UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the
quarterly period ended
September 30, 2009
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
File No. 333-140637
PREMIER POWER RENEWABLE ENERGY, INC.
(Exact
name of registrant as specified in it charter)
Delaware
|
|
13-4343369
|
(State
or other jurisdiction of incorporation or organization)
|
|
(IRS
Employer Identification No.)
|
4961
Windplay Drive, Suite 100
El Dorado Hills, CA
95762
(Address
of principal executive offices)
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period than the
registrant was required to submit and post such
files). Yes
¨
No
¨
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
¨
|
Non-Accelerated
Filer
¨
|
Accelerated
Filer
¨
|
Smaller
Reporting Company
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o
No
x
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each issuer's classes of common stock, as of
the latest practicable date: 29,050,250 issued and outstanding as of
November 16, 2009.
PREMIER
POWER RENEWABLE ENERGY, INC.
TABLE OF
CONTENTS
TO
QUARTERLY REPORT ON FORM 10-Q
FOR
QUARTER ENDED SEPTEMBER 30, 2009
|
|
Page
|
PART I
|
FINANCIAL INFORMATION
|
|
Item
1.
|
Financial
Statements
|
3
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
4
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
10
|
Item
4.
|
Controls
and Procedures
|
10
|
|
|
10
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
10
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
10
|
Item
3.
|
Defaults
Upon Senior Securities
|
10
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
10
|
Item
5.
|
Other
Information
|
10
|
Item
6.
|
Exhibits
|
11
|
|
|
Signatures
|
13
|
PART
I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
Our financial statements start on the
following page, beginning with page F-1.
PREMIER
POWER RENEWABLE ENERGY, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
AS
OF SEPTEMBER 30, 2009 AND DECEMBER 31,
2008
|
|
|
September
30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,666,219
|
|
|
$
|
5,770,536
|
|
Accounts
receivable, net of allowance for
doubtful
accounts of
$18,000
at September 30, 2009 and December 31, 2008
|
|
|
3,215,761
|
|
|
|
4,767,653
|
|
Inventory
|
|
|
2,089,883
|
|
|
|
1,424,910
|
|
Project
assets
|
|
|
3,108,372
|
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
284,201
|
|
|
|
259,328
|
|
Costs
and estimated earnings in excess of billings
on
uncompleted contracts
|
|
|
1,136,653
|
|
|
|
235,929
|
|
Sales
tax receivable
|
|
|
161,918
|
|
|
|
93,775
|
|
Deferred
tax assets
|
|
|
262,709
|
|
|
|
228,835
|
|
Total
current assets
|
|
|
13,925,716
|
|
|
|
12,780,966
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
512,489
|
|
|
|
474,905
|
|
Intangible
assets
|
|
|
962,852
|
|
|
|
1,048,420
|
|
Goodwill
|
|
|
12,465,857
|
|
|
|
483,496
|
|
Deferred
tax assets, long-term
|
|
|
1,427,421
|
|
|
|
24,867
|
|
Total
assets
|
|
$
|
29,294,335
|
|
|
$
|
14,812,654
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
4,280,346
|
|
|
$
|
3,707,141
|
|
Accrued
liablilities
|
|
|
893,597
|
|
|
|
1,368,018
|
|
Billings
in excess of costs and estimated earnings
|
|
|
|
|
|
on
uncompleted contracts
|
|
|
753,498
|
|
|
|
1,206,403
|
|
Taxes
payable
|
|
|
410,385
|
|
|
|
184,470
|
|
Borrowings,
current
|
|
|
144,500
|
|
|
|
38,311
|
|
Total
current liabilities
|
|
|
6,482,326
|
|
|
|
6,504,343
|
|
|
|
|
|
|
|
|
|
|
Borrowings,
non-current
|
|
|
2,136,589
|
|
|
|
92,407
|
|
Contingent
consideration liability
|
|
|
12,026,400
|
|
|
|
-
|
|
Defered
tax liabilities, long-term
|
|
|
343,279
|
|
|
|
343,279
|
|
Total
liabilities
|
|
|
20,988,594
|
|
|
|
6,940,029
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A convertible preferred stock, par value $.0001 per share: 5,000,000
shares
designated
out of 20,000,000 shares of preferred stock authorized; 3,500,000
shares
issued and outstanding at September 30, 2009 and December 31,
2008
|
|
|
350
|
|
|
|
350
|
|
Series
B convertible preferred stock, par value $.0001 per share: 2,800,000
shares
designated
out of 20,000,000 shares
of
preferred stock authorized; 2,800,000
and
0 shares issued and outstanding
at
September 30, 2009 and December 31, 2008, respectively
|
|
|
280
|
|
|
|
-
|
|
Common
stock, par value $.0001 per share; 500,000,000 shares
authorized;
29,050,250
and 26,048,750 shares issued and outstanding at
September
30, 2009 and December 31, 2008, respectively
|
|
|
2,605
|
|
|
|
2,605
|
|
Additional
paid-in-capital
|
|
|
17,598,750
|
|
|
|
7,542,064
|
|
(Accumulated
deficit) retained earnings
|
|
|
(9,480,855
|
)
|
|
|
369,296
|
|
Accumulated
other comprehensive income (loss)
|
|
|
11,155
|
|
|
|
(41,690
|
)
|
Total
Premier Power Renewable Energy, Inc., shareholders' equity
|
|
|
8,132,285
|
|
|
|
7,872,625
|
|
Noncontrolling
interest
|
|
|
173,456
|
|
|
|
-
|
|
Total
shareholders' equity
|
|
|
8,305,741
|
|
|
|
7,872,625
|
|
Total
liabilities and shareholders' equity
|
|
$
|
29,294,335
|
|
|
$
|
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 AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND SEPTEMBER 30,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
Three Months ended September 30,
|
|
|
For
Nine Months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
6,284,590
|
|
|
$
|
9,236,108
|
|
|
$
|
15,192,289
|
|
|
$
|
27,224,925
|
|
Cost
of sales
|
|
|
(4,901,252
|
)
|
|
|
(8,233,171
|
)
|
|
|
(12,901,906
|
)
|
|
|
(23,502,924
|
)
|
Gross
profit
|
|
|
1,383,338
|
|
|
|
1,002,937
|
|
|
|
2,290,383
|
|
|
|
3,722,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
601,281
|
|
|
|
576,451
|
|
|
|
1,973,585
|
|
|
|
1,571,826
|
|
General
and administrative
|
|
|
1,842,370
|
|
|
|
515,163
|
|
|
|
4,245,111
|
|
|
|
1,427,653
|
|
Total
operating expenses
|
|
|
2,443,651
|
|
|
|
1,091,614
|
|
|
|
6,218,696
|
|
|
|
2,999,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss) income
|
|
|
(1,060,313
|
)
|
|
|
(88,677
|
)
|
|
|
(3,928,313
|
)
|
|
|
722,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(29,687
|
)
|
|
|
(16,912
|
)
|
|
|
(37,857
|
)
|
|
|
(55,957
|
)
|
Change
in fair value of financial instruments
|
|
|
-
|
|
|
|
-
|
|
|
|
2,183,498
|
|
|
|
-
|
|
Interest
income
|
|
|
2,091
|
|
|
|
50
|
|
|
|
30,529
|
|
|
|
21,867
|
|
Total
other income (expense), net
|
|
|
(27,596
|
)
|
|
|
(16,862
|
)
|
|
|
2,176,170
|
|
|
|
(34,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income before income taxes
|
|
|
(1,087,909
|
)
|
|
|
(105,539
|
)
|
|
|
(1,752,143
|
)
|
|
|
688,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
|
91,502
|
|
|
|
352,762
|
|
|
|
1,217,989
|
|
|
|
148,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
|
(996,407
|
)
|
|
|
247,223
|
|
|
|
(534,154
|
)
|
|
|
836,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net
(income) loss attributable to noncontrolling interest
|
|
|
8,589
|
|
|
|
90,728
|
|
|
|
8,589
|
|
|
|
(224,315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income attributable to Premier Power Renewable Energy,
Inc.
