|
|
|
#
of Shares Outstanding Prior to the Financing Held by Persons Other than
the Selling Security Holders
|
|
24,438,152
|
#
of Shares Registered for Resale by the Selling Security Holders in Prior
Regi3tration Statemelts
|
|
0
|
# of
Shares Registered for Resale by the Selling Security holders that Cont)nue
to be Held `y the Selling Security Holders
|
|
0
|
#
of Shares that have been Sold in Registered Resale Transactions by the
Selling Security Holders
|
|
0
|
2,328,972 for Vision
Opportunit9 Master Fund. Ltd.;
360,993
shares for Genesis Capital Advisors,
LL
|
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 the Share Exchange, 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 Share Exchange 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 offices in 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
According
to the Energy Information Administration (“EIA”), a section of the United States
Department of Energy, energy markets are seeing dramatic use demands and price
increases. In fact the EIA’s outlook in 2008 was that global energy consumption
would increase by 50% from 2005 to 2030. 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 homeowners’
desires to utilize solar as an alternative source of energy have increased
demand over time. Population shifts to warmer regions have also increased 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 demands 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. Our beliefs have been supported by various studies, including a
study titled "Review of Solutions to Global Warming, Air Pollution, and Energy
Security" by Mark Z. Jacobson, a professor of civil and environment engineering
at Stanford University, published in “Energy & Environment Science,” that
found solar energy to be a top alternative energy solution. 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 to 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.
The
Utility Solar Assessment (USA) Study, produced by clean-tech research and
publishing firm Clean Edge and green-economy nonprofit Co-op America, provides a
comprehensive roadmap for utilities, solar companies, and regulators to enable
solar to reach 10% of all U.S. electricity generation by 2025. The
USA Study found that solar power 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 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.
|
Principal
Products and Services
Premier
Power California’s main business is the installation of solar energy systems and
all related components for use by residential homeowners, commercial and
industrial enterprises, municipalities, and other solar energy
providers.
We also
provide after-market maintenance services for solar energy systems such as
cleaning, and we design the manner in which solar energy systems are
installed. During the fiscal year ended December 31, 2008, less than 0.5%
of our revenue was generated by providing after-market services. About 5%
of the racking and installation systems for the solar energy systems we install
are manufactured by the Company, and about 95% are manufactured by our solar
module suppliers.
In
addition, we are a reseller of solar energy system components including, but not
limited to, racking, wiring, inverters, 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
relationships with Samsung and GE.
Strategy
Premier
Power California has developed a series of strategies that will allow 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.
|
Expanding
our 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 have greater participation in the ancillary revenue that its
projects create, which currently is not
significant.
|
|
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.
|
Develop
financial tools such as leases or Power Purchase Agreements (PPA) 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.
|
Customers
In 2008,
our largest customers were Solar Power Partners, which represented 18% of our
total sales, and Sutter Home and Otis, each representing 12% of our total sales.
For the year ended December 31, 2008, 84% of our revenue was derived from sales
to commercial and industrial customers, and 16% of our revenue was derived from
sales to residential customers. In 2007, our largest customers were
Solar Power Partners, which represented 16% of our total sales, PG&E, which
represented 9% of our total sales, and Chappellet Winery, which represented
5.45% of our total sales. For the fiscal year ended December 31,
2007, 57% of our revenue was derived from sales to commercial and industrial
customers, and 43% of our revenue was derived from sales to residential
customers.
In
addition to our residential customers, our commercial and industrial customers
have included PG&E, Sierra Pacific Power Company, AT&T, Princeton
University, Millennium Sports Club, KB Homes, and General Electric. Our
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.
We
believe that the solar energy market is dynamic and constantly changing as
certain government standards and directives that affect the marketplace have
allowed and will continue to allow for new customers in new geographic
areas. We believe that Renewable Portfolio Standards (“RPS”) in the
United States have resulted in increased demand for solar energy in
the U.S. marketplace. RPS is a state policy that requires
electricity providers to obtain a minimum amount of their power from renewable
energy by a certain date. According to a June 2007 report by the U.S.
Department of Energy, there were 24 states that adopted a RPS-type
mechanism. According to the Pew Center on Global Climate Change, that
number increased to 29 states. The Company believes this number will
continue to increase. With each new state that adopts a RPS, bases of
new customers of solar energy will develop. Also, President Obama’s
budget proposal from February 2009 includes a cap-and-trade plan to limit
greenhouse gas emissions. We believe this will generate additional
demand for solar energy, which would create new customers. We also
believe that the renewable energy directive of the European Union also plays a
role in growth of our marketplace. According to the European
Renewable Energies Foundation and the European Future Energy Forum, the EU’s
member-nations are required to provide at least 20% of gross final energy
consumption from renewable energy sources by 2020. This target is
mandatory of the 27 member-nations. Each member-nation must draft a
Renewable Energy Action Plan, which must include clear development targets for
electricity, heating, cooling, and fuel. Consequently, to avoid
penalties, the member-nations provide incentives in the form of feed-in tariffs
for the generation of solar electricity. This EU renewable
energy directive, thus, also provides for an increase in customers within the
EU. Thus, we believe that our customer base will grow as a result of
such standards and directives.
Quality
Control
Premier
Power California has a “zero defect” quality assurance program for installation
of solar energy systems. Instituted in 2006, the zero defect policy was created
to set the highest quality and customer satisfaction standards in the industry
today. The program sets standards for ten areas of installation: (1)
installed equipment, (2) solar array, (3) array mounting structure, (4) wire
runs, (5) system component location, (6) system component mounting, (7)
electrical, (8) system performance, (9) building requirements, and (10)
surrounding property. Each Premier Power California installation is
independently verified by a quality control officer and must meet a rigid
standard for excellence. One point is awarded for each standard that
is met, and our installation crews must have a score of at least 9 points for
each installation. If an installation crew scores less than 9 points
for a particular installation, we follow up with the customer to allow
management to understand the core problem with that particular installation and
to design and implement measures to further improve the customer
experience.
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 Power California scored a
98.3% score for 2007 and 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 is active in the North American and international markets and
has a very limited number of direct competitors that are concurrently active in
both of those markets. SunPower Corporation is one such competitor. Further, in
the U.S., the solar design and integration market is highly fragmented, and we
face direct competition in these markets from a number of smaller local
installers within many U.S. cities. In certain U.S. cities and regions such as
Los Angeles, the San Francisco Bay Area, and California’s 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.
Major
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, and has developed and secured exclusivity on
various components of its ballast mount roof system that reduces the cost and
time to complete installations.
Advertising
and Promotional Activities
The
Premier Power Group spent approximately $413,251 and $415,622 on domestic and
international marketing and promotional activities in 2008 and 2007,
respectively. The Premier Power Group 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, to showcase its latest installations, and
to provide general and specific sales information.
Principal
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.
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
Properties and Licenses
Premier
Power California has applied with the U.S. Patent and Trademark Office for
trademark protection for the brand names “Premier Power” and “Bright Futures”
and its sales slogan, “Your Solar Electricity
Specialist.” Applications for these trademarks are currently
pending.
Research
and Development
Premier
Power California employs best practices in its design and installation of
systems. Dean R. Marks, our President and Chief Executive Officer, 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 guaranteed by the manufacturer
to have passed all required government approval and regulation requirements.
Some of the electrical services provided by Premier Power California are
regulated and require licensing. The installations of electrical components that
are connected to the electric meter require a C10 license in California and C2
license in Nevada. The installation of solar systems in California requires a
C46 license. As we expand our installations operation into other
states, we may need to obtain additional licenses required by the local building
authorities. Some states accept a C10 license from California. 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, and
some employees 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
As of
May 14, 2009, we had approximately 85 employees, all of which are full-time
employees.
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.
DESCRIPTION
OF PROPERTY
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
|
|
6,700
|
|
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
|
|
|
|
|
|
|
|
1020
Nevada St., #201
Redlands,
CA 92374
|
|
Southern
California operations
|
|
2,303
|
|
September
30, 2010
|
|
|
|
|
|
|
|
Pol
Ind, Calle E, n3
Oficina
0F
31192
Mutilva Baja (Navarra)
Spain
|
|
Spanish
headquarters
|
|
500
|
|
May
2012
|
|
|
|
|
|
|
|
Centro
de Negocios La Garena, 2K
Calle
Granda s/n
Alcala
de Henares, 28806 Madrid
Spain
|
|
Spanish
regional office
|
|
1,100
|
|
December
30,
2013
|
Premier
Power Spain is party to a non-cancelable lease for operating facilities in
Madrid, Spain, which expires in 2013, and a non-cancelable lease for operating
facilities in Navarra, Spain, which expires in 2012. Premier Power
California is party to a non-cancelable lease for operating facilities in
Redlands, California, which expires in 2010. These leases provide for
annual rent increases tied to the Consumer Price Index. The leases require the
following payments as of December 31, 2008, subject to annual adjustment, if
any:
|
|
|
|
|
2009
|
|
$
|
78,003
|
|
2010
|
|
|
43,845
|
|
2011
|
|
|
43,845
|
|
2012
|
|
|
35,319
|
|
2013
|
|
|
23,293
|
|
|
|
|
|
|
Total
|
|
$
|
224,305
|
|
SUMMARY
FINANCIAL DATA
The
summary financial data set forth below should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our financial statements and the related notes included
elsewhere in this prospectus. We derived the financial data as of March 31, 2009
and December 31, 2008 and 2007, and for the three months ended March 31, 2009
and 2008 and the years ended December 31, 2008 and 2007 from our financial
statements included in this prospectus. The historical results are not
necessarily indicative of the results to be expected for any future period. All
monetary amounts are expressed in U.S. dollars.
|
|
Three
Months Ended
March
31,
|
|
|
Year
Ended
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
Income
Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
4,793,352
|
|
$
|
|
|
|
$
|
44,237,984
|
|
|
$
|
16,685,690
|
|
Cost
of Sales
|
|
|
(4,378,890
|
)
|
|
(4,047,800
|
)
|
|
|
(38,710,592
|
)
|
|
|
(12,440,839
|
)
|
Gross
Profit
|
|
|
414,462
|
|
|
817,146
|
|
|
|
5,527,392
|
|
|
|
4,244,851
|
|
Total
Operating Expenses
|
|
|
1,694,132
|
|
|
1,016,563
|
|
|
|
4,729,542
|
|
|
|
3,371,778
|
|
Operating
Income (Loss)
|
|
|
(1,279,670
|
)
|
|
(199,417
|
)
|
|
|
797,850
|
|
|
|
873,073
|
|
Total
Other Income (Expense)
|
|
|
16,167
|
|
|
2,507
|
|
|
|
45,324
|
|
|
|
(5,882
|
)
|
Income
(Loss) Before Income Taxes
|
|
|
(1,263,503
|
)
|
|
(196,910
|
)
|
|
|
752,526
|
|
|
|
867,191
|
|
Income
Tax Provision (Benefit)
|
|
|
(645,053
|
)
|
|
2,800
|
|
|
|
(40,857
|
)
|
|
|
39,873
|
|
Net
Income (Loss) Before Minority Interest
|
|
|
(618,450
|
)
|
|
(199,710
|
)
|
|
|
793,383
|
|
|
|
827,318
|
|
Net
Income (Loss)
|
|
$
|
(618,450
|
)
|
$
|
(193,559
|
)
|
|
$
|
569,068
|
|
|
$
|
843,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
|
$
|
0.03
|
|
|
$
|
.04
|
|
Diluted
|
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
.04
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,048,750
|
|
|
21,159,451
|
|
|
|
22,666,138
|
|
|
|
21,159,451
|
|
Diluted
|
|
|
26,048,750
|
|
|
21,159,451
|
|
|
|
23,749,700
|
|
|
|
21,159,451
|
|
|
|
As
of
|
|
|
As
of December 31,
|
|
|
|
March
31, 2009
|
|
|
2008
|
|
|
2007
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
2,899,388
|
|
|
$
|
5,770,536
|
|
|
$
|
1,278,651
|
|
Working
Capital
|
|
$
|
4,432,408
|
|
|
$
|
6,276,623
|
|
|
$
|
584,209
|
|
Total
Assets
|
|
$
|
12,548,690
|
|
|
$
|
14,812,654
|
|
|
$
|
5,578,041
|
|
Total
Liabilities
|
|
$
|
5,904,930
|
|
|
$
|
6,940,029
|
|
|
$
|
4,862,889
|
|
Total
Shareholders’ Equity
|
|
$
|
6,643,760
|
|
|
$
|
7,872,625
|
|
|
$
|
713,502
|
|
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 Premier Power Renewable Energy, Inc. for the three months ended
March 31, 2009 and 2008 and the fiscal years ended December 31, 2008 and
2007 should be read in conjunction with the Consolidated Financial Statements,
and the notes to those financial statements that are included elsewhere in this
prospectus. References to “we,” “our,” or “us” in this section refers to the
Company and its subsidiaries. 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 prospectus. 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.
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 the
“Business” above for additional details regarding the Share
Exchange.
Concurrently
with the closing of the Share Exchange on September 9, 2008, we raised
$7,000,000 in a private placement financing 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 the “Business” section
above 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 consolidated 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 2 to
our consolidated financial statements, we believe that the following
accounting policies are the most critical to aid the reader in fully
understanding and evaluating this discussion and analysis:
Basis of
Presentation
– The consolidated financial statements include the accounts
of Premier Power Renewable Energy, Inc. and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
Inventory
– Inventory, consisting primarily of raw materials, is recorded using the
average cost method and is carried at the lower of cost or
market.
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 a customer’s financial condition could put recoverability
at risk.
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.
Earnings per
Share
–
Earnings per share is computed in accordance with the provisions of SFAS No.
128, “
Earnings Per
Share
.” Basic net income (loss) per share is computed using the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share is computed using the weighted-average number of common
shares outstanding during the period, as adjusted for the dilutive effect of the
Company’s outstanding convertible preferred shares using the “if converted”
method and dilutive potential common shares. For all of the periods presented,
the Company had no dilutive potential common shares except for outstanding
convertible preferred shares during the three months ended March 31, 2009 and
the year ended December 31, 2008. Warrants to purchase 3,500,000 of
the Company’s common shares were excluded as their exercise price exceeded the
average market price of the Company’s common shares.
Stock-Based
Compensation
–
The Company accounts for stock-based compensation under the provisions of
Statement of Financial Accounting Standards No. 123 (revised 2004), “
Share-Based Payment
,” (SFAS
No. 123(R)), which requires the Company to measure the stock-based compensation
costs of share-based compensation arrangements based on the grant date fair
value and generally recognizes the costs in the financial statements over the
employee requisite service period. Stock-based compensation expense for all
stock-based compensation awards granted was based on the grant date fair value
estimated in accordance with the provisions of SFAS No. 123(R).
Product
Warranties
–
Prior to January 1,
2007, the Company provided a five year warranty covering the labor and materials
associated with its installations. Effective January 1, 2007, the Company
changed the coverage to generally be ten years in the U.S. and to one year in
Spain for all contracts signed after December 31, 2006. Solar panels and
inverters are warranted by the manufacturer for 25 years and 10 years,
respectively.
Comprehensive
Income
–
Statement of
Financial Accounting Standards No. 130, “
Reporting Comprehensive
Income
,” establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income, as defined, includes all
changes in equity during the period from non-owner sources, such as foreign
currency translation adjustments.
Recently
Issued Accounting Pronouncements
In
December 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“FAS”) No. 157,
"
Fair Value
Measurement
" ("FAS 157"), which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP) and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value
measurements. This statement is effective for fiscal years beginning
after November 15, 2007, except for non-financial assets and liabilities
measured at fair value on a non-recurring basis for which the
effective date will be for fiscal years beginning after November 15,
2008. The adoption of FAS 157 for financial assets and liabilities
did not have a material impact on the Company's consolidated financial
statements. The adoption of FAS 157 for non-financial assets is not
expected to have a material impact on the Company’s consolidated financial
statements.
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 FAS 159 did
not have a material effect on our results of operations, cash flows or financial
position.
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 consolidated 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,
“Noncontrolling 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 noncontrolling
(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. The adoption of FAS 160 did not have a
material effect on our financial statements.
In
March 2008, the FASB issued FAS No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133”
(“FAS 161”), which requires additional disclosures about the
objectives of the derivative instruments and hedging activities, the method of
accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. FAS 161 is effective beginning January 1, 2009. The adoption of FAS 161
did not have a material effect on our financial statements.
In
April 2008, the FASB issued FASB Staff Position (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 FAS 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. The adoption of FSP
FAS 142-3 did not have a material effect on our financial
statements.
In May
2008, the FASB issued FAS No. 162, “
The Hierarchy of Generally Accepted
Accounting Principles
” (“FAS 162”), 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 is effective
November 15, 2008 which is 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
adoption of FAS 162 did not have a material effect on our financial
statements.
In
June 2008, the FASB ratified EITF Issue No. 07-5, "
Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock
.” EITF 07-5
provides that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is
indexed
to its own stock, including evaluating the instrument's contingent exercise and
settlement provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008 and interim periods within those fiscal years. See Note
8 to our unaudited condensed consolidated financial statements for additional
information.
In May
2009, the FASB issued FASB Staff Position No. APB 14-1 “
Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)
” FASB Staff Position No. APB 14-1 clarifies that convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14,
Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants
. Additionally, this FSP
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. The adoption of FSP APB 14-1 did not have a material effect on our
consolidated financial statements.
Results
of Operations
Comparison
of Three Months Ended March 31, 2009 and 2008
Net sales.
For the three months ended March 31, 2009, net sales decreased 1%
relative to the three months ended March 31, 2008, from $4,864,946 to
$4,793,352. The slight decrease from the first quarter of 2008 to the first
quarter of 2009 is primarily attributable to continued expansion of our Spanish
operations in the rooftop market offset by a slowdown in our U.S. in residential
and commercial sales.
Cost of sales.
Cost of sales for the three months ended March 31, 2009 was $4,378,890 as
compared to $ 4,047,800 for the three months ended March 31, 2008, an increase
of approximately 8%. The increase in our cost of sales is attributable to a
higher percentage of our net sales being comprised of
commercial
sales rather than residential sales as commercial projects carry a higher cost
of sales than residential projects.
Gross profit.
Gross profit for the three months ended March 31, 2009 was $414,462 as
compared to a gross profit of $ 817,146 for the three months ended March 31,
2008, representing gross margins of approximately 9% and 17%, respectively. The
decrease in gross profit percent is attributed to our higher
fixed
operations cost and some increased costs on our large scale commercial
projects.
Operating
expenses
.
