AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25,
2009
REGISTRATION
STATEMENT NO. 333-155241
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-1/A
AMENDMENT
NO. 6
TO
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
PREMIER
POWER RENEWABLE ENERGY, INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or other jurisdiction of incorporation or organization)
4931
(Primary
Standard Industrial Classification Code Number)
13-4343369
(I.R.S.
Employer Identification Number)
4961
Windplay Drive, Suite 100
El Dorado
Hills, CA 95762
(916)
939-0400
(Address,
including zip code, and telephone lumber, including area code, of registrant’s
principal executive offices)
Dean R.
Marks, Chief Executive Officer
4961
Windplay Drive, Suite 100
El Dorado
Hills, CA 95762
(916)
939-0400
COPY
TO:
Kevin K.
Leung, Esq.
Dominador
Tolentino, Jr., Esq.
Jamie H.
Kim, Esq.
Richardson
& Patel LLP
10900
Wilshire Blvd., Suite 500
Los
Angeles, CA 90024
(310)
208-1182
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
FROM TIME
TO TIME AFTER THE
EFFECTIVE
DATE OF THIS REGISTRATION STATEMENT
(Approximate
date of commencement of proposed sale to the public)
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box.
x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
o
|
|
Accelerated
filer
o
|
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
x
|
|
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of
Securities
to be Registered
|
|
Amount
to
be
Registered
(1)
|
|
|
Proposed
Maximum
Per
Share
Offering Price
|
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
|
|
Amount
of
Registration
Fee
|
|
Common
stock, $0.0001 par value per share
|
|
|
1,089,965
|
|
|
$
|
3.55
|
(2)
|
|
$
|
3,869,376
|
|
|
$
|
152.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.0001 par value per share
(issuable
upon exercise of options)
|
|
|
1,600,000
|
|
|
$
|
3.00
|
(3)
|
|
$
|
4,800,000
|
|
|
$
|
188.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,689,965
|
|
|
|
|
|
|
|
|
|
|
$
|
340.71
|
(4)
|
(1)
|
Pursuant to Rule 416 under the
Securities Act of 1933, as amended, this registration statement shall be
deemed to cover additional securities (i) to be offered or issued in
connection with any provision of any securities purported to be registered
hereby to be offered pursuant to terms which provide for a change in the
amount of securities being offered or issued to prevent dilution resulting
from stock splits, stock dividends, or similar transactions and (ii) of
the same class as the securities covered by this registration statement
issued or issuable prior to completion of the distribution of the
securities covered by this registration statement as a result of a split
of, or a stock dividend on, the registered
securities.
|
(2)
|
Estimated solely for the purpose
of calculating the amount of the registration fee pursuant to Rule 457(c)
of the Securities Act of 1933 based upon the average of the high and low
prices of the common stock of the Registrant as reported on the
Over-the-Counter Bulletin Board on November 5,
2008.
|
(3)
|
Estimated solely for the purpose
of computing the amount of the registration fee pursuant to Rule 457(g)
under the Securities Act.
|
(4)
|
The Registrant previously paid a
registration fee of $1,798.74 in connection with the filing of this
registration statement with the Securities and Exchange Commission on
November 7, 2008.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and no offer to buy these securities is being solicited
in any state where the offer or sale is not permitted.
Prospectus
PREMIER
POWER RENEWABLE ENERGY, INC.
2,689,965
shares of Common
Stock
This
prospectus covers the resale by selling security holders of up to 2,689,965
shares of our common stock, $0.0001 par value per share.
These
securities will be offered for sale from time to time by the selling security
holders identified in this prospectus in accordance with the terms described in
the section of this prospectus entitled “Plan of Distribution.” We will not
receive any of the proceeds from the sale of the common stock by the selling
security holders.
Our
securities are not listed on any national securities exchange. Our common stock
is currently quoted on the OTC Bulletin Board under the symbol “PPRW.” The last
reported per share price for our common stock was $3.95 as quoted on the OTC
Bulletin Board on June 24, 2009.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING
ON PAGE 6.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date of this prospectus is _________________, 2009
No offers
to sell are made, nor are offers sought, to buy these securities in any
jurisdiction where the offer or sale is not permitted. The reader should assume
that the information contained in this prospectus is accurate as of the date in
the front of this prospectus only. Our business, financial condition, results of
operations, and prospectus may have changed since that date.
TABLE
OF CONTENTS
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Page
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Prospectus
Summary
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1
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Risk
Factors
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4
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Special
Note Regarding Forward-Looking Statements
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17
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Use
of Proceeds
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17
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Selling
Security Holders
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17
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Plan
of Distribution
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19
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Legal
Matters
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20
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Experts
|
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20
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Business
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|
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20
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Description
of Property
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31
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Summary
Financial Data
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32
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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33
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Legal
Proceedings
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39
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Management
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39
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Executive
Compensation
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43
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Security
Ownership of Certain Beneficial Holders and Management
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46
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Certain
Relationships and Related Party Transactions
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48
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Description
of Securities
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48
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Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
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56
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Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
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56
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Additional
Information
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58
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Index
to Consolidated Financial Statements
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F-1
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PROSPECTUS
SUMMARY
This
summary contains basic information about us and this offering. The reader should
read the entire prospectus carefully, especially the risks of investing in our
common stock discussed under “Risk Factors.” Some of the statements contained in
this prospectus, including statements under “Summary” and “Risk Factors” as well
as those noted in the documents incorporated herein by reference, are
forward-looking statements and may involve a number of risks and uncertainties.
We note that our actual results and future events may differ significantly based
upon a number of factors. The reader should not put undue reliance on the
forward-looking statements in this document, which speak only as of the date on
the cover of this prospectus.
References
to “we,” “our,” “us,” the “Company,” or “Premier Power” refer to Premier Power
Renewable Energy, Inc., a Delaware corporation, and its consolidated
subsidiaries.
Our
Business
The
Company, through our wholly owned subsidiary Premier Power Renewable Energy,
Inc., a California corporation (“Premier Power California”), is in the business
of developing, marketing, selling, and maintaining solar energy systems for
residential, commercial, and industrial customers in North America and Spain. We
use solar components from the industry’s leading suppliers and manufacturers
such as General Electric (“GE”), Sharp, Fronius, Wattsun, SMA, Satcon, Xantrex,
Schuco and SunPower Corporation. Our clients have included utility companies
such as Pacific Gas and Electric and Sierra Pacific Power Company, home builders
such as KB Homes, and numerous agricultural clients such as leading wineries in
Napa Valley, California.
Corporate
Structure
We own
all of the capital stock of Premier Power California. Premier Power California
wholly owns Bright Future Technologies, LLC, a Nevada limited liability company
(“Bright Future”) and Premier Power Sociedad Limitada, a limited liability
company formed in Spain (“Premier Power Spain”). Bright Future operates 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. Premier Power Spain is the base of Premier
Power California’s European operations and conducts design, sales, and
installation operations in Spain and other parts of Europe.
Share
Exchange Transaction with Premier Power California
On
September 9, 2008, we closed a share exchange transaction (the “Closing”) under
a Share Exchange Agreement (the “Exchange Agreement”) entered into by and among
the Company, our majority stockholder, Premier Power California, and the
stockholders of Premier Power California, consisting of four individuals and one
entity, who, immediately prior to the Closing, collectively held 100% of Premier
Power California’s issued and outstanding share capital (the “PPG Owners”).
Hereinafter, this share exchange transaction is described as the “Share
Exchange.” We completed the acquisition of all of the equity interests of
Premier Power California held by the PPG Owners through the issuance of
24,218,750 restricted shares of our common stock to the PPG Owners. Immediately
prior to the Exchange Agreement transaction and taking into account the
cancellation of 25,448,000 shares of our common stock held by Vision Opportunity
Master Fund, Ltd. (“Vision”) concurrent with the Closing, 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.
As a
result of the Share Exchange, the PPG Owners became our controlling
stockholders, and Premier Power California became our wholly owned subsidiary.
In connection with Premier Power California becoming our wholly owned
subsidiary, we acquired the business and operations of Premier Power California,
and Premier Power California’s wholly owned subsidiaries, Bright Future and
Premier Power Spain, became our indirect wholly owned subsidiaries.
Financing
Transaction with Vision Opportunity Master Fund – September 9,
2008
Concurrently
with the Share Exchange, we entered into a Securities Purchase Agreement (the
“Purchase Agreement”) pursuant to which we agreed to issue and sell a total of
3,500,000 units (the “Units”) to Vision for an aggregate purchase price of
$7,000,000 (the “Financing”). Each Unit consists of one share of our Series A
Convertible Preferred Stock (“Series A Preferred Stock”), one-half of one Series
A Warrant (the “Series A Warrants”), and one-half of one Series B Warrant (the
“Series B Warrants”). Each one share of Series A Preferred Stock will be
convertible into one share of our common stock, par value $0.0001 per share
(“Common Stock”) at any time at the holder’s option, and each share of Series A
Preferred Stock will automatically convert in the event that we complete an
underwritten secondary public offering with minimum gross proceeds of
$25,000,000 and at a minimum price per share of $4.00 or upon listing on NASDAQ.
Each Series A Warrant and each Series B Warrant entitled the holder to purchase
a share of Common Stock at an exercise price of $2.50 and $3.00 per share,
respectively, of Common Stock for a period of four years. Thus, at the Closing,
we issued 3,500,000 shares of Series A Preferred Stock, Series A Warrants for
the purchase of an aggregate 1,750,000 shares of Common Stock, and Series B
Warrants for the purchase of an aggregate 1,750,000 shares of Common Stock to
Vision.
Share
Exchange Agreement with Rupinvest Sarl and Esdras Ltd.
On
June 3, 2009, we entered into a Share Exchange Agreement (the “Exchange
Agreement”) with Rupinvest Sarl, a corporation duly organized and existing under
the laws of Luxembourg (“Rupinvest”) and Esdras Ltd., a corporation duly
organized and existing under the laws of Cyprus (“Esdras”). Rupinvest
is the wholly owned subsidiary of Esdras and it distributes, develops, and
integrates ground mount and rooftop solar power systems in Italy through its
sole wholly owned subsidiary, ARCO Energy, SRL (“Arco Energy”), a private
limited company duly organized and existing under the laws of
Italy. Pursuant to the terms of the Exchange Agreement, we will
acquire 100% of the issued and outstanding equity ownership interest in
Rupinvest in exchange for: (a) a cash payment by us to Esdras in the amount of
twelve thousand five hundred Euros (€12,500, or approximately $17,718); and (b)
the potential transfer to Esdras of up to three million shares of our restricted
common stock, with the number of shares to be transferred, if any, to be
calculated based on sales achieved by Arco Energy over a three-year
period. Not later than twenty (20) trading days after the date that
escrow opens, we must deliver to the escrow agent three million (3,000,000)
restricted shares of our common stock, par value $0.0001 per share, in the form
of stock certificates issued in the name of the escrow agent to be held in
escrow until their release according to a schedule of financial targets of Arco
Energy. As of June 24, 2009, escrow has not been opened.
Financing
Transaction with Vision Opportunity Master Fund – June 16, 2009
On
June 16, 2009, we entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with Vision pursuant to which, we sold to Vision 2,800,000 shares of
our Series B Convertible Preferred Stock (bearing no liquidation preference, no
coupon payments, and no redemption rights) in exchange for the cancellation of
4-year Series A Warrants exercisable for an aggregate 1,750,000 shares of our
common stock and 4-year Series B Warrants exercisable for an aggregate
1,750,000 shares of our common stock, and a $3,000,000 cash
payment.
In
connection with the Purchase Agreement, Vision, a holder of our Series A
Preferred Stock, agreed in writing that no adjustment will be made to
the conversion price of its Series A Preferred Stock shares, which right is
set forth in Section 7(b) of the Certificate of Designation of Preferences,
Rights and Limitations of Series A Convertible Preferred Stock, filed on
September 10, 2008 with the Delaware Secretary of State.
Financial
Results
Our
consolidated financial statements for the years ended December 31, 2008 and 2007
are included in this prospectus. In 2008 and 2007, we had
approximately $44.2 million and $16.7 million in sales, respectively. In 2008
and 2007, we had approximately $569,000 and $844,000 in net income,
respectively.
We have
also included our unaudited condensed consolidated financial statements for the
three months ended March 31, 2009 and 2008, during which time we had
approximately $4.8 million and $4.9 million in sales,
respectively, and $618,000 and $194,000 in net loss,
respectively.
See
“Index to Consolidated Financial Statements” on page F-1.
Risks
Affecting Our Business
We are
subject to a number of risks, which the reader should be aware of before
deciding to purchase the securities in this offering. These risks are discussed
in the summary below and in the section titled “Risk Factors” beginning on page
6 of this prospectus.
Summary
of Risk Factors
This
document contains certain statements of a forward-looking nature. Such
forward-looking statements, including but not limited to growth and strategies,
future operating and financial results, financial expectations and current
business indicators are based upon current information and expectations and are
subject to change based on factors beyond our control. Forward-looking
statements typically are identified by the use of terms such as “look,” “may,”
“will,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate”
and similar words, although some forward-looking statements are expressed
differently. The accuracy of such statements may be impacted by a number of
business risks and uncertainties that could cause actual results to differ
materially from those projected or anticipated, including but not limited
to:
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our ability to timely and
accurately complete orders for our
products;
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our dependence on a limited
number of major customers;
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our ability to expand and grow
our distribution channels;
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general economic conditions which
affect consumer demand for our
products;
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the effect of terrorist acts, or
the threat thereof, on consumer confidence and
spending;
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acceptance in the marketplace of
our new products and changes in consumer
preferences;
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foreign currency exchange rate
fluctuations;
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our ability to identify and
successfully execute cost control initiatives;
and
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other risks outlined above and in
our other public
filings.
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The
reader is cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document. We undertake no
obligation to update this forward-looking information.
While our
management fully intends to make concerted efforts to manage these risks, we
cannot provide assurances that we will be able to do so successfully. See “Risk
Factors” beginning on page 6 of this prospectus.
The
Offering
We are
registering 2,689,965 shares of our common stock for sale by the selling
security holders identified in the section of this prospectus entitled “Selling
Security Holders.” As required by the Registration Rights Agreement, as amended,
that we executed as part of the Financing (more fully described under the
section titled “Business” below), we are registering for resale the following:
(i) 360,993 shares of common stock issued to Genesis Capital Advisors, LLC,
which were issued as part of the Share Exchange, (ii) 728,972 shares of
common stock, and (iii) 1,600,000 share of common stock underlying an
option to purchase such shares. 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. Information
regarding our common stock is included in the section of this prospectus
entitled “Description of Securities.”