|
|
$
|
(987,818
|
)
|
|
$
|
337,951
|
|
|
$
|
(525,565
|
)
|
|
$
|
612,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share attributable
to Premier Power Renewable Energy,
Inc:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.04
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
Diluted
|
|
$
|
(0.04
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,049,294
|
|
|
|
22,268,639
|
|
|
|
26,048,932
|
|
|
|
21,533,243
|
|
Diluted
|
|
|
26,049,294
|
|
|
|
23,067,552
|
|
|
|
26,048,932
|
|
|
|
21,802,474
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND SEPTEMBER 30,
2008
|
|
|
For
Nine Months ended
|
|
|
|
September 30, 2009
|
|
|
September 30, 2008
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
(loss) income
|
|
|
(534,154
|
)
|
|
|
836,860
|
|
Adjustments
to reconcile net (loss) income provided by
|
|
|
|
|
|
|
|
|
(used
in) operating activities:
|
|
|
|
|
|
|
|
|
Employee
stock compensation
|
|
|
376,686
|
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
308,804
|
|
|
|
73,286
|
|
Settlement
of warrant liability
|
|
|
(2,183,498
|
)
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
1,906,258
|
|
|
|
(5,292,474
|
)
|
Sales
tax receivable
|
|
|
(63,812
|
)
|
|
|
-
|
|
Inventory
|
|
|
(372,632
|
)
|
|
|
(5,519,001
|
)
|
Prepaid
expenses and other assets
|
|
|
(23,264
|
)
|
|
|
25,342
|
|
Project
assets
|
|
|
(3,068,025
|
)
|
|
|
-
|
|
Costs
and estimated earnings in excess of billings
|
|
|
|
|
|
|
|
|
on
uncompleted contracts
|
|
|
(866,077
|
)
|
|
|
(603,588
|
)
|
Accounts
payable
|
|
|
145,794
|
|
|
|
2,424,216
|
|
Accrued
liabilities
|
|
|
(537,774
|
)
|
|
|
719,288
|
|
Billings
in excess of costs and estimated earnings
|
|
|
|
|
|
|
|
|
on
uncompleted contracts
|
|
|
(360,961
|
)
|
|
|
5,323,707
|
|
Taxes
payable
|
|
|
(145,506
|
)
|
|
|
-
|
|
Deferred
taxes
|
|
|
(1,436,428
|
)
|
|
|
(203,542
|
)
|
Net
cash used in operating activities
|
|
|
(6,854,589
|
)
|
|
|
(2,215,906
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
|
(113,018
|
)
|
|
|
(89,833
|
)
|
Net
cash paid for Rupinvest acquisition
|
|
|
(1,977
|
)
|
|
|
-
|
|
Proceeds
from sale of property and equipment
|
|
|
-
|
|
|
|
5,480
|
|
Net
cash used in investing activities
|
|
|
(114,995
|
)
|
|
|
(84,353
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Principal
payments on borrowings
|
|
|
(33,649
|
)
|
|
|
(50,745
|
)
|
Sale
of noncontrolling interest
|
|
|
175,600
|
|
|
|
-
|
|
Proceeds
from borrowings
|
|
|
2,152,434
|
|
|
|
1,250,000
|
|
Proceeds
from issuance of preferred stock and warrants
|
|
|
3,000,000
|
|
|
|
5,712,128
|
|
Repayment
from shareholders
|
|
|
-
|
|
|
|
23,458
|
|
Distributions
|
|
|
-
|
|
|
|
(452,000
|
)
|
Cost
related to share registration
|
|
|
(460,809
|
)
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
4,833,576
|
|
|
|
6,482,841
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency
|
|
|
15,334
|
|
|
|
(14,380
|
)
|
(Decrease)
increase in cash and cash equivalents
|
|
|
(2,120,674
|
)
|
|
|
4,168,202
|
|
Cash
and cash equivalents at begining of period
|
|
|
5,786,893
|
|
|
|
1,278,651
|
|
Cash
and cash equivalents at end of period
|
|
$
|
3,666,219
|
|
|
$
|
5,446,853
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
35,417
|
|
|
$
|
16,912
|
|
Taxes
paid
|
|
$
|
140,535
|
|
|
$
|
55,113
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Common
stock issued to acquire noncontrolling interest
|
|
$
|
-
|
|
|
$
|
1,489,234
|
|
Issuance
of notes to acquire equipment
|
|
$
|
-
|
|
|
$
|
62,983
|
|
|
|
|
|
|
|
|
|
|
Net
cash paid for Rupinvest acquisiton:
|
|
|
|
|
|
|
|
|
Tangible
assets
|
|
$
|
615,970
|
|
|
|
|
|
Intangible
assets
|
|
|
12,087,370
|
|
|
|
|
|
Total
assets
|
|
|
12,703,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liablilities
assumed
|
|
|
(658,648
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
price
|
|
|
12,044,692
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Contingent
consideration liability
|
|
|
(12,026,400
|
)
|
|
|
|
|
Cash
acquired
|
|
|
(16,315
|
)
|
|
|
|
|
Net
cash paid for Rupinvest acquisition
|
|
$
|
1,977
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
2009
|
|
|
Common
Stock
|
|
|
Series
A -
Preferred Stock
|
|
|
Series
B -
Preferred
Stock
|
|
|
Additional
Paid
In
|
|
|
Retained
Earnings
(Accumulated
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Premier
Power
Renewable
Energy,
Inc.
Shareholders'
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Income
(Loss)
|
|
|
Equity
|
|
|
Interest
|
|
|
Total
|
|
Balance
December 31, 2008, (audited)
|
|
|
26,048,750
|
|
|
$
|
2,605
|
|
|
|
3,500,000
|
|
|
$
|
350
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
7,542,064
|
|
|
$
|
369,296
|
|
|
$
|
(41,690
|
)
|
|
$
|
7,872,625
|
|
|
$
|
-
|
|
|
$
|
7,872,625
|
|
Cummulative
effect of adjustment upon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adoption
of EITF 07-5 (restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,793,987
|
)
|
|
|
(9,324,586
|
)
|
|
|
|
|
|
|
(11,118,573
|
)
|
|
|
|
|
|
|
(11,118,573
|
)
|
Balance
January 1, 2009 (restated)
|
|
|
26,048,750
|
|
|
|
2,605
|
|
|
|
3,500,000
|
|
|
|
350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,748,077
|
|
|
|
(8,955,290
|
)
|
|
|
(41,690
|
)
|
|
|
(3,245,948
|
)
|
|
|
-
|
|
|
|
(3,245,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(525,565
|
)
|
|
|
|
|
|
|
(525,565
|
)
|
|
|
(8,589
|
)
|
|
|
(534,154
|
)
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,845
|
|
|
|
52,845
|
|
|
|
6,445
|
|
|
|
59,290
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(472,720
|
)
|
|
|
(2,144
|
)
|
|
|
(474,864
|
)
|
Employee
stock compensation
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
376,686
|
|
|
|
|
|
|
|
|
|
|
|
376,686
|
|
|
|
|
|
|
|
376,686
|
|
Cost
related to share registration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(460,809
|
)
|
|
|
|
|
|
|
|
|
|
|
(460,809
|
)
|
|
|
|
|
|
|
(460,809
|
)
|
Sale
of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,600
|
|
|
|
175,600
|
|
Gain
on settlement of warrant liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,435,076
|
|
|
|
|
|
|
|
|
|
|
|
1,435,076
|
|
|
|
|
|
|
|
1,435,076
|
|
Issuance
of series B convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800,000
|
|
|
|
280
|
|
|
|
10,499,720
|
|
|
|
|
|
|
|
|
|
|
|
10,500,000
|
|
|
|
|
|
|
|
10,500,000
|
|
Issuance
of escrow shares related to Rupinvest acquisition
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
September 30, 2009 (unaudited)
|
|
|
29,050,250
|
|
|
$
|
2,605
|
|
|
|
3,500,000
|
|
|
$
|
350
|
|
|
|
2,800,000
|
|
|
$
|
280
|
|
|
$
|
17,598,750
|
|
|
$
|
(9,480,855
|
)
|
|
$
|
11,155
|
|
|
$
|
8,132,285
|
|
|
$
|
173,456
|
|
|
$
|
8,305,741
|
|
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”), through its
wholly owned subsidiaries, Premier Power Renewable Energy, Inc., a California
corporation (“Premier Power California”), and Rupinvest Sarl (“Rupinvest”), and
Premier Power California’s two wholly owned subsidiaries, Bright Future
Technologies LLC (“Bright Future”) and Premier Power Sociedad Limitada (“Premier
Power Spain”), and Rupinvest’s majority-owned subsidiary, Premier Power Italy
S.p.A. (“Premier Power Italy”) (collectively the “Company”) designs, engineers,
and installs photovoltaic systems in the United States, Spain, and
Italy.
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 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 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.
Concurrently
with the closing of the share exchange on September 9, 2008, we raised
$7,000,000 in a private placement financing in which Vision Opportunity Master
Fund, Ltd. (“Vision”) was the investor (the “Financing”) by issuing a total of
3,500,000 units (the “Units”) at $2.00 per Unit, with each Unit consisting of
one share of our Series A Convertible Preferred Stock, one-half of one Series A
Warrant, and one-half of one Series B Warrant.
On June
16, 2009, 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 the 3,500,000 Series A
and Series B 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.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
1.
ORGANIZATION AND NATURE OF BUSINESS
(continued)
On July
31, 2009, we purchased 100% of the issued and outstanding equity ownership of
Rupinvest
, a
corporation duly organized and existing under the laws of
Luxembourg,
from
Esdras Ltd., a corporation duly organized and existing under the laws of Cyprus
(“Esdras”). Rupinvest distributes, develops, and integrates ground
mount and rooftop solar power systems in Italy through its wholly owned
subsidiary, Premier Power Italy (formerly known as ARCO Energy, SRL), a private
limited liability company organized under the laws of Italy. The terms of
the transaction are set forth in a Share Exchange Agreement entered into on June
3, 2009 between the Company, Rupinvest, and Esdras. Prior to the
closing, Rupinvest was a wholly owned subsidiary of Esdras. We
acquired 100% of the issued and outstanding equity ownership interest in
Rupinvest from Esdras in exchange for: (a) a cash payment by us to Esdras in the
amount of twelve thousand five hundred Euros (€12,500, or approximately
$18,292); 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 by Premier Power Italy over a three-year
period. We opened escrow for the Rupinvest acquisition on July 9,
2009 under an Escrow Agreement, which was subsequently amended on July 22,
2009 and July 30, 2009. Capita Trust Company Limited, a private
limited company incorporated in England and Wales (the “Escrow Agent”), acted as
escrow agent and held in escrow the deliverables by each party for the
transaction. We delivered to the Escrow Agent the stock certificate
evidencing three million restricted shares of the Parent’s common stock, par
value $0.0001 per share, which certificate is registered in the name of the
Escrow Agent’s custodial delegate and will be held in escrow until their release
pursuant to disbursement terms set forth in the Escrow Agreement.
Such
shares are presented as issued and outstanding on the Company’s September 30,
2009 balance sheet and statement of shareholders’ equity.
Pursuant
to a Waiver and Second Amendment, which acted as the second amendment to the
Escrow Agreement and which was entered into on July 30, 2009, the parties waived
certain escrow deliverables that Rupinvest and Premier Power Italy were required
to deliver. The parties agreed that the Waiver and Second Amendment
constituted written notice on behalf of the Company, Rupinvest, and Esdras to
the Escrow Agent that the closing deliveries that we, Rupinvest, Premier Power
Italy, and Esdras were required to deliver pursuant to the Share Exchange
Agreement and the Escrow Agreement, as amended, either have been made or waived
pursuant to Section 4.1 of the Escrow Agreement. Following the closing of this
transaction, we conduct operations in Italy through Premier Power
Italy.
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 Company’s financial statements for
the years ended December 31, 2008 and 2007 appearing in the Company’s Form 10-K
filed with the Securities and Exchange Commission on May 6, 2009. The September
30, 2009 and 2008 unaudited interim condensed consolidated financial statements
on Form 10-Q have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission 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 the Parent and its
subsidiaries. Intercompany balances, transactions, and cash flows are eliminated
on consolidation. The consolidated results of operations of Rupinvest
and Premier Power Italy are included from the date of acquisition, July 31,
2009, through September 30, 2009.