Our
operating expenses consist of sales and marketing expenses and administrative
expenses. For the three months ended March 31, 2009, total operating expenses
were $1,694,132, consisting of sales and marketing costs of $624,313 and
administrative costs of $1,069,819, while total operating expenses for the three
months ended March 31, 2008 were $1,016,563, consisting of sales and marketing
costs of $408,504 and administrative costs of $608,059, representing an increase
of approximately 67%. As a percentage of sales, operating expenses were 35% and
21% for the three months ended March 31, 2009 and 2008, respectively. The
increase in operating expenses is due to hiring of additional sales people in
our commercial sales department and increased professional costs related to
becoming a public company through our share exchange transaction that closed in
September 2008.
Income
taxes
. For the three months ended March 31, 2009, we recorded a tax
benefit of $645,053, primarily due to our recognition of net operating losses.
For the three months ended March 31, 2008, we were not subject to federal income
taxes. The change in income taxes primarily related to a change in our tax
status for federal income taxes.
Net loss.
We had a net loss of $ $618,450 for the three months ended March 31, 2009
as compared to a net loss of $193,559 for the three months ended March 31,
2008.
Comparison
of Fiscal Years Ended December 31, 2008 and 2007
Net
sales.
During the
2008 fiscal year, we had net sales of $44,237,984 as compared to net sales of
$16,685,690 during the 2007 fiscal year, an increase of approximately
165%. The increase is attributable to strong sales growth in Spain
and increased commercial sales in the U.S., which grew almost 585% and 125%,
respectively. We had growth in Spain and U.S. commercial sales
because of increased sales efforts in those markets. There was also
continued growth in our U.S. residential business as a result of a new Southern
California residential sales office that opened during 2008.
Cost of
sales.
Cost of
sales for the 2008 fiscal year was $38,710,592 as compared to $12,440,839 for
the 2007 fiscal year, an increase of approximately 211%. The
increase in cost of sales is attributable to the growth in our commercial sales
as commercial projects carry a higher cost of sales relative to net
sales. During 2008, we were awarded and completed a large commercial
project performing only installation services, which did not involve the high
level of integration that we normally provide.
Gross
profit.
Our gross profit for the 2008 fiscal year was
$5,527,392 as compared to a gross profit of $4,244,851 for the 2007 fiscal year,
representing gross margins of approximately 12.5 % and 25.4%,
respectively. The decrease in gross profit percent is directly
related to our decision to increase our commercial contracts, which generally
have lower gross profit margins.
Operating
expenses
.
Our operating expenses consist of sales and marketing expenses and
administrative expenses. During the 2008 fiscal year, total operating
expenses were $4,729,542, consisting of sales and marketing costs of $2,224,362
and administrative costs of $2,505,180, while total operating expenses for the
2007 fiscal year were $3,371,778, consisting of sales and marketing costs of
$1,493,890 and administrative costs of $1,877,888, representing an increase of
approximately 40%. As a percentage of sales, operating expenses were
10.7% and 20.2% for the twelve months ended December 31, 2008 and 2007,
respectively. The increase in operating expenses from 2007 to 2008 is
due to growth in our commercial sales force and increased professional costs
related to becoming a public company through our share exchange transaction that
closed in 2008.
Other
expense
.
We had other expenses of $45,324 for the 2008 fiscal year as
compared to other expenses of $5,882 for the 2007 fiscal year. The
increase in other expenses was due to increased interest expense from greater
use of the Company’s line of credit.
Net
income.
We had net income of $569,068 for the 2008 fiscal year
as compared to net income of $843,865 for the 2007 fiscal year. The
decrease in net income is attributable to growth in our commercial business,
which has lower gross profit margins as compared to our residential sales, and
an increase in operating expenses.
Liquidity
and Capital Resources
Cash
Flows – Three Months Ended March 31, 2009
Net
cash flow used in operating activities was $2,602,351 for the three months ended
March 31, 2009, while net cash flow provided by operating activities was
$445,025 for the three months ended March 31, 2008. The decrease in net cash
flow from operating activities between the two quarters was mainly due to a
greater net loss and accrued liabilities and taxes.
Net
cash flow used in investing activities was $35,057 for the three months ended
March 31, 2009, while and net cash flow used in investing activities was $13,771
for the three months ended March 31, 2008.
Net cash
flow used in financing activities was $124,537 for the three months ended March
31, 2009, while net cash flow provided by financing activities was $485,839 for
the three months ended March 31, 2008. The decrease in net cash flow from
financing activities was mainly due to the Company
utilizing
its line of credit during the three months ended March 31, 2008 as well as
increased costs we incurred during the three months ended March 31, 2009
associated with the registration of certain securities pursuant to the
Registration Rights Agreement we entered into in connection with our financing
transaction
that
closed in September 2008.
Cash
Flows – Fiscal Year Ended December 31, 2008
Net cash
flow used in operating activities was $115,769 for the 2008 fiscal year
while net cash flow provided by operating activities was $844,698 for the
2007 fiscal year. The decrease in net cash
flow from operating activities was mainly due to an increase in
accounts receivable, an increase in prepaid expense, a decrease in billings in
excess of costs and estimated earnings on uncompleted contracts, which was not
significantly offset by an increase in net cash flow attributable to a
decrease in inventory and accounts payable.
Net cash
flow used in investing activities was $150,868 for the 2008 fiscal year and
net cash flow provided by investing activities was $3,740 for the 2007 fiscal
year. The decrease in net cash flow from investing activities
was due to increased purchases of assets to support operations.
Net cash
flow provided by financing activities was $4,815,118 for the 2008 fiscal
year while net cash flow used in financing activities was $508,275 for the
2007 fiscal year. The increase in net cash flow from financing
activities was mainly due to net proceeds from our $7 million financing that
closed on September 9, 2008.
Material
Impact of Known Events on Liquidity
Our
business is exposed to risks associated with the ongoing financial crisis and
weakening global economy, which may have a material impact on our short-term and
long-term liquidity as a result of the uncertainty of project financing for
commercial solar installations and the risk of non-payment from both
commercial
and residential customers. The recent severe tightening of the credit markets,
turmoil in the financial markets, and weakening global economy are contributing
to slowdowns in the solar industry, which slowdowns may worsen if these economic
conditions are prolonged or deteriorate further. The market for installation of
solar power systems depends largely on commercial and consumer capital spending.
Economic uncertainty exacerbates negative trends in these areas of spending, and
may cause our customers to push out, cancel, or refrain from placing orders,
which may reduce our net sales. Difficulties in obtaining capital and
deteriorating market conditions may also lead to the inability of some customers
to obtain affordable financing, including traditional project financing and
tax-incentive based financing and home equity-based financing, resulting in
lower sales to potential customers with liquidity issues, and
may lead
to an increase of incidents where our customers are unwilling or unable to pay
for systems they purchase, and additional bad debt expense for the Company.
Further, these conditions and uncertainty about future economic conditions may
make it challenging for us to obtain equity and debt financing to
meet our
working capital requirements to support our business.
There
are no other 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 9, 2008, we received gross proceeds of $7,000,000 from
a private placement financing transaction. We also have a credit line that is
utilized solely for working capital and capital expenditures, which expires on
May 27, 2009. We plan to renew it with the lender or replace it with a credit
line with a new lender. Additionally, as the credit markets tighten, we continue
to strengthen our balance sheet, allowing us to continue to receive favorable
credit terms as needed. Thus, we believe that our current cash and cash
equivalents, anticipated cash flow from operations, net proceeds from the
private placement financing, and line of credit 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.
We
may, however, 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
On
March 9, 2009, Premier Power California entered into an agreement with Guaranty
Bank for a $3,000,000 line of credit that became effective on February 27, 2009
and matures on May 27, 2009. This line of credit renewed a $3,000,000 line of
credit that Premier Power California had with Guaranty Bank that matured on
February 26, 2009. The line of credit is secured by the assets of Premier Power
California and personal guaranties issued by our Chairman and Chief Executive
Officer, Dean Marks; Sarilee Marks, the wife of Dean Marks; and Bright Future.
The line of credit bears interest at the prime rate plus 1%. At March 31, 2009,
the interest rate was 6%. As of May 15, 2009, there were no amounts outstanding
under our agreement with Guaranty Bank.
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 March 31, 2009, 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
|
|
$
|
107,372
|
|
|
|
21,781
|
|
|
|
51,534
|
|
|
|
29,983
|
|
|
|
4,074
|
|
Other
Indebtedness
|
|
|
5,152
|
|
|
|
5,152
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
Operating
Leases
|
|
|
181,362
|
|
|
|
54,437
|
|
|
|
70,076
|
|
|
|
50,849
|
|
|
|
―
|
|
Totals:
|
|
$
|
293,886
|
|
|
|
81,370
|
|
|
|
127,610
|
|
|
|
80,832
|
|
|
|
4,074
|
|
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.
LEGAL
PROCEEDINGS
We are
not currently involved in any material legal proceedings, and we are not aware
of any material legal proceedings pending or threatened against
us. We are also not aware of any material legal proceedings involving
any of our directors, officers, or affiliates or any owner of record or
beneficially of more than 5% of any class of our voting securities.
MANAGEMENT
Our
directors and executive officers, their ages, their respective offices and
positions, and their respective dates of election or appointment are as
follows:
Name
|
|
Age
|
|
Position
Held
|
|
Officer/Director
since
|
Dean
R. Marks
|
|
52
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
September
9, 2008
|
|
|
|
|
|
|
|
Miguel
de Anquin
|
|
41
|
|
Chief
Operating Officer, Corporate Secretary, and Director
|
|
September
9, 2008
|
|
|
|
|
|
|
|
Teresa
Kelley
|
|
43
|
|
Chief
Financial Officer
|
|
October
24, 2008
|
|
|
|
|
|
|
|
Kevin
Murray
|
|
59
|
|
Director
|
|
December
8, 2008
|
|
|
|
|
|
|
|
Robert
Medearis
|
|
76
|
|
Director
|
|
December
8, 2008
|
|
|
|
|
|
|
|
Tommy
Ross
|
|
55
|
|
Director
|
|
March
18, 2009
|
Business
Experience Descriptions
Set forth
below is a summary of our executive officers’ and directors’ business experience
for the past 5 years.
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, 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 he 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.
Teresa
Kelley - Chief Financial Officer
Ms.
Kelley was appointed Chief Financial Officer of the Company on October 24, 2008.
Ms. Kelley has over 22 years of experience in corporate accounting and
operations management. Prior to joining the Company, she served as Chief
Financial Officer of Vista Point Technologies, a design and manufacturer of
electronic components, since January 2007. Prior to working at Vista Point
Technologies, from 1987 to January 2007, Ms. Kelley worked at Intel Corporation
where she started as a financial analyst and later served in several management
positions before becoming the Senior Controller of the Intel Networking
business. Ms. Kelley has a B.S. in Business and an MBA from Santa Clara
University.
Kevin
Murray - Director
Mr.
Murray was elected to the board of directors on December 8, 2008. He
is currently a Senior Vice President at the William Morris Agency (“WMA”),
working primarily in its corporate consulting division, a position he has held
since re-joining WMA in 2007 after serving twelve years in the California State
Legislature. From 1998 to 2006, Mr. Murray was a Senator in the
California State Senate. Concurrent to his directorship with the
Company, Mr. Murray sits on the board of the Federal Home Loan Bank of San
Francisco. Mr. Murray graduated from California State University,
Northridge with a degree in business administration and accounting and holds a
Masters of Business Administration from Loyola Marymount University and a Juris
Doctorate from Loyola Law School.
Robert
Medearis - Director
Mr.
Medearis was elected to the board of directors on December 8, 2008. He is
currently retired as a management consultant and professor, and has been for the
past 5 years, but he sits on the board of several private companies, including
Solaicx, Inc., Geographic Expeditions, and Visual Network Design Inc., and the
non-profit organization Freedom From Hunger. Mr. Medearis graduated from
Stanford University with a degree in civil engineering and holds a Masters of
Business Administration from the Harvard Graduate School of Business
Administration.
Tommy
Ross - Director
Mr. Ross
was elected to the board of directors on March 18, 2009. He is currently
the President and Chief Executive Officer of Pinnacle Strategic Group, a
business and political consulting firm. From 2003 to 2008, he was employed
at Southern California Edison, at which he served as Vice President of Public
Affairs from 2007 to 2008. Mr. Ross’ experience in the political arena
also include holding positions to which he was appointed by California Governor
Arnold Schwarzenegger, former California Governor Pete Wilson, and former
California Governor Jerry Brown. He is the former Chairman and founding
member of the California African American Political Action Committee, a Lincoln
Fellow at The Claremont Institute, and the founder, Chairman and President of
The Research and Policy Institute of California. Mr. Ross graduated from
Claremont Men’s College with a degree in political
science.
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 petition under the federal bankruptcy laws or any state insolvency law
filed by or against, or had a receiver, fiscal agent, or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years
before the time of such filing, or any corporation or business association
of which he was an executive officer at or within two years before the
time of such filing;
|
|
·
|
Been
convicted in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
|
|
·
|
Been
the subject of any order, judgment, or decree, not subsequently reversed,
suspended, or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him from, or otherwise limiting, the following
activities:
|
|
(i)
|
Acting
as a futures commission merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the Commodity Futures Trading
Commission, or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank,
savings and loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such
activity;
|
|
(ii)
|
Engaging
in any type of business practice;
or
|
|
(iii)
|
Engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of federal or state
securities laws or federal commodities
laws;
|
|
·
|
Been
the subject of any order, judgment, or decree, not subsequently reversed,
suspended, or vacated, of any federal or state authority barring,
suspending, or otherwise limiting for more than 60 days the right of such
person to engage in any activity described in (i) above, or to be
associated with persons engaged in any such
activity;
|
|
·
|
Been
found by a court of competent jurisdiction in a civil action or by the SEC
to have violated any federal or state securities law, where the judgment
in such civil action or finding by the SEC has not been subsequently
reversed, suspended, or vacated; or
|
|
·
|
Been
found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal
commodities law, where the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended, or vacated.
|
Board
of Directors
Our board
of directors is currently composed of four 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
Our board
of directors approved the charters for our audit committee and compensation
committee on December 19, 2008. The audit committee and compensation
committee were formed on March 18, 2009. The members of the audit
committee are Kevin Murray, Robert Medearis, and Tommy Ross. The
members of the compensation committee are Kevin Murray, Robert Medearis, and
Tommy Ross.
Three of
the members of our board of directors - Kevin Murray, Robert Medearis, and Tommy
Ross - are independent as defined by the SEC and the Nasdaq Capital
Market.
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.
Section
16(a) of the Exchange Act
We are
not subject to reporting obligations under Section 16(a) of the Exchange Act as
we are registered under Section 15(d) of the Exchange Act rather than Section
12(b) or Section 12(g).
Code
of Business Conduct and Ethics
We
have adopted a code of ethics that applies to all directors, officers, and
employees, including our Chief Executive Officer and Chief Financial Officer. A
copy of the code of ethics is attached as Exhibit 14.1 to our Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
November 7, 2008.
EXECUTIVE
COMPENSATION
The
following summary compensation table indicates the cash and non-cash
compensation earned during the fiscal years ended December 31, 2008, 2007,
and 2006 by (i) our Chief Executive Officer (principal executive officer), (ii)
our Chief Financial Officer (principal financial officer), (iii) the three most
highly compensated executive officers other than our CEO and CFO who were
serving as executive officers at the end of our last completed fiscal year,
whose total compensation exceeded $100,000 during such fiscal year ends, and
(iv) up to two additional individuals for whom disclosure would have been
provided but for the fact that the individual was not serving as an executive
officer at the end of our last completed fiscal year, whose total compensation
exceeded $100,000 during such fiscal year ends.
Summary
Compensation Table
Name and
Principal
Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
( $)
|
|
|
Option
Awards
($)
|
|
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
|
|
Non-
qualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
( $)
|
|
|
Total
($)
|
|
Dean
R. Marks,
|
|
2008
|
|
$
|
158,077
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
158,077
|
|
Chairman
of the
|
|
2007
|
|
$
|
159,466
|
|
|
$
|
1,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,322
|
(1)
|
|
$
|
170,132
|
|
Board,
President,
|
|
2006
|
|
$
|
122,308
|
|
|
$
|
6,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,009
|
(2)
|
|
$
|
134,317
|
|
and
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miguel
de Anquin,
|
|
2008
|
|
$
|
153,462
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
153,462
|
|
Chief
Operating
|
|
2007
|
|
$
|
126,624
|
|
|
$
|
1,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,037
|
(3)
|
|
$
|
136,005
|
|
Officer,
former Chief Financial Officer, Corporate Secretary, and
Director
|
|
2006
|
|
$
|
120,000
|
|
|
$
|
6,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,902
|
(4)
|
|
$
|
131,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teresa
Kelley,
|
|
2008
|
|
$
|
25,962
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
|
|
|
$
|
25,962
|
|
Chief
Financial
|
|
2007
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Officer
(5)
|
|
2006
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
_________________
(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 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.
|
(4)
|
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.
|
(5)
|
Ms.
Kelley was appointed as our Chief Financial Officer on October 24,
2008.
|
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 our employment agreements with our executive
officers.
The
Company entered into an Employment Agreement with Teresa Kelley on October 24,
2008 for her services as Chief Financial Officer. Ms. Kelley’s annual
compensation is $150,000. She will receive an annual 20% bonus based on her
efforts in helping the Company achieve the following targets: minimum growth
revenue of 80% in the first year of her employment, 80% growth in the second
year, 70% growth in the third year, and 60% growth in the fourth year (each
growth revenue percentage which may be revised by the Company’s Chief Executive
Officer over the term of Ms. Kelley’s office); annual EBITDA and net income in
excess of the prior year’s EBIDTA and net income; net income margins in excess
of 5%; and acquisitions to secure revenue growth, margin growth, and market
share domestically and internationally. These goals are closely
monitored by the Chief Executive Officer and Board of Directors, and Ms.
Kelley’s efforts will be measured by quarterly and annual performance
evaluations by the Chief Executive Officer and Chief Operating Officer, except
that Ms. Kelley’s efforts at helping the Company acquire other businesses will
be measured quarterly by the Board of Directors, which will review her reports
analyzing potential acquisitions. Ms. Kelley will also receive, for her first
year of employment, 100,000 stock options to purchase the Company’s common
stock, exercisable at a price equal to the closing price of the Company’s common
stock on the day the Board approves the option issuance. Such stock options will
vest 25% per year for each year of employment from the date of issue. For her
second year of employment, Ms. Kelley will receive an additional 125,000 stock
options to purchase the Company’s common stock, exercisable at a price equal to
the closing price of the Company’s common stock on the day the Board approves
the stock issuance. Such stock options will vest 33% per year for each year of
employment from the date of issue. In the event of any sale, merger, acquisition
of over 51% of the Company’s capital stock by a third party, or other change of
control event, any stock options issued to Ms. Kelley under the Employment
Agreement will be fully vested for such year. If the Company
terminates Ms. Kelley without cause after January 22, 2009, she is entitled to a
6 months’ severance payment.
