,
Transmission and Distribution Infrastructure Costs.
Historically,
electricity has been generated in centralized power plants transmitted
over high voltage lines and distributed locally through lower voltage
transmission lines and transformer equipment. Despite the increasing
demand for electricity, investment in electricity generation, transmission
and distribution infrastructure have not kept pace, resulting in
service
disruptions in the U.S. As electricity needs increase, these systems
will
need to be expanded, and such expansion will be capital intensive
and time
consuming, and may be restricted by environmental concerns. Without
further investments in this infrastructure, the likelihood of power
shortages may increase.
|
|
|
●
|
Environmental
Concerns and Climate Change
.
Concerns about climate change and greenhouse gas emissions have resulted
in the Kyoto Protocol. 137 countries have voluntarily ratified the
Kyoto
Protocol and are required to reduce greenhouse gas emissions to target
levels. The U.S. has the Renewable Portfolio Standard, which requires
the
purchase of a certain amount of power from renewable sources.
|
The
demand for viable alternate sources of fuel for electric power generation in
order to address the increasing demand for electricity coupled with government
regulations and incentive programs in countries such as Germany, Japan, Spain
and the U.S. that encourage more rapid development of, and the adoption by
businesses and individuals of, solar energy power systems have accelerated
the
growth of the solar energy industry.
We
believe that solar energy is one of the most direct and unlimited alternate
energy sources. Solar energy is the underlying energy source for renewable
fuel
sources, including biomass fuels and hydroelectric energy. By extracting energy
directly from the sun and converting it into an immediately usable form, either
as heat or electricity, intermediate steps normally involved in converting
fuel
to electric power are eliminated. Solar energy can be converted into usable
forms of energy either through the photovoltaic effect (generating electricity
from photons) or by generating heat (solar thermal energy). Solar thermal
systems include traditional domestic hot water collectors (“DHW”), swimming pool
collectors, and high temperature thermal collectors (used to generate
electricity in central generating systems). DHW thermal systems are typically
distributed on rooftops so that they generate heat for the building on which
they are situated. High temperature thermal collectors typically use
concentrating mirror systems and are located in remote sites.
Solar
power also offers a variety of advantages over other sources of power, including
an absence of the need for fossil fuel, environmental cleanliness,
location-based energy production, greater efficiency during peak demand periods,
high reliability and modularity:
|
|
●
|
Clean
Energy Production.
Unlike traditional fossil fuel energy sources and many other renewable
energy sources, solar power systems generate electricity with no
emissions
or noise impact.
|
|
|
●
|
Location-Based
Energy Production.
Solar
power is a distributed energy source, meaning that the electricity
can be
generated at the site of consumption. This provides a significant
advantage to the end user who is therefore not reliant upon the
traditional electricity infrastructure for delivery of electricity
to the
site of use.
|
|
|
●
|
Energy
Generated to Match Peak Usage Times.
Peak
energy usage and high electricity costs typically occur mid-day,
which
also generally corresponds to peak sunlight hours and solar power
electricity generation.
|
|
|
●
|
Reliable
Source of Electricity.
Solar power systems generally do not contain moving parts, nor do
they
require significant ongoing maintenance. As a result, we believe
solar
power systems are one of the most reliable forms of electricity
generation.
|
|
|
●
|
Modular.
Solar power systems are made from interconnecting and laminating
solar
cells into solar modules. Given this method of construction, solar
power
products can be deployed in many different sizes and configurations
to
meet specific customer needs.
|
Challenges
Faced by the Solar Industry
Despite
the benefits and advantages of solar power as an attractive alternative to
traditional energy sources, there remain certain key challenges that the solar
power industry must overcome to accomplish broad commercialization of its
products, including the following:
|
|
●
|
Possible
Reduction or Elimination of Government Subsidies and
Incentives.
The current growth of the solar power industry substantially relies
on the
availability and size of government subsidies and economic incentives,
such as capital cost rebates, reduced tariffs, tax credits, net metering
and other
|
incentives.
Although many states have a RPS (Renewable Portfolio Standard that requires
a
minimum percentage of energy be renewable) which drive the currently expanding
government subsidy programs and solar initiatives, governments may eventually
decide to reduce or eliminate these subsidies and economic incentives. It
remains a challenge for the solar power industry to reach sufficient scale
to be
cost-effective in a non-subsidized marketplace.
|
Renewable
Portfolio Standard (RPS)
.
A
standard requiring that a minimum percentage of generation sold or
capacity installed be provided by renewable energy. Utilities that
are
obligated by these standards are required to meet certain targets.
The map
below, provided by www.dsireusa.org,
lists
these targets as of October 2005.
|
|
|
|
|
|
|
●
|
High
Cost of Solar Power.
Generally,
the per kilowatt-hour cost of generating solar electricity, including
the
upfront capital costs, is greater than retail electricity rates.
While
government policy mechanisms and heightened consumer awareness are
driving
solar power adoption, the cost of solar power products remains an
impediment to growth. To address this issue, manufacturers must improve
the cost efficiency of solar power systems through innovation and
continuous improvement of production techniques. For example, improving
conversion efficiencies of solar cells will reduce raw material
requirements and lower costs required to manufacture a solar power
system
with a given output. Higher conversion efficiencies also decrease
the size
of the solar power system, and thereby lower the system installation
costs.
|
|
|
●
|
Shortages
of Raw Materials.
Polysilicon is the main raw material used in manufacturing our solar
cells
that are used for the solar modules that we use in our solar power
systems. Currently, there is an industry-wide shortage of polysilicon,
which is expected to improve in the next one to two years. As a result
of
this raw material shortage, we believe the growth of the solar industry
may be hindered in the near term. An industry-wide shortage of polysilicon
may have a material effect on our results of operations because a
shortage
will likely cause the suppliers of the solar energy products that
we use
in our systems to raise the prices of the solar cells and modules
that
they sell to us.
|
Despite
these challenges, we believe that increasing fossil fuel costs, more stringent
environmental regulations, expanding government subsidy programs and solar
initiatives, growing national energy security concerns and technological
advances and innovations make it likely that the demand for electric power
derived from non-depleting sources such as solar energy will continue to
increase. We believe that we are well positioned to capitalize on the growing
and changing demands of the burgeoning solar energy market because of several
years of experience as a developer, designer, and integrator of cost-effective,
innovative, and proprietary solar energy systems for residences and
businesses.
Premier
Power California designs, installs, and provides maintenance services for solar
energy systems and all related components used by residential homeowners,
commercial and industrial enterprises, municipalities, and other solar energy
providers. We design, develop, and engineer many of our own racking and
installation systems.
In
addition, we are a reseller of solar energy system components including, but
not
limited to, racking, wiring, invertors, solar modules, and other related
components sourced from the industry’s leading manufactures and suppliers. We
have also offered direct power purchase agreement programs through our
relationship with Samsung and GE.
Strategy
Premier
Power California has developed a series of strategies that allows it to deliver
a superior level of service at a reduced cost, thereby driving business growth
and brand value, while allowing Premier Power California to maintain
profitability in a competitive market. These strategies include:
|
|
1.
|
Diversifying
our solar power systems designs for applications into numerous market
segments and opportunities ranging from residential, agricultural,
commercial and industrial, both domestically and internationally.
Through
geographic, market segment, and product diversification, we have
reduced,
and will continue to able to reduce, the negative impact that systemic
and
economic fluctuations of any one individual market, segment or region
have
on our business.
|
|
|
2.
|
Establishing
and refining best practices for design, sales and marketing that
can be
replicated throughout our different locations while identifying and
centralizing operations that are best centralized in order to reduce
the
cost of operations and increase awareness of our services so that
our best
practices are applied in a uniform manner and delivered consistently
across markets.
|
|
|
3.
|
Optimal
use of our in-house engineering, design and installation staff combined
with the use of outsourcing only when necessary in order to improve
the
customer experience, maintain quality control, reduce costs, and
protect
the Company’s brand.
|
|
|
4.
|
Developing
proprietary turn-key solar power systems and continued improvements
upon
prefabrication abilities for application in commercial, rooftop and
ground
mount applications that will reduce design, permitting, and installation
time and cost.
|
|
|
5.
|
Participation
in “value added” businesses such as providing after-market systems
management programs and customized project finance solutions (in
partnership with companies such as GE and Samsung) to customers and
prospective customers. This will allow Premier Power California to
participate in the ancillary revenue that its projects create.
|
|
|
6.
|
Expansion
through key acquisitions and organic growth. As a growing number
of states
adopt solar programs, Premier Power California expects demand to
grow
dramatically. Therefore, Premier Power California is currently moving
forward on a roll-up and organic growth strategy designed to meet
growing
demand in North America and Europe.
|
|
|
7.
|
Presenting
financial tools such as leases or Power Purchase Agreements to help
consumers and businesses decide in favor of solar power. A PPA is
a
long-term contract with the customer purchasing the energy produced
by the
solar system at a fixed rate, typically adjusted annually at an agreed
rate, for 15, 20 or 25 years. The customer does not own the system,
and
thus, there is no capital outlay which simplifies the “going solar”
decision.
|
The
net
proceeds of the Financing will be used to expand our business through key
acquisitions, the establishment of new offices, and improvements in purchasing
terms from suppliers such as trade discounts. Being a publicly traded company
will enable Premier Power California to complete its acquisition strategy,
maintain and incentivize key employees, and attract future capital at reduced
cost.
Customers
In
2007,
sales to Solar Power Partners represented 15% of total sales. Solar Power
Partners provides PPA financing to Premier Power California customers and as
a
result of the financial structuring, the PPA customer becomes Premier Power
California’s customer. Solar Power Partners is most frequently brought into the
sales process by Premier Power California in order to provide financing. Other
than Solar Power Partners, no one direct customer represents more than 5% of
Premier Power California’s annual sales in 2007. In addition to its residential
customers, Premier Power California’s commercial and industrial customers have
included
PG&E,
Sierra Pacific Power Company, AT&T, Princeton University, Millennium Sports
Club, KB Homes, and General Electric. Premier Power California’s agricultural
customers have included Shafer Vineyards, Silverado Vineyards, Chateau
Montelena, St. Supery, Spottswoode, Larkmead Vineyards, Madroña Vineyards,
Redwood Ranch & Vineyards, Nicol Vineyards, L’Aventure Vineyards, Saxum
Vineyards, Sierra Vista Vineyards, Domain de la Terre Rouge (Easton) Vineyards,
Chateau Chapellet and KT Winco.
Quality
Control
Premier
Power California has a “zero defect” quality assurance program. Instituted in
2006, the zero defect policy was created to set the highest quality and customer
satisfaction standards in the industry today. Each Premier Power California
installation is independently verified by a quality control officer and must
meet a rigid standard for excellence. The review standards used by Premier
Power
California go beyond the quality of the installation to include measures of
the
customer experience. Premier Power California uses the “Net Promoter Score”
developed by the Massachusetts Institute of Technology and implemented by
companies such as GE and Toyota to measure quality and customer satisfaction.
Premier scored a 98.3% score for 2007, and Premier Power California has
regularly scheduled meetings to review the customer surveys and scores and
design and implement measures to further improve the customer
experience.
Competition
Major
Domestic Competitors
Premier
Power California has both North American and international operations and a
very
limited number of direct competitors active in the same markets. SunPower
Corporation, however, is one such competitor. In the U.S., the solar design
and
integration market is highly fragmented. Competitors in most cities consist
of a
number of local installers and, as a result, Premier Power California faces
direct competition in these markets from a number of smaller local installers.
In certain U.S. markets such as Los Angeles, the San Francisco Bay Area, and
the
California Central Valley, Premier Power California experiences intermittent
competition from regional installers such as Borrego Solar, Akeena Solar, SPG,
and Solar City. Based on Premier Power California’s geographic diversification,
buying power and unique installation methods, the effects of any one installer
on Premier Power California are limited but growing. In particular, among the
commercial grade opportunities, there are only a few companies with the level
of
experience Premier Power California possesses. Only a few competitors qualify
under larger scale “Request for Proposal” (“RFP”) projects, and therefore the
pool of competitors on many mid-size commercial installations is limited. There
are a greater number of competitors in the small business and residential
markets. Premier Power California seeks to distinguish itself from the
competition by marketing its depth of experience, complex engineering and design
capabilities, customer satisfaction and its “on-time” and “on-budget”
installations.
Spanish
Competitors
In
the
Spanish market, Premier Power Spain faces competition from Acciona and Tudela
Solar, among other companies. However, most of the competition in Spain results
from companies being accustomed to building large-scale solar farms, which
have
proliferated commensurate with the national feed-in tariffs. Premier Power
Spain’s business is unique because it is not dependent on the large-scale solar
farm subsidies or feeding tariffs, and sets itself apart from the large scale
solar farm developers. Large-scale farm developers are experienced at
engineering ground mount systems in abundant and open space and replicating
redundant tasks related to a large-scale installation. Premier Power Spain
is
focused on the smaller commercial roof top installation, which has greater
design and installation challenges. Premier Power Spain has developed and
secured exclusivity on various components of its ballast mount roof system
that
reduces the cost and time to complete installations. This system
and
other
design techniques based on its years of roof top and ground mount systems
development gives Premier Power Spain a competitive advantage in a growing
segment of the Spanish market.
Advertising
and Promotional Activities
The
Premier Power Group spent approximately $177,838 and $415,622 on domestic and
international marketing and promotional activities in 2006 and 2007,
respectively. During the first six months of 2008, the Premier Power Group
spent
approximately $219,148 on domestic and international marketing and promotional
activities. The Premier Power Group plans to use the net proceeds from the
Financing and future capital-raising activities to increase the cash available
for acquisitions in an effort to create regional market concentration in order
to improve marketing efficiencies and reduce costs per 1,000 customers reached.
The Premier Power Group also participates in the solar industry’s leading trade
shows, uses radio and print advertising and marketing tools, and has hosted
consumer-focused seminars in targeted markets, as well as customer appreciation
events to raise awareness of solar power options and the Premier Power Group’s
brand, services and products. Premier Power California also employs a national
public relations firm and has used web-based promotion tools on its websites
to
educate customers, showcase its latest installations, and provide general and
specific sales information.
Major
Suppliers
The
components used in our solar energy systems consist of solar modules, inverters,
racking, wire, hardware, monitoring equipment, and electrical equipment. Premier
Power California and Premier Power Spain purchases these components from leading
solar energy product suppliers including Sharp, SunPower Corporation, GE, Schüco
USA, L.P. (“Schüco”), Kyocera, Fronius, SMA, and Watsun. In particular, Sharp,
SunPower Corporation, and GE account for over 80% of our purchases of solar
panels. In 2006 and 2007, Premier Power California was the number one reseller
of GE’s solar panels. Premier Power California entered into a written supply
agreement with SunPower Corporation, which is attached hereto as Exhibit 10.15
to this Form 8-K. Premier Power California is also subject to a Master Terms
and
Conditions with Schüco, a copy of which is attached hereto as Exhibit 10.14 to
this Form 8-K, which governs each supply order submitted by Premier Power
California to Schüco.
Premier
Power California constantly evaluates the outlook for supply of solar panels
and
other components. However, we currently do not maintain any long-term supply
agreements for the purchase of these components, and thus we may be subject
to
the availability of and/or market price fluctuations for the components used
in
our solar energy systems.
Intellectual
Property Rights
Premier
Power California has applied for trademark protection for the brand names
“Premier Power” and “Bright Futures” and its sales slogan, “Your Solar
Electricity Specialist.” Premier Power California has also applied for patent
protection for its proprietary roof top mountings. In May 2008, Premier Power
California secured exclusive European resale rights for a patented roof mount
system.
Research
and Development
Premier
Power California employs best practices in its design and installation of
systems. Dean R. Marks, Premier Power California’s President, first become a
member of the California Solar Energy Industry Association (CALSEIA) in 1984,
and his experience has been key in the development of many innovative solar
solutions. Premier Power California leveraged its research and development
capability to help GE develop its popular solar tile. Any technology and/or
procedures that are developed are based on the decades of experience in solar
installations held by the persons behind the development and in-house expertise
in electrical and structural engineering. Premier Power California’s lead
engineer, Ken Baker, has been an electric engineer for over 30 years, including
10 years of experience in renewable energy. The research and development team
at
Premier Power California constantly looks for new and innovative ways to address
space constraints, time, and cost saving designs that will increase efficiencies
and drive added revenue.
Government
Approval and Regulation
All
products resold by Premier Power California are from industry recognized leaders
and are guaranteed by the manufacturer to have passed all required government
approval and regulation requirements. Certain services provided by Premier
Power
California are regulated and require licensing. Premier Power California
possesses and maintains all the necessary licenses required for the services
it
provides. Premier Power California employees hold some of the highest levels
of
licensing and certifications available in the industry, including C10, C2,
C46
and NYSERDA. Premier Power California also has employees that are certified
by
the North America Board of Certified Energy Practitioners (NABCEP).
Compliance
with Environmental Laws
Premier
Power California is not required to comply with any environmental laws that
are
particular to the solar industry. However, it is our policy to be as
environmentally conscientious in every aspect of our operations.
Employees
Premier
Power California has approximately 80 full-time employees worldwide. In
addition, Premier Power California employs a number of part-time employees
and
sub-contractors based on seasonal and sales demands. Premier Power California
is
not affiliated with any union or collective bargaining agreement
.
There
have been no adverse labor incidents or work stoppages in Premier Power
California’s history. Management believes that its relationship with our
employees is good.
Corporate
Information
Our
principal executive offices are located at 4961 Windplay Drive, Suite 100,
El
Dorado Hills, CA 95762. Our
main
telephone number is (916) 939-0400, and our fax number is (916)
939-0490.
RISK
FACTORS
You
should carefully consider the risks described below together with all of the
other information included in this report. The statements contained in or
incorporated into this report that are not historic facts are forward-looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in or implied by
forward-looking statements. If any of the following risks actually occurs,
our
business, financial condition or results of operations could be harmed. In
that
case, the trading price of our common stock could decline, and you may lose
all
or part of your investment.
Risks
Relating to Our Business
Our
limited operating history makes it difficult to evaluate our future prospects
and results of operations.
Premier
Power California was a division spun-out of Premier Homes on April 22, 2003.
Premier Power Spain was formed on July 7, 2006. Our limited operating history
makes it difficult to evaluate our business. In addition, the limited
performance history of our management and sales team and the uncertainty of
our
future performance and ability to maintain or improve our financial, sales
and
operating systems, procedures and controls increase the risk that we may be
unable to continue to successfully operate our business. In the event that
we
are not able to manage our growth and operate as a public company due to our
limited experience, our business may suffer uncertainty and failures, which
makes it difficult to evaluate our business.
We
are dependent upon our suppliers for the components used in the
systems
we
design and install, and our major suppliers are dependent upon the
continued
availability
and pricing of polysilicon and other raw materials used in
solar
panels.
Any increases in the price of solar components or any interruptions to or
shortage or decline in the quality of the solar components we purchase for
our
solar energy systems could adversely affect our business.
Key
components used in our systems are purchased from a limited number of
manufacturers. In particular, Sharp, SunPower Corporation, and General Electric
account for over 80% of our purchases of solar panels. We are subject to market
prices for the components that we purchase for our installations, which are
subject to fluctuation. We cannot ensure that the prices charged by our
suppliers will not increase because of changes in market conditions or other
factors beyond our control. An increase in the price of components used in
our
systems could result in an increase in costs to our customers and could have
a
material adverse effect on our revenues and demand for our products and
services. Our suppliers are dependent upon the availability and pricing of
polysilicon, one of the main materials used in manufacturing solar panels.
