As filed with the Securities and Exchange Commission
on April 2, 2010
Registration
Statement No. 333-155241
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
PREMIER
POWER RENEWABLE ENERGY, INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State or
other jurisdiction of incorporation or organization)
4931
(Primary
Standard Industrial Classification Code Number)
13-4343369
(I.R.S.
Employer Identification Number)
4961
Windplay Drive, Suite 100
El Dorado
Hills, CA 95762
(916)
939-0400
(Address,
including zip code, and telephone number,
including
area code, of registrant’s principal executive offices)
Dean R.
Marks
Chief
Executive Officer
4961
Windplay Drive, Suite 100
El Dorado
Hills, CA 95762
(916)
939-0400
COPY
TO:
Jamie H.
Kim, Esq.
Richardson
& Patel LLP
10900
Wilshire Blvd., Suite 500
Los
Angeles, CA 90024
(310)
208-1182
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
FROM TIME
TO TIME AFTER THE
EFFECTIVE
DATE OF THIS REGISTRATION STATEMENT
(Approximate
date of commencement of proposed sale to the public)
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box.
x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
o
|
|
Accelerated
filer
o
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
x
|
CALCULATION
OF REGISTRATION FEE
|
Title of Each Class of
Securities to be Registered
|
|
Amount to
be
Registered
(1)
|
|
|
Proposed
Maximum
Per Share
Offering Price
|
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
|
|
Amount of
Registration
Fee
|
|
|
Common
stock, $0.0001 par value per share
|
|
|
1,089,965
|
|
|
$
|
3.55
|
(2)
|
|
$
|
3,869,376
|
|
|
$
|
152.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.0001 par value per share (issuable upon exercise of
options)
|
|
|
1,600,000
|
|
|
$
|
3.00
|
(3)
|
|
$
|
4,800,000
|
|
|
$
|
188.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,689,965
|
|
|
|
|
|
|
|
|
|
|
$
|
340.71
|
(4)
|
|
(1)
|
Pursuant to Rule 416 under the
Securities Act of 1933, as amended, this registration statement shall be
deemed to cover additional securities (i) to be offered or issued in
connection with any provision of any securities purported to be registered
hereby to be offered pursuant to terms which provide for a change in the
amount of securities being offered or issued to prevent dilution resulting
from stock splits, stock dividends, or similar transactions and (ii) of
the same class as the securities covered by this registration statement
issued or issuable prior to completion of the distribution of the
securities covered by this registration statement as a result of a split
of, or a stock dividend on, the registered
securities.
|
|
(2)
|
Estimated solely for the purpose
of calculating the amount of the registration fee pursuant to Rule 457(c)
of the Securities Act of 1933 based upon the average of the high and low
prices of the common stock of the Registrant as reported on the
Over-the-Counter Bulletin Board on November 5,
2008.
|
|
(3)
|
Estimated solely for the purpose
of computing the amount of the registration fee pursuant to Rule 457(g)
under the Securities Act.
|
|
(4)
|
The Registrant previously paid a
registration fee of $1,798.74 in connection with the filing of this
registration statement with the Securities and Exchange Commission on
November 7, 2008.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and no offer to buy these securities is being solicited
in any state where the offer or sale is not permitted.
Prospectus
PREMIER
POWER RENEWABLE ENERGY, INC.
2,689,965
shares of Common
Stock
This
prospectus covers the resale by selling security holders of up to 2,689,965
shares of our common stock, $0.0001 par value per share.
These
securities will be offered for sale from time to time by the selling security
holders identified in this prospectus in accordance with the terms described in
the section of this prospectus entitled “Plan of Distribution.” We will not
receive any of the proceeds from the sale of the common stock by the selling
security holders.
Our securities are not listed on any national
securities exchange. Our common stock is currently quoted on the OTC Bulletin
Board under the symbol “PPRW.” The last reported per share price for our common
stock was $2.20 as quoted on the OTC Bulletin Board on April 1,
2010.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING
ON
PAGE
4.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date of this prospectus is _________________, 2010
No offers
to sell are made, nor are offers sought, to buy these securities in any
jurisdiction where the offer or sale is not permitted. The reader should assume
that the information contained in this prospectus is accurate as of the date in
the front of this prospectus only. Our business, financial condition, results of
operations, and prospectus may have changed since that date.
TABLE
OF CONTENTS
|
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Page
|
|
|
|
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Prospectus
Summary
|
2
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|
Risk
Factors
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4
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Special
Note Regarding Forward-Looking Statements
|
16
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Use
of Proceeds
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16
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Selling
Security Holders
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16
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Plan
of Distribution
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18
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|
Legal
Matters
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19
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Experts
|
19
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Business
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19
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Description
of Property
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30
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Summary
Financial Data
|
31
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
32
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Legal
Proceedings
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40
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Management
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40
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Executive
Compensation
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43
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Security
Ownership of Certain Beneficial Holders and Management
|
47
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Certain
Relationships and Related Party Transactions
|
49
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Description
of Securities
|
49
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Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
|
56
|
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Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
56
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|
Additional
Information
|
58
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Index
to Consolidated Financial Statements
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F-1
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PROSPECTUS
SUMMARY
This
summary contains basic information about us and this offering. The
reader should read the entire prospectus carefully, especially the risks of
investing in our common stock discussed under “Risk Factors.” Some of
the statements contained in this prospectus, including statements under
“Summary” and “Risk Factors” as well as those noted in the documents
incorporated herein by reference, are forward-looking statements and may involve
a number of risks and uncertainties. We note that our actual results
and future events may differ significantly based upon a number of
factors. The reader should not put undue reliance on the
forward-looking statements in this document, which speak only as of the date on
the cover of this prospectus.
References
to “we,” “our,” “us,” the “Company,” or “Premier Power” refer to Premier Power
Renewable Energy, Inc., a Delaware corporation, and its consolidated
subsidiaries.
Our
Business
We are a
developer, designer, and integrator of ground mount and rooftop solar energy
solutions for residential, commercial, industrial, and equity fund customers in
North America, Spain, and Italy. We provide a full range of
installation services to our solar energy customers including design,
engineering, procurement, permitting, construction, grid connection, warranty,
system monitoring, and maintenance services. We use solar components
from the industry’s leading suppliers and manufacturers including solar panels
from General Electric (“GE”), Canadian Solar, Sharp, Solyndra, and Sun Power,
inverters from Fronius, Wattsun, SMA, Satcon, and Xantrex, solar trackers from
Wattsun, and residential solar thermal systems from Schuco. We have
installed over 1,400 solar power systems since the commencement of our current
business operations in 2003, with the scale of these projects ranging from 5
kilowatts to multi megawatts of installed capacity. We believe our
experience in developing, designing, and installing large and complex solar
projects differentiates us from many of our competitors.
Corporate
Structure
We own all of the capital stock of Premier Power Renewable Energy,
Inc., a California corporation (“Premier Power California”). Premier
Power California wholly owns Bright Future Technologies, LLC, a Nevada limited
liability company (“Bright Future”) and Premier Power Sociedad Limitada, a
limited liability company formed in Spain (“Premier Power
Spain”). Bright Future operates as a trading company that allows
Premier Power California and Premier Power Spain to consolidate its purchases
from suppliers of solar energy products in order to achieve advantageous trade
terms.
We own all of the capital stock of Rupinvest SARL, a corporation
duly organized and existing under the law of Luxembourg
(“Rupinvest”). Rupinvest owns 100% of Premier Power Italy S.p.A.
(formerly known as ARCO Energy, SRL), a private limited company duly organized
and existing under the laws of Italy (“Premier Power Italy”).
Premier Power Spain and Premier Power Italy are the base of our
European operations in Spain and Italy, respectively.
Financial
Results
Our
consolidated financial statements for the years ended December 31, 2009 and 2008
are included in this prospectus. In 2009 and 2008, we had
approximately $30.8 million and $44.2 million in sales,
respectively. In 2009 and 2008, we had approximately $3.6 million and
$569,000 in net income, respectively.
See
“Index to Consolidated Financial Statements” on page F-1.
Risks
Affecting Our Business
We are
subject to a number of risks, which the reader should be aware of before
deciding to purchase the securities in this offering. These risks are discussed
in the summary below and in the section titled “Risk Factors” beginning on
page 4
of this prospectus.
Summary
of Risk Factors
This
document contains certain statements of a forward-looking nature. Such
forward-looking statements, including but not limited to growth and strategies,
future operating and financial results, financial expectations and current
business indicators are based upon current information and expectations and are
subject to change based on factors beyond our control. Forward-looking
statements typically are identified by the use of terms such as “look,” “may,”
“will,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate”
and similar words, although some forward-looking statements are expressed
differently. The accuracy of such statements may be impacted by a number of
business risks and uncertainties that could cause actual results to differ
materially from those projected or anticipated, including but not limited
to:
|
|
·
|
our
ability to timely and accurately complete orders for our
products;
|
|
|
·
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our
dependence on a limited number of major
customers;
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|
·
our
ability to expand and grow our distribution
channels;
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·
general
economic conditions which affect consumer demand for our
products;
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·
the
effect of terrorist acts, or the threat thereof, on consumer confidence
and spending;
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·
acceptance
in the marketplace of our new products and changes in consumer
preferences;
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·
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foreign
currency exchange rate
fluctuations;
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·
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our
ability to identify and successfully execute cost control initiatives;
and
|
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|
·
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other
risks outlined above and in our other public
filings.
|
The
reader is cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document. We undertake no
obligation to update this forward-looking information.
While
our management fully intends to make concerted efforts to manage these risks, we
cannot provide assurances that we will be able to do so
successfully. See “Risk Factors” beginning on
page 4
of this prospectus.
The Offering
We are registering 2,689,965 shares of our common stock for sale by
the selling security holders identified in the section of this prospectus
entitled “Selling Security Holders.” As required by the Registration Rights
Agreement, as amended, that we executed as part of our $7,000,000 financing that
closed on September 9, 2008 (more fully described under the section titled
“Business” below), we are registering for resale the following: (i) 360,993
shares of common stock issued to Genesis Capital Advisors, LLC, which were
issued as part of a share exchange that closed on September 9, 2008,
(ii) 728,972 shares of common stock, and (iii) 1,600,000 share of
common stock underlying an option to purchase such shares. Up to an additional
20% of the shares being registered by this registration statements that are
required to be registered pursuant to the Registration Rights Agreement, as
amended, will be registered in the future pursuant to Rule 416 under the
Securities Act of 1933, as amended, on the occurrence of an event that is
covered by Rule 416. Information regarding our common stock is
included in the section of this prospectus entitled “Description of
Securities.”
General
Information
Our
principal executive offices are located at 4961 Windplay Drive, Suite 100, El
Dorado Hills, California 95762, and our telephone number is (916)
939-0400.
RISK
FACTORS
The
reader should carefully consider the risks described below together with all of
the other information included in this prospectus. The statements contained in
or incorporated into this prospectus that are not historic facts are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements. If any of the following risks actually
occurs, our business, financial condition or results of operations could be
harmed. In that case, the trading price of our common stock could decline, and
an investor in our securities may lose all or part of their
investment.
Risks
Relating to Our Business
We
have a short operating history as a public company, and the limited operating
history of some of our subsidiaries makes it difficult to evaluate our future
prospects and results of operations.
We may
need to hire additional management personnel and outside assistance from legal,
accounting, and other professionals to assist us with complying with additional
SEC reporting requirements and compliance under the Sarbanes-Oxley Act of 2002
not previously required of us as a private company prior to the September 2008
share exchange. This could be more costly than planned. Further, the
limited operating history of Bright Future, Premier Power Spain, and Premier
Power Italy makes it difficult to evaluate our business. In the event that we
are not able to manage our growth and operate as a public company due to our
limited experience, our business may suffer uncertainty and failures, which
makes it difficult to evaluate our business.
We are dependent upon our suppliers
for the components used in the systems
we design and install, and our major
suppliers are dependent upon the continued
availability and pricing of
polysilicon and other raw materials used in solar
modules. Any increases in
the price of solar components or any interruptions to or shortage or decline in
the quality of the solar components we purchase for our solar energy systems
could adversely affect our business.
Key
components used in our systems are purchased from a limited number of
manufacturers. In particular, Canadian Solar, Sharp, SunPower Corporation,
Solyndra, and GE account for over 95% of our purchases of solar panels. We are
subject to market prices for the components that we purchase for our
installations, which are subject to fluctuation. We cannot ensure that the
prices charged by our suppliers will not increase because of changes in market
conditions or other factors beyond our control. An increase in the price of
components used in our systems could result in an increase in costs to our
customers and could have a material adverse effect on our revenues and demand
for our products and services. Our suppliers are dependent upon the availability
and pricing of polysilicon, one of the main materials used in manufacturing
solar panels. Interruptions in our ability to procure needed components for our
systems, whether due to discontinuance by our suppliers, delays or failures in
delivery, shortages caused by inadequate production capacity or unavailability,
or for other reasons, would adversely affect or limit our sales and growth. In
addition, increases in the prices of solar modules could make systems that have
been sold but not yet installed unprofitable for us. There is no assurance that
we will continue to find qualified manufacturers on acceptable terms and, if we
do, there can be no assurance that product quality will continue to be
acceptable, which could lead to a loss of sales and revenues.
Various
licenses and permits are required to operate our business, and the loss of or
failure to renew any or all of these licenses and permits could prevent us from
either completing current projects or obtaining future projects, and, thus,
materially adversely affect our business.
We hold
electrical contractor licenses in all states in which we operate, including C10,
C2, and C46. Also, we are certified by the North America Board of Certified
Energy Practitioners (NABCEP). The loss of any such licenses or certifications,
or the loss of any key personnel who hold such licenses or certifications, would
materially adversely affect our business because it could prevent us from
obtaining and/or completing solar integration projects in states where we or our
personnel lose such licenses or certifications or are in non-compliance with
state licensing or certification requirements.
We
are highly dependent on senior management and key sales and technical
personnel. The loss and inability to replace any such persons could
have a material adverse effect on our business and operations.
We are
highly dependent on our senior management to manage our business and operations
and our key managerial, financial, sales, design, engineering, technical and
other personnel for the sale, development and installation of our solar power
systems. In particular, we rely substantially on Dean R. Marks, our President
and Chief Executive Officer, and Miguel de Anquin, our Chief Operating Officer,
and Corporate Secretary, to manage our operations. Although we have entered into
employment agreements with and obtained key-man life insurance policies for our
benefit on the lives of Messrs. Marks and de Anquin, we cannot assure their
continued services to the Company. The loss of either one of them, or any other
member of our senior management, would have a material adverse effect on our
business and operations. Competition for senior management and sales and
technical personnel is intense, and the pool of suitable candidates is limited.
We may be unable to locate a suitable replacement for any member of our senior
management or key sales and technical personnel that we lose. In addition, if
any member of our senior management or key sales and technical personnel joins a
competitor or forms a competing company, they may compete with us for customers,
business partners and other key professionals and staff members of our company.
Although each of our senior management and key sales and technical personnel has
signed a confidentiality and non-competition agreement in connection with his
employment with us, we cannot provide assurances that we will be able to
successfully enforce these provisions in the event of a dispute between us and
any member of our senior management or key operational
personnel.
If we are unable to attract, train,
and retain highly qualified personnel,
the quality of our services may
decline, and we may not meet our business and financial
goals.
We
compete for qualified personnel with other solar integration companies. Intense
competition for these personnel could cause our compensation costs to increase
significantly, which, in turn, could have a material adverse effect on our
results of operations. Our future success and ability to grow our business will
depend in part on the continued service of these individuals and our ability to
identify, hire and retain additional qualified personnel. If we are unable to
attract and retain qualified employees, we may be unable to meet our business
and financial goals, which will require the retention of these qualified
employees to work on our future solar integration projects as we expand our
business.
Our
growth strategy may prove to be disruptive and divert management
resources.
Our
growth strategy may involve complex transactions and present financial,
managerial and operational challenges, including diversion of management
attention from our existing businesses, difficulty with integrating personnel
and financial and other systems, increased expenses, including compensation
expenses resulting from newly hired employees, the assumption of unknown
liabilities and potential disputes. We could also experience financial or other
setbacks if any of our growth strategies incur problems of which we are not
presently aware. We may also require additional financing in the future in
connection with our growth strategy.
We
may need to obtain additional debt or equity financing to fund future capital
expenditures and to meet working capital requirements, which may be obtained on
terms that are unfavorable to the Company and/or our stockholders.
Additional
equity may result in dilution to the holders of our outstanding shares of
capital stock. Additional debt financing may include conditions that would
restrict our freedom to operate our business, such as conditions
that:
|
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·
|
limit our ability to pay
dividends or require us to seek consent for the payment of
dividends;
|
|
|
·
|
increase our vulnerability to
general adverse economic and industry
conditions;
|
|
|
·
|
require us to dedicate a portion
of our cash flow from operations to payments on our debt, thereby reducing
the availability of our cash flow to fund capital expenditures, working
capital and other general corporate purposes;
and
|
|
|
·
|
limit our flexibility in planning
for, or reacting to, changes in our business and our
industry.
|
We cannot
guarantee that we will be able to obtain any additional financing on terms that
are acceptable to us, or at all.
Geographical business expansion
efforts we make could result in
difficulties in successfully managing
our business and consequently harm our
financial
condition.
As part
of our business strategy, we may seek to expand by acquiring competing
businesses or customer contracts outside of our current geographic markets, or
we may open offices in the geographical markets we desire to operate within. We
may face challenges in managing expanding product and service offerings and in
integrating acquired businesses with our own. We cannot accurately predict the
timing, size and success of our expansion efforts and the associated capital
commitments that might be required. We expect to face competition for expansion
candidates, which may limit the number of expansion opportunities available to
us and may lead to higher expansion costs. There can be no assurance that we
will be able to identify, acquire or profitably manage additional businesses and
contracts or successfully integrate acquired businesses and contracts, if any,
into our company, without substantial costs, delays or other operational or
financial difficulties. In addition, expansion efforts involve a number of other
risks, including:
|
|
·
|
failure of the expansion efforts
to achieve expected results;
|
|
|
·
|
diversion of management’s
attention and resources to expansion
efforts;
|
|
|
·
|
failure to retain key customers
or personnel of the acquired businesses;
and
|
|
|
·
|
risks associated with
unanticipated events, liabilities or
contingencies.
|
Client
dissatisfaction or performance problems at a single acquired business could
negatively affect our reputation. The inability to acquire businesses on
reasonable terms or successfully integrate and manage acquired companies, or the
occurrence of performance problems at acquired companies, could result in
dilution to our stockholders, unfavorable accounting charges and difficulties in
successfully managing our business.
Our inability to obtain capital, use
internally generated cash, or use
shares of our common stock or debt to
finance future expansion efforts could
impair the growth and expansion of
our business.
Reliance
on internally generated cash or debt to finance our operations or to complete
business expansion efforts could substantially limit our operational and
financial flexibility. The extent to which we will be able or willing to use
shares of common stock to consummate expansions will depend on our market value
from time to time and the willingness of potential sellers to accept it as full
or partial payment. Using shares of common stock for this purpose also may
result in significant dilution to our then existing stockholders. To the extent
that we are unable to use common stock to make future expansions, our ability to
grow through expansions may be limited by the extent to which we are able to
raise capital for this purpose through debt or equity financings. No assurance
can be given that we will be able to obtain the necessary capital to finance a
successful expansion program or our other cash needs. If we are unable to obtain
additional capital on acceptable terms, we may be required to reduce the scope
of any expansion. In addition to requiring funding for expansions, we may need
additional funds to implement our internal growth and operating strategies or to
finance other aspects of our operations. Our failure to (i) obtain additional
capital on acceptable terms, (ii) use internally generated cash or debt to
complete expansions because it significantly limits our operational or financial
flexibility, or (iii) use shares of common stock to make future expansions may
hinder our ability to actively pursue any expansion program we may decide to
implement and negatively impact our stock price.
Our
operations are cash intensive, and our business could be adversely affected if
we fail to maintain sufficient levels of working capital.
We expend
a significant amount of cash in our operations, principally to fund our
materials procurement. Our suppliers typically provide us with credit. In turn,
we typically require our customers to make payment at various stages of the
project. We generally fund most of our working capital requirements out of cash
flow generated from operations. If we fail to generate sufficient revenues from
our sales or if we experience difficulties collecting our accounts receivables,
we may not have sufficient cash flow to fund our operating costs, and our
business could be adversely affected.
Our
operating results may fluctuate from period to period, and if we fail to meet
market expectations for a particular period, our stock price may
decline.
Our
operating results have fluctuated from period to period and are likely to
continue to fluctuate as a result of a wide range of factors, including sales
demands, electricity rate changes, changes in incentives and technological
improvements. Our production and sales are generally lower in the winter due to
weather conditions and holiday activities. Interim reports may not be indicative
of our performance for the year or our future performance, and period-to-period
comparisons may not be meaningful due to a number of reasons beyond our control.
We cannot provide assurances that our operating results will meet the
expectations of market analysts or our investors. If we fail to meet their
expectations, there may be a decline in our stock price.
Because the solar integration
industry is highly competitive and has low barriers to entry,
we may lose market share to larger
companies that are better equipped to
weather deterioration in market
conditions due to increased competition.
Our
industry is highly competitive and fragmented, is subject to rapid change and
has low barriers to entry in some of the markets in which we operate. We may in
the future compete for potential customers with solar system installers and
servicers, electricians, roofers, utilities and other providers of solar power
equipment or electric power. Some of these competitors may have significantly
greater financial, technical and marketing resources and greater name
recognition than we have. We believe that our ability to compete depends in part
on a number of factors outside of our control, including:
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the ability of our competitors to
hire, retain and motivate qualified technical
personnel;
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the ownership by competitors of
proprietary tools to customize systems to the needs of a particular
customer;
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the price at which others offer
comparable services and
equipment;
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the extent of our competitors’
responsiveness to client
needs;
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risk of local economy decline;
and
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installation
technology.
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Competition
in the solar power services industry may increase in the future, partly due to
low barriers to entry, as well as from other alternative energy resources now in
existence or developed in the future. Increased competition could result in
price reductions, reduced margins or loss of market share and greater
competition for qualified technical personnel. There can be no assurance that we
will be able to compete successfully against current and future competitors. If
we are unable to compete effectively, or if competition results in a
deterioration of market conditions, our business and results of operations would
be adversely affected.
We
act as the general contractor for our customers in connection with the
installation of our solar power systems and are subject to risks associated with
construction, bonding, cost overruns, delays, and other contingencies, which
could have a material adverse effect on our business and results of
operations.
We act as
the general contractor for our customers in connection with the installation of
our solar power systems. All essential costs are estimated at the time of
entering into the sales contract for a particular project, and these are
reflected in the overall price that we charge our customers for the project.
These cost estimates are preliminary and may or may not be covered by contracts
between us or the other project developers, subcontractors, suppliers and other
parties to the project. In addition, we require qualified, licensed
subcontractors to install some of our systems. Shortages of such skilled labor
could significantly delay a project or otherwise increase our costs. Should
miscalculations in planning a project or defective or late execution occur, we
may not achieve our expected margins or cover our costs. Also, many systems
customers require performance bonds issued by a bonding agency. Due to the
general performance risk inherent in construction activities, it is sometimes
difficult to secure suitable bonding agencies willing to provide performance
bonding. In the event we are unable to obtain bonding, we will be unable to bid
on, or enter into, sales contracts requiring such bonding. Delays in solar panel
or other supply shipments, other construction delays, unexpected performance
problems in electricity generation or other events could cause us to fail to
meet these performance criteria, resulting in unanticipated and severe revenue
and earnings losses and financial penalties. Construction delays are often
caused by inclement weather, failure to timely receive necessary approvals and
permits, or delays in obtaining necessary solar panels, inverters or other
materials. We operate in international markets that have unique permitting
requirements, which, if not met, may cause delays. The occurrence of
any of these events could have a material adverse effect on our business and
results of operations.
We
generally recognize revenue on system installations on a “percentage of
completion” basis and payments are due upon the achievement of contractual
milestones, and any delay or cancellation of a project could adversely affect
our business.
We
recognize revenue on our system installations on a “percentage of completion”
basis and, as a result, our revenue from these installations is driven by the
performance of our contractual obligations, which is generally driven by
timelines for the installation of our solar power systems at customer sites.
This could result in unpredictability of revenue and, in the short term, a
revenue decrease. As with any project-related business, there is the
potential for delays within any particular customer project. Variation of
project timelines and estimates may impact the amount of revenue recognized in a
particular period. In addition, certain customer contracts may include payment
milestones due at specified points during a project. Because we must invest
substantial time and incur significant expense in advance of achieving
milestones and the receipt of payment, failure to achieve milestones could
adversely affect our business and cash flows.
We
are subject to particularly lengthy sales cycles with our equity fund,
commercial, and government customers, which may adversely affect our sales and
marketing efforts.
Factors
specific to certain of our customers’ industries have an impact on our sales
cycles. Our equity fund, commercial, and government customers may have longer
sales cycles due to the timing of various state and federal requirements. These
lengthy and challenging sales cycles may mean that it could take longer before
our sales and marketing efforts result in revenue, if at all, and may have
adverse effects on our operating results, financial condition, cash flows, and
stock price.
Our failure to meet a customer’s
expectations in the performance of our
services, and the risks and
liabilities associated with placing our employees
and technicians in our customers’
homes and businesses, could give rise to
claims against
us.
Our
engagements involve projects that are critical to our customers’ business or
home. Our failure or inability to meet a customer’s expectations in the
provision of our products and services could damage or result in a material
adverse change to their premises or property, and therefore could give rise to
claims against us or damage our reputation. In addition, we are exposed to
various risks and liabilities associated with placing our employees and
technicians in the homes and workplaces of others, including possible claims of
errors and omissions, harassment, theft of client property, criminal activity
and other claims.
We
generally do not have long-term agreements with our solar integration customers
and, accordingly, could lose customers without warning.
Our
products are generally not sold pursuant to long-term agreements with solar
integration customers, but instead are sold on a purchase order basis. We
typically contract to perform large projects with no assurance of repeat
business from the same customers in the future. Although cancellations on our
purchase orders to date have been insignificant, our customers may cancel or
reschedule purchase orders with us on relatively short notice. Cancellations or
rescheduling of customer orders could result in the delay or loss of anticipated
sales without allowing us sufficient time to reduce, or delay the incurrence of,
our corresponding inventory and operating expenses. In addition, changes in
forecasts or the timing of orders from these or other customers expose us to the
risks of inventory shortages or excess inventory. This, in addition to the
non-repetition of large systems projects and our failure to obtain new large
system projects due to current economic conditions and reduced corporate and
individual spending, could cause our revenues to decline, and, in turn, our
operating results to suffer.
Our profitability depends, in part,
on our success in brand recognition,
and we could lose our competitive
advantage if we are unable to protect our
trademark against infringement. Any
related litigation could be
time-consuming and
costly.
We
believe our brand has gained substantial recognition by customers in certain
geographic areas. We have trademark protection for the brand names “Premier
Power” and “Bright Futures” and have applied for trademark protection of our
sales slogan “Your Solar Electricity Specialist.” Use of our name or
a similar name by competitors in geographic areas in which we have not yet
operated could adversely affect our ability to use or gain protection for our
brand in those markets, which could weaken our brand and harm our business and
competitive position. In addition, any litigation relating to protecting our
trademark against infringement is likely to be time consuming and
costly.
Our
Premier Ballasting and Premier Racking systems are untested for long-term
effectiveness and may not be patentable or may encounter other unexpected
problems, which could adversely affect our business and results of
operations.
Our
Premier Ballasting and Premier Racking systems have been tested in installation
settings but for an insufficient period of time to prove their long-term
effectiveness and benefits. These systems may not be effective or other problems
may occur that are unexpected and could have a material adverse effect on our
business or results of operations. We have not filed patent
applications for our Premier Ballasting and Premier Racking systems technology,
patents may not be issued on such technology, or we may not be able to realize
the benefits from any patents that are issued on such technology.
We
may face intellectual property infringement claims that could be time-consuming
and costly to defend and could result in our loss of significant rights and the
assessment of damages.
If we
receive notice of claims of infringement, misappropriation or misuse of other
parties’ proprietary rights, some of these claims could lead to litigation. We
cannot provide assurances that we will prevail in these actions, or that other
actions alleging misappropriation or misuse by us of third-party trade secrets,
infringement by us of third-party patents and trademarks or the validity of our
patent or trademarks, will not be asserted or prosecuted against us. We may also
initiate claims to defend our intellectual property rights. Intellectual
property litigation, regardless of outcome, is expensive and time-consuming,
could divert management’s attention from our business and have a material
negative effect on our business, operating results or financial condition. If
there is a successful claim of infringement against us, we may be required to
pay substantial damages (including treble damages if we were to be found to have
willfully infringed a third party’s patent) to the party claiming infringement,
develop non-infringing technology, stop selling our products or using technology
that contains the allegedly infringing intellectual property or enter into
royalty or license agreements that may not be available on acceptable or
commercially practical terms, if at all. Our failure to develop non-infringing
technologies or license the proprietary rights on a timely basis could harm our
business. Parties making infringement claims on any future issued patents may be
able to obtain an injunction that would prevent us from selling our products or
using technology that contains the allegedly infringing intellectual property,
which could harm our business.
Product
liability claims against us could result in adverse publicity and potentially
significant monetary damages.
As a
seller of consumer products, we face an inherent risk of exposure to product
liability claims in the event that our solar energy systems’ use results in
damages, injuries or fatalities. Since solar energy systems are electricity
producing devices, it is possible that our products could result in damage,
injury or fatality, whether by product malfunctions, defects, improper
installation or other causes. If such damages, injuries or fatalities or claims
were to occur, we could incur monetary damages, and our business could be
adversely affected by any resulting negative publicity. The successful assertion
of product liability claims against us also could result in potentially
significant monetary damages and, if our insurance protection is inadequate to
cover these claims, could require us to make significant payments from our own
resources.
We
do not carry business interruption insurance, and any unexpected business
interruptions could adversely affect our business.
Our operations are vulnerable to interruption by
earthquake, fire, power failure and power shortages, hardware and software
failure, floods, computer viruses, and other events beyond our control. In
addition, we do not carry business interruption insurance to compensate us for
losses that may occur as a result of these kinds of events, and any such losses
or damages incurred by us could disrupt our solar integration projects and other
Company operations without reimbursement.
A
decrease in the availability of credit or an increase in interest rates could
make it difficult for customers to finance the cost of solar energy systems and
could reduce demand for our services and products.
Some
of our prospective residential and commercial customers may depend on debt
financing, such as power purchase agreements or home equity loans, to fund the
initial capital expenditure required to purchase a solar energy system.
Third-party financing sources, specifically for solar energy systems, are
currently limited, especially due to recent domestic and worldwide economic
troubles. The lack of financing sources, a decrease in the availability of
credit or an increase in interest rates could make it difficult or more costly
for our potential customers to secure the financing necessary to purchase a
solar energy system on favorable terms, or at all, thus lowering demand for our
products and services and negatively impacting our business.
A
portion of our revenues is generated by construction contracts, and, thus, a
decrease in construction could reduce our construction contract-related sales
and, in turn, adversely affect our revenues.
Some of
our solar-related revenues were generated from the design and installation of
solar power products in newly constructed and renovated buildings, plants and
residences. Our ability to generate revenues from construction contracts will
depend on the number of new construction starts and renovations, which should
correlate with the cyclical nature of the construction industry and be affected
by general and local economic conditions, changes in interest rates, lending
standards and other factors. For example, the current housing slump and
tightened credit markets have resulted in reduced new home construction, which
could limit our ability to sell solar products to residential and commercial
developers.
We
derive most of our revenue from sales in a limited number of territories, and we
will be unable to further expand our business if we are unsuccessful in adding
additional geographic sales territories to our operations.
We
currently derive most of our revenue from sales of our solar integration
services in the United States, Italy, and Spain. This geographic concentration
exposes us to growth rates, economic conditions, and other factors that may be
specific to those territories to which we would be less subject if we were more
geographically diversified. The growth of our business will require us to expand
our operations and commence operations in other states, countries, and
territories. Any geographic expansion efforts that we undertake may not be
successful, which, in turn, would limit our growth opportunities.
We
face risks associated with international trade and currency exchange that could
have a material impact on our profitability.
We
transact business in the U.S. dollar and the Euro. Changes in exchange rates
would affect the value of deposits of currencies we hold. We do not currently
hedge against exposure to currencies. We cannot predict with certainty future
exchange rates and their impact on our operating results. Movements in the
exchange rate between the U.S. dollar and the Euro could have a material impact
on our profitability.
Our
success may depend in part on our ability to make successful
acquisitions.
As part
of our business strategy, we plan to expand our operations through strategic
acquisitions in our current markets and in new geographic markets. We cannot
accurately predict the timing, size, and success of our acquisition efforts. Our
acquisition strategy involves significant risks, including the
following:
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our ability to identify suitable
acquisition candidates at acceptable
prices;
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our ability to successfully
complete acquisitions of identified
candidates;
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our ability to compete
effectively for available acquisition
opportunities;
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increases in asking prices by
acquisition candidates to levels beyond our financial capability or to
levels that would not result in the returns required by our acquisition
criteria;
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diversion of management’s
attention to expansion
efforts;
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unanticipated costs and
contingent liabilities associated with
acquisitions;
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failure of acquired businesses to
achieve expected results;
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our failure to retain key
customers or personnel of acquired businesses;
and
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difficulties entering markets in
which we have no or limited
experience.