The
following are summaries of Premier Power California’s employment agreements with
its executive officers.
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%, both forms of additional compensation
of which is due to Mr. Marks within 90 days of Premier Power California’s fiscal
year-end and which payments will be accelerated upon a sale of Premier Power
California, merger involving Premier Power California, or public offering of
Premier Power California’s securities. Mr. Marks is entitled to a severance
payment of $180,000 upon termination by Premier Power California without cause
if such termination occurs between December 31, 2008 and December 31, 2010, and
a severance payment of $90,000 upon termination by Premier Power California
without cause if such termination occurs between December 31, 2010 and the
expiration of the agreement. 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%, both forms of
additional compensation of which is due to Mr. de Anquin within 90 days of
Premier Power California’s fiscal year-end and which payments will be
accelerated upon a sale of Premier Power California, merger involving Premier
Power California, or public offering of Premier Power California’s securities.
Mr. de Anquin is entitled to a severance payment of $180,000 upon termination by
Premier Power California without cause if such termination occurs between
December 31, 2008 and December 31, 2010, and a severance payment of $90,000 upon
termination by Premier Power California without cause if such termination occurs
between December 31, 2010 and the expiration of the agreement. The term of the
agreement is for five years. On August 22, 2008, Mr. de Anquin also entered into
a Non-Disclosure and Non-Competition Agreement with Premier Power California in
connection with his employment.
Director
Compensation
The
following table provides compensation information for our directors during the
fiscal year ended December 31, 2008:
Name
|
|
Fees
Earned or
Paid in
Cash ($)
|
|
|
Stock
Awards ($)
|
|
|
Option
Awards ($)
(1)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings ($)
|
|
|
All Other
Compensation
($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean
Marks (2)
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miguel
de Anquin (2)
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
Murray
|
|
$
|
2,500
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Medearis
|
|
$
|
2,500
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
2,500
|
|
|
(1)
|
Reflects
dollar amount expensed by the Company during applicable fiscal year for
financial statement reporting purposes pursuant to FAS
123R. FAS 123R requires the Company to determine the overall
value of the options as of the date of grant, and to then expense that
value over the service period over which the option1 become exercis!ble
(vested). As a general rule, for time in service based options,
the Company will immediately expense any option or portion thereof which
is vested upon grant, while expensing the balance on a pro rata basis over
the remaining vesting term of the
option.
|
|
(2)
|
This
individual’s compensation as a director is reflected in the table above
titled “Summary Compensation
Table.”
|
On
December 19, 2008, the Company entered into an Amended and Restated Agreement to
Serve as Member of the Board of Directors (the “Murray Agreement”) with Kevin
Murray for his services as director. Pursuant to the terms of the
Murray Agreement, Mr. Murray agreed to serve on the Board until October 15,
2011, such term being subject to re-election at our subsequent annual meeting of
shareholders. Mr. Murray is required to attend at least two Board
meetings via teleconference and at least two Board meetings in person per year,
and he will be compensated for his services to the Board with $1,250 for each
Board meeting he attends via teleconference and $2,500 for each Board meeting he
attends in person. Mr. Murray will also receive 50,000 shares of the
our common stock, par value $0.0001 per share (“Common Stock”), according to the
following schedule: (i) 16,500 common stock shares after the first year of
service on the Board, which shares will be issued to Mr. Murray even if the our
shareholders fail to re-elect Mr. Murray at the first annual meeting of
shareholders following Mr. Murray’s election to the Board, (ii) 16,500 common
stock shares after the second year of service on the Board, and (iii) 17,000
common stock shares after the third year of service on the Board.
On
December 19, 2008, the Company entered into an Amended and Restated
Agreement to Serve as Member of the Board of Directors (the “Medearis
Agreement”) with Robert Medearis for his services as a
director. Pursuant to the terms of the Medearis Agreement, Mr.
Medearis agreed to serve on the Board until October 15, 2011, such term being
subject to his re-election at the our subsequent annual meeting of
shareholders. Mr. Medearis is required to attend at least two Board
meetings via teleconference and at least two Board meetings in person per
year. The Medearis Agreement further provides that Andrew Hargadon
may attend up to 50% of the our Board meetings as Mr. Medearis’ designee,
provided, however, that Mr. Medearis agreed that he would not delegate to Mr.
Hargadon, and that he would personally perform, any and all of his business
managerial duties and obligations as a director for the Company, including but
not limited to any director voting decisions regarding the Company and its
business. Mr. Medearis will be compensated for his services with
$1,250 for each Board meeting he attends via teleconference and $2,500 for each
Board meeting he attends in person. Mr. Medearis will also receive
50,000 shares of common stock according to the following schedule: (i) 16,500
common stock shares after the first year of service on the Board, which shares
will be issued to Mr. Medearis even if our shareholders fail to re-elect Mr.
Medearis to the Board at the first annual meeting of shareholders following Mr.
Medearis’ election to the Board, (ii) 16,500 common stock shares after the
second year of service on the Board, and (iii) 17,000 common stock shares after
the third year of service on the Board.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of our
common stock as of May 1, 2009, 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
prospectus;
|
|
•
|
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, California 95762. The percentage of class beneficially owned set forth
below is based on 26,048,750 shares of common stock outstanding on May 1,
2009.
Name and Position
|
|
Number of
Shares
of
Common
Stock
Beneficially
Owned (1)
|
|
|
Percent of
Shares
of
Common
Stock
Beneficially
Owned
(1)(2)
|
|
Dean
R. Marks,
Chairman
of the Board, President, and Chief Executive Officer
|
|
|
11,234,215
|
|
|
|
43.1
|
%
|
|
|
|
|
|
|
|
|
|
Miguel
de Anquin,
Chief
Operating Officer, Corporate Secretary, and Director
|
|
|
6,744,638
|
|
|
|
25.9
|
%
|
|
|
|
|
|
|
|
|
|
Teresa
Kelley,
Chief
Financial Officer
|
|
|
-
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Kevin
Murray,
Director
|
|
|
-
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Robert
Medearis,
Director
|
|
|
-
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Tommy
Ross,
Director
|
|
|
-
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bjorn
Persson
|
|
|
2,547,126
|
|
|
|
9.8
|
%
|
|
|
|
|
|
|
|
|
|
Genesis
Capital Advisors, LLC (3)
|
|
|
1,580,598
|
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
Vision
Opportunity Master Fund, Ltd. (4)
|
|
|
2,649,359
|
(5)
|
|
|
9.99
|
%
(5)
|
|
|
|
|
|
|
|
|
|
All
Executive Officers and Directors as a Group (6 persons)
|
|
|
17,978,853
|
|
|
|
69.0
|
%
|
_________________
* 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, we
issued 24,218,750 shares of common stock, equal to approximately 93.1% of
our issued and outstanding common stock as of the closing date of the
Share Exchange. After the issuance of shares in connection with the
closing of the Share Exchange, there were approximately 26,018,750 issued
and outstanding shares of our common stock. Percentage totals may vary
slightly due to rounding. Also, in connection with the closing of the
Financing, we 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 our
common stock at an exercise price of $2.50 and $3.00 per share,
respectively, of our 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, 5th Floor, Grand
Cayman KY1-1109, Cayman Islands. Adam Benowitz, as the managing member of
Vision Capital Advisors, LLC, the investment advisor to this stockholder,
has dispositive and voting power over these securities and may be deemed
to be the beneficial owner of these
securities.
|
(5)
|
This
number includes 2,178,000 shares of Common Stock and 471,359 shares
of Common Stock issuable upon conversion of 471,359 shares of our Series A
Preferred Stock, which are presently convertible. This number does not
include (i) 3,028,641 shares of Common Stock underlying its shares of
Series A Preferred Stock, (ii) 1,750,000 shares of Common Stock underlying
its Series A Warrants, (iii)1,750,000 shares of Common Stock underlying
its Series B Warrants, or (iv) 1,600,000 shares of Common Stock underlying
an option to purchase such shares because each of these securities held by
the stockholder contains a restriction on conversion or exercise, as the
case may be, limiting such holder’s ability to convert or exercise to the
extent that such conversion or exercise would cause the beneficial
ownership of the holder, together with its affiliates, to exceed 9.99% of
the number of shares of Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock as a result of a
conversion or exercise. The stockholder may waive this limitation upon 61
days’ notice to the Company. As of May 15, 2009, however, the
Company has not received any such
notice.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth
below are our related party transactions since January 1, 2008:
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 2.6%, 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.
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 shares of
our common stock to the PPG Owners. Immediately prior to the Share Exchange, 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 Share Exchange.
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 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 the Premier Power Group, which became our principal
business.
Concurrently
with the closing of the Share Exchange 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.
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 Share Exchange. This description is only a summary. The reader should
also refer to our certificate of incorporation and bylaws that have been
incorporated by reference or filed with the SEC as exhibits.
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 our Current Report on Form 8-K filed September 11,
2008.
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 aly class of stoc) ranking as to dividends,
redemption or distr)bution of assets upon a Liquidation (as defined in Section 5
-f the Series A Aertificate) senior to or otherwise
pari
passu
with the Series A Preferred, (c) amend its certificate of
inc/rporation or other charter documents in any manner that adver1ely affects
any rights of the holders of Series A Preferred, (d) increase the number of
authorized shares of Series A Prefepred, 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 !ny time and from time to time after the issue date at the
holder’s opti-n into shares of the Company’s common stock (subject to beneficial
ownership limitations as set forth il Section 6(c) of the Series A Certificate)
determined by dividing the Stated alue 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, subject to
Section 6(c) of the Series A Certificate.
“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.
Beneficial
Ownership Limitation
Holders
of our Series A Preferred are restricted from converting their shares of Series
A Preferred to Common Stock if the number of shares of Common Stock to be issued
pursuant to such conversion would cause the number of shares of Common Stock
beneficially owned by such holder, together with its affiliates, at such time to
exceed 9.99% of the then issued and outstanding shares of Common Stock;
provided, however, that such holder may waive this limitation upon 61 days’
notice to the Company. As of May 15, 2009, however, the Company has
not received any such notice.
Redemption
Rights
Upon
the occurrence of a Triggering Event, each Holder shall (in addition to all
other rights it may have hereunder or under applicable law) have the right,
exercisable at the sole option of such Holder, to require the Corporation to,
(A) with respect to the Triggering Events set forth in Sections 9(a)(iii), (v),
(vi), (vii), (viii), (ix), (as to Changes of Control approved by the Board of
Directors of the Corporation) and (x) (as to voluntary filings only), redeem all
of the Preferred Stock then held by such Holder for a redemption price, in cash,
equal to the Triggering Redemption Amount or (B) at the option of each Holder
and with respect to the Triggering Events set forth in Sections 9(a)(i), (ii),
(iv), (ix) (as to Changes of Control not approved by the Board of Directors of
the Corporation), (x) (as to involuntary filings only), (xi) and (xii), either
(a) redeem all of the Preferred Stock then held by such Holder for a redemption
price, in shares of Common Stock, equal to a number of shares of Common Stock
equal to the Triggering Redemption Amount divided by 75% of the average of the
10 VWAPs immediately prior to the date of election hereunder or (b) increase the
dividend rate on all of the outstanding Preferred Stock held by such Holder to
18% per annum thereafter. The Triggering Redemption Amount, in cash or in
shares, shall be due and payable or issuable, as the case may be, within five
(5) Trading Days of the date on which the notice for the payment therefor is
provided by a Holder (the “Triggering Redemption Payment Date”). If
the Corporation fails to pay in full the Triggering Redemption Amount hereunder
on the date such amount is due in accordance with this Section, the Corporation
will pay interest thereon at a rate equal to the lesser of eighteen percent
(18%) per annum or the maximum rate permitted by applicable law, accruing daily
from such date until the Triggering Redemption Amount, plus all such interest
thereon, is paid in full. For purposes of this Section, a share of
Preferred Stock is outstanding until such date as the applicable Holder shall
have received Conversion Shares upon a conversion (or attempted conversion)
thereof that meets the requirements hereof or has been paid the Triggering
Redemption Amount in cash.
“Triggering
Event” means any one or more of the following events (whatever the reason and
whether it shall be voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. the
failure of the initial Conversion Shares Registration Statement to be declared
effective by the Commission on or prior to the 270
th
calendar day after the Original Issue Date;
ii. if,
during the Effectiveness Period, the effectiveness of the Conversion Shares
Registration Statement lapses for more than an aggregate of sixty (60) calendar
days (which need not be consecutive calendar days) during any twelve (12) month
period, or the Holders shall not otherwise be permitted to resell Registrable
Securities under the Conversion Shares Registration Statement for more than an
aggregate of sixty (60) calendar days (which need not be consecutive calendar
days) during any twelve (12) month period;
iii. the
Corporation shall fail to deliver certificates representing Conversion Shares
issuable upon a conversion hereunder that comply with the provisions hereof
prior to the fifth Trading Day after such shares are required to be delivered
hereunder, or the Corporation shall provide written notice to any Holder,
including by way of public announcement, at any time, of its intention not to
comply with requests for conversion of any shares of Preferred Stock in
accordance with the terms hereof;
iv. one
of the Events (as defined in the Registration Rights Agreement) described in
subsections (i), (ii) or (iii) of Section 2(b) of the Registration Rights
Agreement shall not have been cured to the satisfaction of the Holders prior to
the expiration of thirty (30) calendar days from the Event Date (as defined in
the Registration Rights Agreement) relating thereto (other than an Event
resulting from a failure of a Conversion Shares Registration Statement to be
declared effective by the Commission on or prior to the 270th calendar day after
the Original Issue Date, which shall be covered by Section
9(a)(i));
v. the
Corporation shall fail for any reason to pay in full the amount of cash due
pursuant to a Buy-In within five Trading days after notice therefor is delivered
hereunder or shall fail to pay all amounts owed on account of any Event (as
defined in the Registration Rights Agreement) within five Trading days of the
date due;
vi. the
Corporation shall fail to have available a sufficient number of authorized and
unreserved shares of Common Stock to issue to such Holder upon a conversion
hereunder;
vii. unless
specifically addressed elsewhere in this Certificate of Designation as a
Triggering Event, the Corporation shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any breach of
the Transaction Documents, and such failure or breach shall not, if subject to
the possibility of a cure by the Corporation, have been cured within thirty (30)
calendar days after the date on which written notice of such failure or breach
shall have been delivered;
viii. the
Corporation shall redeem more than a
de
minimis
number
of Junior Securities other than as to repurchases of Common Stock or
Common Stock Equivalents from departing officers and directors of the
Corporation, provided that, while any of the Preferred Stock remains
outstanding, such repurchases shall not exceed an aggregate of $100,000 from all
officers and directors;
ix. the
Corporation shall be party to a Change of Control Transaction;
x. there
shall have occurred a Bankruptcy Event;
xi. the
Common Stock shall fail to be listed or quoted for trading on a Trading Market
for more than ten (10) Trading Days, which need not be consecutive Trading Days;
or
xii. any
monetary judgment, writ or similar final process shall be entered or filed
against the Corporation, any subsidiary or any of their respective property or
other assets for greater than $250,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of forty five
(45) calendar days.
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
(subject to beneficial ownership limitations). 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 /f 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.
|
Holders
of the Series A Warrants and Series B Warrants are restricted from exercising
such warrants if the number of shares of Common Stock to be issued pursuant to
such exercise would cause the number of shares of Common Stock beneficially
owned by such holder, together with its affiliates, at such time to exceed 9.99%
of the then issued and outstanding shares of Common Stock; provided, however,
that such holder may waive this limitation upon 61 days’ notice to the
Company. As of May 15, 2009, however, the Company has not received
any such notice.
Registration
Rights
We
agreed to undertake the filing of this prospectus and related registration
statement to register for resale the following: (i) 3,500,000 shares of common
stock that may be issued upon the conversion of the Series A Convertible
Preferred Stock, (ii) 1,750,000 shares of common stock that may be issued upon
the exercise of the Series A Warrants, (iii) 1,750,000 shares of common stock
that may be issued upon the exercise of the Series B Warrants, (iv) 1,580,598
shares of common stock issued to Genesis Capital Advisors, LLC, which were
issued as part of the Share Exchange, (v) 1,600,000 shares of common stock, and
(vi) 1,600,000 share of common stock underlying an option to purchase such
shares, except that if the SEC sets forth a limitation on the number of
securities permitted to be registered, then the number of shares registered for
resale will be reduced
pro
rata
among the selling security holders with regard to the aggregate
number of initial registrable securities held by such holder at the time of
filing of the registration statement. In the event that the
registration statement is not declared effective by the SEC within 180 calendar
days following the closing of the Financing (or, in the event of a “full review”
of the registration statement by the SEC, 240 calendar days after such closing)
(the “Required Effective Date”), then we will be required to issue additional
shares of Common Stock (the “Late Registration Shares”) to the investor in our
September 9, 2008 Financing in an amount equal to 1% of the total shares of
Common Stock into which the total number of shares of Series A Preferred then
held by such investor is convertible for each 30 calendar day period until the
registration statement is declared effective by the SEC, provided, however, that
in no event shall the Late Registration Shares, if any, exceed in the aggregate,
12% of such shares purchased. The Investor waived its right to the Late
Registration Shares through May 19, 2009. The Original RRA has not been
amended to reflect such waiver.
Up to an
additional 20% of the shares being registered by this registration statements
that are required to be registered pursuant to the Registration Rights
Agreement, as amended, will be registered in the future pursuant to Rule 416
under the Securities Act of 1933, as amended, on the occurrence of an event that
is covered by Rule 416.
Registration
of these shares of Common Stock upon exercise of these registration rights would
result in the holders being able to trade these shares without restriction under
the Securities Act once the applicable registration statement is declared
effective. We will pay all registration expenses related to any
registration.
Market
Price of and Dividends on Common Equity and Related Stockholder
Matters
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.”