The
world market for solar panels recently experienced a shortage of supply due
to
insufficient availability of silicon and limited manufacturing capacity. This
shortage caused the prices for solar panels to increase. Interruptions in our
ability to procure needed components for our systems, whether due to
discontinuance by our suppliers, delays or failures in delivery, shortages
caused by inadequate production capacity or unavailability, or for other
reasons, would adversely affect or limit our sales and growth. In addition,
increases in the prices of panels could make systems that have been sold but
not
yet installed unprofitable for us. There is no assurance that we will continue
to find qualified manufacturers on acceptable terms and, if we do, there can
be
no assurance that product quality will continue to be acceptable, which could
lead to a loss of sales and revenues.
Various
licenses and permits are required to operate our business, and the loss of
or
failure to renew any or all of these licenses and permits could materially
adversely affect our business.
We
hold
electrical contractor licenses in all states in which we operate, including
C10,
C2, C46 and NYSERDA. Also, we are certified by the North America Board of
Certified Energy Practitioners (NABCEP). The loss of any such licenses or
certifications, or the loss of any key personnel who hold such licenses or
certifications, would materially adversely affect our business.
We
are highly dependent on senior management and key sales and technical
personnel.
We
are
highly dependent on our senior management to manage our business and operations
and our key managerial, financial, sales, design, engineering, technical and
other personnel for the sale, development and installation of our solar power
systems. In particular, we rely substantially on Dean R. Marks, our President
and Chief Executive Officer, and Miguel de Anquin, our Chief Operating Officer,
Chief Financial Officer, and Corporate Secretary, to manage our operations.
Although we have entered into employment agreements with and obtained key-man
life insurance policies for our benefit on the lives of Messrs. Marks and de
Anquin, we cannot assure their continued services to the Company. The loss
of
either one of them, or any other member of our senior management, would have
a
material adverse effect on our business and operations. Competition for senior
management and sales and technical personnel is intense, and the pool of
suitable candidates is limited. We may be unable to locate a suitable
replacement for any member of our senior management or key sales and technical
personnel that we lose. In addition, if any member of our senior management
or
key sales and technical personnel joins a competitor or forms a competing
company, they may compete with us for customers, business partners and other
key
professionals and staff members of our company.
Although
each of our senior management and key sales and technical personnel has signed
a
confidentiality and non-competition agreement in connection with his employment
with us, we cannot assure you that we will be able to successfully enforce
these
provisions in the event of a dispute between us and any member of our senior
management or key research and development personnel.
If
we are unable to attract, train and retain highly qualified
personnel,
the
quality of our services may decline, and we may not meet our business and
financial goals.
We
compete for qualified personnel with other solar integration companies. Intense
competition for these personnel could cause our compensation costs to increase
significantly, which, in turn, could have a material adverse effect on our
results of operations. Our future success and ability to grow our business
will
depend in part on the continued service of these individuals and our ability
to
identify, hire and retain additional qualified personnel. If we are unable
to
attract and retain qualified employees, we may be unable to meet our business
and financial goals.
Our
growth strategy may prove to be disruptive and divert management
resources.
Our
growth strategy may involve large transactions and present financial, managerial
and operational challenges, including diversion of management attention from
existing businesses, difficulty with integrating personnel and financial and
other systems, increased expenses, including compensation expenses resulting
from newly hired employees, assumption of unknown liabilities and potential
disputes. We could also experience financial or other setbacks if any of our
growth strategies incur problems of which we are not presently aware. We may
require additional financing in the future.
We
may need to obtain additional debt or equity to fund future capital expenditures
and to meet working capital requirements.
Additional
equity may result in dilution to the holders of our outstanding shares of
capital stock. Additional debt financing may include conditions that would
restrict our freedom to operate our business, such as conditions
that:
|
|
●
|
limit
our ability to pay dividends or require us to seek consent for the
payment
of dividends;
|
|
|
●
|
increase
our vulnerability to general adverse economic and industry
conditions;
|
|
|
●
|
require
us to dedicate a portion of our cash flow from operations to payments
on
our debt, thereby reducing the availability of our cash flow to fund
capital expenditures, working capital and other general corporate
purposes; and
|
|
|
●
|
limit
our flexibility in planning for, or reacting to, changes in our business
and our industry.
|
We
cannot
guarantee that we will be able to obtain any additional financing on terms
that
are acceptable to us, or at all.
Geographical
business expansion efforts we make could result in
difficulties
in successfully managing our business and consequently harm
our
financial
condition.
As
part
of our business strategy, we may seek to expand by acquiring competing
businesses or customer
contracts
outside
of our current geographic markets, or we may open offices in the geographical
markets we desire to operate within. We may face challenges in managing
expanding product and service offerings and in integrating acquired businesses
with our own. We cannot accurately predict the timing, size and success of
our
expansion efforts and the associated capital commitments that might be required.
We expect to face competition for expansion candidates, which may limit the
number of expansion opportunities available to us and may lead to higher
expansion costs. There can be no assurance that we will be able to identify,
acquire or profitably manage additional businesses and
contracts
or
successfully integrate acquired businesses and
contracts
,
if any,
into
our
company
,
without
substantial costs, delays or other operational or financial difficulties. In
addition, expansion efforts involve a number of other risks, including:
|
|
●
|
failure
of the expansion efforts to achieve expected
results;
|
|
|
●
|
diversion
of management’s attention and resources to expansion
efforts;
|
|
|
●
|
failure
to retain key customers or personnel of the acquired businesses;
and
|
|
|
●
|
risks
associated with unanticipated events, liabilities or
contingencies.
|
Our
inability to obtain capital, use internally generated cash, or
use
shares
of our common stock or debt to finance future expansion efforts
could
impair
the growth and expansion of our business.
Reliance
on internally generated cash or debt to finance our operations or complete
business expansion efforts could substantially limit our operational and
financial flexibility. The extent to which we will be able or willing to use
shares of common stock to consummate expansions will depend on our market value
from time to time and the willingness of potential sellers to accept it as
full
or partial payment. Using shares of common stock for this purpose also may
result in significant dilution to our then existing stockholders. To the extent
that we are unable to use common stock to make future expansions, our ability
to
grow through expansions may be limited by the extent to which we are able to
raise capital for this purpose through debt or equity financings. No assurance
can be given that we will be able to obtain the necessary capital to finance
a
successful expansion program or our other cash needs. If we are unable to obtain
additional capital on acceptable terms, we may be required to reduce the scope
of any expansion. In addition to requiring funding for expansions, we may need
additional funds to implement our internal growth and operating strategies
or to
finance other aspects of our operations. Our failure to (i) obtain additional
capital on acceptable terms, (ii) use internally generated cash or debt to
complete expansions because it significantly limits our operational or financial
flexibility, or (iii) use shares of common stock to make future expansions
may
hinder our ability to actively pursue any expansion program we may decide to
implement and negatively impact our stock price.
Our
obligations under our credit facility are secured by our
assets.
Thus, if the lender forecloses on its security interest, we may have
to
liquidate
some or all of our assets, which may cause us to curtail or cease
operations.
Our
obligations under our current loan and security agreement with Guaranty Bank
are
secured by all of our assets. If we default under the credit facility, we could
be required to repay all of our borrowings thereunder. As of September 2, 2008,
we owe Guaranty Bank approximately $1,250,000 under the agreement. In addition,
Guaranty Bank could foreclose its security interest and liquidate some or all
of
our assets, which could cause us to curtail or cease operations.
The
terms
of the current credit facility with Guaranty Bank may limit our ability, without
Guaranty Bank’s consent, to, among other things, enter into certain transactions
(such as an acquisition of another company) and create additional liens on
our
assets, and could adversely affect our liquidity and our ability to attract
additional funding if required for our business.
Our
operations are cash intensive, and our business could be adversely affected
if
we fail to maintain sufficient levels of working capital.
We
expend
a significant amount of cash in our operations, principally to fund our
materials procurement. Our suppliers typically provide us with credit. In turn,
we typically require our customers to make payment at various stages of the
project. We generally fund most of our working capital requirements out of
cash
flow generated from operations and our line of credit. If we fail to generate
sufficient revenues from our sales, or if we experience difficulties collecting
our accounts receivables, we may not have sufficient cash flow to fund our
operating costs, and our business could be adversely affected.
Our
operating results may fluctuate from period to period, and if we fail to meet
market expectations for a particular period, our share price may
decline.
Our
operating results have fluctuated from period to period and are likely to
continue to fluctuate as a result of a wide range of factors, including sales
demands, electricity rate changes, changes in incentives and technological
improvements. Our production and sales are generally lower in the winter due
to
weather conditions and holiday activities. Interim reports may not be indicative
of our performance for the year or our future performance, and period-to-period
comparisons may not be meaningful due to a number of reasons beyond our control.
We cannot assure you that our operating results will meet the expectations
of
market analysts or our investors. If we fail to meet their expectations, there
may be a decline in our share price.
Because
our industry is highly competitive and has low barriers to
entry,
we
may lose market share to larger companies that are better equipped
to
weather
deterioration in market conditions due to increased
competition.
Our
industry is highly competitive and fragmented, is subject to rapid change and
has low barriers to entry. We may in the future compete for potential customers
with solar system installers and servicers, electricians, roofers, utilities
and
other providers of solar power equipment or electric power. Some of these
competitors may have significantly greater financial, technical and marketing
resources and greater name recognition than we have. We believe that our ability
to compete depends in part on a number of factors outside of our control,
including:
|
|
●
|
the
ability of our competitors to hire, retain and motivate qualified
technical personnel;
|
|
|
●
|
the
ownership by competitors of proprietary tools to customize systems
to the
needs of a particular customer;
|
|
|
●
|
the
price at which others offer comparable services and
equipment;
|
|
|
●
|
the
extent of our competitors’ responsiveness to client
needs;
|
|
|
●
|
risk
of local economy decline; and
|
|
|
●
|
installation
technology.
|
Competition
in the solar power services industry may increase in the future, partly due
to
low barriers to entry, as well as from other alternative energy resources now
in
existence or developed in the future. Increased competition could result in
price reductions, reduced margins or loss of market share and greater
competition for qualified technical personnel. There can be no assurance that
we
will be able to compete successfully against current
and
future competitors. If we are unable to compete effectively, or if competition
results in a deterioration of market conditions, our business and results of
operations would be adversely affected.
We
act as the general contractor for our customers in connection with the
installation of our solar power systems and are subject to risks associated
with
construction, bonding, cost overruns, delays and other contingencies, which
could have a material adverse effect on our business and results of
operations.
We
act as
the general contractor for our customers in connection with the installation
of
our solar power systems. All essential costs are estimated at the time of
entering into the sales contract for a particular project, and these are
reflected in the overall price that we charge our customers for the project.
These cost estimates are preliminary and may or may not be covered by contracts
between us or the other project developers, subcontractors, suppliers and other
parties to the project. In addition, we require qualified, licensed
subcontractors to install some of our systems. Shortages of such skilled labor
could significantly delay a project or otherwise increase our costs. Should
miscalculations in planning a project or defective or late execution occur,
we
may not achieve our expected margins or cover our costs. Also, many systems
customers require performance bonds issued by a bonding agency. Due to the
general performance risk inherent in construction activities, it is sometimes
difficult to secure suitable bonding agencies willing to provide performance
bonding. In the event we are unable to obtain bonding, we will be unable to
bid
on, or enter into, sales contracts requiring such bonding. Delays in solar
panel
or other supply shipments, other construction delays, unexpected performance
problems in electricity generation or other events could cause us to fail to
meet these performance criteria, resulting in unanticipated and severe revenue
and earnings losses and financial penalties. Construction delays are often
caused by inclement weather, failure to timely receive necessary approvals
and
permits, or delays in obtaining necessary solar panels, inverters or other
materials. The occurrence of any of these events could have a material adverse
effect on our business and results of operations.
We
generally recognize revenue on system installations on a “percentage of
completion” basis and payments are due upon the achievement of contractual
milestones, and any delay or cancellation of a project could adversely affect
our business.
We
recognize revenue on our system installations on a “percentage of completion”
basis and, as a result, our revenue from these installations is driven by the
performance of our contractual obligations, which is generally driven by
timelines for the installation of our solar power systems at customer sites.
This could result in unpredictability of revenue and, in the short term, a
revenue decrease. As with any project-related business, there is the potential
for delays within any particular customer project. Variation of project
timelines and estimates may impact the amount of revenue recognized in a
particular period. In addition, certain customer contracts may include payment
milestones due at specified points during a project. Because we must invest
substantial time and incur significant expense in advance of achieving
milestones and the receipt of payment, failure to achieve milestones could
adversely affect our business and cash flows.
We
are subject to particularly lengthy sales cycles in some
markets.
Factors
specific to certain of our customers’ industries have an impact on our sales
cycles. Some of our customers may have longer sales cycles due to the timing
of
various state and federal subsidies. These lengthy and challenging sales cycles
may mean that it could take longer before our sales and marketing efforts result
in revenue, if at all, and may have adverse effects on our operating results,
financial condition, cash flows and stock price.
Our
failure to meet a client’s expectations in the performance of
our
services,
and the risks and liabilities associated with placing our
employees
and
technicians in our customers’ homes and businesses, could give rise
to
claims
against us.
Our
engagements involve projects that are critical to our customers’ business or
home. Our failure or inability to meet a customer’s expectations in the
provision of our products and services could damage or result in a material
adverse change to their premises or property, and therefore could give rise
to
claims against us or damage our reputation. In addition, we are exposed to
various risks and liabilities associated with placing our employees and
technicians in the homes and workplaces of others, including possible claims
of
errors and omissions, harassment, theft of client property, criminal activity
and other claims.
We
generally do not have long-term agreements with our customers and, accordingly,
could lose customers without warning.
Our
products are generally not sold pursuant to long-term agreements with customers,
but instead are sold on a purchase order basis. We typically contract to perform
large projects with no assurance of repeat business from the same customers
in
the future. Although cancellations on our purchase orders to date have been
insignificant, our customers may cancel or reschedule purchase orders with
us on
relatively short notice. Cancellations or rescheduling of customer orders could
result in the delay or loss of anticipated sales without allowing us sufficient
time to reduce, or delay the incurrence of, our corresponding inventory and
operating expenses. In addition, changes in forecasts or the timing of orders
from these or other customers expose us to the risks of inventory shortages
or
excess inventory. This, in addition to the non-repetition of large systems
projects, could cause our operating results to suffer.
Our
competitive position depends in part on maintaining intellectual property
protection.
Our
ability to compete and to achieve and maintain profitability depends in part
on
our ability to protect our proprietary discoveries and technologies. We have
applied for trademark protection for the brand names “Premier Power” and “Bright
Skies” and our sales slogan “Your Solar Electricity Specialist.” We have also
applied for patent protection for our proprietary roof top mountings, but there
can be no assurance that these applications will be granted by the U.S. Patent
and Trademark Office. We currently rely on a combination of copyrights,
trademarks, trade secret laws and confidentiality agreements to protect our
intellectual property rights. We also rely upon unpatented know-how and
continuing technological innovation to develop and maintain our competitive
position. From time to time, the United States Supreme Court, other federal
courts, the U.S. Congress or the U.S. Patent and Trademark Office may change
the
standards of patentability, and any such changes could have a negative impact
on
our business.
Our
profitability depends, in part, on our success on brand
recognition,
and
we could lose our competitive advantage if we are unable to protect
our
trademark
against infringement. Any related litigation could be
time-consuming
and costly.
We
believe our brand has gained substantial recognition by customers in certain
geographic areas. We have applied for trademark protection for the brand names
“Premier Power” and “Bright Skies” and our sales slogan “Your Solar Electricity
Specialist.” Use of our name or a similar name by competitors in geographic
areas in which we have not yet operated could adversely affect our ability
to
use or gain protection for our brand in those markets, which could weaken our
brand and harm our business and competitive position. In addition, any
litigation relating to protecting our trademark against infringement is likely
to be time consuming and costly.
Our
Premier Ballasting and Premier Racking systems are untested and may not be
effective or patentable or may encounter other unexpected problems, which could
adversely affect our business and results of operations.
Our
Premier Ballasting and Premier Racking systems
are
new
and have not been tested in installation settings for a sufficient period of
time to prove their long-term effectiveness and benefits. These systems may
not
be effective or other problems may occur that are unexpected and could have
a
material adverse effect on our business or results of operations. While we
anticipate filing patent applications for our Premier Ballasting and Premier
Racking systems
technology,
patents may not be issued on such technology, or we may not be able to realize
the benefits from any patents that are issued.
We
may face intellectual property infringement claims that could be time-consuming
and costly to defend and could result in our loss of significant rights and
the
assessment of damages.
If
we
receive notice of claims of infringement, misappropriation or misuse of other
parties’ proprietary rights, some of these claims could lead to litigation. We
cannot assure you that we will prevail in these actions, or that other actions
alleging misappropriation or misuse by us of third-party trade secrets,
infringement by us of third-party patents and trademarks or the validity of
our
patent or trademarks, will not be asserted or prosecuted against us. We may
also
initiate claims to defend our intellectual property rights. Intellectual
property litigation, regardless of outcome, is expensive and time-consuming,
could divert management’s attention from our business and have
a
material
negative effect on our business, operating results or financial condition.
If
there is a successful claim of infringement against us, we may be required
to
pay substantial damages (including treble damages if we were to be found to
have
willfully infringed a third party’s patent) to the party claiming infringement,
develop non-infringing technology, stop selling our products or using technology
that contains the allegedly infringing intellectual property or enter into
royalty or license agreements that may not be available on acceptable or
commercially practical terms, if at all. Our failure to develop non-infringing
technologies or license the proprietary rights on a timely basis could harm
our
business. Parties making infringement claims on any future issued patents may
be
able to obtain an injunction that would prevent us from selling our products
or
using technology that contains the allegedly infringing intellectual property,
which could harm our business.
Product
liability claims against us could result in adverse publicity and potentially
significant monetary damages.
As
a
seller of consumer products, we face an inherent risk of exposure to product
liability claims in the event that our solar energy systems’ use results in
damages, injuries or fatalities. Since solar energy systems are electricity
producing devices, it is possible that our products could result in damage,
injury or fatality, whether by product malfunctions, defects, improper
installation or other causes. If such damages, injuries or fatalities or claims
were to occur, we could incur monetary damages, and our business could be
adversely affected by any resulting negative publicity. The successful assertion
of product liability claims against us also could result in potentially
significant monetary damages and, if our insurance protection is inadequate
to
cover these claims, could require us to make significant payments from our
own
resources.
We
may be subject to unexpected warranty expenses or service claims that could
reduce our profits.
As
a
result of the length of the warranty periods we provide, we bear the risk of
warranty claims several years after we have completed the installation of a
solar energy system. Our current standard warranty for our installation services
includes a 10-year warranty period for defects in material and workmanship
in
California. The warranty period for defects in material and workmanship is
five
years in New Jersey and New York, two years in Nevada, and one year in Spain.
All of the manufacturers of solar photovoltaic modules that Premier Power
California has installed offer a 25-year warranty period for declines in power
performance. The manufacturer provides this manufacturer’s warranty directly to
the end customer. Although we maintain a warranty reserve for potential warranty
or service claims and have not had material warranty claims in the past, claims
in excess of our reserve could adversely affect our operating results. Our
failure to predict accurately future warranty claims could result in unexpected
volatility in our financial condition.
Unexpected
business interruptions could adversely affect our
business.
Our
operations are vulnerable to interruption by earthquake, fire, power failure
and
power shortages, hardware and software failure, floods, computer viruses and
other events beyond our control. In addition, we do not carry business
interruption insurance to compensate us for losses that may occur as a result
of
these kinds of events, and any such losses or damages incurred by us could
disrupt our production and other operations without reimbursement.