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, the valuation of contingent consideration related to business
combinations and derivative instruments, 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 $2,959,956 in cash in bank accounts at September 30,
2009 in excess of deposit insurance limits.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
Concentrations and Credit Risk
–
The
Company had three customers each accounting for more than 10% of the Company’s
sales for the three months ended September 30, 2009 that in the aggregate
accounted for 44% of the Company’s sales during the quarter. Two
customers each accounted for more than 10% of the Company’s sales during the
three months ended September 30, 2008 that in the aggregate accounted for 31% of
the Company’s sales. For the nine months ending September 30, 2009 and 2008, no
single customer accounted for more than 10% of the Company’s
sales. Accounts receivable primarily consist of trade receivables and
amounts due from state agencies and utilities for rebates on solar systems
installed. At September 30, 2009, the Company had three customers
that accounted for 17%, 12%, and 10% of the Company’s accounts receivables,
respectively. At December 31, 2008, the Company had four customers
that accounted for 27%, 13%, 11%, and 10% of the Company’s accounts receivables,
respectively. 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
September 30, 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.
Inventories
–
Inventories, consisting primarily of raw materials, are recorded using
the average cost method, and are 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 Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) 718 (Statement of
Financial Accounting Standards No. 123 (revised 2004),
“Share-Based Payment”
),
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’s
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 FASB ASC 718.
Revenue Recognition
–
Revenue on
solar power projects installed by the Company for customers under 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 installation 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 either costs or
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 an 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 attributable to a project as
well as certain indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs, and depreciation costs. Selling, 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 $596,303
and $352,389 for the nine months ended September 30, 2009 and 2008,
respectively.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
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 ten years in California and generally five to
ten years elsewhere in the U.S., depending upon each state’s specific
requirements, and to one year in Spain for all contracts signed after December
31, 2006. As of September 30, 2009, the Company had no warranty obligations in
Italy as it had not performed any solar power facility installations as of that
date. The Company expects that its warranty policies in Italy will be
similar to those it provides in Spain. 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 nine
months ended September 30, 2009 and 2008 was as follows:
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
Balance
at beginning of period
|
|
$
|
367,250
|
|
|
$
|
172,002
|
|
|
|
|
|
|
|
|
|
|
Warranty
expense
|
|
|
83,161
|
|
|
|
199,482
|
|
|
|
|
|
|
|
|
|
|
Less:
Warranty claims
|
|
|
(157,711
|
)
|
|
|
(39,698
|
)
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
|
$
|
292,700
|
|
|
$
|
331,786
|
|
Foreign Currency
–
The
functional currency of Premier Power Spain and Italy is the Euro. Their 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 and Italy 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 nine months ended September 30, 2009 and 2008, the foreign
currency transaction gain was $298,820 and $10,817,
respectively. For the three months ended September 30, 2009 and 2008,
the foreign currency transaction gain (loss) was $214,602 and ($18,612),
respectively.
Noncontrolling Interest
–
The
noncontrolling interest reflected in the statement of operations in 2008
represents the 49% shareholdings of the noncontrolling shareholders in the
Company’s Spanish operations, Premier Power Spain, for the three and nine months
ended September 30, 2008. Concurrent with the reverse merger, these
shareholdings were converted into shares of the Company’s stock and no longer
reported as noncontrolling interest effective September 9, 2008.
The
noncontrolling interest reflected in the 2009 financial statements represents
the 10% shareholdings of the noncontrolling shareholders in the Company’s
Italian operations, Premier Power Italy, for the three and nine months ended
September 30, 2009.
FASB ASC
Topic 810, “Consolidation” (SFAS No. 160, “
Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51
”) was
effective on January 1, 2009 for the Company and established accounting
reporting standards for noncontrolling interests in a subsidiary. The
retrospective presentation and disclosure requirements outlined by the
consolidation guidance have been incorporated into this Quarterly Report on Form
10-Q for the interim periods ended September 30, 2009 and 2008.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
In
accordance with the new guidance on noncontrolling interests, the Company
revised all previous references to “minority interests” in the consolidated
financial statements to “noncontrolling interest,” and also made the following
changes:
|
·
|
The
Consolidated Statements of Operations now present “Net income (loss),”
which includes “Net income (loss) attributable to noncontrolling interest”
and “Net income (loss) attributable to Premier Power Renewable Energy,
Inc.” Earnings per share is now identified as attributable to
Premier Power Renewable Energy,
Inc.
|
|
·
|
The
Consolidated Balance Sheets now present “Noncontrolling interest” as a
component of “Shareholders’ equity.” The Premier Power
Renewable Energy, Inc. shareholders’ equity is equivalent to the
previously reported “Total shareholders’
equity.”
|
|
·
|
The
Consolidated Statements of Shareholders’ Equity separately displays
noncontrolling interest activity.
|
A summary
of activity related to noncontrolling interest in the Company’s subsidiaries is
as follows:
|
|
Nine
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
September
30, 2009
|
|
|
September
30, 2008
|
|
Beginning
balance
|
|
$
|
―
|
|
|
$
|
1,650
|
|
Net
income (loss)
|
|
|
(8,589
|
)
|
|
|
224,315
|
|
Foreign
currency translation adjustment
|
|
|
6,445
|
|
|
|
(23,535
|
)
|
Purchase
of noncontrolling interest in Premier Power Italy
|
|
|
175,600
|
|
|
|
―
|
|
Sale
of noncontrolling interest in Premier Power Spain
|
|
|
―
|
|
|
|
(202,430
|
)
|
Ending
balance
|
|
$
|
173,456
|
|
|
$
|
―
|
|
Earnings per Share
–
Earnings
per share is computed in accordance with the provisions of FASB ASC Topic 260
(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
excluding
the 3,000,000 contingent shares related to the Rupinvest
acquisition.
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. Potentially dilutive securities
include warrants, convertible preferred stock, restricted shares, and
contingently issuable shares for the purchase of Rupinvest. For the
three and nine months ended September 30, 2009, 5,550,753 and 6,312,466,
respectively, of potentially dilutive securities were excluded from the
computation of diluted earnings per share as their effect was
anti-dilutive. For the three and nine months ended September 30,
2008,
the
dilutive effect of the Company’s 3,500,000 shares of Series A Convertible
Preferred Stock have been excluded from the computation of diluted earnings per
share as their effect was anti-dilutive.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2008
|
|
|
September 30, 2008
|
|
Net
(loss) income
|
|
$
|
337,951
|
|
|
$
|
612,545
|
|
Earnings
Per Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
0.03
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,268,639
|
|
|
|
21,533,243
|
|
Dilutive
effect of warrants
|
|
|
798,913
|
|
|
|
269,231
|
|
Diluted
|
|
|
23,067,552
|
|
|
|
21,802,474
|
|
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 1,142,479 shares of its common stock to eligible
persons. None of these options have vested as of September 30, 2009,
and all of these options are anti-dilutive as of September 30,
2009.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
Comprehensive Income (Loss)
–
FASB
ASC Topic 220 (Statement of Financial Accounting Standards No. 130, “
Reporting Comprehensive
Income
,”) establishes standards for reporting comprehensive income (loss)
and its components in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income (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 September 30, 2009, the Company recorded $(204,471),
$(70,224), and $183,193, in federal, state, and foreign income tax expense
(benefit), respectively. Prior to September 2008, the Company was not
subject to federal income tax. For the three months ended September
30, 2008, the Company recorded $(556,281), $17,763, and $185,756 in federal,
state, and foreign income tax (benefit) expense, respectively. For
the nine months ended September 30, 2009, the Company recorded approximately
$(1,171,053), $(231,237), and $184,301, in federal, state, and foreign income
tax (benefit) expense, respectively. For the nine months ended
September 30, 2008, the Company recorded $(556,281), $14,674, and $393,179 in
federal, state, and foreign income tax (benefit) expense,
respectively. Deferred tax assets of $1,690,130 at September 30, 2009
consists primarily of the tax benefit associated with federal and state net
operating loss carry forwards of $3,642,633.
Effective
September 1, 2008, the Company adopted FASB ASC 740-10 (Financial Accounting
Standards Interpretation FIN No. 48, “
Accounting for Uncertainty in Income
Taxes – an interpretation
of FASB Statement No. 109” (FIN
48))
. FASB ASC 740-10 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
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. As a
result of the implementation of FASB ASC 740-10, 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 FASB
ASC 740-10, the Company recognized no material adjustment in the liability
for unrecognized income tax benefits as of the September 2008 adoption date and
at September 30, 2009. 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 September 30, 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 FASB ASC 740-10.
Premier
Power Spain is organized under the laws of Spain and is subject to federal and
provincial taxes. Premier Power Italy is recognized under the laws of
Italy and is subject to federal and provincial taxes.
Recently
Issued Accounting Pronouncements
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB ASC
805 (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. FASB ASC 805 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 FASB ASC 805 on the Company’s consolidated
financial statements will be determined in part by the nature and timing of any
future acquisitions completed. See Note 5.
In March
2008, the FASB issued FASB ASC 815-40 (SFAS No. 161,
“Disclosures
about Derivatives Instruments and Hedging Activities, an Amendment of FASB
Statement No. 133
”). FASB ASC 815-40 requires enhanced
disclosures about a company’s derivative and hedging activities. ASC 815-40 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. The adoption of FASB ASC 815-40 did not have
a material impact on results of operations, cash flows, or financial
position.
In April
2008, the FASB issued FASB ASC 350-30 (FASB Staff Position (FSP) FAS No. 142-3,
“Determination
of the Useful Life of Intangible Assets”)
.
FASB
ASC 350-30 amends the factors an entity should consider in developing renewal or
extension assumptions used in determining the useful life of recognized
intangible assets under FASB ASC 350-30 (SFAS No. 142,
“Goodwill
and Other Intangible Assets”
). FASB ASC 350-30 must be applied
prospectively to intangible assets acquired after the effective date. The
Company applied the guidance of the FASB ASC 350-30 to intangible assets
acquired after January 1, 2009. The Company’s adoption of FASB ASC
350-30 did not have a material impact on its financial position, results of
operations, or cash flows.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
In June
2008, the FASB ratified FASB ASC 815-40 (EITF Issue 07-5 (EITF 07-5), “
Determining
Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own
Stock
”
). FASB ASC 815-40 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. FASB
ASC 815-40 is effective for fiscal years beginning after December 15, 2008 and
interim periods within those years.
On
January 1, 2009, the Company adopted this pronouncement (see Note
10).
In April
2009, the FASB issued FASB ASC 825-10-50 and FASB ASC 270 (
“
FSP 107-1 and APB 28-1 Interim Disclosures
about Fair Value of Financial Instruments
”
)
,
which increases the frequency of fair value disclosures to a quarterly
basis instead of on an annual basis. The guidance relates to fair value
disclosures for any financial instruments that are not currently reflected on an
entity’s balance sheet at fair value. FASB ASC 825-10-50 and FASB ASC 270 are
effective for interim and annual periods ending after June 15, 2009. The
adoption of
FASB ASC
825-10-50 and FASB ASC 270 did not have a material impact on results of
operations, cash flows, or financial position.