General
Information
Our
principal executive offices are located at 4961 Windplay Drive, Suite 100, El
Dorado Hills, California 95762, and our telephone number is (916)
939-0400.
RISK
FACTORS
The
reader should carefully consider the risks described below together with all of
the other information included in this prospectus. The statements contained in
or incorporated into this prospectus that are not historic facts are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements. If any of the following risks actually
occurs, our business, financial condition or results of operations could be
harmed. In that case, the trading price of our common stock could decline, and
an investor in our securities may lose all or part of their
investment.
Risks
Relating to Our Business
We
have a short operating history as a public company, and the limited operating
history of some of our subsidiaries makes it difficult to evaluate our future
prospects and results of operations.
Our
current management has limited experience in operating a public company, and we
may need to hire additional management personnel and outside assistance from
legal, accounting, and other professionals to assist us with complying with
additional SEC reporting requirements and compliance under the Sarbanes-Oxley
Act of 2002 not previously required of us as a private company prior to the
Share Exchange that could be more costly than planned. Further, the
limited operating history of Bright Future and Premier Power Spain makes it
difficult to evaluate our business. In the event that we are not able to manage
our growth and operate as a public company due to our limited experience, our
business may suffer uncertainty and failures, which makes it difficult to
evaluate our business.
We are dependent upon our suppliers
for the components used in the systems
we design and install, and our major
suppliers are dependent upon the continued
availability and pricing of
polysilicon and other raw materials used in solar
panels. Any increases in the price of
solar components or any interruptions to or shortage or decline in the quality
of the solar components we purchase for our solar energy systems could adversely
affect our business.
Key
components used in our systems are purchased from a limited number of
manufacturers. In particular, Sharp, SunPower Corporation, and General Electric
account for over 80% of our purchases of solar panels. We are subject to market
prices for the components that we purchase for our installations, which are
subject to fluctuation. We cannot ensure that the prices charged by our
suppliers will not increase because of changes in market conditions or other
factors beyond our control. An increase in the price of components used in our
systems could result in an increase in costs to our customers and could have a
material adverse effect on our revenues and demand for our products and
services. Our suppliers are dependent upon the availability and pricing of
polysilicon, one of the main materials used in manufacturing solar panels. The
world market for solar panels recently experienced a shortage of supply due to
insufficient availability of silicon and limited manufacturing capacity. This
shortage caused the prices for solar panels to increase. Interruptions in our
ability to procure needed components for our systems, whether due to
discontinuance by our suppliers, delays or failures in delivery, shortages
caused by inadequate production capacity or unavailability, or for other
reasons, would adversely affect or limit our sales and growth. In addition,
increases in the prices of solar panels could make systems that have been sold
but not yet installed unprofitable for us. There is no assurance that we will
continue to find qualified manufacturers on acceptable terms and, if we do,
there can be no assurance that product quality will continue to be acceptable,
which could lead to a loss of sales and revenues.
Various
licenses and permits are required to operate our business, and the loss of or
failure to renew any or all of these licenses and permits could prevent us from
either completing current projects or obtaining future projects, and, thus,
materially adversely affect our business.
We hold
electrical contractor licenses in all states in which we operate, including C10,
C2, and C46. Also, we are certified by the North America Board of Certified
Energy Practitioners (NABCEP). The loss of any such licenses or certifications,
or the loss of any key personnel who hold such licenses or certifications, would
materially adversely affect our business because it could prevent us from
obtaining and/or completing solar integration projects in states where we or our
personnel lose such licenses or certifications or are in non-compliance with
state licensing or certification requirements.
We
are highly dependent on senior management and key sales and technical
personnel. The loss and inability to replace any such persons could
have a material adverse effect on our business and operations.
We are
highly dependent on our senior management to manage our business and operations
and our key managerial, financial, sales, design, engineering, technical and
other personnel for the sale, development and installation of our solar power
systems. In particular, we rely substantially on Dean R. Marks, our President
and Chief Executive Officer, and Miguel de Anquin, our Chief Operating Officer,
and Corporate Secretary, to manage our operations. Although we have entered into
employment agreements with and obtained key-man life insurance policies for our
benefit on the lives of Messrs. Marks and de Anquin, we cannot assure their
continued services to the Company. The loss of either one of them, or any other
member of our senior management, would have a material adverse effect on our
business and operations. Competition for senior management and sales and
technical personnel is intense, and the pool of suitable candidates is limited.
We may be unable to locate a suitable replacement for any member of our senior
management or key sales and technical personnel that we lose. In addition, if
any member of our senior management or key sales and technical personnel joins a
competitor or forms a competing company, they may compete with us for customers,
business partners and other key professionals and staff members of our company.
Although each of our senior management and key sales and technical personnel has
signed a confidentiality and non-competition agreement in connection with his
employment with us, we cannot provide assurances that we will be able to
successfully enforce these provisions in the event of a dispute between us and
any member of our senior management or key research and development
personnel.
If we are unable to attract, train,
and retain highly qualified personnel,
the quality of our services may
decline, and we may not meet our business and financial
goals.
We
compete for qualified personnel with other solar integration companies. Intense
competition for these personnel could cause our compensation costs to increase
significantly, which, in turn, could have a material adverse effect on our
results of operations. Our future success and ability to grow our business will
depend in part on the continued service of these individuals and our ability to
identify, hire and retain additional qualified personnel. If we are unable to
attract and retain qualified employees, we may be unable to meet our business
and financial goals, which will require the retention of these qualified
employees to work on our future solar integration projects as we expand our
business.
Our
growth strategy may prove to be disruptive and divert management
resources.
Our
growth strategy may involve large transactions and present financial, managerial
and operational challenges, including diversion of management attention from our
existing businesses, difficulty with integrating personnel and financial and
other systems, increased expenses, including compensation expenses resulting
from newly hired employees, the assumption of unknown liabilities and potential
disputes. We could also experience financial or other setbacks if any of our
growth strategies incur problems of which we are not presently aware. We may
also require additional financing in the future in connection with our growth
strategy.
We
may need to obtain additional debt or equity financing to fund future capital
expenditures and to meet working capital requirements, which may be obtained on
terms that are unfavorable to the Company and/or our stockholders.
Additional
equity may result in dilution to the holders of our outstanding shares of
capital stock. Additional debt financing may include conditions that would
restrict our freedom to operate our business, such as conditions
that:
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·
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limit our ability to pay
dividends or require us to seek consent for the payment of
dividends;
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increase our vulnerability to
general adverse economic and industry
conditions;
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require us to dedicate a portion
of our cash flow from operations to payments on our debt, thereby reducing
the availability of our cash flow to fund capital expenditures, working
capital and other general corporate purposes;
and
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limit our flexibility in planning
for, or reacting to, changes in our business and our
industry.
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We cannot
guarantee that we will be able to obtain any additional financing on terms that
are acceptable to us, or at all.
Geographical business expansion
efforts we make could result in
difficulties in successfully managing
our business and consequently harm our
financial
condition.
As part
of our business strategy, we may seek to expand by acquiring competing
businesses or customer contracts outside of our current geographic markets, or
we may open offices in the geographical markets we desire to operate within. We
may face challenges in managing expanding product and service offerings and in
integrating acquired businesses with our own. We cannot accurately predict the
timing, size and success of our expansion efforts and the associated capital
commitments that might be required. We expect to face competition for expansion
candidates, which may limit the number of expansion opportunities available to
us and may lead to higher expansion costs. There can be no assurance that we
will be able to identify, acquire or profitably manage additional businesses and
contracts or successfully integrate acquired businesses and contracts, if any,
into our company, without substantial costs, delays or other operational or
financial difficulties. In addition, expansion efforts involve a number of other
risks, including:
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failure of the expansion efforts
to achieve expected results;
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diversion of management’s
attention and resources to expansion
efforts;
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failure to retain key customers
or personnel of the acquired businesses;
and
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risks associated with
unanticipated events, liabilities or
contingencies.
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Client
dissatisfaction or performance problems at a single acquired business could
negatively affect our reputation. The inability to acquire businesses on
reasonable terms or successfully integrate and manage acquired companies, or the
occurrence of performance problems at acquired companies, could result in
dilution to our stockholders, unfavorable accounting charges and difficulties in
successfully managing our business.
Our inability to obtain capital, use
internally generated cash, or use
shares of our common stock or debt to
finance future expansion efforts could
impair the growth and expansion of
our business.
Reliance
on internally generated cash or debt to finance our operations or to complete
business expansion efforts could substantially limit our operational and
financial flexibility. The extent to which we will be able or willing to use
shares of common stock to consummate expansions will depend on our market value
from time to time and the willingness of potential sellers to accept it as full
or partial payment. Using shares of common stock for this purpose also may
result in significant dilution to our then existing stockholders. To the extent
that we are unable to use common stock to make future expansions, our ability to
grow through expansions may be limited by the extent to which we are able to
raise capital for this purpose through debt or equity financings. No assurance
can be given that we will be able to obtain the necessary capital to finance a
successful expansion program or our other cash needs. If we are unable to obtain
additional capital on acceptable terms, we may be required to reduce the scope
of any expansion. In addition to requiring funding for expansions, we may need
additional funds to implement our internal growth and operating strategies or to
finance other aspects of our operations. Our failure to (i) obtain additional
capital on acceptable terms, (ii) use internally generated cash or debt to
complete expansions because it significantly limits our operational or financial
flexibility, or (iii) use shares of common stock to make future expansions may
hinder our ability to actively pursue any expansion program we may decide to
implement and negatively impact our stock price.
Our
operations are cash intensive, and our business could be adversely affected if
we fail to maintain sufficient levels of working capital.
We
expend a significant amount of cash in our operations, principally to fund our
materials procurement. Our suppliers typically provide us with credit. In turn,
we typically require our customers to make payment at various stages of the
project. We generally fund most of our working capital requirements out of cash
flow generated from operations. If we fail to generate sufficient revenues from
our sales, if we experience difficulties collecting our accounts receivables, or
if we fail to replace our line of credit that we had with Guaranty Bank that
expired in May 2009, we may not have sufficient cash flow to fund our operating
costs, and our business could be adversely affected.
Our
operating results may fluctuate from period to period, and if we fail to meet
market expectations for a particular period, our stock price may
decline.
Our
operating results have fluctuated from period to period and are likely to
continue to fluctuate as a result of a wide range of factors, including sales
demands, electricity rate changes, changes in incentives and technological
improvements. Our production and sales are generally lower in the winter due to
weather conditions and holiday activities. Interim reports may not be indicative
of our performance for the year or our future performance, and period-to-period
comparisons may not be meaningful due to a number of reasons beyond our control.
We cannot provide assurances that our operating results will meet the
expectations of market analysts or our investors. If we fail to meet their
expectations, there may be a decline in our stock price.
Because the solar integration
industry is highly competitive and has low barriers to entry,
we may lose market share to larger
companies that are better equipped to
weather deterioration in market
conditions due to increased competition.
Our
industry is highly competitive and fragmented, is subject to rapid change and
has low barriers to entry. We may in the future compete for potential customers
with solar system installers and servicers, electricians, roofers, utilities and
other providers of solar power equipment or electric power. Some of these
competitors may have significantly greater financial, technical and marketing
resources and greater name recognition than we have. We believe that our ability
to compete depends in part on a number of factors outside of our control,
including:
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the ability of our competitors to
hire, retain and motivate qualified technical
personnel;
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the ownership by competitors of
proprietary tools to customize systems to the needs of a particular
customer;
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the price at which others offer
comparable services and
equipment;
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the extent of our competitors’
responsiveness to client
needs;
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risk of local economy decline;
and
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installation
technology.
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Competition
in the solar power services industry may increase in the future, partly due to
low barriers to entry, as well as from other alternative energy resources now in
existence or developed in the future. Increased competition could result in
price reductions, reduced margins or loss of market share and greater
competition for qualified technical personnel. There can be no assurance that we
will be able to compete successfully against current and future competitors. If
we are unable to compete effectively, or if competition results in a
deterioration of market conditions, our business and results of operations would
be adversely affected.
We
act as the general contractor for our customers in connection with the
installation of our solar power systems and are subject to risks associated with
construction, bonding, cost overruns, delays, and other contingencies, which
could have a material adverse effect on our business and results of
operations.
We act as
the general contractor for our customers in connection with the installation of
our solar power systems. All essential costs are estimated at the time of
entering into the sales contract for a particular project, and these are
reflected in the overall price that we charge our customers for the project.
These cost estimates are preliminary and may or may not be covered by contracts
between us or the other project developers, subcontractors, suppliers and other
parties to the project. In addition, we require qualified, licensed
subcontractors to install some of our systems. Shortages of such skilled labor
could significantly delay a project or otherwise increase our costs. Should
miscalculations in planning a project or defective or late execution occur, we
may not achieve our expected margins or cover our costs. Also, many systems
customers require performance bonds issued by a bonding agency. Due to the
general performance risk inherent in construction activities, it is sometimes
difficult to secure suitable bonding agencies willing to provide performance
bonding. In the event we are unable to obtain bonding, we will be unable to bid
on, or enter into, sales contracts requiring such bonding. Delays in solar panel
or other supply shipments, other construction delays, unexpected performance
problems in electricity generation or other events could cause us to fail to
meet these performance criteria, resulting in unanticipated and severe revenue
and earnings losses and financial penalties. Construction delays are often
caused by inclement weather, failure to timely receive necessary approvals and
permits, or delays in obtaining necessary solar panels, inverters or other
materials. The occurrence of any of these events could have a material adverse
effect on our business and results of operations.
We
generally recognize revenue on system installations on a “percentage of
completion” basis and payments are due upon the achievement of contractual
milestones, and any delay or cancellation of a project could adversely affect
our business.
We
recognize revenue on our system installations on a “percentage of completion”
basis and, as a result, our revenue from these installations is driven by the
performance of our contractual obligations, which is generally driven by
timelines for the installation of our solar power systems at customer sites.
This could result in unpredictability of revenue and, in the short term, a
revenue decrease. As with any project-related business, there is the potential
for delays within any particular customer project. Variation of project
timelines and estimates may impact the amount of revenue recognized in a
particular period. In addition, certain customer contracts may include payment
milestones due at specified points during a project. Because we must invest
substantial time and incur significant expense in advance of achieving
milestones and the receipt of payment, failure to achieve milestones could
adversely affect our business and cash flows.
We
are subject to particularly lengthy sales cycles with our commercial and
government customers, which may adversely affect our sales and marketing
efforts.
Factors
specific to certain of our customers’ industries have an impact on our sales
cycles. Our commercial and government customers may have longer sales cycles due
to the timing of various state and federal requirements. These lengthy and
challenging sales cycles may mean that it could take longer before our sales and
marketing efforts result in revenue, if at all, and may have adverse effects on
our operating results, financial condition, cash flows, and stock
price.