A
decrease in the availability of credit or an increase in interest rates could
make it difficult for customers to finance the cost of solar energy systems
and
could reduce demand for our services and products.
Some
of
our prospective customers may depend on debt financing, such as home equity
loans, to fund the initial capital expenditure required to purchase a solar
energy system. Third-party financing sources, specifically for solar energy
systems, are currently limited. Currently, many of our customers rely on some
form of third-party financing, including home equity loans, to purchase solar
energy systems. The lack of financing sources, a decrease in the availability
of
credit or an increase in interest rates could make it difficult or more costly
for our potential customers to secure the financing necessary to purchase a
solar energy system on favorable terms, or at all, thus lowering demand for
our
products and services and negatively impacting our business.
A
decrease in construction could adversely affect our
business.
Some
of
our solar-related revenues were generated from the design and installation
of
solar power products in newly constructed and renovated buildings, plants and
residences. Our ability to generate revenues from construction contracts will
depend on the number of new construction starts and renovations, which should
correlate with the cyclical nature of the construction industry and be affected
by general and local economic conditions, changes in interest rates, lending
standards and other factors. For example, the current housing slump and
tightened credit markets have resulted in reduced new home construction, which
could limit our ability to sell solar products to residential and commercial
developers.
We
derive most of our revenue from sales in a limited number of territories.
We
currently derive most of our revenue from sales in
California
and Spain
.
This
geographic concentration exposes us to growth rates, economic conditions, and
other factors that may be specific to those territories to which we would be
less subject if we were more geographically diversified. The growth of our
business will require us to expand our operations and commence operations in
other states, countries, and territories. Any geographic expansion efforts
that
we undertake may not be successful, which, in turn, would limit our growth
opportunities.
We
face risks associated with international trade and currency
exchange.
We
transact business in the U.S. dollar and the Euro. Changes in exchange rates
would affect the value of deposits of currencies we hold. We do not currently
hedge against exposure to currencies. We cannot predict with certainty future
exchange rates and their impact on our operating results. Movements between
the
U.S. dollar and the Euro could have a material impact on our profitability.
Our
success may depend in part on our ability to make successful acquisitions.
As
part
of our business strategy, we plan to expand our operations through strategic
acquisitions in our current markets and in new geographic markets. We cannot
accurately predict the timing, size and success of our acquisition efforts.
Our
acquisition strategy involves significant risks, including the
following:
|
|
●
|
our
ability to identify suitable acquisition candidates at acceptable
prices;
|
|
|
●
|
our
ability to successfully complete acquisitions of identified
candidates;
|
|
|
●
|
our
ability to compete effectively for available acquisition
opportunities;
|
|
|
●
|
increases
in asking prices by acquisition candidates to levels beyond our financial
capability or to levels that would not result in the returns required
by
our acquisition criteria;
|
|
|
●
|
diversion
of management’s attention to expansion
efforts;
|
|
|
●
|
unanticipated
costs and contingent liabilities associated with
acquisitions;
|
|
|
●
|
failure
of acquired businesses to achieve expected
results;
|
|
|
●
|
our
failure to retain key customers or personnel of acquired businesses;
and
|
|
|
●
|
difficulties
entering markets in which we have no or limited
experience.
|
These
risks, as well as other circumstances that often accompany expansion through
acquisitions, could inhibit our growth and negatively impact our operating
results. In addition, the size, timing and success of any future acquisitions
may cause substantial fluctuations in our operating results from quarter to
quarter. Consequently, our operating results for any quarter may not be
indicative of the results that may be achieved for any subsequent quarter or
for
a full fiscal year. These fluctuations could adversely affect the market price
of our common stock.
Our
failure to integrate the operations of acquired businesses successfully into
our
operations or to manage our anticipated growth effectively could materially
and
adversely affect our business and operating results.
In
order
to pursue a successful acquisition strategy, we must integrate the operations
of
acquired businesses into our operations, including centralizing certain
functions to achieve cost savings and pursuing programs and processes that
leverage our revenue and growth opportunities. The integration of the
management, operations, and facilities of acquired businesses with our own
could
involve difficulties, which could adversely affect our growth rate and operating
results. We may be unable to do any of the following:
|
|
·
|
effectively
complete the integration of the management, operations, facilities
and
accounting and information systems of acquired businesses with our
own;
|
|
|
·
|
efficiently
manage the combined operations of the acquired businesses with our
operations;
|
|
|
·
|
achieve
our operating, growth and performance goals for acquired businesses;
|
|
|
·
|
achieve
additional revenue as a result of our expanded operations; or
|
|
|
·
|
achieve
operating efficiencies or otherwise realize cost savings as a result
of
anticipated acquisition synergies.
|
Our
rate
of growth and operating performance may suffer if we fail to manage acquired
businesses profitably without substantial additional costs or operational
problems or to implement effectively combined growth and operating
strategies.
If
we fail to develop and maintain an effective system of internal controls, we
may
not be able to accurately report our financial results or prevent fraud. As
a
result, current and potential stockholders could lose confidence in our
financial reports, which could harm our business and the trading price of our
common stock.
Effective
internal controls are necessary for us to provide reliable financial reports
and
effectively prevent fraud. We are currently required to provide an assessment
of
our internal controls over financial reporting. In the future, under Section
404
of the Sarbanes-Oxley Act of 2002, we may be required to evaluate and report
on
these same controls and have our independent registered public accounting firm
annually attest to our evaluation, as well as issue their own opinion on our
internal controls over financial reporting. We plan to prepare for compliance
with Section 404 by strengthening, assessing and testing our system of internal
controls to provide the basis for our report. The process of strengthening
our
internal controls and complying with Section 404 is expensive and
time-consuming, and requires significant management attention, especially given
that we have not yet undertaken any efforts to comply with the requirements
of
Section 404. We cannot be certain that the measures we will undertake will
ensure that we will maintain adequate controls over our financial processes
and
reporting in the future. Furthermore, if we are able to rapidly grow our
business, the internal controls that we will need will become more complex,
and
significantly more resources will be required to ensure our internal controls
remain effective. Failure to implement required controls, or difficulties
encountered in their implementation, could harm our operating results or cause
us to fail to meet our reporting obligations. If our auditors identify a
material weakness in our internal controls, then the disclosure of that fact,
even if the weakness is quickly remedied, could diminish investors’ confidence
in our financial statements and harm our stock price. In addition,
non-compliance with Section 404 could subject us to a variety of administrative
sanctions, including the suspension of trading, ineligibility for listing on
a
national securities exchange, and the inability of registered broker-dealers
to
make a market in our common stock, which would further reduce our stock price.
In conjunction with their audit of our financial statements for the years ended
December 31, 2007 and 2006, our independent public accountants identified
certain deficiencies in our system of internal controls which they considered
to
be material weaknesses and significant deficiencies. We are currently evaluating
such deficiencies and are in the process of implementing corrective changes
to
our internal control processes and procedures.
Costs
incurred because we are a public company may affect our
profitability.
As
a
public company, we incur significant legal, accounting and other expenses,
and
we are subject to the SEC’s rules and regulations relating to public disclosure
that generally involve a substantial expenditure of financial
resources.
In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently
implemented by the SEC, require changes in corporate governance practices of
public companies. We expect that full compliance with these new rules and
regulations will significantly increase our legal and financial compliance
costs
and make some activities more time-consuming and costly. For example, we will
be
required to create board committees and adopt policies regarding internal
controls and disclosure controls and procedures. Such additional reporting
and
compliance costs may negatively impact our financial results. To the extent
our
earnings suffer as a result of the financial impact of our SEC reporting or
compliance costs, our ability to develop an active trading market for our
securities could be harmed.
As
a
public company, we also expect that these new rules and regulations may make
it
more difficult and expensive for us to obtain director and officer liability
insurance in the future, and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same coverage.
As
a result, it may be more difficult for us to attract and retain qualified
persons to serve on our board of directors or as executive
officers.
It
may be
time-consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act,
when applicable to us. Some members of our management team have limited or
no experience operating a company with securities traded or listed on an
exchange, or subject to SEC rules and requirements, including SEC reporting
practices and requirements that are applicable to a publicly traded company.
We
may need to recruit, hire, train and retain additional financial reporting,
internal controls and other personnel in order to develop and implement
appropriate internal controls and reporting procedures. If we are unable to
comply with the internal controls requirements of the Sarbanes-Oxley Act, when
applicable, we may not be able to obtain the independent accountant
certifications required by the Sarbanes-Oxley Act.
Risks
Relating To Our Industry
We
have experienced technological changes in our industry. New
technologies
may prove inappropriate and result in liability to us or may
not
gain
market acceptance by our customers.
The
solar
power industry, which currently accounts for less than 1% of the world’s power
generation according to the Solar Energy Industries Association, is subject
to
technological change. Our future success will depend on our ability to
appropriately respond to changing technologies and changes in function of
products and quality. If we adopt products and technologies that are not
attractive to consumers, we may not be successful in capturing or retaining
a
significant share of our market. In addition, some new technologies are
relatively untested and unperfected and may not perform as expected or as
desired, in which event our adoption of such products or technologies may cause
us to lose money.
A
drop in the retail price of conventional energy or non-solar
alternative
energy
sources may negatively impact our profitability.
We
believe that a customer’s decision to purchase or install solar power
capabilities is primarily driven by the cost and return on investment resulting
from solar power systems. Fluctuations in economic and market conditions that
impact the prices of conventional and non-solar alternative energy sources,
such
as decreases in the prices of oil, coal and other fossil fuels and changes
in
utility electric rates and net metering policies, could cause the demand for
solar power systems to decline, which would have a negative impact on our
profitability.
Existing
regulations, and changes to such regulations, may present
technical,
regulatory and economic barriers to the purchase and use of
solar
power
products, which may significantly reduce demand for our
products.
Installations
of solar power systems are subject to oversight and regulation in accordance
with national and local ordinances, building codes, zoning, environmental
protection regulation, utility interconnection requirements for metering and
other rules and regulations. We attempt to keep up-to-date about these
requirements on a national, state, and local level, and must design systems
to
comply with varying standards. Certain cities may have ordinances that prevent
or increase the cost of installation of our solar power systems. In addition,
new government regulations
or
utility policies pertaining to solar power systems are unpredictable and may
result in significant additional expenses or delays and, as a result, could
cause a significant reduction in demand for solar energy systems and our
services. For example, there currently exist metering caps in certain
jurisdictions that effectively limit the aggregate amount of power that may
be
sold by solar power generators into the power grid.
Our
business depends on the availability of rebates, tax credits and
other
financial
incentives, the reduction or elimination of which would reduce the
demand
for
our services.
Many
states, including California, Nevada and New Jersey, offer substantial
incentives to offset the cost of solar power systems. These incentives can
take
many forms, including direct rebates, state tax credits, system performance
payments and Renewable Energy Credits (“RECs”). Moreover, the federal government
currently offers a 30% tax credit for the installation of solar power systems
scheduled to expire at the end of 2008 (unlimited for businesses, capped at
$2,000 for residences) unless extended; the United States Senate has been unable
to reach a bipartisan compromise to extend these credits several times since
June 2007, and there can be no assurance that they will be extended. Businesses
may also elect to accelerate the depreciation on their system over five years.
Spain also offers substantial incentives, including feed-in tariffs. Spain’s
Industry Ministry is considering a proposal to bridge the current uncapped
solar
subsidy program from its current expiration at the end of September 2008 to
the
end of December 2008 before it implements a new capped program. Reduction in
or
elimination of such incentives or delays or interruptions in the implementation
of favorable federal or state laws could substantially increase the cost to
our
customers, resulting in significant reductions in demand for our products and
services, which would negatively impact our sales.
The
market for solar power products is emerging and rapidly evolving, and its future
success is uncertain. Many factors will influence the widespread adoption of
solar power technology and demand for solar power products, including:
|
|
●
|
cost
effectiveness of solar power technologies as compared with conventional
and non-solar alternative energy
technologies;
|
|
|
●
|
performance
and reliability of solar power products as compared with conventional
and
non-solar alternative energy
products;
|
|
|
●
|
capital
expenditures by customers that tend to decrease if the U.S. economy
slows;
and
|
|
|
●
|
availability
of government subsidies and incentives.
|
If
solar
power technology proves unsuitable for widespread commercial deployment or
if
demand for solar power products fails to develop sufficiently, we would be
unable to generate enough revenue to achieve and sustain profitability. In
addition, demand for solar power products in the markets and geographic regions
we target may not develop or may develop more slowly than we
anticipate.
Risks
Related to Doing Business in Spain
Adverse
changes in the political and economic policies of the Spanish government could
have a material adverse effect on the overall economic growth of Spain, which
could reduce the demand for our products and materially and adversely affect
our
competitive position.
A
significant portion of our business operations are conducted in Spain through
our indirect wholly owned subsidiary, Premier Power Spain, and some of our
sales
are made in Spain. Spain also offers substantial incentives, including feed-in
tariffs. Accordingly, our business, financial condition, results of operations,
and prospects are affected significantly by economic, political, and legal
developments in Spain. Any adverse change in such policies could have a material
adverse effect on the overall economic growth in Spain or the level of our
incentives, which in
turn
could lead to a reduction in demand for our products and consequently have
a
material adverse effect on our businesses.
Fluctuation
in the value of the Euro may have a material adverse effect on your
investment.
The
change in value of the Euro against the U.S. dollar depends on, among other
things, changes in Spain’s political and economic conditions. Changes in
exchange rates would affect the value of deposits of currencies we hold. We
do
not currently hedge against exposure to currencies. We cannot predict with
certainty future exchange rates and their impact on our operating results.
Movements between the U.S. dollar and the Euro could have a material impact
on
our profitability.
Our
business benefits from certain Spanish government incentives. Expiration of,
or
changes to, these incentives could have a material adverse effect on our
operating results.
The
Spanish government has provided various incentives to solar energy providers
in
order to encourage development of the solar industry. Such incentives include
feed-in tariffs and other measures. Reduction in or elimination of such
incentives or delays or interruptions in the implementation of such favorable
policies could substantially decrease the economic benefits of solar to our
customers, resulting in significant reductions in demand for our products and
services, which would negatively impact our sales. The current rate structure
of
the Spanish incentive program will expire in September 2008, and the renewed
rate structure has not yet been determined.
You
may experience difficulties in effecting service of legal process, enforcing
foreign judgments, or bringing original actions in Spain based on United States
or other foreign laws against us or our management.
We
conduct a significant amount of our business through our indirect wholly owned
subsidiary, Premier Power Spain, which is established in Spain, and a portion
of
our assets are located in Spain. As a result, it may not be possible to effect
service of process within the United States or in Spain against us or upon
our
executive officers or directors, including with respect to matters arising
under
U.S. federal securities laws or applicable state securities laws. Moreover,
there is uncertainty that the courts of Spain would enforce judgments of U.S.
courts against us or our directors and officers based on the civil liability
provisions of the securities laws of the United States or any state, or
entertain an original action brought in Spain based upon the securities laws
of
the United States or any state.
Risk
Relating to Our Securities
Generally,
we have not paid any cash dividends, and no cash dividends will be paid in
the
foreseeable future.
We
do not
anticipate paying cash dividends on our common stock in the foreseeable future,
and we may not have sufficient funds legally available to pay dividends. Even
if
funds are legally available for distribution, we may nevertheless decide not
to
or may be unable to pay any dividends. We intend to retain all earnings for
our
company’s operations. Accordingly, you may have to sell some or all of your
common stock in order to generate cash flow from your investment. You may not
receive a gain on your investment when you sell our common stock and may lose
some or all of the amount of your investment. Any determination to pay dividends
in the future on our common stock will be made at the discretion of our board
of
directors and will depend on our results of operations, financial conditions,
contractual restrictions, restrictions imposed by applicable law, capital
requirements and other factors that our board of directors deems relevant.
If
you purchase our common stock, you may incur substantial dilution.
The
issuance of additional shares of our capital stock or the exercise of stock
options or warrants could be substantially dilutive to your shares and may
negatively affect the market price of our common stock.
The
application of the “penny stock” rules could adversely affect the market price
of our common stock and increase your transaction costs to sell those
shares.
Our
common stock may be subject to the “penny stock” rules adopted under Section
15(g) of the Securities Exchange Act of 1934. The penny stock rules apply to
companies that are not traded on a national securities exchange whose common
stock trades at less than $5.00 per share or that have tangible net worth of
less than $5,000,000 ($2,000,000 if the company has been operating for three
or
more years). The “penny stock” rules impose additional sales practice
requirements on broker-dealers who sell securities to persons other than
established customers and accredited investors (generally those with assets
in
excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of securities
and
have received the purchaser’s written consent to the transaction before the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the broker-dealer must deliver, before the transaction, a disclosure
schedule prescribed by the SEC relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for
the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common stock, and may result in decreased
liquidity for our common stock and increased transaction costs for sales and
purchases of our common stock as compared to other securities.
Our
common stock is thinly traded, and you may be unable to sell at or near “ask”
prices or at all if you need to sell your shares to raise money or otherwise
desire to liquidate your shares.
Although
our common stock is quoted on the Over-the-Counter Bulletin Board (“OTC”), we
cannot predict the extent to which an active public market for our common stock
will develop or be sustained. However, we do not rule out the possibility of
applying for listing on a national exchange. Our common stock has historically
been sporadically or “thinly traded” on the OTC, meaning that the number of
persons interested in purchasing our common stock at or near bid prices at
any
give time may be relatively small or nonexistent. This situation is attributable
to a number of factors, including the fact that we are a small company that
is
relatively unknown to stock analysts, stock brokers, institutional investors
and
others in the investment community that generate or influence sales volume,
and
that even if we came to the attention of such persons, they tend to be
risk-adverse and would be reluctant to follow an unproven company such as ours
or purchase or recommend the purchase of our shares until such time as we become
more seasoned and viable. As a consequence, there may be periods of several
days
or more when trading activity in our shares is minimal or non-existent, as
compared to a seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on share price. We cannot give you any assurance that a broader or more active
public trading market for our common stock will develop or be sustained, or
that
current trading levels will be sustained.
The
market price of our common stock is particularly volatile given our status
as a
relatively small company with a small and thinly traded “float” that could lead
to wide fluctuations in our share price. The price at which you purchase our
common stock may not be indicative of the price that will prevail in the trading
market. You may be unable to sell your common stock at or above your purchase
price if at all, which may result in substantial losses to you.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. As
noted above, our common stock is sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our stockholders may disproportionately influence the
price of those shares in either direction. The price for our shares could,
for
example, decline precipitously in the event a large number of our shares are
sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its share price.
The following factors also may add to the volatility in the price of our common
stock: actual or anticipated variations in our quarterly or annual operating
results; adverse outcomes; additions to or departures of our key personnel,
as
well as other items discussed under this “Risk Factors” section, as well as
elsewhere in this report. Many of these factors are beyond our control and
may
decrease the market price of our common stock, regardless of our operating
performance. We cannot make any predictions or projections as to what the
prevailing market price for our common stock will be at any time, including
as
to whether our common stock will sustain its current market prices, or as to
what effect the sale of shares or the availability of shares for sale at any
time will have on the prevailing market price.
Stockholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse.
Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through pre-arranged matching of purchases and sales
and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups
by
selling broker-dealers; and (5) the wholesale dumping of the same securities
by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect
to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
If
we do not meet the listing standards established by The NASDAQ Stock Market
or
other similar markets, our common stock may not become listed for trading on
one
of those markets.