The
following table sets forth the high and low bid information for our common stock
for each quarter within our last two fiscal years and the quarter ended March
31, 2009, as reported by the OTC Bulletin Board. The bid prices reflect
inter-dealer quotations, do not include retail markups, markdowns, or
commissions, and do not necessarily reflect actual
transactions.
|
|
Low
|
|
|
High
|
|
2009
|
|
|
|
|
|
|
Quarter
ended March 31, 2009
|
|
$
|
2.00
|
|
|
$
|
4.50
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
Quarter
ended December 31, 2008
|
|
$
|
2.25
|
|
|
$
|
5.05
|
|
Quarter
ended September 30, 2008*
|
|
|
4.05
|
|
|
|
5.90
|
|
Quarter
ended June 30, 2008
|
|
|
*
|
|
|
|
*
|
|
Quarter
ended March 31, 2008
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
Quarter
ended December 31, 2007
|
|
$
|
*
|
|
|
$
|
*
|
|
Quarter
ended September 30, 2007
|
|
|
*
|
|
|
|
*
|
|
Quarter
ended June 30, 2007
|
|
|
*
|
|
|
|
*
|
|
Quarter
ended March 31, 2007
|
|
|
*
|
|
|
|
*
|
|
_________________________
* Our
Common Stock had no active trading market until September 12, 2008.
The
last reported closing sales price for shares of our common stock was $4.00 per
share on the Over-The-Counter Bulletin Board on May 14, 2009.
Holders
As of May
1, 2009, we had approximately 44 stockholders of record of our common stock
based upon the stockholder list provided by our transfer agent.
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.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE
There are
not and have not been any disagreements between us and our accountants on any
matter of accounting principles, practices, or financial statement disclosure
during our two most recent fiscal years and subsequent interim
period.
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION
FOR
SECURITIES ACT LIABILITIES
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
We have
adopted the following indemnification provisions in our certificate of
incorporation for our 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.”
We also
have a $2,000,000 director’s and officer’s liability insurance
policy.
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.
ADDITIONAL
INFORMATION
Premier
Power Renewable Energy, Inc. is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Reports filed
with the SEC pursuant to the Exchange Act, including proxy statements, annual
and quarterly reports, and other reports filed by the Company can be inspected
and copied at the public reference facilities maintained by the SEC at the
Headquarters Office, 100 F. Street N.E., Room 1580, Washington, D.C. 20549. The
reader may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. The reader can request copies of these
documents upon payment of a duplicating fee by writing to the SEC. The Company’s
filings are also available on the SEC’s internet site at
http://www.sec.gov.
Premier
Power Renewable Energy, Inc.
Index
to Consolidated Financial Statements
Contents
|
Pages
|
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December
31, 2008
|
F-2
|
|
|
Condensed
Consolidated Statements of Operations for the Three Months Ended March 31,
2009 (unaudited) and March 31, 2008 (unaudited)
|
F-3
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2009 (unaudited) and March 31, 2008 (unaudited)
|
F-4
|
|
|
Condensed
Consolidated Statements of Shareholders’ Equity for the Three Months Ended
March 31, 2009 (unaudited)
|
F-5
|
|
|
Notes
to the Condensed Consolidated Financial Statements (unaudited)
|
F-6
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-17
|
|
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
F-18
|
|
|
Consolidated
Statements of Operations for the Years Ended December 31, 2008 and
2007
|
F-19
|
|
|
Consolidated
Statements of Shareholders’ Equity for the Years Ended December 31, 2008
and 2007
|
F-20
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008 and
2007
|
F-21
|
|
|
Notes
to the Consolidated Financial Statements for the Years Ended December 31,
2008 and 2007
|
F-22
|
PREMIER
POWER RENEWABLE ENERGY, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF MARCH 31, 2009 AND DECEMBER 31, 2008
|
|
March 31,
2009
|
|
|
December 31,
2008
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,899,388
|
|
|
$
|
5,770,536
|
|
Accounts
receivable, net of allowance for doubtful accounts of $18,000 and $18,000
at March 31, 2009 and at December 31, 2008, respectively
|
|
|
4,025,281
|
|
|
|
4,767,653
|
|
Inventory
|
|
|
1,458,843
|
|
|
|
1,424,910
|
|
Prepaid
expenses and other current assets
|
|
|
181,590
|
|
|
|
259,328
|
|
Costs
and estimated earnings in excess of billings on uncompleted
contracts
|
|
|
830,140
|
|
|
|
235,929
|
|
Sales
tax receivable
|
|
|
250,517
|
|
|
|
93,775
|
|
Deferred
tax assets
|
|
|
262,709
|
|
|
|
228,835
|
|
Total
current assets
|
|
|
9,908,468
|
|
|
|
12,780,966
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
501,537
|
|
|
|
474,905
|
|
Intangible
assets
|
|
|
986,839
|
|
|
|
1,048,420
|
|
Goodwill
|
|
|
483,496
|
|
|
|
483,496
|
|
Deferred
tax assets, long-term
|
|
|
668,350
|
|
|
|
24,867
|
|
Total
assets
|
|
$
|
12,548,690
|
|
|
$
|
14,812,654
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,020,664
|
|
|
$
|
3,707,141
|
|
Accrued
liablilities
|
|
|
915,242
|
|
|
|
1,368,018
|
|
Other
current
|
|
|
506,560
|
|
|
|
-
|
|
Billings
in excess of costs and estimated earnings on uncompleted
contracts
|
|
|
726,063
|
|
|
|
1,206,403
|
|
Taxes
payable
|
|
|
280,598
|
|
|
|
184,470
|
|
Borrowings,
current
|
|
|
26,933
|
|
|
|
38,311
|
|
Total
current liabilities
|
|
|
5,476,060
|
|
|
|
6,504,343
|
|
|
|
|
|
|
|
|
|
|
Borrowings,
non-current
|
|
|
85,591
|
|
|
|
92,407
|
|
Deferred
tax liabilities, long-term
|
|
|
343,279
|
|
|
|
343,279
|
|
Total
liabilities
|
|
|
5,904,930
|
|
|
|
6,940,029
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A convertible preferred stock, par value $.0001 per share: 5,000,000
shares designated; 20,000,000 shares of preferred stock authorized;
3,500,000 shares issued and outstanding at March 31, 2009 and December 31,
2008, respectively
|
|
|
350
|
|
|
|
350
|
|
Common
stock, par value $.0001 per share; 500,000,000 shares
authorized;
26,048,750
and 26,048,750 shares issued and outstanding at March 31, 2009 and
December 31, 2008, respectively
|
|
|
2,605
|
|
|
|
2,605
|
|
Additional
paid-in-capital
|
|
|
5,687,987
|
|
|
|
7,542,064
|
|
Retained
earnings
|
|
|
1,038,273
|
|
|
|
369,296
|
|
Accumulated
other comprehensive (loss)
|
|
|
(85,455
|
)
|
|
|
(41,690
|
)
|
Total
shareholders' equity
|
|
|
6,643,760
|
|
|
|
7,872,625
|
|
Total
liabilities and shareholders' equity
|
|
$
|
12,548,690
|
|
|
$
|
14,812,654
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND MARCH 31, 2008
|
|
Three
Months Ended
March 31,
|
|
|
Three
Months Ended
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
4,793,352
|
|
|
$
|
4,864,946
|
|
Cost
of sales
|
|
|
(4,378,890
|
)
|
|
|
(4,047,800
|
)
|
Gross
profit
|
|
|
414,462
|
|
|
|
817,146
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
624,313
|
|
|
|
408,504
|
|
General
and administrative
|
|
|
1,069,819
|
|
|
|
608,059
|
|
Total
operating expenses
|
|
|
1,694,132
|
|
|
|
1,016,563
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(1,279,670
|
)
|
|
|
(199,417
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(1,771
|
)
|
|
|
(6,622
|
)
|
Interest
income
|
|
|
17,938
|
|
|
|
9,129
|
|
Total
other income (expense), net
|
|
|
16,167
|
|
|
|
2,507
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(1,263,503
|
)
|
|
|
(196,910
|
)
|
|
|
|
|
|
|
|
|
|
Income
tax (benefit) expense
|
|
|
(645,053
|
)
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
Net
loss before minority interest
|
|
|
(618,450
|
)
|
|
|
(199,710
|
)
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
-
|
|
|
|
6,151
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(618,450
|
)
|
|
$
|
(193,559
|
)
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,048,750
|
|
|
|
21,159,451
|
|
Diluted
|
|
|
26,048,750
|
|
|
|
21,159,451
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND MARCH 31, 2008
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
|
|
March 31, 2009
|
|
|
March 31, 2008
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(618,450
|
)
|
|
$
|
(193,559
|
)
|
Minority
interest
|
|
|
-
|
|
|
|
(6,151
|
)
|
Net loss
before minority interest
|
|
|
(618,450
|
)
|
|
|
(199,710
|
)
|
Adjustments
to reconcile net loss provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Employees
stock compensation
|
|
|
9,556
|
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
101,028
|
|
|
|
24,270
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
522,198
|
|
|
|
1,363,921
|
|
Sales
tax receivable
|
|
|
(155,450
|
)
|
|
|
-
|
|
Inventory
|
|
|
(40,946
|
)
|
|
|
167,065
|
|
Prepaid
expenses and other assets
|
|
|
77,356
|
|
|
|
10,597
|
|
Costs
and estimated earnings in excess of billings
|
|
|
|
|
|
|
-
|
|
on
uncompleted contracts
|
|
|
(592,967
|
)
|
|
|
(614,521
|
)
|
Accounts
payable
|
|
|
(438,754
|
)
|
|
|
(828,740
|
)
|
Accrued
liablities
|
|
|
(437,074
|
)
|
|
|
203,632
|
|
Billings in
excess of costs and estimated earnings
|
|
|
|
|
|
|
-
|
|
on
uncompleted contracts
|
|
|
(454,421
|
)
|
|
|
329,511
|
|
Income
tax payable
|
|
|
104,882
|
|
|
|
-
|
|
Deferred
taxes
|
|
|
(679,309
|
)
|
|
|
(11,000
|
)
|
Net
cash (used in) provided by operating activities
|
|
|
(2,602,351
|
)
|
|
|
445,025
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
|
(35,057
|
)
|
|
|
(13,771
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
principal payments on borrowings
|
|
|
(54,891
|
)
|
|
|
(14,161
|
)
|
Proceeds
from line of credit
|
|
|
-
|
|
|
|
500,000
|
|
Cost
related to share registration
|
|
|
(69,646
|
)
|
|
|
-
|
|
Net
cash (used in) provided by financing activities
|
|
|
(124,537
|
)
|
|
|
485,839
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency
|
|
|
(109,203
|
)
|
|
|
(31,382
|
)
|
(Decrease)
increase in cash and cash equivalents
|
|
|
(2,871,148
|
)
|
|
|
885,711
|
|
Cash
and cash equivalents at begining of period
|
|
|
5,770,536
|
|
|
|
1,277,043
|
|
Cash
and cash equivalents at end of period
|
|
$
|
2,899,388
|
|
|
$
|
2,162,754
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of notes to acquire equipment
|
|
$
|
38,768
|
|
|
$
|
-
|
|
Initial
valuation of derivative liability
|
|
$
|
506,560
|
|
|
$
|
-
|
|
Interest
paid
|
|
$
|
1,864
|
|
|
$
|
6,622
|
|
Taxes
paid
|
|
$
|
9,450
|
|
|
$
|
2,800
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR
THE THREE MONTHS ENDED MARCH 31, 2009
|
|
Common
Stock
|
|
Preferred
Stock
|
|
|
Additional
Paid
|
|
|
Retained
|
|
|
Accumulated
Other
Compre-
hensive
|
|
|
Unaudited
|
|
|
|
Shares
|
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
|
In
Capital
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2008
|
|
|
26,048,750
|
|
|
$
|
2,605
|
|
|
3,500,000
|
|
|
$
|
350
|
|
|
$
|
7,542,064
|
|
|
$
|
369,296
|
|
|
$
|
(41,690
|
)
|
|
$
|
7,872,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(618,450
|
)
|
|
|
|
|
|
|
(618,450
|
)
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,765
|
)
|
|
|
(43,765
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(662,215
|
)
|
Employee
stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,556
|
|
|
|
|
|
|
|
|
|
|
|
9,556
|
|
Cost
related to share registration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69,646
|
)
|
|
|
|
|
|
|
|
|
|
|
(69,646
|
)
|
Cummulative
effect of adjustment upon adoption of EITF 07-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,793,987
|
)
|
|
|
1,287,427
|
|
|
|
|
|
|
|
(506,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
March 31, 2009 (unaudited)
|
|
|
26,048,750
|
|
|
$
|
2,605
|
|
|
3,500,000
|
|
|
$
|
350
|
|
|
$
|
5,687,987
|
|
|
$
|
1,038,273
|
|
|
$
|
(85,455
|
)
|
|
$
|
6,643,760
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
1.
|
ORGANIZATION
AND NATURE OF BUSINESS
|
Premier
Power Renewable Energy, Inc., a Delaware corporation (the “Parent”), and its
subsidiaries, 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”) (collectively the
“Company”) designs, engineers, and installs photovoltaic systems in the United
States and Spain.
Prior to
September 9, 2008, Premier Power California and Bright Future were wholly owned
by a common shareholder group. That same shareholder group was deemed to
exercise control over Premier Power Spain through a 51% ownership interest,
management control, and the absence of disproportionate voting rights. On
September 1, 2008, that shareholder group exchanged their interests in Premier
Power Spain for shares of common stock of Premier Power California. On August
27, 2008, the holders of the 49% minority interest in Premier Power Spain
exchanged their interests in Premier Power Spain for shares of common stock of
Premier Power California. A summary of the fair value of the acquired tangible
and intangible assets and liabilities held by the 49% minority interest is as
follows:
Fair
value of shares exchanged
|
|
$
|
1,489,234
|
|
Tangible
assets acquired
|
|
$
|
(1,033,603
|
)
|
Amortizing
intangible assets acquired
|
|
$
|
(1,110,001
|
)
|
Liabilities
assumed
|
|
$
|
1,137,866
|
|
Goodwill
|
|
$
|
483,496
|
|
As of
December 31, 2008, the Company has completed the process of valuing the acquired
assets and liabilities. There were no material adjustments to the
initial allocation of the acquisition price as a result of the completion of
this process.
The
historical financial statements of the Company prior to September 9, 2008
present its financial position, results of operations, and cash flows on a
combined basis.
Pursuant
to a reverse acquisition between the Parent (formerly “Harry’s Trucking, Inc.”)
and Premier Power California that closed on September 9, 2008, the shareholders
of Premier Power California exchanged 100% of their interests in Premier Power
California for an aggregate 24,218,750 shares of the Parent’s common
stock.
Subsequent
to the merger, the former shareholders of Premier Power California held
approximately 87% of the outstanding common stock of the Company. The merger was
considered to be a reverse acquisition accounted for as a recapitalization.
Premier Power California was considered to be the accounting acquirer, and the
historical financial statements of the Company are those of Premier Power
California. The outstanding shares, members’ equity, and earnings per share in
the historical financial statements have been restated to
give
effect to the shares of common stock issued to the controlling
shareholders.
In
connection with the reverse acquisition, the Company issued 3,500,000
units, each unit consisting of 1 share of Series A Convertible Preferred Stock,
½ of a Series A Warrant, and ½ of a Series B Warrant in exchange for $5,511,845
in net proceeds. Each 1 share of Series A Convertible Preferred Stock converts
into 1 share of common stock. Each 1 Series A Warrant and 1 Series B Warrant
entitles the holder thereof to purchase one share of common stock at $2.50 and
$3.00 per share, respectively.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis of Presentation
- The
accompanying condensed consolidated financial statements are unaudited and have
been prepared in accordance with generally accepted accounting principles for
interim financial information. They should be read in conjunction with the
financial statements and related notes to the financial statements of Premier
Power Renewable Energy, Inc. (the “Company”) for the years ended
December 31, 2008 and 2007 appearing in the Company’s Form 10-K filed with the
Securities and Exchange Commission (the “SEC”). The March 31, 2009 unaudited
interim condensed consolidated financial statements on Form 10-Q have been
prepared pursuant to the rules and regulations of the SEC for smaller reporting
companies. Certain information and note disclosures normally included in the
annual financial statements on Form 10-K have been condensed or omitted pursuant
to those rules and regulations, although the Company’s management believes the
disclosures made are adequate to make the information presented not misleading.
In the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the results of operation for the
interim periods presented have been reflected herein. The results of operations
for the interim periods are not necessarily indicative of the results to be
expected for the entire year.
The
consolidated financial statements include the accounts of Premier Power
Renewable Energy, Inc. and its subsidiaries. Intercompany balances, transactions
and cash flows are eliminated on consolidation.
Use of Estimates
- The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Significant estimates include the allowance for doubtful accounts, warranty
reserves, revenue recognition, the estimated useful life of property and
equipment, derivative values, and income taxes. Accordingly, actual results
could differ from those estimates.
Cash and Cash Equivalents
-
Cash and cash equivalents include cash on hand or in the bank and short-term
investment securities with remaining maturities of 90 days or less at date of
purchase.
The
Company maintains its cash in bank deposit accounts that, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company had $2,672,010 and $5,129,335 in cash in bank accounts at
March 31, 2009 and December 31, 2008, respectively, in excess of deposit
insurance limits.
Concentrations and Credit Risk
- One customer accounted for 24% of the Company’s sales for the three
months ended March 31, 2009. One customer accounted for 27% of the Company’s
revenues, another 10% of revenue and a third customer accounted for 9% of
revenue for the three months ended March 31, 2008. Accounts
receivable primarily consist of trade receivables and amounts due from state
agencies and utilities for rebates on solar systems installed. At
March 31, 2009, the Company had two customers that accounted for 34% and 18%,
respectively, of the Company’s accounts receivable. At March
31, 2008, four customers accounted for 20, 18%, 17%, and 14% ,
respectively, of the Company’s accounts receivable. The Company monitors account
balances and follows up with accounts that are past due as defined in the terms
of the contract with the customer. To date, the Company’s losses on
uncollectible accounts receivable have been immaterial. The Company maintains an
allowance for doubtful accounts receivable based on the expected collectability
of its accounts receivable. The allowance for doubtful accounts is based on
assessments of the collectability of specific customer accounts and the aging of
the accounts receivable. If there is a deterioration of a major customer’s
credit worthiness or actual defaults are higher than historical experience, the
allowance for doubtful accounts is increased. The allowance for doubtful
accounts was $18,000 and $18,000 as of March 31, 2009 and December 31, 2008,
respectively.
The
Company purchases its solar panels from a limited number of vendors, but
believes that in the event it is unable to purchase solar panels from these
vendors, alternative sources of solar panels will be available.
Inventory
- Inventory,
consisting primarily of raw materials, is recorded using the average cost
method and is carried at the lower of cost or market.
Property and Equipment
-
Property and equipment with a value greater than $2,000 are recorded at cost and
depreciated using the 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.