In May
2009, the FASB issued FASB ASC 470 (Staff Position No. APB 14-1 “
Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
”). FASB ASC 470 clarifies that
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by FASB ASC 470-20-65-1
(paragraph 12 of APB Opinion No. 14, “
Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants
”).
Additionally, FASB ASC 470 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. FASB ASC 470 is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and interim
periods within those fiscal years. The adoption of FASB ASC 470 did not have a
material effect on our consolidated financial statements.
In May
2009, the FASB issued FASB ASC 855 (SFAS No. 165,
“Subsequent
Events”
), which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In particular,
FASB ASC 855 sets forth (a) the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, (b)
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and (c) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. FASB ASC 855 is effective for interim or
annual financial reporting periods ending after June 15, 2009. The adoption of
FASB ASC 855 did not have a material impact on results of operations, cash
flows, or financial position.
In June
2009, the FASB issued FASB ASC 810 (SFAS No. 167, “
Amendments
to FASB Interpretation No. 46(R)”
). FASB ASC 810 applies to FASB ASC 105
entities and is effective for annual financial periods beginning after November
15, 2009 and for interim periods within those years. Earlier application is
prohibited. A calendar year-end company must adopt this statement as of January
1, 2010. The Company does not anticipate the adoption of FASB ASC 810 to have a
material impact on results of operations, cash flows, or financial
position.
In June
2009, the FASB issued FASB ASC 860 (SFAS No. 166,
“Accounting
for Transfers of Financial Assets-an amendment of FASB Statement No.
140”
). FASB ASC 860 applies to all entities and is effective for annual
financial periods beginning after November 15, 2009 and for interim periods
within those years. Earlier application is prohibited. A calendar year-end
company must adopt this statement as of January 1, 2010. This statement retains
many of the criteria of FASB ASC 860 (FASB 140, “
Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”
) to determine whether a transfer of financial assets
qualifies for sale accounting, but there are some significant changes as
discussed in the statement. Its disclosure and measurement requirements apply to
all transfers of financial assets occurring on or after the effective date. Its
disclosure requirements, however, apply to transfers that occurred
both
before and after the effective date. In addition, because FASB ASC 860
eliminates the consolidation exemption for Qualifying Special Purpose Entities,
a company will have to analyze all existing QSPEs to determine whether they must
be consolidated under FASB ASC 810. The Company does not anticipate the adoption
of FASB ASC 860 to have a material impact on results of operations, cash flows,
or financial position.
In August
2009, the FASB issued ASU 2009-05, “
Measuring
Liabilities at Fair Value
.
”
ASU 2009-05 applies to all entities that measure liabilities at fair
value within the scope of FASB ASC 820, “
Fair
Value Measurements and Disclosures
.
”
ASU 2009-05 is effective for the first reporting period (including
interim periods) beginning after issuance, October 1, 2009 for the Company. The
Company does not expect the adoption of ASU 2009-05 to have a material impact on
results of operations, cash flows, or financial position.
In
October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on
Issue 08-1,
“Revenue
Arrangements with Multiple Deliverables”
). FASB ASC 605-25 is effective
for fiscal years beginning on or after June 15, 2010. Earlier adoption is
permitted on a prospective or retrospective basis. The Company
is
currently evaluating the impact of this pronouncement on its consolidated
financial statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
3.
INTANGIBLE ASSETS
Intangibles
consist of amortizing intangibles and goodwill. At September 30, 2009 and
December 31, 2008, such amounts were as follows:
Amortizing Intangibles
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
Trademark
|
|
$
|
729,032
|
|
|
$
|
865,106
|
|
Customer
List
|
|
|
99,175
|
|
|
|
-
|
|
Employee
contract
|
|
|
134,645
|
|
|
|
157,086
|
|
Backlog
|
|
|
-
|
|
|
|
26,228
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
962,852
|
|
|
|
1,048,420
|
|
Goodwill
|
|
|
12,465,857
|
|
|
|
483,496
|
|
Total
|
|
$
|
13,428,709
|
|
|
$
|
1,531,916
|
|
Amortization
periods for the intangibles are as follows: trademark – 17 years, customer list
– 3 years, employee contract – 2 years, and backlog – 6 months. Amortization for
the three and nine months ended September 30, 2009 was $67,415 and
$190,577, respectively. Accumulated amortization was $252,158 at September 30,
2009.
The
change in the carrying amount of goodwill for the nine months ended September
30, 2009 was as follows:
Beginning
balance, January 1, 2009
|
|
$
|
483,496
|
|
Goodwill
from Rupinvest acquisition
|
|
|
11,982,361
|
|
Ending
balance, September 31, 2009
|
|
$
|
12,465,857
|
|
FASB ASC
350,
Intangibles – Goodwill and Other
,
requires us to test goodwill for impairment as least annually, or sooner, if
facts or circumstances between scheduled annual tests indicate that it is more
likely than not that the fair value of goodwill might be less than its carrying
value. We performed our goodwill impairment test in the fourth
quarter of the fiscal year ending December 31, 2009. Based on that
test, we concluded that our goodwill was not impaired. We have also
concluded that there have been no changes in facts and circumstances since the
date of that test and since the acquisition of Rupinvest on July 31, 2009 that
would trigger an interim goodwill impairment.
4. PROJECT
ASSETS
Project
assets of $3,108,372 consist of costs capitalized relating to a solar power
project in development by Premier Power Italy. Such costs
include legal, consulting, permitting, and other similar costs. We
expense these costs upon the sale of the project or if we determine that the
project is not commercially viable. For the three and nine months
ended September 30, 2009, no such costs were expensed.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
5. ACQUISITION
On July
31, 2009, the Company completed the acquisition of Rupinvest and its
majority-owned subsidiary, Premier Power Italy. The Company
pursued the acquisition of Rupinvest to enter the growing Italian solar
market. The terms of the transaction are set forth in a Share
Exchange Agreement entered into on June 3, 2009 between the Company, Rupinvest,
and Esdras. Prior to the closing, Rupinvest was the wholly owned
subsidiary of Esdras. We acquired Rupinvest from Esdras in exchange
for (i) a cash payment to Esdras in the amount of twelve thousand five hundred
Euros (12,500 or approximately $18,292), and (ii) the potential transfer to
Esdras of up to 3,000,000 shares of our common stock, with the number of shares
to be transferred, if any, to be calculated based on sales by Premier Power
Italy over a three-year period (“Contingent Consideration”). The fair
value assigned to the Contingent Consideration is $12,026,400.
In
conjunction with the acquisition of Rupinvest, the Company made a capital
contribution of $1,580,000.
The
Contingent Consideration is to be distributed over a three-year period based
upon Premier Power Italy achieving certain sales and gross margin goals during
such period. The fair value of the Contingent Consideration was
determined by an independent third party. The valuation used a
discounted future income methodology for the years 2009, 2010, and 2011
inclusive and then applied a discounted cash flow model to the calculation
periods. The applicable results obtained were then incorporated into
the universal income projections for the Company for the years 2009 through 2011
and further analyzed from a cash flow perspective in order to determine the
overall value of the Company and the related fair value of the Company’s
outstanding stock in 2009, 2010, and 2011. The projected 2009, 2010,
and 2011 fair value of the Company’s stock price was then multiplied against a
yearly estimate of shares earned by Rupinvest. The specific
calculation of the shares earned was determined by utilizing a probability
weighted approach. A discount rate of 20% was used in the valuation
model, based on the aggregate of 3 factors: [1] risk free rate of return, [2]
market equity premium, and [3] special company risk premium determined by the
independent third party valuation. As of September 30, 2009, based on projected
sales and gross margin levels of Premier Power Italy, the Company’s calculation
of the fair value of the Contingent Consideration was materially unchanged from
its acquisition date amount.
The
acquisition of Rupinvest and Premier Power Italy was accounted for under the
accounting guidance for business combination FASB ASC 805 (FASB statement
141(R)). Accordingly, goodwill has been measured as the excess of the
total consideration on the acquisition date over the amounts assigned to the
identifiable assets acquired and liabilities assumed.
The total
purchase price of Rupinvest and Premier Power Italy of $12,044,692 was allocated
to the net tangible assets and intangible assets acquired based upon their
estimated fair value as of July 31, 2009, as set forth below. The
excess of the purchase price over the net tangible assets and intangible assets
was recorded as goodwill. The preliminary allocation of the purchase
price was based upon a preliminary valuation and our estimates and assumptions
are subject to change.
A summary
of the acquired tangible and intangible assets and liabilities is as
follows:
Cash
|
|
$
|
16,315
|
|
Accounts
Receivable
|
|
|
314,702
|
|
Inventory
|
|
|
246,962
|
|
Intangible
assets - customer list
|
|
|
105,009
|
|
Fixed
assets
|
|
|
37,991
|
|
Accounts
payable and accrued liabilities
|
|
|
(381,405
|
)
|
Taxes
payable
|
|
|
(277,243
|
)
|
Goodwill
|
|
|
11,982,361
|
|
Total
purchase consideration
|
|
$
|
12,044,692
|
|
Intangible
assets consist of the estimated fair value of acquired customer
lists. In estimating the fair value we used an income approach,
utilizing a discount rate of 20%. We estimated the useful life of the
acquired customer lists to be three years.
The gross
contractual accounts receivable amount was $314,702. The qualitative
factors that make up goodwill recognized include, among other factors, Premier
Power Italy management and knowledge of local business practices and
regulations.
Goodwill
that is expected to be deductible for tax purposes has not yet been
determined.
The
following table provides pro forma results of operations for the nine months
ended September 30, 2009 and 2008, as if the acquisition had been completed on
January 1, 2008. Accordingly, such pro forma amounts are not
necessarily indicative of the results that actually would have occurred had the
acquisition been completed on the dates indicated, nor are they indicative of
the future operating results of the combined company.
|
|
Nine Months Ended
|
|
|
Nine Months Ended
|
|
|
|
Septmeber 30, 2009
|
|
|
September 30, 2008
|
|
Total
Revenue
|
|
$
|
17,973,557
|
|
|
$
|
32,988,862
|
|
Net
(loss) income
|
|
$
|
(592,186
|
)
|
|
$
|
1,036,832
|
|
For the
three and nine months ended September 30, 2009, the statement of operations
contains $336,936 and ($85,891) of revenue and net loss, respectively, relating
to the consolidated operations of Rupinvest.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
6.