As
soon
as reasonably practicable, we intend to apply to list our common stock for
trading on The NASDAQ Stock Market, on either the NASDAQ Global Market tier
or
The NASDAQ Capital Market tier. The NASDAQ Stock Market has established certain
quantitative criteria and qualitative standards that companies must meet in
order to become and remain listed for trading on these markets. We cannot
guarantee that we will be able to meet or maintain all necessary requirements
for listing; therefore, we cannot guarantee that our common stock will be listed
for trading on The NASDAQ Stock Market or other similar markets.
Volatility
in our common stock price may subject us to securities
litigation.
The
market for our common stock may be characterized by significant price volatility
when compared to seasoned issuers, and we expect our share price will be more
volatile than a seasoned issuer for the indefinite future. In the past,
plaintiffs have often initiated securities class action litigation against
a
company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management’s attention and resources.
Past
activities of our company and affiliates may lead to future liability for our
company.
Prior
to
our acquisition of Premier Power California, we were engaged in a business
unrelated to our current operations. Any liabilities relating to such prior
business against which we are not completely indemnified will be borne by us
and
may have a material adverse effect on the Company.
We
have raised substantial amounts of capital in a recent financing, and if we
inadvertently failed to comply with applicable securities laws, ensuing
rescission rights or lawsuits would severely damage our financial
position.
The
securities offered in our September 9, 2008 private placement were not
registered under the Securities Act or any state “blue sky” law in reliance upon
exemptions from such registration requirements. Such exemptions are highly
technical in nature, and if we inadvertently failed to comply with the
requirements or any of such exemptive provisions, the investor would have the
right to rescind their purchase of our securities or sue for damages. If the
investor was to successfully seek such rescission or prevail in any such suit,
we would face severe financial demands that could materially and adversely
affect our financial position. Financings that may be available to us under
current market conditions frequently involve sales at prices below the prices
at
which our common stock currently is quoted on the OTC or exchange on which
our
common stock may in the future be listed, as well as the issuance of warrants
or
convertible securities at a discount to market price.
Future
sales of our securities may decrease the price for shares of our common
stock.
Actual
sales, or the prospect of sales by our stockholders, may have a negative effect
on the market price of the shares of our common stock. We may also register
certain shares of our common stock underlying our Series A Convertible Preferred
Stock, Series A Warrants, and Series B Warrants, and any other outstanding
convertible securities issued in the future. Once such shares are registered
or
may be sold pursuant to Rule 144 of the Securities Act of 1933, as amended,
they
can be freely sold in the public market. If any of our stockholders, either
individually or in the aggregate, cause a large number of securities to be
sold
in the public market, or if the market perceives that these holders intend
to
sell a large number of securities, such sales or anticipated sales could result
in a substantial drop in the trading price of shares of our common stock and
could also impede our ability to raise future capital.
Our
corporate actions are substantially controlled by our principal
stockholders.
Our
principal stockholders include Dean R. Marks, who is our Chairman of the Board,
President, and Chief Executive Officer, and Miguel de Anquin, who is our Chief
Operating Officer, Chief Financial Officer, and Corporate Secretary and a member
of our Board. Messrs. Marks and de Anquin own approximately 75.3% of our
outstanding shares of common stock. These stockholders, acting individually
or
as a group, could exert substantial influence over matters such as electing
directors, amending our certificate of incorporation or bylaws, and approving
mergers or other business combinations or transactions. In addition, because
of
the percentage of ownership and voting concentration in these principal
stockholders and their affiliated entities, elections of our board of directors
will generally be within the control of these stockholders and their affiliated
entities. While all of our stockholders are entitled to vote on matters
submitted to our stockholders for approval, the concentration of shares and
voting control presently lies with these principal stockholders and their
affiliated entities. As such, it would be difficult for stockholders to propose
and have approved proposals not supported by these principal stockholders and
their affiliated entities. There can be no assurance that matters voted upon
by
our officers and directors in their capacity as stockholders will be viewed
favorably by all stockholders of our company. The stock ownership of our
principal stockholders and their affiliated entities may discourage a potential
acquirer from seeking to acquire shares of our common stock or otherwise
attempting to obtain control of our company, which in turn could reduce our
stock price or prevent our stockholders from realizing a premium over our stock
price.
We
are responsible for the indemnification of our officers and directors, which
could result in substantial expenditures.
Our
bylaws provide for the indemnification of our directors, officers, employees,
and agents, and, under certain circumstances, against attorneys’ fees and other
expenses incurred by them in litigation to which they become a party arising
from their association with or activities on behalf of the Company. This
indemnification policy could result in substantial expenditures, which we may
be
unable to recoup.
The
market price for our stock may be volatile.
The
market price for our stock may be volatile and subject to wide fluctuations
in
response to factors including the following:
|
|
●
|
actual
or anticipated fluctuations in our quarterly operating
results;
|
|
|
●
|
operating
results that fall below
expectations;
|
|
|
●
|
changes
in financial estimates by securities research
analysts;
|
|
|
●
|
changes
in the economic performance or market valuations of other solar
integration companies;
|
|
|
●
|
announcements
by us or our competitors of new products, acquisitions, strategic
partnerships, joint ventures or capital
commitments;
|
|
|
●
|
announcements
or press releases relating to the energy sector or to our business
or
prospects;
|
|
|
●
|
technological
innovations or new products and services by us or our
competitors;
|
|
|
●
|
our
ability to execute our business
plan;
|
|
|
●
|
regulatory,
legislative or other developments affecting us or the solar power
industry
generally;
|
|
|
●
|
limited
availability of freely tradable “unrestricted” shares of our common stock
to satisfy investor purchase orders and
demand;
|
|
|
●
|
volume
and timing of customer orders;
|
|
|
●
|
economic
and other external factors;
|
|
|
●
|
addition
or departure of key personnel; and
|
|
|
●
|
intellectual
property litigation.
|
In
addition, the securities market has from time to time experienced significant
price and volume fluctuations that are not related to the operating performance
of particular companies. These fluctuations may include a so-called “bubble
market” in which investors temporarily raise the price of the stocks of
companies in certain industries, such as the renewable energy industry, to
unsustainable levels. These market fluctuations may also materially and
adversely affect the market price of our stock.
We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our
stockholders.
We
believe that our current cash and cash equivalents, anticipated cash flow from
operations and the net proceeds from our September 9, 2008 financing will be
sufficient to meet our anticipated cash needs for the near future. We may,
however, require additional cash resources due to changed business conditions
or
other future developments, including any investments or acquisitions we may
decide to pursue. If our resources are insufficient to satisfy our cash
requirements, we may seek to sell additional equity or debt securities or obtain
an increased credit facility. The sale of additional equity securities could
result in additional dilution to our stockholders. The incurrence of additional
indebtedness would result in increased debt service obligations and could result
in further operating and financing covenants that would further restrict our
operations. We cannot assure you that financing will be available in amounts
or
on terms acceptable to us, if at all.
Our
certificate of incorporation authorizes our board to create new
series
of
preferred stock without further approval by our stockholders, which
could
adversely
affect the rights of the holders of our common stock.
Our
board
of directors has the authority to fix and determine the relative rights and
preferences of preferred stock. Our board of directors also has the authority
to
issue preferred stock without further stockholder approval. As a result, our
board of directors could authorize the issuance of a series of preferred stock
that would grant to holders the preferred right to our assets upon liquidation,
the right to receive dividend payments before dividends are distributed to
the
holders of common stock and the right to the redemption of the shares, together
with a premium, prior to the redemption of our common stock. In addition, our
board of directors could authorize the issuance of a series of preferred stock
that has greater voting power than our common stock or that is convertible
into
our common stock, which could decrease the relative voting power of our common
stock or result in dilution to our existing stockholders.
SUMMARY
COMBINED FINANCIAL DATA
The
following tables summarize financial data regarding the business of the Premier
Power Group and should be read together with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the combined
financial statements and the related notes included with those financial
statements attached to this Form 8-K as Exhibit 99.1. The summary
combined financial information as of June 30, 2008, and for the years ended
December 31, 2007 and 2006, have been derived from Premier Power Group’s
financial statements. All monetary amounts are expressed in U.S.
dollars.
|
|
|
Twelve Months Ended December 31
,
|
|
Six
Months Ended June 30
,
|
|
|
|
|
2007
|
|
2006
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Income
Statement Data:
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
16,685,690
|
|
$
|
9,933,345
|
|
$
|
17,988,817
|
|
$
|
8,824,200
|
|
|
Cost
of Sales
|
|
|
12,440,839
|
|
|
7,529,362
|
|
|
15,269,775
|
|
|
6,764,456
|
|
|
Gross
Profit
|
|
|
4,244,851
|
|
|
2,403,983
|
|
|
2,719,042
|
|
|
2,059,744
|
|
|
Total
Operating Expenses
|
|
|
3,371,778
|
|
|
2,181,019
|
|
|
1,907,866
|
|
|
1,533,152
|
|
|
Operating
Income
|
|
|
873,072
|
|
|
222,964
|
|
|
811,176
|
|
|
526,592
|
|
|
Total
Other Income (Expense)
|
|
|
(5,882
|
|
|
3,171
|
|
|
(17,228
|
)
|
|
5,470
|
|
|
Income
Before Income Taxes
|
|
|
867,191
|
|
|
226,135
|
|
|
793,948
|
|
|
532,062
|
|
|
Income
Tax Provision (Benefit)
|
|
|
39,873
|
|
|
(4,304
|
)
|
|
204,336
|
|
|
5,234
|
|
|
Net
Income Before Minority Interest
|
|
|
827,318
|
|
|
230,439
|
|
|
589,612
|
|
|
526,828
|
|
|
Net
Income
|
|
$
|
843,865
|
|
$
|
214,570
|
|
$
|
274,569
|
|
$
|
545,025
|
|
|
|
|
As
of December 31,
|
|
As
of June 30,
|
|
|
|
|
2007
|
|
2006
|
|
2008
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
1,278,651
|
|
$
|
934,853
|
|
$
|
928,221
|
|
|
Working
Capital
|
|
|
584,209
|
|
|
178,546
|
|
|
1,126,538
|
|
|
Total
Assets
|
|
|
5,578,041
|
|
|
3,173,789
|
|
|
7,893,713
|
|
|
Total
Liabilities
|
|
|
4,862,889
|
|
|
2,857,404
|
|
|
6,627,798
|
|
|
Total
Stockholders’/Members’ Equity
|
|
|
713,502
|
|
|
298,188
|
|
|
946,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Share
Exchange is deemed to be a reverse acquisition, where Premier Power Renewable
Energy, Inc. (formerly Harry’s Trucking, Inc.) (the legal acquirer) is
considered the accounting acquiree and Premier Power California (the legal
acquiree) is considered the accounting acquirer. The unaudited pro forma
financial statements for the exchange transaction are attached to this report
as
Exhibit 99.2.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
The
following discussion and analysis of the results of operations and financial
condition of the Premier Power Group for the fiscal years ended December 31,
2007 and 2006 and the six months ended June 30, 2008 and 2007 should be read
in
conjunction with the Combined Financial Statements, and the notes to those
financial statements that are included elsewhere in this Form 8-K. References
to
“we,” “our,” or “us” in this section refers to the Premier Power Group. Our
discussion includes forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements
as
a result of a number of factors, including those set forth under the Risk
Factors, Forward-Looking Statements and Business sections in this Form 8-K.
We
use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and
similar expressions to identify forward-looking statements.
Overview
We
are a
developer, designer, and integrator of solar energy solutions. Our financial
statements give effect to the financial position and results of operations
of
Premier Power Renewable Energy, Inc., a California corporation (“Premier Power
California”), Bright Future Technologies LLC (“Bright Future”), and Premier
Power Sociedad Limitada (“Premier Power Spain”), all of which are deemed to have
common ownership and control. We develop, market, sell, and maintain solar
energy systems for residential, agricultural, commercial, industrial customers
in North America and Spain. We use solar components from the solar industry’s
leading suppliers and manufacturers such as General Electric (“GE”), Sharp,
Kyocera, Fronius, Watsun, and SunPower Corporation. We are a leading reseller
of
GE’s solar products, and we were the number one reseller of GE’s solar products
in the United States for the years 2006 and 2007. In addition to operations
in
the United States, we conduct operations in Spain.
On
September 9, 2008, we acquired all of the outstanding shares of Premier Power
California in exchange for the issuance by the Company of 24,218,750 restricted
shares of our common stock to the PPG Owners, which represented approximately
93.1% of the then-issued and outstanding common stock of the Company (excluding
the shares issued in the Financing). As a result of the Share Exchange, Premier
Power California became the Company’s wholly owned subsidiary, and the Company
acquired the business and operations of the Premier Power Group. See Item 1.01
of this Form 8-K for additional details regarding the Share
Exchange.
Concurrently
with the closing of the share exchange transaction, on September 9, 2008 we
raised $7,000,000 in a private placement by issuing a total of 3,500,000 units
(the “Units”), with each Unit consisting of one share of our Series A
Convertible Preferred Stock (“Series A Preferred Stock”), one-half of one Series
A Warrant (the “Series A Warrants”), and one-half of one Series B Warrant (the
“Series B Warrants”) to investors at $2.00 per Unit. See Item 1.01 of this Form
8-K for additional details regarding this financing.
Critical
Accounting Policies and Estimates
Our
management’s discussion and analysis of our financial condition and results of
operations are based on our combined financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to
make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date
of the financial statements as well as the reported net sales and expenses
during the reporting periods. On an ongoing basis, we evaluate our estimates
and
assumptions. We base our estimates on historical experience and on various
other
factors that we believe are reasonable under the circumstances, the results
of
which form the basis for making judgments about the carrying value of assets
and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or
conditions.
While
our
significant accounting policies are more fully described in Note 1 to our
combined financial statements attached hereto as Exhibit 99.1, we believe that
the following accounting policies are the most critical to aid you in fully
understanding and evaluating this discussion and analysis:
Principles
of Combination
The
combined financial statements include the financial position, cash flows and
results of operations of three entities that are each majority controlled by
a
common stockholder group. All significant inter-company accounts and
transactions have been eliminated in the combined financial statements. Listed
below are the entities included in the combined financial
statements:
|
|
·
|
Premier
Power Renewable Energy, Inc. (Premier Power
California)
|
|
|
·
|
Bright
Future Technologies, LLC (Bright
Future)
|
|
|
·
|
Premier
Power Sociedad Limitada (Premier Power
Spain)
|
Premier
Power California designs, engineers, and installs photovoltaic systems in the
United States. Bright Future distributes solar panels primarily to Premier
Power
California and Premier Power Spain. Premier Power Spain designs, engineers
and
installs photovoltaic systems in Spain.
Inventories
We
plan
inventory procurement based on contracts in force, estimated backlog, and
supplier incentive programs. Inventories are stated at the lower of cost or
market. Cost is determined on an average cost basis, including freight and
duty.
Provisions are made for obsolete or slow-moving inventory based on management
estimates. We write down inventories for estimated obsolescence based on the
difference between the cost of inventories and the net realizable value based
upon estimates about future demand from customers and specific customer
requirements on certain projects.
Property
and Equipment
Property
and equipment with a value greater than $2,000 are recorded at cost and
depreciated using straight-line method over estimated useful lives of 5 years,
or in the case of leasehold improvements, the lease term, if shorter.
Maintenance and repairs are expensed as they occur.
Revenue
Recognition
Revenue
on photovoltaic system installation contracts is recognized using the percentage
of completion method of accounting. At the end of each period, the Company
measures the cost incurred on each project and compares the result against
its
estimated total costs at completion. The percent of cost incurred determines
the
amount of revenue to be recognized. Payment terms are generally defined by
the
contract and as a result may not match the timing of the costs incurred by
the
Company and the related recognition of revenue. Such differences are recorded
as
costs and estimated earnings in excess of billings on uncompleted contracts
or
billings in excess of costs and estimated earnings on uncompleted contracts.
The
Company determines its customer’s credit worthiness at the time the order is
accepted. Sudden and unexpected changes in customer’s financial condition could
put recoverability at risk.
In
our
solar photovoltaic business, contract costs include all direct material and
labor costs and those indirect costs related to contract performance, such
as
indirect labor, supplies, tools, repairs, and depreciation costs. Selling and
general and administrative costs are charged to expense as incurred. Provisions
for estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revisions to costs
and
income and are recognized in the period in which the revisions are determined.
Profit incentives are included in revenues when their realization is reasonably
assured.
Warranties
Prior
to
January 1, 2007, the Company provided a five year warranty covering the labor
and materials associated with its installations in California. Effective January
1, 2007, the Company extended that coverage to ten years in California. The
warranty period for defects in material and workmanship is five years in New
Jersey and
New
York,
two years in Nevada, and one year in Spain. Solar panels and inverters are
warranted by the manufacturer for at least 25 years and 10 years, respectively.
The Company determines its warranty reserve based upon its historical experience
and gives consideration to changes in its operations.
Foreign
Currency
Premier
Power Spain’s functional currency is the Euro. Its assets and liabilities are
translated at year-end exchange rates, except for certain non-monetary balances
which are translated at historical rates. All income and expense amounts of
Premier Power Spain are translated at average exchange rates for the years
ended
December 31, 2007 and 2006 and the six months ended June 30, 2008 and 2007.
Translation gains and losses are not included in determining net income but
are
accumulated in a separate component of stockholders’/members’ equity. Foreign
currency transaction gains and losses are included in the determination of
net
income (loss) in the period in which they occur.
Income
Taxes
The
Company accounts for income taxes under the liability method. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax reporting bases of assets and liabilities and are
measured using enacted tax rates and laws that are expected to be in effect
when
the differences are expected to reverse. Realization of deferred tax assets
is
dependent upon the weight of available evidence, including expected future
earnings. A valuation allowance is recognized if it is more likely than not
that
some portion, or all of a deferred tax asset will not be realized.
Premier
Power California (a corporation) and Bright Future (a limited liability company)
are not subject to federal income tax, but are, however, subject to state income
taxes, which are not significant for any of the periods presented.
Premier
Power Spain is organized under the laws of Spain and is subject to federal
and
provincial income taxes. For the years ended December 31, 2007 and 2006, Premier
Power Spain recorded a tax expense of $3,465 and $0, respectively. For the
six
months ended June 30, 2008 and June 30, 2007, Premier Power Spain recorded
income tax expense of $207,424 and $0, respectively.
Recently
Issued Accounting Pronouncements
In
February 2007, the FASB issued FAS No. 159, “
The
Fair Value Option for
Financial
Assets and Financial Liabilities — Including an amendment of
FASB
Statement
No. 115
”,
(“FAS
159”) which permits entities to choose to measure many financial instruments and
certain other items at fair value at specified election dates. A business entity
is required to report unrealized gains and losses on items for which the fair
value option has been elected in earnings at each subsequent reporting date.
This statement is expected to expand the use of fair value measurement. FAS
159
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The adoption of SFAS 159
did
not have a material effect on the Company's financial position, results of
operations, or cash flows.
In
December 2007, the FASB issued FAS No. 141(R),
“Business
Combinations”
(“FAS
141(R)”) which requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. FAS 141(R) is prospectively effective to business combinations
for
which the acquisition is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The impact of FAS 141(R) on
the
Company's combined financial statements will be determined in part by the nature
and timing of any future acquisition completed.
In
December 2007, the FASB issued FAS No. 160,
“Non-Controlling
Interests in Consolidated Financial Statements (as amended)”
(“FAS
160”) which improves the relevance, comparability, and transparency of financial
information provided to investors by requiring all entities to
report
non-controlling
(minority) interests in subsidiaries in the same way as equity consolidated
financial statements. Moreover, FAS 160 eliminates the
diversity
that currently exists in accounting from transactions between an entity and
non-controlling interests by requiring they be treated as equity transactions.