Our failure to meet a customer’s
expectations in the performance of our
services, and the risks and
liabilities associated with placing our employees
and technicians in our customers’
homes and businesses, could give rise to
claims against
us.
Our
engagements involve projects that are critical to our customers’ business or
home. Our failure or inability to meet a customer’s expectations in the
provision of our products and services could damage or result in a material
adverse change to their premises or property, and therefore could give rise to
claims against us or damage our reputation. In addition, we are exposed to
various risks and liabilities associated with placing our employees and
technicians in the homes and workplaces of others, including possible claims of
errors and omissions, harassment, theft of client property, criminal activity
and other claims.
We
generally do not have long-term agreements with our solar integration customers
and, accordingly, could lose customers without warning.
Our
products are generally not sold pursuant to long-term agreements with solar
integration customers, but instead are sold on a purchase order basis. We
typically contract to perform large projects with no assurance of repeat
business from the same customers in the future. Although cancellations on our
purchase orders to date have been insignificant, our customers may cancel or
reschedule purchase orders with us on relatively short notice. Cancellations or
rescheduling of customer orders could result in the delay or loss of anticipated
sales without allowing us sufficient time to reduce, or delay the incurrence of,
our corresponding inventory and operating expenses. In addition, changes in
forecasts or the timing of orders from these or other customers expose us to the
risks of inventory shortages or excess inventory. This, in addition to the
non-repetition of large systems projects and our failure to obtain new large
system projects due to current economic conditions and reduced corporate and
individual spending, could cause our revenues to decline, and, in turn, our
operating results to suffer.
Our profitability depends, in part,
on our success in brand recognition,
and we could lose our competitive
advantage if we are unable to protect our
trademark against infringement. Any
related litigation could be
time-consuming and
costly.
We
believe our brand has gained substantial recognition by customers in certain
geographic areas. We have applied for trademark protection for the brand names
“Premier Power” and “Bright Futures” and our sales slogan “Your Solar
Electricity Specialist.” Use of our name or a similar name by competitors in
geographic areas in which we have not yet operated could adversely affect our
ability to use or gain protection for our brand in those markets, which could
weaken our brand and harm our business and competitive position. In addition,
any litigation relating to protecting our trademark against infringement is
likely to be time consuming and costly.
Our
Premier Ballasting and Premier Racking systems are untested and may not be
effective or patentable or may encounter other unexpected problems, which could
adversely affect our business and results of operations.
Our
Premier Ballasting and Premier Racking systems are new and have not been tested
in installation settings for a sufficient period of time to prove their
long-term effectiveness and benefits. These systems may not be effective or
other problems may occur that are unexpected and could have a material adverse
effect on our business or results of operations. While we anticipate filing
patent applications for our Premier Ballasting and Premier Racking systems
technology, patents may not be issued on such technology, or we may not be able
to realize the benefits from any patents that are issued.
We
may face intellectual property infringement claims that could be time-consuming
and costly to defend and could result in our loss of significant rights and the
assessment of damages.
If we
receive notice of claims of infringement, misappropriation or misuse of other
parties’ proprietary rights, some of these claims could lead to litigation. We
cannot provide assurances that we will prevail in these actions, or that other
actions alleging misappropriation or misuse by us of third-party trade secrets,
infringement by us of third-party patents and trademarks or the validity of our
patent or trademarks, will not be asserted or prosecuted against us. We may also
initiate claims to defend our intellectual property rights. Intellectual
property litigation, regardless of outcome, is expensive and time-consuming,
could divert management’s attention from our business and have a material
negative effect on our business, operating results or financial condition. If
there is a successful claim of infringement against us, we may be required to
pay substantial damages (including treble damages if we were to be found to have
willfully infringed a third party’s patent) to the party claiming infringement,
develop non-infringing technology, stop selling our products or using technology
that contains the allegedly infringing intellectual property or enter into
royalty or license agreements that may not be available on acceptable or
commercially practical terms, if at all. Our failure to develop non-infringing
technologies or license the proprietary rights on a timely basis could harm our
business. Parties making infringement claims on any future issued patents may be
able to obtain an injunction that would prevent us from selling our products or
using technology that contains the allegedly infringing intellectual property,
which could harm our business.
Product
liability claims against us could result in adverse publicity and potentially
significant monetary damages.
As a
seller of consumer products, we face an inherent risk of exposure to product
liability claims in the event that our solar energy systems’ use results in
damages, injuries or fatalities. Since solar energy systems are electricity
producing devices, it is possible that our products could result in damage,
injury or fatality, whether by product malfunctions, defects, improper
installation or other causes. If such damages, injuries or fatalities or claims
were to occur, we could incur monetary damages, and our business could be
adversely affected by any resulting negative publicity. The successful assertion
of product liability claims against us also could result in potentially
significant monetary damages and, if our insurance protection is inadequate to
cover these claims, could require us to make significant payments from our own
resources.
We
do not carry business interruption insurance, and any unexpected business
interruptions could adversely affect our business.
Our
operations are vulnerable to interruption by earthquake, fire, power failure and
power shortages, hardware and software failure, floods, computer viruses and
other events beyond our control. In addition, we do not carry business
interruption insurance to compensate us for losses that may occur as a result of
these kinds of events, and any such losses or damages incurred by us could
disrupt our solar integration projects and other Company operations without
reimbursement.
A
decrease in the availability of credit or an increase in interest rates could
make it difficult for customers to finance the cost of solar energy systems and
could reduce demand for our services and products.
Some of
our prospective customers may depend on debt financing, such as home equity
loans, to fund the initial capital expenditure required to purchase a solar
energy system. Third-party financing sources, specifically for solar energy
systems, are currently limited, especially due to recent domestic and worldwide
economic troubles. The lack of financing sources, a decrease in the availability
of credit or an increase in interest rates could make it difficult or more
costly for our potential customers to secure the financing necessary to purchase
a solar energy system on favorable terms, or at all, thus lowering demand for
our products and services and negatively impacting our business.
A
portion of our revenues is generated by construction contracts, and, thus, a
decrease in construction could reduce our construction contract-related sales
and, in turn, adversely affect our revenues.
Some of
our solar-related revenues were generated from the design and installation of
solar power products in newly constructed and renovated buildings, plants and
residences. Our ability to generate revenues from construction contracts will
depend on the number of new construction starts and renovations, which should
correlate with the cyclical nature of the construction industry and be affected
by general and local economic conditions, changes in interest rates, lending
standards and other factors. For example, the current housing slump and
tightened credit markets have resulted in reduced new home construction, which
could limit our ability to sell solar products to residential and commercial
developers.
We
derive most of our revenue from sales in a limited number of territories, and we
will be unable to further expand our business if we are unsuccessful in adding
additional geographic sales territories to our operations.
We
currently derive most of our revenue from sales of our solar integration
services in California and Spain. This geographic concentration exposes us to
growth rates, economic conditions, and other factors that may be specific to
those territories to which we would be less subject if we were more
geographically diversified. The growth of our business will require us to expand
our operations and commence operations in other states, countries, and
territories. Any geographic expansion efforts that we undertake may not be
successful, which, in turn, would limit our growth opportunities.
We
face risks associated with international trade and currency exchange that could
have a material impact on our profitability.
We
transact business in the U.S. dollar and the Euro. Changes in exchange rates
would affect the value of deposits of currencies we hold. We do not currently
hedge against exposure to currencies. We cannot predict with certainty future
exchange rates and their impact on our operating results. Movements in the
exchange rate between the U.S. dollar and the Euro could have a material impact
on our profitability.
Our
success may depend in part on our ability to make successful
acquisitions.
As part
of our business strategy, we plan to expand our operations through strategic
acquisitions in our current markets and in new geographic markets. We cannot
accurately predict the timing, size, and success of our acquisition efforts. Our
acquisition strategy involves significant risks, including the
following:
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our ability to identify suitable
acquisition candidates at acceptable
prices;
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our ability to successfully
complete acquisitions of identified
candidates;
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our ability to compete
effectively for available acquisition
opportunities;
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increases in asking prices by
acquisition candidates to levels beyond our financial capability or to
levels that would not result in the returns required by our acquisition
criteria;
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diversion of management’s
attention to expansion
efforts;
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unanticipated costs and
contingent liabilities associated with
acquisitions;
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failure of acquired businesses to
achieve expected results;
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our failure to retain key
customers or personnel of acquired businesses;
and
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difficulties entering markets in
which we have no or limited
experience.
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These
risks, as well as other circumstances that often accompany expansion through
acquisitions, could inhibit our growth and negatively impact our operating
results. In addition, the size, timing, and success of any future acquisitions
may cause substantial fluctuations in our operating results from quarter to
quarter. Consequently, our operating results for any quarter may not be
indicative of the results that may be achieved for any subsequent quarter or for
a full fiscal year. These fluctuations could adversely affect the market price
of our common stock.
Our
failure to integrate the operations of acquired businesses successfully into our
operations or to manage our anticipated growth effectively could materially and
adversely affect our business and operating results.
In order
to pursue a successful acquisition strategy, we must integrate the operations of
acquired businesses into our operations, including centralizing certain
functions to achieve cost savings and pursuing programs and processes that
leverage our revenue and growth opportunities. The integration of the
management, operations, and facilities of acquired businesses with our own could
involve difficulties, which could adversely affect our growth rate and operating
results. We may be unable to do any of the following:
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effectively complete the
integration of the management, operations, facilities and accounting and
information systems of acquired businesses with our
own;
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efficiently manage the combined
operations of the acquired businesses with our
operations;
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achieve our operating, growth and
performance goals for acquired
businesses;
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achieve additional revenue as a
result of our expanded operations;
or
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achieve operating efficiencies or
otherwise realize cost savings as a result of anticipated acquisition
synergies.
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Our rate
of growth and operating performance may suffer if we fail to manage acquired
businesses profitably without substantial additional costs or operational
problems or to implement effectively combined growth and operating
strategies.
If
we fail to develop and maintain an effective system of internal controls, we may
not be able to accurately report our financial results or prevent fraud. As a
result, current and potential stockholders could lose confidence in our
financial reports, which could harm our business and stock price.
Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. We are currently required to provide an assessment of
our internal controls over financial reporting. Beginning with the annual report
for our fiscal year ended December 31, 2009, under Section 404 of the
Sarbanes-Oxley Act of 2002, our independent registered public accounting firm
must provide an annual attestation report on our internal control over financial
reporting. The process of strengthening our internal controls and complying with
Section 404 is expensive and time-consuming, and requires significant management
attention, especially given that we have just initiated efforts to comply with
the requirements of Section 404. We cannot be certain that the measures we will
undertake will ensure that we will maintain adequate controls over our financial
processes and reporting in the future. Furthermore, if we are able to rapidly
grow our business, the internal controls that we will need will become more
complex, and significantly more resources will be required to ensure our
internal controls remain effective. Failure to implement required controls, or
difficulties encountered in their implementation, could harm our operating
results or cause us to fail to meet our reporting obligations. The disclosure of
any material weaknesses in our internal controls that are identified by our
auditors, even if the weakness is quickly remedied, could diminish investors’
confidence in our financial statements and harm our stock price. In addition,
non-compliance with Section 404 could subject us to a variety of administrative
sanctions, including the suspension of trading, ineligibility for listing on a
national securities exchange, and the inability of registered broker-dealers to
make a market in our common stock, which would further reduce our stock
price.
Costs
incurred because we are a public company may affect our
profitability.
As a
public company, we incur significant legal, accounting and other expenses, and
we are subject to the SEC’s rules and regulations relating to public disclosure
that generally involve a substantial expenditure of financial resources. In
addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently
implemented by the SEC, require changes in corporate governance practices of
public companies. We expect that full compliance with these new rules and
regulations will significantly increase our legal and financial compliance costs
and make some activities more time-consuming and costly, which may negatively
impact our financial results. To the extent our earnings suffer as a result of
the financial impact of our SEC reporting or compliance costs, our ability to
develop an active trading market for our securities could be
harmed.
As a
public company, we also expect that these new rules and regulations may make it
more difficult and expensive for us to obtain director and officer liability
insurance in the future, and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same coverage. As
a result, it may be more difficult for us to attract and retain qualified
persons to serve on our board of directors or as executive
officers.
It may be
time-consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act,
when applicable to us. Some members of our management team have limited or no
experience operating a company with securities traded or listed on an exchange,
or subject to SEC rules and requirements, including SEC reporting practices and
requirements that are applicable to a publicly traded company. We may need to
recruit, hire, train, and retain additional financial reporting, internal
controls, and other personnel in order to develop and implement appropriate
internal controls and reporting procedures. If we are unable to comply with the
internal controls requirements of the Sarbanes-Oxley Act, when applicable, we
may not be able to obtain our independent accountant’s attestation report on our
internal controls over financial reporting required by the Sarbanes-Oxley
Act.
Our
business is exposed to risks associated with the ongoing financial crisis and
weakening global economy, which increases 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, forecast our operating results, make business decisions,
and identify the risks that may affect our business, financial condition and
results of operations. If we are unable to timely and appropriately
adapt to changes resulting from the difficult macroeconomic environment, our
business, financial condition, or results of operations may be materially and
adversely affected.
Risks
Relating To Our Industry
We have experienced technological
changes in our industry. New
technologies may prove inappropriate
and result in liability to us or may not
gain market acceptance by our
customers.
The solar
power industry, which currently accounts for less than 1% of the world’s power
generation according to the Solar Energy Industries Association, is subject to
technological change. Our future success will depend on our ability to
appropriately respond to changing technologies and changes in function of
products and quality. If we adopt products and technologies that are not
attractive to consumers, we may not be successful in capturing or retaining a
significant share of our market. In addition, some new technologies are
relatively untested and unperfected and may not perform as expected or as
desired, in which event our adoption of such products or technologies may cause
us to lose money.
A drop in the retail price of
conventional energy or non-solar alternative
energy sources may negatively impact
our profitability.
We
believe that a customer’s decision to purchase or install solar power
capabilities is primarily driven by the cost and return on investment resulting
from solar power systems. Fluctuations in economic and market conditions that
impact the prices of conventional and non-solar alternative energy sources, such
as decreases in the prices of oil, coal and other fossil fuels and changes in
utility electric rates and net metering policies, could cause the demand for
solar power systems to decline, which would have a negative impact on our
profitability.
Existing regulations, and changes to
such regulations, may present
technical, regulatory, and economic
barriers to the purchase and use of solar
power products, which may
significantly reduce demand for our products.