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These
risks, as well as other circumstances that often accompany expansion through
acquisitions, could inhibit our growth and negatively impact our operating
results. In addition, the size, timing, and success of any future acquisitions
may cause substantial fluctuations in our operating results from quarter to
quarter. Consequently, our operating results for any quarter may not be
indicative of the results that may be achieved for any subsequent quarter or for
a full fiscal year. These fluctuations could adversely affect the market price
of our common stock.
Our
failure to integrate the operations of acquired businesses successfully into our
operations or to manage our anticipated growth effectively could materially and
adversely affect our business and operating results.
In order
to pursue a successful acquisition strategy, we must integrate the operations of
acquired businesses into our operations, including centralizing certain
functions to achieve cost savings and pursuing programs and processes that
leverage our revenue and growth opportunities. The integration of the
management, operations, and facilities of acquired businesses with our own could
involve difficulties, which could adversely affect our growth rate and operating
results. We may be unable to do any of the following:
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effectively complete the
integration of the management, operations, facilities and accounting and
information systems of acquired businesses with our
own;
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efficiently manage the combined
operations of the acquired businesses with our
operations;
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achieve our operating, growth and
performance goals for acquired
businesses;
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achieve additional revenue as a
result of our expanded operations;
or
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achieve operating efficiencies or
otherwise realize cost savings as a result of anticipated acquisition
synergies.
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Our rate
of growth and operating performance may suffer if we fail to manage acquired
businesses profitably without substantial additional costs or operational
problems or to implement effectively combined growth and operating
strategies.
Costs
incurred because we are a public company may affect our
profitability.
As a
public company, we incur significant legal, accounting and other expenses, and
we are subject to the SEC’s rules and regulations relating to public disclosure
that generally involve a substantial expenditure of financial resources. In
addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently
implemented by the SEC, requires changes in corporate governance practices of
public companies. We expect that full compliance with these new rules and
regulations will significantly increase our legal and financial compliance costs
and make some activities more time-consuming and costly, which may negatively
impact our financial results. To the extent our earnings suffer as a result of
the financial impact of our SEC reporting or compliance costs, our ability to
develop an active trading market for our securities could be
harmed.
It may be
time-consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act,
when applicable to us. Some members of our management team have limited or no
experience operating a company with securities traded or listed on an exchange,
or subject to SEC rules and requirements, including SEC reporting practices and
requirements that are applicable to a publicly traded company. We may need to
recruit, hire, train, and retain additional financial reporting, internal
controls, and other personnel in order to develop and implement appropriate
internal controls and reporting procedures both domestically and
internationally. If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, when applicable, we may not be
able to obtain our independent accountant’s attestation report on our internal
controls over financial reporting required by the Sarbanes-Oxley
Act.
Our
business is exposed to risks associated with the ongoing financial crisis and
weakening global economy, which increases the uncertainty of project financing
for commercial solar installations and the risk of non-payment from both
commercial and residential customers.
The
recent severe tightening of the credit markets, turmoil in the financial
markets, and weakening global economy are contributing to slowdowns in the solar
industry, which slowdowns may worsen if these economic conditions are prolonged
or deteriorate further. The market for installation of solar power
systems depends largely on commercial and consumer capital
spending. Economic uncertainty exacerbates negative trends in these
areas of spending, and may cause our customers to push out, cancel, or refrain
from placing orders, which may reduce our net sales. Difficulties in
obtaining capital and deteriorating market conditions may also lead to the
inability of some customers to obtain affordable financing, including
traditional project financing and tax-incentive based financing and home
equity-based financing, resulting in lower sales to potential customers with
liquidity issues, and may lead to an increase of incidents where our customers
are unwilling or unable to pay for systems they purchase, and additional bad
debt expense for the Company. Further, these conditions and
uncertainty about future economic conditions may make it challenging for us to
obtain equity and debt financing to meet our working capital requirements to
support our business, forecast our operating results, make business decisions,
and identify the risks that may affect our business, financial condition and
results of operations. If we are unable to timely and appropriately
adapt to changes resulting from the difficult macroeconomic environment, our
business, financial condition, or results of operations may be materially and
adversely affected.
Risks
Relating To Our Industry
We have experienced technological
changes in our industry. New
technologies may prove inappropriate
and result in liability to us or may not
gain market acceptance by our
customers.
The solar
power industry, which currently accounts for less than 1% of the world’s power
generation according to the Solar Energy Industries Association, is subject to
technological change. Our future success will depend on our ability to
appropriately respond to changing technologies and changes in function of
products and quality. If we adopt products and technologies that are not
attractive to consumers, we may not be successful in capturing or retaining a
significant share of our market. In addition, some new technologies are
relatively untested and unperfected and may not perform as expected or as
desired, in which event our adoption of such products or technologies may cause
us to lose money.
A drop in the retail price of
conventional energy or non-solar alternative
energy sources may negatively impact
our profitability.
We
believe that a customer’s decision to purchase or install solar power
capabilities is primarily driven by the cost and return on investment resulting
from solar power systems. Fluctuations in economic and market conditions that
impact the prices of conventional and non-solar alternative energy sources, such
as decreases in the prices of oil, coal and other fossil fuels and changes in
utility electric rates and net metering policies, could cause the demand for
solar power systems to decline, which would have a negative impact on our
profitability.
Existing regulations, and changes to
such regulations, may present
technical, regulatory, and economic
barriers to the purchase and use of solar
power products, which may
significantly reduce demand for our products.
Installations
of solar power systems are subject to oversight and regulation in accordance
with national and local ordinances, building codes, zoning, environmental
protection regulation, utility interconnection requirements for metering, and
other rules and regulations. We attempt to keep up-to-date with these
requirements on a national, state, and local level, and must design, construct
and connect systems to comply with varying standards. Certain cities may have
ordinances that prevent or increase the cost of installation of our solar power
systems. In addition, new government regulations or utility policies pertaining
to solar power systems are unpredictable and may result in significant
additional expenses or delays and, as a result, could cause a significant
reduction in demand for solar energy systems and our services. For example,
there currently exists metering caps in certain jurisdictions that effectively
limit the aggregate amount of power that may be sold by solar power generators
into the power grid. Moreover, in certain markets, the process for obtaining the
permits and rights necessary to construct and interconnect a solar power system
to the grid requires significant lead time and may become prolonged, and the
cost associated with acquiring such permits and project rights may be subject to
fluctuation.
Our business depends on the
availability of rebates, tax credits and other
financial incentives, the reduction
or elimination of which would reduce the demand
for our services.
Many U.S.
states, including California, Nevada and New Jersey, offer substantial
incentives to offset the cost of solar power systems. These incentives can take
many forms, including direct rebates, state tax credits, system performance
payments, and Renewable Energy Credits (“RECs”). Moreover, although the United
States Congress recently passed legislation to extend for 8 years a 30% federal
tax credit for the installation of solar power systems, there can be no
assurance that the tax credit will be further extended once they expire.
Additionally, businesses that install solar power systems may elect to
accelerate the depreciation of their system over five years. Spain also offers
substantial incentives, including feed-in tariffs. Spain’s Industry Ministry has
implemented a capped solar subsidy program for MW installation and reduced
tariff levels. Italy offers incentives in the form of minimum user
prices for solar electricity production and feed-in tariffs that are subject to
reduction annually for new applications. In Italy, the current
feed-in tariff decree is effective through 2010. Subsequent decrees will
redefine rates for solar power plants commissioned thereafter. A reduction in or
elimination of such incentives could substantially increase the cost or reduce
the economic benefit to our customers, resulting in significant reductions in
demand for our products and services, which may negatively impact our
sales.
If solar power technology is not
suitable for widespread adoption or
sufficient demand for solar power
products does not develop or takes longer to
develop than we anticipate, our sales
would decline, and we would be unable to
achieve or sustain
profitability.
The
market for solar power products is emerging and rapidly evolving, and its future
success is uncertain. Many factors will influence the widespread adoption of
solar power technology and demand for solar power products,
including:
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cost effectiveness of solar power
technologies as compared with conventional and non-solar alternative
energy technologies;
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performance and reliability of
solar power products as compared with conventional and non-solar
alternative energy products;
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capital expenditures by customers
that tend to decrease if the U.S. economy slows;
and
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availability of government
subsidies and incentives.
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If solar
power technology proves unsuitable for widespread commercial deployment or if
demand for solar power products fails to develop sufficiently, we would be
unable to generate enough revenue to achieve and sustain profitability. In
addition, demand for solar power products in the markets and geographic regions
we target may not develop or may develop more slowly than we
anticipate.
Risks
Related to Doing Business in Spain and Italy
Adverse
changes in the political and economic policies of the Spanish and Italian
governments could have a material adverse effect on the overall economic growth
of Spain and Italy, respectively, which could reduce the demand for our products
and materially and adversely affect our competitive position in those
regions.
A
significant portion of our business operations are conducted in, and a
significant portion of our sales are made in, Spain through our subsidiary,
Premier Power Spain. In addition, we have business operations in Italy through
our wholly owned subsidiary, Premier Power Italy, and we hope to generate a
significant level of sales in Italy. Spain and Italy offer substantial
incentives, including feed-in tariffs, to encourage the growth of solar power as
a form of renewable energy. However, recently there had been significant changes
in Spain’s laws which cap the amount of kilowatts installed by solar power
installers in Spain at 66 Megawatts per quarter, effectively limiting the number
of solar module installations throughout Spain, and such new laws also created a
more complicated and lengthy permitting process in order to receive the
government funded feed-in tariffs. Accordingly, our business, financial
condition, results of operations, and prospects are affected significantly by
economic, political, and legal developments in Spain and Italy. Any adverse
change in such policies could have a material adverse effect on the overall
economic growth in Spain and Italy or on the level of our incentives, which, in
turn, could lead to a reduction in demand for our products and consequently have
a material adverse effect on our European operations and sales.
Fluctuation
in the value of the Euro may have a material adverse effect on an investment in
our securities.
Changes
in exchange rates would affect the value of deposits of currencies we hold. We
do not currently hedge against exposure to currencies. We cannot predict with
certainty future exchange rates and their impact on our operating results.
Movements between the U.S. dollar and the Euro could have a material impact on
our profitability.
Our
business benefits from certain Spanish and Italian government incentives.
Expiration of, or changes to, these incentives could have a material adverse
effect on our operating results.
The
Spanish and Italian governments have provided various incentives to solar energy
providers in order to encourage development of the solar industry. Such
incentives include feed-in tariffs and other measures. Reduction in or
elimination of such incentives or delays or interruptions in the implementation
of such favorable policies could substantially decrease the economic benefits of
solar energy to our customers, resulting in significant reductions in demand for
our products and services, which would negatively impact our
sales.
Effecting
service of legal process, enforcing foreign judgments, or bringing original
actions in Spain and Italy based on United States or other foreign laws against
us or our management may be difficult.
We
conduct a significant amount of our business through Premier Power Spain and
Premier Power Italy, which are established in Spain and Italy, respectively, and
a portion of our assets are located in Spain and Italy. As a result, it may not
be possible to effect service of process in Spain and Italy against us or upon
our executive officers or directors, including with respect to matters arising
under U.S. federal securities laws or applicable state securities laws.
Moreover, there is uncertainty that the courts of Spain and Italy would enforce
judgments of U.S. courts against us or our directors and officers based on the
civil liability provisions of the securities laws of the United States or any
state, or entertain an original action brought in Spain and Italy based upon the
securities laws of the United States or any state. These risks may
discourage a potential acquirer from seeking to acquire shares of our common
stock which, in turn, could reduce our stock price or prevent our stockholders
from realizing a premium over our stock price.
Risk
Relating to Our Securities
Generally,
we have not paid any cash dividends, and no cash dividends will be paid in the
foreseeable future, which may require our stockholders to generate a cash flow
from their investment in our securities through alternative means.
We do not
anticipate paying cash dividends on our common stock in the foreseeable future,
and we may not have sufficient funds legally available to pay dividends. Even if
funds are legally available for distribution, we may nevertheless decide not to
or may be unable to pay any dividends to our stockholders. We intend to retain
all earnings for our operations. Accordingly, our stockholders may have to sell
some or all of their common stock in order to generate cash flow from their
investment. Our stockholders may not receive a gain on their investment when
they sell their common stock and may lose some or all of their investment. Any
determination to pay dividends in the future on our common stock will be made at
the discretion of our board of directors and will depend on our results of
operations, financial conditions, contractual restrictions, restrictions imposed
by applicable law, capital requirements, and other factors that our board of
directors deems relevant.
We
may need additional capital, and the sale of additional shares or other equity
securities could result in dilution to our
stockholders. Additionally, our stockholders may face dilution from
conversion of our Series A Convertible Preferred Stock or Series B Convertible
Preferred Stock.
We
believe that our current cash and cash equivalents, anticipated cash flow from
operations, and our lines of credit will be sufficient to meet our anticipated
cash needs for the near future. We may, however, require additional cash
resources due to changed business conditions or other future developments,
including any investments or acquisitions we may decide to pursue. If our
resources are insufficient to satisfy our cash requirements, we may seek to sell
additional equity or debt securities or obtain an increased credit facility. The
sale of additional equity securities could result in dilution to our
stockholders. The incurrence of additional indebtedness would result in
increased debt service obligations and could result in further operating and
financing covenants that would further restrict our operations. We cannot
provide assurances that financing will be available in amounts or on terms
acceptable to us, if at all. Additionally, there are outstanding
shares of our Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock issued by us, the conversion of which will dilute our current
stockholders.
The
application of the “penny stock” rules could adversely affect the market price
of our common stock and increase our stockholders’ transaction costs to sell
those shares.
Our
common stock may be subject to the “penny stock” rules adopted under Section
15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The penny stock rules apply to companies that are not traded on a national
securities exchange whose common stock trades at less than $5.00 per share or
that have tangible net worth of less than $5,000,000 ($2,000,000 if the company
has been operating for three or more years). The “penny stock” rules impose
additional sales practice requirements on broker-dealers who sell securities to
persons other than established customers and accredited investors (generally
those with assets in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 together with their spouse). For transactions covered by these rules,
the broker-dealer must make a special suitability determination for the purchase
of securities and have received the purchaser’s written consent to the
transaction before the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the broker-dealer must deliver, before the
transaction, a disclosure schedule prescribed by the SEC relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. These additional
burdens imposed on broker-dealers may restrict the ability or decrease the
willingness of broker-dealers to sell our common stock, and may result in
decreased liquidity for our common stock and increased transaction costs for
sales and purchases of our common stock as compared to other
securities.
Our
common stock is thinly traded, and an active public market for our common stock
may not develop or be sustained.
Although
our common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”), we
cannot predict the extent to which an active public market for our common stock
will develop or be sustained. Our common stock has historically been
sporadically or “thinly traded” on the OTCBB, meaning that the number of persons
interested in purchasing our common stock at or near bid prices at any given
time may be relatively small or nonexistent. This situation is attributable to a
number of factors, including the fact that we are a small company that is
relatively unknown to stock analysts, stock brokers, institutional investors and
others in the investment community that generate or influence sales volume, and
that even if we came to the attention of such persons, they tend to be
risk-adverse and would be reluctant to follow an unproven company such as ours
or purchase or recommend the purchase of our shares until such time as we become
more seasoned and viable. As a consequence, there may be periods of several days
or more when trading activity in our shares is minimal or non-existent, as
compared to a seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on our stock price. We cannot provide assurances that a broader or more active
public trading market for our common stock will develop or be sustained, or that
current trading levels will be sustained.
The
volatility of the market price of our common stock may render our stockholders
unable to sell their shares of our common stock at or near “ask” prices or at
all if they need to sell their shares to raise money or otherwise desire to
liquidate their shares.
The
market price of our common stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” that could lead
to wide fluctuations in our stock price. The price at which our common stock is
purchased may not be indicative of the price that will prevail in the trading
market. An investor in our common stock may be unable to sell their common stock
at or above their purchase price if at all, which may result in substantial
losses to such investor.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our stock price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our stock price is attributable to a number of factors. As
noted above, our common stock is sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our stockholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event a large number of our shares are
sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its stock price.
The following factors also may add to the volatility in the price of our common
stock: actual or anticipated variations in our quarterly or annual operating
results; adverse outcomes; additions to or departures of our key personnel, as
well as other items discussed under this “Risk Factors” section, as well as
elsewhere in this prospectus. Many of these factors are beyond our control and
may decrease the market price of our common stock, regardless of our operating
performance. We cannot make any predictions or projections as to what the
prevailing market price for our common stock will be at any time, including as
to whether our common stock will sustain its current market prices, or as to
what effect the sale of shares or the availability of shares for sale at any
time will have on the prevailing market price.
If
we do not meet the listing standards established by national securities exchange
markets such as Nasdaq and NYSE Alternext U.S., LLC, our common stock may not
become listed for trading on one of those markets, which may restrict the
liquidity of shares held by our stockholders.
We have
applied for listing of our common stock for trading on national securities
exchanges, and the applications are currently pending. The listing of
our common stock on a national securities exchange may result in a more active
public market for our common stock, resulting in turn in greater liquidity of
shares held by our stockholders. National securities exchanges such as Nasdaq
and NYSE Alternext U.S., LLC have established certain quantitative criteria and
qualitative standards that companies must meet in order to become and remain
listed for trading on these markets. We cannot guarantee that we will be able to
maintain all necessary requirements for listing; therefore, we cannot guarantee
that our common stock will be listed for trading on a national securities
exchange.
Volatility
in our common stock price may subject us to securities litigation that could
result in substantial costs to our business.
The
market for our common stock may be characterized by significant price volatility
when compared to seasoned issuers, and we expect our stock price will be more
volatile than a seasoned issuer for the indefinite future. In the past,
plaintiffs have often initiated securities class action litigation against a
company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management’s attention and resources that otherwise could have been focused on
our business operations.
Past
activities of our company and affiliates may lead to future liability for our
company.
Prior to
our acquisition of Premier Power California, we were a third-party logistics
provider for supply chain management, a business unrelated to our current
operations. Any liabilities relating to such prior business against which we are
not completely indemnified will be borne by us and may result in substantial
costs to the Company and could divert management’s attention and resources that
otherwise could have been focused on our business operations.
We
have raised substantial amounts of capital in recent financings, and if we
inadvertently failed to comply with applicable securities laws, ensuing
rescission rights or lawsuits would severely damage our financial
position.
The
securities offered in our September 9, 2008 and June 16, 2009 private placement
financings were not registered under the Act or any state “blue sky” law in
reliance upon exemptions from such registration requirements. Such exemptions
are highly technical in nature, and if we inadvertently failed to comply with
the requirements or any of such exemptive provisions, the investor would have
the right to rescind their purchase of our securities or sue for damages. If the
investor was to successfully seek such rescission or prevail in any such suit,
we would face severe financial demands that could materially and adversely
affect our financial position. Financings that may be available to us under
current market conditions frequently involve sales at prices below the prices at
which our common stock currently is quoted on the OTC or exchange on which our
common stock may in the future be listed, as well as the issuance of warrants or
convertible securities at a discount to market price.
Our
principal stockholders are two members of our management. As these
principal stockholders substantially control our corporate actions, our other
stockholders may face difficulty in exerting any influence over matters not
supported by these two members of management.
Our
principal stockholders include Dean R. Marks, who is our Chairman of the Board,
President, and Chief Executive Officer, and Miguel de Anquin, who is our Chief
Operating Officer and Corporate Secretary and a member of our Board. Messrs.
Marks and de Anquin own approximately 62.0% of our outstanding shares of common
stock. These stockholders, acting individually or as a group, could exert
substantial influence over matters such as electing directors, amending our
certificate of incorporation or bylaws, and approving mergers or other business
combinations or transactions. In addition, because of the percentage of
ownership and voting concentration in these principal stockholders and their
affiliated entities, elections of our board of directors will generally be
within the control of these stockholders and their affiliated entities. While
all of our stockholders are entitled to vote on matters submitted to our
stockholders for approval, the concentration of shares and voting control
presently lies with these principal stockholders and their affiliated entities.
As such, it would be difficult for stockholders to propose and have approved
proposals not supported by these principal stockholders and their affiliated
entities. There can be no assurance that matters voted upon by our officers and
directors in their capacity as stockholders will be viewed favorably by all
stockholders of our company. The stock ownership of our principal stockholders
and their affiliated entities may discourage a potential acquirer from seeking
to acquire shares of our common stock which, in turn, could reduce our stock
price or prevent our stockholders from realizing a premium over our stock
price.
We
are responsible for the indemnification of our officers and directors, which
could result in substantial expenditures.
Our
bylaws provide for the indemnification of our directors, officers, employees,
and agents, and, under certain circumstances, against attorneys’ fees and other
expenses incurred by them in litigation to which they become a party arising
from their association with or activities on behalf of the Company. This
indemnification policy could result in substantial expenditures, which we may be
unable to recoup.
Our certificate of incorporation
authorizes our board to create new series
of preferred stock without further
approval by our stockholders, which could
adversely affect the rights of the
holders of our common stock.
Our board
of directors has the authority to fix and determine the relative rights and
preferences of preferred stock. Our board of directors also has the authority to
issue preferred stock without further stockholder approval. As a result, our
board of directors could authorize the issuance of a series of preferred stock
that would grant to holders the preferred right to our assets upon liquidation,
the right to receive dividend payments before dividends are distributed to the
holders of common stock and the right to the redemption of the shares, together
with a premium, prior to the redemption of our common stock. In addition, our
board of directors could authorize the issuance of a series of preferred stock
that has greater voting power than our common stock or that is convertible into
our common stock, which could decrease the relative voting power of our common
stock or result in dilution to our existing stockholders.
Contractual
limitations that restrict conversion of securities held by Vision Opportunity
Master Fund, Ltd. may not necessarily prevent substantial dilution of the voting
power and value of an investment in our securities.
The
contractual limitations that restrict conversion of shares of Series A
Convertible Preferred Stock and of Series B Convertible Preferred Stock
held by Vision Opportunity Master Fund, Ltd. (“Vision”) for shares of our common
stock are limited in their application and effect and may not prevent
substantial dilution of our existing stockholders. Pursuant to the terms of such
securities, Vision may not convert the Series A Stock or the Series B Stock to
the extent that such conversion would cause Vision’s beneficial ownership,
together with its affiliates, to exceed 9.99% of the number of shares of our
outstanding common stock immediately after giving effect to the issuance of
shares of common stock as a result of a conversion. Vision, may,
however waive this limitation upon 61 days’ notice to the Company. In
addition, this 9.99% limitation does not prevent Vision from converting the
Series A Stock or the Series B Stock into shares of our common stock and
then reselling those shares in stages over time where Vision and its affiliates
do not, at any given time, beneficially own shares in excess of the 9.99%
limitation. Consequently, this limitation will not necessarily
prevent substantial dilution of the voting power and value of an investment in
our securities.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
All
statements contained in this prospectus, other than statements of historical
facts, that address future activities, events or developments, are
forward-looking statements, including, but not limited to, statements containing
the words “believe,” “anticipate,” “expect” and words of similar import. These
statements are based on certain assumptions and analyses made by us in light of
our experience and our assessment of historical trends, current conditions and
expected future developments as well as other factors we believe are appropriate
under the circumstances. Whether actual results will conform to the expectations
and predictions of management, however, is subject to a number of risks and
uncertainties that may cause actual results to differ materially. Such risks are
in the section entitled “Risk Factors” on
page
4
,
and in our previous SEC filings.
Consequently,
all of the forward-looking statements made in this prospectus are qualified by
these cautionary statements, and there can be no assurance that the actual
results anticipated by management will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on our
business operations.
USE
OF PROCEEDS
We will
not receive any proceeds from the sale of the common stock by the selling
security holders. All proceeds from the sale of such securities offered by the
selling security holders under this prospectus will be for the account of the
selling security holders, as described below in the sections entitled “Selling
Security Holders” and “Plan of Distribution.” With the exception of any
brokerage fees and commissions which are the respective obligations of the
selling security holders, we are responsible for the fees, costs and expenses of
this offering which includes our legal and accounting fees, printing costs and
filing and other miscellaneous fees and expenses.
SELLING
SECURITY HOLDERS
We are
registering the following securities:
|
|
·
|
360,993 shares of common
stock held by Genesis Capital Advisors, LLC, which were issued as part of
the Share Exchange, pursuant to the terms of the Registration Rights
Agreement;
|
|
|
·
|
728,972 shares of common
stock held by Vision Opportunity Master Fund, Ltd., pursuant to the terms
of the First Amendment to Registration Rights Agreement between the
Company, Genesis Capital Advisors, LLC, and Vision Opportunity Master
Fund, Ltd., dated October 31, 2008 (the “First Amended Registration Rights
Agreement”); and
|
|
|
·
|
1,600,000 shares of common
stock underlying an option to purchase such shares held by Vision
Opportunity Master Fund, Ltd., pursuant to the terms of the First Amended
Registration Rights
Agreement.
|
We are
registering these securities in order to permit the selling security holders to
dispose of the shares of common stock, or interests therein, from time to time.
Up to an additional 20% of such securities will be registered in the future to
accommodate possible issuances as required under the Registration Rights
Agreement and the First Amended Registration Rights Agreement upon the
occurrence of events covered under Rule 416 under the Securities Act of 1993, as
amended. The selling security holders may sell all, some, or none of
their shares in this offering. See “Plan of Distribution.”
The table
below lists the selling security holders and other information regarding the
beneficial ownership of the shares of common stock by each of the selling
security holders. Column B lists the number of shares of common stock
beneficially owned by each selling security holder as of March 10, 2010. Column
C lists the shares of common stock covered by this prospectus that may be
disposed of by each of the selling security holders. Column D lists the number
of shares of common stock that will be beneficially owned by the selling
security holders assuming all of the shares covered by this prospectus are sold.
Column E lists the percentage of class beneficially owned, based on 29,083,250
shares of common stock outstanding on March 10, 2010.
The
selling security holders may decide to sell all, some, or none of the securities
listed below. We cannot provide an estimate of the number of securities that any
of the selling security holders will hold in the future. For purposes of this
table, beneficial ownership is determined in accordance with the rules of the
SEC, and includes voting power and investment power with respect to such
securities.
The
inclusion of any securities in the following table does not constitute an
admission of beneficial ownership by the persons named below. Except as
indicated in the footnotes to the table, no selling security holder has had any
material relationship with us or our affiliates during the last three years.
Except as indicated below, no selling security holder is the beneficial owner of
any additional shares of common stock or other equity securities issued by us or
any securities convertible into, or exercisable or exchangeable for, our equity
securities. Except as indicated below, no selling security holder is a
registered broker-dealer or an affiliate of a broker-dealer.
Selling
Security Holder Table
|
Name
(A)
|
|
Securities
Beneficially
Owned Prior to
Offering
(B)
|
|
|
Securities
Being
Offered
(C)
|
|
|
Securities
Beneficially
Owned After
Offering
(D)
|
|
|
% Beneficial
Ownership After
Offering
(E)
|
|
|
Vision
Opportunity Master Fund, Ltd. (1)
|
|
|
2,905,022
|
(2)
|
|
|
2,328,972
|
(3)
|
|
|
2,905,022
|
(2)
|
|
|
9.99
|
% (2)
|
|
Genesis
Capital Advisors, LLC (4)
|
|
|
1,580,598
|
|
|
|
360,993
|
(5)
|
|
|
1,219,605
|
|
|
|
5.40
|
%
|
|
TOTAL
|
|
|
4,485,620
|
|
|
|
2,689,965
|
|
|
|
4,124,627
|
|
|
|
|
|
|
(1)
|
The address for this stockholder
is c/o Ogier Fiduciary Services (Cayman) Limited, 89 Nexus Way, Camana
Bay, Grand Cayman, KY1-9007, Cayman Islands. Adam Benowitz, as the
managing member of Vision Capital Advisors, LLC, the investment advisor to
this stockholder, has dispositive and voting power over these securities
and may be deemed to be the beneficial owner of these
securities.
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|
(2)
|
Immediately prior to our share
exchange transaction that closed on September 9, 2008, this selling
security holder agreed to cancel 25,448,000 of its shares of our common
stock in consideration for the agreement by the stockholders of Premier
Power California to enter into the share exchange transaction with this
selling security holder, which prior to the transaction was the majority
stockholder of the Company. Thus, this selling security
holder’s beneficial ownership includes 2,178,000 shares of our common
stock and 471,359 shares of our common stock issuable upon conversion of
471,359 shares of our Series A Preferred Stock, which are presently
convertible. This selling security holder’s beneficial ownership does not
include (i) 3,028,641 shares of common stock underlying its shares of
Series A Preferred Stock, (ii) 2,800,000 shares of common stock underlying
its shares of Series B Preferred Stock, or (iii) 1,600,000 shares of
common stock underlying an option to purchase such shares because each of
these securities held by the selling security holder contains a
restriction on conversion or exercise, as the case may be, limiting such
holder’s ability to convert or exercise to the extent that such conversion
or exercise would cause the beneficial ownership of the holder, together
with its affiliates, to exceed 9.99% of the number of shares of our common
stock outstanding immediately after giving effect to the issuance of
shares of common stock as a result of a conversion or exercise. The
selling security holder may waive this limitation upon 61 days’ notice to
the Company. As of April 2, 2010, however, the Company has
not received any such notice. After the offering, this selling security
holder will continue to beneficially own 9.99% or 2,905,022 shares because
the remaining shares of its Series A Preferred Stock, Series B Preferred
Stock, and the option will remain presently convertible or exercisable up
to an amount not to exceed
9.99%.
|
|
(3)
|
Pursuant to the Registration
Rights Agreement, as amended, that we entered into as part of the $7
million financing that closed on September 9, 2008 (more fully described
under the section titled “Business” below), we are registering for resale
the following securities: (i) 1,600,000 shares of common stock
underlying an option to purchase such shares and (ii) 728,972 shares of
common stock, all of which are held by this selling security
holder.
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|
(4)
|
The address for this security
holder is 15760 Ventura Blvd., Suite 1550, Encino, California 91436.
Ronald Andrikian and Charles Gilreath, as the members of this stockholder,
have shared dispositive and voting power over these securities and may be
deemed to be the beneficial owner of these
securities.
|
|
(5)
|
Pursuant to the Registration
Rights Agreement we entered into as part of the $7 million financing that
closed on September 9, 2008 (more fully described under the section titled
“Business” below), we are registering for resale 360,993 shares of common
stock issued to this selling security
holder.
|
PLAN
OF DISTRIBUTION
Each
selling security holder named below and any of their pledgees, assignees, and
successors-in-interest (each a “Selling Security Holder” and collectively the
“Selling Security Holders”) may, from time to time, sell any or all of their
shares of common stock on the OTC Bulletin Board or any other stock exchange,
market, or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. A Selling
Security Holder may use any one or more of the following methods when selling
shares:
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|
·
|
ordinary brokerage transactions
and transactions in which the broker-dealer solicits
purchasers;
|
|
|
·
|
block trades in which the
broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the
transaction;
|
|
|
·
|
purchases by a broker-dealer as
principal and resale by the broker-dealer for its
account;
|
|
|
·
|
an exchange distribution in
accordance with the rules of the applicable
exchange;
|
|
|
·
|
privately negotiated
transactions;
|
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|
·
|
settlement of short sales entered
into after the effective date of the registration statement of which this
prospectus is a part;
|
|
|
·
|
broker-dealers may agree with the
Selling Security Holders to sell a specified number of such shares at a
stipulated price per share;
|
|
|
·
|
through the writing or settlement
of options or other hedging transactions, whether through an options
exchange or otherwise;
|
|
|
·
|
a combination of any such methods
of sale; or
|
|
|
·
|
any other method permitted
pursuant to applicable law.
|
The
Selling Security Holders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), if available, rather
than under this prospectus.
Broker-dealers
engaged by the Selling Security Holders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Security Holders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with
FINRA Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with FINRA IM-2440.
In
connection with the sale of the common stock or interests therein, the Selling
Security Holders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Security Holders may also sell shares of the common stock short and deliver
these securities to close out their short positions, or loan or pledge the
common stock to broker-dealers that in turn may sell these securities. The
Selling Security Holders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Security Holders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Security Holder has informed
the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute their
shares of common stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Security Holders may be deemed to be “underwriters” within the meaning
of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling Security
Holders.
We agreed
to keep this prospectus effective until the earlier of (i) the date on which all
of the registrable shares may be resold by the Selling Security Holders without
registration and without regard to any volume or manner-of-sale limitations by
reason of Rule 144, without the requirement for the Company to be in compliance
with the current public information under Rule 144 under the Securities Act or
any other rule of similar effect or (ii) all of the shares have been sold
pursuant to this prospectus or Rule 144 under the Securities Act or any other
rule of similar effect. The resale shares will be sold only through registered
or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the resale shares may not be sold unless
they have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and is
complied with.
Under
applicable rules and regulations under the Securities and Exchange Act of 1934,
as amended (the “Exchange Act”), any person engaged in the distribution of the
resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in
Regulation M, prior to the commencement of the distribution. In addition, the
Selling Security Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of shares of the common stock
by the Selling Security Holders or any other person. We will make copies of this
prospectus available to the Selling Security Holders and have informed them of
the need to deliver a copy of this prospectus to each purchaser at or prior to
the time of the sale (including by compliance with Rule 172 under the Securities
Act).
LEGAL
MATTERS
Richardson
& Patel LLP has rendered an opinion regarding the legality of the issuance
of the shares of common stock being registered in this prospectus. As
of April 2, 2010, neither Richardson & Patel LLP nor any of its
principals or employees hold Company securities.