FAS 160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008; earlier adoption is prohibited.
The Company is currently evaluating the impact that FAS 160 will have on its
combined financial statements.
In
March
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161,
“
Disclosures
about Derivatives Instruments and Hedging Activities, an Amendment of FASB
Statement No. 133 (“SFAS No. 161
”)”.
SFAS
No. 161 requires enhanced disclosures about a company’s derivative and hedging
activities. SFAS No. 161is effective for financial statements issued for fiscal
years beginning after December 15, 2008. The Company is currently evaluating
the
impact of the adoption of SFAS No. 161 and does not expect adoption to have
a
material impact on results of operations, cash flows or financial
position.
In
May
2008, the FASB issued FAS No. 162, “
The
Hierarchy of Generally Accepted Accounting Principles
”,
which
identifies the sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States of America (the GAAP
hierarchy). This statement shall be effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments of AU
Section 411, “
The
Meaning of Presents Fairly in Conformity with Generally Accepted Accounting
Principles.
”
The
Company is currently evaluating the impact that FAS 162 will have on its
combined financial statements.
In
April
2008, the FASB issued FSP FAS No. 142-3 “
Determination of the Useful Life of
Intangible Assets
”. The FSP amends the factors an entity should consider in
developing renewal or extension assumptions used in determining the useful
life
of recognized intangible assets under SFAS No. 142, “
Goodwill and Other
Intangible Assets
”. The FSP must be applied prospectively to intangible
assets acquired after the effective date. The Company will apply the guidance
of
the FSP to intangible assets acquired after January 1, 2009.
Results
of Operations
Comparison
of Years Ended December 31, 2007 and December 31,
2006
The
following table sets forth the results of our operations for the periods
indicated as a percentage of net sales:
|
|
|
Year
Ended
|
|
|
|
Year
Ended
|
|
|
|
|
|
|
December
31,
|
|
%
of
|
|
December
31,
|
|
%
of
|
|
|
|
|
2007
|
|
Sales
|
|
2006
|
|
Sales
|
|
|
Net
Sales
|
|
$
|
16,685,690
|
|
|
100.0
|
%
|
$
|
9,933,345
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
12,440,839
|
|
|
74.6
|
%
|
|
7,529,362
|
|
|
75.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
4,244,851
|
|
|
25.4
|
%
|
|
2,403,983
|
|
|
24.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and Marketing Expenses
|
|
|
1,493,890
|
|
|
9.0
|
%
|
|
935,228
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
Expenses
|
|
|
1,877,888
|
|
|
11.3
|
%
|
|
1,245,791
|
|
|
12.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expense
|
|
|
3,371,778
|
|
|
20.2
|
%
|
|
2,181,019
|
|
|
22.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
873,073
|
|
|
5.2
|
%
|
|
222,964
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
|
|
Year
Ended
|
|
|
|
|
|
|
December
31,
|
|
%
of
|
|
December
31,
|
|
%
of
|
|
|
|
|
2007
|
|
Sales
|
|
2006
|
|
Sales
|
|
|
Other
Income (Expense)
|
|
|
(5,882
|
)
|
|
0.0
|
%
|
|
3,171
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Before Income Tax
|
|
|
867,191
|
|
|
5.2
|
%
|
|
226,135
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
|
|
39,873
|
|
|
0.2
|
%
|
|
4,304
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income Before Minority Interest
|
|
|
827,318
|
|
|
5.0
|
%
|
|
230,439
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
843,865
|
|
|
5.1
|
%
|
$
|
214,570
|
|
|
2.2
|
%
|
Net
Sales.
Our
sales are derived from the sale and installation of solar power systems. During
the year ended December 31, 2007, we had sales of $16,685,690 as compared to
sales of $9,933,345 for the year ended December 31, 2006, an increase of
approximately 68.0%. This increase is attributable to additional sales generated
in the United States and Spain resulting from an increased demand for solar
power systems and the Company’s completion of projects and expanded sales and
marketing efforts. We believe that our sales will continue to grow because
we
are expanding internationally and selling larger scale solar
systems.
Cost
of Sales.
Cost of
sales for 2007 increased $4,911,477 or 65.2%, from $7,529,362 for the year
ended
December 31, 2006 to $12,440,839 for the year ended December 31, 2007. The
increase in our cost of sales was caused by our increase in sales.
Gross
Profit.
Gross
profit was $4,244,851 for the year ended December 31, 2007 as compared to
$2,403,983 for the year ended December 31, 2006, representing gross margins
of
approximately 25.4% and 24.2%, respectively. The increase in our gross margin
percentage was mainly due to an increase in production efficiency, resulting
from our higher level of volume.
Sales
and Marketing Expenses.
Sales
and marketing expenses totaled $1,493,890 for the year ended December
31, 2007, as compared to $935,228 for the comparable period in 2006, an increase
of approximately 59.7%. This increase is primarily attributable to increased
selling costs (including salesperson salaries and commissions) due to the
increase in sales.
Administrative
Expenses.
Administrative expenses totaled $1,877,888 for the year ended December 31,
2007,
as compared to $1,245,791 for the comparable period in 2006, an increase of
approximately 50.7%. This increase is primarily attributable to increased
administrative costs (including wages, benefits, and office overhead) due to
the
increased number of employees needed to support higher sales
levels.
Other
Income and Expenses
.
Our
other income and expenses consist of finance charges, interest income and
interest expense. We had other expenses of $5,882 for the year ended December
31, 2007 as compared to other income of $3,171 for the comparable period in
2006, an increase in other expenses of approximately 285.5%. The increase in
other expenses was attributable to higher interest expense paid for lines of
credit.
Net
Income.
Our net
income for the year ended December 31, 2007 was $843,865 as compared to $214,570
for the year ended December 31, 2006. The increase in net income was mainly
attributable to increased sales and cost efficiencies.
Comparison
of Six Month Periods Ended June 30, 2008 and June 30, 2007
The
following table sets forth the results of our operations for the periods
indicated:
|
|
|
Six
Months Ended
|
|
|
|
Six
Months Ended
|
|
|
|
|
|
|
June
30,
|
|
%
of
|
|
June
30,
|
|
%
of
|
|
|
|
|
2008
(unaudited)
|
|
Sales
|
|
2007
(unaudited)
|
|
Sales
|
|
|
Net
Sales
|
|
$
|
17,988,817
|
|
|
100.0
|
%
|
$
|
8,824,200
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
15,269,775
|
|
|
84.9
|
%
|
|
6,764,456
|
|
|
76.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
2,719,042
|
|
|
15.1
|
%
|
|
2,059,744
|
|
|
23.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and Marketing Expenses
|
|
|
995,376
|
|
|
5.5
|
%
|
|
685,052
|
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
Expenses
|
|
|
912,490
|
|
|
5.1
|
%
|
|
848,100
|
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expense
|
|
|
1,907,866
|
|
|
10.6
|
%
|
|
1,533,152
|
|
|
17.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
811,176
|
|
|
4.5
|
%
|
|
526,592
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
(17,228
|
)
|
|
(0.1
|
)%
|
|
5,470
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Before Income Tax
|
|
|
793,948
|
|
|
4.4
|
%
|
|
532,062
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense
|
|
|
204,336
|
|
|
1.1
|
%
|
|
5,234
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income Before Minority Interest
|
|
|
589,612
|
|
|
3.3
|
%
|
|
526,828
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
274,569
|
|
|
1.5
|
%
|
$
|
545,025
|
|
|
6.2
|
%
|
Net
Sales.
During
the six months ended June 30, 2008, we had sales of $17,988,817 compared to
sales of $8,824,200 for the six months ended June 30, 2007, an increase of
approximately 103.9%. This increase is attributable to additional sales
generated in the United States and Spain resulting from an increased demand
for
solar power systems and our completion of certain projects and expanded sales
and marketing efforts during the first half of 2008. We believe that our sales
will continue to grow because we are expanding internationally and selling
larger scale solar systems.
Cost
of Sales.
Cost of
sales for the six months ended June 30, 2008 increased to $15,269,775 or 125.7%,
from $6,764,456 for the six months ended June 30, 2007. The increase was due
to
our increase in sales. Furthermore, cost of sales as a percentage of sales
for
the six months ended June 30, 2008 increased to 84.9%, from 76.7% for the six
months ended June 30, 2007. This increase was primarily due to a transition
to
the sale and installation of larger scale commercial solar system, which sell
for a lower price per watt than smaller systems, combined with an increase
in
module prices, increase in the balance of system components, and an increase
in
the cost of labor.
Gross
Profit.
Gross
profit was $2,719,042 for the six months ended June 30, 2008 as compared to
$2,059,744 for the six months ended June 30, 2007, representing gross margins
of
approximately 15.1% and 23.3%, respectively. The increase in our gross profits
was primarily attributable to our increase in sales. Furthermore, gross profit
as a percentage of sales for the six months ended June 30, 2008 decreased to
15.1%, from 23.3% for the six months ended June 30, 2007. This decrease was
primarily due to a transition to the sale and installation of larger scale
commercial solar system, which sell for a lower price per watt than smaller
systems, combined with an increase in module prices, increase in the balance
of
system components, and an increase in the cost of labor.
Sales
and Marketing Expenses.
Sales
and marketing expenses totaled $995,376 for the six months ended June 30,
2008, as compared to $685,052 for the six months ended June 30, 2007, an
increase of approximately 45.3%. This increase is primarily attributable to
increased selling costs (including salesperson salaries and commissions) due
to
the increase in sales.
Administrative
Expenses.
Administrative expenses totaled $912,490 for the six months ended June 30,
2008,
as compared to $848,100 for the six months ended June 30, 2007, an
increase
of
approximately
7.6%.
This
increase is primarily attributable to increased administrative costs (including
wages, benefits, and office overhead) due to the increased number of employees
needed to support higher sales levels.
Other
Income (Expense)
.
Our
other income and expenses consist of finance charges, interest income and
interest expense. We had net other expense of $17,228 for the six months ended
June 30, 2008 as compared to net other income of $5,470 for the six months
ended
June 30, 2007, an increase in other expenses of approximately 414.9%. The
increase in other expenses was primarily attributable to higher finance charges
paid for lines of credit.
Net
Income.
Our net
income for the six months ended June 30, 2008 was $274,569 as compared to net
income of $545,025 for the six months ended June 30, 2007. Furthermore, net
income as a percentage of sales for the six months ended June 30, 2008 decreased
to 1.5%, from 6.2% for the six months ended June 30, 2007. This decrease was
mainly attributable to increased cost of sales as a percentage of sales,
primarily due to a transition to the sale and installation of larger scale
commercial solar system, which sell for a lower price per watt than smaller
systems, combined with an increase in certain costs.
Liquidity
and Capital Resources
Cash
Flows
Twelve
Months ended December 31, 2007 and 2006
Net
cash
flow provided by
operating
activities was $844,698 in fiscal year 2007, while net cash flow provided by
operating activities was $373,804 in fiscal year 2006. The increase in net
cash flow provided by operating activities from 2006 to 2007 was mainly due
to
the increase in net income and accounts payable.
Net
cash
flow used in investing activities was $433,026 for fiscal year 2007 and $142,285
in fiscal year 2006. Uses of cash flow for investing activities primarily
consist of equipment purchases and dividend payments. The increase in net cash
flow used in investing activities during fiscal year 2007 was primarily
attributable to increased distribution payments.
Net
cash
flow used in financing activities was $71,509 in fiscal year 2007 as compared
to
$46,343 in fiscal year 2006. The increase in net cash flow used in financing
activities was mainly due to payments for advances to stockholders.
Six
Months ended June 30, 2008
Net
cash
flow used in operating activities was $785,450 for the six months ended June
30,
2008, while net cash flow used in operating activities was $246,240 for the
six
months ended June 30, 2007. The increase in net cash flow used in operating
activities for the six months ended June 30, 2008 was mainly due to an increase
in accounts receivable, prepaid expenses and cost and estimated earnings in
excess of billings on uncompleted contracts.
Net
cash
flow used in investing activities was $87,412 for the six months ended June
30,
2008 and $391,198 for the six months ended June 30, 2007. Uses of cash flow
for
investing activities primarily consist of equipment purchases and distribution
payments. The decrease in net cash flow used in operating activities for the
six
months ended June 30, 2008 was mainly due to decreased distribution
payments.
Net
cash
flow provided by financing activities was $499,282 for the six months ended
June
30, 2008, compared to $14,892 for the six months ended June 30, 2007. The
increase in financing cash flow was primarily attributable to the receipt of
proceeds from the issuance of debt.
Material
Impact of Known Events on Liquidity
There
are
no known events that are expected to have a material impact on our short-term
or
long-term liquidity.
Capital
Resources
We
have
financed our operations primarily through cash flows from operations and
borrowings. On September 10, 2008, we also received net proceeds of $7,000,000
from a private placement financing transaction. See “$7,000,000 Financing”
above. Thus, we believe that our current cash and cash equivalents, anticipated
cash flow from operations, and net proceeds from the private placement financing
will be sufficient to meet our anticipated cash needs, including our cash needs
for working capital and capital expenditures for at least the next 12 months.
The proceeds from the private placement financing will be used for general
working capital purposes (including funding the purchase of additional inventory
and advertising and marketing expenses) and for acquisitions we may decide
to
pursue.
However,
we may require additional cash due to changes in business conditions or other
future developments, including any investments or acquisitions we may decide
to
pursue. To the extent it becomes necessary to raise additional cash in the
future, we may seek to raise it through the sale of debt or equity securities,
funding from joint-venture or strategic partners, debt financing or loans,
issuance of common stock or a combination of the foregoing. Other than our
lines
of credit with banks, we currently do not have any binding commitments for,
or
readily available sources of, additional financing. We cannot provide any
assurances that we will be able to secure the additional cash or working capital
we may require to continue our operations.
Contractual
Obligations and Off-Balance Sheet Arrangements
Line
of Credit
In
February 2007, Premier Power California entered into an agreement with Guaranty
Bank for a $2,000,000 line of credit, maturing in February 2008. The line of
credit was secured by the assets of Premier Power California and a personal
guaranty by Dean Marks; Sarilee Marks, the wife of Dean Marks; Simply Solar,
Inc.; and Bright Future Technologies, LLC. Simply Solar, Inc. is a corporation
whose management and sole shareholders are Dean Marks, Sarilee Marks, and Miguel
de Anquin. Actual amounts available under the line of credit each month are
dependent on the balance of accounts receivable and inventory each month. The
line of credit bears interest at the prime rate plus 1%. At June 30, 2008,
the
interest rate was 6%. At June 3, 2007, $200,000 was outstanding, and at December
31, 2007, there was no outstanding balance. The line of credit was renewed
in
February 2008 with a borrowing limit of $3,000,000, maturing in February 2009.
As of September 2, 2008, $1,250,000 was outstanding.
The
line
of credit includes certain financial covenants. At June 30, 2008, Premier Power
California was in violation of a minimum net worth covenant. The Bank waived
the
covenant violation, and Premier Power California does not anticipate that it
will be in violation of this covenant in the future.
Contractual
Obligations
We
have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash
flows.
The
following table summarizes our contractual obligations as of June 30, 2008,
and
the effect these obligations are expected to have on our liquidity and cash
flows in future periods.
|
|
|
Payments
Due by Period
|
|
|
|
|
Total
|
|
Less
than 1 year
|
|
1-3
Years
|
|
3-5
Years
|
|
5
Years +
|
|
|
Contractual
Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
Indebtedness
|
|
$
|
500,000
|
|
$
|
500,000
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
Other
Indebtedness
|
|
|
280,194
|
|
|
67,203
|
|
|
117,864
|
|
|
82,510
|
|
|
12,617
|
|
|
Operating
Leases
|
|
|
45,816
|
|
|
10,592
|
|
|
24,864
|
|
|
10,360
|
|
|
0
|
|
|
Totals:
|
|
$
|
826,010
|
|
$
|
577,795
|
|
$
|
142,728
|
|
$
|
92,870
|
|
$
|
12,617
|
|
Off-Balance
Sheet Arrangements
We
have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered
into
any derivative contracts that are indexed to our shares and classified as
stockholders’ equity or that are not reflected in our financial statements.
Furthermore, we do not have any retained or contingent interest in assets
transferred to an unconsolidated entity that serves as credit, liquidity or
market risk support to such entity. We do not have any variable interest in
any
unconsolidated entity that provides financing, liquidity, market risk or credit
support to us or engages in leasing, hedging or research and development
services with us.
Quantitative
and Qualitative Disclosures about Market Risk
We
do not
use derivative financial instruments and had no foreign exchange contracts
as of
September 9, 2008. Our financial instruments consist of cash and cash
equivalents, trade accounts receivable, accounts payable, and certain debt
obligations. We consider investments in highly liquid instruments purchased
with
a remaining maturity of 90 days or less at the date of purchase to be cash
equivalents.
Interest
Rates
.
Our
exposure to market risk for changes in interest rates relates primarily to
our
short-term investments and short-term debt obligations; thus, fluctuations
in
interest rates would not have a material impact on the fair value of these
securities. At June 30, 2008, we had approximately $928,221 in cash and cash
equivalents. A hypothetical 5% increase or decrease in interest rates would
not
have a material impact on our earnings or loss, or the fair market value or
cash
flows of these instruments. At June 30, 2008, we had approximately $500,000
in
variable rate notes payable. A hypothetical 5% increase or decrease in interest
rates would not have a material impact on our earnings or loss, or the fair
market value or cash flows of these instruments.
Foreign
Exchange Rates
.
A
substantial portion of our sales during the first six months of 2008 is
denominated in Euros, and we anticipate this to continue to be the case. As
a
result, changes in the relative values of the U.S. dollar and the Euros affect
our reported levels of revenues and profitability as the results are translated
into U.S. dollars for reporting purposes. In particular, fluctuations in
currency exchange rates could have a significant impact on our financial
stability due to a mismatch among various foreign currency-denominated sales
and
costs. Fluctuations in the exchange rate between the U.S. dollar and the
Euro affect our gross and net profit margins and could result in foreign
exchange and operating losses.
Our
exposure to foreign exchange risk primarily relates to currency gains or losses
resulting from timing differences between signing of sales contracts and
settling of these contracts. Transaction gains or losses for the years
ended December 31, 2007 and 2006 and for the six month periods ended June
30, 2008 and 2007 were not significant.
We
translate the monetary assets and liabilities and the results of operations
of
Premier Spain, whose functional currency is the Euro, into the U.S. dollar,
which is our reporting currency. Our results of operations and
cash
flow
are translated at average exchange rates during the period, and assets and
liabilities are translated at the unified exchange rate as quoted by OANDA.com
at the end of the period; except for certain non-monetary balances, which are
translated at historical rates. Translation adjustments resulting from this
process are included in accumulated other comprehensive income in our statement
of stockholders’ equity. We have not used any forward contracts, currency
options or borrowings to hedge our exposure to foreign currency exchange risk.
We cannot predict the impact of future exchange rate fluctuations on our results
of operations and may incur net foreign currency losses in the future. As our
sales denominated in Euros continue to grow or as we begin to conduct sales
denominated in other foreign currencies, we will consider using arrangements
to
hedge our exposure to foreign currency exchange risk.
Our
financial statements are expressed in U.S. dollars but the functional
currency of Premier Power Spain is the Euro. The value of your investment in
our
stock will be affected by the foreign exchange rate between U.S. dollars
and the Euro. To the extent we hold assets denominated in U.S. dollars, any
appreciation of the Euro against the U.S. dollar could result in a change
to our statement of operations and a reduction in the value of our
U.S. dollar denominated assets. On the other hand, a decline in the value
of Euro against the U.S. dollar could reduce the U.S. dollar
equivalent amounts of our financial results, the value of your investment in
our
company, and any dividends we may pay in the future, all of which may have
a
material adverse effect on the price of our stock.