Stock-Based Compensation –
The
Company accounts for stock-based compensation under the provisions of Statement
of Financial Accounting Standards No. 123 (revised 2004), “
Share-Based Payment
,” (SFAS
No. 123(R)), which requires the Company to measure the stock-based compensation
costs of share-based compensation arrangements based on the grant date fair
value and generally recognizes the costs in the financial statements over the
employee requisite service period. Stock-based compensation expense
for all stock-based compensation awards granted was based on the grant date fair
value estimated in accordance with the provisions of SFAS No.
123(R).
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
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 a customer’s financial condition
could put recoverability at risk.
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.
Advertising
- The Company
expenses advertising costs as they are incurred. Advertising costs were
$171,061and $149,174 for the three months ended March 31, 2009 and 2008,
respectively.
Product Warranties -
Prior to
January 1, 2007, the Company provided a five year warranty covering the labor
and materials associated with its installations. Effective January 1, 2007, the
Company changed the coverage to generally be ten years in the U.S. and to one
year in Spain for all contracts signed after December 31, 2006. Solar panels and
inverters are warranted by the manufacturer for 25 years and 10 years,
respectively. The Company recorded warranty expense of $83,882 and warranty
claims of $42,624 for the three months ended March 31, 2008. Activity
in the Company’s warranty reserve for the three months ended March 31, 2009 was
as follows:
|
|
Three
Months Ended
March
31, 2009
|
|
Balance
at beginning of period
|
|
$
|
367,250
|
|
|
|
|
|
|
Warranty
expense
|
|
|
113,301
|
|
|
|
|
|
|
Less:
Warranty claims
|
|
|
(148,304
|
)
|
|
|
|
|
|
Balance
at end of period
|
|
$
|
332,247
|
|
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 respective
period. Translation gains and losses are not included in determining net income
but are accumulated in a separate component of shareholders’ equity. Foreign
currency transaction gains and losses are included in the determination of net
income (loss) in the period in which they occur. For the three months ended
March 31, 2009 and 2008, the foreign currency transaction loss was
$41,093 and $69,244, respectively.
Minority Interest
– The
minority interest reflected in the statement of operations represents the
49% shareholdings of the non-controlling shareholders in the Company’s Spanish
operations, Premier Power Spain. Concurrent with the reverse merger, these
shareholdings were converted into shares of the Company’s stock and no longer
reported as a minority interest effective September 9, 2008.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
Earnings per Share –
Earnings
per share is computed in accordance with the provisions of SFAS No. 128, “
Earnings Per Share
.” Basic
net income (loss) per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted-average number of common shares outstanding during
the period, as adjusted for the dilutive effect of the Company’s outstanding
convertible preferred shares using the “if converted” method and dilutive
potential common shares. For all of the periods presented, the Company had no
dilutive potential common shares except for outstanding convertible preferred
shares during the three months ended March 31, 2009. Warrants to
purchase 3,500,000 of the Company’s common shares were excluded as their
exercise price exceeded the average market price of the Company’s common
shares.
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
|
|
March
31, 2009
|
|
|
March
31, 2008
|
|
Net
Income (Loss)
|
|
$
|
(618,450
|
)
|
|
$
|
(193,559
|
)
|
Earnings
Per Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,048,750
|
|
|
|
21,159,451
|
|
Diluted
effect of convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
Diluted
|
|
|
26,048,750
|
|
|
|
21,159,451
|
|
On
December 19, 2008, the board of directors approved the Premier Power Renewable
Energy, Inc. 2008 Equity Incentive Plan (the “Incentive Plan”). All
of the Company’s employees, officers, and directors, and those consultants who
(i) are natural persons and (ii) provide bona fide services to the Company not
connected to a capital raising transaction or the promotion or creation of a
market for our securities are eligible to be granted options or restricted stock
awards under the Incentive Plan. In January 2009, the Company granted
stock options for 1,134,229 shares of its common stock to eligible
persons.
Comprehensive Loss
-
Statement of Financial
Accounting Standards No. 130, “
Reporting Comprehensive
Income
,” establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive loss, as defined, includes all
changes in equity during the period from non-owner sources, such as foreign
currency translation adjustments.
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
the 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.
For the
three months ended March 31, 2009, the Company recorded approximately
$(612,000), $(34,000) and $1,000 in federal, state, and foreign income tax
(benefit) expense, respectively. For the three months ended March 31,
2008, the Company recorded $0, $3,000, and $0 in federal, state, and
foreign income tax expense, respectively
.
Prior to
September 2008, the Company was not subject to federal income
tax. For the three months ended March 31, 2008, the Company’s pro
forma tax and earnings per share data, had it been subject to federal income
tax, would not have been materially different from that presented, and, thus,
such pro forma data is not presented.
At March
31, 2009, the Company recorded a deferred tax asset of approximately $645,000
related to its net operating loss. At March 31, 2009 and December 31, 2008, the
Company had income tax payable of approximately $170,000 and $184,000,
respectively.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
Effective
September 1, 2008, the Company adopted Financial Accounting Standards
Interpretation No. 48, or FIN No. 48,
“Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109”
(FIN 48). FIN 48 prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of uncertain tax positions taken or expected to be
taken in a company’s income tax return, and also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. As a result of the
implementation of FIN 48, the Company recognized no change in the liability for
unrecognized tax benefits related to tax positions taken in prior periods, and
no corresponding change in retained earnings. As a result of
the implementation of FIN 48, the Company recognized no material adjustment in
the liability for unrecognized income tax benefits as of the September 2008
adoption date and at March 31, 2008. Also, the Company had no amounts of
unrecognized tax benefits that, if recognized, would affect its effective tax
rate.
The
Company’s policy for deducting interest and penalties is to treat interest as
interest expense and penalties as taxes. As of March 31, 2009, the Company had
no amount accrued for the payment of interest and penalties related to
unrecognized tax benefits and no amounts as of the adoption date of FIN
48.
Premier
Power Spain is organized under the laws of Spain and is subject to federal and
provincial taxes.
Recently
Issued Accounting Pronouncements
In
December 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“FAS”) No. 157,
"
Fair Value
Measurement
" ("FAS 157"), which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP) and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value
measurements. This statement is effective for fiscal years beginning
after November 15, 2007, except for non-financial assets and liabilities
measured at fair value on a non-recurring basis for which the
effective date will be for fiscal years beginning after November 15,
2008. The adoption of FAS 157 for financial assets and liabilities
did not have a material impact on the Company's consolidated financial
statements. The adoption of FAS 157 for non-financial assets did not
have a material impact on the Company’s financial position, results of
operations or cash flows.
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 FAS 159 did
not have a material effect on our results of operations, cash flows or financial
position.
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 consolidated financial statements will be determined in part by the
nature and timing of any future acquisitions completed.
In
December 2007, the FASB issued FAS No. 160,
“Noncontrolling 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 noncontrolling
(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
adoption of FAS 160 did not have a material effect on our results of operations,
cash flows, or financial position.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
In March
2008, the FASB issued FAS No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133”
(“FAS 161”), which requires additional disclosures about
the objectives of the derivative instruments and hedging activities, the method
of accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. The Company adopted FAS 161 effective beginning January 1, 2009. The
adoption of FAS 161 did not have a material effect on the Company’s financial
position, results of operations or cash flows.
In April
2008, the FASB issued FASB Staff Position (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 FAS No. 142, “
Goodwill and
Other Intangible Assets
.” The
FSP must be applied prospectively to intangible assets acquired after the
effective date. The adoption of the FSP did not have a material effect on the
Company’s consolidated financial statements.
In May
2008, the FASB issued FAS No. 162, “
The Hierarchy of Generally Accepted
Accounting Principles
” (“FAS 162”), 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 (the GAAP hierarchy). This statement became effective on November
15, 2008 which is 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
adoption of FAS 162 did not have a material effect on our consolidated financial
statements.
In June
2008, the FASB ratified EITF Issue No. 07-5, "
Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own St
ock
.” EITF 07-5
provides that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument's contingent exercise and settlement
provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal
years beginning after December 15, 2008 and interim periods within those fiscal
years. See Note 8 for additional information.
In May
2009, the FASB issued FASB Staff Position No. APB 14-1
“
Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
”
FASB Staff Position No. APB 14-1
clarifies that convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement) are not addressed by paragraph 12
of APB Opinion No. 14,
Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants
. Additionally, this FSP
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. The adoption of FSP APB 14-1 did not have a material
effect on our consolidated financial statements.
Intangibles
consist of amortizing intangibles and goodwill. At March 31, 2009 and December
31, 2008, such amounts were as follows:
|
|
March
31,2009
|
|
|
December
31,2008
|
|
|
|
|
|
|
|
|
Trademark
|
|
$
|
852,194
|
|
|
$
|
865,106
|
|
Employee
contract
|
|
|
134,645
|
|
|
|
157,086
|
|
Backlog
|
|
—
|
|
|
|
26,228
|
|
Subtotal
– amortizing intangibles
|
|
|
986,839
|
|
|
|
1,048,420
|
|
Goodwill
|
|
|
483,496
|
|
|
|
483,496
|
|
Total
|
|
$
|
1,470,335
|
|
|
$
|
1,531,916
|
|
There
were no intangible assets at March 31, 2008. Amortization periods
for the intangibles are as follows: trademark – 17 years, employee contract – 2
years, and backlog – 6 months. Amortization for the three months ended March 31,
2009 was $61,581. Accumulated amortization was $123,161. The Company
expenses the costs, if any, to renew its recognized intangible
assets.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
4.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consists of the following:
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
139,777
|
|
|
$
|
203,628
|
|
Furniture
and computers
|
|
|
156,115
|
|
|
|
59,194
|
|
Vehicles
|
|
|
536,299
|
|
|
|
504,546
|
|
|
|
|
832,191
|
|
|
|
767,368
|
|
|
|
|
|
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
(330,654
|
)
|
|
|
(292,463
|
)
|
|
|
$
|
501,537
|
|
|
$
|
474,905
|
|
Depreciation
expense was $39,447 and $24,270 for the three months ended March 31, 2009
and 2008, respectively.
Accrued
liabilities consisted of the following :
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
Payroll
|
|
$
|
239,490
|
|
|
$
|
477,163
|
|
Warranty
reserve
|
|
|
332,247
|
|
|
|
367,250
|
|
401K
plan
|
|
|
36,760
|
|
|
|
20,000
|
|
Sales
and local taxes
|
|
|
137,155
|
|
|
|
301,938
|
|
Workers
compensation insurance
|
|
|
23,735
|
|
|
|
20,000
|
|
Accrued
subcontractors
|
|
—
|
|
|
|
79,002
|
|
Other
operational accruals
|
|
|
145,855
|
|
|
|
102,665
|
|
Total
|
|
$
|
915,242
|
|
|
$
|
1,368,018
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
Borrowings
consist of notes payable and lines of credit.
Notes
Payable
Notes
payable were $112,524 and $130,718 at March 31, 2009 and December 31, 3008,
respectively. The notes are secured by vehicles and have maturities
through 2014. The annual interest rates on the notes range from
1.9% to 6.6%. The future principal payments on these notes as of
March 31, 2009 are as follows:
2009
|
|
$
|
26,933
|
|
2010
|
|
|
27,783
|
|
2011
|
|
|
23,751
|
|
2012
|
|
|
19,999
|
|
2013
|
|
|
9,984
|
|
2014
|
|
|
4,074
|
|
|
|
$
|
112,524
|
|
Line of
Credit
In
February 2008, Premier Power California entered into a $3,000,000 line of credit
agreement (LOC) with Guaranty Bank, which expires on May 27,
2009. The line of credit is secured by the assets of Premier Power
California and personal guaranties issued by our Chairman and Chief Executive
Officer, Dean Marks; Sarilee Marks, the wife of Dean Marks; and Bright
Future. The line of credit bears interest at the prime rate plus
1%. At March 31, 2009, the interest rate was 6%. At March
31, 2009 and December 31, 2008, the Company had no amounts outstanding
under the LOC.
7.
|
COMMITMENTS
AND CONTINGENCIES
|
Premier
Power Spain is party to a non-cancelable lease for operating facilities in
Madrid, Spain, which expires in 2013, and a non-cancelable lease for operating
facilities in Navarra, Spain, which expires in 2012. Premier Power
California is party to a non-cancelable lease for operating facilities in
Redlands, California, which expires in 2010. These leases provide for
annual rent increases tied to the Consumer Price Index. The leases require the
following payments as of March 31, 2009, subject to annual adjustment, if
any:
2009
|
|
$
|
54,437
|
|
2010
|
|
|
38,038
|
|
2011
|
|
|
38,038
|
|
2012
|
|
|
30,642
|
|
2013
|
|
|
20,208
|
|
|
|
|
|
|
Total
|
|
$
|
181,363
|
|
8.
|
DERIVATIVE
INSTRUMENTS
|
Adoption of EITF
07-5
On
January 1, 2009, the Company adopted EITF 07-5,
Determining Whether an Instrument
(or embedded Feature) is Indexed to an Entity’s Own Stock
. As part of the
adoption of EITF 07-5, the Company determined that its warrants are not indexed
to its stock, and therefore the value of the warrants has been recorded as a
liability. Additionally, the Company determined that its convertible
preferred stock instrument was not indexed to its stock, and therefore, the
value of the conversion feature should be separated from the preferred stock and
reclassified as a liability. The Company determined that the fair
value of the conversion feature of its convertible preferred stock was
insignificant at January 1, 2009 and March 31, 2009.
The
Company recorded the following cumulative effect of change in accounting
principle pursuant to its adoption of EITF 07-5:
|
|
Other
Paid-In-Capital
|
|
|
Other
Current
Liability
|
|
|
Retained
Earnings
|
|
Record January 1, 2009, derivative
instrument liability related to convertible preferred
stock
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Record January 1, 2009,
derivative instrument liability related to
warrants
|
|
|
–
|
|
|
|
506,560
|
|
|
|
(506,560
|
)
|
Record the reversal of prior
accounting related to warrants
|
|
|
(1,793,987
|
)
|
|
|
–
|
|
|
|
1,793,987
|
|
|
|
$
|
(1,793,987
|
)
|
|
$
|
506,560
|
|
|
$
|
1,287,427
|
|
A
Black-Scholes option-pricing model was used to obtain the fair value of the
Company’s warrants using the assumptions below at March 31,
2009. Based on an independent valuation of its common stock the
Company has determined that the value of its common stock was $.42 at both
January 1, 2009 and March 31, 2009.
Number of Shares included in
Warrants
|
|
Dividend
Yield
|
|
Volatility
|
|
Risk-Free
Rate
|
|
Expected Life
(in years)
|
|
Exercise
Price
|
1,750,000
|
|
0.0%
|
|
95.0%
|
|
4.5%
|
|
3.5
|
|
$
|
2.50
|
1,750,000
|
|
0.0%
|
|
95.0%
|
|
4.5%
|
|
3.5
|
|
$
|
3.00
|
9.
|
STOCK-BASED
COMPENSATION
|
The
Company’s 2008 Equity Incentive Plan (the “2008 Plan”) provides for the issuance
of incentive stock options, non-statutory stock options, and restricted stock.
The Company’s Board of Directors determines to whom grants are made and the
vesting, timing, amounts and other terms of such grants, subject to the terms of
the 2008 Plan. Incentive stock options may be granted only to employees of the
Company, while non-statutory stock options may be granted to the Company’s
employees, officers, directors, consultants and advisors. Options under the 2008
Plan vest as determined by the Board of Directors. The term of the
options granted under the 2008 Plan may not exceed 10 years, and the maximum
aggregate shares subject to awards under the 2008 Plan that may be granted
during any one (1) calendar year to any covered employee is 1,500,000
shares of common stock. Options for 1,142,479 shares of common stock were
outstanding as of March 31, 2009. The Company did not
grant stock options prior to January 2009, and there was no stock compensation
expense for the three months ended March 31, 2008.
The
Company recognized stock-based compensation expense of approximately
$9,556 during the three months ended March 31,
2009..
The
following table sets forth a summary stock option activity for the
three months ended March 31,2009 :
|
|
|
|
Weighted-
|
|
|
|
|
|
Average
|
|
|
Number of
|
|
|
Grant Date
|
|
|
Shares
|
|
|
Fair Value
|
|
Outstanding
and not vested beginning balance
|
|
|
-
|
|
|
$
|
-
|
|
Granted
during the period
|
|
|
1,142,479
|
|
|
|
0.21
|
|
Forfeited/cancelled
during the period
|
|
|
-
|
|
|
|
-
|
|
Released/vested
during the period
|
|
|
-
|
|
|
|
-
|
|
Outstanding
and not vested at March 31, 2009
|
|
|
1,142,479
|
|
|
$
|
0.21
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
At March 31, 2009 and December 31,
2008, there was approximately
$199,898
and
$0, respectively,
of unrecognized stock-based
compensation expense associated with the non-vested stock
options granted. Stock-based compensation expense relating to
these stock options is being recognized over a weighted-average period
of 4.
7
years.
Stock compensation expense of $9,556
and $0 was recognized
during the three months ended March 31, 2009 and 2008,
respectively. SFAS 123R requires the cash flows as a result of the
tax benefits resulting from tax deductions in excess of the compensation cost
recognized (excess tax benefits) to be classified as financing cash flows. There
are no excess tax benefits relating to stock options for the three months ended
March 31, 2009 and 2008, respectively, and therefore, there is no impact on the
accompanying consolidated statements of cash flows. Tax expense associated with
stock-based compensation expense for the three months ended March 31, 2009 was
not significant.
The
following table summarizes the consolidated stock-based compensation by line
item for the three months ended March 31, 2009:
|
|
Three Months Ended
|
|
|
|
March 31, 2009
|
|
|
|
|
|
Administration
|
|
$
|
4,472
|
|
Sales and
marketing
|
|
|
2,010
|
|
Cost
of goods sold
|
|
|
3,075
|
|
Total
stock-based compensation expense
|
|
|
9,556
|
|
Tax
effect on stock-based compensation expense
|
|
|
-
|
|
Total
stock-based compensation expense after taxes
|
|
$
|
9,556
|
|
Effect
on net loss per share: basic and diluted
|
|
$
|
-
|
|
The
following table sets forth a summary of stock option activity for the three
months ended March 31, 2009:
|
|
Number of
Shares
Subject To
|
|
|
Weighted-
Average
|
|
|
|
Option
|
|
|
Exercise Price
|
|
Outstanding
at January 1, 2009
|
|
-
|
|
|
$
|
-
|
|
Granted
during three months ended March 31, 2009
|
|
|
1,142,479
|
|
|
|
4.25
|
|
Forfeited/cancelled/expired
during 2009
|
|
|
-
|
|
|
|
-
|
|
Exercised
during the year
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at March 31, 2009
|
|
|
1,142,479
|
|
|
$
|
4.25
|
|
Exercisable
at March 31, 2009
|
|
|
-
|
|
|
$
|
-
|
|
The fair
value of stock option grants during the three months ended March 31, 2009 was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions:
Valuation
Assumptions
Valuation and Amortization
Method —
The Company estimates the fair value of stock options
granted using the Black-Scholes-Merton option-pricing formula. The fair value is
then amortized over the requisite service periods of the awards, which is
generally the vesting period. Stock options typically have a ten year
life from date of grant and vesting periods of four to five years. For the three
months ended March 31, 2009, the fair value of the Company’s common stock is
based on its value as determined by an independent valuation at the time of the
reverse merger as the Company’s shares were not actively
traded. Compensation expense is recognized on a straight-line basis over
the respective vesting period.