EXPERTS
Our
consolidated financial statements as of December 31, 2009 and 2008 and for the
years then ended appearing in this prospectus and registration statement and the
financial statements of Rupinvest SARL as of December 31, 2008 and for the
period from August 1, 2008 (inception) to December 31, 2008 appearing in this
prospectus and registration statement have been audited by Macias Gini &
O’Connell LLP, an independent registered public accounting firm, as set forth in
their reports appearing herein, and are included in reliance upon such reports
given on the authority of such firm as experts in auditing and accounting. The
report of Macias Gini & O’Connell LLP on our consolidated financial
statements includes an explanatory paragraph related to our adoption in 2009 of
FASB ASC 815 (EITF 07-5).
Additionally, the financial statements of Premier Power Italy
S.p.A. (formerly ARCO Energy, SRL), as of December 31, 2008 and for
the period from January 23, 2008 to December 31, 2008 appearing in
this prospectus and registration statement have been audited by Ria &
Partners S.p.A., an independent registered public accounting firm, as set forth
in their report appearing herein, and are included in reliance upon such report
given on the authority of such firm as experts in auditing and accounting.
BUSINESS
Overview
We are a
developer, designer, and integrator of ground mount and rooftop solar energy
solutions for residential, commercial, industrial, and equity fund customers in
North America, Spain, and Italy. We provide a full range of
installation services to our solar energy customers including design,
engineering, procurement, permitting, construction, grid connection, warranty,
system monitoring, and maintenance services. We use solar components
from the industry’s leading suppliers and manufacturers including solar panels
from General Electric (“GE”), Canadian Solar, Sharp, Solyndra, and Sun Power,
inverters from Fronius, Wattsun, SMA, Satcon, and Xantrex, solar trackers from
Wattsun, and residential solar thermal systems from Schuco. We have
installed over 1,400 solar power systems since the commencement of our current
business operations in 2003, with the scale of these projects ranging from 5
kilowatts to multi megawatts of installed capacity. We believe our
experience in developing, designing, and installing large and complex solar
projects differentiates us from many of our competitors.
On July
31, 2009, we acquired Premier Power Italy S.p.A. (formerly known as ARCO Energy,
SRL, hereinafter “Premier Power Italy”), a distributor of solar modules and
developer and integrator of ground mount and rooftop solar power systems in
Italy.
Our
History
We were
originally incorporated as “Harry’s Trucking, Inc.” in Delaware on August 31,
2006. Effective September 5, 2008, we changed our name to “Premier
Power Renewable Energy, Inc.” On September 9, 2008, we consummated a
share exchange transaction whereby we acquired Premier Power Renewable Energy,
Inc., a California corporation (“Premier Power California”) and Premier Power
California’s wholly owned subsidiaries, Premier Power Sociedad Limitada
(“Premier Power Spain”) and Bright Future Technologies, LLC (“Bright
Future”).
Premier
Power California’s history dates back to 2001 when Premier Homes Properties,
Inc. (“Premier Homes”), a privately held homebuilder based in Roseville, formed
a solar power systems design and integration division (the “Solar Division”) in
order to meet its internal mandate to make one out of every three homes Premier
Homes developed into a solar home. On April 22, 2003, in order to
meet the growing demand for commercial and residential retrofit solar power
system installations, the Solar Division was spun-off from Premier Homes by the
formation of Premier Power California.
Bright
Future, a wholly owned subsidiary of Premier Power California, was formed on
December 13, 2006 as a Nevada limited liability company. Bright
Future operates as a trading company that allows Premier Power California and
Premier Power Spain to consolidate its purchases from suppliers of solar energy
products in order to achieve advantageous trade terms.
Premier
Power Spain, a wholly owned subsidiary of Premier Power California, was formed
on July 7, 2006 as a Spanish limited liability company by the principals of
Premier Power California in order to conduct design, sales, and installation
operations in Spain and other parts of Europe. Premier Power Spain
was our initial entry into the European market.
On July 31, 2009, we acquired all of the capital
stock of Rupinvest SARL, a corporation duly organized and existing under the law
of Luxembourg (“Rupinvest”). Rupinvest initially owned 90% of Premier
Power Italy, a private limited company duly organized and existing under the
laws of Italy. On December 31, 2009, Rupinvest purchased the
remaining 10% interest in Premier Power Italy making it a wholly owned
subsidiary. Premier Power Italy is a distributor, developer, and
integrator of ground mount and rooftop solar power systems in
Italy.
Share
Exchange Transaction with Premier Power California
On
September 9, 2008, we closed a share exchange transaction under a Share Exchange
Agreement entered into by and among the Company, our majority stockholder,
Premier Power California, and the stockholders of Premier Power California,
consisting of four individuals and one entity, who, immediately prior to the
closing, collectively held 100% of Premier Power California’s issued and
outstanding share capital. Hereinafter, this share exchange transaction is
described as the “2008 Share Exchange.” We completed the acquisition of all of
the issued and outstanding equity interests of Premier Power California through
the issuance of 24,218,750 restricted shares of our common stock, par value
$0.0001 per share to the stockholders of Premier Power California. Immediately
prior to the 2008 Share Exchange and taking into account the cancellation of
25,448,000 shares of our common stock held by Vision Opportunity Master Fund,
Ltd. (“Vision”) concurrent with the closing, we had 1,800,000 shares of common
stock issued and outstanding. Immediately after the issuance of the shares to
the stockholders of Premier Power California, we had 26,018,750 shares of common
stock issued and outstanding.
As a
result of the 2008 Share Exchange, the stockholders of Premier Power California
became our controlling stockholders, and Premier Power California became our
wholly owned subsidiary. In connection with Premier Power California becoming
our wholly owned subsidiary, we acquired the business and operations of Premier
Power California, and Premier Power California’s wholly owned subsidiaries,
Bright Future and Premier Power Spain, became our indirect wholly owned
subsidiaries.
Financing
Transaction with Vision Opportunity Master Fund – September 9, 2008
Concurrently
with the 2008 Share Exchange, we entered into a Securities Purchase Agreement
pursuant to which we agreed to issue and sell a total of 3,500,000 units to one
accredited investor, Vision, for an aggregate purchase price of $7,000,000 (the
“$7 Million Financing”). Each unit consists 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. Each one share of Series A Preferred Stock will be
convertible into one share of our common stock at any time at the holder’s
option, and each share of Series A Preferred Stock will automatically convert in
the event that we complete an underwritten secondary public offering with
minimum gross proceeds of $25,000,000 and at a minimum price per share of $4.00
or upon listing on NASDAQ. Each Series A Warrant and each Series B Warrant
entitled the holder to purchase a share of our common stock at an exercise price
of $2.50 and $3.00 per share, respectively, of common stock for a period of four
years. Thus, at the closing of the $7 Million Financing, we issued 3,500,000
shares of Series A Preferred Stock, Series A Warrants for the purchase of an
aggregate 1,750,000 shares of common stock, and Series B Warrants for the
purchase of an aggregate 1,750,000 shares of common stock to
Vision.
Pursuant
to the terms of the 2008 Share Exchange and in connection with the $7 Million
Financing, we entered into a Registration Rights Agreement (the “Original RRA”)
with Vision and Genesis Capital Advisors, LLC (“Genesis”), a consulting firm
that was issued shares of common stock as part of the 2008 Share Exchange
because Genesis was a stockholder of Premier Power California prior to the 2008
Share Exchange. Pursuant to the Original RRA, we agreed to register for public
re-sale all of the shares of common stock underlying the Series A Preferred
Stock, Series A Warrants, and Series B Warrants issued to Vision in the $7
Million Financing and the shares of common stock held by Genesis, except that if
the SEC sets forth a limitation on the number of securities permitted to be
registered, then the number of shares registered for resale will be reduced
pro rata
among the
selling security holders with regard to the aggregate number of initial
registrable securities held by such holder at the time of filing of the
registration statement. (The shares we are required to register, as described
above, are collectively referred to hereinafter as the “Registrable
Securities.”) The Original RRA provided that we must file a Registration
Statement on Form S-1 relating to the resale of the Registrable Securities
within 90 calendar days following the $7 Million Financing (the “Filing Deadline
Date”) and that we shall use best efforts to cause such Registration Statement
to become effective 180 calendar days after the $7 Million Financing (or, in the
event of a “full review” of the Registration Statement by the SEC, 240 calendar
days after the $7 Million Financing) (the “Effectiveness Date”). If the
Registration Statement or any pre-effective amendments are not filed on a timely
basis or the Registration Statement is not declared effective by the SEC for any
reason on a timely basis, the Company will be required to issue additional
shares of common stock (the “Late Registration Shares”) to Vision in an amount
equal to 1% of the total shares of common stock into which the total number of
shares of Series A Preferred Stock then held by such person is convertible for
each 30 calendar day period, pro rata, until the Registration Statement, or
pre-effective amendment, is filed or declared effective by the SEC, as the case
may be; provided, however, that in no event shall the Late Registration Shares,
if any, exceed in the aggregate, 12% of such shares purchased. The
definition of “Effectiveness Date” was amended by a Second Amendment to the
Original RRA, as discussed below under this sub-section, and Late Registration
Shares for an untimely effective Registration Statement started accruing on
September 5, 2009. Pre-effective amendments are required to be filed within
twenty-one calendar days after receipt of comments from the SEC, and Late
Registration Shares for the late filing of a pre-effective amendment have
accrued. The total number of Late Registration Shares that have
accrued through January 19, 2010, the date the registration statement became
effective, is 236,002 shares, consisting of 164,835 shares for late
effectiveness and 71,167 shares for late filings of pre-effective
amendments. On November 7, 2009, however, Vision waived all Late
Registration Shares that accured through December 31, 2009; on January 8, 2010,
Vision waived all Late Registration Shares that accrued from January 1, 2010
through January 15, 2010; and on January 14, 2010, Vision waived all Late
Registration Shares that accrued from January 15, 2010 through January 19, 2010.
Thus, we
did not issue any Late Registration Shares to Vision, and no Late Registration
Shares are due.
In
connection with the $7 Million Financing , the stockholders of Premier Power
California entered into a Lock-up Agreement whereby they agreed not to transfer
their shares of common stock from the $7 Million Financing until the earlier of
(a) the 12 months after the initial registration statement associated with the
$7 Million Financing is declared effective (the “Effective Date”) and (b) the
date that (i) our common stock has a closing bid price of $4.00 or more for 20
consecutive trading days and an average daily trading volume during such same
period of at least 100,000 shares (such price and volume adjusted for any stock
splits and similar adjustments effected after the $7 Million Financing ) or (ii)
our common stock is listed on any tier of the Nasdaq Stock Market (such period,
the “Restriction Period”). During the Restricted Period, the stockholders of
Premier Power California (except for Genesis) may sell up to 20% of the number
of shares they each received in the 2008 Share Exchange so long as the closing
bid price on the trading day prior to such transfer is at least $3.00 (adjusted
for any stock splits and similar adjustments effected after the $7 Million
Financing). During the Restricted Period, Genesis is allowed to sell up to 45%
of the number of shares it received in the 2008 Share Exchange (the “45%
Shares”) so long as the closing bid price on the trading day prior to such
transfer is at least $2.00 (adjusted for any stock splits and similar
adjustments effected after the $7 Million Financing); provided further, that
Genesis may not sell any additional shares it received in the 2008 Share
Exchange (other than the 45% Shares) at any price less than $3.00 per share
prior to the earlier of 12 months after the Effective Date or the listing of our
common stock on any tier of the Nasdaq Stock Market.
GT
Securities, Inc. acted as the placement agent in connection with the $7 Million
Financing pursuant to an engagement by Premier Power California. For its
services, the placement agent received a cash fee equal to 3% of the gross
proceeds or approximately $210,000 from the $7 Million Financing.
In
connection with the $7 Million Financing, the Company agreed to place $300,000
of the gross proceeds from the $7 Million Financing in an escrow account to be
expended for investor relations.
Immediately
after the issuance of securities to Vision in the $7 Million Financing, the
Company had a total of 26,018,750 shares of common stock outstanding and
3,500,000 shares of its Series A Preferred Stock outstanding.
On
October 31, 2008, the Company, Genesis, and Vision entered into a First
Amendment to Registration Rights Agreement (the “First Amended RRA”), which
amends the Original RRA. Specifically, the First Amended RRA added to the
definition of “Registrable Securities” 1,600,000 shares of our common stock (the
“1.6m Shares”) held by Vision and an aggregate 1,600,000 shares of our common
stock (the “Option Shares”) underlying an option to purchase the Option Shares
held by Vision. As a result, we are now required to register for public resale
the 1.6m Shares and the Option Shares in addition to the securities that were
required to be registered for public resale under the Original RRA. In addition,
the parties to the Amended RRA amended the manner in which the number of
unregistered “Registrable Securities” shall be reduced in the registration
statement to be filed pursuant to the Original RRA to a pro rata reduction among
the holders of such “Registrable Securities” if, after the registration
statement’s filing, there is SEC guidance that limits the number of such
“Registrable Securities” that can be registered under the registration
statement.
On May 1,
2009, the Company, Genesis, and Vision entered into a Second Amendment to
Registration Rights Agreement (the “Second Amended RRA”). Specifically, upon the
execution by the Company of a material definitive agreement with an acquisition
target, which target shall be to the satisfaction of Vision, the Second Amended
RRA deletes the definition of “Effectiveness Date” and replaces the definition
in its entirety with the following text: “Effectiveness Date” means, with
respect to the Initial Registration Statement required to be filed hereunder,
the 180
th
calendar day following the date hereof (or, in the event of a “full review” by
the Commission, the 360
th
calendar day following the date hereof) and with respect to any additional
Registration Statements which may be required pursuant to Section 3(c), the
90
th
calendar day following the date on which an additional Registration Statement is
required to be filed hereunder; provided, however, that in the event the Company
is notified by the Commission that one or more of the above Registration
Statements will not be reviewed or is no longer subject to further review and
comments, the Effectiveness Date as to such Registration Statement shall be the
fifth trading day following the date on which the Company is so notified if such
date precedes the dates otherwise required above. The Company
executed a material definitive agreement with such an acquisition target, which
agreement is described under the sub-section below titled “Share Exchange
Agreement with Rupinvest SARL and Esdras Ltd.”
The
tables below provide details on the shares of common stock underlying the
options that are being registered for resale, based on the market price per
share of the Company’s common stock on the date of sale of such derivative
security. The options were purchased by Vision in a privately
negotiated sale on October 31, 2008 from other Company stockholders, but we note
that we will receive no proceeds from the exercise of the options as the options
were issued by stockholders of the Company and not by the Company.
|
Date of Sale
|
|
Derivative Security
|
|
# of Underlying Shares of
Common Stock
|
|
|
Market Price Per
Share on Date of Sale
|
|
|
$ Value of Underlying
Shares of Common
Stock
|
|
|
Oct. 31,
2008
|
|
Options
|
|
|
1,600,000
|
|
|
$
|
4.25
|
|
|
$
|
6,800,000
|
|
|
|
|
Options
|
|
|
Market
Price per Share of Common Stock Underlying the Securities on Date of
Sale
|
|
$
|
4.25
|
|
|
|
|
|
|
|
|
Conversion/Exercise
Price per Share of Common Stock Underlying the Securities on Date of
Sale
|
|
$
|
3.00
|
|
|
|
|
|
|
|
|
Total
Shares of Common Stock Underlying the Securities
|
|
|
1,600,000
|
|
|
|
|
|
|
|
|
Combined
Total Market Price
|
|
$
|
6,800,000
|
|
|
|
|
|
|
|
|
Combined
Total Exercise Price
|
|
$
|
4,800,000
|
|
|
|
|
|
|
|
|
Total
Possible Discount
|
|
$
|
2,000,000
|
|
The
table below represents the 2008 Share Exchange and $7 Million Financing
transactions that are described above beginning on
page 20
and the financing transaction described
below on
page 23
:
|
Date of
Transaction
|
|
# of Shares of
Common
Stock
Subject to the
Transaction
that were
Outstanding
Prior to the
Transaction
|
|
|
# of Shares of
Common
Stock
Subject to the
Transaction
that were
Outstanding
Prior to
the Transaction
and
Held by Persons
Other than the
Selling
Security Holders
|
|
|
# of Shares of
Common Stock
Subject to the
Transaction that
were
Issued/Issuable in
Connection with
the Transaction
|
|
|
% of Total Issued
and
Outstanding Shares
of Common Stock
that were
Issued/Issuable
in the Transaction
|
|
|
Market Price
per Share of
Common
Stock Subject
to the
Transaction
Immediately
Prior to the
Transaction
|
|
|
Market Price
per Share of
Common Stock
Subject to the
Transaction, as
of April
1, 2010
|
|
|
9/9/08
(Share Exchange)
|
|
|
1,800,000
|
|
|
|
47,000
|
|
|
|
24,218,750
|
|
|
|
1,345
|
%
|
|
$
|
0.42
|
(1)
|
|
$
|
2.20
|
|
|
9/9/08
(Financing)
|
|
|
26,018,750
|
|
|
|
23,860,152
|
|
|
|
3,500,000
|
(2)
|
|
|
28
|
%
|
|
$
|
0.42
|
(1)
|
|
$
|
|
|
|
6/16/09
(Financing)
|
|
|
26,048,750
|
|
|
|
23,870,750
|
|
|
|
2,800,000
|
(3)
|
|
|
11
|
%
|
|
$
|
3.75
|
(1)
|
|
$
|
|
|
|
(1)
|
This value was derived from a
third-party independent valuation of these
shares.
|
|
(2)
|
These shares represent the
shares of common stock that are issuable upon conversion of 3,500,000
shares of Series A Convertible Preferred Stock. On June 16,
2009, Series A Warrants and Series B Warrants issued to Vision that were
exercisable for an aggregate 3,500,000 shares of common stock were
cancelled by the Company, and, as of April 2, 2010, none of the
shares of common stock issuable upon conversion of the Series A Preferred
Stock have been issued.
|
|
(3)
|
These shares represent the
shares of common stock that are issuable upon conversion of 2,800,000
shares of Series B Convertible Preferred Stock. As
of April 2, 2010, none of the shares of common stock issuable upon
conversion of the Series B Preferred Stock have been
issued.
|
The table
below provides information as to the shares being registered on this
registration statement and other related information.
|
#
of Shares Outstanding Prior to the $7 Million Financing Held by Persons
Other than the Selling Security Holders
|
|
24,438,152
|
|
#
of Shares Registered for Resale by the Selling Security Holders in Prior
Registration Statements
|
|
0
|
|
#
of Shares Registered for Resale by the Selling Security holders that
Continue to be Held by the Selling Security Holders
|
|
0
|
|
#
of Shares that have been Sold in Registered Resale Transactions by the
Selling Security Holders
|
|
0
|
|
#
of Shares Registered for Resale on Behalf of the Selling Security
Holders
|
|
2,328,972
for Vision Opportunity Master Fund. Ltd.;
360,993
shares for Genesis Capital Advisors,
LLC
|
Recent
Developments
Share Exchange Transaction with Rupinvest SARL and
Esdras Ltd.
On July 31, 2009, we closed the acquisition of 100%
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 subsidiary, Premier
Power Italy, which was a majority-owned subsidiary at the closing but which
became a wholly owned subsidiary on December 31, 2009 as described
below. 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 of this share exchange, Rupinvest was
the 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 million shares of our common
stock, with the number of shares to be transferred, if any, to be calculated
based on achieving certain sales and gross margin goals 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 representing a 90% interest. Following the
closing of this share exchange, we conduct operations in Italy through Premier
Power Italy.
On
December 31, 2009, Rupinvest purchased the remaining 10% interest of Premier
Power Italy from Esdras pursuant to the Share Exchange Agreement whereby Premier
Power Italy became the wholly owned subsidiary of
Rupinvest. The agreement allowed for the reimbursement of the
initial capitalization of one hundred and twenty five thousand Euros (€125,000,
or approximately $175,600) made by Esdras if the remaining 10% was purchased by
December 31, 2009.
Financing
Transaction with Vision Opportunity Master Fund – June 16, 2009
On June 16, 2009, we entered into a Securities
Purchase Agreement with Vision Opportunity Master Fund (“Vision”) pursuant to
which we sold to Vision 2.8 million shares of our Series B Convertible Preferred
Stock (bearing no liquidation preference, no coupon payments, and no redemption
rights) in exchange for the cancellation of 4-year Series A Warrants exercisable
for an aggregate 1.75 million shares of our common stock and 4-year Series
B Warrants exercisable for an aggregate 1,750,000 shares of our common stock,
and a $3 million cash payment.
In connection with the purchase agreement, Vision,
a holder of our Series A Convertible Preferred Stock, agreed in
writing that no adjustment will be made to the conversion price of its
Series A Convertible Preferred Stock shares, which right is set forth in Section
7(b) of the Certificate of Designation of Preferences, Rights and Limitations of
Series A Convertible Preferred Stock, filed on September 10, 2008 with the
Delaware Secretary of State.
Industry
Overview
Challenges
Facing the Electric Power Industry
According
to the Energy Information Administration (“EIA”), a section of the United States
Department of Energy, energy outlook projects moderate growth in U.S. energy
consumption with greater use of renewables. In fact the EIA’s outlook
in 2010 was that global energy consumption would increase by 14% from 2008 to
2035. Electric power used to operate businesses and industries
provides the power needed for homes and offices and provides the power for our
communications, entertainment, transportation, and medical needs. On
the residential side, growth in population and homeowners’ desires to utilize
solar as an alternative source of energy have increased demand over
time. Population shifts to warmer regions have also increased the
need for cooling. Electricity is now more commonly used for local
transportation (electric vehicles) and space/water heating needs.
Due to
continuously increasing energy demands, we believe the electric power industry
faces the following challenges:
|
|
·
|
Limited Fossil Fuel Supplies
and Cost Pressures.
Supplies of fossil fuels that are
used to generate electricity such as oil, coal and natural gas are
limited, and yet worldwide demand for electricity continues to
increase. The increasing demand for electricity and a finite
supply of fossil fuels may result in increased fossil fuel prices, which,
in turn, will likely result in a continuation of increases in long-term
average costs for electricity.
|
|
|
·
|
Stability of Suppliers.
Many of the world’s leading suppliers of fossil fuels are
located in unstable regions of the world where political instability,
labor unrest, war, and terrorist threats may disrupt oil and natural gas
production. Purchasing oil and natural gas from these countries
may increase the risk of supply shortages and may increase costs of fossil
fuels.
|
|
|
·
|
Generation, Transmission, and
Distribution Infrastructure Costs.
Historically,
electricity has been generated in centralized power plants transmitted
over high voltage lines and distributed locally through lower voltage
transmission lines and transformer equipment. Despite the
increasing demand for electricity, investment in electricity generation,
transmission, and distribution infrastructure have not kept pace,
resulting in service disruptions in the U.S. As electricity
demands increase, these systems will need to be expanded, and such
expansion will be capital intensive and time consuming, and may be
restricted by environmental concerns. Without further
investments in this infrastructure, the likelihood of power shortages may
increase.
|
|
|
·
|
Environmental Concerns and
Climate Change
. Concerns about climate change and
greenhouse gas emissions have resulted in the Kyoto Protocol, an
international agreement establishing a legally binding commitment for the
reduction of greenhouse gases. As of February 2010 189
countries had voluntarily ratified the Kyoto Protocol and are required to
reduce greenhouse gas emissions to target levels which vary by
country. In the United States, 29 states have implemented the
Renewable Portfolio Standard, which require electric companies to purchase
a specific amount of power from renewable
sources.
|
Drivers
of Solar Market Adoption
The
challenges facing the traditional electric power industry are driving the
adoption of renewable energy sources. Solar power systems have been
used to produce electricity for several decades, although at generally higher
costs as compared with traditional energy sources. Technological
advances during the past decade that have significantly reduced system costs,
combined with the advantages of solar power as a renewable energy source and
government subsidies and incentives for solar power, have led to solar power
becoming one of the fastest growing renewable energy technologies.
Advantages
that solar power offers over other sources of power include:
|
|
·
|
Clean Energy
Production.
Unlike traditional fossil fuel energy sources and
many other renewable energy sources, solar power systems generate
electricity with no emissions or noise
impact.
|
|
|
·
|
Location-Based Energy
Production.
Solar power is a distributed energy source,
meaning the electricity can be generated at the site of
consumption. This provides a significant advantage to the end
user who is therefore not reliant upon the traditional electricity
infrastructure for delivery of electricity to the site of
use.
|
|
|
·
|
Energy Generated to Match Peak
Usage Times.
Peak energy usage and high electricity costs
typically occur mid-day, which also generally corresponds to peak sunlight
hours and solar power electricity
generation.
|
|
|
·
|
Reliable Source of
Electricity.
Solar power systems generally do not
contain moving parts, nor do they require significant ongoing
maintenance. As a result, we believe solar power systems are
one of the most reliable forms of electricity
generation.
|
|
|
·
|
Modular.
Solar power systems are made from interconnecting and
laminating solar cells into solar modules. Given this method of
construction, solar power products can be deployed in many different sizes
and configurations to meet specific customer
needs.
|
According to Solarbuzz, an independent
solar energy research firm, total worldwide solar cell production increased from
682 megawatts (MW) in 2003 to 6,854 MW in 2008, which represented a compound
annual growth rate, or CAGR, of approximately 58.7%. Solarbuzz
projects worldwide solar cell production will reach approximately 17,200 MW by
2013 in its “Green World Scenario,” which we believe represents the most
appropriate of three forecast scenarios published by Solarbuzz because it
balances further growth resulting from increased development of government
incentive programs with measured growth in industry production
capacity. This represents a CAGR of 20.2% from 2008 actual solar cell
production of 6,854 MW as reported by Solarbuzz.
Government
Incentives for Solar Energy
Despite
the significant advantages of solar energy that have resulted in recent rapid
market growth, solar energy continues to represent only a small fraction of the
world’s energy output as a result of costs that remain higher than those of
traditional energy sources. According to Solarbuzz, the cost of
generating a kWh of solar electricity has declined from 40 cent per kWh to 20
cent per kWh, but still remains significantly higher than the cost of
traditional energy, which ranges from an average price of 10.3 cents per kWh in
the United States to 27.2 cents per kWh in Italy. While the solar
industry continues to drive down costs by 20% to 40%, various government
incentives have been put in place to make solar energy economically
competitive. These incentives include:
|
|
·
|
Feed-in Tariffs.
Feed-in tariffs, used primarily in Europe, require utility
companies to purchase electricity from renewable energy sources at a
guaranteed rate, generally above the standard rate for
electricity.
|
|
|
·
|
Renewable Portfolio
Standards.
Renewable portfolio standards, adopted by 29
states in the United States, require utilities to deliver a certain
percentage of power from renewable energy sources by a specific
date. For example, California requires electric companies to
increase procurement from eligible renewable energy sources by at least 1%
of their retail sales annually, until they reach 20% by
2010.
|
|
|
·
|
Tax credits or grants.
Tax credits or grants provide an offset to the cost of
installing a solar system. In the United States, there is
currently a 30% federal tax credit for commercial and residential solar
power systems, which takes the form of a cash grant in 2009 and
2010.
|
|
|
·
|
Loan Guarantees.
Government-backed loan guarantees enable companies to finance
solar projects at a lower cost of capital than would otherwise be
available in the capital markets.
|
U.S.
Solar Market Dynamics
According
to Solarbuzz, the market for solar energy in the United States is expected to
grow from 342 MW in 2008 to 3,200 MW in 2012, representing a CAGR of
75%. Drivers for solar market growth include rapidly declining costs
of solar systems as much as 20% to 40% over the next three years as well as
government incentives including an investment tax credit (providing a 30%
federal rebate for solar energy systems), renewable portfolio standards in 29
states, and selected state and local tax credits.
Spanish
Solar Market Dynamics
Spain led
the global market for solar in 2008, with 2.51 gigawatts installed that year
alone, according to a report from the European Photovoltaic Industry Association
(EPIA). Spain imposed a 500 MW cap on the feed-in tariff in 2009,
causing Solarbuzz to forecast the market to decline to 550 MW in 2009, and to
then resume growth to 1,050 MW by 2012. With a majority of Spain’s
rooftop solar energy targets unmet, and government support of rooftop solar
systems through a revised feed-in-tariff, the commercial rooftop market has
become the leading solar market segment in Spain.
Italian
Solar Market Dynamics
According
to Solarbuzz, the market for solar energy in Italy is expected to grow from 258
MW in 2008 to 1,600 MW in 2012. We believe that Italy represents an
attractive solar market as a result of favorable sunlight patterns, high
traditional power prices, and an attractive feed-in tariff of €0.346 per kWh
(approximately $0.50). According to Solar Plaza, a solar analyst
firm, Italy is the second largest solar PV energy market after Germany in the
European market. The Italian government has set ambitious goals for
solar PV, with an initial target of 3,000 MW of installed PV power by 2016 and
8,500 MW of PV expected to be installed by 2020. We believe that
grid-parity will become a fact of life in Italy during this timeframe, meaning
that solar electricity will be able to compete with electricity from the grid
without subsidies.
Our
Products and Services
We
provide a full range of installation services to our solar energy customers
including design, engineering, procurement, permitting, construction, grid
connection, warranty, system monitoring, and maintenance services. In
addition, we are a reseller of solar energy system components including, but not
limited to, racking, wiring, inverters, solar modules, and other related
components sourced from the industry’s leading manufacturers and
suppliers. Through our partners, we assist in arranging power
purchase agreement programs for our customers. In 2010, we intend to offer
direct power purchase agreements.
Business
Segments
We
operate in four business segments: U.S. commercial, U.S. residential,
Spain, and Italy.
U.S
Commercial
Our U.S.
commercial business consists of ground mount or rooftop solar energy projects
generally ranging from 100 kilowatt (kWh) to 20 MW provided to corporate,
municipal, agricultural, and utility customers. In this market, we
design and build our solar energy systems to meet each customer’s individual
needs and circumstances. We assess the customer’s annual power
requirements and average daily consumption rates in different seasons of the
year to size and engineer the solar energy system. We assess the
customer’s site and if relevant roof size, configuration, and composition to
determine the optimum location for the solar modules. We factor in
information about the customer’s electrical service territory and its rate
structures, and we identify the customer’s budget and preferred financing
method, as well as the customer’s aesthetic preferences. We also
identify the relevant federal, state, and local regulations, including building
codes that are important to the cost, operation, and return on investment of the
customer’s solar energy system, as well as relevant tax rates and various other
factors. We assess this data using solar monitoring tools that enable
us to design a solar energy system to a size and configuration that maximizes
energy efficiency for each customer’s circumstances. We provide
customers with a return on investment analysis and determine the rebates and
performance-based incentives that are available to each customer. We
prepare final construction plans to obtain a building permit and, as soon as the
permit is approved, our installation professionals begin the installation by
placing metal racking on the customer’s roof (or by building a ground mount),
followed by installation of the solar modules, inverters, and the balance of
systems components and safety equipment.
After the
solar photovoltaic (PV) modules and inverters are procured and installed, we
obtain a final inspection of the installation by the local building department,
prepare and submit all rebate applications to the appropriate rebating
jurisdiction, and apply for the local utility company to interconnect the
customer’s solar energy system to the utility grid. The entire
process from signing of the contract through final inspection by the local
building department typically takes between 3 and 6 months, with the actual
installation work usually requiring two weeks to two months.
U.S.
Residential
Our U.S.
residential business consists mainly of rooftop solar installations generally
ranging from 5 kWh to 40 kWh provided to customers primarily in California and
New Jersey as a result of the attractive government incentives in those
states. We do provide installations in other states when financially
attractive. The services we provide to our residential customers are
largely similar to our U.S. commercial customers. Key differences
include that the entire process typically takes between 60 to 90 days for
residential customers versus 3 to 6 months for commercial customers, and the
actual installation work usually requires two to five days for residential
customers versus two weeks to two months for commercial customers.
Spain
Our
Spanish business consists of rooftop solar installations generally ranging 5 kWh
to 1 MW provided primarily to businesses that own commercial buildings or
warehouses. Our Spanish business also serves other European countries
other than Italy. The services we provide to our Spanish customers
are largely similar to our U.S. commercial customers. Our global
experience and unmatched engineering and design expertise strongly position us
to capitalize on the commercial rooftop opportunities and further build our
leadership role in this growing market. Additionally in Spain, we
perform distribution services whereby we procure solar modules and invertors and
sell these to other solar integrators or commercial buyers.
Italy
Our
Italian business consists of distribution, ground mount, roof mount, and solar
power plant installations. In Italy, a portion of our business
consists of ground mount or rooftop solar energy projects generally ranging from
50 kWh to 500 kWh provided to corporate, municipal, agricultural, and utility
customers. In Italy, our customers commission us to install solar
energy systems based on customer-defined specifications, but we have the ability
to define our own projects and select sites based on attractive solar
characteristics. These projects are typically 1 MW in
size. We enter into these projects generally with a
reseller of solar power plants or a financial investor who contracts us to
construct the project. Upon completion of the project, the acquirer
of the project has the rights to the sell electricity to the Italian power
authority at specified rates over 20 years based on Italy’s feed-in
tariff.