Installations
of solar power systems are subject to oversight and regulation in accordance
with national and local ordinances, building codes, zoning, environmental
protection regulation, utility interconnection requirements for metering, and
other rules and regulations. We attempt to keep up-to-date about these
requirements on a national, state, and local level, and must design systems to
comply with varying standards. Certain cities may have ordinances that prevent
or increase the cost of installation of our solar power systems. In addition,
new government regulations or utility policies pertaining to solar power systems
are unpredictable and may result in significant additional expenses or delays
and, as a result, could cause a significant reduction in demand for solar energy
systems and our services. For example, there currently exist metering caps in
certain jurisdictions that effectively limit the aggregate amount of power that
may be sold by solar power generators into the power grid.
Our business depends on the
availability of rebates, tax credits and other
financial incentives, the reduction
or elimination of which would reduce the demand
for our services.
Many
states, including California, Nevada and New Jersey, offer substantial
incentives to offset the cost of solar power systems. These incentives can take
many forms, including direct rebates, state tax credits, system performance
payments and Renewable Energy Credits (“RECs”). Moreover, although the United
States Congress recently passed legislation to extend for 8 years a 30% federal
tax credit for the installation of solar power systems, there can be no
assurance that they will be further extended once they expire. Additionally,
businesses that install solar power systems may elect to accelerate the
depreciation of their system over five years. Spain also offers substantial
incentives, including feed-in tariffs. Spain’s Industry Ministry has implemented
a capped solar subsidy program for MW installation and reduced tariff
levels. A reduction in or elimination of such incentives could
substantially increase the cost to our customers, resulting in significant
reductions in demand for our products and services, which may negatively impact
our sales.
If solar power technology is not
suitable for widespread adoption or
sufficient demand for solar power
products does not develop or takes longer to
develop than we anticipate, our sales
would decline, and we would be unable to
achieve or sustain
profitability.
The
market for solar power products is emerging and rapidly evolving, and its future
success is uncertain. Many factors will influence the widespread adoption of
solar power technology and demand for solar power products,
including:
|
·
|
cost effectiveness of solar power
technologies as compared with conventional and non-solar alternative
energy technologies;
|
|
·
|
performance and reliability of
solar power products as compared with conventional and non-solar
alternative energy products;
|
|
·
|
capital expenditures by customers
that tend to decrease if the U.S. economy slows;
and
|
|
·
|
availability of government
subsidies and incentives.
|
If solar
power technology proves unsuitable for widespread commercial deployment or if
demand for solar power products fails to develop sufficiently, we would be
unable to generate enough revenue to achieve and sustain profitability. In
addition, demand for solar power products in the markets and geographic regions
we target may not develop or may develop more slowly than we
anticipate.
Risks
Related to Doing Business in Spain
Adverse
changes in the political and economic policies of the Spanish government could
have a material adverse effect on the overall economic growth of Spain, which
could reduce the demand for our products and materially and adversely affect our
competitive position.
A
significant portion of our business operations are conducted in Spain through
our indirect wholly owned subsidiary, Premier Power Spain, and a significant
portion of our sales are made in Spain. Spain offers substantial incentives,
including feed-in tariffs, to encourage the growth of solar power as a form of
renewable energy. Accordingly, our business, financial condition, results of
operations, and prospects are affected significantly by economic, political, and
legal developments in Spain. Any adverse change in such policies could have a
material adverse effect on the overall economic growth in Spain or the level of
our incentives, which in turn could lead to a reduction in demand for our
products and consequently have a material adverse effect on our
businesses.
Fluctuation
in the value of the Euro may have a material adverse effect on an investment in
our securities.
Changes
in exchange rates would affect the value of deposits of currencies we hold. We
do not currently hedge against exposure to currencies. We cannot predict with
certainty future exchange rates and their impact on our operating results.
Movements between the U.S. dollar and the Euro could have a material impact on
our profitability.
Our
business benefits from certain Spanish government incentives. Expiration of, or
changes to, these incentives could have a material adverse effect on our
operating results.
The
Spanish government has provided various incentives to solar energy providers in
order to encourage development of the solar industry. Such incentives include
feed-in tariffs and other measures. Reduction in or elimination of such
incentives or delays or interruptions in the implementation of such favorable
policies could substantially decrease the economic benefits of solar to our
customers, resulting in significant reductions in demand for our products and
services, which would negatively impact our sales.
Effecting
service of legal process, enforcing foreign judgments, or bringing original
actions in Spain based on United States or other foreign laws against us or our
management may be difficult.
We
conduct a significant amount of our business through our indirect wholly owned
subsidiary, Premier Power Spain, which is established in Spain, and a portion of
our assets are located in Spain. As a result, it may not be possible to effect
service of process in Spain against us or upon our executive officers or
directors, including with respect to matters arising under U.S. federal
securities laws or applicable state securities laws. Moreover, there is
uncertainty that the courts of Spain would enforce judgments of U.S. courts
against us or our directors and officers based on the civil liability provisions
of the securities laws of the United States or any state, or entertain an
original action brought in Spain based upon the securities laws of the United
States or any state. These risks may discourage a potential acquirer
from seeking to acquire shares of our common stock which, in turn, could reduce
our stock price or prevent our stockholders from realizing a premium over our
stock price.
Risk
Relating to Our Securities
Generally,
we have not paid any cash dividends, and no cash dividends will be paid in the
foreseeable future, which may require our stockholders to generate a cash flow
from their investment in our securities through alternative means.
We do not
anticipate paying cash dividends on our common stock in the foreseeable future,
and we may not have sufficient funds legally available to pay dividends. Even if
funds are legally available for distribution, we may nevertheless decide not to
or may be unable to pay any dividends to our stockholders. We intend to retain
all earnings for our operations. Accordingly, our stockholders may have to sell
some or all of their common stock in order to generate cash flow from their
investment. Our stockholders may not receive a gain on their investment when
they sell their common stock and may lose some or all of the amount of their
investment. Any determination to pay dividends in the future on our common stock
will be made at the discretion of our board of directors and will depend on our
results of operations, financial conditions, contractual restrictions,
restrictions imposed by applicable law, capital requirements, and other factors
that our board of directors deems relevant.
We
may need additional capital, and the sale of additional shares or other equity
securities could result in dilution to our
stockholders. Additionally, our stockholders may face dilution from
conversion of our Series A Convertible Preferred Stock or Series B Convertible
Preferred Stock.
We
believe that our current cash and cash equivalents, anticipated cash flow from
operations, and net proceeds from our September 9, 2008 financing and June 16,
2009 financing will be sufficient to meet our anticipated cash needs for the
near future. We may, however, require additional cash resources due to changed
business conditions or other future developments, including any investments or
acquisitions we may decide to pursue. If our resources are insufficient to
satisfy our cash requirements, we may seek to sell additional equity or debt
securities or obtain an increased credit facility. The sale of additional equity
securities could result in dilution to our stockholders. The incurrence of
additional indebtedness would result in increased debt service obligations and
could result in further operating and financing covenants that would further
restrict our operations. We cannot provide assurances that financing will be
available in amounts or on terms acceptable to us, if at
all. Additionally, there are outstanding shares of our Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock issued by
us, the conversion of which may also dilute our stockholders.
The
application of the “penny stock” rules could adversely affect the market price
of our common stock and increase our stockholders’ transaction costs to sell
those shares.
Our
common stock may be subject to the “penny stock” rules adopted under Section
15(g) of the Securities Exchange Act of 1934. The penny stock rules apply to
companies that are not traded on a national securities exchange whose common
stock trades at less than $5.00 per share or that have tangible net worth of
less than $5,000,000 ($2,000,000 if the company has been operating for three or
more years). The “penny stock” rules impose additional sales practice
requirements on broker-dealers who sell securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of securities and
have received the purchaser’s written consent to the transaction before the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the broker-dealer must deliver, before the transaction, a disclosure
schedule prescribed by the SEC relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common stock, and may result in decreased
liquidity for our common stock and increased transaction costs for sales and
purchases of our common stock as compared to other securities.
Our
common stock is thinly traded, and an active public market for our common stock
may not develop or be sustained.
Although
our common stock is quoted on the Over-the-Counter Bulletin Board (“OTC”), we
cannot predict the extent to which an active public market for our common stock
will develop or be sustained. Our common stock has historically been
sporadically or “thinly traded” on the OTC, meaning that the number of persons
interested in purchasing our common stock at or near bid prices at any given
time may be relatively small or nonexistent. This situation is attributable to a
number of factors, including the fact that we are a small company that is
relatively unknown to stock analysts, stock brokers, institutional investors and
others in the investment community that generate or influence sales volume, and
that even if we came to the attention of such persons, they tend to be
risk-adverse and would be reluctant to follow an unproven company such as ours
or purchase or recommend the purchase of our shares until such time as we become
more seasoned and viable. As a consequence, there may be periods of several days
or more when trading activity in our shares is minimal or non-existent, as
compared to a seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on our stock price. We cannot provide assurances that a broader or more active
public trading market for our common stock will develop or be sustained, or that
current trading levels will be sustained.
The
volatility of the market price of our common stock may render our stockholders
unable to sell their shares of our common stock at or near “ask” prices or at
all if they need to sell their shares to raise money or otherwise desire to
liquidate their shares.
The
market price of our common stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” that could lead
to wide fluctuations in our stock price. The price at which our common stock is
purchased may not be indicative of the price that will prevail in the trading
market. An investor in our common stock may be unable to sell their common stock
at or above their purchase price if at all, which may result in substantial
losses to such investor.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our stock price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our stock price is attributable to a number of factors. As
noted above, our common stock is sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our stockholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event a large number of our shares are
sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its stock price.
The following factors also may add to the volatility in the price of our common
stock: actual or anticipated variations in our quarterly or annual operating
results; adverse outcomes; additions to or departures of our key personnel, as
well as other items discussed under this “Risk Factors” section, as well as
elsewhere in this prospectus. Many of these factors are beyond our control and
may decrease the market price of our common stock, regardless of our operating
performance. We cannot make any predictions or projections as to what the
prevailing market price for our common stock will be at any time, including as
to whether our common stock will sustain its current market prices, or as to
what effect the sale of shares or the availability of shares for sale at any
time will have on the prevailing market price.
If
we do not meet the listing standards established by Nasdaq, NYSE Alternext US
LLC, or other similar markets, our common stock may not become listed for
trading on one of those markets, which may restrict the liquidity of shares held
by our stockholders.
As soon
as reasonably practicable, we intend to apply to list our common stock for
trading on a national securities exchange such as the Nasdaq Stock Market
(“Nasdaq”) or NYSE Alternext U.S. LLC (the “Alternext”). The listing
of our common stock on a national securities exchange may result in a more
active public market for our common stock, resulting in turn in greater
liquidity of shares held by our stockholders. Nasdaq and the Alternext have
established certain quantitative criteria and qualitative standards that
companies must meet in order to become and remain listed for trading on these
markets. We cannot guarantee that we will be able to meet or maintain all
necessary requirements for listing; therefore, we cannot guarantee that our
common stock will be listed for trading on a national securities
exchange.
Volatility
in our common stock price may subject us to securities litigation that could
result in substantial costs to our business.
The
market for our common stock may be characterized by significant price volatility
when compared to seasoned issuers, and we expect our stock price will be more
volatile than a seasoned issuer for the indefinite future. In the past,
plaintiffs have often initiated securities class action litigation against a
company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management’s attention and resources that otherwise could have been focused on
our business operations.
Past
activities of our company and affiliates may lead to future liability for our
company.
Prior to
our acquisition of Premier Power California, we were a third-party logistics
provider for supply chain management, a business unrelated to our current
operations. Any liabilities relating to such prior business against which we are
not completely indemnified will be borne by us and may result in substantial
costs to the Company and could divert management’s attention and resources that
otherwise could have been focused on our business operations.
We
have raised substantial amounts of capital in a recent financing, and if we
inadvertently failed to comply with applicable securities laws, ensuing
rescission rights or lawsuits would severely damage our financial
position.
The
securities offered in our September 9, 2008 private placement were not
registered under the Securities Act or any state “blue sky” law in reliance upon
exemptions from such registration requirements. Such exemptions are highly
technical in nature, and if we inadvertently failed to comply with the
requirements or any of such exemptive provisions, the investor would have the
right to rescind their purchase of our securities or sue for damages. If the
investor was to successfully seek such rescission or prevail in any such suit,
we would face severe financial demands that could materially and adversely
affect our financial position. Financings that may be available to us under
current market conditions frequently involve sales at prices below the prices at
which our common stock currently is quoted on the OTC or exchange on which our
common stock may in the future be listed, as well as the issuance of warrants or
convertible securities at a discount to market price.
Our
principal stockholders are two members of our management. As these
principal stockholders substantially control our corporate actions, our other
stockholders may face difficulty in exerting any influence over matters not
supported by these two members of management.
Our
principal stockholders include Dean R. Marks, who is our Chairman of the Board,
President, and Chief Executive Officer, and Miguel de Anquin, who is our Chief
Operating Officer and Corporate Secretary and a member of our Board. Messrs.
Marks and de Anquin own approximately 69% of our outstanding shares of common
stock. These stockholders, acting individually or as a group, could exert
substantial influence over matters such as electing directors, amending our
certificate of incorporation or bylaws, and approving mergers or other business
combinations or transactions. In addition, because of the percentage of
ownership and voting concentration in these principal stockholders and their
affiliated entities, elections of our board of directors will generally be
within the control of these stockholders and their affiliated entities. While
all of our stockholders are entitled to vote on matters submitted to our
stockholders for approval, the concentration of shares and voting control
presently lies with these principal stockholders and their affiliated entities.
As such, it would be difficult for stockholders to propose and have approved
proposals not supported by these principal stockholders and their affiliated
entities. There can be no assurance that matters voted upon by our officers and
directors in their capacity as stockholders will be viewed favorably by all
stockholders of our company. The stock ownership of our principal stockholders
and their affiliated entities may discourage a potential acquirer from seeking
to acquire shares of our common stock which, in turn, could reduce our stock
price or prevent our stockholders from realizing a premium over our stock
price.
We
are responsible for the indemnification of our officers and directors, which
could result in substantial expenditures.
Our
bylaws provide for the indemnification of our directors, officers, employees,
and agents, and, under certain circumstances, against attorneys’ fees and other
expenses incurred by them in litigation to which they become a party arising
from their association with or activities on behalf of the Company. This
indemnification policy could result in substantial expenditures, which we may be
unable to recoup.
Our certificate of incorporation
authorizes our board to create new series
of preferred stock without further
approval by our stockholders, which could
adversely affect the rights of the
holders of our common stock.