PROPERTIES
Offices
and Facilities
Our
principal executive offices are located at 4961 Windplay Drive, Suite 100,
El
Dorado Hills, California. The table below provides a general description of
our
offices and facilities, including those for our international
operations:
|
Location
|
|
Principal
Activities
|
|
Area
(sq. ft.)
|
|
Lease
Expiration Date
|
|
|
4961
Windplay Drive, Suite 100
El
Dorado Hills, California 95762
|
|
Company
headquarters and warehouse
|
|
6700
|
|
Month-to-month
|
|
|
|
|
|
|
|
|
|
|
|
3
Newlands Circle
Reno,
Nevada 80509
|
|
Bright
Future office
|
|
100
|
|
Month-to-month
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic
Office Suites, LLC
1913
Atlantic Avenue
Manasquan,
NJ 08736
|
|
East
Coast operations
|
|
72
|
|
Month-to-month
|
|
|
|
|
|
|
|
|
|
|
|
Pol
Ind, Calle E, n3
Oficina
0F
31192
Mutilva Baja (Navarra)
Spain
|
|
Spain
operations
|
|
500
|
|
May
2012
|
|
|
|
|
|
|
|
|
|
|
|
1020
Nevada St.,#201
Redlands,
CA 92374
|
|
Southern
California operations
|
|
2,303
|
|
September
30, 2010
|
|
Premier
Power Spain is party to a non-cancelable operating lease, which expires in
May
2012, for its administrative and operating facility, which lease provides for
annual rent increases tied to the Consumer Price Index. Premier Power California
is also a party to a lease for property in Redlands, California for its Southern
California operations. The minimum future commitments under lease agreements
payable as of June 30, 2008 are as follows:
|
|
|
Amount
|
|
|
2008
|
|
$
|
18,298
|
|
|
2009
|
|
$
|
48,112
|
|
|
2010
|
|
$
|
39,476
|
|
|
2011
|
|
$
|
13,567
|
|
|
Thereafter
|
|
$
|
4,522
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of
our
common stock as of September 9, 2008, for each of the following persons, after
giving effect to the Exchange Agreement and the Financing:
|
|
•
|
Each
of our directors and each of the named executive officers in the
“Management—Executive Compensation” section of this report;
|
|
|
•
|
all
directors and named executive officers as a group; and
|
|
|
•
|
each
person who is known by us to own beneficially 5% or more of our common
stock after the change of control transaction.
|
Beneficial
ownership is determined in accordance with the rules of the SEC. Unless
otherwise indicated in the table, the persons and entities named in the table
have sole voting and sole investment power with respect to the shares set forth
opposite the stockholder’s name. Unless otherwise indicated, the address of each
beneficial owner listed below is 4961 Windplay Drive, Suite 100, El Dorado
Hills, CA 95762. The percentage of class beneficially owned set forth below
is
based on
26,018,750
shares
of common stock outstanding on September 9, 2008.
|
Name
and Position
|
|
|
Number
of Shares of Common Stock Beneficially Owned
(1)
|
|
|
Percent
of Shares of Common Stock Beneficially Owned
(2)
|
|
|
Dean
R. Marks,
Chairman
of the Board, President, and Chief Executive Officer
|
|
|
12,488,056
|
|
|
48.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Miguel
de Anquin,
Chief
Operating Officer, Chief Financial Officer, Corporate Secretary,
and
Director
|
|
|
7,090,797
|
|
|
27.3
|
%
|
|
|
|
|
|
|
|
|
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Genesis
Capital Advisors, LLC (3)
|
|
|
1,580,598
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Vision
Opportunity Master Fund, Ltd. (4)
|
|
|
7,578,000
|
|
|
23.0
|
%
|
|
|
|
|
|
|
|
|
|
|
All
Executive Officers and Directors as a Group (2 persons)
|
|
|
19,578,853
|
|
|
75.3
|
%
|
|
|
|
|
|
|
|
|
|
*
Less
than 1%
|
(1)
|
Under
Rule 13d-3, a beneficial owner of a security includes any person
who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which
includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition
of
shares. Certain shares may be deemed to be beneficially owned by
more than
one person (if, for example, persons share the power to vote or the
power
to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire
the
shares (for example, upon exercise of an option) within 60 days of
the
date as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed
to
include the amount of shares beneficially owned by such person (and
only
such person) by reason of these acquisition rights. As a result,
the
percentage of outstanding shares of any person as shown in this table
does
not necessarily reflect the person's actual ownership or voting power
with
respect to the number of shares of common stock actually outstanding.
|
|
(2)
|
Pursuant
to the terms of the Share Exchange Agreement dated September 9, 2008,
our
Company issued 24,218,750 shares of common stock, equal to approximately
93.1% of the issued and outstanding common stock of the Company as
of the
closing date of the share exchange transaction. After the Company’s
issuance of shares in connection with the closing of the Share Exchange,
there are approximately 26,018,750 issued and outstanding shares
of the
Company’s common stock. Percentage totals may vary slightly due to
rounding. Also, in connection with the closing of the Financing,
the
Company issued a total of 3,500,000 units (the “Units”) to one accredited
investor, each Unit consisting of one share of our Series A Preferred
Stock, one-half of one Series A Warrant, and one-half of one Series
B
Warrant. Each one share of Series A Preferred Stock will be convertible
into one share of our Common Stock, and each Series A Warrant and
Series B
Warrant entitles the holder to purchase one share of Common Stock
at an
exercise price of $2.50 and $3.00 per share, respectively, of Common
Stock.
|
|
(3)
|
The
address for this stockholder is 15760 Ventura Blvd., Suite 1550,
Encino,
CA 91436.
|
|
(4)
|
The
address for this stockholder is c/o Citi Hedge Fund Services (Cayman)
Limited, Cayman Corporate Centre, 27 Hospital Road, 5
th
Floor,
Grand Cayman KY1-1109, Cayman Islands
.
Includes 578,000 shares of Common Stock, 3,500,000 shares of Series
A
Preferred Stock, 1,750,000 Series A Warrants, and 1,750,000 Series
B
Warrants.
|
DIRECTORS
AND EXECUTIVE OFFICERS
Appointment
of New Directors and Officers
In
connection with the exchange transaction, Dean R. Marks and Miguel de Anquin
were appointed as members of our board of directors, and Haris Tajyar, Omar
Tajyar, and Miki Antunovich resigned as members of our board of directors.
Furthermore,
concurrent with the closing of the exchange transaction, Haris Tajyar resigned
as our President and Chief Executive Officer, Omar Tajyar resigned as our Chief
Operating Officer, and Miki Antunovich resigned as our Chief Financial Officer.
Immediately following the resignations of Messrs. Tajyar, Tajyar, and
Antunovich, we appointed 2 new executive officers.
Descriptions
of our newly appointed directors and officers can be found below.
Current
Management
The
following table sets forth the names and ages of our directors, executive
officers, and key employees as of the date of this Form 8-K:
|
Name
|
|
Age
|
|
Position
|
|
Dean
R. Marks
|
|
52
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
Miguel
de Anquin
|
|
41
|
|
Chief
Operating Officer, Chief Financial Officer, Corporate Secretary,
and
Director
|
Dean
R. Marks - Chairman of the Board, President, and Chief Executive Officer
Dean
R. Marks has been a key player in the solar sector since the early 1980's.
In 1984, Mr. Marks established a solar sales organization with over 2,000
employees in over 26 markets across the nation. Since that time, Mr. Marks
has
pioneered multiple applications of solar energy in the residential, commercial,
and industrial market. As President and CEO of Premier Power
California since 2001
,
he
built Premier Power
California
into one
of the most stable market leaders in the industry. Mr. Marks has overseen
Premier Power
California
’s
expansion from residential to commercial, agricultural, and industrial markets
as well as international expansion. Under Mr. Marks leadership, Premier Power
California
has
distinguished itself from the competition by developing a number of innovative
and propriety installation systems in use today. Mr. Marks has served on the
California Solar Energy Industry Association (CALSEIA) board and has been an
active participant in the solar industry for over 20 years. He has co
authored
several preeminent papers promoting renewable energy. Mr. Marks holds a Bachelor
of Science degree from Auburn University, with special emphasis in Environmental
Science.
Miguel
de Anquin - Director, Chief Operating Officer, Chief Financial Officer, and
Corporate Secretary
Miguel de
Anquin serves as Executive Vice President and President of World Wide Sales
at
Premier Power
California
since
2001. In his role at Premier Power
California
,
Mr. de
Anquin achieved company success in growing sales and profits. An accomplished
corporate strategist, his strategic approach to building a business is reflected
in his work as Director of Marketing for Nordic Information System and Next
Information System. He was a Technology Advisor for General Electric and IBM
and
developed the data security auditing system for Bank of America. At Premier
Power
California
,
Mr. de
Anquin’s understanding of international opportunities, his vision and expertise
in business performance have driven notable enterprise wide growth. Mr. de
Anquin led Premier Power
California
’s
expansion into international markets, and he has increased Premier
Power
California
's
profitability through brand revitalization that included major shifts in brand
strategy, operations, marketing communications, and sales tactics. He has
focused Premier Power
California
on
data
driven decision making processes that have separated Premier Power
California
from
its
competitors. He holds a Masters in Business Administration from the University
of California at Davis and a Bachelor of Science degree in Computer Science
from
the Universidad de Belgrano in Buenos Aires, Argentina.
Family
Relationships
There
are
no family relationships among our directors and executive officers.
Involvement
in Certain Legal Proceedings
None
of
our directors or executive officers has, during the past five
years:
|
|
·
|
had
any bankruptcy petition filed by or against any business of which
such
person was a general partner or executive officer either at the time
of
the bankruptcy or within two years prior to that
time;
|
|
|
·
|
been
convicted in a criminal proceeding or subject to a pending criminal
proceeding;
|
|
|
·
|
been
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting
his
involvement in any type of business, securities, futures, commodities
or
banking activities; or
|
|
|
·
|
been
found by a court of competent jurisdiction (in a civil action), the
SEC or
the Commodity Futures Trading Commission to have violated a federal
or
state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
|
Board
of Directors
Our
board
of directors is currently composed of two members. All members of our board
of
directors serve in this capacity until their terms expire or until their
successors are duly elected and qualified. Our bylaws provide that the
authorized number of directors will be not less than one.
Board
Committees; Director Independence
As
of the
date of this Form 8-K, our board of directors has not established an audit
committee, compensation committee, or nominating committee. The functions
ordinarily handled by these committees are currently handled by our entire
board
of directors. Our board of directors intends to review our governance structure
and institute board committees as necessary and advisable in the future to
facilitate the management of our business.
None
of
the members of our board of directors is independent in accordance with the
definitions and criteria applicable under NASDAQ rules.
Compensation
Committee Interlocks and Insider Participation
No
interlocking relationship exists between our board of directors and the board
of
directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.
EXECUTIVE
COMPENSATION
Director
Compensation
Currently,
we do not pay any compensation to members of our board of directors for their
service on the board. We do, however, intend to review and consider future
proposals regarding board compensation, and we intend to begin paying $2,500
per
board meeting to independent directors beginning with our first meeting
following the date of this Form 8-K.
Executive
Compensation
The
following summary compensation table reflects all compensation for fiscal years
2007, 2006, and 2005 received by our predecessor’s principal executive officer,
principal financial officer, and three most highly compensated executive
officers whose salary exceeded $100,000.
Summary
Compensation Table - Predecessor
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
(
$)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Comp-ensation
($)
|
|
Non-qualified
Deferred
Comp-ensation
Earnings
($)
|
|
All
Other
Comp-ensation
(
$)
|
|
Total
($)
|
|
|
Haris
Tajyar,
|
|
2007
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
—
|
|
|
President,
Chief Executive Officer, and Director
|
|
2006
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miki
Antunovich,
|
|
2007
|
|
|
36,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36,000
|
|
|
Chief
Financial Officer and Director
|
|
2006
|
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
2005
|
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
The
following summary compensation table reflects all compensation for fiscal years
2007, 2006, and 2005 received by Premier Power California’s principal executive
officer, principal financial officer, and three most highly compensated
executive officers whose salary exceeded $100,000.
Summary
Compensation Table - Premier Power
California
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
(
$)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Comp-ensation
($)
|
|
Non-qualified
Deferred
Comp-ensation
Earnings
($)
|
|
All
Other
Comp-ensation
(
$)
|
|
Total
($)
|
|
|
Dean
R. Marks,
|
|
2007
|
|
$
|
159,466
|
|
|
1,344
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,322
|
(1)
|
$
|
170,199
|
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
2006
|
|
|
122,308
|
|
|
6,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,009
|
(2)
|
|
134,317
|
|
|
|
|
2005
|
|
|
120,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,000
|
(3)
|
|
148,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miguel
de Anquin,
|
|
2007
|
|
|
126,624
|
|
|
1,344
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,037
|
(4)
|
|
136,005
|
|
|
Board,
Chief Operating Officer, Chief Financial Officer, and Corporate
Secretary
|
|
2006
|
|
|
120,000
|
|
|
6,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,902
|
(5)
|
|
131,902
|
|
|
|
|
2005
|
|
|
120,000
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,987
|
(6)
|
|
124,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
amounts shown in this column represent compensation earned under
the
401(k) Plan.
|
|
(2)
|
The
amounts shown in this column represent the following: (a) $50 as
the
dollar amount recognized for life insurance premiums paid for the
named
executive officer, and (b) $5,959 as compensation earned under the
401(k)
Plan.
|
|
(3)
|
The
amounts shown in this column represent compensation earned under
the
401(k) Plan.
|
|
(4)
|
The
amounts shown in this column represent the following: (a) $67 as
the
dollar amount recognized for life insurance premiums paid for the
named
executive officer, and (b) $7,970 as compensation earned under the
401(k)
Plan.
|
|
(5)
|
The
amounts shown in this column represent the following: (a) $50 as
the
dollar amount recognized for life insurance premiums paid for the
named
executive officer, and (b) $5,852 as compensation earned under the
401(k)
Plan.
|
|
(6)
|
The
amounts shown in this column represent compensation earned under
the
401(k) Plan.
|
Outstanding
Equity Awards
There
are
no unexercised options, stock that has not vested, or equity incentive plan
awards for any of our named executive officers outstanding as of the end of
our
last completed fiscal year.
Retirement
Plans
Except
as
described below, we currently have no plans that provide for the payment of
retirement benefits, or benefits that will be paid primarily following
retirement, including but not limited to tax-qualified defined benefit plans,
supplemental executive retirement plans, tax-qualified defined contribution
plans and nonqualified defined contribution plans.
Premier
Power California maintains a 401(k) plan that is tax-qualified for its
employees, including its executive officers. Premier Power California does
not
offer employer matching with the 401(k) plan. The 401(k) plan does, however,
offer a discretionary employer contribution at year end.
Potential
Payments upon Termination or Change-in-Control
Except
as
described below under “Employment Agreements,” we currently have no contract,
agreement, plan or arrangement, whether written or unwritten, that provides
for
payments to a named executive officer at, following, or in connection with
any
termination, including without limitation resignation, severance, retirement
or
a constructive termination of a named executive officer, or a change in control
of the registrant or a change in the named executive officer’s responsibilities,
with respect to each named executive officer.
Employment
Agreements
The
following are summaries of Premier Power California’s employment agreements with
the Company’s incoming executive officers and other employees.
We
currently have no employment agreements with any of our executive
officers,
but we
plan to assume the agreements described below with Mr. Marks and Mr. de Anquin
following the closing of the September 2008 Share Exchange and
Financing.
Premier
Power California entered into an Employment Agreement with Dean R. Marks on
August 22, 2008 for his services as its President and Chief Executive Officer.
Mr. Marks’ total annual salary is $180,000, and he is to receive additional
compensation in the form of, and based on, the following: (i) 0.5% of Premier
Power California’s annual earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) in excess of $200,000 if Premier Power California’s
annual EBITDA margin is less than 5%, and (ii) 1.5% of Premier Power
California’s annual EBITDA in excess of $200,000 if Premier Power California’s
annual EBITDA margin is greater than 5%. The term of the agreement is for five
years. On August 22, 2008, Mr. Marks also entered into a Non-Disclosure and
Non-Competition Agreement with Premier Power California in connection with
his
employment.
Premier
Power California entered into an Employment Agreement with Miguel de Anquin
on
August 22, 2008 for his services as its Executive Vice President of Worldwide
Operations. Mr. de Anquin’s total annual salary is $180,000, and he is to
receive additional compensation in the form of, and based on, the following:
(i)
0.5% of Premier Power California’s annual EBITDA in excess of $200,000 if
Premier Power California’s annual EBITDA margin is less than 5%, and (ii) 1.5%
of Premier Power California’s annual EBITDA in excess of $200,000 if Premier
Power California’s annual EBITDA margin is greater than 5%. The term of the
agreement is for five years. On August 22, 2008, Mr. de Anquin also entered
into
a Non-Disclosure and Non-Competition Agreement with Premier Power California
in
connection with his employment.
Premier
Power California entered into an Employment Agreement with Bjorn Persson on
August 22, 2008 for his services as its Executive Vice President of European
Operations. Mr. Persson’s total annual salary is 120,000€ (approximately
$174,268), and he is to receive additional compensation in the form of, and
based on, the following: (i) 0.5% of Premier Power California’s European
operation’s annual EBITDA in excess of 200,000€ (approximately $290,408) if
Premier Power California’s European operation’s annual EBITDA margin is less
than 5%, and (ii) 1.5% of Premier Power California’s European operation’s annual
EBITDA in excess of 200,000€ (approximately $290,408) if Premier Power
California’s European operation’s annual EBITDA margin is greater than 5%. The
term of the agreement is for five years. On August 22, 2008, Mr. Persson also
entered into a Non-Disclosure and Non-Competition Agreement with Premier Power
California in connection with his employment.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS,
AND
DIRECTOR INDEPENDENCE
Share
Exchange Agreement
On
September 9, 2008, in a share exchange transaction, we acquired a solar energy
business based in California that specializes in solar integration, by executing
the Exchange Agreement by and among the Company, Premier Power California,
and
the PPG Owners.
Under
the
Exchange Agreement, on the Closing Date, we acquired all of the outstanding
shares of Premier Power California through the issuance of 24,218,750 restricted
shares of our common stock to the PPG Owners. Immediately prior to the exchange
transaction, we had 1,800,000 shares of common stock outstanding, after taking
account
of our cancellation of 25,448,000 shares of our common stock held by Vision
Opportunity Master Fund, which cancellation occurred concurrently with the
exchange transaction. Immediately after the issuance of the shares to the PPG
Owners, we had
26,018,750
shares
of
common stock issued and outstanding. As a result of this exchange transaction,
the PPG Owners became our controlling stockholders, and Premier Power California
became our wholly owned subsidiary. In connection with Premier Power California
becoming our wholly owned subsidiary, we acquired the business and operations
of
the Premier Power Group, which became our principal business.
Related
Party Transactions of Premier Power Group
Set
forth
below are the related party transactions since January 1, 2007 between Premier
Power California’s stockholders, officers and/or directors, and Premier Power
California.
On
July
11, 2008, Dean Marks transferred 18% of his 85% holdings of shares of common
stock in Premier Power California to Miguel de Anquin. Following this transfer,
Dean Marks and Miguel de Anquin held 67% and 33%, respectively, of the shares
of
common stock in Premier Power California.