Strategy
Our goal
is to be the leading integrator of commercial solar energy
systems. We intend to pursue the following strategies to achieve this
goal:
|
|
·
|
Target multiple
markets
. We intend to continue to target numerous market
segments and opportunities ranging from commercial and industrial to
agricultural and residential, both domestically and
internationally. Through geographic, market segment, and
product diversification, we have reduced, and will continue to be able to
reduce, the impact of economic and other fluctuations that any one
individual market, segment, or region may have on our
business.
|
|
|
·
|
Establish best practices
across market segments
. We intend to continue to focus
on establishing and refining best practices for design, sales, and
marketing that can be replicated throughout our different locations while
identifying and centralizing operations that are best centralized in order
to reduce the cost of operations and increase awareness of our services so
that our best practices are applied in a uniform manner and delivered
consistently across markets.
|
|
|
·
|
Develop proprietary know
how
. We believe our experience in developing, designing,
and installing large and complex solar projects differentiates us from
many of our competitors. We intend to continue to develop
proprietary turn-key solar power systems and continued improvements upon
our prefabrication abilities for application in commercial, rooftop, and
ground mount applications that will reduce design, permitting, and
installation time and cost.
|
|
|
·
|
Balance in-house engineering
with outsourced labor
. We intend to balance the use of
our in-house engineering, design, and installation staffs with the use of
outsourcing when appropriate in order to improve the customer experience,
maintain quality control, reduce costs, and protect our
brand.
|
|
|
·
|
Expand our participation in
“value added” businesses
. We intend to continue to
expand our offerings to include services such as providing after-market
systems management programs and customized project finance solutions to
customers and prospective customers. This will allow us to have
greater participation in the ancillary revenue that our projects create,
which currently is not a significant portion of our
business.
|
|
|
·
|
Develop financial tools such
as leases or Power Purchase Agreements (PPAs) to help consumers and
businesses decide in favor of solar power
. A PPA is a
long-term contract under which a customer has no up-front cost and instead
agrees to purchase the energy produced by the solar system at a fixed
rate, typically adjusted annually at an agreed rate, for 15, 20, or 25
years. The customer does not own the system and the elimination
of a capital outlay simplifies the “going solar”
decision.
|
|
|
·
|
Expand through both
acquisitions and organic growth
. As a growing number of
states and countries adopt solar programs, we expect solar demand to
continue to grow. We intend to continue to evaluate potential
acquisitions to expand our presence worldwide. We view
acquiring a local presence in a new market as a critical step in gaining a
strong brand and presence in a
market.
|
Customers
Our
business consists of the installation of solar energy systems and all related
components for use by commercial and industrial enterprises, municipalities,
residential homeowners, and other solar energy providers. The
following table highlights the breakdown of our revenue by market in 2009 and
2008:
|
|
|
United
States
|
|
|
Spain
|
|
|
Italy
|
|
|
2009
|
|
|
45.5
|
%
|
|
|
19.2
|
%
|
|
|
35.3
|
%
|
|
2008
|
|
|
70.2
|
%
|
|
|
29.8
|
%
|
|
|
-
|
|
In 2009,
our largest customers were an Italian reseller, which represented 17% of our
total revenue, a distribution customer, which represented 5% of our total
revenue, and a U.S. commercial customer, which represented 6% of our total
revenue. For the fiscal year ended December 31, 2009, 81% of our
revenue was derived from commercial and industrial customers, and 19% of our
revenue was derived from residential customers. In 2008, our two
largest customers represented 18% and 12% of our total revenue,
respectively. For the fiscal year ended December 31, 2008, 84% of our
revenue was derived from commercial and industrial customers, and 16% of our
revenue was derived from residential customers.
Our
clients in the United States have included utility companies such as Pacific Gas
and Electric and Sierra Pacific Power Company, home builders such as KB Homes,
and numerous agricultural clients such as leading wineries in Napa Valley,
California. Our clients in Spain have included BTV, CasaVilla, and
Salvi Cazados. Our clients in Italy have included Global Green
Advisors, Nacastri, and Camardo.
We
believe that the solar energy market is dynamic and constantly changing as
certain government standards and directives that affect the marketplace have
allowed, and will continue to allow, for new customers in new geographic
areas. We believe that Renewable Portfolio Standards (“RPS”) in the
United States have resulted in increased demand for solar energy in the American
marketplace. RPS is a state policy that requires electricity providers to
obtain a minimum amount of their power from renewable energy by a certain
date. According to a May 2009 report by the U.S. Department of
Energy, there were 24 states that adopted a RPS-type
mechanism. According to the Pew Center on Global Climate Change, that
number increased to 29 states. We believe that this number will
continue to increase. With each new state that adopts a RPS, bases of
new customers of solar energy will develop. In June 2009, Congress
passed a cap-and-trade energy bill that would require electric utilities to meet
20% of their electricity demand through renewable sources by 2020. We
believe this will generate additional demand for solar energy, which would
create new customers. We also believe that the renewable energy
directive of the European Union also plays a role in growth of our
marketplace. According to the European Renewable Energies Foundation
and the European Future Energy Forum, the EU’s member-nations are required to
provide at least 20% of gross final energy consumption from renewable energy
sources by 2020. This target is mandatory of the 27
member-nations. Each member-nation must draft a Renewable Energy
Action Plan, which must include clear development targets for electricity,
heating, cooling, and fuel. Consequently, to avoid penalties, the
member-nations provide incentives in the form of feed-in tariffs for the
generation of solar electricity. This EU renewable energy directive,
thus, also provides for an increase in customers within the EU. We
believe that our customer base will grow as a result of such standards and
directives.
Quality
Control
We have a
“zero defect” quality assurance program for installation of solar energy
systems. Instituted in 2006, the zero defect policy was created to
set the highest quality and customer satisfaction standards in the industry
today. The program sets standards for ten areas of installation: (1)
installed equipment, (2) solar array, (3) array mounting structure, (4) wire
runs, (5) system component location, (6) system component mounting, (7)
electrical, (8) system performance, (9) building requirements, and (10)
surrounding property. Each of our installations is independently
verified by a quality control officer and must meet a rigid standard for
excellence. One point is awarded for each standard that is met, and
our installation crews must have a score of at least 9 points for each
installation. If an installation crew scores less than 9 points for a
particular installation, we follow up with the customer to allow management to
understand the core problem with that particular installation and to design and
implement measures to further improve the customer experience.
Our
review standards go beyond the quality of the installation to include measures
of the customer experience. We use the “Net Promoter Score” developed
by the Massachusetts Institute of Technology and implemented by companies such
as GE and Toyota to measure quality and customer satisfaction. We
regularly review customer surveys and scores and design and implement measures
to further improve the customer experience.
Competition
We
are active in the U.S. and European markets and have a few direct competitors
that are concurrently active in both of those markets. The following
provides more specific competitive information for each of our target
markets.
U.S.
Competitors
In
the United States, the solar design and integration market is highly fragmented,
and we face direct competition in this market from a number of smaller local
installers within many U.S. cities, particularly for residential
customers. For residential opportunities in American cities and
regions such as Los Angeles, the San Francisco Bay Area, and California’s
Central Valley, we experience competition from regional installers such as
Akeena Solar, Solar Universe, Solar City, and SPG. Based on our
geographic diversification, buying power, and unique installation methods, the
effect of any one installer on our business is limited but
growing. In particular, among the commercial grade opportunities,
there are few companies with the level of experience to perform, and therefore
only a few competitors qualify under larger scale “Request for Proposal” (“RFP”)
projects. These competitors include SunPower and BP
Solar. We seek to distinguish ourselves from the competition by
marketing our depth of experience, complex engineering and design capabilities,
customer satisfaction, and our track record for delivering “on-time” and
“on-budget” installations and when project finance is required providing the
customer with an attractive financing model.
Spanish
Competitors
In the
Spanish market, we face competition from Acciona and Tudela Solar, among other
companies. These companies, along with most of the competition in
Spain, are focused on building large-scale solar farms, which have proliferated
in 2008 as a result of national feed-in tariffs. Large-scale farm
developers are experienced at engineering ground mount systems in abundant and
open space and replicating redundant tasks related to a large-scale
installation. Our Spanish business is differentiated because it is
not dependent on large-scale solar farm subsidies or feed-in tariffs, and
instead is focused on the smaller commercial roof top installation, which has
greater design and installation challenges. These projects have not
been affected by the caps placed on solar farms by the Spanish
government. In addition, we have developed and secured exclusivity on
various components of our ballast mount roof system that reduces the cost and
time to complete installations and provides a competitive
advantage.
Italian
Competitors
In the
Italian market, we face competition from Enerqos and SAEM Energy Alternative,
among other companies. Premier Power Italy intends to operate
as a solar developer and solar integrator. In 2009, we largely
operated as a constructor of solar power plants. In 2010, it is our intent
to market large scale solar power plants as turnkey systems to mostly
financial buyers that acquire systems for purposes of investment because once
these systems are connected to the power grid they produce a constant stream of
cash flow for 20 years for the electricity they produce pursuant to the Italian
feed-in tariff program. Dealing in the development, construction, and sale
of large scale, capital intensive solar power plants to sophisticated financial
buyers that purchase and manage a portfolio of income producing solar power
plants as a core business requires significant resources, capabilities,
relationships, and a proven track record. These factors, in addition to
long development cycles that must be funded in advance, a localized culture that
can impede outsiders, and the complex nature of the relatively new solar feed-in
tariff program and varied regional permitting processes, create barriers to
competitor entry and hinder both small and large companies alike from entering
the market.
Sales
and Marketing Activities
We spent
approximately $.8 million and $.4 million on domestic and international sales
and marketing activities in 2009 and 2008, respectively. We
participate in the solar industry’s leading trade shows, use radio and print
advertising and marketing tools, and have hosted consumer-focused seminars in
targeted markets, as well as customer appreciation events to raise awareness of
solar power options and our brand, services and products. We also
employ a national public relations firm in the United States, and have used
web-based promotion tools on our websites to educate customers, to showcase our
latest installations, and to provide general and specific sales
information.
Principal
Suppliers
The
components used in our solar energy systems consist of solar modules, inverters,
racking, wire, hardware, monitoring equipment, and electrical
equipment. We have no exclusive supplier
relationships. We purchase the components from leading solar
energy product suppliers including solar modules from GE, Sharp, and SunPower
Corporation; inverters from Fronius, Satcon, SMS, and Zantrex; solar trackers
from Watsun; and residential solar thermal systems from Schuco. In
particular, Canadian Solar, GE, Sharp, SunPower Corporation, and Solyndra
together accounted for over 95% and 80% of our purchases of solar modules during
the fiscal years ended December 31, 2009 and 2008, respectively.
Solar
modules and inverters comprise a substantial portion of the total cost
of our installations. We constantly evaluate the outlook for supply
of solar panels and other components. However, we currently do not
maintain any long-term supply agreements for the purchase of these components,
and thus we may be subject to the availability of and/or market price
fluctuations for the components used in our solar energy systems.
Intellectual
Properties and Licenses
We
applied with the U.S. Patent and Trademark Office (“USPTO”) for trademark
protection for the brand name “Premier Power,” for which we received approval on
July 21, 2009, and for the brand name “Bright Futures,” for which we received
approval on December 15, 2009. We also applied with the USPTO for
trademark protection of our sales slogan, “Your Solar Electricity
Specialist.” This application is currently pending.
Research
and Development
We are
focused on leveraging our years of experience in designing and installing solar
systems to develop best practices and differentiating know how. For
example, we help GE develop its popular solar tile. Any technology
and/or procedures that are developed are based on the decades of experience in
solar installations held by the persons behind the development and in-house
expertise in electrical and structural engineering. Our experienced
engineering team constantly looks for new and innovative ways to address space
constraints, time, and cost saving designs that will increase efficiencies and
drive added revenue.
Our
research and development efforts are often aimed at technology integrations and
system productivity and performance features. Our engineering team
has evaluated Thin Film module technology, new racking system, next generation
inverter, and connector applications on various installation projects throughout
the year. Under our installation contracts, we typically obtain the
rights to use any improvements to our technology developed or discovered on a
particular installation on other customer installations.
Government
Approval and Regulation
All
products that we resell are guaranteed by the manufacturer to have passed all
required government approval and regulation requirements. Some of the electrical
services we provide are regulated and require licensing. For example, the
installations of electrical components that are connected to the electric meter
require a C10 license in California and C2 license in Nevada, and the
installation of solar systems in California requires a C46
license. As we expand our installations operation into other states,
we may need to obtain additional licenses required by the local building
authorities. Some states accept a C10 license from California. We possess and
maintain all the necessary licenses required for the services we provide. Our
employees hold some of the highest levels of licensing and certifications
available in the industry, and some employees are certified by the North America
Board of Certified Energy Practitioners (NABCEP).
Compliance
with Environmental Laws
We are
not required to comply with any environmental laws that are particular to the
solar industry. However, it is our policy to be as environmentally
conscientious in every aspect of our operations.
Employees
As
of April 2, 2010, we had approximately 80 employees, all of which are
full-time employees.
Offices
and Websites
Our
principal executive offices are located at 4961Windplay Drive, Suite 100, El
Dorado Hills, CA 95762. Our main telephone number is (916) 939-0400,
and our fax number is (916) 939-0490. We also have offices in
Southern California, Nevada, New Jersey, Spain (in Barcelona, Pamplona, and
Madrid), and Italy (in Rome and Campobasso). We also have websites
located at www.premierpower.com and www.mysolarexperience.com. The
information on these websites is not incorporated herein by
reference.
DESCRIPTION
OF PROPERTY
Our
principal executive offices are located in El Dorado Hills, California. The
table below provides a general description of our offices and facilities,
including those for our international operations:
|
Location
|
|
Principal Activities
|
|
Area (sq. ft.)
|
|
Lease Expiration Date
|
|
4961
Windplay Drive, Suite 100
|
|
Company
headquarters and
|
|
|
6,700
|
|
Month-to-month
|
|
El
Dorado Hills, California 95762
|
|
warehouse
|
|
|
|
|
|
|
3
Newlands Circle
|
|
Bright
Future office
|
|
|
100
|
|
Month-to-month
|
|
Reno,
Nevada 80509
|
|
|
|
|
|
|
|
|
1913
Atlantic Avenue, Suite 176
|
|
U.S.
East Coast operations
|
|
|
72
|
|
Month-to-month
|
|
Manasquan,
New Jersey 08736
|
|
|
|
|
|
|
|
|
1020
Nevada Street, #201
|
|
U.S.
Southern California
|
|
|
2,303
|
|
September
30, 2010
|
|
Redlands,
CA 92374
|
|
operations
|
|
|
|
|
|
|
Polígono
Industrial
|
|
Spain
headquarters
|
|
|
650
|
|
April
30, 2012
|
|
Calle
E nº3 Bajo F
|
|
|
|
|
|
|
|
|
31192
Mutilva Baja - Navarra, Spain
|
|
|
|
|
|
|
|
|
Centro
de Negocios “La Garena”
|
|
Spain
regional office
|
|
|
1,100
|
|
December
30, 2013
|
|
Calle
Padre Granda, 4 2k
|
|
|
|
|
|
|
|
|
28806
Alcalá de Henares - Madrid, Spain
|
|
|
|
|
|
|
|
|
C/Llull,
321 (Edifici CINC)
|
|
Spain
regional office
|
|
|
200
|
|
April
30, 2014
|
|
08019
Barcelona (22@)
|
|
|
|
|
|
|
|
|
Contrada
Taverna del Cortile (Z.I.)
|
|
Italy
headquarters and
|
|
|
3,767
|
|
July
21, 2015
|
|
Ripalimosani,
Campobasso 86025 Italy
|
|
warehouse
|
|
|
|
|
|
|
Piazza
del Popolo 18
|
|
Italy
sales office
|
|
|
500
|
|
Month-to-month
|
|
00187
Roma, Italy
|
|
|
|
|
|
|
|
Premier
Power Spain is party to a non-cancelable lease for operating facilities in
Madrid, Spain, which expires in 2013, Navarra, Spain, which expires in 2012, and
Barcelona, Spain, which expires in 2014. Premier Power Italy is party
to a non-cancelable renewable lease for operating facilities in Campobasso,
Italy, which expires in 2015. We are 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 or equivalent indices in Spain and Italy. The leases
require the following payments as of December 31, 2009, subject to annual
adjustment, if any:
|
|
|
(in thousands)
|
|
|
2010
|
|
$
|
102
|
|
|
2011
|
|
|
75
|
|
|
2012
|
|
|
67
|
|
|
2013
|
|
|
56
|
|
|
2014
and beyond
|
|
|
50
|
|
|
|
|
$
|
350
|
|
SUMMARY
FINANCIAL DATA
The
following selected consolidated financial data should be read in conjunction
with the “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” section and our consolidated financial statements
included elsewhere in this prospectus. The selected consolidated
balance sheet data as of December 31, 2009 and 2008 and the selected
consolidated statement of operations data for the years ended December 31, 2009
and 2008 have been derived from our audited consolidated financial statements,
which are included elsewhere in this prospectus. Historical results
are not necessarily indicative of the results to be expected in the
future.
|
|
|
Year Ended December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands, except per share data)
|
|
|
Net
sales
|
|
$
|
30,750
|
|
|
$
|
44,238
|
|
|
Cost
of sales
|
|
|
(26,292
|
)
|
|
|
(38,711
|
)
|
|
Gross
profit
|
|
|
4,458
|
|
|
|
5,527
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
2,910
|
|
|
|
2,224
|
|
|
Administrative
expense
|
|
|
5,808
|
|
|
|
2,505
|
|
|
Total
operating expenses
|
|
|
8,718
|
|
|
|
4,729
|
|
|
Operating
(loss) income
|
|
|
(4,260
|
)
|
|
|
798
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(89
|
)
|
|
|
(82
|
)
|
|
Other
income
|
|
|
23
|
|
|
|
-
|
|
|
Change
in fair value of contingent consideration liability
|
|
|
4,301
|
|
|
|
-
|
|
|
Change
in fair value of warrants
|
|
|
2,184
|
|
|
|
-
|
|
|
Interest
income
|
|
|
44
|
|
|
|
37
|
|
|
Total
other income (expense), net
|
|
|
6,463
|
|
|
|
(45
|
)
|
|
Income
before income taxes
|
|
|
2,203
|
|
|
|
753
|
|
|
Income
tax benefit
|
|
|
1,452
|
|
|
|
40
|
|
|
Net
income
|
|
|
3,655
|
|
|
|
793
|
|
|
Less:
Net income attributable to noncontrolling interest
|
|
|
(85
|
)
|
|
|
(224
|
)
|
|
Net
income attributable to Premier Power Renewable Energy,
Inc.
|
|
$
|
3,570
|
|
|
$
|
569
|
|
|
Earnings
Per Share attributable to Premier Power Renewable Energy,
Inc.:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.03
|
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.02
|
|
|
Weighted
Average Shares Outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,050
|
|
|
|
22,666
|
|
|
Diluted
|
|
|
31,273
|
|
|
|
23,750
|
|
|
|
|
Year Ended December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in thousands)
|
|
|
Non-Cash
Stock-Based Compensation Data:
|
|
|
|
|
|
|
|
Cost
of sales
|
|
$
|
145
|
|
|
$
|
-
|
|
|
General
and administrative
|
|
|
361
|
|
|
|
-
|
|
|
Sales
and Marketing
|
|
|
118
|
|
|
|
-
|
|
|
Total
non-cash share-based compensation
|
|
$
|
624
|
|
|
$
|
-
|
|
|
|
|
As of December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,792
|
|
|
$
|
5,771
|
|
|
Total
assets
|
|
$
|
43,180
|
|
|
$
|
14,813
|
|
|
Line
of credit and notes payable
|
|
$
|
2,240
|
|
|
$
|
131
|
|
|
Deferred
revenue
|
|
$
|
374
|
|
|
$
|
1,206
|
|
|
Total
shareholders’ equity
|
|
$
|
12,158
|
|
|
$
|
7,873
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of the results of operations and financial
condition of Premier Power Renewable Energy, Inc. for the fiscal years ended
December 31, 2009 and 2008 should be read in conjunction with our financial
statements and the notes to those financial statements that are included
elsewhere in this prospectus. Our discussion includes forward-looking statements
based upon current expectations that involve risks and uncertainties, such as
our plans, objectives, expectations, and intentions. Actual results and the
timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Risk Factors, Special Note Regarding Forward-Looking
Statements, and Business sections in this prospectus. We use words such as
“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.
Overview
We are a
developer, designer, and integrator of solar energy solutions. We develop,
market, sell, and maintain solar energy systems for residential, agricultural,
commercial, industrial customers in North America and Spain through Bright
Future and Premier Power Spain, both of which are wholly owned subsidiaries of
Premier Power California, which is our wholly owned subsidiary. We also
distribute solar modules and develop and integrate ground mount and rooftop
solar power systems in Italy through Premier Power Italy, the wholly owned
subsidiary of Rupinvest, which is our wholly owned subsidiary. We use solar
components from the solar industry’s leading suppliers and manufacturers such as
General Electric, Sharp, Kyocera, Fronius, Watsun, and SunPower
Corporation.
On
September 9, 2008, we acquired all of the outstanding shares of Premier Power
California in exchange for the issuance by the Company of 24,218,750 restricted
shares of our common stock to the stockholders 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 this 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. See the “Business” section
above for additional details regarding this 2008 share exchange.
Concurrently
with the closing of the September 2008 share exchange, we raised $7 million in a
private placement financing by issuing a total of 3.5 million units, 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 to
investors at $2.00 per unit. See the “Business” section above for additional
details regarding this financing.
On June
16, 2009, we raised $3 million in a private placement financing by issuing 2.8
million shares of our Series B Preferred Stock. In connection with
this financing, we also cancelled all issued and outstanding Series A Warrants
and Series B Warrants that were held by the investor. See the
“Business” section above for additional details regarding this
financing.
On July
31, 2009, we purchased 100% of the issued and outstanding equity ownership of
Rupinvest from Esdras. 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 million shares of our common stock, with the
number of shares to be transferred, if any, to be calculated based on achieving
certain sales and gross margin goals by Premier Power Italy, Rupinvest’s
subsidiary, 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 Note 2 to our
consolidated financial statements, we believe that the following accounting
policies are the most critical to aid the reader in fully understanding and
evaluating this discussion and analysis:
Basis of Presentation –
The
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles accepted in the United States
(“GAAP”), and include the accounts of Premier Power Renewable Energy, Inc. and
its subsidiaries. All intercompany accounts and transactions have
been eliminated.
Inventories –
Inventories,
consisting primarily of raw materials, are recorded using the average cost
method, and are carried at the lower of cost or market.
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.
Goodwill and Other Intangible Assets
–
The Company does not amortize goodwill, but rather tests goodwill for
impairment at least annually. We determine the fair value using a weighted
market and income approach. Under the income approach, we calculate the
fair value of a reporting unit based on the present value of estimated future
cash flows. Under the market approach, we calculate the fair value of the
reporting unit using selected comparable company’s revenue multiples from the
Public Guideline
Companies
and apply the lowest revenue multiple to the Company’s revenue.
If the fair value of the reporting unit exceeds the carrying value of the net
assets including goodwill assigned to that unit, goodwill is not impaired.
If the carrying value of the reporting unit’s net assets including
goodwill exceeds the fair value of the reporting unit, then we determine the
implied fair value of the reporting unit’s goodwill. If the carrying value of a
reporting unit’s goodwill exceeds its implied fair value, then an impairment of
goodwill has occurred and we recognize an impairment of loss for the difference
between the carrying amount and the implied fair value of goodwill as a
component of operating income. We did not recognize any goodwill impairment
charges in 2009 and 2008. Intangible assets, consisting of a customer
list, trademarks, and employee contract are amortized over their estimated
useful lifes ranging from 2-17 years.
Fair Value of Financial Instruments
–
The carrying value reported for cash equivalents, accounts receivable,
prepaid expenses, other receivables, accounts payable, and accrued liabilities
approximated their respective fair values at each balance sheet date due to the
short-term maturity of these financial instruments.
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 a 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.
The
percentage of completion method requires the ability to estimate several
factors, including the ability of the customer to meet its obligations under the
contract, including the payment of amounts when due. If we determine that
collectability is not assured at the onset of a contract, we will defer revenue
recognition and use methods of accounting for the contract such as completed
contract method until such time we determine that collectability is reasonably
assured or through the completion of the project.
Revenue
related to distribution sales is recognized when we have received either a
purchase order or contract, deem delivery of product to have occurred, when the
title and risk of ownership have passed to the buyer and we determine that
collection is probable. Some Customers will pay the Company and ask
the Company to segregate and store the product separate from other
products. The Company considers the risk has passed when payment and
segregation has occurred.
Product Warranties –
The
Company warrants its projects for labor and materials associated with its
installations. The Company’s warranty is ten years in California and
generally five to ten years elsewhere in the U.S., depending upon each state’s
specific requirements. We provide a one year warranty in Spain for all
contracts. Italy provided a ten year warranty covering the labor and materials
associated with its installations. Since the Company does not have sufficient
historical data to estimate its exposure, we have looked to our historical data
and the historical data reported by other solar system installers. Solar panels
and inverters are warranted by the manufacturer for 25 years and 10 years,
respectively.
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. Prior
to September 2008, the Company was not subject to federal income tax.
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 December 31, 2009. The Company does not
expect there to be any material change to the assessment of uncertain tax
positions over the next twelve months.
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.
Contingent Consideration
Liability
– In connection with the acquisition of Rupinvest, contingent
consideration liability of $12 million was recorded at the time of the purchase.
The contingent consideration liability relates to the contingent issuance of 3
million shares to the sellers of Rupinvest. In accordance with FASB ASC
820 the Company estimates the fair value of the contingent consideration
liability at each reporting period, with changes in the estimated fair value
recorded in income.
The fair
value measurement assumes that the contingent consideration liability is
transferred to a market participant at the valuation date and that the
nonperformance risk related to the contingent consideration liability remains
constant. The Company estimates the fair value using the market price of its
shares since it believes this represents the present value of its future stock
returns, discounted at the Company’s required rate of return. The Company also
estimates the number of shares to be issued based on a number of financial
scenarios weighted based on their relative probability. The Company considers
the effect of counterparty performance risk in its fair value estimate. The
Company estimates the counterparty performance risk by comparing its borrowing
rate to those of U.S. treasury notes and uses the underlying spread to
discount the estimated fair value.
Summary
of 2009 Results of Operations
Our total
net sales for the year ended December 31, 2009 was $30.7 million, a decrease of
$13.5 million, or 30%, from the year ended December 31, 2008. U.S.
net sales was $14.0 million for the year ended December 31, 2009, a decrease of
$17.1 million, or 55%, from the prior year. Spain’s net sales were
$5.9 million for the year ended December 31, 2009, a decrease of $7.2 million,
or 55%, from the prior year. Our Italian operations provided $10.8
million of net sales in its first 5 months of operations. The
decrease in our net sales was primarily due to the overall economic environment,
the resulting decrease in and/or postponements of capital spending by our
customers, and the reduction in the pricing and cost of solar systems requiring
more installations sales to match the prior year’s net sales.
Our net
income for the year ended December 31, 2009, was $3.7 million, or $0.14 per
share, compared to net income of $0.8 million, or $0.03 per share, for year
ended December 31, 2008. Net income included $6.5 million associated
with changes in fair value of financial instruments. Our profitability is
primarily dependent upon revenue from sales to commercial, governmental,
residential, and equity fund customers. Profitability is also
affected by the costs and expenses associated with installation of
systems. Cost of sales decreased by $12.4 million, or 32%, in the
year ended December 31, 2009, compared to the prior fiscal year. The
decrease was primarily the result of cost reductions and lower
sales. Operating expenses increased by $4.0 million, or 84%, for the
year ended December 31, 2009 as compared to the year ended December 31, 2008,
due primarily to the acquisition of Premier Power Italy, the costs associated
with our first full fiscal year of being a public company following the reverse
merger in 2008, and stock-based compensation.
Sources
of Revenue
|
|
|
Year Ended December 31,
|
|
|
(Dollars
in thousands)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Net
sales:
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
13,987
|
|
|
$
|
31,074
|
|
|
|
(55
|
)%
|
|
Spain
|
|
|
5,919
|
|
|
|
13,164
|
|
|
|
(55
|
)%
|
|
Italy
|
|
|
10,844
|
|
|
|
-
|
|
|
|
|
|
|
Total
net sales
|
|
$
|
30,750
|
|
|
$
|
44,238
|
|
|
|
(30
|
)%
|
Our net
sales include revenue recognized under installation contracts using the
percentage of completion method of accounting. Additionally, we
derive net sales from distribution sales to customers in Italy and Spain. This
decrease in the United States is largely the result of three items: the
financial crisis, which slowed business development dramatically in the first
half of the year, the lack of available project finance as a result of the
Company’s focus on larger projects, and the fact that we had one large
commercial deal in the U.S. last year. The decrease in our Spanish
market is largely the result of more protracted sales process resulting from new
permitting laws in Spain that have taken permit timing from as little as one
month to more than 6 months. The growth in Italian net sales is a
result of the acquisition of our Italian subsidiary in the third quarter of
2009.
Cost
of sales
|
(Dollars
in thousands)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Cost
of Sales
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
12,383
|
|
|
$
|
27,229
|
|
|
|
(55
|
)%
|
|
Spain
|
|
|
5,051
|
|
|
|
11,482
|
|
|
|
(56
|
)%
|
|
Italy
|
|
|
8,858
|
|
|
|
|
|
|
|
|
|
|
Total
cost of sales
|
|
$
|
26,292
|
|
|
$
|
38,711
|
|
|
|
(32
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation included above
|
|
$
|
145
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
11.5
|
%
|
|
|
12.4
|
%
|
|
|
|
|
|
Spain
|
|
|
14.7
|
%
|
|
|
12.8
|
%
|
|
|
|
|
|
Italy
|
|
|
18.3
|
%
|
|
|
-
|
|
|
|
|
|
|
Total
|
|
|
14.5
|
%
|
|
|
12.5
|
%
|
|
|
|
|
Cost
of sales 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. Cost of sales for the U.S. decreased $14.8 million, or 55%,
for the year ended December 31, 2009 compared to the year ended December 31,
2008. The decrease was primarily the result of cost reductions and
lower sales. U.S. gross margin decreased to 11.5% due to the
increased competitive nature of the industry and the scope and size of projects
as smaller projects typically have lower gross margins. Cost of sales
for our Spanish operations decreased $6.4 million, or 56%, for the year ended
December 31, 2009 compared to the year ended December 31, 2008. The
decrease was primarily the result of a decrease in net sales. The
gross margin for our Spanish operations increased slightly to 14.7% and remains
competitive in the marketplace. The gross margin for our Italian
operations was 18.3% and is a combination of our higher margin solar
projects and our lower margin distribution margins.
Operating
Expenses
|
|
|
Year Ended
December 31,
|
|
|
(Dollars
in thousands)
|
|
2009
|
|
|
2008
|
|
|
Change
%
|
|
|
Sales
and marketing expenses
|
|
$
|
2,910
|
|
|
$
|
2,224
|
|
|
|
(31
|
)%
|
|
General
and administrative expenses
|
|
$
|
5,808
|
|
|
$
|
2,505
|
|
|
|
(132
|
)%
|
|
As
a percent of net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing expenses
|
|
|
9.5
|
%
|
|
|
5.0
|
%
|
|
|
|
|
|
General
and administrative expenses
|
|
|
18.9
|
%
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-Based
Compensation Included Above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing expenses
|
|
$
|
118
|
|
|
|
-
|
|
|
|
|
|
|
General
and administrative expenses
|
|
$
|
361
|
|
|
|
-
|
|
|
|
|
|
Sales
and Marketing Expenses
Sales
and marketing expenses consist primarily of personnel costs and costs related to
our sales force and marketing staff. They also include expenses
relating to advertising, brand building, marketing promotions and trade show
events, lead generation, and travel. Commissions are due and payable when
customer payment is received. Accordingly, selling and marketing
expense were higher in 2009 as a result of strong 2008 fourth quarter
revenues. Sales and marketing expense for the year ended December 31, 2009
increased by $.7 million, or 31%, compared to the year ended December 31, 2008,
which is due to the addition of our newly acquired Italian operations,
stock-based compensation, and the variability in sales commission expense
associated with the increase or decrease in product revenue.
General
and Administrative Expenses
General
and administrative expenses consist of personnel and related costs for
accounting, legal, information systems, human resources, and other
administrative functions. They also include professional service
fees, bad debt expense, other corporate expenses and related
overhead. General and administrative expenses increased by $3.3
million, or 132%, for the year ended December 31, 2009 compared to the year
ended December 31, 2008. The increase was attributable to higher
professional service fees incurred for the purchase of our Italian operations,
higher auditing and legal fees associated with being a public company for the
first full fiscal year following the reverse merger in 2008, first time Italian
operating expenses, and stock-based compensation.
Other
Income and Expenses
Other
income and expense consists of change in fair value of financial instruments,
interest income, interest expense, and other income (expense). Change
in fair value of financial instruments consists of gain on the fair value and
cancellation of warrant liability (Note 13) and changes in the fair value of
contingent consideration liability (Note 12). Other income consists
of gain on sale of a special purpose entity in Italy. For the year
ended December 31, 2009, interest expense increased by $7 thousand, or 9%,
compared to the year ended December 31, 2008, due to increased borrowing in
Spain.
Income
Tax Benefit
The
effective tax rate in the years ended December 31, 2009 and 2008 was (65.9)% and
4.5%, respectively. The effective tax rate in the year ended December
31, 2009 differed from the federal statutory rate of 34% primarily due to the
recognition of net operating losses.
Liquidity
Cash
Flows
The
Company generates cash from operations primarily from cash collections related
to its installation sales. Net cash flow used in operating activities
was $6.2 million in the year ended December 31, 2009, compared with net cash
used by operations of $.1 million for the year ended December 31,
2008. The decrease in net cash flow from operating activities was
primarily a result of the increase in costs and estimated earnings in excess of
billings on uncompleted contracts of $14.3 million for the solar projects in
Italy, operating loss of $4.3 million, increase in accounts receivable of $2.6
million, and decrease in billings in excess costs of $0.8 million, offset by an
increase of accounts payable and accrued liabilities of $15
million.