Our board
of directors has the authority to fix and determine the relative rights and
preferences of preferred stock. Our board of directors also has the authority to
issue preferred stock without further stockholder approval. As a result, our
board of directors could authorize the issuance of a series of preferred stock
that would grant to holders the preferred right to our assets upon liquidation,
the right to receive dividend payments before dividends are distributed to the
holders of common stock and the right to the redemption of the shares, together
with a premium, prior to the redemption of our common stock. In addition, our
board of directors could authorize the issuance of a series of preferred stock
that has greater voting power than our common stock or that is convertible into
our common stock, which could decrease the relative voting power of our common
stock or result in dilution to our existing stockholders.
Contractual
limitations that restrict conversion of securities held by Vision Opportunity
Master Fund, Ltd. may not necessarily prevent substantial dilution of the voting
power and value of an investment in our securities.
The
contractual limitations that restrict conversion of shares of Series A
Convertible Preferred Stock (“Series A Stock”) and of Series B Convertible
Preferred Stock (“Series B Stock”) held by Vision Opportunity
Master Fund, Ltd. (“Vision”) for shares of our common stock are limited in their
application and effect and may not prevent substantial dilution of our existing
stockholders. Pursuant to the terms of such securities, Vision may not convert
the Series A Stock or the Series B Stock to the extent that such conversion
would cause Vision’s beneficial ownership, together with its affiliates, to
exceed 9.99% of the number of shares of our outstanding common stock immediately
after giving effect to the issuance of shares of common stock as a result of a
conversion. Vision, may, however waive this limitation upon 61 days’
notice to the Company. In addition, this 9.99% limitation does
not prevent Vision from converting the Series A Stock or the Series B
Stock into shares of our common stock and then reselling those shares in
stages over time where Vision and its affiliates do not, at any given time,
beneficially own shares in excess of the 9.99%
limitation. Consequently, this limitation will not necessarily
prevent substantial dilution of the voting power and value of an investment in
our securities.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
All
statements contained in this prospectus, other than statements of historical
facts, that address future activities, events or developments, are
forward-looking statements, including, but not limited to, statements containing
the words “believe,” “anticipate,” “expect” and words of similar import. These
statements are based on certain assumptions and analyses made by us in light of
our experience and our assessment of historical trends, current conditions and
expected future developments as well as other factors we believe are appropriate
under the circumstances. Whether actual results will conform to the expectations
and predictions of management, however, is subject to a number of risks and
uncertainties that may cause actual results to differ materially. Such risks are
in the section entitled “Risk Factors” on page 6, and in our previous SEC
filings.
Consequently,
all of the forward-looking statements made in this prospectus are qualified by
these cautionary statements, and there can be no assurance that the actual
results anticipated by management will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on our
business operations.
USE
OF PROCEEDS
We will
not receive any proceeds from the sale of the common stock by the selling
security holders. All proceeds from the sale of such securities offered by the
selling security holders under this prospectus will be for the account of the
selling security holders, as described below in the sections entitled “Selling
Security Holders” and “Plan of Distribution.” With the exception of any
brokerage fees and commissions which are the respective obligations of the
selling security holders, we are responsible for the fees, costs and expenses of
this offering which includes our legal and accounting fees, printing costs and
filing and other miscellaneous fees and expenses.
SELLING
SECURITY HOLDERS
We are
registering the following securities:
|
·
|
360,993 shares of common
stock held by Genesis Capital Advisors, LLC, which were issued as part of
the Share Exchange, pursuant to the terms of the Registration Rights
Agreement;
|
|
·
|
728,972 shares of common
stock held by Vision Opportunity Master Fund, Ltd., pursuant to the terms
of the First Amendment to Registration Rights Agreement between the
Company, Genesis Capital Advisors, LLC, and Vision Opportunity Master
Fund, Ltd., dated October 31, 2008 (the “First Amended Registration Rights
Agreement”); and
|
|
·
|
1,600,000 shares of
common stock underlying an option to purchase such shares held by Vision
Opportunity Master Fund, Ltd., pursuant to the terms of the First Amended
Registration Rights
Agreement.
|
We are
registering these securities in order to permit the selling security holders to
dispose of the shares of common stock, or interests therein, from time to time.
Up to an additional 20% of such securities will be registered in the future to
accommodate possible issuances as required under the Registration Rights
Agreement and the First Amended Registration Rights Agreement upon the
occurrence of events covered under Rule 416 under the Securities Act of 1993, as
amended. The selling security holders may sell all, some, or none of
their shares in this offering. See “Plan of Distribution.”
The
table below lists the selling security holders and other information regarding
the beneficial ownership of the shares of common stock by each of the selling
security holders. Column B lists the number of shares of common stock
beneficially owned by each selling security holder as of June 24, 2009. Column C
lists the shares of common stock covered by this prospectus that may be disposed
of by each of the selling security holders. Column D lists the number of shares
of common stock that will be beneficially owned by the selling security holders
assuming all of the shares covered by this prospectus are sold. Column E lists
the percentage of class beneficially owned, based on 26,048,750 shares of common
stock outstanding on June 24, 2009.
The
selling security holders may decide to sell all, some, or none of the securities
listed below. We cannot provide an estimate of the number of securities that any
of the selling security holders will hold in the future. For purposes of this
table, beneficial ownership is determined in accordance with the rules of the
SEC, and includes voting power and investment power with respect to such
securities.
The
inclusion of any securities in the following table does not constitute an
admission of beneficial ownership by the persons named below. Except as
indicated in the footnotes to the table, no selling security holder has had any
material relationship with us or our affiliates during the last three years.
Except as indicated below, no selling security holder is the beneficial owner of
any additional shares of common stock or other equity securities issued by us or
any securities convertible into, or exercisable or exchangeable for, our equity
securities. Except as indicated below, no selling security holder is a
registered broker-dealer or an affiliate of a broker-dealer.
Selling
Security Holder Table
Name
(A)
|
|
Securities
Beneficially
Owned Prior to
Offering
(B)
|
|
|
Securities
Being
Offered
(C)
|
|
|
Securities
Beneficially
Owned After
Offering
(D)
|
|
|
% Beneficial
Ownership After
Offering
(E)
|
|
Vision
Opportunity Master Fund,
Ltd.
(1)
|
|
$
|
2,649,359
|
(2)
|
|
$
|
2,328,972
|
(3)
|
|
$
|
2,649,359
|
(2)
|
|
$
|
9.99%
|
(2)
|
Genesis
Capital Advisors, LLC (4)
|
|
|
1,580,598
|
|
|
|
360,993
|
(5)
|
|
|
1,219,605
|
|
|
|
4.68%
|
|
TOTAL
|
|
|
4,229,957
|
|
|
|
2,689,965
|
|
|
|
3,868,964
|
|
|
|
|
|
(1)
|
The address for this security
holder is Citi Hedge Fund Services (Cayman) Limited, Cayman Corporate
Centre, 27 Hospital Road, 5
th
Floor, Grand Cayman KY1-1109,
Cayman Islands. Adam Benowitz, as the managing member of Vision Capital
Advisors, LLC, the investment advisor to this security holder, has
dispositive and voting power over these securities and may be deemed to be
the beneficial owner of these
securities.
|
(2)
|
Immediately prior to our Share
Exchange transaction, this selling security holder agreed to cancel
25,448,000 of its shares of our common stock in consideration for the
agreement by the shareholders of Premier Power California to enter into
the Share Exchange transaction with this selling security holder, which
prior to the transaction was the majority stockholder of the
Company. Thus, this selling security holder’s beneficial
ownership 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 selling security
holder’s beneficial ownership does not include (i) 3,028,641 shares of
Common Stock underlying its shares of Series A Preferred Stock, (ii)
2,800,000 shares of Common Stock underlying its shares of Series B
Preferred Stock, or (iii) 1,600,000 shares of Common Stock underlying an
option to purchase such shares because each of these securities held by
the selling security holder 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 selling security holder may
waive this limitation upon 61 days’ notice to the Company. As
of June 24, 2009, however, the Company has not received any such notice.
After the offering, this selling security holder will continue to
beneficially own 9.99% or 2,649,359 shares because the remaining shares of
its Series A Preferred Stock, Series B Preferred Stock, and the option
will remain presently convertible or exercisable up to an amount not to
exceed 9.99%.
|
(3)
|
Pursuant to the Registration
Rights Agreement, as amended, that we entered into as part of the
Financing (more fully described under the section titled “Business”
below), we are registering for resale the following: (i)
1,600,000 shares of common stock underlying an option to purchase
such shares and (ii) 728,972 shares of common stock, all of which are held
by this selling security
holder.
|
(4)
|
The address for this security
holder is 15760 Ventura Blvd., Suite 1550, Encino, California 91436.
Ronald Andrikian and Charles Gilreath have shared dispositive and voting
power over these securities and may be deemed to be the beneficial owner
of these securities.
|
(5)
|
Pursuant to the Registration
Rights Agreement we entered into as part of the Financing more fully
described under the section titled “Business” below, we are registering
for resale 360,993 shares of common stock issued to this selling security
holder.
|
PLAN
OF DISTRIBUTION
Each
selling security holder named below and any of their pledgees, assignees, and
successors-in-interest (each a “Selling Security Holder” and collectively the
“Selling Security Holders”) may, from time to time, sell any or all of their
shares of common stock on the OTC Bulletin Board or any other stock exchange,
market, or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. A Selling
Security Holder may use any one or more of the following methods when selling
shares:
|
·
|
ordinary brokerage transactions
and transactions in which the broker-dealer solicits
purchasers;
|
|
·
|
block trades in which the
broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the
transaction;
|
|
·
|
purchases by a broker-dealer as
principal and resale by the broker-dealer for its
account;
|
|
·
|
an exchange distribution in
accordance with the rules of the applicable
exchange;
|
|
·
|
privately negotiated
transactions;
|
|
·
|
settlement of short sales entered
into after the effective date of the registration statement of which this
prospectus is a part;
|
|
·
|
broker-dealers may agree with the
Selling Security Holders to sell a specified number of such shares at a
stipulated price per share;
|
|
·
|
through the writing or settlement
of options or other hedging transactions, whether through an options
exchange or otherwise;
|
|
·
|
a combination of any such methods
of sale; or
|
|
·
|
any other method permitted
pursuant to applicable law.
|
The
Selling Security Holders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), if available, rather
than under this prospectus.
Broker-dealers
engaged by the Selling Security Holders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Security Holders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with
FINRA Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with FINRA IM-2440.
In
connection with the sale of the common stock or interests therein, the Selling
Security Holders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Security Holders may also sell shares of the common stock short and deliver
these securities to close out their short positions, or loan or pledge the
common stock to broker-dealers that in turn may sell these securities. The
Selling Security Holders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Security Holders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Security Holder has informed
the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute their
shares of common stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Security Holders may be deemed to be “underwriters” within the meaning
of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling Security
Holders.
We agreed
to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Security Holders without registration and
without regard to any volume or manner-of-sale limitations by reason of Rule
144, without the requirement for the Company to be in compliance with the
current public information under Rule 144 under the Securities Act or any other
rule of similar effect or (ii) all of the shares have been sold pursuant to this
prospectus or Rule 144 under the Securities Act or any other rule of similar
effect. The resale shares will be sold only through registered or licensed
brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Securities and Exchange Act of 1934,
as amended (the “Exchange Act”), any person engaged in the distribution of the
resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in
Regulation M, prior to the commencement of the distribution. In addition, the
Selling Security Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of shares of the common stock
by the Selling Security Holders or any other person. We will make copies of this
prospectus available to the Selling Security Holders and have informed them of
the need to deliver a copy of this prospectus to each purchaser at or prior to
the time of the sale (including by compliance with Rule 172 under the Securities
Act).
LEGAL
MATTERS
Richardson
& Patel LLP has rendered an opinion regarding the legality of the issuance
of the shares of common stock being registered in this prospectus. As of June
24, 2009, neither Richardson & Patel LLP nor any of its principals or
employees hold Company securities.
EXPERTS
Our
consolidated financial statements as of December 31, 2008 and 2007 and for the
years then ended appearing in this prospectus and registration statement have
been audited by Macias Gini & O’Connell LLP, an independent registered
public accounting firm, as set forth in their report appearing herein, and are
included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
BUSINESS
Overview
We are a
developer, designer, and integrator of solar energy solutions for residential,
commercial, and industrial customers in North America and Spain. We use solar
components from the industry’s leading suppliers and manufacturers such as
General Electric (“GE”), Sharp, Fronius, Wattsun, SMA, Satcon, Xantrex, Schuco
and SunPower Corporation. Our clients have included utility companies such as
Pacific Gas and Electric and Sierra Pacific Power Company, home builders such as
KB Homes, and numerous agricultural clients such as leading wineries in Napa
Valley, California.
Corporate
History
We were
originally incorporated as “Harry’s Trucking, Inc.” in Delaware on August 31,
2006 and had business operations as a third-party logistics provider for supply
chain management through a wholly owned subsidiary, “Harry’s Trucking, LLC,”
which was formed on April 2, 2004 as a limited liability company in California.
In connection with the closing of the share exchange transaction discussed more
fully below, we sold 100% of our interest in Harry’s Trucking, LLC to Haris
Tajyar and Omar Tajyar. Effective September 5, 2008, we changed our name to
“Premier Power Renewable Energy, Inc.” On September 9, 2008, we consummated a
share exchange transaction discussed more fully below, and, as a result, we now
operate through our subsidiaries as a developer, designer, and integrator of
solar energy solutions.
Share
Exchange Transaction with Premier Power California
On
September 9, 2008 (the “ “Closing Date”), we closed a share exchange transaction
(the “Closing”) under a Share Exchange Agreement (the “Exchange Agreement”)
entered into by and among the Company, our 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, collectively held 100% of
Premier Power California’s issued and outstanding share capital (the “PPG
Owners”). Hereinafter, this share exchange transaction is described as the
“Share Exchange.” We completed the acquisition of all of the equity interests of
Premier Power California held by the PPG Owners through the issuance of
24,218,750 restricted shares of our common stock, par value $0.0001 per share
(“Common Stock”) to the PPG Owners. Immediately prior to the Exchange Agreement
transaction and taking into account the cancellation of 25,448,000 shares of our
common stock held by Vision Opportunity Master Fund, Ltd. (“Vision”) concurrent
with the Closing, 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.
As a
result of the Share Exchange, the PPG Owners became our controlling
stockholders, and Premier Power California became our wholly owned subsidiary.
In connection with Premier Power California becoming our wholly owned
subsidiary, we acquired the business and operations of Premier Power California,
and Premier Power California’s wholly owned subsidiaries, Bright Future
Technologies, LLC, a Nevada limited liability company (“Bright Future”) and
Premier Power Sociedad Limitada, a limited liability company formed in Spain
(“Premier Power Spain,” and together with Premier Power California and Bright
Future, referred to herein as the “Premier Power Group”), became our indirect
wholly owned subsidiaries.