On
August
27, 2008, Bjorn Persson and Juan Ostiz each exchanged 100% of their interests
in
Premier Power Spain for shares of common stock in Premier Power California.
On
September 1, 2008, Dean Marks and Miguel de Anquin each exchanged 100% of their
interests in Premier Power Spain and Bright Future for shares of common stock
in
Premier Power California. Following these transfers, Dean Marks, Miguel de
Anquin, Bjorn Persson, and Juan Ostiz held approximately 54.1%, 30.7%, 12.6%,
and 2.5%, respectively of the shares of common stock in Premier Power
California, and Premier Power Spain and Bright Future became wholly owned
subsidiaries of Premier Power California.
Related
Party Transactions of Premier Power
Set
forth
below are the Company’s related party transactions since January 1,
2007:
Concurrently
with the closing of the exchange transaction under the Exchange Agreement and
pursuant to a purchase and sale agreement, we sold all of the outstanding
membership interests of our wholly owned subsidiary, Harry’s Trucking, LLC, a
California limited liability company, to Haris Tajyar and Omar Tajyar in full
satisfaction of related party cash advances and their indemnity with respect
to
the Company's prior business operations.
Director
Independence
For
a
description of director independence, see “Board Committees; Director
Independence” under the section entitled “Directors and Executive Officers”
above.
LEGAL
PROCEEDINGS
Other
than the proceeding described below, we are not currently involved in any
material legal proceedings, nor have we been involved in any such proceedings
that have had or may have a significant effect on us. We are not aware of any
other material legal proceedings pending or threatened against us.
John
Wilson v. Premier Power Renewable Energy, Inc., El Dorado County Superior Court,
Case No. PC20060079.
On
February 22, 2006, Plaintiff John Wilson filed a complaint in El Dorado County
Superior Court seeking commission payments for solar power projects that Premier
Power California never performed or did perform but for which Plaintiff was
previously paid. Plaintiff sought damages measuring in excess of $100,000.
The
case went to trial in November 2007 and resulted in a mistrial. The case was
reset for trial in March 2008 and continued to May 12, 2008. On May 12, 2008,
the court vacated the trial date. The parties were ordered to appear for a
case
management conference on May 28, 2008. Trial began on August 25, 2008 and
concluded on August 26, 2008, and a verdict is expected in September 2008.
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY
AND
RELATED STOCKHOLDER MATTERS
Market
Information
On
January 3, 2008, our shares of common stock commenced trading on the
Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol “HARY.” On
September 8, 2008, in connection with our name change that went effective
September 5, 2008, our symbol changed to “PPRW.” As of September 9, 2008, our
common stock has yet to trade on the OTCBB.
Holders
As
of
September 9, 2008, we had approximately 49 stockholders of record of our common
stock based upon the stockholder list provided by our transfer agent. Our
transfer agent is Computershare located at 350 Indiana Street, Suite 800,
Golden, Colorado, and their telephone number is (303) 262-0600.
Dividends
We
have
never paid cash dividends on our common stock. We intend to keep future
earnings, if any, to finance the expansion of our business, and we do not
anticipate that any cash dividends will be paid in the foreseeable future.
Our
future payment of dividends will depend on our earnings, capital requirements,
expansion plans, financial condition and other relevant factors that our board
of directors may deem relevant. Our retained earnings deficit and our loan
with
Guaranty Bank currently limits our ability to pay dividends.
RECENT
SALES OF UNREGISTERED SECURITIES
Reference
is made to Item 3.02 of this Form 8-K for a description of recent sales of
unregistered securities, which is hereby incorporated by reference.
DESCRIPTION
OF SECURITIES
The
following information describes our capital stock and provisions of our
certificate
of
incorporation and our bylaws, all as in effect upon the closing of the exchange
transaction. This description is only a summary. You should also refer to our
certificate of incorporation and bylaws that have been incorporated by reference
or filed with the SEC as exhibits to this Form 8-K.
General
Our
authorized capital stock consists of 100,000,000 shares of common stock, par
value $0.0001 per share, and 20,000,000 shares of preferred stock, par value
$0.0001 per share, of which 5,000,000 is designated as Series A Convertible
Preferred Stock (“Series A Preferred”).
Common
Stock
Holders
of our common stock are entitled to one vote per share on all matters submitted
to a vote of the stockholders, including the election of directors. Generally,
all matters to be voted on by stockholders must be approved by a majority of
the
votes entitled to be cast by all shares of our common stock that are present
in
person or represented by proxy. Holders of our common stock representing fifty
percent (50%) of our capital stock issued,
outstanding,
and entitled to vote, represented in person or by proxy, are necessary to
constitute a quorum at any meeting of our stockholders. A vote by the holders
of
a majority of our outstanding shares is required to effectuate certain
fundamental corporate changes such as liquidation, merger or an amendment to
our
certificate of incorporation. Our certificate of incorporation does not provide
for cumulative voting in the election of directors.
The
holders of shares of our common stock will be entitled to such cash dividends
as
may be declared from time to time by our board of directors from funds available
therefore.
Upon
liquidation, dissolution, or winding up, the holders of shares of our common
stock will be entitled to receive pro rata all assets available for distribution
to such holders after distribution of assets to the holders of Series A
Preferred.
In
the
event of any merger or consolidation with or into another company in connection
with which shares of our common stock are converted into or exchangeable for
shares of stock, other securities, or property (including cash), all holders
of
our common stock will be entitled to receive the same kind and amount of shares
of stock and other securities and property (including cash).
Holders
of our common stock have no pre-emptive rights and no conversion rights, and
there are no redemption provisions applicable to our common stock.
Series
A Convertible Preferred Stock
The
following is a summary of the preferences and rights contained in the
Certificate of Designation of Preferences, Rights and Limitations (the “Series A
Certificate”) of the Series A Convertible Preferred Stock (“Series A Preferred”)
and is qualified in its entirety by reference to the Series A Certificate,
which
is attached as Exhibit 3.5 to this Form 8-K.
Voting
Rights
Except
as
otherwise provided in the Series A Certificate or by law, each holder of shares
of Series A Preferred shall have no voting rights. As long as any shares of
Series A Preferred are outstanding, however, the Company shall not, without
the
affirmative vote of the holders of a majority of the then outstanding shares
of
the Series A Preferred, (a) alter or change adversely the powers, preferences,
or rights given to the Series A Preferred or alter or amend the Series A
Certificate, (b) authorize or create any class of stock ranking as to dividends,
redemption or distribution of assets upon a Liquidation (as defined in Section
5
of the Series A Certificate) senior to or otherwise
pari
passu
with the
Series A Preferred, (c) amend its certificate of incorporation or other charter
documents in any manner that adversely affects any rights of the holders of
Series A Preferred, (d) increase the number of authorized shares of Series
A
Preferred, or (e) enter into any agreement with respect to any of the
foregoing.
Conversion
Rights
Conversion
at the Holder’s Option
Each
share of Series A Preferred is convertible at any time and from time to time
after the issue date at the holder’s option into shares of the Company’s common
stock (subject to limitations as set forth in Section 6(c) of the Series A
Certificate) determined by dividing the Stated Value of such share of Series
A
Preferred by the Conversion Price (each as defined below).
Stated
Value
. Each
share of Series A Preferred shall have a stated value equal to
$2.00.
Conversion
Price
. The
conversion price for the Series A Preferred shall equal $2.00, subject to
adjustment as provided in the Series A Certificate.
Automatic
Conversion
Upon
a
Qualified Public Offering (as defined below) all outstanding shares of Series
A
Preferred plus all accrued but unpaid dividends shall automatically be converted
into shares of the Company’s common stock at the Conversion Price.
“Qualified
Public Offering” means (i) a firm-commitment underwritten public offering for
gross proceeds of not less than $25,000,000 and a public offering price of
not
less than $4.00 (subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the common
stock that occur after the Original Issue Date, as defined below) or (ii) a
listing on any level of the Nasdaq Stock Market.
“Original
Issue Date” means the date of the first issuance of any shares of the Series A
Preferred regardless of the number of transfers of any particular shares of
Series A Preferred and regardless of the number of certificates which may be
issued to evidence such Series A Preferred.
Adjustment
for Stock Dividends and Stock Splits
If
the
Company, at any time while Series A Preferred is outstanding: (A) pays a stock
dividend or otherwise makes a distribution or distributions payable in shares
of
common stock on shares of common stock or any other Common Stock Equivalents
(as
defined in Section 1 of the Series A Certificate, and, which, for avoidance
of
doubt, shall not include any shares of common stock issued by the Company upon
conversion of, or payment of a dividend on, Series A Preferred); (B) subdivides
outstanding shares of common stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of common stock
into a smaller number of shares; or (D) issues, in the event of a
reclassification of shares of the common stock, any shares of capital stock
of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of common stock (excluding
any
treasury shares of the Company) outstanding immediately before such event and
of
which the denominator shall be the number of shares of common stock outstanding
immediately after such event.
Adjustment
for Subsequent Equity Sales
If,
at
any time while Series A Preferred is outstanding, the Company or any of its
subsidiaries sells or grants any option to purchase or sells or grants any
right
to reprice its securities, or otherwise disposes of or issues (or announces
any
sale, grant or any option to purchase or other disposition) any common stock
or
Common Stock Equivalents (as defined in Section 1 of the Series A Certificate)
entitling any person to acquire shares of common stock at an effective price
per
share that is lower than the then Conversion Price (such lower price, the “Base
Conversion Price” and such issuances collectively, a “Dilutive Issuance”) (if
the holder of the common stock or Common Stock Equivalents so issued shall
at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such
issuance, be entitled to receive shares of common stock at an effective price
per share that is lower than the Conversion Price, such issuance shall be deemed
to have occurred for less than the Conversion Price on such date of the Dilutive
Issuance), then (i) as to any Dilutive Issuances that occur on or before the
24
month anniversary of the Original Issue Date (as defined above, and the
Conversion Price shall be reduced to equal the Base Conversion Price and (ii)
as
to any Dilutive Issuances that occur after the 24 month anniversary of the
Original Issue Date and until Series A Preferred is no longer outstanding,
the
Conversion Price shall be reduced by multiplying the Conversion Price by a
fraction, the numerator of which is the number of shares of common stock issued
and outstanding immediately prior to the Dilutive Issuance plus the number
of
shares of common stock which the offering price for such Dilutive Issuance
would
purchase at the then Conversion Price, and the denominator of which shall be
the
sum of the number of shares of common stock issued and outstanding immediately
prior to the Dilutive Issuance plus the number of shares of common stock so
issued or issuable in connection with the Dilutive Issuance.
Notwithstanding
the foregoing, no adjustment will be made under this Section 7(b) in respect
of
an Exempt Issuance (as defined in Section 1 of the Series A
Certificate)
.
If the
Company enters into a Variable Rate Transaction (as defined in Section 4.12(b)
of the Purchase Agreement), despite the prohibition set forth in the Purchase
Agreement, the Company shall be deemed to have issued common stock or Common
Stock Equivalents at the lowest possible conversion price at which such
securities may be converted or exercised. The Company shall notify the holders
in writing, no later than the business day following the issuance of
any
common stock or Common Stock Equivalents subject to this Section 7(b),
indicating therein the applicable issuance price, or applicable reset price,
exchange price, conversion price and other pricing terms.
Adjustment
for Subsequent Rights Offerings
If
the
Company, at any time while the Series A Preferred is outstanding, shall issue
rights, options or warrants to all holders of common stock (and not to holders)
entitling them to subscribe for or purchase shares of common stock at a price
per share that is lower than the VWAP (defined in Section 1 of the Series A
Certificate) on the record date referenced below, then the Conversion Price
shall be multiplied by a fraction of which the denominator shall be the number
of shares of the common stock outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of common stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of the common stock outstanding on the date of issuance of such rights
or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered (assuming delivery to the Company in full
of
all consideration payable upon exercise of such rights, options or warrants)
would purchase at such VWAP. Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants.
Adjustment
for Pro Rata Distributions
If
the
Company, at any time while the Series A Preferred is outstanding, distributes
to
all holders of common stock (and not to holders) evidences of its indebtedness
or assets (including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security (other than common stock, which shall be subject
to
Section 7(b)), then in each such case the Conversion Price shall be adjusted
by
multiplying such Conversion Price in effect immediately prior to the record
date
fixed for determination of stockholders entitled to receive such distribution
by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP
on
such record date less the then fair market value at such record date of the
portion of such assets, evidence of indebtedness or rights or warrants so
distributed applicable to one outstanding share of the common stock as
determined by the board of directors of the Company in good faith. In either
case the adjustments shall be described in a statement delivered to the holders
describing the portion of assets or evidences of indebtedness so distributed
or
such subscription rights applicable to one share of common stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
Adjustment
for Fundamental Transactions
If,
at
any time while the Series A Preferred is outstanding, (A) the Company effects
any merger or consolidation of the Company with or into another person, (B)
the
Company effects any sale of all or substantially all of its assets in one
transaction or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another person) is completed pursuant
to which holders of common stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the common stock or any compulsory share exchange pursuant
to which the common stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent conversion of Series A Preferred, the holders shall
have the right to receive, for each Conversion Share (as defined in Section
1 of
the Series A Certificate) that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one share
of
common stock (the “Alternate Consideration”). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of common stock in
such
Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders
of
common stock are given any choice as to the securities, cash or property to
be
received in a Fundamental Transaction, then the holders shall be given the
same
choice as to the Alternate Consideration it receives upon any conversion of
Series A Preferred following such
Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions,
any
successor to the Corporation or surviving entity in such Fundamental Transaction
shall file a new Certificate of Designation with the same terms and conditions
and issue to the Holders new preferred stock consistent with the foregoing
provisions and evidencing the holders’ right to convert such preferred stock
into Alternate Consideration. The terms of any agreement pursuant to which
a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section
7(e)
and insuring that Series A Preferred (or any such replacement security) will
be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
Series
A Warrants and Series B Warrants
In
connection with the Financing more fully described above under Item 1.01 above,
we issued to one accredited investor Series A Warrants and Series B
Warrants to purchase 1,750,000 and 1,750,000 shares of our common stock,
respectively. The Series A Warrants and Series B Warrants are exercisable for
four years from the date of issuance at an exercise price of $2.50 and $3.00
per
share, respectively. The Series A Warrants and Series B Warrants contain a
cashless exercise provision that such holders may utilize after one year from
issuance of such warrant if there is no effective registration statement
registering, or no prospectus available for the resale of, the shares underlying
the warrants.
The
Company has the right to call for cancellation each outstanding Series A Warrant
or Series B Warrant upon the occurrence of each of the following:
|
|
(i)
|
the
volume weighted average price for each of 30 consecutive trading
days (the
“Measurement
Period,”
which 30 consecutive trading day period shall not have commenced
until
after the issue date of the respective warrant) exceeds 200% of the
applicable then-effective exercise price,
|
|
|
(ii)
|
the
average daily volume for such Measurement Period exceeds 50,000 shares
per
trading day (adjusted for any stock splits
etc.),
|
|
|
(iii)
|
a
registration statement is effective for the resale of all of the
shares of
Common Stock underlying the applicable warrant,
and
|
|
|
(iv)
|
the
holder of the applicable warrant is not in possession of any information
that constitutes, or might constitute, material non-public information
which was provided by the Company.
|
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Delaware
Law
Section 145
of the Delaware General Corporation Law authorizes a court to award, or a
corporation’s board of directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit indemnification for liabilities, including
reimbursement for expenses incurred, arising under the Securities Act. Pursuant
to the provisions of Section 145, a corporation may indemnify its directors,
officers, employees, and agents as follows:
“(a)
A
corporation shall have power to indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if
the
person acted in good faith and in a manner the person reasonably believed to
be
in or not opposed to the best interests of the corporation, and, with respect
to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere
or
its equivalent, shall not, of itself, create a presumption that the person
did
not
act in good faith and in a manner which the person reasonably believed to be
in
or not opposed to the best interests of the corporation, and, with respect
to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b)
A
corporation shall have power to indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action
or
suit by or in the right of the corporation to procure a judgment in its favor
by
reason of the fact that the person is or was a director, officer, employee
or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall
be
made in respect of any claim, issue or matter as to which such person shall
have
been adjudged to be liable to the corporation unless and only to the extent
that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c)
To
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(d)
Any
indemnification under subsections (a) and (b) of this section (unless ordered
by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because
the
person has met the applicable standard of conduct set forth in subsections
(a)
and (b) of this section. Such determination shall be made, with respect to
a
person who is a director or officer at the time of such determination, (1)
by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than
a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e)
Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit
or
proceeding may be paid by the corporation in advance of the final disposition
of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents may
be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f)
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
the other subsections of this section shall not be deemed exclusive of any
other
rights to which those seeking indemnification or advancement of expenses may
be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity
and
as to action in another capacity while holding such office.
(g)
A
corporation shall have power to purchase and maintain insurance on behalf of
any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status
as
such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
(h)
For
purposes of this section, references to "the corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
(i)
For
purposes of this section, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the corporation" shall include any service as
a
director, officer, employee or agent of the corporation which imposes duties
on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person
who
acted in good faith and in a manner such person reasonably believed to be in
the
interest of the participants and beneficiaries of an employee benefit plan
shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j)
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee
or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(k)
The
Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).”
Charter
Provisions and Other Arrangements of the Registrant
Our
predecessor has adopted the following indemnification provisions in its
certificate of incorporation for its officers and directors:
“The
corporation shall, to the fullest extent permitted by the provisions of 145
of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and
the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be
a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such person.”
Insofar
as indemnification for liabilities arising under the Securities Act of 1933,
as
amended (the “Securities Act”) may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and
is therefore unenforceable.
The
Company also has a $2,000,000 director’s and officer’s liability insurance
policy.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Reference
is made to Item 4.01 of this Form 8-K for a description of
changes
and disagreements with accountants
,
which
is hereby incorporated by reference.
|
Item
2.03
|
Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a
Registrant
|
On
September 9, 2008, we signed a Guaranty of Payment in favor of Guaranty Bank
pursuant to which we guaranteed the full and prompt payment of all indebtedness,
liabilities, and other obligations of Premier Power California to Guaranty
Bank
under and in connection with the $3,000,000 line of credit that Premier Power
California has with Guaranty Bank, under which $1,250,000 is outstanding as
of
September 2, 2008 and which is more fully described under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Contractual Obligations and Off-Balance Sheet Arrangements” under Item 2.01
above.
The
foregoing description of the Guaranty of Payment is qualified in its entirety
by
the terms of such Guaranty of Payment, which is attached hereto as Exhibit
10.27
to this Form 8-K.
|
Item
3.02
|
Unregistered
Sales of Equity Securities
|
On
September 9, 2008, and also as more fully described in Items 1.01 and 2.01
above, in connection with the Exchange Agreement, we issued
24,218,750
shares of our common stock to the PPG Owners in exchange for 100% of the capital
stock of Premier Power California. Reference is made to the disclosures set
forth in Items 1.01 and 2.01 of this Form 8-K, which disclosures are
incorporated herein by reference. The issuance of the common stock to the PPG
Owners pursuant to the Exchange Agreement was exempt from registration under
the
Securities Act pursuant to Section 4(2) and Regulation D thereof. We made this
determination based on the representations of the PPG Owners which included,
in
pertinent part, that such stockholders were "accredited investors" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act, and
that such stockholders were acquiring our common stock for investment purposes
for their own respective accounts and not as nominees or agents and not with
a
view to the resale or distribution thereof, and that each owner understood
that
the shares of our common stock may not be sold or otherwise disposed of without
registration under the Securities Act or an applicable exemption therefrom.