Net cash
flow used in investing activities was $0.3 million and $0.2 million for the
years ended December 31, 2009 and 2008, respectively. The decrease in
net cash flow from investing activities was due to the assets purchased in
our Italian acquisition.
Net cash
flow provided by financing activities was $4.5 million and $4.8 million for
the years ended December 31, 2009 and 2008, respectively. The
decrease in net cash flow from financing activities was mainly due to
proceeds from the issuance of preferred stock of $3 million and proceeds from
borrowings of $2.4 million. We used cash in financing activities to
pay down debt of $0.3 million and pay for costs related to share registration of
$.6 million.
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. Solar
power project development cycles can take several months to develop. In
certain of our markets, primarily Italy, it is not uncommon to receive payment
at the end of a project. This may require us to make an advancement of costs
prior to cash receipts. To date, we have financed these up-front construction
costs using working capital and cash on hand.
The
disruption in the credit markets has had a significant adverse impact on a
number of financial institutions. As of December 31, 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. Nonetheless, we cannot 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. We have in place a $7.0 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. The amount available for borrowing is limited by certain
financial calculations. At December 31, 2009, $0.3 million was available
under the Umpqua line. Thus, we believe that our current cash and cash
equivalents, anticipated cash flow from operations, 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 were used for 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 project
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
Line
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
$12.0 million in the event that we acquire another subsidiary and require
additional working capital for such subsidiary. The line of credit is
secured by its assets and by the assets of Premier Power California and Bright
Future. 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 December 31, 2009, the interest rate was
5%. As of December 31, 2009, there is $1.5 million outstanding under
the agreement with Umpqua Bank.
The
loan agreement with Umpqua Bank contains various financial condition covenants
with which we must comply, 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 out of compliance with
certain covenants as of December 31, 2009 primarily as a result of the
Contingent Consideration Liability. See note 12 to our consolidated
financial statements. As of April 2, 2010, the bank is aware of
the non-compliance and has not waived the non-compliance. The bank has not
issued a notice of default, nor instituted default rates, nor cut funding under
the line. We do not expect any of these events to occur and are currently
working with the bank to redefine our financial covenants.
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 December 31, 2009,
and the effect these obligations are expected to have on our liquidity and cash
flows in future periods.
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
Less than 1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
|
|
(in
thousands)
|
|
|
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
Indebtedness
|
|
$
|
2,352
|
|
|
$
|
1,777
|
|
|
$
|
570
|
|
|
$
|
5
|
|
|
Operating
Leases
|
|
|
350
|
|
|
|
102
|
|
|
|
198
|
|
|
|
50
|
|
|
|
|
$
|
2,702
|
|
|
$
|
1,879
|
|
|
$
|
768
|
|
|
$
|
55
|
|
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.
Recently
Issued Accounting Pronouncements
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB ASC
805 (FAS No. 141(R), “
Business
Combinations
” (“FASB 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 the Company’s 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 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 12).
In April
2009, the FASB issued FASB ASC 825-10-65 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 825-10-65 and FASB ASC 270 are effective for interim and
annual periods ending after June 15, 2009. The adoption of FASB ASC 825-10-65
and FASB ASC 270 did not have a material impact on the Company’s 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 the Company’s 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 its 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 its 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 August
2009, an update was made to
Fair Value Measurements and
Disclosures – Measuring Liabilities at Fair Value.”
This
update permits entities to measure the fair value of liabilities, in
circumstances in which a quoted price in an active market for an identical
liability is not available, using a valuation technique that uses a quoted price
of an identical liability when traded as an asset, quoted prices for similar
liabilities or similar liabilities when traded as assets or the income or market
approach that is consistent with the principles of
Fair Value Measurements and
Disclosures.
Effective upon issuance, the Company has adopted
this guidance. See Note 16.
In
October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on
Issue 00-21,
“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.
LEGAL
PROCEEDINGS
We are
not currently involved in any material legal proceedings, and we are not aware
of any material legal proceedings pending or threatened against
us. We are also not aware of any material legal proceedings involving
any of our directors, officers, or affiliates or any owner of record or
beneficially of more than 5% of any class of our voting securities.
In
connection with Rupinvest’ s purchase of the 10% noncontrolling interest in
Premier Power Italy from Esdras, Esdras has notified Rupinvest that it does not
believe that it was properly notified of the intent to acquire and believes
a premium on the purchase price was necessary. The Company
disagrees with this position. No legal proceedings have been
threatened. In the event, however, that legal
proceedings are conducted, we do not anticipate a material
exposure.
MANAGEMENT
Current
Management
Our
directors and executive officers, their ages, their respective offices and
positions, and their respective dates of election or appointment are as
follows:
|
Name
|
|
Age
|
|
Position Held
|
|
Officer/Director since
|
|
Dean
R. Marks
|
|
53
|
|
Chairman
of the Board, President, and Chief Executive Officer
|
|
September
9, 2008
|
|
Miguel
de Anquin
|
|
42
|
|
Chief
Operating Officer, Corporate Secretary, and Director
|
|
September
9, 2008
|
|
Frank
J. Sansone
|
|
38
|
|
Chief
Financial Officer
|
|
November
5, 2009
|
|
Kevin
Murray
|
|
60
|
|
Director
|
|
December
8, 2008
|
|
Robert
Medearis
|
|
77
|
|
Director
|
|
December
8, 2008
|
|
Tommy
Ross
|
|
56
|
|
Director
|
|
March
18, 2009
|
Business
Experience Descriptions
Set forth
below is a summary of our executive officers’ and directors’ business experience
for the past 5 years. The experience and background of each of the directors, as
summarized below, were significant factors in their previously being nominated
as directors of the Company.
Dean
R. Marks - Chairman of the Board, President, and Chief Executive
Officer
Dean R.
Marks has been a key player in the solar sector since the early 1980's. In 1984,
Mr. Marks established a solar sales organization with over 2,000 employees in
over 26 markets across the nation. Since that time, Mr. Marks has pioneered
multiple applications of solar energy in the residential, commercial, and
industrial market. As President and CEO of Premier Power California since 2001,
he built Premier Power California into one of the most stable market leaders in
the industry. Mr. Marks has overseen Premier Power California’s expansion from
residential to commercial, agricultural, and industrial markets as well as
international expansion. Under Mr. Marks leadership, Premier Power California
has distinguished itself from the competition by developing a number of
innovative and propriety installation systems in use today. Mr. Marks has served
on the California Solar Energy Industry Association (CALSEIA) board and has been
an active participant in the solar industry for over 20 years. He has
co-authored several preeminent papers promoting renewable energy. Mr. Marks
holds a Bachelor of Science degree from Auburn University, with special emphasis
in Environmental Science.
Miguel
de Anquin - Director, Chief Operating Officer, and Corporate
Secretary
Miguel de
Anquin serves as Executive Vice President and President of World Wide Sales at
Premier Power California since 2001. In his role at Premier Power California,
Mr. de Anquin achieved company success in growing sales and profits. An
accomplished corporate strategist, his strategic approach to building a business
is reflected in his work as Director of Marketing for Nordic Information System
and Next Information System. He was a Technology Advisor for General Electric
and IBM and he developed the data security auditing system for Bank of America.
At Premier Power California, Mr. de Anquin’s understanding of international
opportunities, his vision and expertise in business performance have driven
notable enterprise wide growth. Mr. de Anquin led Premier Power California’s
expansion into international markets, and he has increased Premier Power
California's profitability through brand revitalization that included major
shifts in brand strategy, operations, marketing communications, and sales
tactics. He has focused Premier Power California on data driven decision making
processes that have separated Premier Power California from its competitors. He
holds a Masters in Business Administration from the University of California at
Davis and a Bachelor of Science degree in Computer Science from the Universidad
de Belgrano in Buenos Aires, Argentina.
Frank
J. Sansone - Chief Financial Officer
Mr.
Sansone was appointed Chief Financial Officer of the Company on November 5,
2009. He has over 16 years of finance experience. Prior to
his appointment as the registrant’s Chief Financial Officer, Mr. Sansone was the
Chief Financial Officer and a member of the Board of Directors of LiveOffice
LLC, a provider of software-as-a service email archiving and Hosted Exchange
2007 solutions, from 2008 to 2009. From 2002 to 2008, he was the
Chief Financial Officer of Guidance Software, Inc., a Nasdaq-listed company with
operations in digital investigative solutions. Mr. Sansone graduated
from the University of La Verne with a bachelor’s degree in
accounting. He is an inactive member of the American Institute
of Certified Public Accountants and the California Society of Certified Public
Accountants. Mr. Sansone is currently a member of the Board of
Directors of Ditech Networks, Inc., a Nasdaq-listed company, and one other
private company.
Kevin
Murray - Director
Mr.
Murray was elected to the board of directors on December 8, 2008. He
is currently a Senior Vice President at the William Morris Agency (“WMA”),
working primarily in its corporate consulting division, a position he has held
since re-joining WMA in 2007 after serving twelve years in the California State
Legislature. From 1998 to 2006, Mr. Murray was a Senator in the
California State Senate. Concurrent to his directorship with the
Company, Mr. Murray sits on the board of the Federal Home Loan Bank of San
Francisco. Mr. Murray graduated from California State University,
Northridge with a degree in business administration and accounting and holds a
Masters of Business Administration from Loyola Marymount University and a Juris
Doctorate from Loyola Law School.
Robert
Medearis - Director
Mr.
Medearis was elected to the board of directors on December 8, 2008. He is
currently retired as a management consultant and professor, and has been for the
past 5 years, but he sits on the board of several private companies, including
Solaicx, Inc., Geographic Expeditions, and Visual Network Design Inc., and the
non-profit organization Freedom From Hunger. Mr. Medearis graduated from
Stanford University with a degree in civil engineering and holds a Masters of
Business Administration from the Harvard Graduate School of Business
Administration.
Tommy
Ross - Director
Mr. Ross
was elected to the board of directors on March 18, 2009. He is currently
the President and Chief Executive Officer of Pinnacle Strategic Group, a
business and political consulting firm. From 2003 to 2008, he was employed
at Southern California Edison, at which he served as Vice President of Public
Affairs from 2007 to 2008. Mr. Ross’ experience in the political arena
also include holding positions to which he was appointed by California Governor
Arnold Schwarzenegger, former California Governor Pete Wilson, and former
California Governor Jerry Brown. He is the former Chairman and founding
member of the California African American Political Action Committee, a Lincoln
Fellow at The Claremont Institute, and the founder, Chairman and President of
The Research and Policy Institute of California. Mr. Ross graduated from
Claremont Men’s College with a degree in political
science.
Family
Relationships
There are
no family relationships among our directors and executive officers.
Involvement
in Certain Legal Proceedings
None of
our directors or executive officers has, during the past ten years:
|
|
·
|
Had any petition under the
federal bankruptcy laws or any state insolvency law filed by or against,
or had a receiver, fiscal agent, or similar officer appointed by a court
for the business or property of such person, or any partnership in which
he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such
filing;
|
|
|
·
|
Been convicted in a criminal
proceeding or a named subject of a pending criminal proceeding (excluding
traffic violations and other minor
offenses);
|
|
|
·
|
Been the subject of any order,
judgment, or decree, not subsequently reversed, suspended, or vacated, of
any court of competent jurisdiction, permanently or temporarily enjoining
him from, or otherwise limiting, the following
activities:
|
|
|
(i)
|
Acting
as a futures commission merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the Commodity Futures Trading
Commission, or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank,
savings and loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such
activity;
|
|
|
(ii)
|
Engaging
in any type of business practice;
or
|
|
|
(iii)
|
Engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of federal or state
securities laws or federal commodities
laws;
|
|
|
·
|
Been the subject of any order,
judgment, or decree, not subsequently reversed, suspended, or vacated, of
any federal or state authority barring, suspending, or otherwise limiting
for more than 60 days the right of such person to engage in any activity
described in (i) above, or to be associated with persons engaged in any
such activity;
|
|
|
·
|
Been found by a court of
competent jurisdiction in a civil action or by the SEC to have violated
any federal or state securities law, where the judgment in such civil
action or finding by the SEC has not been subsequently reversed,
suspended, or vacated;
|
|
|
·
|
Been found by a court of
competent jurisdiction in a civil action or by the Commodity Futures
Trading Commission to have violated any federal commodities law, where the
judgment in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended, or
vacated;
|
|
|
·
|
Been
the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation
of:
|
|
|
(i)
|
Any
federal or state securities or commodities law or
regulation;
|
|
|
(ii)
|
Any
law or regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary or permanent injunction, order
of disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order;
or
|
|
|
(iii)
|
Any
law or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity; or
|
|
|
·
|
Been the subject of, or a party
to, any sanction or order, not subsequently reversed, suspended or
vacated, of any self-regulatory organization (as defined in Section
3(a)(26) of the Securities Exchange Act of 1934), any registered entity
(as defined in Section 1(a)(29) of the Commodity Exchange Act), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
|
Board
of Directors
Our board
of directors is currently composed of five members. All members of
our board of directors serve in this capacity until their terms expire or until
their successors are duly elected and qualified. Our bylaws provide
that the authorized number of directors will be not less than one.
Board
Committees; Director Independence
Our board
of directors approved the charters for our audit committee and compensation
committee on December 19, 2008. The audit committee and compensation
committee were formed on March 18, 2009. The members of the audit
committee are Kevin Murray, Robert Medearis, and Tommy Ross, and Mr. Medearis
chairs the audit committee. The members of the compensation committee
are Kevin Murray, Robert Medearis, and Tommy Ross, and Mr. Murray chairs the
compensation committee.
Three of
the members of our board of directors - Kevin Murray, Robert Medearis, and Tommy
Ross - are independent as defined by the SEC and the Nasdaq Capital
Market.
Diversity
While the Company does not have a policy regarding diversity of its
board members, diversity is one of a number of factors that is typically taken
into account in identifying board nominees. We believe that we have a
very diverse board of directors in terms of previous business experience
and educational and personal background of the members of our
board.
Compensation
Committee Interlocks and Insider Participation
No
interlocking relationship exists between our board of directors and the board of
directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.
Section
16(a) of the Exchange Act
We are
not subject to reporting obligations under Section 16(a) of the Exchange Act as
we are registered under Section 15(d) of the Exchange Act rather than Section
12(b) or Section 12(g).
Code
of Business Conduct and Ethics
We have
adopted a code of ethics that applies to all directors, officers, and employees,
including our Chief Executive Officer and Chief Financial Officer. A
copy of the code of ethics is attached as Exhibit 14.1 to our Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
November 7, 2008.
EXECUTIVE
COMPENSATION
The
following summary compensation table indicates the cash and non-cash
compensation earned during the fiscal years ended December 31, 2009, 2008,
and 2007 by (i) our Chief Executive Officer (principal executive officer), (ii)
our Chief Financial Officer (principal financial officer), (iii) the three most
highly compensated executive officers other than our CEO and CFO who were
serving as executive officers at the end of our last completed fiscal year,
whose total compensation exceeded $100,000 during such fiscal year ends, and
(iv) up to two additional individuals for whom disclosure would have been
provided but for the fact that the individual was not serving as an executive
officer at the end of our last completed fiscal year, whose total compensation
exceeded $100,000 during such fiscal year ends.
Summary
Compensation Table
|
Name and
Principal
Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Option
Awards
($)(2)
|
|
|
Non-Equity
Incentive
Plan
Compensation ($)
|
|
|
Non-qualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
( $)
|
|
|
Total
($)
|
|
|
Dean
R. Marks,
|
|
2009
|
|
$
|
184,231
|
(3)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,392
|
(4)
|
|
$
|
229,727
|
|
|
Chairman
of the Board,
|
|
2008
|
|
$
|
158,077
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
158,077
|
|
|
President,
and CEO
|
|
2007
|
|
$
|
159,466
|
|
|
$
|
1,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,322
|
(5)
|
|
$
|
170,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miguel
de Anquin,
|
|
2009
|
|
$
|
184,231
|
(3)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,392
|
(4)
|
|
$
|
229,727
|
|
|
COO,
former CFO, Corporate
|
|
2008
|
|
$
|
153,462
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
153,462
|
|
|
Secretary,
and Director
|
|
2007
|
|
$
|
126,624
|
|
|
$
|
1,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,037
|
(6)
|
|
$
|
136,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Sansone,
|
|
2009
|
|
$
|
24,231
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,768
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,999
|
|
|
CFO
(7)
|
|
2008
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
2007
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teresa
Kelley
|
|
2009
|
|
$
|
130,931
|
|
|
$
|
—
|
|
|
$
|
740
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
131,671
|
|
|
former
CFO (8)
|
|
2008
|
|
$
|
25,962
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,962
|
|
|
|
|
2007
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
Reflects dollar amount expensed
by the Company during the applicable fiscal year for financial statement
reporting purposes pursuant to FASB ASC 805. (FAS 123R)
requires the Company to determine the overall value of the stock award as
of the date of grant, and to then expense that value over the service
period over which the stock award becomes exercisable
(vested). As a general rule, for time in service based stock
awards, the Company will immediately expense any stock award or portion
thereof that is vested upon grant, while expensing the balance on a pro
rata basis over the remaining vesting term of the stock
award.
|
|
(2)
|
Reflects dollar amount expensed
by the Company during the applicable fiscal year for financial statement
reporting purposes pursuant to FASB ASC 805. (FAS 123R)
requires the Company to determine the overall value of the options as of
the date of grant, and to then expense that value over the service period
over which the options becomes exercisable (vested). As a
general rule, for time in service based options, the Company will
immediately expense any option or portion thereof that is vested upon
grant, while expensing the balance on a pro rata basis over the remaining
vesting term of the option.
|
|
(3)
|
The amount shown includes $4,231
that was earned during the 2009 fiscal year as a result of an extra pay
period during the year.
|
|
(4)
|
The amount shown represents a
$12,560 pay-out for sick leave, an $8,400 automobile allowance, and $432
in life insurance premiums paid for the named executive
officer.
|
|
(5)
|
The amount shown represents
compensation earned under the 401(k)
Plan.
|
|
(6)
|
The amount shown represents the
following: (a) $67 as the dollar amount recognized for life insurance
premiums paid for the named executive officer, and (b) $7,970 as
compensation earned under the 401(k)
Plan.
|
|
(7)
|
Mr. Sansone was appointed as our
Chief Financial Officer on November 5,
2009.
|
|
(8)
|
Ms. Kelley was our Chief
Financial Officer from October 24, 2008 to her resignation on October 30,
2009.
|
Grants
of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
or
Base
|
|
|
Grant
Date
|
|
|
|
|
|
|
Estimated
Future Payouts Under
|
|
|
Estimated
Future Payouts Under
|
|
|
Number
|
|
|
Number
of
|
|
|
Price
of
|
|
|
Fair
Value
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Awards
|
|
|
Equity
Incentive Plan Awards
|
|
|
of
Shares
|
|
|
Securities
|
|
|
Option
|
|
|
of
Stock
|
|
|
|
|
Grant
|
|
Thres-
|
|
|
Target
|
|
|
Max-
|
|
|
Thres-
|
|
|
Target
|
|
|
Max-
|
|
|
of
Stock
|
|
|
Underlying
|
|
|
Awards
|
|
|
and
Option
|
|
|
Name
|
|
Date
|
|
hold
($)
|
|
|
($)
|
|
|
imum
($)
|
|
|
hold
($)
|
|
|
($)
|
|
|
imum
($)
|
|
|
or
Units (#)
|
|
|
Options
(#)
|
|
|
($/Sh)
|
|
|
Awards
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean
Marks (2)
|
|
1/9/09
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
―
|
|
|
|
83,932
|
|
|
$
|
4.675
|
|
|
$
|
24,104
|
|
|
Miguel
de
Anquin(2)
|
|
1/9/09
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
―
|
|
|
|
83,932
|
|
|
$
|
4.675
|
|
|
$
|
24,104
|
|
|
Teresa
Kelley (3)(4)
|
|
1/9/09
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
―
|
|
|
|
100,000
|
|
|
$
|
4.25
|
|
|
$
|
36,399
|
|
|
Teresa
Kelley (3)(5)
|
|
1/9/09
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
―
|
|
|
|
250,000
|
|
|
$
|
4.25
|
|
|
$
|
60,706
|
|
|
Teresa
Kelley (3)
|
|
8/28/09
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
200
|
|
|
|
―
|
|
|
$
|
―
|
|
|
$
|
740
|
|
|
Frank
Sansone (4)
|
|
11/5/09
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
―
|
|
|
|
250,000
|
|
|
$
|
2.90
|
|
|
$
|
9,767
|
|
|
(1)
|
Reflects dollar amount expensed
by the Company during the applicable fiscal year for financial statement
reporting purposes pursuant to FAS
123R.
|
|
(2)
|
The vesting schedule for these
options is as follows: 20% on each of the 1
st
, 2
nd
, 3
rd
, 4
th
, and 5
th
year anniversary of the grant
date.
|
|
(3)
|
Ms. Kelley was our Chief
Financial Officer from October 24, 2008 to her resignation on October 30,
2009. Ms. Kelley’s grants expired on January 31,
2010.
|
|
(4)
|
The vesting schedule for these
options is as follows: 25% on each of the 1
st
, 2
nd
, 3
rd
, and 4
th
year anniversary of the grant
date.
|
|
(5)
|
The vesting schedule for these
options is as follows: 33.33% on each of the 2
nd
, 3
rd
, and 4
th
year anniversary of the grant
date.
|
Employment
Agreements
The
following are summaries of our employment agreements with our current and former
executive officers whose compensation is listed in the Summary Compensation
Table above.
The
Company entered into an Employment Agreement with Frank Sansone on November 5,
2009 in connection with his services as Chief Financial Officer over a four-year
term. Mr. Sansone’s compensation will consist of an annual base
salary of $180,000 and options granted under the Company’s 2008 Equity Incentive
Plan to purchase an aggregate 250,000 shares of the Company’s common stock,
exercisable at a price equal to the closing price of the Company’s common stock
on the day the Board of Directors approves the option grant. The
stock options will vest 25% per year for each year of employment from the date
of grant. A sale of over 50% of the Company’s common stock to a third party will
trigger accelerated vesting where the portion that would have vested at the next
annual anniversary of the grant date will vest in full on the date of the
triggering event. The Company agreed to indemnify Mr. Sansone against any claims
arising from his services as Chief Financial Officer unless such claims are due
to his gross negligence or misconduct. The Company may terminate Mr.
Sansone’s employment during the first 90 days of employment by providing four
days’ written notice or at any time without notice for cause. After
the first 90 days of employment, the Company may terminate the Employment
Agreement without cause upon a triggering event. In the event the
Company terminates Mr. Sansone without cause after the first 90 days of
employment, Mr. Sansone is entitled to a severance payment equal to six months
of his annual compensation. Mr. Sansone agreed not to enter into any
business with operations that compete directly with the Company for a period of
three years after his employment agreement terminates.
The
Company entered into an Employment Agreement with Teresa Kelley on October 24,
2008 for her services as Chief Financial Officer. Ms. Kelley’s annual
compensation is $150,000. She will receive an annual 20% bonus based on her
efforts in helping the Company achieve the following targets: minimum growth
revenue of 80% in the first year of her employment, 80% growth in the second
year, 70% growth in the third year, and 60% growth in the fourth year (each
growth revenue percentage which may be revised by the Company’s Chief Executive
Officer over the term of Ms. Kelley’s office); annual EBITDA and net income in
excess of the prior year’s EBIDTA and net income; net income margins in excess
of 5%; and acquisitions to secure revenue growth, margin growth, and market
share domestically and internationally. These goals are closely
monitored by the Chief Executive Officer and Board of Directors, and Ms.
Kelley’s efforts will be measured by quarterly and annual performance
evaluations by the Chief Executive Officer and Chief Operating Officer, except
that Ms. Kelley’s efforts at helping the Company acquire other businesses will
be measured quarterly by the Board of Directors, which will review her reports
analyzing potential acquisitions. Ms. Kelley will also receive, for her first
year of employment, 100,000 stock options to purchase the Company’s common
stock, exercisable at a price equal to the closing price of the Company’s common
stock on the day the Board approves the option issuance. Such stock options will
vest 25% per year for each year of employment from the date of issue. For her
second year of employment, Ms. Kelley will receive an additional 125,000 stock
options to purchase the Company’s common stock, exercisable at a price equal to
the closing price of the Company’s common stock on the day the Board approves
the stock issuance. Such stock options will vest 33% per year for each year of
employment from the date of issue. In the event of any sale, merger, acquisition
of over 51% of the Company’s capital stock by a third party, or other change of
control event, any stock options issued to Ms. Kelley under the Employment
Agreement will be fully vested for such year. Ms. Kelley resigned on
October 31, 2009.
Premier
Power California entered into an Employment Agreement with Dean R. Marks on
August 22, 2008 for his services as its President and Chief Executive Officer.
Mr. Marks’ total annual salary is $180,000, and he is to receive additional
compensation in the form of, and based on, the following: (i) 0.5% of Premier
Power California’s annual earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) in excess of $200,000 if Premier Power California’s
annual EBITDA margin is less than 5%, and (ii) 1.5% of Premier Power
California’s annual EBITDA in excess of $200,000 if Premier Power California’s
annual EBITDA margin is greater than 5%, both forms of additional compensation
of which is due to Mr. Marks within 90 days of Premier Power California’s fiscal
year-end and which payments will be accelerated upon a sale of Premier Power
California, merger involving Premier Power California, or public offering of
Premier Power California’s securities. Mr. Marks is entitled to a severance
payment of $180,000 upon termination by Premier Power California without cause
if such termination occurs between December 31, 2008 and December 31, 2010, and
a severance payment of $90,000 upon termination by Premier Power California
without cause if such termination occurs between December 31, 2010 and the
expiration of the agreement. The term of the agreement is for five
years. On August 22, 2008, Mr. Marks also entered into a Non-Disclosure and
Non-Competition Agreement with Premier Power California in connection with his
employment.
Premier
Power California entered into an Employment Agreement with Miguel de Anquin on
August 22, 2008 for his services as its Executive Vice President of Worldwide
Operations. Mr. de Anquin’s total annual salary is $180,000, and he is to
receive additional compensation in the form of, and based on, the following: (i)
0.5% of Premier Power California’s annual EBITDA in excess of $200,000 if
Premier Power California’s annual EBITDA margin is less than 5%, and (ii) 1.5%
of Premier Power California’s annual EBITDA in excess of $200,000 if Premier
Power California’s annual EBITDA margin is greater than 5%, both forms of
additional compensation of which is due to Mr. de Anquin within 90 days of
Premier Power California’s fiscal year-end and which payments will be
accelerated upon a sale of Premier Power California, merger involving Premier
Power California, or public offering of Premier Power California’s securities.
Mr. de Anquin is entitled to a severance payment of $180,000 upon termination by
Premier Power California without cause if such termination occurs between
December 31, 2008 and December 31, 2010, and a severance payment of $90,000 upon
termination by Premier Power California without cause if such termination occurs
between December 31, 2010 and the expiration of the agreement. The term of the
agreement is for five years. On August 22, 2008, Mr. de Anquin also entered into
a Non-Disclosure and Non-Competition Agreement with Premier Power California in
connection with his employment.
Outstanding
Equity Awards at Fiscal Year-End
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units,
or
Other
Rights
That
Have Not
Vested (#)
|
|
|
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units,
or Other
Rights That
Have Not
Vested (#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean
Marks
|
|
|
16,786
|
(1)
|
|
|
67,146
|
(1)
|
|
|
―
|
|
|
$
|
4.675
|
|
1/9/19
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
Miguel
de Anquin
|
|
|
16,786
|
(1)
|
|
|
67,146
|
(1)
|
|
|
―
|
|
|
$
|
4.675
|
|
1/9/19
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
Frank
Sansone
|
|
|
―
|
|
|
|
250,000
|
(2)
|
|
|
―
|
|
|
$
|
2.90
|
|
11/5/19
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
(1)
|
20%
of this named executive officer’s options vest(ed) on January 1, 2010,
January 1, 2011, January 1, 2012, January 1, 2013, and January 1,
2014.
|
|
(2)
|
25%
of this named executive officer’s options vest on November 5, 2010,
November 5, 2011, November 5, 2012, and November 5,
2013.
|
Director
Compensation
The
following table provides compensation information for our directors during the
fiscal year ended December 31, 2009:
|
Name
|
|
Fees
Earned or
Paid in Cash
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Option
Awards ($)
|
|
|
Non-Equity
Incentive Plan
Compensation ($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings ($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean
Marks (2)
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miguel
de Anquin (2)
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
Murray
|
|
$
|
23,750
|
|
|
$
|
58,333
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
82,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Medearis
|
|
$
|
32,000
|
|
|
$
|
58,333
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
90,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tommy
Ross
|
|
$
|
26,250
|
|
|
$
|
41,438
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
―
|
|
|
$
|
67,688
|
|
|
(1)
|
Reflects
dollar amount expensed by the Company during the applicable fiscal year
for financial statement reporting purposes pursuant to FAS
123R. FAS 123R requires the Company to determine the overall
value of the stock award as of the date of grant, and to then expense that
value over the service period over which the stock award becomes
exercisable (vested). As a general rule, for time in service
based stock awards, the Company will immediately expense any stock award
or portion thereof that is vested upon grant, while expensing the balance
on a pro rata basis over the remaining vesting term of the stock
award.
|
|
(2)
|
This
individual’s compensation as a director is reflected in the Summary
Compensation Table above.
|
On
December 19, 2008, the Company entered into an Amended and Restated Agreement to
Serve as Member of the Board of Directors with Kevin Murray for his services as
director, which was amended by the Second Amended and Restated Agreement to
Serve as Member of the Board of Directors entered into by the parties on March
25, 2010. Pursuant to the terms of the agreement, Mr. Murray agreed
to serve on the Board until October 15, 2011, such term being subject to
re-election at our subsequent annual meeting of shareholders. Mr.
Murray is required to attend at least two Board meetings via teleconference and
at least two Board meetings in person per year, and he will be compensated in
cash for his services to the Board with $2,500 per Board meeting attended in
person or by telephone and $1,000 per month. Meetings attended by
telephone for which $2,500 cash compensation is due must be a meeting
considered, at our sole discretion, to be of substantive significance and not
incidental to Mr. Murray’s role as a director. Mr. Murray will also
receive 50,000 shares of the our common stock according to the following
schedule: (i) 16,500 common stock shares after the first year of service on the
Board, which shares will be issued to Mr. Murray even if the our shareholders
fail to re-elect Mr. Murray at the first annual meeting of shareholders
following Mr. Murray’s election to the Board, (ii) 16,500 common stock shares
after the second year of service on the Board, and (iii) 17,000 common stock
shares after the third year of service on the Board.
On
December 19, 2008, the Company entered into an Amended and Restated
Agreement to Serve as Member of the Board of Directors with Robert Medearis for
his services as a director, which was amended by the Second Amended and Restated
Agreement to Serve as Member of the Board of Directors entered into by the
parties on March 25, 2010. Pursuant to the terms of the agreement,
Mr. Medearis agreed to serve on the Board until October 15, 2011, such term
being subject to his re-election at the our subsequent annual meeting of
shareholders. Mr. Medearis is required to attend at least two Board
meetings via teleconference and at least two Board meetings in person per
year. Mr. Medearis will be compensated in cash for his services to
the Board with $2,500 per Board meeting attended in person or by telephone and
$1,000 per month. Meetings attended by telephone for which $2,500
cash compensation is due must be a meeting considered, at our sole discretion,
to be of substantive significance and not incidental to Mr. Medearis’ role as a
director. Mr. Medearis will also receive 50,000 shares of our common
stock according to the following schedule: (i) 16,500 common stock shares after
the first year of service on the Board, which shares will be issued to Mr.
Medearis even if our shareholders fail to re-elect Mr. Medearis to the Board at
the first annual meeting of shareholders following Mr. Medearis’ election to the
Board, (ii) 16,500 common stock shares after the second year of service on
the Board, and (iii) 17,000 common stock shares after the third year of service
on the Board.
On March
23, 2009, the Company entered into a Director Agreement with Tommy Ross for his
services as a director, which was amended by the Amended and Restated Director
Agreement entered into by the parties on March 25, 2010. Pursuant to
the terms of the agreement, Mr. Ross agreed to serve on the Board until March
11, 2011, such term being subject to re-election at our subsequent annual
meeting of shareholders. Mr. Ross is required to attend at least two
Board meetings via teleconference and at least two Board meetings in person per
year, and he will be compensated in cash for his services to the Board with
$2,500 per Board meeting attended in person or by telephone and $1,000 per
month. Meetings attended by telephone for which $2,500 cash
compensation is due must be a meeting considered, at our sole discretion, to be
of substantive significance and not incidental to Mr. Ross’ role as a
director. Mr. Ross will also receive 50,000 shares of our common
stock according to the following schedule: (i) 16,500 common stock shares after
the first year of service on the Board, which shares will be issued to Mr. Ross
even if our shareholders fail to re-elect Mr. Ross at the first annual meeting
of shareholders following Mr. Ross’ election to the Board, (ii) 16,500 common
stock shares after the second year of service on the Board, and (iii) 17,000
common stock shares after the third year of service on the
Board.