PROPERTY AND
EQUIPMENT
Property
and equipment consists of the following:
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
Equipment
|
|
$
|
163,031
|
|
|
$
|
203,628
|
|
Furniture and
computers
|
|
|
165,201
|
|
|
|
59,194
|
|
Vehicles
|
|
|
597,128
|
|
|
|
504,546
|
|
|
|
|
925,360
|
|
|
|
767,368
|
|
Less:
accumulated depreciation
|
|
|
(412,871
|
)
|
|
|
(292,463
|
)
|
|
|
$
|
512,489
|
|
|
$
|
474,905
|
|
Depreciation
expense was $118,227 and $73,286 for the nine months ended September 30, 2009
and 2008, respectively.
7.
ACCRUED LIABILITIES
Accrued
liabilities consisted of the following:
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
Payroll
|
|
$
|
248,064
|
|
|
$
|
477,163
|
|
Warranty
reserve
|
|
|
292,700
|
|
|
|
367,250
|
|
401K
plan
|
|
|
-
|
|
|
|
20,000
|
|
Sales
and local taxes
|
|
|
139,307
|
|
|
|
301,938
|
|
Workers
compensation insurance
|
|
|
-
|
|
|
|
20,000
|
|
Accrued
subcontractors
|
|
|
18,485
|
|
|
|
79,002
|
|
Other
operational accruals
|
|
|
195,041
|
|
|
|
102,665
|
|
Total
|
|
$
|
893,597
|
|
|
$
|
1,368,018
|
|
8.
BORROWINGS
Borrowings
consist of notes payable and lines of credit.
Notes
Payable
Notes
payable were $462,740 and $130,718 at September 30, 2009 and December 31, 3008,
respectively. Notes payable of $97,947 are secured by vehicles and
have maturities through 2014. The annual interest rates on the
notes range from 2.9% to 6.4%. Premier Power Spain has an unsecured loan
for $364,793 with Instituto de Crédito Oficial as of September 30, 2009, with
the first payment due on December 18, 2010 and each additional payment due six
months thereafter until June 18, 2013, which is the last payment due
date. Payment amounts are $86,693. The future principal payments on
these notes as of September 30, 2009 are as follows:
2009
|
|
$
|
26,151
|
|
2010
|
|
|
86,979
|
|
2011
|
|
|
147,440
|
|
2012
|
|
|
134,754
|
|
2013
|
|
|
66,994
|
|
2014
|
|
|
422
|
|
|
|
$
|
462,740
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
8. BORROWINGS
(continued)
Lines of
Credit
On July
13, 2009, we entered into a loan agreement with Umpqua Bank, an Oregon
corporation, for a line of credit of up to $12 million, maturing on July 13,
2011. The loan agreement provides for an initial line of credit of $7
million, provided, however, that we may request no more than twice prior to the
maturity date that the line of credit be increased to an amount not to exceed
$12 million in the event we acquire another subsidiary and require additional
working capital for such subsidiary. The line of credit is secured by
our assets and by the assets of Premier Power California, Bright Future, and
Premier Power Spain. The line of credit bears interest at the prime
rate, provided, however, that the interest rate will not be less than five
percent (5%) per annum. At September 30, 2009, the interest rate was
5%. As of September 30, 2009, there is $1,700,000 outstanding under
our agreement with Umpqua Bank at an interest rate of 5%.
At
September 30, 2009, Premier Power Spain has an unsecured line of credit for
$118,349, which has interest terms of Euribor + 1% and is due in full on
May 21, 2010.
The loan
agreement with Umpqua Bank contains various financial condition covenants which
we must comply with, including minimum current ratio, maximum debt to tangible
net worth ratio, and minimum tangible net worth. Under the loan
agreement, we are also subject to customary non-financial covenants including
limitations in secured indebtedness and limitations on dividends and other
restricted payments. We were in compliance with these covenants as of
September 30, 2009.
9.
COMMITMENTS AND
CONTINGENCIES
Premier
Power Spain is party to non-cancelable leases for operating facilities in
Barcelona and Madrid, Spain, which expire in 2012 and 2013. Premier Power
Italy is party to a non-cancelable lease for operating facilities in
Ripalimosani, Campobasso, Italy, which expires in 2015. 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 September 30, 2009, subject to annual adjustment, if
any:
2009
|
|
$
|
26,803
|
|
2010
|
|
|
101,454
|
|
2011
|
|
|
72,667
|
|
2012
|
|
|
64,495
|
|
2013
|
|
|
52,968
|
|
Thereafter
|
|
|
48,517
|
|
Total
|
|
$
|
366,904
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
10.
DERIVATVE
INSTRUMENT
On
January 1, 2009, the Company adopted FASB ASC 815 (
EITF 07-5, Determining Whether an
Instrument (or embedded Feature) is Indexed to an Entity’s Own Stock)
. As
part of the adoption of FASB ASC 815, the Company determined that its warrants
are not indexed to its stock as a result of the basis of an exercise price reset
that occurs when the Company sells its common stock at a lower price, even if
such price is at fair value. Thus, the value of the warrants has been recorded
as a liability.
The
Company recorded a warrant liability in the amount of $11,118,573 upon adoption
of FASB ASC 815. The Company determined the fair value of the warrant
liability to be $9,643,348 as of March 31, 2009 and $8,935,076 as of June 16,
2009, immediately prior to retiring the warrants. As a result of the
changes in fair value, the Company recorded income of $0 and $2,183,498 for the
three and nine months ended September 30, 2009, respectively.
On June
16, 2009, the Company entered into a Securities Purchase Agreement with
Vision. The terms of the agreement called for the cancellation of
Series A and Series B warrants exercisable for an aggregate 3,500,000 shares of
common stock held by Vision. The cancellation of warrants resulted in the
elimination of all our issued and outstanding warrants. As a result
of the cancellation, the Company derecognized the warrant liability of
$8,935,076 and recorded the gain on its extinguishment of $1,435,076 in
additional paid in capital in accordance with the provisions of APB No. 26,
Early Extinguishment of
Debt
.
The
Company uses the Black-Scholes pricing model to calculate fair value of its
warrant liability. Key assumptions used are as follows:
Number of Shares
included in Warrant
|
|
Dividend Yield
|
|
|
Volatility
|
|
|
Risk-Free
Rate
|
|
|
Expected Life
(in years)
|
|
|
Stock Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750,000
|
|
|
0.0
|
%
|
|
|
95.0
|
%
|
|
|
4.5
|
%
|
|
|
4
|
|
|
$
|
2.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750,000
|
|
|
0.0
|
%
|
|
|
95.0
|
%
|
|
|
4.5
|
%
|
|
|
4
|
|
|
$
|
3.00
|
|
11.
STOCK-BASED
COMPENSATION
The
Company’s 2008 Equity Incentive Plan (the “Incentive Plan”) provides for the
issuance of incentive stock options and non-statutory stock options. The 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 Incentive
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 Incentive Plan
vest as determined by the Board. The term of the options granted
under the Incentive Plan may not exceed 10 years, and the maximum number of
shares of common stock that may be issued pursuant to stock options and
stock awards granted under the Incentive Plan is 2,951,875 shares in
the aggregate. Options convertible into an aggregate 1,017,229 shares of common
stock were outstanding under the Incentive Plan as of September 30,
2009. The Company did not grant stock options prior to January 2009,
and there was no stock compensation expense for the three and nine months ended
September 30, 2008.
The
Company recognized stock-based compensation expense of approximately $87,146 and
$376,686 during the three and nine months ended September 30, 2009,
respectively.
The
following table sets forth a summary stock option activity for the nine months
ended September 30, 2009:
|
|
|
|
|
Weighted-
|
|
|
|
Number of
|
|
|
Average Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
September 30, 2009
|
|
|
September 30, 2009
|
|
Outstanding and not
vested beginning balance
|
|
|
-
|
|
|
$
|
-
|
|
Granted
during the year
|
|
|
1,142,479
|
|
|
|
3.32
|
|
Forfeited/cancelled
during the year
|
|
|
(125,250
|
)
|
|
|
3.32
|
|
Released/vested
during the year
|
|
|
-
|
|
|
|
-
|
|
Outstanding
and not vested at September 30, 2009
|
|
|
1,017,229
|
|
|
$
|
3.32
|
|
Stock-based
compensation expense relating to these shares is being recognized over a
weighted-average period of 4.7 years. Stock compensation expense of
$376,686 was recognized during the nine months ended September 30,
2009.
In August
2009, the Company issued 1,500 shares of its common stock under the 2008 Equity
Incentive Plan to employees for services. The shares were immediately vested,
and there were no restrictions. The fair value of these shares was not
significant.
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 for
the nine months ended September 30, 2009 and 2008, respectively, and therefore,
there is no impact on the accompanying consolidated statements of cash
flows.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
11.
STOCK-BASED COMPENSATION
(continued)
The
following table summarizes the consolidated stock-based compensation by line
item for the nine months ended September 30, 2009:
|
|
Nine Months Ended
|
|
|
|
September 30, 2009
|
|
Administration
|
|
$
|
176,267
|
|
Sales and
marketing
|
|
|
79,213
|
|
Cost
of goods sold
|
|
|
121,206
|
|
Total
stock-based compensation expense
|
|
|
376,686
|
|
Tax
effect on stock-based compensation expense
|
|
|
119,372
|
|
Total
stock-based compensation expense after taxes
|
|
$
|
257,314
|
|
|
|
|
|
|
Effect
on net loss per share: Basic
|
|
$
|
(0.01
|
)
|
Effect
on net loss per share: Diluted
|
|
$
|
(0.01
|
)
|
The
following tables set forth a summary of stock option activity for the three
months and nine months ended September 30, 2009, respectively:
|
|
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 three months ended March 31, 2009
|
|
|
-
|
|
|
|
-
|
|
Exercisable
at during the year
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at March 31, 2009
|
|
|
1,142,479
|
|
|
|
4.25
|
|
Exercisable
at March 31, 2009
|
|
|
-
|
|
|
|
-
|
|
Forfeited/cancelled/expired
during three months ended June 30, 2009
|
|
|
78,000
|
|
|
|
4.25
|
|
Exercisable
at during the year
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at June 30, 2009
|
|
|
1,064,479
|
|
|
|
4.25
|
|
Exercisable
at June 30, 2009
|
|
|
-
|
|
|
|
-
|
|
Forfeited/cancelled/expired
during three months ended September 30, 2009
|
|
|
47,250
|
|
|
|
4.25
|
|
Exercisable
at during the year
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at Setempber 30, 2009
|
|
$
|
1,017,229
|
|
|
$
|
4.25
|
|
Exercisable
at September 30, 2009
|
|
|
-
|
|
|
|
-
|
|
The fair
value of stock option grants during the nine months ended September 30, 2009 was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions:
Valuation and Amortization
Method —
The Company estimates the fair value of service-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. The fair value of the
company’s common stock is based on its value as determined by market prices on
the date of grant. 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 FASB ASC 718-10-S99-1(Staff Accounting Bulletin No. 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. Accordingly, the dividend yield percentage is zero
for all periods.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
11.