Expected Term —
The
Company’s expected term represents the period that the Company’s stock-based
awards are expected to be outstanding. For awards granted subject only to
service vesting requirements, the Company utilizes the simplified method under
the provisions of Staff Accounting Bulletin No. 107 (“SAB 107”) for
estimating the expected term of the stock-based award.
Expected
Volatility
— Because there is minimal history of stock price returns, the
Company does not have sufficient historical volatility data for its equity
awards. Accordingly, the Company has chosen to use rates for similar publicly
traded U.S.-based competitors to calculate the volatility for its granted
options.
Expected Dividend
— The
Company has never paid dividends on its common shares and currently does not
intend to do so, and accordingly, the dividend yield percentage is zero for all
periods.
Risk-Free Interest Rate —
The
Company bases the risk-free interest rate used in the Black-Scholes valuation
method upon the implied yield curve currently available on U.S. Treasury
zero-coupon issues with a remaining term equal to the expected term used as the
assumption in the model.
Expected
volatility
|
|
|
93.60
|
%
|
Expected
dividends
|
|
|
0.0
|
%
|
Expected
life
|
7.5 years
|
|
Risk-free
interest rate
|
|
|
1.88
|
%
|
Weighted-average
fair value per share
|
|
$
|
0.21
|
|
The
weighted-average fair value per share of the stock options as determined on the
date of grant was $0.21 for the 1,142,479 stock options granted during the three
months ended March 31, 2009. The total fair value of stock options vested during
the three months ended March 31, 2009 was $0.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
Premier
Power Renewable Energy, Inc. has a 401(k) plan (the Plan) for its employees.
Employees are eligible to make contributions when they attain an age of
twenty-one and have completed at least one year of service. Premier Power makes
discretionary matching contributions to employees who qualify for the Plan and
were employed on the last day of the Plan year. Such contributions totaled
$12,000 and $18,000 for the three months ended March 31, 2009 and 2008,
respectively. Employees are vested 100% after 3 years of service. Neither Bright
Future nor Premier Power Spain offer defined contribution or defined
benefit plans to their employees.
|
|
11.
|
RELATED
PARTIES TRANSACTION
|
The
Company’s CEO, who is also a significant shareholder of the Company, is a
guarantor of the Company’s line of credit with Guaranty Bank. Prior to the
reverse merger, Premier Power California made distributions to its members to
cover their estimated tax liabilities on their deemed portion of its income.
These distributions are based on the Company's best estimates and available
information, and may be revised at a later date. Such revisions may result in a
portion of previously made distributions being refunded to the Company. The
balance of $23,458 was recorded as due from shareholders at March 31, 2008 and
represents payments made to a member of Premier Power California in excess of
the member’s actual tax liability. Such amounts were repaid on June 30, 2008.
Due to the nature of the receivable and its short duration, it was not interest
bearing or collateralized.
12. FAIR
VALUE MEASUREMENTS
SFAS No.
157 defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Statement No. 157 establishes a
fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy, as defined below, gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable
inputs.
·
|
Level
1, defined as observable inputs such as quoted prices in active markets
for identical assets.
|
·
|
Level
2, defined as observable inputs other than Level 1 prices. They
include quoted prices for similar assets or liabilities in an active
market, quoted prices for identical assets and liabilities in a market
that is not active, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of
the assets or liabilities.
|
·
|
Level
3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own
assumptions.
|
The table
below sets forth, by level, the Company’s financial assets and liabilities that
are accounted for at fair value.
|
Level 1
|
|
Level 2
|
|
Level 3
|
Liabilities: Warrants
|
$
–
|
|
|
|
$ 506,560
|
The
following table summarizes the change in the fair values of the derivative
instrument liabilities categorized as Level 3:
|
Three Months Ended
March 31,
2009
|
|
Beginning
balance
|
$
|
–
|
|
January 1, 2009, beginning balance
adjustment pursuant to adoption of EITF 07-5
|
|
(506,560
|
)
|
Change in fair
value
|
|
–
|
|
Ending
balance
|
$
|
(506,560
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
Premier
Power Renewable Energy, Inc.
El Dorado
Hills, California
We have
audited the accompanying consolidated balance sheets of Premier Power Renewable
Energy, Inc. as of December 31, 2008 and 2007, and the related consolidated
statements of operations, shareholders’ equity, and cash flows for the years
then ended. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Premier Power Renewable
Energy, Inc. at December 31, 2008 and 2007, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/
Macias Gini & O’Connell LLP
Sacramento,
California
March 31,
2009
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
BALANCE SHEETS
As
of December 31, 2008 and 2007
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
5,770,536
|
|
|
$
|
1,278,651
|
|
Accounts
receivable, net of allowance for doubtful accounts of
|
|
|
|
|
|
|
|
|
$18,000
at December 31, 2008 and $10,000 at December 31, 2007
|
|
|
4,767,653
|
|
|
|
2,437,851
|
|
Inventory
|
|
|
1,424,910
|
|
|
|
1,417,338
|
|
Prepaid
expenses and other current assets
|
|
|
259,328
|
|
|
|
69,332
|
|
Costs
and estimated earnings in excess of billings
|
|
|
|
|
|
|
|
|
on
uncompleted contracts
|
|
|
235,929
|
|
|
|
37,245
|
|
Other
receivables
|
|
|
93,775
|
|
|
|
—
|
|
Due
from shareholders
|
|
|
—
|
|
|
|
23,458
|
|
Deferred
tax assets
|
|
|
228,835
|
|
|
|
—
|
|
Total
current assets
|
|
|
12,780,966
|
|
|
|
5,263,875
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
474,905
|
|
|
|
314,166
|
|
Intangible
assets
|
|
|
1,048,420
|
|
|
|
—
|
|
Goodwill
|
|
|
483,496
|
|
|
|
—
|
|
Deferred
tax assets, long-term
|
|
|
24,867
|
|
|
|
—
|
|
Total
assets
|
|
$
|
14,812,654
|
|
|
$
|
5,578,041
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,707,141
|
|
|
$
|
2,611,162
|
|
Accrued
liabilities
|
|
|
1,368,018
|
|
|
|
527,550
|
|
Billings
in excess of costs and estimated earnings
|
|
|
|
|
|
|
|
|
on
uncompleted contracts
|
|
|
1,206,403
|
|
|
|
1,451,637
|
|
Income
taxes payable
|
|
|
184,470
|
|
|
|
31,152
|
|
Borrowings,
current
|
|
|
38,311
|
|
|
|
58,165
|
|
Total
current liabilities
|
|
|
6,504,343
|
|
|
|
4,679,666
|
|
|
|
|
|
|
|
|
|
|
Borrowings,
non-current
|
|
|
92,407
|
|
|
|
183,223
|
|
Long-term
deferred income taxes
|
|
|
343,279
|
|
|
|
—
|
|
Total
liabilities
|
|
|
6,940,029
|
|
|
|
4,862,889
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
—
|
|
|
|
1,650
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Series
A convertible preferred stock, par value $.0001 per share; 5,000,000
shares
|
|
|
|
|
|
designated;
20,000,000 shares of preferred stock authorized; 3,500,000
|
|
|
|
|
|
and
0 shares issued and outstanding at December 31, 2008 and
|
|
|
|
|
|
|
|
|
December
31, 2007, respectively
|
|
|
350
|
|
|
|
—
|
|
Common
stock, par value $.0001 per share; 500,000,000 shares
authorized;
|
|
|
|
|
|
26,048,750
and 21,159,451 shares issued and outstanding at
|
|
|
|
|
|
|
|
|
December
31, 2008 and December 31, 2007, respectively
|
|
|
2,605
|
|
|
|
2,116
|
|
Additional
paid-in-capital
|
|
|
7,542,064
|
|
|
|
1,408
|
|
Retained
earnings
|
|
|
369,296
|
|
|
|
700,913
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(41,690
|
)
|
|
|
9,065
|
|
Total
shareholders' equity
|
|
|
7,872,625
|
|
|
|
713,502
|
|
Total
liabilities and shareholders' equity
|
|
$
|
14,812,654
|
|
|
$
|
5,578,041
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the years ended December 31, 2008 and 2007
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
44,237,984
|
|
|
$
|
16,685,690
|
|
Cost
of sales
|
|
|
(38,710,592
|
)
|
|
|
(12,440,839
|
)
|
Gross
profit
|
|
|
5,527,392
|
|
|
|
4,244,851
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
2,224,362
|
|
|
|
1,493,890
|
|
General
and administrative
|
|
|
2,505,180
|
|
|
|
1,877,888
|
|
Total
operating expenses
|
|
|
4,729,542
|
|
|
|
3,371,778
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
797,850
|
|
|
|
873,073
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(82,088
|
)
|
|
|
(26,222
|
)
|
Interest
income
|
|
|
36,764
|
|
|
|
20,340
|
|
Total
other income (expense), net
|
|
|
(45,324
|
)
|
|
|
(5,882
|
)
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
752,526
|
|
|
|
867,191
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense (benefit)
|
|
|
(40,857
|
)
|
|
|
39,873
|
|
|
|
|
|
|
|
|
|
|
Net
income before minority interest
|
|
|
793,383
|
|
|
|
827,318
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
(224,315
|
)
|
|
|
16,547
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
569,068
|
|
|
$
|
843,865
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.04
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,666,138
|
|
|
|
21,159,451
|
|
Diluted
|
|
|
23,749,700
|
|
|
|
21,159,451
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
For
the years ended December 31, 2008 and 2007
|
|
Common
Stock
|
|
|
Preferred
Stock
|
|
|
Additional
Paid
|
|
|
Retained
|
|
|
Accumulated
Other Comprehensive
|
|
|
Unaudited
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
In
Capital
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2006
|
|
|
21,159,451
|
|
|
$
|
2,116
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
1,408
|
|
|
$
|
293,814
|
|
|
$
|
850
|
|
|
$
|
298,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
843,865
|
|
|
|
|
|
|
|
843,865
|
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,215
|
|
|
|
8,215
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
852,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(436,766
|
)
|
|
|
|
|
|
|
(436,766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2007
|
|
|
21,159,451
|
|
|
|
2,116
|
|
|
|
|
|
|
|
|
|
|
|
1,408
|
|
|
|
700,913
|
|
|
|
9,065
|
|
|
|
713,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
569,068
|
|
|
|
|
|
|
|
569,068
|
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50,755
|
)
|
|
|
(50,755
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
518,313
|
|
Issuance
of shares to purchase minority interest
|
|
|
3,059,299
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
1,488,928
|
|
|
|
|
|
|
|
|
|
|
|
1,489,234
|
|
Shares
issued in connection with
reverse
acquisition
|
|
|
1,800,000
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180
|
|
Issuance
of Series A and Series B
warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,793,987
|
|
|
|
|
|
|
|
|
|
|
|
1,793,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Series A convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preferred
stock
|
|
|
|
|
|
|
|
|
|
|
3,500,000
|
|
|
|
350
|
|
|
|
3,717,558
|
|
|
|
|
|
|
|
|
|
|
|
3,717,908
|
|
Issuance
of shares for service
|
|
|
30,000
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
91,498
|
|
|
|
|
|
|
|
|
|
|
|
91,501
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(452,000
|
)
|
|
|
|
|
|
|
(452,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
constructive contribution (distribution) of S-Corp undistributed
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
448,685
|
|
|
|
(448,685
|
)
|
|
|
|
|
|
|
|
|
Balance
December 31, 2008
|
|
|
26,048,750
|
|
|
$
|
2,605
|
|
|
|
3,500,000
|
|
|
$
|
350
|
|
|
$
|
7,542,064
|
|
|
$
|
369,296
|
|
|
$
|
(41,690
|
)
|
|
$
|
7,872,625
|
|
The
accompanying notes are an integral part of these financial
statements
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
the years ended December 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
569,068
|
|
|
$
|
843,865
|
|
Minority
interest
|
|
|
224,315
|
|
|
|
(16,547
|
)
|
Net
income before minority interest
|
|
|
793,383
|
|
|
|
827,318
|
|
Adjustments
to reconcile net income provided by
|
|
|
|
|
|
|
|
|
(used
in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
196,676
|
|
|
|
76,435
|
|
Loss
on sale of property and equipment
|
|
|
4,559
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,352,548
|
)
|
|
|
(1,212,554
|
)
|
Other
receivable
|
|
|
(93,775
|
)
|
|
|
—
|
|
Inventory
|
|
|
(14,881
|
)
|
|
|
(920,884
|
)
|
Prepaid
expenses and other assets
|
|
|
(104,746
|
)
|
|
|
86,272
|
|
Costs
and estimated earnings in excess of billings
|
|
|
|
|
|
|
|
|
on
uncompleted contracts
|
|
|
(198,684
|
)
|
|
|
115,842
|
|
Accounts
payable
|
|
|
1,096,909
|
|
|
|
1,435,966
|
|
Accrued
liablities
|
|
|
856,568
|
|
|
|
188,320
|
|
Billings
in excess of costs and estimated earnings
|
|
|
|
|
|
|
|
|
on
uncompleted contracts
|
|
|
(218,074
|
)
|
|
|
228,511
|
|
Deferred
tax assets
|
|
|
(272,876
|
)
|
|
|
19,472
|
|
Income
tax payable
|
|
|
191,720
|
|
|
|
—
|
|
Net
cash (used in) provided by operating activities
|
|
|
(115,769
|
)
|
|
|
844,698
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
|
(163,039
|
)
|
|
|
(6,692
|
)
|
Proceeds
from sale of property and equipment
|
|
|
12,171
|
|
|
|
10,432
|
|
Net
cash (used in) provided by investing activities
|
|
|
(150,868
|
)
|
|
|
3,740
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
principal payments on borrowings
|
|
|
(283,527
|
)
|
|
|
(48,051
|
)
|
Net
repayments from shareholders
|
|
|
23,458
|
|
|
|
(23,458
|
)
|
Proceeds
from borrowings
|
|
|
15,292
|
|
|
|
—
|
|
Issuance
of preferred stock and warrants
|
|
|
5,511,895
|
|
|
|
—
|
|
Distributions
|
|
|
(452,000
|
)
|
|
|
(436,766
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
4,815,118
|
|
|
|
(508,275
|
)
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency on cash and cash equivalents
|
|
|
(56,596
|
)
|
|
|
3,635
|
|
Increase
in cash and cash equivalents
|
|
|
4,491,885
|
|
|
|
343,798
|
|
Cash
and cash equivalents at beginning of period
|
|
|
1,278,651
|
|
|
|
934,853
|
|
Cash
and cash equivalents at end of period
|
|
$
|
5,770,536
|
|
|
$
|
1,278,651
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
82,088
|
|
|
$
|
24,760
|
|
Taxes
paid
|
|
$
|
75,800
|
|
|
$
|
24,238
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of notes to acquire equipment
|
|
$
|
156,804
|
|
|
$
|
185,846
|
|
Common
stock issued for services
|
|
$
|
91,501
|
|
|
|
|
|
Common
stock issued to acquire minority interest
|
|
$
|
1,489,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
1.
|
ORGANIZATION
AND NATURE OF BUSINESS
|
Premier
Power Renewable Energy, Inc., a Delaware corporation (the “Parent”), and its
subsidiaries, 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) (collectively the
“Company”) designs, engineers, and installs photovoltaic systems in the United
States and Spain.
Prior to
September 9, 2008, Premier Power California and Bright Future were wholly owned
by a common shareholder group. That same shareholder group was deemed to
exercise control over Premier Power Spain through a 51% ownership interest,
management control, and the absence of disproportionate voting rights. On
September 1, 2008, that shareholder group exchanged their interests in Premier
Power Spain for shares of common stock of Premier Power California. On August
27, 2008, the holders of the 49% minority interest in Premier Power Spain
exchanged their interests in Premier Power Spain for shares of common stock of
Premier Power California.
A summary of the fair
value of the acquired tangible and intangible assets and liabilities held by the
49% minority interest is as follows:
Fair value of shares
exchanged
|
|
$
|
1,489,234
|
|
Tangible
assets acquired
|
|
$
|
(1,033,603
|
)
|
Amortizing
intangible assets acquired
|
|
$
|
(1,110,001
|
)
|
Liabilities assumed
|
|
$
|
1,137,866
|
|
Goodwill
|
|
$
|
483,
496
|
|
As of
December 31, 2008, the Company has completed the process of valuing the acquired
assets and liabilities. There were no material adjustments to the
initial allocation of the acquisition price as a result of the completion of
this process.
The
following unaudited proforma information gives effect to the acquisition of
the minority interest as if such had been acquired on January 1,
2007. The proforma information is not necessarily indicative of what
would have occurred had the acquisition been made on such date, nor is it
indicative of future results of operations. The pro forma amounts
give effect to appropriate adjustments for the fair value of the acquired assets
and liabilities.
|
|
Year
End December 31
|
|
|
|
2008
|
|
|
2007
|
|
Description
|
|
|
|
|
|
|
Net
Sales
|
|
$
|
44,237,984
|
|
|
$
|
16,685,690
|
|
Pro
forma operating expenses
|
|
$
|
4,809,373
|
|
|
$
|
3,565,646
|
|
Pro
forma net income
|
|
$
|
713,552
|
|
|
$
|
633,450
|
|
|
|
|
|
|
|
|
|
|
Pro
forma earnings per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
The
historical financial statements of the Company prior to September 9, 2008
present its financial position, results of operations, and cash flows on a
combined basis.
Pursuant
to a reverse acquisition between the Parent (formerly “Harry’s Trucking, Inc.”)
and Premier Power California that closed on September 9, 2008, the shareholders
of Premier Power California exchanged 100% of their interests for an aggregate
24,218,750 shares of the Parent’s common stock.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Subsequent
to the merger, the former shareholders of Premier Power California held
approximately 87% of the outstanding common stock of the Company. The merger was
considered to be a reverse acquisition accounted for as a recapitalization.
Premier Power California was considered to be the accounting acquirer and the
historical financial statements of the Company are those of Premier Power
California. The outstanding shares, members’ equity and earnings per share in
the historical financial statements have been restated to give effect to the
common shares issued to the controlling shareholders.