We are
required to maintain a Directors’ Errors and Omissions insurance policy insuring
the entire Board, including Messrs. Murray, Medearis, and Ross for a policy
amount of no less than $5,000,000, and in the event the policy coverage is
insufficient to cover losses occasioned by actions of the Board, we also agreed
to indemnify and hold each of Messrs. Murray, Medearis, and Ross harmless from
and against any loss, damages, costs, expenses, liabilities, and or causes of
action that may arise as a result of any of his dutiful and responsible
performance of each of his duties as a Board member.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of our
common stock as of March 10, 2010, for each of the following
persons:
|
|
•
|
each of our directors and each of
the named executive
officers;
|
|
|
•
|
all directors and named executive
officers as a group; and
|
|
|
•
|
each person who is known by us to
own beneficially 5% or more of our common
stock.
|
Beneficial
ownership is determined in accordance with the rules of the SEC. Unless
otherwise indicated in the table, the persons and entities named in the table
have sole voting and sole investment power with respect to the shares set forth
opposite the stockholder’s name. Unless otherwise indicated, the address of each
beneficial owner listed below is 4961 Windplay Drive, Suite 100, El Dorado
Hills, California 95762. The percentage of class beneficially owned set forth
below is based on 29,083,250 shares of common stock outstanding on March 10,
2010.
|
Name and Position
|
|
Number of Shares of
Common Stock
Beneficially Owned (1)
|
|
|
% of Shares of Common
Stock Beneficially
Owned (1)(2)
|
|
|
Dean
R. Marks,
Chairman
of the Board, President, and Chief Executive Officer
|
|
|
11,256,601
|
(3)
|
|
|
38.7
|
%
|
|
Miguel
de Anquin,
Chief
Operating Officer, Corporate Secretary, and Director
|
|
|
6,761,424
|
(4)
|
|
|
23.2
|
%
|
|
Frank
Sansone,
Chief
Financial Officer
|
|
|
500
|
|
|
|
*
|
|
|
Kevin
Murray,
Director
|
|
|
16,500
|
|
|
|
*
|
|
|
Robert
Medearis,
Director
|
|
|
16,500
|
|
|
|
*
|
|
|
Tommy
Ross,
Director
|
|
|
2,690
|
(5)
|
|
|
*
|
|
|
Teresa
Kelley,
Former
Chief Financial Officer (6)
|
|
|
200
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
|
Bjorn
Persson
|
|
|
2,560,699
|
(7)
|
|
|
8.8
|
%
|
|
Genesis
Capital Advisors, LLC (8)
|
|
|
1,580,598
|
|
|
|
5.4
|
%
|
|
Vision
Opportunity Master Fund, Ltd. (9)
|
|
|
2,905,022
|
(10)
|
|
|
9.99
|
%(10)
|
|
|
|
|
|
|
|
|
|
|
|
All Executive Officers and
Directors as a Group
(6 persons)
|
|
|
18,054,215
|
|
|
|
62.0
|
%
|
|
(1)
|
Under
Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power
to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the
date as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually
outstanding.
|
|
(2)
|
Pursuant
to the terms of the 2008 share exchange, we issued 24,218,750 shares of
common stock, equal to approximately 93.1% of our issued and outstanding
common stock as of the closing date of the 2008 share exchange. After the
issuance of shares in connection with the closing of the 2008 share
exchange, there were approximately 26,018,750 issued and outstanding
shares of our common stock. Percentage totals may vary slightly due to
rounding. Also, in connection with the closing of the $7 Million
Financing, we issued a total of 3,500,000 units to one accredited
investor, each unit consisting of one share of our Series A Preferred
Stock, one-half of one Series A Warrant, and one-half of one Series B
Warrant. Each one share of Series A Preferred Stock will be convertible
into one share of our common stock. Each Series A Warrant and
Series B Warrant entitled the holder to purchase one share of our common
stock at an exercise price of $2.50 and $3.00 per share, respectively, of
our common stock. On June 16, 2009, all of the Series A Warrants and
Series B Warrants held by this holder were cancelled by the
Company.
|
|
(3)
|
This
number includes 16,786 shares of common stock issuable upon exercise of
stock options that were granted to this stockholder on January 9, 2009,
200 shares of common stock held by the stockholder’s wife, and 5,400
shares of common stock issuable upon exercise of stock options that were
granted to this stockholder’s wife on January 9,
2009.
|
|
(4)
|
This
number includes 16,786 shares of common stock issuable upon exercise of
stock options that were granted to this stockholder on January 9,
2009.
|
|
(5)
|
This
number includes an aggregate 1,270 shares of common stock held by the
shareholder’s children, and 370 shares of common stock held in the
stockholder’s IRA account.
|
|
(6)
|
The
address for this stockholder is 4135 Meadow Wood Drive, El Dorado Hills,
CA 95762.
|
|
(7)
|
This
number includes 13,573 shares of common stock issuable upon exercise of
stock options that were granted to this stockholder on January 9,
2009.
|
|
(8)
|
The
address for this stockholder is 15760 Ventura Blvd., Suite 1550, Encino,
CA 91436. Ronald Andrikian and Charles Gilreath, as the members of this
stockholder, have shared dispositive and voting power over these
securities and may be deemed to be the beneficial owner of these
securities.
|
|
(9)
|
The
address for this stockholder is c/o Ogier Fiduciary Services (Cayman)
Limited, 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9007, Cayman Islands.
Adam Benowitz, as the managing member of Vision Capital Advisors, LLC, the
investment advisor to this stockholder, has dispositive and voting power
over these securities and may be deemed to be the beneficial owner of
these securities.
|
|
(10)
|
This
number includes 2,178,000 shares of common stock and 471,359 shares
of common stock issuable upon conversion of 471,359 shares of our Series A
Preferred Stock, which are presently convertible. This number does not
include (i) 3,028,641 shares of common stock underlying its shares of
Series A Preferred Stock, (ii) 2,800,000 shares of common stock underlying
its shares of Series B Preferred Stock, or (iii) 1,600,000 shares of
common stock underlying an option to purchase such shares because each of
these securities held by the stockholder contains a restriction on
conversion or exercise, as the case may be, limiting such holder’s ability
to convert or exercise to the extent that such conversion or exercise
would cause the beneficial ownership of the holder, together with its
affiliates, to exceed 9.99% of the number of shares of common stock
outstanding immediately after giving effect to the issuance of shares of
common stock as a result of a conversion or exercise. The stockholder may
waive this limitation upon 61 days’ notice to the Company. As
of April 2, 2010, however, the Company has not received any such
notice.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth
below are our related party transactions since January 1, 2009:
On June
16, 2009, we cancelled 3,500,000 warrants held by Vision Opportunity Master
Fund, Ltd., a shareholder of the Company, pursuant to the terms of a Securities
Purchase Agreement we entered into with Vision under which we sold Vision
2,800,000 shares of our Series B Convertible Preferred Stock. This cancellation
resulted in the elimination of all our issued and outstanding warrants. We
recorded $1,435,076 as a gain on share settled debt from this
cancellation.
DESCRIPTION
OF SECURITIES
The
following information describes our capital stock and provisions of our
certificate of incorporation and our bylaws, all as in currently effect. This
description is only a summary. The reader should also refer to our certificate
of incorporation and bylaws that have been incorporated by reference or filed
with the SEC as exhibits.
General
Our
authorized capital stock consists of 100,000,000 shares of common stock, par
value $0.0001 per share, and 20,000,000 shares of preferred stock, par value
$0.0001 per share, of which 5,000,000 is designated as Series A Convertible
Preferred Stock and 2,800,000 is designated as Series B Convertible Preferred
Stock.
Common
Stock
Holders
of our common stock are entitled to one vote per share on all matters submitted
to a vote of the stockholders, including the election of directors. Generally,
all matters to be voted on by stockholders must be approved by a majority of the
votes entitled to be cast by all shares of our common stock that are present in
person or represented by proxy. Holders of our common stock representing fifty
percent (50%) of our capital stock issued, outstanding, and entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum at any
meeting of our stockholders. A vote by the holders of a majority of our
outstanding shares is required to effectuate certain fundamental corporate
changes such as liquidation, merger or an amendment to our certificate of
incorporation. Our certificate of incorporation does not provide for cumulative
voting in the election of directors.
The
holders of shares of our common stock will be entitled to such cash dividends as
may be declared from time to time by our board of directors from funds available
therefore.
Upon
liquidation, dissolution, or winding up, the holders of shares of our common
stock will be entitled to receive pro rata all assets available for distribution
to such holders after distribution of assets to the holders of Series A
Preferred.
In the
event of any merger or consolidation with or into another company in connection
with which shares of our common stock are converted into or exchangeable for
shares of stock, other securities, or property (including cash), all holders of
our common stock will be entitled to receive the same kind and amount of shares
of stock and other securities and property (including cash).
Holders
of our common stock have no pre-emptive rights and no conversion rights, and
there are no redemption provisions applicable to our common stock.
Series
A Convertible Preferred Stock
The
following is a summary of the material terms of the Certificate of Designation
of Preferences, Rights and Limitations (the “Series A Certificate”) of the
Series A Convertible Preferred Stock and is qualified in its entirety by
reference to the Series A Certificate, which is attached as Exhibit 3.5 to our
Current Report on Form 8-K filed September 11, 2008.
Voting
Rights
Except as
otherwise provided in the Series A Certificate or by law, each holder of shares
of Series A Preferred shall have no voting rights. As long as any shares of
Series A Preferred are outstanding, however, the Company shall not, without the
affirmative vote of the holders of a majority of the then outstanding shares of
the Series A Preferred, (a) alter or change adversely the powers, preferences,
or rights given to the Series A Preferred or alter or amend the Series A
Certificate, (b) authorize or create any class of stock ranking as to dividends,
redemption or distribution of assets upon a Liquidation (as defined in Section 5
of the Series A Certificate) senior to or otherwise
pari
passu with the
Series A Preferred, (c) amend its certificate of incorporation or other charter
documents in any manner that adver1ely affects any rights of the holders of
Series A Preferred, (d) increase the number of authorized shares of Series A
Preferred, or (e) enter into any agreement with respect to any of the
foregoing.
Conversion
Rights
Conversion
at the Holder’s Option
Each
share of Series A Preferred is convertible at any time and from time to time
after the issue date at the holder’s option into shares of the Company’s common
stock (subject to beneficial ownership limitations as set forth in Section 6(c)
of the Series A Certificate) determined by dividing the Stated Value of such
share of Series A Preferred by the Conversion Price (each as defined
below).
Stated
Value
. Each share of Series A Preferred shall have a stated
value equal to $2.00.
Conversion
Price
. The conversion price for the Series A Preferred shall
equal $2.00, subject to adjustment as provided in the Series A
Certificate.
Automatic
Conversion
Upon a
Qualified Public Offering (as defined below) all outstanding shares of Series A
Preferred plus all accrued but unpaid dividends shall automatically be converted
into shares of the Company’s common stock at the Conversion Price, subject to
Section 6(c) of the Series A Certificate.
“Qualified
Public Offering” means (i) a firm-commitment underwritten public offering for
gross proceeds of not less than $25,000,000 and a public offering price of not
less than $4.00 (subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the common
stock that occur after the Original Issue Date, as defined below) or (ii) a
listing on any level of the Nasdaq Stock Market.
“Original
Issue Date” means the date of the first issuance of any shares of the Series A
Preferred regardless of the number of transfers of any particular shares of
Series A Preferred and regardless of the number of certificates which may be
issued to evidence such Series A Preferred.
Beneficial
Ownership Limitation
Holders
of our Series A Preferred are restricted from converting their shares of Series
A Preferred to Common Stock if the number of shares of Common Stock to be issued
pursuant to such conversion would cause the number of shares of Common Stock
beneficially owned by such holder, together with its affiliates, at such time to
exceed 9.99% of the then issued and outstanding shares of Common Stock;
provided, however, that such holder may waive this limitation upon 61 days’
notice to the Company. As of April 2, 2010, however, the Company
has not received any such notice.
Redemption
Rights
Upon the
occurrence of a Triggering Event, each Holder shall (in addition to all other
rights it may have hereunder or under applicable law) have the right,
exercisable at the sole option of such Holder, to require the Corporation to,
(A) with respect to the Triggering Events set forth in Sections 9(a)(iii), (v),
(vi), (vii), (viii), (ix), (as to Changes of Control approved by the Board of
Directors of the Corporation) and (x) (as to voluntary filings only), redeem all
of the Preferred Stock then held by such Holder for a redemption price, in cash,
equal to the Triggering Redemption Amount or (B) at the option of each Holder
and with respect to the Triggering Events set forth in Sections 9(a)(i), (ii),
(iv), (ix) (as to Changes of Control not approved by the Board of Directors of
the Corporation), (x) (as to involuntary filings only), (xi) and (xii), either
(a) redeem all of the Preferred Stock then held by such Holder for a redemption
price, in shares of Common Stock, equal to a number of shares of Common Stock
equal to the Triggering Redemption Amount divided by 75% of the average of the
10 VWAPs immediately prior to the date of election hereunder or (b) increase the
dividend rate on all of the outstanding Preferred Stock held by such Holder to
18% per annum thereafter. The Triggering Redemption Amount, in cash or in
shares, shall be due and payable or issuable, as the case may be, within five
(5) Trading Days of the date on which the notice for the payment therefor is
provided by a Holder (the “Triggering Redemption Payment Date”). If
the Corporation fails to pay in full the Triggering Redemption Amount hereunder
on the date such amount is due in accordance with this Section, the Corporation
will pay interest thereon at a rate equal to the lesser of eighteen percent
(18%) per annum or the maximum rate permitted by applicable law, accruing daily
from such date until the Triggering Redemption Amount, plus all such interest
thereon, is paid in full. For purposes of this Section, a share of
Preferred Stock is outstanding until such date as the applicable Holder shall
have received Conversion Shares upon a conversion (or attempted conversion)
thereof that meets the requirements hereof or has been paid the Triggering
Redemption Amount in cash.
“Triggering
Event” means any one or more of the following events (whatever the reason and
whether it shall be voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. the
failure of the initial Conversion Shares Registration Statement to be declared
effective by the Commission on or prior to the 270
th
calendar day after the Original Issue Date;
ii. if,
during the Effectiveness Period, the effectiveness of the Conversion Shares
Registration Statement lapses for more than an aggregate of sixty (60) calendar
days (which need not be consecutive calendar days) during any twelve (12) month
period, or the Holders shall not otherwise be permitted to resell Registrable
Securities under the Conversion Shares Registration Statement for more than an
aggregate of sixty (60) calendar days (which need not be consecutive calendar
days) during any twelve (12) month period;
iii. the
Corporation shall fail to deliver certificates representing Conversion Shares
issuable upon a conversion hereunder that comply with the provisions hereof
prior to the fifth Trading Day after such shares are required to be delivered
hereunder, or the Corporation shall provide written notice to any Holder,
including by way of public announcement, at any time, of its intention not to
comply with requests for conversion of any shares of Preferred Stock in
accordance with the terms hereof;
iv. one
of the Events (as defined in the Registration Rights Agreement) described in
subsections (i), (ii) or (iii) of Section 2(b) of the Registration Rights
Agreement shall not have been cured to the satisfaction of the Holders prior to
the expiration of thirty (30) calendar days from the Event Date (as defined in
the Registration Rights Agreement) relating thereto (other than an Event
resulting from a failure of a Conversion Shares Registration Statement to be
declared effective by the Commission on or prior to the 270th calendar day after
the Original Issue Date, which shall be covered by Section
9(a)(i));
v. the
Corporation shall fail for any reason to pay in full the amount of cash due
pursuant to a Buy-In within five Trading days after notice therefor is delivered
hereunder or shall fail to pay all amounts owed on account of any Event (as
defined in the Registration Rights Agreement) within five Trading days of the
date due;
vi. the
Corporation shall fail to have available a sufficient number of authorized and
unreserved shares of Common Stock to issue to such Holder upon a conversion
hereunder;
vii. unless
specifically addressed elsewhere in this Certificate of Designation as a
Triggering Event, the Corporation shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any breach of
the Transaction Documents, and such failure or breach shall not, if subject to
the possibility of a cure by the Corporation, have been cured within thirty (30)
calendar days after the date on which written notice of such failure or breach
shall have been delivered;
viii. the
Corporation shall redeem more than a
de
minimis
number
of Junior Securities other than as to repurchases of Common Stock or
Common Stock Equivalents from departing officers and directors of the
Corporation, provided that, while any of the Preferred Stock remains
outstanding, such repurchases shall not exceed an aggregate of $100,000 from all
officers and directors;
ix. the
Corporation shall be party to a Change of Control Transaction;
x. there
shall have occurred a Bankruptcy Event;
xi. the
Common Stock shall fail to be listed or quoted for trading on a Trading Market
for more than ten (10) Trading Days, which need not be consecutive Trading Days;
or
xii. any
monetary judgment, writ or similar final process shall be entered or filed
against the Corporation, any subsidiary or any of their respective property or
other assets for greater than $250,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of forty five
(45) calendar days.
Adjustment
for Stock Dividends and Stock Splits
If the
Company, at any time while Series A Preferred is outstanding: (A) pays a stock
dividend or otherwise makes a distribution or distributions payable in shares of
common stock on shares of common stock or any other Common Stock Equivalents (as
defined in Section 1 of the Series A Certificate, and, which, for avoidance of
doubt, shall not include any shares of common stock issued by the Company upon
conversion of, or payment of a dividend on, Series A Preferred); (B) subdivides
outstanding shares of common stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of common stock
into a smaller number of shares; or (D) issues, in the event of a
reclassification of shares of the common stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of common stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of common stock outstanding
immediately after such event.
Adjustment
for Subsequent Equity Sales
If, at
any time while Series A Preferred is outstanding, the Company or any of its
subsidiaries sells or grants any option to purchase or sells or grants any right
to reprice its securities, or otherwise disposes of or issues (or announces any
sale, grant or any option to purchase or other disposition) any common stock or
Common Stock Equivalents (as defined in Section 1 of the Series A Certificate)
entitling any person to acquire shares of common stock at an effective price per
share that is lower than the then Conversion Price (such lower price, the “Base
Conversion Price” and such issuances collectively, a “Dilutive Issuance”) (if
the holder of the common stock or Common Stock Equivalents so issued shall at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such
issuance, be entitled to receive shares of common stock at an effective price
per share that is lower than the Conversion Price, such issuance shall be deemed
to have occurred for less than the Conversion Price on such date of the Dilutive
Issuance), then (i) as to any Dilutive Issuances that occur on or before the 24
month anniversary of the Original Issue Date (as defined above, and the
Conversion Price shall be reduced to equal the Base Conversion Price and (ii) as
to any Dilutive Issuances that occur after the 24 month anniversary of the
Original Issue Date and until Series A Preferred is no longer outstanding, the
Conversion Price shall be reduced by multiplying the Conversion Price by a
fraction, the numerator of which is the number of shares of common stock issued
and outstanding immediately prior to the Dilutive Issuance plus the number of
shares of common stock which the offering price for such Dilutive Issuance would
purchase at the then Conversion Price, and the denominator of which shall be the
sum of the number of shares of common stock issued and outstanding immediately
prior to the Dilutive Issuance plus the number of shares of common stock so
issued or issuable in connection with the Dilutive Issuance. Notwithstanding the
foregoing, no adjustment will be made under this Section 7(b) in respect of an
Exempt Issuance (as defined in Section 1 of the Series A Certificate). If the
Company enters into a Variable Rate Transaction (as defined in Section 4.12(b)
of the Purchase Agreement), despite the prohibition set forth in the Purchase
Agreement, the Company shall be deemed to have issued common stock or Common
Stock Equivalents at the lowest possible conversion price at which such
securities may be converted or exercised. The Company shall notify the holders
in writing, no later than the business day following the issuance of any common
stock or Common Stock Equivalents subject to this Section 7(b), indicating
therein the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms.
Adjustment
for Subsequent Rights Offerings
If the
Company, at any time while the Series A Preferred is outstanding, shall issue
rights, options or warrants to all holders of common stock (and not to holders)
entitling them to subscribe for or purchase shares of common stock at a price
per share that is lower than the VWAP (defined in Section 1 of the Series A
Certificate) on the record date referenced below, then the Conversion Price
shall be multiplied by a fraction of which the denominator shall be the number
of shares of the common stock outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of common stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of the common stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered (assuming delivery to the Company in full of
all consideration payable upon exercise of such rights, options or warrants)
would purchase at such VWAP. Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants.
Adjustment
for Pro Rata Distributions
If the
Company, at any time while the Series A Preferred is outstanding, distributes to
all holders of common stock (and not to holders) evidences of its indebtedness
or assets (including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security (other than common stock, which shall be subject to
Section 7(b)), then in each such case the Conversion Price shall be adjusted by
multiplying such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then fair market value at such record date of the
portion of such assets, evidence of indebtedness or rights or warrants so
distributed applicable to one outstanding share of the common stock as
determined by the board of directors of the Company in good faith. In either
case the adjustments shall be described in a statement delivered to the holders
describing the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of common stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
Adjustment
for Fundamental Transactions
If, at
any time while the Series A Preferred is outstanding, (A) the Company effects
any merger or consolidation of the Company with or into another person, (B) the
Company effects any sale of all or substantially all of its assets in one
transaction or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another person) is completed pursuant
to which holders of common stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the common stock or any compulsory share exchange pursuant
to which the common stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent conversion of Series A Preferred, the holders shall
have the right to receive, for each Conversion Share (as defined in Section 1 of
the Series A Certificate) that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one share of
common stock (the “Alternate Consideration”). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of common stock in such
Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of
common stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the holders shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of
Series A Preferred following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to the
Corporation or surviving entity in such Fundamental Transaction shall file a new
Certificate of Designation with the same terms and conditions and issue to the
Holders new preferred stock consistent with the foregoing provisions and
evidencing the holders’ right to convert such preferred stock into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 7(e) and insuring
that Series A Preferred (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
Series
B Convertible Preferred Stock
The
following is a summary of the material terms of the Certificate of Designation
of Preferences, Rights and Limitations (the “Series B Certificate”) of the
Series B Convertible Preferred Stock and is qualified in its entirety by
reference to the Series B Certificate, which is attached as Exhibit 3.1 to our
Current Report on Form 8-K filed June 18, 2009.
Voting
Rights
Except as
otherwise provided in the Series B Certificate or by law, each holder of shares
of Series B Preferred shall have no voting rights. As long as any shares of
Series B Preferred are outstanding, however, the Company shall not, without the
affirmative vote of the holders of a majority of the then outstanding shares of
the Series B Preferred, (a) alter or change adversely the powers, preferences,
or rights given to the Series B Preferred or alter or amend the Series B
Certificate, (b) authorize or create any class of stock ranking as to dividends,
redemption or distribution of assets upon a Liquidation (as defined in Section 5
of the Series B Certificate) senior to or otherwise
pari
passu with the
Series B Preferred, (c) amend its certificate of incorporation or other charter
documents in any manner that adver1ely affects any rights of the holders of
Series B Preferred, (d) increase the number of authorized shares of Series B
Preferred, or (e) enter into any agreement with respect to any of the
foregoing.
Conversion
Rights
Conversion
at the Holder’s Option
Each
share of Series B Preferred is convertible at any time and from time to time
after the issue date at the holder’s option into shares of the Company’s common
stock (subject to beneficial ownership limitations as set forth in Section 6(c)
of the Series B Certificate) determined by dividing the Stated Value of such
share of Series B Preferred by the Conversion Price (each as defined
below).
Stated
Value
. Each share of Series B Preferred shall have a stated
value equal to $1.07143.
Conversion
Price
. The conversion price for the Series B Preferred shall
equal $1.07143, subject to adjustment as provided in the Series B
Certificate.
Automatic
Conversion
Upon a
Qualified Public Offering (as defined below) all outstanding shares of Series B
Preferred plus all accrued but unpaid dividends shall automatically be converted
into shares of the Company’s common stock at the Conversion Price, subject to
Section 6(c) of the Series B Certificate.
“Qualified
Public Offering” means (i) a firm-commitment underwritten public offering for
gross proceeds of not less than $25,000,000 and a public offering price of not
less than $4.00 (subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the common
stock that occur after the Original Issue Date, as defined below) or (ii) a
listing on any level of the Nasdaq Stock Market.
“Original
Issue Date” means the date of the first issuance of any shares of the Series B
Preferred regardless of the number of transfers of any particular shares of
Series B Preferred and regardless of the number of certificates which may be
issued to evidence such Series B Preferred.
Beneficial
Ownership Limitation
Holders
of our Series B Preferred are restricted from converting their shares of Series
B Preferred to Common Stock if the number of shares of Common Stock to be issued
pursuant to such conversion would cause the number of shares of Common Stock
beneficially owned by such holder, together with its affiliates, at such time to
exceed 9.99% of the then issued and outstanding shares of Common Stock;
provided, however, that such holder may waive this limitation upon 61 days’
notice to the Company. As of April 2, 2010, however, the Company
has not received any such notice.
Adjustment
for Stock Dividends and Stock Splits
If the
Company, at any time while Series B Preferred is outstanding: (A) pays a stock
dividend or otherwise makes a distribution or distributions payable in shares of
common stock on shares of common stock or any other Common Stock Equivalents (as
defined in Section 1 of the Series B Certificate, and, which, for avoidance of
doubt, shall not include any shares of common stock issued by the Company upon
conversion of, or payment of a dividend on, Series B Preferred); (B) subdivides
outstanding shares of common stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of common stock
into a smaller number of shares; or (D) issues, in the event of a
reclassification of shares of the common stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of common stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of common stock outstanding
immediately after such event.
Adjustment
for Subsequent Rights Offerings
The
Company shall not, at any time while Series B Preferred is outstanding,
issue rights, options or warrants to all holders of Common Stock entitling them
to subscribe for or purchase shares of Common Stock at a price per share that is
lower than the VWAP on the record date without issuing the same rights, options
or warrants to all Series B Preferred holders on an as-converted to Common Stock
basis.
Adjustment
for Pro Rata Distributions
The
Company shall not, at any time while Series B Preferred is outstanding,
distribute to all holders of Common Stock (and not to holders of Series B
Preferred) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security
(other than Common Stock, which shall be subject to Section 7(b) of the Series B
Certificate) without distributing evidences of such indebtedness or assets or
rights or warrants to Holders on an as-converted to Common Stock
basis.
Adjustment
for Fundamental Transactions
If, at
any time while the Series B Preferred is outstanding, (A) the Company effects
any merger or consolidation of the Company with or into another person, (B) the
Company effects any sale of all or substantially all of its assets in one
transaction or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another person) is completed pursuant
to which holders of common stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the common stock or any compulsory share exchange pursuant
to which the common stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent conversion of Series B Preferred, the holders shall
have the right to receive, for each Conversion Share (as defined in Section 1 of
the Series B Certificate) that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one share of
common stock (the “Alternate Consideration”). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of common stock in such
Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of
common stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the holders shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of
Series B Preferred following such Fundamental Transaction.
Registration
Rights
We
agreed to undertake the filing of this prospectus and related registration
statement to register for resale the following: (i) 3,500,000 shares of common
stock that may be issued upon the conversion of the Series A Convertible
Preferred Stock, (ii) 1,580,598 shares of common stock issued to Genesis Capital
Advisors, LLC, which were issued as part of the 2008 Share Exchange, (iii)
1,600,000 shares of common stock, and (iv) 1,600,000 share of common stock
underlying an option to purchase such shares, except that if the SEC sets forth
a limitation on the number of securities permitted to be registered, then the
number of shares registered for resale will be reduced
pro rata
among the selling
security holders with regard to the aggregate number of initial registrable
securities held by such holder at the time of filing of the registration
statement. In the event that we do not file a pre-effective amendment that is
required in order for the registration statement to be declared effective within
21 calendar days after receipt of comments from the SEC or the registration
statement is not declared effective by the SEC within 180 calendar days
following the closing of the $7 Million Financing (or, in the event of a “full
review” of the registration statement by the SEC, 360 calendar days after the $7
Million Financing) (the “Required Effective Date”), then we will be required to
issue Late Registration Shares to the investor in the $7 Million Financing. Late
Registration Shares for an untimely effective Registration Statement started
accruing on September 5, 2009.
Pre-effective
amendments are required to be filed within twenty-one calendar days after
receipt of comments from the SEC, and Late Registration Shares for the late
filing of a pre-effective amendment have accrued. The total number of Late
Registration Shares that have accrued through January 19, 2010, the date the
registration statement became effective, is 236,002 shares, consisting of
164,835 shares for late effectiveness and 71,167 shares for late filings of
pre-effective amendments. On November 7, 2009, however, Vision waived all Late
Registration Shares that accrued through December 31, 2009; on January 8, 2010,
Vision waived all Late Registration Shares that accrued from January 1, 2010
through January 15, 2010; and on January 14, 2010, Vision waived all Late
Registration Shares that accrued from January 15, 2010 through January 19, 2010.
Thus, we
did not issue any Late Registration Shares to Vision, and no Late Registration
Shares are due.
Up to an
additional 20% of the shares being registered by this registration statements
that are required to be registered pursuant to the Registration Rights
Agreement, as amended, will be registered in the future pursuant to Rule 416
under the Securities Act of 1933, as amended, on the occurrence of an event that
is covered by Rule 416.
Registration
of these shares of common stock upon exercise of these registration rights would
result in the holders being able to trade these shares without restriction under
the Securities Act once the applicable registration statement is declared
effective. We will pay all registration expenses related to any
registration.
Market
Price of and Dividends on Common Equity and Related Stockholder
Matters
Our
common stock is traded on the Over-the-Counter Bulletin Board (“OTCBB”) under
the symbol “PPRW.” The following table sets forth, for the periods
indicated, the reported high and low closing bid quotations for our common stock
as reported on the OTCBB. The bid prices reflect inter-dealer
quotations, do not include retail markups, markdowns, or commissions, and do not
necessarily reflect actual transactions.
|
Quarter Ended
|
|
High Bid
|
|
|
Low Bid
|
|
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
$
|
3.60
|
|
|
$
|
1.60
|
|
|
September
30, 2009
|
|
$
|
4.20
|
|
|
$
|
2.10
|
|
|
June
30, 2009
|
|
$
|
4.37
|
|
|
$
|
3.50
|
|
|
March
31, 2009
|
|
$
|
4.50
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
$
|
5.05
|
|
|
$
|
2.25
|
|
|
September
30, 2008*
|
|
$
|
5.90
|
|
|
$
|
4.05
|
|
|
June
30, 2008
|
|
$
|
|
*
|
|
$
|
|
*
|
|
March
31, 2008
|
|
$
|
|
*
|
|
$
|
|
*
|
* Our
common stock had no active trading market until September 15, 2008.
As of
April 1, 2010, the closing sales price for shares of our common stock was $2.20
per share on the OTCBB.
Holders
As of
April 2, 2010, we have approximately 53 stockholders of record of our issued and
outstanding common stock based upon a shareholder list provided by our transfer
agent. Our transfer agent is Computershare located at 350 Indiana
Street, Suite 800, Golden, Colorado 80401, and their telephone number is (303)
262-0600.
Transfer
Agent
Our
transfer agent is Computershare located at 350 Indiana Street, Suite 800,
Golden, Colorado, and their telephone number is (303) 262-0600.
Dividend
Policy
We do not
currently intend to pay any cash dividends in the foreseeable future on our
common stock and, instead, intend to retain earnings, if any, for
operations. Any decision to declare and pay dividends in the future
will be made at the discretion of our board of directors and will depend on,
among other things, our results of operations, cash requirements, financial
condition, contractual restrictions, and other factors that our board of
directors may deem relevant.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE
There
are not and have not been any disagreements between us and our accountants on
any matter of accounting principles, practices, or financial statement
disclosure during our two most recent fiscal years.
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION
FOR
SECURITIES ACT LIABILITIES
Section
145 of the Delaware General Corporation Law authorizes a court to award, or a
corporation’s board of directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit indemnification for liabilities, including
reimbursement for expenses incurred, arising under the Securities Act. Pursuant
to the provisions of Section 145, a corporation may indemnify its directors,
officers, employees, and agents as follows:
“(a) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(d) Any
indemnification under subsections (a) and (b) of this section (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e)
Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this section shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office.
(g) A
corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
(h) For
purposes of this section, references to "the corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
(i) For
purposes of this section, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(k) The
Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).”
Charter
Provisions and Other Arrangements of the Registrant
We have
adopted the following indemnification provisions in our certificate of
incorporation for our officers and directors:
“The
corporation shall, to the fullest extent permitted by the provisions of 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such person.”
We also
have a $5,000,000 director’s and officer’s liability insurance
policy.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended (the “Securities Act”) may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
ADDITIONAL
INFORMATION
Premier
Power Renewable Energy, Inc. is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Reports filed
with the SEC pursuant to the Exchange Act, including proxy statements, annual
and quarterly reports, and other reports filed by the Company can be inspected
and copied at the public reference facilities maintained by the SEC at the
Headquarters Office, 100 F. Street N.E., Room 1580, Washington, D.C. 20549. The
reader may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. The reader can request copies of these
documents upon payment of a duplicating fee by writing to the SEC. The Company’s
filings are also available on the SEC’s internet site at
http://www.sec.gov.
Premier
Power Renewable Energy, Inc.