Financing
Transaction with Vision Opportunity Master Fund – September 9,
2008
Concurrently
with the Share Exchange, we also entered into a Securities Purchase Agreement
(the “Purchase Agreement”) pursuant to which we agreed to issue and sell a total
of 3,500,000 units (the “Units”) to one accredited investor, Vision (the
“Investor”), for an aggregate purchase price of $7,000,000 (the “Financing”).
Each Unit consists of one share of our Series A Convertible Preferred Stock
(“Series A Preferred Stock”), one-half of one Series A Warrant (the “Series A
Warrants”), and one-half of one Series B Warrant (the “Series B Warrants”). Each
one share of Series A Preferred Stock will be convertible into one share of
Common Stock at any time at the holder’s option, and each share of Series A
Preferred Stock will automatically convert in the event that we complete an
underwritten secondary public offering with minimum gross proceeds of
$25,000,000 and at a minimum price per share of $4.00 or upon listing on NASDAQ.
Each Series A Warrant and each Series B Warrant entitled the holder to purchase
a share of Common Stock at an exercise price of $2.50 and $3.00 per share,
respectively, of Common Stock for a period of four years. Thus, at the Closing,
we issued 3,500,000 shares of Series A Preferred Stock, Series A Warrants for
the purchase of an aggregate 1,750,000 shares of Common Stock, and Series B
Warrants for the purchase of an aggregate 1,750,000 shares of Common Stock to
the Investor.
Pursuant
to the Exchange Agreement and in connection with the Financing, we entered into
a Registration Rights Agreement (the "Original RRA") with the Investor and
Genesis Capital Advisors, LLC (“Genesis”), a consulting firm that was issued
shares of common stock as part of the Share Exchange because Genesis was a
stockholder of Premier Power California prior to the Share Exchange. Pursuant to
the Original RRA, we agreed to register for public re-sale all of the shares of
Common Stock underlying the Series A Preferred Stock, Series A Warrants, and
Series B Warrants issued to the Investor in the Financing and the shares of
Common Stock held by Genesis, 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. (The shares we are required to register, as described above, are
collectively referred to hereinafter as the “Registrable Securities.”) The
Original RRA provided that we must file a Registration Statement on Form S-1
(the “Registration Statement”) relating to the resale of the Registrable
Securities within 90 calendar days following the Closing (the “Filing Deadline
Date”) and that we shall use best efforts to cause such Registration Statement
to become effective 180 calendar days after the Closing Date, (or, in the event
of a “full review” of the Registration Statement by the SEC, 240 calendar days
after the Closing Date) (the “Effectiveness Date”). If the Registration
Statement is not filed on a timely basis or is not declared effective by the SEC
for any reason on a timely basis, the Company will be required to issue
additional shares of Common Stock (the “Late Registration Shares”) to each
Investor in an amount equal to 1% of the total shares of Common Stock into which
the total number of shares of Series A Preferred Stock then held by such
Investor is convertible for each 30 calendar day period, pro rata, until the
Registration Statement is filed or declared effective by the SEC, as the case
may be; provided, however, that in no event shall the Late Registration Shares,
if any, exceed in the aggregate, 12% of such shares purchased. The
definition of “Effectiveness Date” was amended by a Second Amendment to the
Original RRA, as discussed below under this sub-section.
In
connection with the Purchase Agreement, the PPG Owners entered into a Lock-up
Agreement (the “Lock-up Agreement”) whereby they agreed not to transfer their
shares of Common Stock from the Closing Date until the earlier of (a) the 12
months after the initial registration statement associated with the Financing is
declared effective (the “Effective Date”) and (b) the date that (i) the Common
Stock has a closing bid price of $4.00 or more for 20 consecutive trading days
and an average daily trading volume during such same period of at least 100,000
shares (such price and volume adjusted for any stock splits and similar
adjustments effected after the Closing Date) or (ii) the Common Stock is listed
on any tier of the Nasdaq Stock Market (such period, the “Restriction Period”).
During the Restricted Period, the PPG Owners (except for Genesis) may sell up to
20% of the number of shares they each received in the Share Exchange so long as
the closing bid price on the trading day prior to such transfer is at least
$3.00 (adjusted for any stock splits and similar adjustments effected after the
Closing Date). During the Restricted Period, Genesis is allowed to sell up to
45% of the number of shares it received in the Share Exchange (the “45% Shares”)
so long as the closing bid price on the trading day prior to such transfer is at
least $2.00 (adjusted for any stock splits and similar adjustments effected
after the Closing Date); provided further, that Genesis may not sell any
additional shares it received in the Share Exchange (other than the 45% Shares)
at any price less than $3.00 per share prior to the earlier of 12 months after
the Effective Date or the listing of the Common Stock on any tier of the Nasdaq
Stock Market.
GT
Securities, Inc. (the “Placement Agent”) acted as the placement agent in
connection with the Financing pursuant to an engagement by Premier Power
California. For its services, the Placement Agent received a placement agent’s
cash fee equal to 3% of the gross proceeds or approximately $210,000 from the
Financing.
In
connection with the Financing, the Company agreed to place $300,000 of the gross
proceeds from the Financing in an escrow account to be expended for investor
relations.
Immediately
after the issuance of securities to the Investor in the Financing, the Company
had a total of 26,018,750 shares of Common Stock outstanding and 3,500,000
shares of its Series A Preferred Stock outstanding.
On
October 31, 2008, the Company, Genesis, and Vision entered into a First
Amendment to Registration Rights Agreement (the “First Amended RRA”), which
amends the Original RRA. Specifically, the First Amended RRA added to the
definition of “Registrable Securities” 1,600,000 shares of our Common Stock (the
“1.6m Shares”) held by Vision and an aggregate 1,600,000 shares of our Common
Stock (the “Option Shares”) underlying an option to purchase the Option Shares
held by Vision. As a result, we are now required to register for public resale
the 1.6m Shares and the Option Shares in addition to the securities that were
required to be registered for public resale under the Original RRA. In addition,
the parties to the Amended RRA amended the manner in which the number of
unregistered “Registrable Securities” shall be reduced in the registration
statement to be filed pursuant to the Original RRA to a pro rata reduction among
the holders of such “Registrable Securities” if, after the registration
statement’s filing, there is SEC guidance that limits the number of such
“Registrable Securities” that can be registered under the registration
statement.
On May
1, 2009, the Company, Genesis, and Vision entered into a Second Amendment to
Registration Rights Agreement (the “Second Amended RRA”). Specifically, upon the
execution by the Company of a material definitive agreement with an acquisition
target, which target shall be to the satisfaction of Vision, the Second Amended
RRA deletes the definition of “Effectiveness Date” and replaces the definition
in its entirety with the following text: “Effectiveness Date” means, with
respect to the Initial Registration Statement required to be filed hereunder,
the 180
th
calendar day following the date hereof (or, in the event of a “full review” by
the Commission, the 360
th
calendar day following the date hereof) and with respect to any additional
Registration Statements which may be required pursuant to Section 3(c), the
90
th
calendar day following the date on which an additional Registration Statement is
required to be filed hereunder;
provided
,
however
, that in the
event the Company is notified by the Commission that one or more of the above
Registration Statements will not be reviewed or is no longer subject to further
review and comments, the Effectiveness Date as to such Registration Statement
shall be the fifth Trading Day following the date on which the Company is so
notified if such date precedes the dates otherwise required
above. The Company executed a material definitive agreement with such
an acquisition target, which agreement is described under the sub-section below
titled “Share Exchange Agreement with Rupinvest Sarl and Esdras
Ltd.”
The
tables below provide details on the shares of common stock underlying the
options that are being registered for resale, based on the market price per
share of the Company’s common stock on the date of sale of such derivative
security. The options were purchased by Vision in a
privately-negotiated sale on October 31, 2008 from other Company stockholders,
but we note that we will receive no proceeds from the exercise of the options as
the options were issued by stockholders of the Company and not by the
Company.
Date of Sale
|
|
Derivative Security
|
|
# of Underlying Shares of
Common Stock
|
|
|
Market Price Per
Share on Date of Sale
|
|
|
$ Value of Underlying
Shares of Common
Stock
|
|
Oct. 31,
2008
|
|
Options
|
|
|
1,600,000
|
|
|
$
|
4.25
|
|
|
$
|
6,800,000
|
|
|
|
Options
|
|
Market
Price per Share of Common Stock Underlying the Securities on Date of
Sale
|
|
$
|
4.25
|
|
|
|
|
|
|
Conversion/Exercise
Price per Share of Common Stock Underlying the Securities on Date of
Sale
|
|
$
|
3.00
|
|
|
|
|
|
|
Total
Shares of Common Stock Underlying the Securities
|
|
|
1,600,000
|
|
|
|
|
|
|
Combined
Total Market Price
|
|
$
|
6,800,000
|
|
|
|
|
|
|
Combined
Total Exercise Price
|
|
$
|
4,800,000
|
|
|
|
|
|
|
Total
Possible Discount
|
|
$
|
2,000,000
|
|
The
table below represents the Share Exchange and Financing transactions that are
described above beginning on page 20:
Date of
Transaction
|
|
# of Shares of
Common
Stock
Subject to the
Transaction
that were
Outstanding
Prior to
the
Transaction
|
|
# of Shares of
Common
Stock
Subject to the
Transaction
that were
Outstanding
Prior to
the
Transaction
and
Held by
Persons
Other than the
Selling
Security
Holders
|
|
# of Shares of
Common Stock
Subject to the
Transaction that
were
Issued/Issuable in
Connection with the
Transaction
|
|
% of Total Issued
and
Outstanding Shares
of Common Stock
that
were
Issued/Issuable
in the Transaction
|
|
Market Price
per
Share of
Common
Stock Subject
to the
Transaction
Immediately
Prior to
the
Transaction
|
|
Market Price
per Share of
Common Stock
Subject to the
Transaction, as
of June 24,
2009
|
9/9/08
(Share Exchange)
|
|
1,800,000
|
|
|
47,000
|
|
24,218,750
|
|
1,345
|
%
|
$
|
0.42
|
(1)
|
$
|
3.95
|
9/9/08
(Financing)
|
|
26,018,750
|
|
|
23,860,152
|
|
7,000,000
|
(2)
|
28
|
%
|
$
|
0.42
|
(1)
|
$
|
3.95
|
(1)
|
This value was derived from a
third-party independent valuation of these
shares.
|
(2)
|
These shares represent
3,500,00 shares of common stock that are issuable upon conversion of
3,500,000 shares of Series A Convertible Preferred Stock, 1,750,000 shares
of common stock that were issuable upon exercise of Series A Warrants, and
1,750,000 shares of common stock that were issuable upon exercise of
Series B Warrants. On June 16, 2009, the Series A Warrants and
Series B Warrants were cancelled by the Company, and, as of June 24, 2009,
none of the shares of common stock issuable upon conversion of the Series
A Preferred Stock have been
issued.
|
The table
below provides information as to the shares being registered on this
Registration Statement and other related information.
|
|
|
#
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
Registration Statements
|
|
0
|
#
of Shares Registered for Resale by the Selling Security holders that
Continue to be Held by the Selling Security Holders
|
|
0
|
#
of Shares that have been Sold in Registered Resale Transactions by the
Selling Security Holders
|
|
0
|
#
of Shares Registered for Resale on Behalf of the Selling Security Holders
in the Current Transaction
|
|
2,328,972
for Vision Opportunity Master Fund. Ltd.;
360,993
shares for Genesis Capital Advisors,
LLC
|
Share
Exchange Agreement with Rupinvest Sarl and Esdras Ltd.
On
June 3, 2009 (the “Effective Date”), we entered into a Share Exchange Agreement
(the “Exchange Agreement”) with Rupinvest Sarl, a corporation duly organized and
existing under the laws of Luxembourg (“Rupinvest”) and Esdras Ltd., a
corporation duly organized and existing under the laws of Cyprus
(“Esdras”). Rupinvest is the wholly owned subsidiary of Esdras and it
distributes, develops, and integrates ground mount and rooftop solar power
systems in Italy through its sole wholly owned subsidiary, ARCO Energy, SRL
(“Arco Energy”), a private limited company duly organized and existing under the
laws of Italy.
Pursuant
to the terms of the Exchange Agreement, we will acquire 100% of the issued and
outstanding equity ownership interest in Rupinvest in exchange for: (a) a cash
payment by us to Esdras in the amount of twelve thousand five hundred Euros
(€12,500, or approximately $17,718); and (b) the potential transfer to Esdras of
up to three million shares of our restricted common stock, with the number of
shares to be transferred, if any, to be calculated based on Sales (as defined
below) achieved by Premier Power Italy (as defined below) over a
three-years period (collectively the “Purchase
Consideration”). Not later than twenty (20) trading days after the
date that escrow opens (“Escrow Opening Date”), we must deliver to the escrow
agent three million (3,000,000) restricted shares (the “Securities”) of our
common stock, par value $0.0001 per share, in the form of stock certificates
issued in the name of the escrow agent to be held in escrow until their release
(“Escrow”). The conditions that must be met and the amount of
Securities, if any, to be released and transferred to Esdras are described
below:
|
(i)
|
375,000 shares of the
Securities for each ten million Euros (€10 million, or approximately $13.6
million) worth of Sales achieved by Premier Power Italy from the Effective
Date to December 31, 2009 (the “First Issuance”), with the maximum number
of shares released to Esdras as part of the First Issuance to be 1,500,000
shares (any number of shares not issuable as part of the First Issuance
solely due to the fact that the 1,500,000 shares threshold was exceeded is
hereinafter referred to as the “Excess Issuable
Amount”);
|
|
(ii)
|
50% of the Excess Issuable
Amount, if any, plus 200,000 shares of the Securities for each ten million
Euros (€10 million, or approximately $13.6 million) worth of Sales
achieved by Premier Power Italy from January 1, 2010 to December 31, 2010
(the “Second Issuance”). The maximum combined number of shares
to be released to Esdras as part of the First Issuance and the Second
Issuance, in the aggregate, shall not exceed 3,000,000 shares;
and
|
|
(iii)
|
100,000 shares of the
Securities for each ten million Euros (€10 million, or approximately $13.6
million) worth of Sales achieved by Premier Power Italy from January 1,
2011 to December 31, 2011 (the “Third Issuance”). The maximum
combined number of shares to be released to Esdras as part of the First
Issuance, the Second Issuance, and the Third Issuance, in the aggregate,
shall not exceed 3,000,000
shares.
|
“Sales”
is defined in the Exchange Agreement as gross sales revenue earned by Premier
Power Italy in a given period with an average Gross Margin in excess of fourteen
percent (14%). For purposes of the Exchange Agreement, “Gross Margin”
is defined as gross sales revenue minus direct costs (including, but not limited
to, the cost of system design, engineering, property acquisition, special
purpose entity formation, legal services, consulting services, permitting, civil
works, solar modules, invertors, racking, mounting, trackers, balance of system
costs, subcontracting services, substation construction, grid connection, labor,
taxes, and sales commissions), the difference to be divided by gross sales
revenue. Any gross sales revenue earned by Premier Power Italy
without a fourteen percent (14%) Gross Margin will be excluded from Sales,
unless expressly accepted by the Company in writing. We must deliver
each of the First Issuance, Second Issuance, and Third Issuance, if any, to
Esdras no later than ninety (90) calendar days after Premier Power Italy’s
fiscal year-end (“Italy Year-End”), which Italy Year-End is to be no later than
March 1 of each calendar year. If the Italy Year-End changes to
another fiscal year-end (“New Italy Year-End”), then we must deliver each of the
First Issuance, Second Issuance, and Third Issuance, if any, to Esdras no later
than ninety (90) calendar days after the New Italy Year-End. If after
the Third Issuance, if any, any portion of the Securities remains in Escrow (the
“Unissued Securities”), then the Unissued Securities will be released to
us.