In
connection with the reverse acquisition, the Company issued 3,500,000
units, consisting each of 1 share of Series A Convertible Preferred Stock, ½ of
a Series A Warrant, and ½ of a Series B Warrant in exchange for $5,511,845 in
net proceeds. Each 1 share of Series A Convertible Preferred Stock converts into
1 share of common stock. Each 1 Series A Warrant and 1 Series B Warrant entitles
the holder thereof to purchase one share of common stock at $2.50 and $3.00 per
share, respectively.
2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis of Presentation
- The
consolidated financial statements include the accounts of Premier Power
Renewable Energy, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Use of Estimates
- The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Significant estimates include the allowance for doubtful accounts, warranty
reserves, revenue recognition, the estimated useful life of property and
equipment, and income taxes. Accordingly, actual results could differ from those
estimates.
Cash and Cash Equivalents
-
Cash and cash equivalents include cash on hand or in the bank and short-term
investment securities with remaining maturities of 90 days or less at date of
purchase.
The
Company maintains its cash in bank deposit accounts that, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company had $5,129,335 and $1,600,061 in cash in bank
accounts at December 31, 2008 and December 31, 2007, respectively, in excess of
deposit insurance limits.
Concentrations
and Credit Risk
One customer accounted for 18% and two customers
accounted for 12% each of our sales for the year ended December 31, 2008. One
customer accounted for 16% of the Company’s revenues in
2007. Accounts receivable primarily consist of trade receivables and
amounts due from state agencies and utilities for rebates on solar systems
installed. At December 31, 2008, the Company had four customers that accounted
for 27%, 13%, 11%, and 10% of the Company’s accounts
receivables. At December 31, 2007, two customers accounted for
49% and 22% of the Company’s accounts receivable. The Company monitors account
balances and follows up with accounts that are past due as defined in the terms
of the contract with the customer. To date, the Company’s losses on
uncollectible accounts receivable have been immaterial. The Company maintains an
allowance for doubtful accounts receivable based on the expected collectability
of its accounts receivable. The allowance for doubtful accounts is based on
assessments of the collectability of specific customer accounts and the aging of
the accounts receivable. If there is a deterioration of a major customer’s
credit worthiness or actual defaults are higher than historical experience, the
allowance for doubtful accounts is increased. The allowance for doubtful
accounts was $18,000 and $10,000 as of December 31, 2008 and December 31, 2007,
respectively.
The
Company purchases its solar panels from a limited number of vendors, but
believes that in the event it is unable to purchase solar panels from these
vendors, alternative sources of solar panels will be available.
Inventories
- Inventories,
consisting primarily of raw materials, are recorded using the average cost
method and are carried at the lower of cost or market.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Property and Equipment
-
Property and equipment with a value greater than $2,000 are recorded at cost and
depreciated using the 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 a customer’s financial condition
could put recoverability at risk.
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.
Advertising
- The Company
expenses advertising costs as they are incurred. Advertising costs were $413,251
and $415,622 for the years ended December 31, 2008 and 2007,
respectively.
Product Warranties -
Prior to
January 1, 2007, the Company provided a five year warranty covering the labor
and materials associated with its installations. Effective January 1, 2007, the
Company changed the coverage to generally be ten years in the U.S. and to one
year in Spain for all contracts signed after December 31, 2006. Solar panels and
inverters are warranted by the manufacturer for 25 years and 10 years,
respectively. Activity in the Company’s warranty reserve for the years ended
December 31, 2008 and 2007 was as follows:
|
|
2008
|
|
|
2007
|
|
Balance
at beginning of period
|
|
$
|
172,002
|
|
|
$
|
58,375
|
|
|
|
|
|
|
|
|
|
|
Warranty
expense
|
|
|
275,108
|
|
|
|
132,533
|
|
|
|
|
|
|
|
|
|
|
Less:
warranty claims
|
|
|
(79,860
|
)
|
|
|
(18,906
|
)
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
|
$
|
367,250
|
|
|
$
|
172,002
|
|
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 respective
period. Translation gains and losses are not included in determining net income
but are accumulated in a separate component of shareholders’ equity. Foreign
currency transaction gains and losses are included in the determination of net
income (loss) in the period in which they occur. For the years ended December
31, 2008 and 2007, the foreign currency transaction loss was $
(159,898) and $0, respectively.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Minority Interest
– The
minority interest reflected in the balance sheets and statement of operations
represent the 49% shareholdings of the non-controlling shareholders in the
Company’s Spanish operations, Premier Power Spain. Concurrent with the reverse
merger, these shareholdings were converted into shares of the Company’s stock
and no longer reported as a minority interest effective September 9,
2008.
Earnings per Share –
Earnings
per share is computed in accordance with the provisions of SFAS No. 128, “
Earnings Per Share
.”
Basic net income (loss) per share is computed using the weighted-average number
of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted-average number of common shares outstanding during
the period, as adjusted for the dilutive effect of the Company’s outstanding
convertible preferred shares using the “if converted” method and dilutive
potential common shares. For all of the periods presented, the Company had no
dilutive potential common shares except for outstanding convertible preferred
shares during the year ended December 31, 2008. Warrants to purchase
3,500,000 of the Company’s common shares were excluded as their exercise price
exceeded the average market price of the Company’s common shares.
|
|
2008
|
|
|
2007
|
|
Net
income
|
|
$
|
569,068
|
|
|
$
|
843,865
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.04
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,666,138
|
|
|
|
21,159,451
|
|
Diluted
effect of convertible preferred stock
|
|
|
1,083,562
|
|
|
|
—
|
|
Diluted
|
|
|
23,749,700
|
|
|
|
21,159,451
|
|
On
December 19, 2008, our board of directors approved the Premier Power Renewable
Energy, Inc. 2008 Equity Incentive Plan (the “Plan”). All of our
employees, officers, and directors, and those of our consultants who (i) are
natural persons and (ii) provide bona fide services to the Company not connected
to a capital raising transaction or the promotion or creation of a market for
our securities are eligible to be granted options or restricted stock awards
under the Plan. In January 2009, the Company granted stock options
for 1,134,229 shares of its common stock to eligible persons.
Comprehensive Income
-
Statement of Financial
Accounting Standards No. 130, “
Reporting Comprehensive
Income
,” establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income, as defined, includes all
changes in equity during the period from non-owner sources, such as foreign
currency translation adjustments.
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
the 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 RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Prior to
September 9, 2008, Premier Power California (a Subchapter S corporation) and
Bright Future (a limited liability company) were not subject to federal income
tax, but were subject to state income tax. For the year ended December 31, 2007,
the Company recorded $36,408 in state income tax expense for its U.S. entities.
From January 1, 2008 to September 8, 2008, the Company recorded $14,674 in state
income tax expense related to these entities. Subsequent to September 8, 2008
and in conjunction with the reverse acquisition, the Company and its U.S.
subsidiaries became subject to federal income taxes. In conjunction with the
conversion of Premier Power California and Bright Future to a C-corporation for
tax purposes, the Company recorded a net deferred tax asset of $485,864. The
majority of this benefit is attributable to changing the method of accounting
from the cash to accrual basis of accounting for tax purposes. In
conjunction with the acquisition of the Spain minority interest, the Company
recorded a deferred tax liability of $333,000 resulting in an offsetting
increase to goodwill. The change in tax status did not result in a change in the
tax basis of the Company and its U.S. subsidiaries.
Premier
Power Spain is organized under the laws of Spain and is subject to federal and
provincial taxes.
Recently
Issued Accounting Pronouncements
In
December 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“FAS”) No. 157,
"
Fair Value
Measurement
" ("FAS 157"), which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP) and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value
measurements. This statement is effective for fiscal years beginning
after November 15, 2007, except for non-financial assets and liabilities
measured at fair value on a non-recurring basis for which the
effective date will be for fiscal years beginning after November 15,
2008. The adoption of FAS 157 for financial assets and liabilities
did not have a material impact on the Company's consolidated financial
statements. The adoption of FAS 157 for non-financial assets is not
expected to have a material impact on the Company’s consolidated financial
statements.
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 FAS 159 did
not have a material effect on our results of operations, cash flows or financial
position.
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 consolidated 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,
“Noncontrolling 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 noncontrolling
(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.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
In March
2008, the FASB issued FAS No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133”
(“FAS 161”), which requires additional disclosures about
the objectives of the derivative instruments and hedging activities, the method
of accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. FAS 161 is effective beginning January 1, 2009. We are currently
assessing the potential impact that the adoption of FAS 161 may have
on our financial statements.
In April
2008, the FASB issued FASB Staff Position (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 FAS 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.
In May
2008, the FASB issued FAS No. 162, “
The Hierarchy of Generally Accepted
Accounting Principles
” (“FAS 162”), 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 is effective
November 15, 2008 which is 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
adoption of FAS 162 did not have a material effect on our financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Intangibles
consist of amortizing intangibles and goodwill. At December 31, 2008, such
amounts were as follows:
Amortizing Intangibles
|
|
|
|
Trademark
|
|
$
|
865,106
|
|
Employee
contract
|
|
|
157,086
|
|
Backlog
|
|
|
26,228
|
|
Subtotal
|
|
|
1,048,420
|
|
Goodwill
|
|
|
483,496
|
|
Total
|
|
$
|
1,531,916
|
|
There
were no intangible assets at December 31, 2007. There were no
adjustments recorded to goodwill during the year ended December 31,
2008. Amortization periods for the intangibles are as follows:
trademark - 17 years, employee contract - 2 years, backlog - 6 months.
Amortization for the year ended December 31, 2008 was $61,580. Accumulated
amortization was $61,580.
4.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consists of the following as of December 31:
|
|
2008
|
|
|
2007
|
|
Equipment
and Computers
|
|
$
|
203,628
|
|
|
$
|
138,151
|
|
Furniture
and Fixtures
|
|
|
59,194
|
|
|
|
12,352
|
|
Vehicles
|
|
|
504,546
|
|
|
|
338,663
|
|
|
|
|
767,368
|
|
|
|
489,166
|
|
Less:
Accumulated depreciation
|
|
|
(292,463
|
)
|
|
|
(175,000
|
)
|
|
|
$
|
474,905
|
|
|
$
|
314,166
|
|
Depreciation
expense was $135,095 and $76,435 for the years ended December 31, 2008 and 2007,
respectively.
Accrued
liabilities consisted of the following as of December 31:
|
|
2008
|
|
|
2007
|
|
Payroll
|
|
$
|
477,163
|
|
|
$
|
215,434
|
|
Warranty
reserve
|
|
|
367,250
|
|
|
|
172,002
|
|
401K
plan
|
|
|
20,000
|
|
|
|
60,000
|
|
Sales
taxes
|
|
|
301,938
|
|
|
|
24,020
|
|
Workers
compensation insurance
|
|
|
20,000
|
|
|
|
20,000
|
|
Accrued
subcontractors
|
|
|
79,002
|
|
|
|
—
|
|
Other
operational accruals
|
|
|
102,665
|
|
|
|
36,094
|
|
Total
|
|
$
|
1,368,018
|
|
|
$
|
527,550
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Borrowings
consist of notes payable and lines of credit.
Notes
Payable
Notes
payable were $130,718 and $241,388 at December 31, 2008 and December 31, 2007,
respectively. The notes are secured by vehicles and have maturities through
2014. The annual interest rates on the notes range from 1.9% to 6.6%. The future
principal payments on these notes as of December 31, 2008 are as
follows:
2009
|
|
$
|
38,311
|
|
2010
|
|
|
25,410
|
|
2011
|
|
|
24,737
|
|
2012
|
|
|
24,270
|
|
2013
|
|
|
13,641
|
|
2014
|
|
|
4,349
|
|
|
|
$
|
130,718
|
|
Line of
Credit
In
February 2008, Premier Power California entered into a $3,000,000 line of credit
agreement (LOC) with Guaranty Bank, which expired on February 26, 2009 but was
renewed on February 26, 2009 under similar terms and conditions (see Note 12
below). The line of credit is secured by the assets of Premier Power
California and personal guaranties issued by our Chairman and Chief Executive
Officer, Dean Marks; Sarilee Marks, the wife of Dean Marks; and Bright
Future. The line of credit bears interest at the prime rate plus
1%. At December 31, 2008, the interest rate was 6%. During
the year ended December 31, 2008, the Company borrowed and repaid $1,250,000
under the LOC. At December 31, 2008, no amount was outstanding on the LOC. At
March 31, 2009, no amount was outstanding under the LOC.
Preferred
Stock
The
Company has authorized 20,000,000 shares of preferred stock, par value $0.0001
per share (“Preferred Stock”). The Preferred Stock may be issued from time to
time in series having such designated preferences and rights, qualifications and
to such limitations as the Board of Directors may determine.
The
Company has designated 5,000,000 shares of Preferred Stock as Series A
Convertible Preferred Stock (“Series A Stock”). The holders of Series A Stock
have no voting rights except with regards to certain corporate events, enjoys a
$2.40 liquidation preference per share, subject to adjustment, over holders of
common stock, and may convert each share of Series A Stock into one share of
common stock at any time. Series A stock converts automatically upon the
occurrence of an offering meeting certain criteria. Holders of the Series A
Stock have certain redemption rights. The Company has determined that
the events triggering such rights are either in control of the Company or in the
case of such events where the Company is not deemed to exercise control; the
redemption right is limited to the ability to convert into shares of the
Company’s common stock. As of December 31, 2008, there were 3,500,000
shares of Series A Stock outstanding.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Warrants
In
September 2008, the Company issued Series A Warrants and Series B Warrants to
purchase 1,750,000 and 1,750,000 shares of common stock, respectively, in
connection with the issuance of Series A Stock. Both the Series A and
B Warrants have four year lives. The Company has the right to call for
cancellation of each outstanding Series A Warrant or Series B Warrant under
certain circumstances. The Series A Warrants have an exercise price of $2.50 and
a fair value of $.15 per warrant. The Series B Warrants have an exercise price
of $3.00 and a fair value of $.13 per warrant.
The
significant assumptions used to determine the fair values of the warrants, are
as follows:
|
|
|
|
Risk-free
interest rate at grant date
|
|
|
4.5
|
%
|
Expected
stock price volatility
|
|
|
95
|
%
|
Expected
dividend payout
|
|
|
—
|
|
Expected
option life-years
|
|
4
yrs
|
|
In
September 2008, the Company issued 3,500,000 units, consisting each of 1 share
of Preferred Stock, ½ of a Series A Warrant, and ½ of a Series B Warrant in
exchange for $7,000,000 in gross proceeds. The fair value of the
preferred stock was calculated based on the estimated fair value and underlying
number of common shares it would convert into at the time of the transaction.
The estimated fair value of our common stock on the transaction date was $.42
per share, and the preferred stock would have converted into 3,500,000 common
shares, thus deriving a fair value of $1,470,000 for the underlying common
shares.
Based on
the relative fair values of the preferred stock and the warrants, we allocated
$5,206,013 and $1,793,987 of the $7,000,000 gross proceeds, before issuance
costs, to the preferred stock and warrants, respectively. The aggregate net
proceeds received from the issuance of the preferred stock and warrants was
$5,511,895, giving effect to an aggregate $1,488,105 of financing-related
costs. The Company determined that the issuance of the warrants did
not result in significant incremental financing-related costs and, as a result,
netted such costs against the gross proceeds allocated to the preferred
stock. Net of financing-related costs, the Company allocated
$3,717,908 and $1,793,987 of the net proceeds to the preferred stock and
warrants, respectively.
The
domestic and foreign components of income before income tax expense were as
follows:
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
Domestic
|
|
$
|
123,552
|
|
|
$
|
822,009
|
|
Foreign
|
|
$
|
628,974
|
|
|
$
|
45,182
|
|
Total
|
|
$
|
752,526
|
|
|
$
|
867,191
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
For the
year ended December 31, 2008, the decrease in income tax expense was due to the
conversion to a C-Corporation status in September 2008 and related deferred tax
assets of $485,864 recorded as a result of the conversion for the U.S. reporting
entities offset by an increase in foreign tax expense.
|
|
Year
End
|
|
|
|
December
31,
2008
|
|
|
December
31,
2007
|
|
Current
|
|
|
|
|
|
|
Federal
|
|
$
|
32,672
|
|
|
$
|
—
|
|
State
|
|
|
3,310
|
|
|
|
36,408
|
|
Foreign
|
|
|
141,718
|
|
|
|
3,465
|
|
Subtotal
|
|
$
|
177,700
|
|
|
$
|
39,873
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(153,146
|
)
|
|
|
—
|
|
State
|
|
|
(40,539
|
)
|
|
|
—
|
|
Foreign
|
|
|
(24,872
|
)
|
|
|
—
|
|
Subtotal
|
|
|
(218,557
|
)
|
|
|
—
|
|
Total
Provision
|
|
$
|
(40,857
|
)
|
|
$
|
39,873
|
|
The
income tax provision (benefit) differs from the amounts obtained by applying the
statutory U.S. federal tax rate to income (loss) before taxes. Please
see the table below.
|
|
Year
End
|
|
|
|
December
31,
2008
|
|
|
December
31,
2007
|
|
Tax
provision (benefit) at U.S. statutory rate
|
|
$
|
305,714
|
|
|
$
|
—
|
|
State
income taxes, net of federal benefit
|
|
|
(24,571
|
)
|
|
|
36,408
|
|
Foreign
income and withholding taxes
|
|
|
121,881
|
|
|
|
3,465
|
|
Effect
of change in statutory tax rates on deferred taxes
|
|
|
(443,881
|
)
|
|
|
—
|
|
Total
|
|
$
|
(40,857
|
)
|
|
$
|
39,873
|
|
|
|
|
|
|
|
|
|
|
Prior to
the conversion of the S-corporations to C-corporations for U.S.
federal tax purposes, during the quarter ended December 31, 2008, all
income and losses from the operations of the Company generally flowed through to
its shareholders. The Company was not subject to U.S. federal income
taxes at the corporate level and was only subject to state income
taxes. Since the Company operated as an S-corporation prior to
September 9, 2008, the U.S. statutory rate was 0%. As a
result of the change in tax reporting status, the effective tax rate for U.S.
purposes for the year ended December 31, 2008 has been adjusted to account for
the zero rate for the income or deductions during the majority of the
year. The Company recorded a deferred tax benefit of approximately
$200,000 during the quarter ended December 31, 2008 due to the effect of the
change in statutory tax rates on its deferred tax assets.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Temporary
differences and carry forwards, which give rise to significant portions of
deferred tax assets and liabilities, are as follows:
|
|
December
31, 2008
|
|
Accruals
and reserves
|
|
$
|
252,577
|
|
Other
|
|
|
1,125
|
|
Gross
deferred tax assets
|
|
|
253,702
|
|
|
|
|
|
|
Fixed
assets
|
|
$
|
(28,753
|
)
|
Intangible
assets
|
|
$
|
(314,526
|
)
|
Gross
deferred tax liability
|
|
$
|
(343,279
|
)
|
|
|
|
|
|
Net
deferred tax liability
|
|
$
|
(89,577
|
)
|
The
Company has not provided U.S. taxes or foreign withholding taxes on
approximately $660,000 of foreign earnings. If these earnings were
distributed to the United States in the form of dividends or otherwise, or if
the shares of the relevant foreign subsidiary were sold or transferred, the
Company would be subject to additional U.S. income taxes (subject to an
adjustment for foreign tax credits) and foreign withholding
taxes. The Company intends to permanently reinvest these
earnings.