Index
to Consolidated Financial Statements
|
|
|
Pages
|
|
|
Financial Statements of Premier Power Renewable
Energy, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
F-2
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
|
|
F-3
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Operations for the Year Ended December 31, 2009 and
2008
|
|
|
F-4
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Year Ended December 31, 2009 and
2008
|
|
|
F-5
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Shareholders’ Equity for the Year Ended December 31, 2009
and 2008
|
|
|
F-6
|
|
|
|
|
|
|
|
|
Notes
to the Consolidated Financial Statements
|
|
|
F-7
|
|
|
|
|
|
|
|
|
Financial Statements of Rupinvest
SARL
|
|
|
|
|
|
|
|
|
|
|
|
Report
of Independent Auditor
|
|
|
F-28
|
|
|
|
|
|
|
|
|
Balance
Sheet at December 31, 2008
|
|
|
F-29
|
|
|
|
|
|
|
|
|
Statement
of Operations from Inception (August 1, 2008) through December 31,
2008
|
|
|
F-30
|
|
|
|
|
|
|
|
|
Statement
of Stockholders’ Equity from Inception (August 1, 2008) through December
31, 2008
|
|
|
F-31
|
|
|
|
|
|
|
|
|
Statement
of Cash Flows from Inception (August 1, 2008) through December 31,
2008
|
|
|
F-32
|
|
|
|
|
|
|
|
|
Notes
to Financial Statements
|
|
|
F-33
|
|
|
|
|
|
|
|
|
Financials Statements of Premier Power Italy
S.p.A. (formerly ARCO Energy, SRL)
|
|
|
|
|
|
|
|
|
|
|
|
Report
of Independent Certified Public Accountants
|
|
|
F-37
|
|
|
|
|
|
|
|
|
Balance
Sheet as of December 31, 2008
|
|
|
F-38
|
|
|
|
|
|
|
|
|
Statement
of Operations for the Year Ended December 31,
2008
|
|
|
F-39
|
|
|
|
|
|
|
|
|
Statement
of Cash Flows for the Year Ended December 31,
2008
|
|
|
F-40
|
|
|
|
|
|
|
|
|
Statement
of Stockholder’s Equity for the Year Ended December 31,
2008
|
|
|
F-41
|
|
|
|
|
|
|
|
|
Notes
to Financial Statements
|
|
|
F-42
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed Consolidated
Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 2009
|
|
|
F-44
|
|
|
|
|
|
|
|
|
Notes
to the Unaudited Pro Forma Condensed Consolidated Statement of
Operations
|
|
|
F-45
|
|
Report of Independent Registered Public Accounting Firm
Board of Directors and
Shareholders
Premier Power Renewable Energy,
Inc.
El Dorado Hills
,
California
We have audited the accompanying
consolidated balance sheets of Premier Power Renewable Energy, Inc. and
subsidiaries as of December 31, 2009 and 2008 and the related consolidated
statements of operations, shareholders’ equity, and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board
(
United States
). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of Premier Power Renewable Energy, Inc. and subsidiaries
at December 31, 2009 and 2008, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the
United States of America
.
As
discussed in Note
14
to the financial
statements in 2009, the Company has changed its method
of
accounting for warrants
which are not indexed to its stock
due to the adoption of
FASB ASC
815 (
EITF
07-5),
Determining
Whether
an Instrument (or embedded Feature) is Indexed to an Entity’s Own
Stock
).
/s/ Macias Gini & O’Connell LLP
Sacramento
,
California
March 24, 2010
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
BALANCE SHEETS
(in
thousands, except share data)
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,792
|
|
|
$
|
5,771
|
|
Accounts
receivable, net of allowance for doubtful accounts of
$137 and $18
at December 31, 2009 and 2008, respectively
|
|
|
7,676
|
|
|
|
4,768
|
|
|
Inventory
|
|
|
1,824
|
|
|
|
1,425
|
|
|
Prepaid
expenses and other current assets
|
|
|
432
|
|
|
|
259
|
|
|
Costs
and estimated earnings in excess of billings on uncompleted
contracts
|
|
|
13,674
|
|
|
|
236
|
|
|
Other
receivables
|
|
|
175
|
|
|
|
94
|
|
|
Deferred
tax assets
|
|
|
473
|
|
|
|
229
|
|
|
Total
current assets
|
|
|
28,046
|
|
|
|
12,782
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
615
|
|
|
|
475
|
|
|
Intangible
assets, net
|
|
|
970
|
|
|
|
1,048
|
|
|
Goodwill
|
|
|
12,254
|
|
|
|
483
|
|
|
Deferred
tax assets
|
|
|
1,295
|
|
|
|
25
|
|
|
Total
assets
|
|
$
|
43,180
|
|
|
$
|
14,813
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
18,347
|
|
|
$
|
3,707
|
|
|
Accrued
liabilities
|
|
|
2,043
|
|
|
|
1,368
|
|
|
Billings
in excess of costs and estimated earnings on uncompleted
contracts
|
|
|
374
|
|
|
|
1,206
|
|
|
Taxes
payable
|
|
|
293
|
|
|
|
185
|
|
|
Borrowings,
current
|
|
|
1,692
|
|
|
|
38
|
|
|
Total
current liabilities
|
|
|
22,749
|
|
|
|
6,504
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings,
non-current
|
|
|
548
|
|
|
|
93
|
|
|
Contingent
consideration liability
|
|
|
7,725
|
|
|
|
-
|
|
|
Deferred
tax liabilities
|
|
|
-
|
|
|
|
343
|
|
|
Total
liabilities
|
|
|
31,022
|
|
|
|
6,940
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 12)
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
Series
A convertible preferred stock, par value $.0001 per share: 5,000,000
shares designated; 20,000,000 shares of preferred stock authorized;
3,500,000 shares issued and outstanding at December 31, 2009 and 2008,
respectively
|
|
|
-
|
|
|
|
-
|
|
|
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 December 31, 2009 and
2008, respectively
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock, par value $.0001 per share; 500,000,000 shares authorized;
29,050,250 and 26,048,075 shares issued and outstanding
at December 31, 2009 and 2008, respectively
|
|
|
3
|
|
|
|
3
|
|
|
Additional
paid-in-capital
|
|
|
17,822
|
|
|
|
7,542
|
|
|
(Accumulated
deficit) retained earnings
|
|
|
(5,385
|
)
|
|
|
369
|
|
|
Accumulated
other comprehensive loss
|
|
|
(282
|
)
|
|
|
(41
|
)
|
|
Total
shareholders' equity
|
|
|
12,158
|
|
|
|
7,873
|
|
|
Total
liabilities and shareholders' equity
|
|
$
|
43,180
|
|
|
$
|
14,813
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in
thousands, except per share data)
|
|
|
For Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
30,750
|
|
|
$
|
44,238
|
|
|
Cost
of sales
|
|
|
(26,292
|
)
|
|
|
(38,711
|
)
|
|
Gross
profit
|
|
|
4,458
|
|
|
|
5,527
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
2,910
|
|
|
|
2,224
|
|
|
General
and administrative
|
|
|
5,808
|
|
|
|
2,505
|
|
|
Total
operating expenses
|
|
|
8,718
|
|
|
|
4,729
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss) income
|
|
|
(4,260
|
)
|
|
|
798
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(89
|
)
|
|
|
(82
|
)
|
|
Other
income
|
|
|
23
|
|
|
|
-
|
|
|
Change
in fair value of contingent consideration liability
|
|
|
4,301
|
|
|
|
-
|
|
|
Change
in fair value of warrants
|
|
|
2,184
|
|
|
|
|
|
|
Interest
income
|
|
|
44
|
|
|
|
37
|
|
|
Total
other (expense) income, net
|
|
|
6,463
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
2,203
|
|
|
|
753
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
|
1,452
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
3,655
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net
income attributable to noncontrolling interest
|
|
|
(85
|
)
|
|
|
(224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to Premier Power Renewable Energy,
Inc.
|
|
$
|
3,570
|
|
|
$
|
569
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share attributable to Premier Power Renewable Energy,
Inc:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.03
|
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,050
|
|
|
|
22,666
|
|
|
Diluted
|
|
|
31,273
|
|
|
|
23,750
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands, except per share data)
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income attributable to Premier Power Renewable Energy,
Inc.
|
|
$
|
3,570
|
|
|
$
|
569
|
|
|
Net
income attributable to noncontrolling interest
|
|
|
85
|
|
|
|
224
|
|
|
Net
income
|
|
|
3,655
|
|
|
|
793
|
|
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Gain
on sale of special purpose entities
|
|
|
(23
|
)
|
|
|
-
|
|
|
Stock
based compensation
|
|
|
624
|
|
|
|
-
|
|
|
Depreciation
and amortization
|
|
|
345
|
|
|
|
197
|
|
|
Change
in fair value of contingent consideration liability
|
|
|
(4,301
|
)
|
|
|
-
|
|
|
Change
in fair value of warrant liability
|
|
|
(2,184
|
)
|
|
|
-
|
|
|
Deferred
taxes
|
|
|
(1,857
|
)
|
|
|
(273
|
)
|
|
Loss
on sale of property and equipment
|
|
|
-
|
|
|
|
5
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,608
|
)
|
|
|
(2,353
|
)
|
|
Inventory
|
|
|
(119
|
)
|
|
|
(15
|
)
|
|
Prepaid
expenses and other current assets
|
|
|
(175
|
)
|
|
|
(199
|
)
|
Costs
and estimated earnings in excess of billings
on uncompleted
contracts
|
|
|
(13,563
|
)
|
|
|
(199
|
)
|
|
Other
receivables
|
|
|
(78
|
)
|
|
|
-
|
|
|
Accounts
payable
|
|
|
14,436
|
|
|
|
1,097
|
|
|
Accrued
liabilities
|
|
|
623
|
|
|
|
857
|
|
Billings
in excess of costs and estimated earnings
on uncompleted
contracts
|
|
|
(833
|
)
|
|
|
(218
|
)
|
|
Taxes
payable
|
|
|
(164
|
)
|
|
|
192
|
|
|
Net
cash used in operating activities
|
|
|
(6,222
|
)
|
|
|
(116
|
)
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
|
(265
|
)
|
|
|
(163
|
)
|
|
Net
cash paid for Rupinvest acquisition
|
|
|
(2
|
)
|
|
|
-
|
|
|
Proceeds
from sale of property and equipment
|
|
|
-
|
|
|
|
12
|
|
|
Net
cash used in investing activities
|
|
|
(267
|
)
|
|
|
(151
|
)
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Principal
payments on borrowings
|
|
|
(306
|
)
|
|
|
(283
|
)
|
|
Sale
of noncontrolling interest
|
|
|
176
|
|
|
|
-
|
|
|
Purchase of
noncontrolling interest
|
|
|
(176
|
)
|
|
|
-
|
|
|
Proceeds
from borrowings
|
|
|
2,391
|
|
|
|
15
|
|
|
Proceeds
from issuance of preferred stock and warrants
|
|
|
3,000
|
|
|
|
5,512
|
|
|
Repayment
from shareholders
|
|
|
-
|
|
|
|
23
|
|
|
Distributions
|
|
|
-
|
|
|
|
(452
|
)
|
|
Cost
related to share registration
|
|
|
(570
|
)
|
|
|
-
|
|
|
Net
cash provided by financing activities
|
|
|
4,515
|
|
|
|
4,815
|
|
|
Effect
of foreign currency
|
|
|
(5
|
)
|
|
|
(56
|
)
|
|
(Decrease)
increase in cash and cash equivalents
|
|
|
(1,979
|
)
|
|
|
4,492
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
5,771
|
|
|
|
1,279
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
3,792
|
|
|
$
|
5,771
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
72
|
|
|
$
|
82
|
|
|
Taxes
paid
|
|
$
|
434
|
|
|
$
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Common
stock issued to acquire noncontrolling interest
|
|
$
|
-
|
|
|
$
|
1,489
|
|
|
Issuance
of notes to acquire equipment
|
|
$
|
-
|
|
|
$
|
157
|
|
|
Common
stock issued for service
|
|
$
|
-
|
|
|
$
|
91
|
|
|
Contingent
Consideration liability
|
|
$
|
12,027
|
|
|
$
|
-
|
|
|
Warrant
liability
|
|
$
|
11,118
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash paid for Rupinvest acquisition:
|
|
|
|
|
|
|
|
|
|
Tangible
assets
|
|
$
|
616
|
|
|
|
|
|
|
Intangible
assets
|
|
|
12,087
|
|
|
|
|
|
|
Total
assets
|
|
|
12,703
|
|
|
|
|
|
|
Liabilities
assumed
|
|
|
(658
|
)
|
|
|
|
|
|
Purchase
price
|
|
|
12,045
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Contingent
consideration liability
|
|
|
(12,027
|
)
|
|
|
|
|
|
Cash
acquired
|
|
|
(16
|
)
|
|
|
|
|
|
Net
cash paid for Rupinvest acquisition
|
|
$
|
2
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
For
the Year Ended December 31, 2008 and 2009
(in
thousands)
|
|
|
|
|
|
|
Series A -
|
|
Series B -
|
|
|
|
|
Retained Earnings
|
|
|
Accumulated
Other
|
|
|
Premier Power
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Preferred Stock
|
|
Preferred Stock
|
|
|
Additional Paid
|
|
(Accumulated
|
|
|
Comprehensive
|
|
|
Renewable
Energy, Inc.
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
In Capital
|
|
Deficit)
|
|
|
Income (Loss)
|
|
|
Shareholders'
Equity
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2007
|
|
21,160
|
|
$
|
3
|
|
-
|
|
$
|
-
|
|
-
|
|
$
|
-
|
|
|
$
|
1
|
|
$
|
701
|
|
|
$
|
9
|
|
|
$
|
714
|
|
|
$
|
2
|
|
|
$
|
716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
569
|
|
|
|
|
|
|
|
569
|
|
|
|
224
|
|
|
|
793
|
|
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
|
|
(50
|
)
|
|
|
(23
|
)
|
|
|
(73
|
)
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519
|
|
|
|
201
|
|
|
|
720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares to purchase minority interest
|
|
3,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,489
|
|
|
|
|
|
|
|
|
|
|
1,489
|
|
|
|
|
|
|
|
1,489
|
|
|
Shares
issued in connection with reverse acquisition
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Series A and Series B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,794
|
|
|
|
|
|
|
|
|
|
|
1,794
|
|
|
|
|
|
|
|
1,794
|
|
|
warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Series A convertible preferred stock
|
|
|
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
3,718
|
|
|
|
|
|
|
|
|
|
|
3,718
|
|
|
|
|
|
|
|
3,718
|
|
|
Issuance
of shares for service
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of noncontrolling interest in Premier Power Spain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(203
|
)
|
|
|
(203
|
)
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(452
|
)
|
|
|
|
|
|
|
(452
|
)
|
|
|
|
|
|
|
(452
|
)
|
|
Deemed
constructive contribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(distribution)
of S-Corp undistributed earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
449
|
|
|
(449
|
)
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2008
|
|
26,049
|
|
|
3
|
|
3,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
7,542
|
|
|
369
|
|
|
|
(41
|
)
|
|
|
7,873
|
|
|
|
-
|
|
|
|
7,873
|
|
|
Cummulative
effect of adjustment upon adoption of EITF 07-5 (restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,794
|
)
|
|
(9,324
|
)
|
|
|
|
|
|
|
(11,118
|
)
|
|
|
|
|
|
|
(11,118
|
)
|
|
Balance
January 1, 2009 (restated)
|
|
26,049
|
|
|
3
|
|
3,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
5,748
|
|
|
(8,955
|
)
|
|
|
(41
|
)
|
|
|
(3,245
|
)
|
|
|
|
|
|
|
(3,245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,570
|
|
|
|
|
|
|
|
3,570
|
|
|
|
85
|
|
|
|
3,655
|
|
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(241
|
)
|
|
|
(241
|
)
|
|
|
(21
|
)
|
|
|
(262
|
)
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,329
|
|
|
|
64
|
|
|
|
3,393
|
|
|
Stock
based compensation
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
624
|
|
|
|
|
|
|
|
|
|
|
624
|
|
|
|
|
|
|
|
624
|
|
|
Cost
related to share registration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(570
|
)
|
|
|
|
|
|
|
|
|
|
(570
|
)
|
|
|
|
|
|
|
(570
|
)
|
|
Sale
of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176
|
|
|
|
176
|
|
|
Purchase
of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(155
|
)
|
|
|
(155
|
)
|
|
Noncontrolling
interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
(85
|
)
|
|
|
-
|
|
|
Gain
on settlement of warrant liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,435
|
|
|
|
|
|
|
|
|
|
|
1,435
|
|
|
|
|
|
|
|
1,435
|
|
|
Issuance
of series B convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
|
|
-
|
|
|
|
10,500
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
|
|
|
|
|
|
10,500
|
|
|
Issuance
of escrow shares related to Rupinvest acquisition
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2009
|
|
29,050
|
|
$
|
3
|
|
3,500
|
|
$
|
-
|
|
|
2,800
|
|
$
|
-
|
|
|
$
|
17,822
|
|
$
|
(5,385
|
)
|
|
$
|
(282
|
)
|
|
$
|
12,158
|
|
|
$
|
-
|
|
|
$
|
12,158
|
|
The
accompanying notes are an integral part of these financial
statements.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes to Consolidated Financial
Statements
1.
ORGANIZATION
AND NATURE OF BUSINESS
Premier
Power Renewable Energy, Inc., a Delaware corporation (the “Parent”), 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 wholly 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% noncontrolling 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%
noncontrolling interest is as follows:
|
|
|
(in thousands)
|
|
|
Fair
value of shares exchanged
|
|
$
|
1,489
|
|
|
Tangible
assets acquired
|
|
|
(1,034
|
)
|
|
Amortizing
intangible assets acquired
|
|
|
(1,110
|
)
|
|
Liabilities
assumed
|
|
|
1,138
|
|
|
Goodwill
|
|
$
|
483
|
|
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, the Company raised
$7 million in a private placement financing in which Vision Opportunity Master
Fund, Ltd. (“Vision”) was the investor (the “Financing”) by issuing a total of
3.5 million units (the “Units”) at $2.00 per Unit, with each Unit consisting of
one share of the Company’s Series A Convertible Preferred Stock, one-half of one
Series A Warrant, and one-half of one Series B Warrant.
On June
16, 2009, the Company sold to Vision 2.8 million shares of Series B Convertible
Preferred Stock (bearing no liquidation preference, no coupon payments, and no
redemption rights) in exchange for the cancellation of the 3.5 million Series A
and Series B warrants held by Vision, and $3 million in cash. The
cancellation of warrants resulted in the elimination of all the Company’s issued
and outstanding warrants.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
On July
31, 2009, the Company 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
then majority-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. The Company 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 the Company’s restricted common stock,
with the number of shares to be transferred, if any, to be calculated based on
achieving certain sales by Premier Power Italy over a three-year
period. The Company 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. The Company delivered to the Escrow Agent the
stock certificate evidencing three million restricted shares of the Parent’s
common stock, which certificate is registered in the name of the Escrow Agent’s
custodial delegate. Such shares are presented as issued and outstanding on the
Company’s December 31, 2009 balance sheet and statement of shareholders’ equity.
Pursuant to the closing of this transaction, the Company conducts
operations in Italy through Premier Power Italy.
On
December 31, 2009, Rupinvest purchased the remaining 10% interest of Premier
Power Italy from Esdras at Esdras’s initial capital contribution per the Share
Exchange Agreement, and Premier Power Italy became the wholly owned subsidiary
of Rupinvest.
2.
SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation –
The
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles accepted in the United States
(“GAAP”), and include the accounts of the Parent and its
subsidiaries. All intercompany accounts and transactions have been
eliminated.
Concentrations and Credit Risk –
Two customers accounted for more than 10% of the Company’s sales for the
year ended December 31, 2009. One customer accounted for 18% and two
customers accounted for 12% each of the Company’s sales for the year ended
December 31, 2008. Accounts receivable primarily consist of trade
receivables and amounts due from state agencies and utilities for rebates on
solar systems installed. At December 31, 2009, the Company had two
customers that accounted for 22.9% and 10.9% of the Company’s accounts
receivables. At December 31, 2008, the Company had four customers
that accounted for 27%, 13%, 11%, and 10% of the Company’s accounts
receivables. 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 $.1 million and $.02 million
as of December 31, 2009 and 2008, respectively.
The
Company purchases its solar modules 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 modules will be available.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
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. 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 the statutory insured limits of the jurisdiction in which
the accounts are held. The Company has not experienced any losses on
these investments. At December 31, 2009, the Company had $2.5 million in cash in
bank accounts in excess of the various deposit insurance limits of the
jurisdictions in which the balances were held.
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 are stated 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. Upon disposition, the cost
and related accumulated depreciation are removed from the accounts, and the
resulting gain or loss is reflected in current operations.
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.
Goodwill and Other Intangible Assets
–
The Company does not amortize goodwill, but rather tests goodwill for
impairment at least annually.
We
determine the fair value using a weighted market and income approach. Under
the income approach, we calculate the fair value of a reporting unit based on
the present value of estimated future cash flows. Under the market approach, we
calculate the fair value of the reporting unit using selected comparable
companies’ revenue multiples and apply an average of such companies’ multiples
to the Company’s revenue. If the fair value of the reporting unit exceeds the
carrying value of the net assets including goodwill assigned to that unit,
goodwill is not impaired. If the carrying value of the reporting unit’s net
assets including goodwill exceeds the fair value of the reporting unit, then we
determine the implied fair value of the reporting unit’s goodwill. If the
carrying value of a reporting unit’s goodwill exceeds its implied fair value,
then an impairment of goodwill has occurred and we recognize an impairment of
loss for the difference between the carrying amount and the implied fair value
of goodwill as a component of operating income. We did not recognize any
goodwill impairment charges in 2009 and 2008.
Intangible
assets, consisting of a customer list, trademarks, and an employee contract, are
amortized over their estimated useful lifes ranging from 2-17
years.
Fair Value of Financial Instruments –
The carrying value reported for cash equivalents, accounts receivable,
prepaid expenses, other receivables, accounts payable and accrued liabilities
approximated their respective fair values at each balance sheet date due to the
short-term maturity of these financial instruments.
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 a 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.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
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.
The
percentage of completion method requires the ability to estimate several
factors, including the ability of the customer to meet its obligations under the
contract, including the payment of amounts when due. If we determine that
collectability is not assured at the onset of a contract, we will defer revenue
recognition and use methods of accounting for the contract such as completed
contract method until such time we determine that collectability is reasonably
assured or through the completion of the project.
Revenue
related to distribution sales is recognized when we have received either a
purchase order or contract, deem delivery of product to have occurred, when the
title and risk of ownership have passed to the buyer and we determine that
collection is probable. Some customers will pay the Company and ask
the Company to segregate and store the product separate from other
products. The Company considers the risk has passed when payment and
segregation has occurred.
Advertising –
The Company
expenses advertising costs as they are incurred. Advertising costs were $.8
million and $.4 million for the year ended December 31, 2009 and 2008,
respectively.
Product Warranties –
The
Company warrants its projects for labor and materials associated with its
installations. The Company’s warranty is ten years in California and
generally five to ten years elsewhere in the U.S. depending upon each state’s
specific requirements, and is one year in Spain for all contracts signed after
December 31, 2006. Italy provides a ten year warranty covering the
labor and materials associated with its installations. Solar panels
and inverters are warranted by the manufacturer for 25 years and 10 years,
respectively.
Since the
Company does not have sufficient historical data to estimate its exposure, we
have looked to our historical data and the historical data reported by other
solar system installers.
Activity in the Company’s accrued warranty
reserve for the year ended December 31, 2009 and 2008 was as
follows:
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Beginning
accrued warranty balance
|
|
$
|
367
|
|
|
$
|
172
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruals
related to warranties issued during period
|
|
|
159
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction
for labor payments and claims made under the warranty
|
|
|
(167
|
)
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Ending
accrued warranty balance
|
|
$
|
359
|
|
|
$
|
367
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
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 year ended December 31, 2009 and 2008, the foreign currency
transaction gain was $0.3 million and $0.01 million,
respectively.
Noncontrolling Interest –
The
noncontrolling interest reflected in the statement of operations for the year
ended December 31, 2008 represents the 49% shareholdings of the noncontrolling
shareholders in the Company’s Spanish operations, Premier Power Spain through
September 9, 2008. Concurrent with the reverse merger, these
shareholdings were converted into shares of the Company’s common stock and no
longer reported as noncontrolling interest effective September 9,
2008.
The
noncontrolling interest reflected in the statement of operations for the year
ended December 31, 2009 represents the 10% shareholdings of the noncontrolling
shareholders in the Company’s Italian operations, Premier Power
Italy. On December 31, 2009, Rupinvest purchased the 10%
noncontrolling interest from Esdras; thus, as of December 31, 2009, there is no
longer a noncontrolling interest in the Company’s operations.
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 Annual Report on Form
10-K for the years ended December 31, 2009 and 2008.
In
accordance with the new guidance on noncontrolling interests, the Company
revised all previous references to “minority interests” in the consolidated 2008
financial statements to “noncontrolling interest,” and also made the following
changes to the 2008 consolidated financial statements:
|
|
●
|
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 interests in the Company’s subsidiaries is
as follows:
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
2
|
|
|
Sale
of noncontrolling interest in Premier Power Italy
|
|
|
176
|
|
|
|
-
|
|
|
Net
income attributed to noncontrolling interest
|
|
|
85
|
|
|
|
224
|
|
|
Foreign
currency tanslation adjustment
|
|
|
(21
|
)
|
|
|
(23
|
)
|
|
Purchase of
noncontrolling interest in Premier Power Spain
|
|
|
-
|
|
|
|
(203
|
)
|
|
Purchase
of noncontrolling interest in Premier Power Italy
|
|
|
(155
|
)
|
|
|
-
|
|
|
Noncontrolling interest income
|
|
|
(85
|
)
|
|
|
|
|
|
Ending
balance
|
|
$
|
-
|
|
|
$
|
-
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Comprehensive Income –
FASB
ASC Topic 220 (Statement of Financial Accounting Standards No. 130, “
Reporting Comprehensive
Income
,”) establishes standards for reporting comprehensive income and
its components in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income, as defined,
includes all changes in equity during the period from non-owner sources, such as
foreign currency translation adjustments.
Income Taxes –
The Company accounts for
income taxes under the liability method. Under this method, deferred tax assets
and liabilities are determined based on differences between the financial
reporting and tax reporting bases of assets and liabilities and are measured
using enacted tax rates and laws that are expected to be in effect when the
differences are expected to reverse. Realization of deferred tax assets is
dependent upon the weight of available evidence, including expected future
earnings. A valuation allowance is recognized if it is more likely than not that
some portion or all of a deferred tax asset will not be realized.
Prior to September 2008, the Company
was not subject to federal income tax.
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 December 31, 2009. Also, the Company had
no amounts of unrecognized tax benefits that, if recognized, would affect its
effective tax rate.
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.
Contingent Consideration Liability
– In connection with the acquisition of Rupinvest, contingent
consideration liability of $12 million was recorded at the time of the purchase.
The contingent consideration liability relates to the contingent issuance of 3
million shares to the sellers of Rupinvest.
In accordance with FASB ASC
820, the Company estimates the fair value of the contingent consideration
liability at each reporting period, with changes in the estimated fair value
recorded in income.
The fair value measurement assumes that the contingent consideration
liability is transferred to a market participant at the valuation date and that
the nonperformance risk related to the contingent consideration liability
remains constant. The Company estimates the fair value using the market price of
its shares since it believes this represents the present value of its future
stock returns, discounted at the Company
’
s required rule of
return. The Company also estimates the number of shares to be issued based on a
number of financial scenarios weighted based on their relative probability. The
Company considers the effect of counterparty performance risk in its fair value
estimate. The Company estimates the counterparty performance risk by comparing
its borrowing rate to those of U.S. treasury notes and uses the underlying
spread to discount the estimated fair value.
Recently
Issued Accounting Pronouncements
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB ASC
805 (FAS No. 141(R), “
Business
Combinations
” (“FASB 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 the Company’s results of operations, cash flows, or financial
position.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
In April
2008, the FASB issued FASB ASC 350-30 (FASB Staff Position (FSP) FAS No. 142-3,
“
Determination of the Useful Life of
Intangibl
e
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
Intangibl
e
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 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 12).
In April
2009, the FASB issued FASB ASC 825-10-65 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 825-10-65 and FASB ASC 270 are effective for
interim and annual periods ending after June 15, 2009. The adoption of
FASB ASC 825-10-65 and FASB ASC 270 did not have a material impact on the
Company’s 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 Pu
rchase 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 the Company’s 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 its results of operations, cash flows, or financial
position.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
In June
2009, the FASB issued FASB ASC 860 (SFAS No. 166,
“
Accounting for Transfer
s 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 its 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 August
2009, an update was made to
Fair Value Measurements and
Disclosures
–
Measuring Liabilities at Fair
Value.”
This update permits
entities to measure the fair value of liabilities, in circumstances in which a
quoted price in an active market for an identical liability is not available,
using a valuation technique that uses a quoted price of an identical liability
when traded as an asset, quoted prices for similar liabilities or similar
liabilities when traded as assets or the income or market approach that is
consistent with the principles of
Fair Value Measurements and
Disclosures.
Effective upon issuance, the Company has adopted
this guidance. See Note 16.
In
October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on
Issue 00-21,
“
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.
3. 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.
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 convertible preferred stock, employee stock options,
restricted shares, and contingently issuable shares for the purchase of
Rupinvest. For the year ended December 31 2008, there were no
anti-dilutive shares.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
|
|
|
Years Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in thousands,
except per share data)
|
|
|
Net
income attributable to Premier Power Renewable Energy,
Inc.
|
|
$
|
3,570
|
|
|
$
|
569
|
|
|
Earnings
Per Share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.03
|
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.02
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,050
|
|
|
|
22,666
|
|
|
Diluted
effect of convertible preferred stock, series A
|
|
|
3,500
|
|
|
|
1,084
|
|
|
Diluted
effect of unissued restricted shares
|
|
|
91
|
|
|
|
-
|
|
|
Diluted
effect of contingent liability
|
|
|
113
|
|
|
|
-
|
|
|
Diluted
effect of convertible preferred stock, series B
|
|
|
1,519
|
|
|
|
-
|
|
|
Diluted
|
|
|
31,273
|
|
|
|
23,750
|
|
At
December 31, 2009, there were stock options for 1,320,729 shares of common stock
which were anti-dilutive due to their exercise price. There were no
stock options outstanding at December 31, 2008. For the year ended
December 31, 2008, warrants to purchase 3.5 million of the Company’s common
shares were excluded as their exercise price exceeded the average market price
of the Company’s common shares, and were anti-dilutive.
4.
INTANGIBLE
ASSETS
Intangibles
consist of amortizing intangibles and goodwill. At December 31, 2009 and
2008, such amounts were as follows:
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Trademark
|
|
$
|
814
|
|
|
$
|
865
|
|
|
Customer
List
|
|
|
89
|
|
|
|
-
|
|
|
Employee
contract
|
|
|
67
|
|
|
|
157
|
|
|
Backlog
|
|
|
-
|
|
|
|
26
|
|
|
Subtotal
|
|
|
970
|
|
|
|
1,048
|
|
|
Goodwill
|
|
|
12,254
|
|
|
|
483
|
|
|
|
|
$
|
13,224
|
|
|
$
|
1,531
|
|
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 years ended December 31, 2009, and 2008 was $.2 million and $.06
million. Accumulated amortization was $.3 million and $.06 million at December
31, 2009, and 2008, respectively.
The
Company expects amortization expense for the next five years to be as follows
(in thousands):
|
Year
|
|
Amount
|
|
|
2010
|
|
$
|
119
|
|
|
2011
|
|
|
52
|
|
|
2012
|
|
|
52
|
|
|
2013
|
|
|
52
|
|
|
2014
|
|
|
52
|
|
The
change in the carrying amount of goodwill for the year ended December 31, 2009
and 2008 was as follows:
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Beginning
balance, January 1, 2009
|
|
$
|
483
|
|
|
$
|
-
|
|
|
Goodwill
from acquisitions
|
|
|
11,771
|
|
|
|
483
|
|
|
Ending
balance, December 31, 2009
|
|
$
|
12,254
|
|
|
$
|
483
|
|
PREMIER POWER RENEWABLE ENERGY,
INC.
Notes
to Consolidated Financial Statements
5. ACQUISITION
On July
31, 2009, the Company acquired Rupinvest and its then majority-owned subsidiary,
Premier Power Italy. The Company 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 million shares of the Company’s common stock, with the
number of shares to be transferred, if any, to be calculated based on achieving
certain sales and gross margin goals by Premier Power Italy over a
three-year period (“Contingent Consideration”). The fair value
assigned to the Contingent Consideration was approximately $12 million. In
conjunction with the acquisition of Rupinvest, the Company made a capital
contribution of $1.6 million to Premier Power Italy.
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 of the
contingent liability at the time of the acquisition used a discounted cash flow
model which was 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. The resulting value materially approximated the
number of shares estimated by the Company to be earned by the seller multiplied
by the then share price of the Company’s common stock.
At December
31, 2009, an independent third party estimated the fair value of the contingent
liability using a probability weighted estimated of the number of the shares to
be earned by the seller, multiplied by the market price of the Company’s
shares. The Company determined that the effect of counterparty
performance risk was not material to the estimated fair value of the contingent
liability. The change in fair value of the contingent liability of
$4.3 million was recorded to other income.
The
reduction in fair value was primarily due to the reduction in the Company’s
stock price since the date of acquisition.
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 approximately $12 million
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.