The
parties also agreed that no later than twenty (20) trading days after the Escrow
Opening Date, the corporate structure of Arco Energy is to be converted by
Rupinvest from an Italian Srl (LTD) company to an Italian Spa (PLC) company, and
its name shall be changed to “Premier Power Italy S.p.A.” (“Premier Power
Italy”) (the conversion is hereinafter referred to as the
“Restructuring”). In addition, immediately upon completion of the
Restructuring, the parties agreed that the social capitalization of Premier
Power Italy will be increased by €1,250,000 (“Initial Capitalization Increase”),
and an additional social capital increase will be determined within 120 calendar
days of the Effective Date, with the total increase in social capital not to
exceed five million Euros (“Total Combined Capitalization
Increase”). The Initial Capitalization Increase and the Total
Combined Capitalization Increase will be funded as follows: ninety (90%) by the
Company through our post-share exchange subsidiary Rupinvest; and ten percent
(10%) by Esdras. Following the Initial Capitalization Increase and
continuing through the Total Combined Capitalization Increase, Rupinvest
will retain 90% of the total equity ownership interests of Premier Power Italy,
and Esdras will own the remaining 10% of Premier Power Italy’s total equity
ownership interests (the “Esdras 10%
PPRW Italy
Interest”). Rupinvest’s post-share exchange board of directors will
determine how much of the subject social capital increases shall be from
capitalization and how much will be in the form of low interest loans, provided
however that, notwithstanding anything the contrary, no more than forty percent
(40%) of the total funding shall be in the form of loans. The parties
further agreed that Rupinvest shall have the option to repurchase the Esdras 10%
PPRW Italy Interest: (a) on or before December 31, 2009, in exchange for a
payment to Esdras of the total combined amount of funds contributed by Esdras
toward the Initial Capitalization Increase and the Total
Combined Capitalization Increase; or (b) after December 31, 2009, in
exchange for a payment to Esdras of the total combined amount of funds
contributed by Esdras toward the Initial Capitalization Increase and the Total
Combined Capitalization Increase plus ten percent of any net profits
accrued up to the time of Rupinvest’s repurchase of the Esdras 10% PPRW Italy
Interest.
No
later than twenty (20) trading days after the Escrow Opening Date, (i) all of
the executive officers and directors of Rupinvest and Premier Power Italy will
resign from their positions as such with each respective entity; (ii) Dean
Marks, our Chairman of the Board and Chief Executive Officer, will be appointed
as the Chairman of the Board of both Rupinvest and Premier Power Italy; (iii)
Miguel de Anquin, our Chief Operating Officer and a member of the Board, will be
appointed as a member of the Board of both Rupinvest and Premier Power Italy;
(iv) Marco Pulitano will be appointed as a managing director of Premier Power
Italy and a member of the board of directors of Premier Power Italy; (v)
Giovanni Pulitano will be appointed as a managing director of Premier Power
Italy and as a member of the board of directors of Premier Power Italy; (vi) an
additional director to be chosen and designated by the Company will be appointed
as the fifth member of Premier Power Italy’s board of directors; and (vii) the
new executive officers of Rupinvest shall be chosen by the Company and shall be
appointed to such offices by Rupinvest’s Board.
The
Exchange Agreement may be terminated at any time prior to the Escrow Opening
Date, which date may not exceed twenty (20) days from the Effective Date, by the
following parties and in the following scenarios:
|
(i)
|
by either the Company or
Rupinvest if a governmental entity shall have issued an order, decree, or
ruling, or taken any other action, in any case having the effect of
permanently restraining, enjoining, or otherwise prohibiting the share
exchange, which order, decree, ruling, or other action is final and
non-appealable;
|
|
(ii)
|
by Rupinvest, upon our material
breach of any representation, warranty, covenant, or agreement, or if any
of our representations or warranties shall have become materially untrue;
but if the breach is curable by the Company prior to the Escrow Opening
Date, then Rupinvest may not terminate the Exchange Agreement under this
clause for thirty (30) days after delivery of written notice from
Rupinvest to the Company of such breach,
provided
we continue to exercise
commercially reasonable efforts to cure such breach;
or
|
|
(iii)
|
by the Company upon Rupinvest’s
and/or Esdras’ material breach of any representation, warranty, covenant,
or agreement, or if any representation or warranty by Rupinvest and/or
Esdras shall have become materially untrue; but if the breach is curable
by Rupinvest and/or Esdras prior to the Escrow Opening Date, then we may
not terminate the Agreement under this clause for thirty (30) days after
delivery of written notice from the Company to Rupinvest and/or Esdras of
such breach,
provided
Rupinvest and/or Esdras continue
to exercise commercially reasonable efforts to cure such
breach.
|
As of
June 24, 2009, escrow in connection with this Exchange Agreement has not yet
opened. Upon satisfaction by all parties of the conditions to the
parties’ obligations set forth in the Exchange Agreement, Rupinvest will become
our wholly owned subsidiary, and Premier Power Italy will become our indirect
majority owned subsidiary.
Series
B Certificate of Designation
On
June 24, 2009, we filed a Certificate of Designation to fix the preferences,
limitations, and relative rights of our Series B Convertible Preferred Stock
with the Delaware Secretary of State. Our Board designated 2,800,000
of our 20,000,000 authorized preferred stock as Series B Convertible Preferred
Stock (“Series B Preferred Stock”). For a description of the material
terms of our Series B Preferred Stock, please see the section titled
“Description of Securities.”
Securities
Purchase Agreement with Vision Opportunity Master Fund – June 16,
2009
On
June 16, 2009, we entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with Vision. Pursuant to the Purchase Agreement, we sold to Vision
2,800,000 shares of our Series B Preferred Stock (bearing no liquidation
preference, no coupon payments, and no redemption rights) in exchange for the
cancellation of 3,500,000 warrants, held by Vision, and $3,000,000 in
cash. The cancellation of warrants resulted in the elimination of all
our issued and outstanding warrants. The cancellation of the
3,500,000 warrants included (i) the cancellation by us of 4-year Series A
Warrants issued to Vision on September 9, 2008 exercisable for an aggregate
1,750,000 shares of our common stock at $2.50 per share, and (ii) the
cancellation by us of 4-year Series B Warrants issued to Vision on September 9,
2008 exercisable for an aggregate 1,750,000 shares of our common stock at $3.00
per share.
In
connection with the Purchase Agreement, Vision, a holder of our Series A
Preferred Stock, agreed in writing that no adjustment will be made to
the conversion price of its Series A Preferred Stock shares, which right is
set forth in Section 7(b) of the Certificate of Designation of Preferences,
Rights and Limitations of Series A Convertible Preferred Stock, filed on
September 10, 2008 with the Delaware Secretary of
State.
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
June 24, 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
|
|
$
|
4,864,946
|
|
|
$
|
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” section above for additional details regarding this 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.
On
June 3, 2009, we entered into a Share Exchange Agreement with Rupinvest Sarl, a
corporation duly organized and existing under the laws of Luxembourg
(“Rupinvest”) and Esdras Ltd., a corporation duly organized and existing under
the laws of Cyprus (“Esdras”). Rupinvest is the wholly owned
subsidiary of Esdras and it distributes, develops, and integrates ground mount
and rooftop solar power systems in Italy through its sole wholly owned
subsidiary, ARCO Energy, SRL (“Arco Energy”), a private limited company duly
organized and existing under the laws of Italy. Pursuant to the terms
of the Exchange Agreement, we will acquire 100% of the issued and outstanding
equity ownership interest in Rupinvest in exchange for: (a) a cash payment by us
to Esdras in the amount of twelve thousand five hundred Euros (€12,500, or
approximately $17,718); and (b) the potential transfer to Esdras of up to three
million shares of our restricted common stock, with the number of shares to be
transferred, if any, to be calculated based on sales achieved
by Arco Energy over a three-year period. Not later
than twenty (20) trading days after the date that escrow opens, we must deliver
to the escrow agent three million (3,000,000) restricted shares of our common
stock, par value $0.0001 per share, in the form of stock certificates issued in
the name of the escrow agent to be held in escrow until their release according
to a schedule of financial targets of Arco Energy. We have not yet
opened escrow in connection with this share exchange. See the
“Business” section above for additional details regarding this share exchange
agreement.
On
June 16, 2009, we raised $3,000,000 in a private placement financing by issuing
2,800,000 shares of our Series B Preferred Stock. In connection with
this financing, we also cancelled all issued and outstanding Series A Warrants
and Series B Warrants that were held by the investor. 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 from the calculation of diluted
earnings per share as they were antidilutive.
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 that closed in September 2008 and
$3,000,000 from a private placement financing transaction that closed in June
2009. Thus, we believe that our current cash and cash equivalents, anticipated
cash flow from operations, and net proceeds from the private placement
financings 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 financings 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. 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.
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 was 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
bore interest at the prime rate plus 1%. At March 31, 2009, the interest rate
was 6%. The line of credit expired on May 27, 2009, and on that date, there were
no amounts outstanding under our agreement with Guaranty Bank. As of
June 24, 2009, we are in negotiations to replace this credit
line.
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
|
|
|
|
76,076
|
|
|
|
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, and Mr.
Medearis chairs the audit committee. The members of the compensation
committee are Kevin Murray, Robert Medearis, and Tommy Ross, and Mr. Murray
chairs the compensation committee.
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 exercisable (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.
On March
23, 2009, the Company entered into a Director Agreement (“Ross Agreement”) with
Tommy Ross for his services as a director. Pursuant to the terms of
the Ross Agreement, Mr. Ross agreed to serve on the Board until March 11, 2011,
such term being subject to re-election at our subsequent annual meeting of
shareholders. Mr. Ross 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. Ross will also receive 50,000 shares of 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. Ross even if our
shareholders fail to re-elect Mr. Ross at the first annual meeting of
shareholders following Mr. Ross’ 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. We are
required to maintain a Directors’ Errors and Omissions insurance policy
(“D&O Policy”) insuring the entire Board, including Mr. Ross, for a policy
amount of no less than $2,000,000, and in the event the D&O Policy coverage
is insufficient to cover losses occasioned by actions of the Board, we also
agreed to indemnify and hold Mr. Ross harmless from and against any loss,
damages, costs, expenses, liabilities, and or causes of action that may arise as
a result of his dutiful and responsible performance of his duties as a Board
member.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of our
common stock as of June 24, 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 June 24,
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
.
E
ach Series A Warrant and Series B
Warrant entitle
d
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
, but all of the Series A
Warrants and Series B Warrants held by this holder were cancelled by the
Company on June 16,
2009 .
|
(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)
2,800,000
shares of Common Stock underlying its shares of Series B Preferred
Stock
, or
(i
ii
) 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
June
24
, 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”) and 2,800,000 is designated as Series B
Convertible Preferred Stock (“Series B 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 any class of stock ranking as to dividends,
redemption or distribution of assets upon a Liquidation (as defined in Section 5
of the Series A Certificate) senior to or otherwise
pari
passu with the
Series A Preferred, (c) amend its certificate of incorporation or other charter
documents in any manner that adver1ely affects any rights of the holders of
Series A Preferred, (d) increase the number of authorized shares of Series A
Preferred, or (e) enter into any agreement with respect to any of the
foregoing.
Conversion
Rights
Conversion
at the Holder’s Option
Each
share of Series A Preferred is convertible at any time and from time to time
after the issue date at the holder’s option into shares of the Company’s common
stock (subject to beneficial ownership limitations as set forth in Section 6(c)
of the Series A Certificate) determined by dividing the Stated Value of such
share of Series A Preferred by the Conversion Price (each as defined
below).
Stated
Value
. Each share of Series A Preferred shall have a stated
value equal to $2.00.
Conversion
Price
. The conversion price for the Series A Preferred shall
equal $2.00, subject to adjustment as provided in the Series A
Certificate .
Automatic
Conversion
Upon a
Qualified Public Offering (as defined below) all outstanding shares of Series A
Preferred plus all accrued but unpaid dividends shall automatically be converted
into shares of the Company’s common stock at the Conversion Price, 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 June 24, 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
B 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 B
Certificate”) of the Series B Convertible Preferred Stock (“Series B Preferred”)
and is qualified in its entirety by reference to the Series B Certificate, which
is attached as Exhibit 3.1 to our Current Report on Form 8-K filed June 18,
2009.
Voting
Rights
Except
as otherwise provided in the Series B Certificate or by law, each holder of
shares of Series B Preferred shall have no voting rights. As long as any shares
of Series B 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 B Preferred, (a) alter or change adversely the powers,
preferences, or rights given to the Series B Preferred or alter or amend the
Series B Certificate, (b) authorize or create any class of stock ranking as to
dividends, redemption or distribution of assets upon a Liquidation (as defined
in Section 5 of the Series B Certificate) senior to or otherwise
pari
passu with the
Series B Preferred, (c) amend its certificate of incorporation or other charter
documents in any manner that adver1ely affects any rights of the holders of
Series B Preferred, (d) increase the number of authorized shares of Series B
Preferred, or (e) enter into any agreement with respect to any of the
foregoing.
Conversion
Rights
Conversion
at the Holder’s Option
Each
share of Series B Preferred is convertible at any time and from time to time
after the issue date at the holder’s option into shares of the Company’s common
stock (subject to beneficial ownership limitations as set forth in Section 6(c)
of the Series B Certificate) determined by dividing the Stated Value of such
share of Series B Preferred by the Conversion Price (each as defined
below).
Stated
Value
. Each share of Series B Preferred shall have a stated
value equal to $1.07143.
Conversion
Price
. The conversion price for the Series B Preferred shall
equal $1.07143, subject to adjustment as provided in the Series B
Certificate.