STOCK-BASED COMPENSATION
(continued)
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
|
%
|
Expected
term
|
|
6.5
years
|
|
Risk-free
interest rate
|
|
|
1.88
|
%
|
Weighted-average
fair value per share
|
|
$
|
3.32
|
|
The
weighted-average fair value per share of the stock options as determined on the
date of grant was $3.32 for the 1,142,479 stock options granted during the nine
months ended September 30, 2009. The total fair value of stock options vested
during the nine months ended September 30, 2009 was $0.
12.
EMPLOYEE BENEFITS
The
Company has a 401(k) 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. The Company 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 $0 for the nine months ended September 30, 2009
and 2008. Employees are vested 100% after 3 years of service. Neither Bright
Future nor Premier Power Spain nor Premier Power Italy offer defined
contribution or defined benefit plans to their employees.
13.
FAIR VALUE OF FINANCIAL
INSTRUMENTS
The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in an orderly transaction between market participants to sell the
asset or transfer the liability. In accordance with FASB
ASC 820 (SAS No. 157
Fair
Value Measurements)
, the Company uses fair value measurements based on
quoted prices in active markets for identical assets or liabilities (Level 1),
significant other observable inputs (Level 2), or unobservable inputs for assts
or liabilities (Level 3), depending on the nature of the item being
valued.
The
following disclosure is made in accordance with FASB ASC 820 (FASB Staff
Position (FSP) FAS 107-1,
Interim Disclosures about Fair Value
of Financial Instruments
):
The
carrying amounts of cash and cash equivalents and accounts receivable, prepaid
expenses, costs and estimated earnings in excess of billings, accounts payable,
b
illings
in excess of costs and estimated earnings on uncompleted contracts,
and
accrued liabilities approximate their fair values at each balance sheet date due
to the short-term maturity of these financial instruments. The fair value of the
Company’s borrowing is based upon current interest rates for debt instruments
with comparable maturities and characteristics and approximates carrying
values.
FASB ASC
820 (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. FASB ASC 820 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:
Contingent consideration
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
12,026,400
|
|
14. SUBSEQUENT
EVENTS
We have
evaluated subsequent events through November 16, 2009, the date the financial
statements were issued.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking
Statements
Certain
statements in this Management’s Discussion and Analysis section, other than
purely historical information, including estimates, projections, statements
relating to our business plans, objectives, and expected operating results, and
the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, and Section 21E of
the Securities Exchange Act of 1934. These forward-looking statements generally
are identified by the words “believe,” “project,” “expect,” “anticipate,”
“estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties that may cause actual results to
differ materially from the forward-looking statements. A detailed discussion of
risks and uncertainties that could cause actual results and events to differ
materially from such forward-looking statements is included in the “Risk
Factors” section of our most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission. We undertake no obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events, or otherwise.
As
used in this report, unless the context requires otherwise, “we” or “us” or the
“Company” or “Premier Power” means Premier Power Renewable Energy, Inc., a
Delaware corporation, and its subsidiaries.
Overview
We are a
developer, designer, and integrator of solar energy solutions. We develop,
market, sell, and maintain solar energy systems for residential, agricultural,
commercial, industrial customers in North America and Spain through Bright
Future Technologies LLC (“Bright Future”) and Premier Power Sociedad Limitada
(“Premier Power Spain”), both of which are wholly owned subsidiaries of Premier
Power Renewable Energy, Inc., a California corporation (“Premier Power
California”), which is our wholly owned subsidiary. We also distribute, develop,
and integrate ground mount and rooftop solar power systems in Italy through
Premier Power Italy S.p.A. (formerly ARCO Energy, SRL) (“Premier Power Italy”),
the majority-owned subsidiary of Rupinvest Sarl, a corporation duly
organized and existing under the laws of Luxembourg (“Rupinvest”), which is our
wholly owned subsidiary.
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 shareholders of Premier Power California,
which represented approximately 93.1% of the then-issued and outstanding common
stock of the Company (excluding the shares issued in a related financing). As a
result of the share exchange, Premier Power California became our wholly owned
subsidiary, and we acquired the business and operations of Premier Power
California, Bright Future, and Premier Power Spain.
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, 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.
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.
On July
31, 2009, we purchased100% of the issued and outstanding equity ownership of
Rupinvest from Esdras Ltd., a corporation duly organized and existing under the
laws of Cyprus (“Esdras”). Rupinvest distributes, develops, and
integrates ground mount and rooftop solar power systems in Italy through its
majority-owned subsidiary, Premier Power Italy. The terms of the
transaction are set forth in a Share Exchange Agreement entered into on June 3,
2009 between the Company, Rupinvest, and Esdras. Prior to the
closing, Rupinvest was a wholly owned subsidiary of Esdras. We
acquired Rupinvest from Esdras in exchange for (i) a cash payment by us to
Esdras in the amount of twelve thousand five hundred Euros (€12,500, or
approximately $18,292) and (ii) the potential transfer to Esdras of up
to 3,000,000 shares of our common stock, with the number of shares to be
transferred, if any, to be calculated based on sales by Premier Power Italy over
a three-year period. Pursuant to the terms of the transaction, we
also made a capital contribution in the amount of one million, one hundred and
twenty five thousand Euros (€1,125,000, or approximately $1,580,063) into
Premier Power Italy.
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 the footnotes to our
condensed 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 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 Company’s financial statements for the years
ended December 31, 2008 and 2007 appearing in the Company’s Form 10-K filed with
the Securities and Exchange Commission on May 6, 2009. The September 30, 2009
and 2008 unaudited interim condensed consolidated financial statements on Form
10-Q have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission 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 the Parent and its
subsidiaries. Intercompany balances, transactions, and cash flows are eliminated
on consolidation. The consolidated results of operations of Rupinvest
and Premier Power Italy are included from the date of acquisition, July 31,
2009, through September 30, 2009.
Inventories
–
Inventories, consisting
primarily of raw materials, are recorded using the average cost method, and are
carried at the lower of cost or market.
Revenue Recognition
–
Revenue on solar power
projects installed by the Company for customers under 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 installation 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 either costs or
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 an 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 attributable to a project as
well as certain indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs, and depreciation costs. Selling, 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 Financial
Accounting
Standards (FASB) Accounting Standards Codification (
ASC)
Topic 260 (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.
Potentially
dilutive securities include warrants, convertible preferred stock, restricted
stock, and contingently issuable shares for the purchase of
Rupinvest.
Stock-Based Compensation
–
The Company accounts for stock-based compensation under the
provisions of FASB ASC 718 (Statement of Financial Accounting
Standards No. 123 (revised 2004),
“Share-Based Payment”
), 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’s
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 FASB ASC 718.
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 ten years in
California and generally five to ten years elsewhere in the U.S., depending upon
each state’s specific requirements, and to one year in Spain for all contracts
signed after December 31, 2006. As of September 30, 2009, the Company had no
warranty obligations in Italy as it had not performed any solar power facility
installations as of that date. The Company expects that its warranty
policies in Italy will be similar to those it provides in
Spain. Solar panels and inverters are warranted by the manufacturer
for 25 years and 10 years, respectively.
Comprehensive Income
(Loss)
–
FASB ASC Topic 220
(Statement of Financial Accounting Standards No. 130, “
Reporting Comprehensive
Income
,”) establishes standards for reporting comprehensive income (loss)
and its components in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income (loss), 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 2007, the FASB issued FASB ASC 805 (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. FASB ASC 805 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 FASB ASC 805 on the Company’s consolidated financial statements will
be determined in part by the nature and timing of any future acquisitions
completed.
In March
2008, the Financial Accounting Standards Board (“FASB”) issued FASB ASC 815-40
(SFAS No. 161,
“Disclosures
about Derivatives Instruments and Hedging Activities, an Amendment of FASB
Statement No. 133
”). FASB ASC 815-40 requires enhanced
disclosures about a company’s derivative and hedging activities. ASC 815-40 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. The adoption of FASB ASC 815-40 did not have
a material impact on results of operations, cash flows, or financial
position.
In April
2008, the FASB issued FASB ASC 350-30 (FASB Staff Position (FSP) FAS No. 142-3,
“Determination
of the Useful Life of Intangible Assets”)
.
FASB
ASC 350-30 amends the factors an entity should consider in developing renewal or
extension assumptions used in determining the useful life of recognized
intangible assets under FASB ASC 350-30 (SFAS No. 142,
“Goodwill
and Other Intangible Assets”
). FASB ASC 350-30 must be applied
prospectively to intangible assets acquired after the effective date. The
Company applied the guidance of the FASB ASC 350-30 to intangible assets
acquired after January 1, 2009. The Company’s adoption of FASB ASC
350-30 did not have a material impact on its financial position, results of
operations, or cash flows.
In June
2008, the FASB ratified FASB ASC 815-40 (EITF Issue 07-5 (EITF 07-5), “
Determining
Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own
Stock
”). FASB ASC 815-40 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. FASB ASC 815-40 is effective for fiscal years
beginning after December 15, 2008 and interim periods within those
years. On January 1, 2009, the Company adopted this
pronouncement.
In April
2009, the FASB issued FASB ASC 825-10-50 and FASB ASC 270 (
“
FSP 107-1 and APB 28-1 Interim Disclosures
about Fair Value of Financial Instruments
”)
,
which increases the frequency of
fair value disclosures to a quarterly basis instead of on an annual basis. The
guidance relates to fair value disclosures for any financial instruments that
are not currently reflected on an entity’s balance sheet at fair value. FASB ASC
825-10-50 and FASB ASC 270 are effective for interim and annual periods ending
after June 15, 2009. The adoption of
FASB ASC 825-10-50 and
FASB ASC 270 did not have a material impact on results of operations, cash
flows, or financial position
In May
2009, the FASB issued FASB ASC 470 (Staff Position No. APB 14-1 “
Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(
Including Partial Cash Settlement
)
”). FASB ASC 470 clarifies that
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by FASB ASC 470-20-65-1
(paragraph 12 of APB Opinion No. 14, “
Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants
”).