The
following unaudited pro forma information gives effect as if Premier Power
California and Bright Future previously operated as C-corporations for each of
the years ended December 31, 2008 and 2007. The pro forma data below shows the
estimated effect of income taxes on net income and earnings per share for
periods prior to becoming a taxable corporation.
|
|
For
the Year Ended
|
|
|
|
2008
|
|
|
2007
|
|
Pro
Forma Disclosures
|
|
|
|
|
|
|
Net
income before income taxes
|
|
$
|
752,526
|
|
|
$
|
867,191
|
|
Income
tax expense
|
|
|
(233,344
|
)
|
|
|
(343,767
|
)
|
Minority
interest
|
|
|
(224,315
|
)
|
|
|
16,547
|
|
Income
|
|
$
|
294,867
|
|
|
$
|
539,971
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.03
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
0.03
|
|
Effective
September 8, 2008, the Company adopted Financial Accounting Standards Board
Interpretation, or FIN No. 48, “
Accounting for Uncertainty in Income
Taxes
–
an interpretation of FASB Statement
No. 109
” (FIN 48). FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
uncertain tax positions taken or expected to be taken in a company’s income tax
return, and also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure, and
transition.
As a
result of the implementation of FIN 48, the Company recognized no change in the
liability for unrecognized tax benefits related to tax positions taken in prior
periods, and no corresponding change in retained earnings.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
As a
result of the implementation of FIN 48, the Company recognized no material
adjustment in the liability for unrecognized income tax benefits as of the
September 2008 adoption date and at December 31, 2008. Also, the Company had no
amounts of unrecognized tax benefits that, if recognized, would affect its
effective tax rate.
The
Company’s policy for deducting interest and penalties is to treat interest as
interest expense and penalties as taxes. As of December 31, 2008, the Company
had no amount accrued for the payment of interest and penalties related to
unrecognized tax benefits and no amounts were recorded as of the adoption date
of FIN 48.
The
Company files income tax returns in the U.S. federal, California and foreign
jurisdictions. Tax years 2004 through 2008 remain open in most tax
jurisdictions. For federal and California purposes, prior to September 9, 2008,
the Company filed as an S-corporation, and income tax liabilities and uncertain
tax positions are attributable to the S-corporation shareholders during
those years.
9.
|
COMMITMENTS
AND CONTINGENCIES
|
Premier
Power Spain is party to a non-cancelable lease for operating facilities in
Madrid, Spain, which expires in 2013, and a non-cancelable lease for operating
facilities in Navarra, Spain, which expires in 2012. Premier Power
California is party to a non-cancelable lease for operating facilities in
Redlands, California, which expires in 2010. These leases provide for
annual rent increases tied to the Consumer Price Index. The leases require the
following payments as of December 31, 2008, subject to annual adjustment, if
any:
|
|
|
|
|
2009
|
|
$
|
78,003
|
|
2010
|
|
|
43,845
|
|
2011
|
|
|
43,845
|
|
2012
|
|
|
35,319
|
|
2013
|
|
|
23,293
|
|
|
|
|
|
|
Total
|
|
$
|
224,305
|
|
Premier
Power Renewable Energy, Inc. has a 401(k) plan (the Plan) for its employees.
Employees are eligible to make contributions when they attain an age of
twenty-one and have completed at least one year of service. Premier Power makes
discretionary matching contributions to employees who qualify for the Plan and
were employed on the last day of the Plan year. Such contributions totaled
$20,000 and $60,000 for the year ended December 30, 2008 and 2007, respectively.
Employees are vested 100% after 3 years of service. Neither Bright Future nor
Premier Power Spain offer defined contribution or defined
benefit plans to their employees.
11.
|
RELATED
PARTIES TRANSACTION
|
The
Company’s CEO and controlling shareholder of the Company is a guarantor of the
Company’s line of credit with Guaranty Bank. Prior to the reverse merger,
Premier Power California made distributions to its members to cover their
estimated tax liabilities on their deemed portion of its income. These
distributions are based on the Company's best estimates and available
information, and may be revised at a later date. Such revisions may result in a
portion of previously made distributions being refunded to the Company. The
balance of $23,458 was recorded as due from shareholders at December 31, 2007
and represents payments made to a member of Premier Power California in excess
of the member’s actual tax liability. Such amounts were repaid on June 30, 2008.
Due to the nature of the receivable and its short duration, it was not interest
bearing or collateralized.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Effective
February 26, 2009, Premier Power California extended its existing $3,000,000
line of credit with Guaranty Bank to May 27, 2009. The line of credit
is secured by the assets of Premier Power California and personal guaranties
issued by our Chairman and Chief Executive Officer, Dean Marks; Sarilee Marks,
the wife of Dean Marks; and Bright Future. As of March 31, 2009,
there were no amounts outstanding under our agreement with Guaranty
Bank.
Prospectus
dated _______, 2009
PREMIER
POWER RENEWABLE ENERGY, INC.
2,689,965
shares of Common
Stock
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth the costs and expenses, payable by the registrant in
connection with the sale of common stock being registered. All amounts are
estimates except the SEC registration fee.
Securities
and Exchange Commission registration fee
|
|
$
|
360
|
|
Printing
and engraving expenses
|
|
|
―
|
|
Blue
Sky fees and expenses
|
|
|
1,385
|
|
Legal
fees and expenses
|
|
|
25,000
|
|
Accounting
fees and expenses
|
|
|
15,000
|
|
Miscellaneous
|
|
|
―
|
|
|
|
|
|
|
Total
|
|
$
|
41,475
|
|
ITEM
14. 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
We have
adopted the following indemnification provisions in our certificate of
incorporation for our 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.”
We also
have a $2,000,000 director’s and officer’s liability insurance
policy.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted for our directors, officers, and controlling persons 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.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
The
following is a summary of our transactions during the last three years involving
sales of our securities that were not registered under the Securities
Act:
On
December 31, 2008, the Company issued two options to purchase up to an aggregate
250,000 shares of common stock to Capital Group Communications, Inc. (“CGC”) in
conjunction with an agreement to provide compensation for investor
communications and public relations services. This issuance was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. We made this determination based on the representations of CGC, which
included, in pertinent part, that such stockholder was an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act, and that such stockholder was acquiring our securities for investment
purposes for its own respective accounts and not as nominees or agents and not
with a view to the resale or distribution thereof, and that the stockholder
understood that our securities may not be sold or otherwise disposed of without
registration under the Securities Act or an applicable exemption
therefrom.
On
December 4, 2008, the Company issued 30,000 restricted shares of common stock to
Capital Group Communications, Inc. (“CGC”) in conjunction with an agreement to
provide compensation for investor communications and public relations
services. This issuance was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof. We made this determination
based on the representations of CGC, which included, in pertinent part, that
such stockholder was an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act, and that such stockholder was
acquiring our securities for investment purposes for its own respective accounts
and not as nominees or agents and not with a view to the resale or distribution
thereof, and that the stockholder understood that our securities may not be sold
or otherwise disposed of without registration under the Securities Act or an
applicable exemption therefrom.
On
September 9, 2008, in connection with 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”), 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 (the “Share
Exchange”). 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. In connection with and prior to the Share Exchange,
Vision, the pre-Share Exchange majority stockholder of the Company, agreed to
cancel 25,448,000 of its shares of our common stock in consideration for the
agreement by the PPG Owners to enter into the Share Exchange transaction with
the majority stockholder of the Company and the Company. Immediately
prior to the Share Exchange, we had 1,800,000 shares of common stock issued and
outstanding. Immediately after the issuance of the shares to the PPG
Owners, we had 26,018,750 shares of common stock issued and
outstanding.
On
September 9, 2008, in connection with a financing (“Financing”) pursuant to a
Securities Purchase Agreement (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 one investor (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.
On
September 6, 2006, we issued 900,000 shares of our common stock to Haris Tajyar
in exchange for his 90% interest in Harry’s Trucking, LLC, a California limited
liability company (“Harry’s Trucking, LLC”). On September 6, 2006, we issued
100,000 shares to Omar Tajyar in exchange for his 10% interest in Harry’s
Trucking, LLC. On September 6, 2006, we issued 10,000 shares of our common stock
to Frank J. Hariton, Esq. as a portion of his legal fee for the estimated fair
value of $10,000. All of such transactions were exempt from registration by
reason of Section 4(2) of the Securities Act.
During
September and October 2006, an aggregate 38,000 shares of our common stock were
issued to 38 investors for an aggregate purchase price of $38,000. These shares
were issued in a private offering pursuant to Regulation D under the Securities
Act, and each of the investors represented that such investor was an accredited
investor as that term is defined in Regulation D and that he was acquiring the
shares for his own account and for investment. No underwriter or placement agent
participated in the foregoing transactions, no underwriting discounts or
commissions were paid, nor was any general solicitation or general advertising
conducted. The offering was exempt from registration by reason of Section 4(6)
of the Securities Act.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Exhibits
See
“Exhibit Index” below, which follows the signature page to this registration
statement.
ITEM
17. UNDERTAKINGS
(a) The
undersigned registrant hereby undertakes:
|
(1)
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933 (the "Securities Act");
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus file with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in
the effective registration statement;
and
|
|
(iii)
|
Include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration
statement.
|
|
(2)
|
For
purposes of determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
|
|
(3)
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act to any
purchaser, if the registrant is subject to Rule 430C, each prospectus
filed pursuant to Rule 424(b) as part of a registration statement relating
to an offering, other than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A, shall be deemed to
be part of and included in the registration statement as of the date it is
first used after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
|
|
(5)
|
For
determining liability of the undersigned registrant under the Securities
Act to any purchaser in the initial distribution of the securities, the
undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to
purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
|
|
(i)
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any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
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(ii)
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any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
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(iii)
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portion
of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities
provided by or on behalf of the undersigned registrant;
and
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(iv)
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any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
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(b)
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of El Dorado Hills, State of
California, on May 15, 2009.
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PREMIER
POWER RENEWABLE
ENERGY,
INC.
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By:
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/s/
Dean R. Marks
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Dean
R. Marks
Chief
Executive Officer
(Principal
Executive Officer)
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By:
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/s/
Teresa Kelley
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Teresa
Kelley
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
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Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature
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Title
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Date
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/s/
Dean R. Marks
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May
15, 2009
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Dean
R. Marks
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Chairman
of the Board,
President,
and Chief Executive
Officer
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/s/
Miguel de Anquin
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May
15, 2009
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Miguel
de Anquin
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Chief
Operating Officer,
Corporate
Secretary, and
Director
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/s/
Teresa Kelley
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May
15, 2009
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Teresa
Kelley
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Chief
Financial Officer
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/s/
Tommy Ross
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May
15, 2009
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Tommy
Ross
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Director
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EXHIBIT
INDEX
Exhibit
Number
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Description
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2.1
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Share
Exchange Agreement by and among the Company, its majority stockholder,
Premier Power Renewable Energy, Inc., and its stockholders, dated
September 9, 2008 (3)
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3.1
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Certificate
of Incorporation (1)
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3.2
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Bylaws
(1)
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3.3
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Certificate
of Amendment of the Certificate of Incorporation, filed August 19, 2008
with the Secretary of State of the State of Delaware
(2)
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3.4
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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)
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3.5
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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 (3)
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3.6
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Amendment
to Certificate of Incorporation, filed November 24, 2008 with the
Secretary of State of Delaware (6)
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3.7
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Amendment
to Bylaws (7)
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5.1
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Opinion
of Richardson & Patel LLP *
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10.1
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Business
Loan Agreement (Asset Based) between Premier Power Renewable Energy, Inc.
and Guaranty Bank, dated February 27, 2008 (3)
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10.2
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Promissory
Note issued to Guaranty Bank by Premier Power Renewable Energy, Inc.,
dated February 27, 2008 (3)
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10.3
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Commercial
Guaranty between Premier Power Renewable Energy, Inc., Dean Marks, and
Guaranty Bank, dated February 27, 2008 (3)
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10.4
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Commercial
Guaranty between Premier Power Renewable Energy, Inc., Sarilee Marks, and
Guaranty Bank, dated February 27, 2008 (3)
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10.5
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Commercial
Guaranty between Premier Power Renewable Energy, Inc., Simply Solar Inc.,
and Guaranty Bank, dated February 27, 2008 (3)
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10.6
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Commercial
Guaranty between Premier Power Renewable Energy, Inc., Bright Future
Technologies, LLC, and Guaranty Bank, dated February 27, 2008
(3)
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10.7
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Master
Commercial Solar Terms and Conditions of Schüco USA, L.P.
(3)
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10.8
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Authorized
Dealer Agreement between Premier Power Renewable Energy, Inc. and SunPower
Corporation, dated June 20, 2008 (3)
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10.9
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Employment
Agreement between Premier Power Renewable Energy, Inc. and Dean R. Marks,
dated August 22, 2008 (3)
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10.10
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Employment
Agreement between Premier Power Renewable Energy, Inc. and Miguel de
Anquin, dated August 22, 2008 (3)
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10.11
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Premier
Management Consulting Agreement between Genesis Capital Advisors, LLC and
Premier Power Renewable Energy, Inc., dated November 13, 2007
(3)
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10.12
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Engagement
Agreement between GT Securities and Genesis Capital Advisors, LLC with and
on behalf of Premier Power Renewable Energy, Inc., dated November 13, 2007
(3)
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10.13
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Form
of Securities Purchase Agreement (3)
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10.14
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Form
of Registration Rights Agreement (3)
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10.15
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Form
of Series A Common Stock Purchase Warrant (3)
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10.16
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Form
of Series B Common Stock Purchase Warrant (3)
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10.17
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Form
of Lock-up Agreement (3)
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10.18
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Purchase
and Sale Agreement between Harry’s Trucking, Inc. and Haris Tajyar and
Omar Tajyar, dated September 9, 2008 (3)
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10.19
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Guaranty
of Payment by Premier Power Renewable Energy, Inc. in favor of Guaranty
Bank, dated September 9, 2008 (3)
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10.20
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Employment
Agreement between Premier Power Renewable Energy, Inc. and Teresa Kelley,
date October 24, 2008 (4)
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10.21
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First
Amendment to Registration Rights Agreement between Premier Power Renewable
Energy, Inc., Genesis Capital Advisors, LLC, and Vision Opportunity Master
Fund, Ltd., dated October 31, 2008 (5)
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10.22
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Amended
and Restated Agreement to Serve as Member of the Board of Directors
between Premier Power Renewable Energy, Inc. and Kevin Murray, dated
December 19, 2008 (8)
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10.23
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Amended
and Restated Agreement to Serve as Member of the Board of Directors
between Premier Power Renewable Energy, Inc. and Robert Medearis, dated
December 19, 2008 (8)
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10.24
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Voting
Agreement between Dean Marks and Miguel de Anquin, signed June 16, 2008
(and addendum) (10)
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10.25
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Voting
Agreement between Dean Marks and Miguel de Anquin, dated January 21, 2009
(10)
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10.26
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Voting
Agreement between Dean Marks, Sarilee Marks, and Miguel de Anquin, dated
January 21, 2009 (10)
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10.27
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Business
Loan Agreement (Asset Based) between Premier Power Renewable Energy, Inc.
and Guaranty Bank, entered into on March 9, 2009 and effective February
27, 2009 (11)
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10.28
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Promissory
Note issued to Guaranty Bank by Premier Power Renewable Energy, Inc.,
entered into on March 9, 2009 and effective February 27, 2009
(11)
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10.29
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Commercial
Guaranty between Premier Power Renewable Energy, Inc., Dean Marks, and
Guaranty Bank, entered into on March 9, 2009 and effective February 27,
2009 (11)
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10.30
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Commercial
Guaranty between Premier Power Renewable Energy, Inc., Sarilee Marks, and
Guaranty Bank, entered into on March 9, 2009 and effective February 27,
2009 (11)
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10.31
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Commercial
Guaranty between Premier Power Renewable Energy, Inc., Bright Future
Technologies, LLC, and Guaranty Bank, entered into on March 9, 2009 and
effective February 27, 2009 (11)
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10.32
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Director
Agreement between Premier Power Renewable Energy, Inc. and Tommy Ross
(12)
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10.33
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Voting
Agreement between Dean Marks and Miguel de Anquin, dated January 2, 2006
(13)
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10.34
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Second
Amendment to Registration Rights Agreement between Premier Power Renewable
Energy, Inc., Genesis Capital Advisors, LLC, and Vision Opportunity Master
Fund, Ltd., dated May 1, 2009 (14)
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14.1
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Code
of Business Conduct and Ethics (9)
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16.1
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Letter
from Li & Company, PC, dated September 11, 2008
(3)
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21.1
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List
of Subsidiaries (3)
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23.1
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Consent
of Macias Gini & O’Connell LLP *
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23.2
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Consent
of Richardson & Patel LLP (included in Exhibit 5.1)
*
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_______________________
(1)
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Filed
on February 13, 2007 as an exhibit to our Registration Statement on Form
SB-2/A, and incorporated herein by
reference.
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(2)
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Filed
on August 29, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(3)
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Filed
on September 11, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(4)
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Filed
on October 30, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(5)
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Filed
on November 6, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(6)
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Filed
on November 26, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(7)
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Filed
on January 16, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(8)
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Filed
on December 29, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(9)
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Filed
on November 7, 2008 as an exhibit to our Registration Statement on Form
S-1, and incorporated herein by
reference.
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(10)
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Filed
on February 5, 2009 as an exhibit to our Amendment No. 1 to Registration
Statement on Form S-1/A, and incorporated herein by
reference.
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(11)
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Filed
on March 12, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(12)
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Filed
on March 24, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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(13)
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Filed
on March 31, 2009 as an exhibit to our Annual Report on Form 10-K, and
incorporated herein by reference.
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(14)
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Filed
on May 4, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
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