Automatic
Conversion
Upon a
Qualified Public Offering (as defined below) all outstanding shares of Series B
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 B 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 B
Preferred regardless of the number of transfers of any particular shares of
Series B Preferred and regardless of the number of certificates which may be
issued to evidence such Series B Preferred.
Beneficial
Ownership Limitation
Holders
of our Series B Preferred are restricted from converting their shares of Series
B 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 June 24, 2009, however, the Company has
not received any such notice.
Adjustment
for Stock Dividends and Stock Splits
If the
Company, at any time while Series B 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 B 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 B 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 Rights Offerings
The
Company shall not, at any time while Series B Preferred is
outstanding, issue rights, options or warrants to all holders of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share that is lower than the VWAP on the record date without issuing the
same rights, options or warrants to all Series B Preferred holders on an
as-converted to Common Stock basis.
Adjustment
for Pro Rata Distributions
The
Company shall not, at any time while Series B Preferred is outstanding,
distribute to all holders of Common Stock (and not to holders of Series B
Preferred) 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) of the Series B
Certificate) without distributing evidences of such indebtedness or assets or
rights or warrants to Holders on an as-converted to Common Stock
basis.
Adjustment
for Fundamental Transactions
If, at
any time while the Series B 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 B Preferred, the holders shall
have the right to receive, for each Conversion Share (as defined in Section 1 of
the Series B 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 B Preferred following such Fundamental Transaction.
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, 360 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 .
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 $3.95 per
share on the Over-The-Counter Bulletin Board on June 24,
2009.
Holders
As of
June 24, 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 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
liabilities
|
|
|
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
liabilities
|
|
|
(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 beginning 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of adjustment upon adoption of EITF 07-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,793,987
|
)
|
|
|
1,287,427
|
|
|
|
|
|
|
|
(506,560
|
)
|
Balance
January 1, 2009
|
|
|
26,048,750
|
|
|
|
2,605
|
|
3,500,000
|
|
|
350
|
|
|
|
5,748,077
|
|
|
|
1,656,723
|
|
|
|
(41,690
|
)
|
|
|
7,366,065
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 from the
calculation of diluted earnings per share as they were
antidilutive.
|
|
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
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
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 was 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 bore 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 common stock as a result of the basis of certain aspects of an exercise
price reset feature included in the warrants. The reset feature
occurs and the exercise price of the warrant is reduced upon a
subsequent sale of common shares at a per share price less than the
then-effective exercise price of the warrants, even if such price reflects the
fair value of the Company’s common shares; upon a subsequent rights
offering to holders of common stock at a per share price that is less than the
volume weighted average price at the record date for the determination of
stockholders entitled to receive such securities; and if the Company doesn’t
meet specific revenue targets for the year ending December 31,
2009.
As a
result of the above reset features, 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 common 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 convertible preferred
stock was not indexed to its common stock as a result of a price adjustment
clause that provides the number of common shares to be received upon conversion
will be increased in the event of the following: a subsequent sale of
common shares or a subsequent rights offering at a per share price less than the
daily volume weighted average price of the common stock for such
date (if
not listed or quoted then the fair market value of a share of common stock as
determined by an independent appraiser) at the time the convertible preferred
stock was issued even if such price reflects the fair value of the Company’s
share at the time of the sale or rights offering.
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 as of January 1,
2009:
|
|
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
January 1, 2009, the reversal of prior accounting related to
warrants
|
|
|
(1,793,987
|
)
|
|
|
–
|
|
|
|
1,793,987
|
|
|
|
$
|
(1,793,987
|
)
|
|
$
|
506,560
|
|
|
$
|
1,287,427
|
|
There was
no significant impact to the Company’s statement of operations for the three
months ended March 31, 2009 from changes in the value of the warrants liability.
As a result, there was no significant impact on the Company’s net income and
related per share amounts.
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, was a
guarantor of the Company’s line of credit with Guaranty Bank that expired on May
27, 2009. 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
|
)
|
On
June 3, 2009, the Company entered into an agreement (“Agreement”) with Esdras
Ltd., a Cyprus corporation, and Rupinvest Sarl, a Luxembourg corporation.
Rupinvest Sarl is the wholly owned subsidiary of Esdras Ltd. and it distributes,
develops, and integrates ground mount and rooftop solar power systems in Italy
through its sole wholly owned subsidiary, ARCO Energy, SRL.
Pursuant
to the terms of the Agreement, the Company will acquire 100% of the issued and
outstanding equity ownership in Rupinvest Sarl in exchange for: (a) a
cash payment by the Company to Esdras Ltd. in the amount of twelve thousand five
hundred Euros (€12,500) (approximately $17,718); and (b) the potential transfer
to Esdras Ltd. of up to three million shares of the Company’s
restricted common stock, with the number of shares to be transferred, if any, to
be calculated based on sales achieved by ARCO Energy, SRL over a three year
period.
On
June 16, 2009, the Company entered into a securities purchase
agreement (“Purchase Agreement”) with Vision Opportunity Master Fund,
Ltd. (“Vision”). Pursuant to the Purchase Agreement, the Company sold
to Vision 2,800,000 shares of Series B Convertible Preferred Stock (bearing no
liquidation preference, no coupon payments, and no redemption rights) in
exchange for the cancellation of warrants for 3,500,000 shares of the Company’s
common stock, and $3,000,000 in cash. The cancellation of warrants resulted in
the elimination of all the Company’s issued and outstanding
warrants.
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 (June 24, 2009 as to Note 12)
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
liabilities
|
|
|
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
|
|
401Kplan
|
|
|
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), which expires on May 27, 2009. The line of credit was 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 bore 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.
|
|
YearEnd
|
|
|
|
December31,
2008
|
|
|
December31,
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
|
)
|
|
|
—
|
|
TotalProvision
|
|
$
|
(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 was a guarantor of the
Company’s line of credit with Guaranty Bank that expired on May 27, 2009. 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
On
June 3, 2009, the Company entered into an agreement (“Agreement”) with Esdras
Ltd., a Cyprus corporation, and Rupinvest Sarl, a Luxembourg corporation.
Rupinvest Sarl is the wholly owned subsidiary of Esdras Ltd. and it distributes,
develops, and integrates ground mount and rooftop solar power systems in Italy
through its sole wholly owned subsidiary, ARCO Energy, SRL.
Pursuant
to the terms of the Agreement, the Company will acquire 100% of the issued and
outstanding equity ownership in Rupinvest Sarl in exchange for: (a) a
cash payment by the Company to Esdras Ltd. in the amount of twelve thousand five
hundred Euros (€12,500) (approximately $17,718); and (b) the potential transfer
to Esdras Ltd. of up to three million shares of the Company’s
restricted common stock, with the number of shares to be transferred, if any, to
be calculated based on sales achieved by ARCO Energy, SRL over a three year
period.
On
June 16, 2009, the Company entered into a securities purchase
agreement (“Purchase Agreement”) with Vision Opportunity Master Fund,
Ltd. (“Vision”). Pursuant to the Purchase Agreement, the Company sold
to Vision 2,800,000 shares of Series B Convertible Preferred Stock (bearing no
liquidation preference, no coupon payments, and no redemption rights) in
exchange for the cancellation of warrants for 3,500,000 shares of the Company’s
common stock, and $3,000,000 in cash. The cancellation of warrants resulted in
the elimination of all the Company’s issued and outstanding
warrants.
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 of
1933, as amended (the “Act”):
On
June 16, 2009, we issued 2,800,000 shares of our Series B Convertible Preferred
Stock to Vision Opportunity Master Fund Ltd. (“Vision”) in consideration
for (i) the cancellation of all Series A Warrants and Series B Warrants issued
by the Company to Vision and (ii) $3,000,000 in gross proceeds. The
investor represented that it was an “accredited investor” as defined in Rule 501
under the Securities Act of 1933, as amended (the “Act”). The registrant relied
upon the exemption from registration as set forth in Section 4(2) of the Act for
the issuance of these securities.
On
June 3, 2009, we agreed to issue and transfer up to three million (3,000,000)
restricted shares of our common stock, par value $0.0001 per share, to Esdras
Ltd. (“Esdras”) in addition to additional compensation of a cash payment by us
to Esdras in the amount of twelve thousand five hundred Euros (€12,500, or
approximately $17,718) in exchange for our acquisition of 100% of the issued and
outstanding equity ownership interest in Rupinvest Sarl. The shares
will be held by an escrow agent in trust in connection with a share exchange
agreement we entered into on June 3, 2009, with the number of shares to be
transferred, if any, to be calculated based on sales achieved by Rupinvest’s
wholly owned subsidiary, ARCO Energy, SRL, or the escrow agent may return a
portion of or all of the shares to the Company. The issuance and
transfer of the shares to Esdras shall be exempt from registration under the
Act, pursuant to Section 4(2) and Regulation S thereof. We made this
determination based on Esdras’ representations in the exchange agreement, which
included, in pertinent part, that Esdras is not a "U.S. person" as that term is
defined in Rule 902 of Regulation S under the Act, and that it was acquiring the
shares 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 it understood that the shares may not be sold or otherwise disposed of
without registration under the Act or an applicable exemption
therefrom.
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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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");
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|
(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
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|
(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.
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|
(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.
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(3)
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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.
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(4)
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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.
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(5)
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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:
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(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 June 25, 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)
|
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
|
|
Date
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/s/
Dean R. Marks
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June
25, 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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June
25, 2009
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Miguel
de Anquin
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|
Chief
Operating Officer, Corporate Secretary,
and
Director
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|
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|
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/s/
Teresa Kelley
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|
|
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June
25, 2009
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Teresa
Kelley
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Chief
Financial Officer
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/s/
Kevin Murray
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|
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June
25, 2009
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Kevin
Murray
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Director
|
|
|
|
|
|
|
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/s/
Tommy Ross
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|
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June
25, 2009
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Tommy
Ross
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Director
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/s/
Robert Medearis
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|
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Robert
Medearis
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Director
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June
25,
2009
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EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
|
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2.1
|
|
Share
Exchange Agreement by and among the Company, its majority stockholder,
Premier Power Renewable Energy, Inc., and its stockholders, dated
September 9, 2008 (3)
|
|
|
|
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
|
|
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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|
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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
|
|
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)
|
|
|
|
3.8
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series B
Convertible Preferred Stock, filed with the Delaware Secretary of State on
June 12, 2009 (15)
|
|
|
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5.1
|
|
Opinion
of Richardson & Patel LLP *
|
|
|
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10.1
|
|
Master
Commercial Solar Terms and Conditions of Schüco USA, L.P.
(3)
|
10.2
|
|
Authorized
Dealer Agreement between Premier Power Renewable Energy, Inc. and SunPower
Corporation, dated June 20, 2008 (3)
|
|
|
|
10.3
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc. and Dean R. Marks,
dated August 22, 2008 (3)
|
|
|
|
10.4
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc. and Miguel de
Anquin, dated August 22, 2008 (3)
|
|
|
|
10.5
|
|
Premier
Management Consulting Agreement between Genesis Capital Advisors, LLC and
Premier Power Renewable Energy, Inc., dated November 13, 2007
(3)
|
|
|
|
10.6
|
|
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)
|
10.7
|
|
Form
of Securities Purchase Agreement (3)
|
|
|
|
10.8
|
|
Form
of Registration Rights Agreement (3)
|
|
|
|
10.9
|
|
Form
of Series A Common Stock Purchase Warrant (3)
|
|
|
|
10.10
|
|
Form
of Series B Common Stock Purchase Warrant (3)
|
|
|
|
10.11
|
|
Form
of Lock-up Agreement (3)
|
|
|
|
10.12
|
|
Purchase
and Sale Agreement between Harry’s Trucking, Inc. and Haris Tajyar and
Omar Tajyar, dated September 9, 2008 (3)
|
|
|
|
10.13
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc. and Teresa Kelley,
date October 24, 2008 (4)
|
|
|
|
10.14
|
|
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)
|
|
|
|
10.15
|
|
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)
|
|
|
|
10.16
|
|
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)
|
|
|
|
10.17
|
|
Voting
Agreement between Dean Marks and Miguel de Anquin, signed June 16, 2008
(and addendum) (10)
|
|
|
|
10.18
|
|
Voting
Agreement between Dean Marks and Miguel de Anquin, dated January 21, 2009
(10)
|
|
|
|
10.19
|
|
Voting
Agreement between Dean Marks, Sarilee Marks, and Miguel de Anquin, dated
January 21, 2009 (10)
|
|
|
|
10.20
|
|
Director
Agreement between Premier Power Renewable Energy, Inc. and Tommy Ross
(11)
|
|
|
|
10.21
|
|
Voting
Agreement between Dean Marks and Miguel de Anquin, dated January 2, 2006
(12)
|
|
|
|
10.22
|
|
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 (13)
|
|
|
|
10.23
|
|
Share Exchange Agreement between
the Registrant, Rupinvest Sarl, and Esdras Ltd., dated June 3, 2009
(14)
|
|
|
|
10.24
|
|
Securities
Purchase Agreement between the Registrant and Vision Opportunity Master
Fund, Ltd., dated June 16, 2009 (15)
|
|
|
|
10.25
|
|
Waiver
of Anti-Dilution Rights of Series A Preferred Stock by Vision Opportunity
Master Fund, Ltd., dated June 16, 2009 (15)
|
|
|
|
14.1
|
|
Code
of Business Conduct and Ethics (9)
|
|
|
|
16.1
|
|
Letter
from Li & Company, PC, dated September 11, 2008
(3)
|
21.1
|
|
List
of Subsidiaries (3)
|
|
|
|
23.1
|
|
Consent
of Macias Gini & O’Connell LLP *
|
|
|
|
23.2
|
|
Consent
of Richardson & Patel LLP (included in Exhibit 5.1)
*
|
(1)
|
Filed
on February 13, 2007 as an exhibit to our Registration Statement on Form
SB-2/A, and incorporated herein by
reference.
|
(2)
|
Filed
on August 29, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(3)
|
Filed
on September 11, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(4)
|
Filed
on October 30, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(5)
|
Filed
on November 6, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(6)
|
Filed
on November 26, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(7)
|
Filed
on January 16, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(8)
|
Filed
on December 29, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(9)
|
Filed
on November 7, 2008 as an exhibit to our Registration Statement on Form
S-1, and incorporated herein by
reference.
|
(10)
|
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.
|
(11)
|
Filed
on March 24, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(12)
|
Filed
on March 31, 2009 as an exhibit to our Annual Report on Form 10-K, and
incorporated herein by
reference.
|
(13)
|
Filed
on May 4, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(14)
|
Filed
on June 8, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
(15)
|
Filed
on June 18, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
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