Additionally, FASB ASC 470 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. FASB ASC 470 is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and interim
periods within those fiscal years. The adoption of FASB ASC 470 did not have a
material effect on our consolidated financial statements.
In May
2009, the FASB issued FASB ASC 855 (SFAS No. 165,
“Subsequent
Events”
), which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In particular,
FASB ASC 855 sets forth (a) the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, (b)
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and (c) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. FASB ASC 855 is effective for interim or
annual financial reporting periods ending after June 15, 2009. The adoption of
FASB ASC 855 did not have a material impact on results of operations, cash
flows, or financial position.
In June 2009, the FASB issued FASB ASC 810 (SFAS
No. 167, “
Amendments
to FASB Interpretation No. 46(R)”
). FASB ASC 810 applies to FASB ASC 105
entities and is effective for annual financial periods beginning after November
15, 2009 and for interim periods within those years. Earlier application is
prohibited. A calendar year-end company must adopt this statement as of January
1, 2010. The Company does not anticipate the adoption of FASB ASC 810 to have a
material impact on results of operations, cash flows, or financial position.
In June
2009, the FASB issued FASB ASC 860 (SFAS No. 166,
“Accounting
for Transfers of Financial Assets-an amendment of FASB Statement No.
140”
). FASB ASC 860 applies to all entities and is effective for annual
financial periods beginning after November 15, 2009 and for interim periods
within those years. Earlier application is prohibited. A calendar year-end
company must adopt this statement as of January 1, 2010. This statement retains
many of the criteria of FASB ASC 860 (FASB 140, “
Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”
) to determine whether a transfer of financial assets
qualifies for sale accounting, but there are some significant changes as
discussed in the statement. Its disclosure and measurement requirements apply to
all transfers of financial assets occurring on or after the effective date. Its
disclosure requirements, however, apply to transfers that occurred
both
before and after the effective date. In addition, because FASB ASC 860
eliminates the consolidation exemption for Qualifying Special Purpose Entities,
a company will have to analyze all existing QSPEs to determine whether they must
be consolidated under FASB ASC 810. The Company does not anticipate the adoption
of FASB ASC 860 to have a material impact on results of operations, cash flows,
or financial position.
In August
2009, the FASB issued ASU 2009-05, “
Measuring
Liabilities at Fair Value
.
”
ASU 2009-05 applies to all entities that measure liabilities at fair
value within the scope of FASB ASC 820, “
Fair
Value Measurements and Disclosures
.
”
ASU 2009-05 is effective for the first reporting period (including
interim periods) beginning after issuance, October 1, 2009 for the Company. The
Company does not anticipate the adoption of ASU 2009-05 to have a material
impact on results of operations, cash flows, or financial position.
In
October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on
Issue 08-1,
“Revenue
Arrangements with Multiple Deliverables”
). FASB ASC 605-25 is effective
for fiscal years beginning on or after June 15, 2010. Earlier adoption is
permitted on a prospective or retrospective basis. The Company is currently
evaluating the impact of this pronouncement on its consolidated financial
statements.
Results
of Operations
Comparison of Three Months
Ended September 30, 2009 and September 30, 2008
Net
sales.
For the three months ended September 30, 2009, net sales decreased 32%
relative to the three months ended September 30, 2008 from $9,236,108 to
$6,284,590. The decrease between the periods is primarily
attributable to the Company having no installation projects during the three
months ended September 30, 2009 that were similar in size to the larger projects
we installed during the quarter ended September 30, 2008. The larger projects in
2008 accounted for over $3 million in net sales during the third quarter of
2008. Net sales generated by operations from our Spanish subsidiary
was approximately $2 million lower in the third quarter of 2009 as compared to
the same period in 2008 due to changes in Spain’s permitting laws that capped
the amount of kilowatt installed by solar power installers in Spain, effectively
limiting the number of solar panel installations throughout Spain
, which
resulted in a higher level of backlog at September 30, 2009 as compared to
September 30, 2008.
Cost of
sales.
Cost of sales for the three months ended September 30, 2009 was
$4,901,252 compared to $8,233,171 for the three months ended September 30, 2008,
a decrease of approximately 40%. While most of the decrease in our
cost of sales is consistent with the reduction in net sales, there was also a
40% decrease in the cost of photovoltaic solar modules. Additionally, we
tightened controls over purchasing activities between the two
periods.
Gross
profit.
Gross profit for the three months ended September 30,
2009 was $1,383,338 compared to gross profit of $1,002,937 for the three months
ended September 30, 2008, representing gross margins of approximately 22% and
11%, respectively.
The
improvement in gross profit was largely attributable to lower costs on our
purchased protovoltaic solar modules and tighter controls over purchasing
activities.
Operating
expenses
.
Our operating expenses consist of sales and marketing expenses and
administrative expenses. For the three months ended September 30,
2009, total operating expenses were $2,443,651, consisting of sales and
marketing costs of $601,281 and administrative costs of $1,842,370, while total
operating expenses for the three months ended September 30, 2008 were
$1,091,614, consisting of sales and marketing costs of $576,451 and
administrative costs of $515,163, representing an increase in total operating
expenses of approximately 124%. As a percentage of sales, operating
expenses were approximately 39% and 12% for the three months ended September 30,
2009 and 2008, respectively. The increase in operating expenses is
primarily due to an increase in professional costs related to becoming a public
company in September 2008, salary costs related to restructuring and severance
payments made to employees who were laid off during the third quarter of 2009
that we did not incur during the same period in 2008, and a one-time cost of
commissions associated with our acquisition of Rupinvest during the third
quarter of 2009. The increase can be further explained by a stock
compensation expense resulting from the issuance of stock options in January
2009.
Income
taxes
.
For the three
months ended September 30, 2009 and 2008, we recorded a tax benefit of $91,502
and $352,762, respectively. The decrease in income tax
benefit relates to a decrease in the effective tax rate due to a foreign tax
benefit of losses in Spain and an increase in estimated taxes
in Italy.
Comparison of Nine Months
Ended September 30, 2009 and September 30, 2008
Net
sales.
For the nine months ended September 30, 2009, net sales decreased 44%
relative to the nine months ended September 30, 2008 from $27,224,925 to
$15,192,289. The decrease between the periods is primarily
attributable to the Company having no installation projects during the nine
months ended September 30, 2009 that were similar in size to the larger projects
we installed during the nine months ended September 30, 2008. The
larger projects accounted for over $12 million in net sales during the nine
months ended September 30, 2008. Net sales generated by operations
from our Spanish subsidiary was approximately $4.9 million lower in the first
three quarters of 2009 than the same period in 2008 due to changes in Spain’s
permitting laws that capped the amount of kilowatt installed by solar power
installers in Spain, effectively limiting the number of solar panel
installations throughout Spain, which resulted in a higher level of backlog
at September 30, 2009 as compared to September 30, 2008.
Cost of
sales.
Cost of sales for the nine months ended September 30, 2009 was
$12,901,906 compared to $23,502,924 for the nine months ended September 30,
2008, a decrease of approximately 45%. The decrease in our cost of
sales is in line with the reduction in net sales and also due to a 40% decrease
in the cost of photovoltaic solar modules.
Gross
profit.
Gross profit for the nine months ended September 30,
2009 was $2,290,383 compared to gross profit of $3,722,001 for the nine months
ended September 30, 2008, representing gross margins of approximately 15% and
14%, respectively. The decrease in gross profit between the periods
is generally consistent with the reduction in
revenues.
Operating
expenses
.
Our operating expenses consist of sales and marketing expenses and
administrative expenses. For the nine months ended September 30,
2009, total operating expenses were $6,218,696, consisting of sales and
marketing costs of $1,973,585 and administrative costs of $4,245,111, while
total operating expenses for the nine months ended September 30, 2008 were
$2,999,479, consisting of sales and marketing costs of $1,571,826 and
administrative costs of $1,427,653, representing an increase in total operating
expenses of approximately 107%. As a percentage of sales, operating
expenses were approximately 41% and 11% for the nine months ended September 30,
2009 and 2008, respectively. The increase in operating expenses is
due to an increase in professional costs related to becoming a public company,
salary cost related to restructuring and severance payments made to employees
who were laid off during the first three quarters of 2009, and a one-time cost
of commissions associated with our acquisition of Rupinvest. The
increase can be further explained by the stock compensation expense resulting
from the issuance of stock options in January 2009.
Income
taxes
. For the nine months ended September 30, 2009 and 2008,
we recorded a tax benefit of $1,217,989 and $148,428, respectively. The
increase in income tax benefit is
primarily
attributable to the level of loss we incurred in the first nine months of
2009.
LIQUIDITY
Cash
Flows
(in thousands)
|
|
Nine Months Ended
September 30, 2009
|
|
|
Nine Months Ended
September 30, 2008
|
|
Net
cash used in operating activities
|
|
$
|
(6,854,589
|
)
|
|
$
|
(2,215,906
|
)
|
Net
cash used in investing activities
|
|
$
|
(114,995
|
)
|
|
$
|
(84,353
|
)
|
Net
cash provided by financing activities
|
|
$
|
4,833,576
|
|
|
$
|
6,482,841
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
$
|
(2,120,674
|
)
|
|
$
|
4,168,202
|
|
Net cash
used in operating activities was $6,854,589 and $2,215,906 for the nine months
ended September 30, 2009 and 2008, respectively. The increase in net
cash flows used in operating activities was mainly due to our increased levels
of use of working capital associated with development and installation costs
related to project assets from our acquisition of Rupinvest and Premier Power
Italy during the third quarter of 2009.
Net cash
used in investing activities was $114,995 and $84,353 for the nine months ended
September 30, 2009 and 2008, respectively. The increase in net cash
flows used in investing activities between the two periods was mainly due to an
increase in acquisition of property and equipment.
Net cash
provided by financing activities was $4,833,576 for the nine months ended
September 30, 2009 compared to $6,482,841 for the nine months ended September
30, 2008. The decrease in net cash flows from financing
activities between the two periods was due to our $7,000,000 financing in
September 2008, which cash amount was unmatched from financing activities during
the first three quarters of 2009.