On
September 9, 2008, and also as more fully described in Items 1.01 and 2.01
above, pursuant to the Purchase Agreement, we issued a total of 3,500,000 Units,
each Unit consisting of one share of our Series A Preferred Stock, one-half
of
one Series A Warrant, and one-half of one Series B Warrant, to the Investor
in
connection with the closing of the Financing. The issuance of the Units to
the
Investor pursuant to the Purchase Agreement was exempt from registration under
the Securities Act pursuant to Section 4(2) and Regulation D thereof. We made
this determination based on the representations of the Investor, which included,
in pertinent part, that such person was an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act, and
that such person was acquiring our common stock for investment purposes for
its
own respective account and not as a nominee or agent and not with a view to
the
resale or distribution thereof, and that the Investor understood that the shares
of our Series A Preferred Stock and our Series A Warrants and Series B warrants
may not be sold or otherwise disposed of without registration under the
Securities Act or an applicable exemption therefrom.
|
Item
4.01
|
Changes
in Registrant’s Certifying Accountant.
|
We
terminated Li & Company, PC (“Li & Company”) as our independent auditors
effective as of September 9, 2008
in
connection with the Share Exchange described under Item 1.01 above
.
This
action was approved by our Board of Directors. Li & Company served as our
independent registered accounting firm for our fiscal year ended December 31,
2007 while we operated under the name “Harry’s Trucking, Inc.”
The
reports of Li & Company on our financial statements as of December 31, 2007
and for the year ended December 31, 2007 did not contain an adverse opinion
or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles other than an explanatory paragraph as
to
a going concern.
Prior
to
its dismissal, there were no disagreements with Li & Company on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Li & Company would have caused it to make reference to this
subject matter of the disagreements in connection with its report, nor were
there any "reportable events" as such term as described in Item 304(a)(1)(v)
of
Regulation S-K, promulgated under the Securities Exchange Act of 1934, as
amended.
On
September 9, 2008, we engaged Macias Gini & O’Connell LLP (“MGO”) as our
independent registered accounting firm. MGO
performed the audit of
Premier
Power Renewable Energy, Inc., a California corporation (“Premier Power
California”), which became our subsidiary after the Share Exchange described in
Item 2.01 above. During our two most recent fiscal years and any subsequent
interim period prior to the engagement of MGO, neither we nor anyone on our
behalf consulted with MGO, regarding either (i) the application of accounting
principles to a specified transaction, either contemplated or proposed, or
the
type of audit opinion that might be rendered on our financial statements or
(ii)
any matter that was either the subject of a "disagreement" or a "reportable
event."
We
requested Li & Company to review the disclosures contained herein and asked
Li & Company to furnish us with a letter addressed to the SEC containing any
new information, clarification of our expression of Li & Company’s views, or
the respects in which Li & Company does not agree with the statements
contained herein. A copy of Li & Company’s letter is filed hereto to as
Exhibit 16.1 to this Form 8-K.
|
Item
5.01
|
Changes
in Control of Registrant.
|
As
more
fully described in Items 1.01 and 2.01 above, on September 9, 2008, in a share
exchange transaction, we acquired a solar power business based in California
that specializes in solar integration, by executing the Exchange Agreement
by
and among the Company, its majority stockholder, Premier Power California,
and
the PPG Owners. Under the Exchange Agreement, on the Closing Date, we acquired
all of the issued and outstanding shares of Premier Power California through
the
issuance of 18,919,600 restricted shares of our common stock to the PPG Owners.
Immediately prior to the exchange transaction, we had 1,800,000 shares of common
stock outstanding. Immediately after the issuance of the shares to the PPG
Owners, we had 26,018,750 shares of common stock outstanding. As a result of
this exchange transaction, the PPG Owners became our controlling stockholders,
and Premier Power California became our wholly owned subsidiary.
In
connection with this change in control, and as explained in Item 5.02 below,
effective September 9, 2008, Haris Tajyar
resigned
as our President and Chief Executive Officer, Omar Tajyar resigned as our Chief
Operating Officer, and Miki Antunovich resigned as our Chief Financial Officer.
Further, effective September 9, 2008, we appointed the following new executive
officers:
|
Name
|
|
Age
|
|
Positions
held:
|
|
Dean
R. Marks
|
|
52
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
Miguel
de Anquin
|
|
41
|
|
Chief
Operating Officer, Chief Financial Officer, Corporate Secretary,
and
Director
|
In
addition, and as explained in Item 5.02 below, Haris Tajyar, Omar Tajyar, and
Miki Antunovich agreed to resign as members of our board of directors, and
the
following new directors were appointed to our board of directors:
|
Name
|
|
Age
|
|
Positions
Held:
|
|
Dean
R. Marks
|
|
52
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
Miguel
de Anquin
|
|
41
|
|
Chief
Operating Officer, Chief Financial Officer, Corporate Secretary,
and
Director
|
|
Item
5.02
|
Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain Officers.
|
As
more
fully described in Items 1.01, 2.01 and 5.01 above, on September 9, 2008, in
a
share exchange transaction, we acquired a solar energy business based in
California that specializes in solar integration, by executing the Exchange
Agreement by and among the Company, Premier Power California, and the PPG
Owners. The closing of this transaction occurred on September 9, 2008. Reference
is made to the disclosures set forth under Items 1.01, 2.01 and 5.01 of this
Form 8-K, which disclosures are incorporated herein by reference.
|
(a)
|
Resignation
of Directors
|
In
connection with the exchange transaction, on September 9, 2008, Haris Tajyar,
Omar Tajyar, and Miki Antunovich (the “Resigning Directors”) resigned as members
of our board of directors. There were no disagreements between the Resigning
Directors and any of our officers.
|
(b)
|
Resignation
of Officers
|
Effective
September 9, 2008, Haris Tajyar
resigned
as our President and Chief Executive Officer; Omar Tajyar resigned as our Chief
Operating Officer; and Miki Antunovich resigned as our Chief Financial Officer.
|
(c)
|
Appointment
of Officers
|
Effective
September 9, 2008, the following persons were appointed as our newly appointed
executive officers (individually, a “New Officer” and collectively, the “New
Officers”):
|
Name
|
|
Age
|
|
Positions
held:
|
|
Dean
R. Marks
|
|
52
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
Miguel
de Anquin
|
|
41
|
|
Chief
Operating Officer, Chief Financial Officer, Corporate Secretary,
and
Director
|
There
are
no family relationships among any of our officers or directors. The New Officers
currently have employment agreements with the Company, which are described
under “Executive Compensation - Employment Agreements” above. Other than the
exchange transaction and the transaction described under “Certain Relationships
and Related Transactions, and Director Independence - Related Party Transactions
of Premier Power Group” under Item 2.01 above, there are no transactions, since
the beginning of our last fiscal year, or any currently proposed transaction,
in
which the Company was or is to be a participant and the amount involved exceeds
the lesser of $120,000 or one percent of the average of the Company’s total
assets at year-end for the last three completed fiscal years, and in which
any
of the New Officers had or will have a direct or indirect material interest.
Other than the exchange transaction and employment agreement with Premier Power
California, there is no material plan, contract or arrangement (whether or
not
written) to which any of the New Officers is a party or in which any New Officer
participates that is entered into or material amendment in connection with
our
appointment of the New Officers, or any grant or award to any New Officer or
modification thereto, under any such plan, contract or arrangement in connection
with our appointment of the New Officers.
Descriptions
of our newly appointed officers can be found in Item 2.01 above, in the
section titled “Directors and Executive Officers - Current Management.”
|
(d)
|
Appointment
of Directors
|
In
connection with the exchange transaction and effective as of September 9, 2008,
the following persons were appointed as new members of our board of directors
(individually, a “New Director” and collectively, the “New
Directors”):
|
Name
|
|
Age
|
|
Positions
Held:
|
|
Dean
R. Marks
|
|
52
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
Miguel
de Anquin
|
|
41
|
|
Chief
Operating Officer, Chief Financial Officer, Corporate Secretary,
and
Director
|
There
are
no family relationships among any of our officers or directors. None of the
New
Directors has been named or, at the time of this Form 8-K, is expected to be
named to any committee of the board of directors. Other than the exchange
transaction, there are no transactions, since the beginning of our last fiscal
year, or any currently proposed transaction, in which the Company was or is
to
be a participant and the amount involved exceeds the lesser of $120,000 or
one
percent of the average of the Company’s total assets at year-end for the last
three completed fiscal years, and in which any of the New Directors had or
will
have a direct or indirect material interest. Other than the exchange
transaction, there is no material plan, contract or arrangement (whether or
not
written) to which any of the New Directors is a party or in which any New
Director participates that is entered into or material amendment in connection
with our appointment of the New Directors, or any grant or award to any New
Director or modification thereto, under any such plan, contract or arrangement
in connection with our appointment of the New Directors.
Descriptions
of our newly appointed directors can be found in Item 2.01 above, in the
section titled “Directors and Executive Officers - Current
Management.”
|
Item
5.03
|
Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
|
Effective
September 5, 2008, we changed our name to “Premier Power Renewable Energy, Inc.”
by filing a Certificate of Amendment to our certificate of incorporation with
the Secretary of State of the State of Delaware. In connection with this name
change, as of the open of business on September 8, 2008, we had the following
new CUSIP number and trading symbol:
New
CUSIP
Number:
415867100
New
Trading Symbol: PPRW
|
(b)
|
Certificate
of Designation for Series A Convertible Preferred
Stock
|
On
September 10, 2008, and as more fully described in Item 2.01 above, we filed
a
Series A Certificate to fix the preferences, limitations, and relative rights
of
our Series A Convertible Preferred Stock. A copy of such certificate is attached
hereto as Exhibit 3.5 and is incorporated herein by
reference.
|
Item
9.01
|
Financial
Statement and Exhibits.
|
Reference
is made to the Share Exchange, as described in Item 1.01, which is incorporated
herein by reference. As a result of the closing of the Share Exchange, our
primary operations consist of the business and operations of the Premier Power
Group, which are conducted in the United States and Spain. In the Share
Exchange, the Company is the accounting acquiree, and Premier Power California
is the accounting acquirer. Accordingly, we are presenting the financial
statements of Premier Power California.
|
(a)
|
Financial
Statements of the Business Acquired
|
The
audited combined financial statements of the Premier Power Group for the years
ended December 31, 2007 and 2006, and the unaudited combined financial
statements for the six months ended June 30, 2008 and 2007, including the notes
to such financial statements, are incorporated herein by reference to Exhibit
99.1 to this Form 8-K.
|
(b)
|
Pro
Forma Financial
Information
|
The
unaudited pro forma consolidated financial statements of the Company and the
Premier Power Group (the “Combined Entity”) for the year ended
December 31, 2007 and the six months ended June 30, 2008, including the notes
to
such financial statements, are incorporated herein as of June 30, 2008 an by
reference to Exhibit 99.2 to this Form 8-K.
The
unaudited pro forma consolidated financial statements are presented to
illustrate the estimated effects of our acquisition of Premier Power California
and the exchange transaction on our historical financial position and our
results of operations. We have derived our historical financial data for the
six
months ended June 30, 2008 from our unaudited financial statements contained
on
Form 10-Q as filed with the SEC. We derived Premier Power California’s
historical combined financial statements as of June 30, 2008 from Premier Power
California’s unaudited combined financial statements for the six months ended
June 30, 2008 contained elsewhere in this Form 8-K. In accordance with Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
and the assumptions and adjustments described in the accompanying notes to
the
unaudited pro forma combined condensed financial statements, Premier Power
California is considered the accounting acquirer. Because Premier Power
California’s owners as a group retained or received the larger portion of the
voting rights in the Combined Entity and Premier Power California’s senior
management represents all of the senior management of the Combined Entity,
Premier Power California was considered the acquiror for accounting purposes
and
will account for the exchange transaction as a reverse acquisition. The
acquisition has been accounted for as a reorganization of entities and the
financial statements have been prepared as if the reorganization had occurred
retroactively. Our fiscal year will continue to end on December 31.
The
exchange transaction was completed on September 9, 2008. The unaudited pro
forma
consolidated statements of operations for the year ended December 31, 2007
and
the six months ended June 30, 2008 assume that the exchange transaction,
cancellation of shares, distribution of certain assets and payment of
liabilities were consummated on January 1, 2008. The unaudited pro forma
consolidated balance sheet as of June 30, 2008 assumes the exchange transaction
and issuance of shares were consummated on that date. The information presented
in the unaudited pro forma consolidated financial statements does not purport
to
represent what our financial position or results of operations would have been
had the exchange transaction and issuance of shares occurred as of the dates
indicated, nor is it indicative of our future financial position or results
of
operations for any period. You should not rely on this information as being
indicative of the historical results that would have been achieved had the
companies always been consolidated or the future results that the consolidated
company will experience after the exchange transaction.
The
pro
forma adjustments are based upon available information and certain assumptions
that we believe are reasonable under the circumstances. These unaudited pro
forma consolidated financial statements should be read in conjunction with
the
accompanying notes and assumptions and the historical financial statements
and
related notes of us and Premier Power California.
INDEX
TO EXHIBITS
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
2.1
|
|
Share
Exchange Agreement by and among the Company, its majority stockholder,
Premier Power Renewable Energy, Inc., and its stockholders, dated
September 9, 2008 *
|
|
|
|
|
|
3.1
|
|
Certificate
of Incorporation (1)
|
|
|
|
|
|
3.2
|
|
Bylaws
(1)
|
|
|
|
|
|
3.3
|
|
Certificate
of Amendment of the Certificate of Incorporation, filed August 19,
2008
with the Secretary of State of the State of Delaware
(2)
|
|
|
|
|
|
3.4
|
|
Certificate
of Amendment of the Certificate of Incorporation, filed August 29,
2008
and effective September 5, 2008 with the Secretary of State of the
State
of Delaware *
|
|
|
|
|
|
3.5
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series A
Convertible Preferred Stock, filed September 10, 2008 with the Secretary
of State of the State of Delaware *
|
|
|
|
|
|
10.1
|
|
Business
Loan Agreement (Asset Based) between Premier Power Renewable Energy,
Inc.
and Guaranty Bank, dated February 28, 2007
*
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
10.2
|
|
Promissory
Note issued to Guaranty Bank by Premier Power Renewable Energy,
Inc.,
dated February 28, 2007 *
|
|
|
|
|
|
10.3
|
|
Commercial
Security Agreement between Premier Power Renewable Energy, Inc.
and
Guaranty Bank, dated February 28, 2007 *
|
|
|
|
|
|
10.4
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Dean Marks,
and
Guaranty Bank, dated February 28, 2007 *
|
|
|
|
|
|
10.5
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Sarilee
Marks, and
Guaranty Bank, dated February 28, 2007 *
|
|
|
|
|
|
10.6
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Simply Solar
Inc.,
and Guaranty Bank, dated February 28, 2007 *
|
|
|
|
|
|
10.7
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Bright Future
Technologies, LLC, and Guaranty Bank, dated February 28, 2007
*
|
|
|
|
|
|
10.8
|
|
Business
Loan Agreement (Asset Based) between Premier Power Renewable Energy,
Inc.
and Guaranty Bank, dated February 27, 2008 *
|
|
|
|
|
|
10.9
|
|
Promissory
Note issued to Guaranty Bank by Premier Power Renewable Energy,
Inc.,
dated February 27, 2008 *
|
|
|
|
|
|
10.10
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Dean Marks,
and
Guaranty Bank, dated February 27, 2008 *
|
|
|
|
|
|
10.11
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Sarilee
Marks, and
Guaranty Bank, dated February 27, 2008 *
|
|
|
|
|
|
10.12
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Simply Solar
Inc.,
and Guaranty Bank, dated February 27, 2008 *
|
|
|
|
|
|
10.13
|
|
Commercial
Guaranty between Premier Power Renewable Energy, Inc., Bright Future
Technologies, LLC, and Guaranty Bank, dated February 27, 2008
*
|
|
|
|
|
|
10.14
|
|
Master
Commercial Solar Terms and Conditions of Schüco USA, L.P.
*
|
|
|
|
|
|
10.15
|
|
Authorized
Dealer Agreement between Premier Power Renewable Energy, Inc. and
SunPower
Corporation, dated June 20, 2008 *
|
|
|
|
|
|
10.16
|
|
401(k)
Plan of Premier Power Renewable Energy, Inc. *
|
|
|
|
|
|
10.17
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc. and Dean
R. Marks,
dated August 22, 2008 *
|
|
|
|
|
|
10.18
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc. and Miguel
de
Anquin, dated August 22, 2008 *
|
|
|
|
|
|
10.19
|
|
Premier
Management Consulting Agreement between Genesis Capital Advisors,
LLC and
Premier Power Renewable Energy, Inc., dated November 13, 2007
*
|
|
|
|
|
|
10.20
|
|
Engagement
Agreement between GT Securities and Genesis Capital Advisors, LLC
with and
on behalf of Premier Power Renewable Energy, Inc., dated November
13, 2007
*
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
10.21
|
|
Form
of Securities Purchase Agreement *
|
|
|
|
|
|
10.22
|
|
Form
of Registration Rights Agreement *
|
|
|
|
|
|
10.23
|
|
Form
of Series A Common Stock Purchase Warrant *
|
|
|
|
|
|
10.24
|
|
Form
of Series B Common Stock Purchase Warrant *
|
|
|
|
|
|
10.25
|
|
Form
of Lock-up Agreement *
|
|
|
|
|
|
10.26
|
|
Purchase
and Sale Agreement between Harry’s Trucking, Inc. and Haris Tajyar and
Omar Tajyar, dated September 9, 2008 *
|
|
|
|
|
|
10.27
|
|
Guaranty
of Payment by the Company in favor of Guaranty Bank, dated September
9,
2008 *
|
|
|
|
|
|
16.1
|
|
Letter
from Li & Company, PC, dated September 11, 2008 *
|
|
|
|
|
|
17.1
|
|
Letter
of Resignation from Haris Tajyar to the Board of Directors *
|
|
|
|
|
|
17.2
|
|
Letter
of Resignation from Omar Tajyar to the Board of Directors
*
|
|
|
|
|
|
17.3
|
|
Letter
of Resignation from Miki Antunovich to the Board of Directors
*
|
|
|
|
|
|
21.1
|
|
List
of Subsidiaries *
|
|
|
|
|
|
23.1
|
|
Consent
Letter of Macias Gini & O’Connell LLP *
|
|
|
|
|
|
99.1
|
|
Audited
combined financial statements of Premier Power California for
the years
ended December 31, 2007 and 2006, and unaudited combined financial
statements for the six months ended June 30, 2008 and 2007, and
accompanying notes to combined financial statements*
|
|
|
|
|
|
99.2
|
|
Unaudited
pro forma consolidated financial statements of the Company and
the Premier
Power Group as of June 30, 2008 and for the year ended December 31,
2007 and the six months ended June 30, 2008*
|
|
|
|
|
|
(1)
|
Filed
on February 13, 2007 as an exhibit to the Company’s Registration Statement
on Form SB-2/A, and incorporated herein by
reference.
|
|
(2)
|
Filed
on August 29, 2008 as an exhibit to the Company’s Current Report on Form
8-K, and incorporated herein by
reference.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
|
|
|
|
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
|
|
|
|
|
|
Date: September
11, 2008
|
By:
|
/s/
Dean R. Marks
|
|
|
Dean
R. Marks
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Premier Power Renewable ... (CE) (USOTC:PPRW)
Historical Stock Chart
From May 2024 to Jun 2024
Premier Power Renewable ... (CE) (USOTC:PPRW)
Historical Stock Chart
From Jun 2023 to Jun 2024