Material
Impact of Known Events on Liquidity
Our
expanding large-scale solar power project development business in Italy is
expected to have increasing liquidity requirements in the
future. While we have extended the payment terms with our primary
vendors, solar power project development cycles can take several months to
develop. As a result, we may need to make significant up front
investments of resources in advance of receipt of any revenue resulting from the
of signing of either project sales contracts or power purchase
agreements. To date, we have financed these required up front
investments associated with our Italian project development and implementation
efforts primarily using working capital and cash on hand. In the
future, we may also engage in one or more debt or equity financings to fund our
operations. Such financings could result in increased expenses or
dilution to our existing stockholders. If we are unable to obtain
debt or equity financing on commercially reasonable terms, we may be unable to
execute our expansion strategy according to plan.
The
disruption in the credit markets has had a significant adverse impact on a
number of financial institutions. As of September 30, 2009, however,
our liquidity and capital investments have not been materially adversely
impacted, and we believe that they will not be materially adversely impacted in
the near future. We will continue to closely monitor our liquidity
and the credit markets. We cannot, however, predict with any
certainty the impact to us of any further disruption in the credit
environment.
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 debt
and equity financings. On September 9, 2008, we received gross
proceeds of $7 million from a private placement financing transaction, and on
June 16, 2009, we received gross proceeds of $3 million from another private
placement financing transaction. We also have in place a $7 million
credit line with Umpqua Bank that is available for working capital and capital
expenditures, which expires on July 13, 2011, and
Premier
Power Spain has a 100,000 Euro credit line that is available for working
capital, which expires on May 21, 2010.
Thus,
we believe that our current cash and cash equivalents, anticipated cash flow
from operations, net proceeds from the private placement financings, and our
lines of credit with banks 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
are being used for acquisitions and general working capital purposes, including
funding the purchase of additional inventory and advertising and marketing
expenses.
Notwithstanding
the above, we may seek to raise additional cash to fund future investments or
acquisitions we may decide to pursue. To the extent it becomes necessary to
raise additional cash in the future, we may seek to raise it through the sale of
debt or equity securities, funding from joint-venture or strategic partners,
debt financing or loans, issuance of common stock, or a combination of the
foregoing. Other than our lines of credit, 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
Lines
of Credit
On July
13, 2009, we entered into a loan agreement with Umpqua Bank for a line of credit
that matures on July 13, 2011. The agreement provides for an initial
line of credit of $7 million, provided, however, that we may request no more
than twice prior to the maturity date that the line of credit be increased to an
amount not to exceed $12 million in the event we acquire another subsidiary and
require additional working capital for such subsidiary. The line of
credit is secured by our assets and by the assets of Premier Power California,
Bright Future, and Premier Power Spain. The line of credit bears
interest at the prime rate, provided, however, that the interest rate will not
be less than five percent (5%) per annum. At September 30, 2009, the
interest rate was 5%. As of November 16, 2009, there is $1,700,000
outstanding under our agreement with Umpqua Bank at an interest rate of
5%.
Additionally,
on June 1, 2009, Premier Power Spain opened an unsecured line of credit for
$118,349, which has interest terms of Euribor + 1% and is due in full on May 21,
2010.
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 September 30, 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
|
|
$
|
2,281,089
|
|
|
$
|
144,500
|
|
|
$
|
1,995,217
|
|
|
$
|
140,531
|
|
|
$
|
841
|
|
Operating
Leases
|
|
|
366,904
|
|
|
|
26,803
|
|
|
|
238,616
|
|
|
|
83,610
|
|
|
|
17,875
|
|
Totals:
|
|
$
|
2,647,993
|
|
|
$
|
171,303
|
|
|
$
|
2,233,833
|
|
|
$
|
224,141
|
|
|
$
|
18,716
|
|
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.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not
applicable.
ITEM
4. CONTROLS AND PROCEDURES.
Disclosure
Controls and Procedures
As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer (principal executive Officer) and Controller (principal
financial and accounting officer), of the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Based upon that evaluation, our Chief Executive
Officer and Controller concluded that our disclosure controls and procedures
were effective as of the end of the applicable period to ensure that the
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act (i) is recorded, processed, summarized, and
reported within the time periods specified in Securities and Exchange Commission
rules and forms and (ii) is accumulated and communicated to our management,
including our Chief Executive Officer and Controller, as appropriate to allow
timely decisions regarding required disclosures.
Changes
in Internal Control over Financial Reporting
There was
no change in our internal control over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
There
have been no material developments during the quarter ended September 30, 2009
in any material pending legal proceedings to which the Company is a party or of
which any of our property is the subject.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
There
were no unregistered sales of equity securities during the quarter ended
September 30, 2009 to report that have not already been disclosed in a Current
Report on Form 8-K.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM
5. OTHER INFORMATION.
(a) None.
(b) There
were no changes to the procedures by which security holders may recommend
nominees to our board of directors.
ITEM
6. EXHIBITS.
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
Share
Exchange Agreement between the Company and its majority stockholder, and
Premier Power Renewable Energy, Inc. and its stockholders, dated September
9, 2008 (3)
|
2.2
|
|
Share
Exchange Agreement between Premier Power Renewable Energy, Inc., Rupinvest
Sarl, and Esdras Ltd., dated June 3, 2009 (6)
(3)
|
3.1
|
|
Certificate
of Incorporation (1)
|
3.2
|
|
Bylaws
(1)
|
3.3
|
|
Certificate
of Amendment of the Certificate of Incorporation, filed August 19, 2008
with the Secretary of State of the State of Delaware
(2)
|
3.4
|
|
Certificate
of Amendment of the Certificate of Incorporation, filed August 29, 2008
and effective September 5, 2008 with the Secretary of State of the State
of Delaware (3)
|
3.5
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series A
Convertible Preferred Stock, filed September 10, 2008 with the Secretary
of State of the State of Delaware (3)
|
3.6
|
|
Amendment
to Certificate of Incorporation, filed November 24, 2008 with the
Secretary of State of Delaware (4)
|
3.7
|
|
Amendment
to Bylaws (5)
|
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 (7)
|
10.1
|
|
Loan
Agreement (Asset Based) between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (8)
|
10.2
|
|
Promissory
Note (Line of Credit Note) between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (8)
|
10.3
|
|
Form
of Modification to Promissory Note (Line of Credit Note) and Loan
Agreement between Umpqua Bank and Premier Power Renewable Energy, Inc.
(8)
|
10.4
|
|
Commercial
Security Agreement between Umpqua Bank and Premier Power Renewable Energy,
Inc., dated July 13, 2009 (8)
|
10.5
|
|
Commercial
Security Agreement (Premier Power California) between Umpqua Bank and
Premier Power Renewable Energy, Inc., dated July 13, 2009
(8)
|
10.6
|
|
Rider
to Security Agreement Executed by Non-Borrower Grantor (Premier Power
California) between Umpqua Bank and Premier Power Renewable Energy, Inc.,
dated July 13, 2009 (8)
|
10.7
|
|
Commercial
Security Agreement (Bright Futures Technologies, LLC) between Umpqua Bank
and Bright Futures Technologies, LLC, dated July 13, 2009
(8)
|
10.8
|
|
Rider
to Security Agreement Executed by Non-Borrower Grantor (Bright Futures
Technologies, LLC) between Umpqua Bank and Bright Futures Technologies,
LLC, dated July 13, 2009 (8)
|
10.9
|
|
Commercial
Security Agreement (Premier Power, Sociedad Limitada) between Umpqua Bank
and Premier Power, Sociedad Limitada, dated July 13, 2009
(8)
|
10.10
|
|
Rider
to Security Agreement Executed by Non-Borrower Grantor (Premier Power,
Sociedad Limitada) between Umpqua Bank and Premier Power, Sociedad
Limitada, dated July 13, 2009 (8)
|
10.11
|
|
Agreement
to Provide Insurance between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (8)
|
10.12
|
|
Disbursement
Request and Authorization between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (8)
|
10.13
|
|
Landlord’s
Release and Waiver among Umpqua Bank, Premier Power Renewable Energy, Inc.
and Wagner Family ILP, dated July 13, 2009 (8)
|
10.14
|
|
Landlord’s
Release and Waiver among Umpqua Bank, Premier Power Renewable Energy,
Inc., and MKJ - McCalla Investments, LLC dated July 13, 2009
(8)
|
10.15
|
|
Landlord’s
Release and Waiver among Umpqua Bank, Premier Power Renewable
Energy, Inc. and 33 Partners, Inc., dated July 13, 2009
(8)
|
10.16
|
|
Escrow
Agreement between the Registrant, Rupinvest Sarl, Esdras Ltd., and Capita
Trust Company Limited, dated July 9, 2009
(9)
|
10.17
|
|
Escrow
Agreement Amendment No. 1 between the Registrant, Rupinvest Sarl, Esdras
Ltd., and Capita Trust Company Limited, dated July 22, 2009
(10)
|
10.18
|
|
Waiver
and Amendment between the Registrant, Rupinvest Sarl, Esdras Ltd., and
Capita Trust Company Limited, dated July 30, 2009 (11)
|
31.1
|
|
Section 302
Certification by the Corporation’s Principal Executive Officer
*
|
31.2
|
|
Section 302
Certification by the Corporation’s Principal Financial and Accounting
Officer *
|
32.1
|
|
Section 906
Certification by the Corporation’s Principal Executive Officer
*
|
32.2
|
|
Section 906
Certification by the Corporation’s Principal Financial and Accounting
Officer *
|
*
|
Filed
herewith.
|
(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 November 26, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(5)
|
Filed
on January 16, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(6)
|
Filed
on June 8, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(7)
|
Filed
on June 18, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(8)
|
Filed
on July 13, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(9)
|
Filed
on July 15, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(10)
|
Filed
on July 23, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(11)
|
Filed
on August 5, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
|
|
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
PREMIER
POWER RENEWABLE ENERGY, INC.
|
|
(Registrant)
|
|
|
Date:
November 16, 2009
|
By:
|
/s/ Dean Marks
|
|
|
Dean
Marks
|
|
|
Chief
Executive Officer and President (Principal Executive
Officer)
|
|
|
|
Date:
November 16, 2009
|
By:
|
/s/ Rhonda Holden
|
|
|
Rhonda
Holden
|
|
|
Controller
(Principal Financial & Accounting
Officer)*
|
*
Although the registrant appointed a new Chief Financial Officer on November 5,
2009, the registrant’s Controller is performing the function of the principal
financial and accounting officer on the filing date of this
report.
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