A summary
of the acquired tangible and intangible assets and liabilities is as follows (in
thousands):
|
Cash
|
|
$
|
16
|
|
|
Accounts
Receivable
|
|
|
315
|
|
|
Inventory
|
|
|
247
|
|
|
Intangible
assets - customer list
|
|
|
105
|
|
|
Fixed
assets
|
|
|
38
|
|
|
Accounts
payable and accrued liabilities
|
|
|
(381
|
)
|
|
Taxes
payable
|
|
|
(277
|
)
|
|
Goodwill
|
|
|
11,982
|
|
|
|
|
$
|
12,045
|
|
The
following table provides pro forma results of operations for the years ended
December 31, 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 be occurred had the acquisition been completed
on the dates indicated, nor are they indicative of the future operating results
of the combined company.
|
|
|
Year
Ended
December
31, 2009
(unaudited)
|
|
|
Year
Ended
December
31, 2008
(unaudited)
|
|
|
|
|
(in
thousands)
|
|
|
Total
Revenue
|
|
$
|
33,532
|
|
|
$
|
51,923
|
|
|
Net income
|
|
$
|
3,503
|
|
|
$
|
838
|
|
For the
year ended December 31, 2009, the statement of operations contains $10.8
million and $0.8 million of revenue and net loss, respectively,
relating to the consolidated operations of Rupinvest.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
Intangible
assets consist of the estimated fair value of acquired customer
lists. In estimating the fair value the Company used an income
approach, utilizing a discount rate of 20%. The Company estimated the
useful life of the acquired customer lists to be three years. The gross
contractual accounts receivable amount was $.3 million. The
qualitative factors that make up goodwill recognized include, among other
factors, Premier Power Italy management and knowledge of local business
practices and regulations. The large premium over the fair value of the
net assets acquired is related to the stage of Premier Power Italy’s development
and the Company’s perception of the Italian marketplace. The Company
viewed the Italian solar market as being very attractive and was willing to pay
a premium to obtain access to the market. However, at the time of
acquisition, Premier Power Italy had not yet undertaken the development of solar
projects and as a result, the Company and Esdras, the seller of Rupinvest,
agreed to a payment structure in which substantially all of the consideration is
contingent on Premier Power Italy’s ability to perform.
6.
PROPERTY AND
EQUIPMENT
Property
and equipment consists of the following:
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Equipment
|
|
$
|
217
|
|
|
$
|
204
|
|
|
Furniture
and computers
|
|
|
204
|
|
|
|
59
|
|
|
Vehicles
|
|
|
651
|
|
|
|
505
|
|
|
|
|
|
1,072
|
|
|
|
768
|
|
|
Less:
accumulated depreciation
|
|
|
(457
|
)
|
|
|
(293
|
)
|
|
|
|
$
|
615
|
|
|
$
|
475
|
|
Depreciation
expense was $.2 million and $.1 million for the years ended December 31, 2009
and 2008, respectively.
7.
ACCRUED
LIABILITIES
Accrued
liabilities consist of the following:
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Payroll
|
|
$
|
363
|
|
|
$
|
477
|
|
|
401K
plan
|
|
|
-
|
|
|
|
20
|
|
|
Warranty
reserve
|
|
|
359
|
|
|
|
367
|
|
|
Sales
and local taxes
|
|
|
176
|
|
|
|
302
|
|
|
Workers
compensation insurance
|
|
|
-
|
|
|
|
20
|
|
|
Accrued
subcontractor's costs
|
|
|
998
|
|
|
|
79
|
|
|
Other operational
accruals
|
|
|
147
|
|
|
|
103
|
|
|
|
|
$
|
2,043
|
|
|
$
|
1,368
|
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
8. INCOME
TAXES
The
domestic and foreign components of income before income tax expense were as
follows:
|
|
|
Year
Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Domestic
|
|
$
|
1,617
|
|
|
$
|
124
|
|
|
Foreign
|
|
|
586
|
|
|
|
629
|
|
|
Total
|
|
$
|
2,203
|
|
|
$
|
753
|
|
The
Company is subject to federal, state and foreign corporate income
taxes. The benefit for income taxes consists of the
following:
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(15
|
)
|
|
$
|
33
|
|
|
State
|
|
|
3
|
|
|
|
3
|
|
|
Foreign
|
|
|
446
|
|
|
|
142
|
|
|
|
|
$
|
434
|
|
|
$
|
178
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(1,237
|
)
|
|
$
|
(153
|
)
|
|
State
|
|
|
(379
|
)
|
|
|
(40
|
)
|
|
Foreign
|
|
|
(270
|
)
|
|
|
(25
|
)
|
|
|
|
$
|
(1,886
|
)
|
|
$
|
(218
|
)
|
|
Total
Benefit
|
|
$
|
(1,452
|
)
|
|
$
|
(40
|
)
|
The
Company intends to permanently reinvest all foreign earnings in foreign
jurisdictions and has calculated its tax liability and deferred tax assets and
deferred tax liabilities accordingly.
A
reconciliation of the provision for income taxes at the federal statutory rate
compared to the Company’s actual tax benefit is as follows:
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in thousands)
|
|
|
Federal
income tax expense at U.S. statutory rate
|
|
$
|
749
|
|
|
$
|
306
|
|
|
State
income taxes, net of federal benefit
|
|
|
(261
|
)
|
|
|
(24
|
)
|
|
Foreign
income and withholding taxes
|
|
|
(21
|
)
|
|
|
122
|
|
|
Share-based
compensation
|
|
|
157
|
|
|
|
-
|
|
|
Effect
of change in statutory tax rates on deferred taxes
|
|
|
-
|
|
|
|
(444
|
)
|
|
Gain
on change in fair value of contingent liability
|
|
|
(1,463
|
)
|
|
|
-
|
|
|
Warrant
revaluation
|
|
|
(742
|
)
|
|
|
-
|
|
|
Unrecognized
tax benefit
|
|
|
87
|
|
|
|
-
|
|
|
Other,
net
|
|
|
42
|
|
|
|
-
|
|
|
|
|
$
|
(1,452
|
)
|
|
$
|
(40
|
)
|
Prior to
the conversion of the Company to C-corporation tax status for U.S. federal tax
purposes during the quarter ended December 31, 2008, all income and losses from
the operations of the Company generally flowed through to its shareholders. The
Company was not subject to U.S. federal income taxes at the corporate level and
was only subject to state income taxes. Since the Company operated as an
S-corporation prior to September 9, 2008, the U.S. statutory rate was 0%. As a
result of the change in tax reporting status, the effective tax rate for U.S.
purposes for the year ended December 31, 2008 has been adjusted to account for
the zero rate for the income and deductions during the majority of the year. The
Company recorded a deferred tax benefit of approximately $200,000 during the
quarter ended December 31, 2008 due to the effect of the change in statutory tax
rates on its deferred tax assets.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
The
components of deferred tax assets and liabilities are as follows:
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in thousands)
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Accrued
expenses
|
|
$
|
234
|
|
|
$
|
253
|
|
|
Share-based
compensation
|
|
|
15
|
|
|
|
-
|
|
|
Net
operating losses
|
|
|
1,845
|
|
|
|
-
|
|
|
Other
|
|
|
-
|
|
|
|
1
|
|
|
Total
deferred tax assets
|
|
$
|
2,094
|
|
|
$
|
254
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
|
Intangibles
|
|
|
(264
|
)
|
|
|
(314
|
)
|
|
Depreciable
assets
|
|
|
(62
|
)
|
|
|
(29
|
)
|
|
Total
deferred tax liabilities
|
|
|
(326
|
)
|
|
|
(343
|
)
|
|
Net
deferred tax assets
|
|
$
|
1,768
|
|
|
$
|
(89
|
)
|
As of
December 31, 2009, the Company’s federal, state, foreign net operation loss
carryforwards for income tax purposes are approximately $4.1 million, $4.5
million, $.3 million, respectively, which begins to expire in 2024 through
2029. The Company files income tax returns in the U.S. federal
jurisdiction, and various state and foreign jurisdictions. The
Company adopted the provisions of accounting for uncertain tax positions in
accordance with the
Income
Taxes (ASC 740)
topic on September 8, 2008, and accordingly, performed a
comprehensive review of the Company’s uncertain tax positions as of that
date. In this regard, an uncertain tax position represents its
expected treatment of a tax position taken in a filed tax return, or planned to
be taken in a future tax return, that has not been reflected in measuring income
tax expense for financial reporting purposes. A reconciliation of the
Company’s total unrecognized tax benefits at December 31, 2009 and 2008
follows:
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in thousands)
|
|
|
Balance
at beginning of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Addition
based on tax positions in the current period
|
|
|
219
|
|
|
|
-
|
|
|
Balance
at end of year
|
|
$
|
219
|
|
|
$
|
-
|
|
The
Company does not expect there to be any material changes to the assessment of
uncertain tax positions over the next twelve months. The Company is
subject to routine corporate income tax audits in the United States and foreign
jurisdictions. The statute of limitations for the Company’s 2008 tax
years remains open for U.S. purposes. Most foreign jurisdictions have
statute of limitations that range from three to six years.
The
liability for uncertain tax positions is recorded in accrued expenses in the
Company’s consolidated balance sheet. The Company recognizes interest
and penalties related to uncertain tax positions in the income tax
provision. Interest and penalties are computed based upon the
difference between its uncertain tax positions under
ASC 740
and the amount
deducted or expected to be deducted in its tax returns. During 2009
and 2008, the Company did not accrue or pay for any interest and
penalties.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
9.
BORROWINGS
Notes
Payable
Notes
payable were $0.6 million and $0.1 million at December 31, 2009 and 2008,
respectively. Notes payable of $0.1 million 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 $0.4 million with Instituto de Crédito Oficial as of December 31, 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 $0.1 million.
On July
13, 2009, the Company 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 the Company 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 the Company acquires another subsidiary and
require additional working capital for such subsidiary. The line of
credit is secured by its assets and by the assets of Premier Power California
and Bright Future. 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 December 31, 2009, the interest rate was
5%. As of December 31, 2009, there is $1.5 million outstanding under the
agreement with Umpqua Bank.
The
loan agreement with Umpqua Bank contains various financial condition covenants
with which the Company must comply, including minimum current ratio, maximum
debt to tangible net worth ratio, and minimum tangible net
worth. Under the loan agreement, the Company is also subject to
customary non-financial covenants including limitations in secured indebtedness
and limitations on dividends and other restricted payments. The
Company was out of compliance of certain covenants as of December
31, 2009 that did not take into account our Contingent Consideration Liability
as noted in Note 13. As of March 24, 2010, the bank is aware of
the non-compliance and has not waived the non-compliance. The bank has not
issued a notice of default, nor instituted default rates, nor cut funding under
the line. We do not expect any of these events to occur and are currently
working with the bank to redefine our financial covenants.
The future principle payments on
these balances as of December 31, 2009 are as follows:
|
|
|
(in thousands)
|
|
|
2010
|
|
$
|
1,692
|
|
|
2011
|
|
|
313
|
|
|
2012
|
|
|
220
|
|
|
2013
|
|
|
10
|
|
|
2014
|
|
|
5
|
|
|
|
|
$
|
2,240
|
|
Preferr
e
d Stock
The Company has a
u
thorized 20,000,000 shares of
prefe
rr
ed stock, par value $
0.0001 per share (
“
Preferred Stock
”
). The Preferred Stock may be issued
from time to time in series having such designated preferences and
righ
ts
, qualifications and to such limitations
as the Board of Directors may determine.
The Company has designated
5,000,000 shares of Preferred Stock as
Series
A
Convertible Preferred Stock
(
“
Series A Stock
”
). The holders of Series A Stock have no
voting righ
ts
except with regards to certain
corporate even
ts
, enjoys a $2.40 liquidation preference
per share, subject to
adjustment, over holders of common stock, and may convert each share of Series
A
Stock into one share of common stock at
any time. Series A stock conver
ts
automatically upon the occurrence
of
an
offering meeting certain criteria.
Holders of the Series A S
tock have certain redemption
righ
ts
. The Company has determined that the
even
ts
triggering such righ
ts
are either in control of the Company or
in the case of such even
ts
where the Company is not deemed to
exercise co
nt
rol; the redemption right is limited
t
o the ability to
con
vert into shares of the
Company
’
s common stock. As of December
31
,
2009 and 2008, there were 3,500,000
shares of Series A Stock ou
ts
ta
n
ding.
The Company has designated 2,800,000
shares of Preferred Stock as Series B Convertible Preferr
ed Stock (
“
Series B Stock
”
). The holders of
S
eries B Stock have no voting
righ
ts
except with regards to certain
corporate even
ts
and may convert each share of Series B
Stock into one share of common stock at any time. Series B stock
conver
ts
automatically u
pon the occurrence of an offering
meeting certain criteria. Holders of the Series B Stock have certain redemption
righ
ts
. The Company has determined that the
e
ven
ts
t
riggering such righ
ts
are either in control of the Company or
in the case of such even
ts
w
here the Company is not deemed to
exercise control; the redemption right is limited to the ability to convert into
sh
ar
es of the Company
’
s co
m
mon stock. As of December 31
,
2009 and 2008, there were 2,800,000
and
0
Series B Stock ou
ts
tanding, respectively.
Warrants
I
n September 2008, the Company issued
Series
A
Warran
ts
and Series
B
Warran
ts
to purchase 1,750,000 and 1,750,000
shares of common stock, respectively, in connection with the issuance of Series
A Stock. Both the Series
A
and B Warran
ts
had four year lives.
The Company had the right to call for
cancellation of each ou
ts
tanding Series A Warrant or Series B
Warrant under certain circumstances. The Series A Warran
ts
had an exercise price of
$2.50 and a fair value of $.
1
5 per warrant. The Series
B
Warran
ts
had
an exercise price of $3.00 and a fair
value of $.
1
3 per warrant. All of the issued and
outstanding Series A Warrants and Series B Warrants were cancelled on June 16,
2009 in connection with a sale of our Series B Stock.
The significant assu
m
ptions used to determine the fair values
of the warran
ts
are as follows:
|
Risk-free in
te
re
st rate at grant
date
|
|
|
4.5
|
%
|
|
Expected
stock p
rice
volatility
|
|
|
95
|
%
|
|
Expected dividend
payout
|
|
|
-
|
|
|
Expected
option
life-years
|
|
4
yrs
|
In Septemb
e
r 2008, t
h
e Company issued 3,500,000
uni
ts
, consisting each of 1 share of
Preferred Stock,
½
o
f a Series
A
Warrant, and
½
of a Series B Warrant in exchange for
$
7,000,000 in gross
proceeds. The fair value of the preferred stock was calculated based on the
estimated
f
air value and underlying number of
common shares it would convert into at the time of the transaction.
The
estimated fair value of our common stock
on
the transaction date was
$.42 per share, and the preferred stock would have converted into 3,500,000
common shares, thus deriving a fair value of $1,470,000 for the underlying
co
m
m
on shares.
Based on
the relative fair values of the preferred stock and the warrants, we allocated
$5,206,013 and $1,793,987 of the $7,000,000 gross proceeds, before issuance
costs, to the preferred stock and warrants, respectively. The aggregate net
proceeds received from the issuance of the preferred stock and
warrants was $5,511,895, giving effect to an aggregate $1,488,105 of
financing-related costs. The Company determined that the issuance of the
warrants did not result in significant incremental financing-related costs
and, as a result, netted such costs against the gross proceeds allocated to the
preferred stock. Net of financing-related costs, the Company allocated
$3,717,908 and $1,793,987 of the net proceeds to the preferred stock and
warrants, respectively.
11. RELATED
PARTY TRANSACTIONS
Certain
stockholders have guaranteed certain obligations under the Company’s borrowings
and operating leases.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
12.
COMMITMENTS
AND CONTINGENCIES
Premier
Power Spain is party to three non-cancelable leases for operating facilities in
Navarro, Madrid, and Barcelona, Spain, which expire in 2012, 2013, and 2014,
respectively. Premier Power Italy is party to a non-cancelable lease for
operating facilities in 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 December
31, 2009, subject to annual adjustment, if any:
|
|
|
(in thousands)
|
|
|
2010
|
|
$
|
102
|
|
|
2011
|
|
|
75
|
|
|
2012
|
|
|
67
|
|
|
2013
|
|
|
56
|
|
|
2014
and beyond
|
|
|
50
|
|
|
|
|
$
|
350
|
|
We are
not currently involved in any material legal proceedings, and we are not aware
of any material legal proceedings pending or threatened against us. We are also
not aware of any material legal proceedings involving any of our directors,
officers, or affiliates or any owner of record or beneficially of more than 5%
of any class of our voting securities.
In
connection with Rupinvest’s purchase of the 10% noncontrolling interest in
Premier Power Italy from Esdras, Esdras has notified Rupinvest that it does not
believe that it was properly notified of the intent to acquire and believes a
premium on the purchase price was necessary. The Company disagrees with this
position. No legal proceedings have been threatened. In the event, however, that
legal proceedings are conducted, we do not anticipate a material
exposure.
13. CONTINGENT
CONSIDERATION
LIABILITY
In
connection with the acquisition of Rupinvest (See Note 5), contingent
consideration liability of $12 million was recorded at the time of the purchase
to reflect the estimated fair value of 3 million contingently issuable shares of
the Company
’
s
common stock.
The conditions that must be met and the amount of the 3
million shares, if any, to be issued are described below:
|
|
375,000 shares for
each ten million Euros (
€
10
million, or approximately $14.2 million) worth of Sales (as defined below)
achieved by Premier Power Italy from July 9, 2009, the escrow opening
date, to December 31, 2009 (the
“First
Issuance
”),
with the maximum number of shares released as part of the First Issuance
to be 1,500,000 shares (any number of shares not issuable as part of the
First Issuance solely due to the fact that the 1,500,000 shares threshold
was exceeded is hereinafter referred to as the
“
Excess
Issuable Amount
”
);
|
|
|
50% of the Excess
Issuable Amount, if any, plus 200,000 shares for each ten million Euros
(
€
10
million, or approximately $14.2 million) worth of Sales achieved by
Premier Power Italy from January 1, 2010 to December 31, 2010 (the
“Second
Issuance)
”).
The maximum combined number of shares to be released as part of the First
Issuance and the Second Issuance, in the aggregate, shall not exceed
3,000,000 shares; and
|
|
|
100,000 shares for
each ten million Euros (
€
10
million, or approximately $14.2 million) worth of Sales achieved by
Premier Power Italy from January 1, 2011 to December 31, 2011 (the
“Third
Issuance
”).
The maximum combined number of shares to be released as part of the First
Issuance, the Second Issuance, and the Third issuance, in the aggregate,
shall not exceed 3,000,000
shares.
|
At December 31, 2009, the Company estimated the fair value of the
contingent consideration liability at $7,725,000 assuming 2,801,875 shares
of its common stock would be issued, a share price of $2.75 at December 31,
2009, transaction costs and its determination that the adjustment for
counterparty performance risk was not material. As of December 31, 2009, the
Company had not, yet, determined the amount of shares earned by the
sellers.
14.
DERIVATIVE
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 $11.1 million upon
adoption of FASB ASC 815. The Company determined the fair value of
the warrant liability to be $8.9 million 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 $2.2 million for the year ended December 31,
2009.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
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 held by Vision exercisable for an aggregate 3.5
million shares of common stock held by Vision. The cancellation of warrants
resulted in the elimination of all the Company’s issued and outstanding
warrants. As a result of the cancellation, the Company derecognized
the warrant liability of $8.9 million and recorded the gain on its
extinguishment of $1.4 million 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
|
%
|
|
|
4.0
|
|
|
$
|
2.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750,000
|
|
|
0.0
|
%
|
|
|
95.0
|
%
|
|
|
4.5
|
%
|
|
|
4.0
|
|
|
$
|
3.00
|
|
15.
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, certain consultants, and certain 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 1,320,729 shares of common stock were outstanding under the Incentive
Plan as of December 31, 2009. The Company did not grant stock options
prior to January 2009, and there was no stock compensation expense prior to this
period.
The
following table sets forth a summary stock option activity for the year ended
December 31, 2009:
|
|
|
|
|
Weighted-
|
|
Weighted-
|
|
|
|
|
Number of
|
|
Average Date
|
|
Average Date
|
|
|
|
|
Shares
|
|
Fair Value
|
|
Exercise Price
|
|
|
|
|
December 31, 2009
|
|
|
Outstanding
and not vested beginning balance
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
Granted
during the year
|
|
|
1,710,979
|
|
$
|
3.00
|
|
$
|
3.86
|
|
|
Forfeited/cancelled
during the year
|
|
|
(390,250
|
)
|
$
|
3.32
|
|
$
|
4.25
|
|
|
Released/vested
during the year
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
Outstanding
and not vested at December 31, 2009
|
|
|
1,320,729
|
|
$
|
2.99
|
|
$
|
3.75
|
|
Stock-based
compensation expense relating to these shares is being recognized over a
weighted-average period of 4.5 years. The Company recognized
stock-based compensation expense of approximately $0.5 million during the year
ended December 31, 2009.
At
December 31, 2009, there was $3.3 million of total unrecognized compensation
cost related to nonvested stock options. The Company expects to
recognize that cost over a weighted average period of 4.1 years.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
The
following tables summarize the total stock-based compensation expense
the Company recorded for the year ended December 31, 2009:
|
|
|
(in thousands)
|
|
|
Cost
of goods sold
|
|
$
|
145
|
|
|
Administration
|
|
|
200
|
|
|
Sales
and marketing
|
|
|
118
|
|
|
Total
stock-based compensation expense
|
|
$
|
463
|
|
|
|
|
(in thousands)
|
|
|
Stock
option awards to employees
|
|
$
|
463
|
|
|
Restricted
stock grants to board of directors
|
|
|
161
|
|
|
Total
stock-based compensation expense
|
|
$
|
624
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
|
|
|
|
|
|
|
Average
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Number of
|
|
Exercise
|
|
Term
|
|
|
Intrinsic
|
|
|
|
Options
|
|
Price
|
|
(in years)
|
|
|
Value
|
|
Options
expected to vest
|
|
940,208
|
|
$
|
3.84
|
|
8.66
|
|
$
|
-
|
The
Company defines in the money options at December 31, 2009 as options that had
exercise prices that were lower than the $2.75 fair market value of its common
stock at that date. The aggregate intrinsic value of options
outstanding at December 31, 2009 is calculated as the difference between the
exercise price of the underlying options and the fair market value of the
Company’s common stock. At December 31, 2009, the aggregate intrinsic
value was zero.
The fair
value of stock option grants during the year ended December 31, 2009 was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions:
|
Expected
volatitity
|
|
|
93.60
|
%
|
|
Expected
dividends
|
|
|
0
|
%
|
|
Expected
term
|
|
6.5
years
|
|
|
Risk-free
interest rate
|
|
|
1.88
|
%
|
|
Weighted-average
fair value per share
|
|
$
|
3.00
|
|
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 three 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.
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
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.
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.
The
weighted-average fair value per share of the stock options as determined on the
date of grant was $3.00 for the 1,710,979 stock options granted during the year
ended December 31, 2009. The total fair value of stock options vested during the
year ended December 31, 2009 was $0 as no stock options vested in
2009.
Restricted
Stock Awards
During
2009, the Company began issuing restricted stock awards to certain directors,
officers, and employees under the Incentive Plan. Compensation
expense for such awards, based on the fair market value of the awards on the
grant date, is recorded during the vesting period.
A summary
of restricted stock awards activity follows:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Number of
|
|
|
Fair
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Outstanding,
December 31, 2008
|
|
|
-
|
|
|
$
|
-
|
|
|
Granted
|
|
|
1,500
|
|
|
$
|
3.70
|
|
|
Vested
and issued
|
|
|
(1,500
|
)
|
|
$
|
3.70
|
|
|
Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
Outstanding,
December 31, 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. Additionally, as of December 31, 2009, the
Company owed an aggregate 33,000 restricted shares of common stock to certain
members of the board of directors pursuant to their director agreements, which
were issued on March 10, 2010. The fair value of these shares was not
significant. ASC Topic 718 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 year ended December 31, 2009, and therefore,
there is no impact on the accompanying consolidated statements of cash
flows.
PREMIER POWER RENEWABLE ENERGY,
INC.
Notes
to Consolidated Financial Statements
16.
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 and $20,000 for the year ended December 31,
2009 and 2008, respectively. Employees are vested 100% after 3 years of service.
Neither Bright Future, Premier Power Spain, nor Premier Power Italy offers
defined contribution or defined benefit plans to employees.
17.
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 assets
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, billings 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
borrowings 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, the Company’s Level 3 financial assets and liabilities that
are accounted for at fair value.
(in thousands):
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level 3
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Liabilities:
Contingent consideration
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,725
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
Contingent
|
|
|
|
|
Consideration
|
|
|
|
|
Liability
|
|
|
|
|
(in
thousands):
|
|
|
Beginning
balance
|
|
$
|
-
|
|
|
Acquisition
of Rupinvest
|
|
|
12,026
|
|
|
Total
gain realized
|
|
|
(4,301
|
)
|
|
Ending
balance
|
|
$
|
7,725
|
|
PREMIER POWER RENEWABLE ENERGY,
INC.
Notes
to Consolidated Financial Statements
18. CONTINGENCIES
Legal
Matters
The
Company is subject to legal proceedings, claims, and litigation arising in the
ordinary course of business. The Company is not currently involved in
any litigation, the outcome of which would, based on information currently
available, have a material adverse effect on the Company’s financial position,
results of operations, or cash flows.
Indemnifications
The
Company indemnifies its directors and executive officers for costs associated
with any fees, expenses, judgments, fines and settlement amounts incurred by
them in any action or proceeding to which any of them is, or is threatened to
be, made a party by reason of his or her services in their role as a director or
officer.
19. SEGMENT
INFORMATION
The
Company has adopted
Segment
Reporting (ASC 280)
requiring segmentation based on the Company’s
internal organization, reporting of revenue and other performance
measures. Operating segments are defined as components of an
enterprise about which discrete financial information is available that is
evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing
performance. The Company’s chief operating decision maker is the
Chief Executive Officer. The Company’s segments are designed to
allocate resources internally and provide a framework to determine management
responsibility. There are three operating segments, as summarized
below:
|
|
|
United
States – consists of (i) commercial ground mount or rooftop solar energy
projects generally ranging from 100kWh to 20MW provided to corporate,
municipal, agricultural, and utility customers and (ii) residential that
consists mainly of rooftop solar installations generally ranging from 5kWh
to 40kWh provided to residential customers primarily in California and New
Jersey.
|
|
|
|
Spain
– consists of rooftop solar installations generally ranging 5kWh to 1MW
provided primarily to businesses that own commercial buildings or
warehouses.
|
|
|
|
Italy
– consists of distribution, ground mount, roof mount, and solar power
plant installations.
|
Prior to its acquisition of
Premier Power Italy, the Company determined that it operated as a single
segment. In conjunction with the acquisition and changes in its management
structure, the Company determined that the three operating segments noted above
are more reflective of its operations.
The
Company refers to the Net Sales as the revenue earned from the installation
projects or distribution sales. Currently, the Company does not
separately allocate operating expenses to these segments, nor does it allocate
specific assets to these segments. Therefore, the segment information
reported includes only net sales, cost of sales, and gross
profit. The following tables present the operations by each operating
segment:
|
|
|
Year
Ended December 31, 2009
|
|
|
|
|
United States
|
|
|
Spain
|
|
|
Italy
|
|
|
Total
|
|
|
|
|
(in
thousands)
|
|
|
Net
sales
|
|
$
|
13,987
|
|
|
$
|
5,919
|
|
|
$
|
10,844
|
|
|
$
|
30,750
|
|
|
Cost
of sales
|
|
|
(12,383
|
)
|
|
|
(5,051
|
)
|
|
|
(8,858
|
)
|
|
|
(26,292
|
)
|
|
Gross
profit
|
|
$
|
1,604
|
|
|
$
|
868
|
|
|
$
|
1,986
|
|
|
|
4,458
|
|
|
Total
operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,718
|
|
|
Operating
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(4,260
|
)
|
PREMIER
POWER RENEWABLE ENERGY, INC.
Notes
to Consolidated Financial Statements
|
|
|
(Restated)
Year Ended December 31, 2008
|
|
|
|
|
United States
|
|
|
Spain
|
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
Net sales
|
|
$
|
31,074
|
|
|
$
|
13,164
|
|
|
$
|
44,238
|
|
|
Cost
of sales
|
|
|
(27,229
|
)
|
|
|
(11,482
|
)
|
|
|
(38,711
|
)
|
|
Gross
profit
|
|
$
|
3,845
|
|
|
$
|
1,682
|
|
|
|
5,527
|
|
|
Total
operating expenses
|
|
|
|
|
|
|
|
|
|
|
4,729
|
|
|
Operating
income
|
|
|
|
|
|
|
|
|
|
$
|
798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
(Restated)
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
$
|
13,987
|
|
|
$
|
31,074
|
|
|
Spain
|
|
|
|
|
|
|
5,919
|
|
|
|
13,164
|
|
|
Italy
|
|
|
|
|
|
|
10,844
|
|
|
|
-
|
|
|
|
|
|
|
|
|
$
|
30,750
|
|
|
$
|
44,238
|
|
At
December 31, 2009 and 2008, property and equipment located in the United States,
net of accumulated depreciation and amortization was approximately $0.3 million
and $0.4 million, respectively. At December 31, 2009 and 2008,
property and equipment located in foreign countries, net of accumulated
depreciation and amortization was approximately $0.3 million and $0.1 million,
respectively.
INDEPENDENT
AUDITOR’S REPORT
Board of
Directors and Stockholders
Rupinvest
SARL
We have
audited the accompanying balance sheet of Rupinvest SARL (a development stage
company) (the “Company”) as of December 31, 2008 and the related statements of
operations, stockholders’ equity, and cash flows for the period from
inception (August 1, 2008) through December 31, 2008. These financial statements
are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audit.
We
conducted our audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Rupinvest SARL at December 31,
2008, and the results of its operations and its cash flows from inception
(August 1, 2008) through December 31, 2008 in conformity with accounting
principles generally accepted in the United States of America.
/s/
Macias Gini & O’Connell LLP
Sacramento,
California
September
24, 2009
|
RUPINVEST
SARL
|
|
|
(A
DEVELOPMENT STAGE COMPANY)
|
|
|
BALANCE
SHEET
|
|
|
DECEMBER
31, 2008
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
15,318
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
15,318
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
Common
stock, par value $16; 1,250 shares authorized, issued and outstanding at
December 31, 2008
|
|
$
|
19,500
|
|
|
Deficit
accumulated during development stage
|
|
|
(2,255
|
)
|
|
Accumulated
other comprehensive loss
|
|
|
(1,927
|
)
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
$
|
15,318
|
|
The
accompanying notes are an integral part of these financial
statements.
|
RUPINVEST
SARL
|
|
(A
DEVELOPMENT STAGE COMPANY)
|
|
STATEMENT
OF OPERATIONS
|
|
FROM
INCEPTION (AUGUST 1, 2008) THROUGH DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
General
and administrative
|
|
$
|
2,255
|
|
|
Total
operating expenses
|
|
|
2,255
|
|
|
|
|
|
|
|
|
Loss
before provision for income tax
|
|
|
(2,255
|
)
|
|
Provision
for income tax
|
|
|
-
|
|
|
Net
loss
|
|
$
|
(2,255
|
)
|
The
accompanying notes are an integral part of these financial
statements.
RUPINVEST
SARL
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS' EQUITY
FROM
INCEPTION (AUGUST 1, 2008) THROUGH DECEMBER 31, 2008
|
|
|
Common Stock
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Deficit
Accumulated
During
Development
Stage
|
|
|
Total
Stockholders'
Equity
|
|
|
|
|
Shares
|
|
|
Price
per
share
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
August 1, 2008
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock August 1, 2008
|
|
|
1,250
|
|
|
|
15.60
|
|
|
|
19,500
|
|
|
|
|
|
|
|
|
|
|
|
19,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,255
|
)
|
|
|
(2,255
|
)
|
|
Foreign
currency translations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,927
|
)
|
|
|
|
|
|
|
(1,927
|
)
|
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
1,250
|
|
|
$
|
15.60
|
|
|
$
|
19,500
|
|
|
$
|
(1,927
|
)
|
|
$
|
(2,255
|
)
|
|
$
|
15,318
|
|
The
accompanying notes are an integral part of these financial
statements.
RUPINVEST
SARL
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CASH FLOWS
FROM
INCEPTION (AUGUST 1, 2008) THROUGH DECEMBER 31, 2008
|
Cash
flows from operating activities:
|
|
|
|
|
Net
loss
|
|
$
|
(2,255
|
)
|
|
|
|
|
|
|
|
Cash
used in operating activities
|
|
|
(2,255
|
)
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
19,500
|
|
|
|
|
|
|
|
|
Cash
provided by financing activities
|
|
|
19,500
|
|
|
|
|
|
|
|
|
Effect
of exchange rate on cash
|
|
|
(1,927
|
)
|
|
|
|
|
|
|
|
Increase in
cash and cash equivalents during the period
|
|
|
15,318
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
-
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
15,318
|
|
The
accompanying notes are an integral part of these financial
statements.
RUPINVEST
SARL
(A
Development Stage Company)
Notes
to Financial Statements
From
Inception (August 1, 2008) Through December 31, 2008
|
1.
|
DESCRIPTION OF
BUSINESS
|
Rupinvest
SARL (the “Company”) was incorporated on August 1, 2008. The Company
was established to invest in other enterprises through the acquisition of
securities and rights, underwriting business firm purchase or option, and
acquiring patents and licenses. The Company has not received any
revenues from the sale of products or services. Accordingly, through
the date of these financial statements, the Company is considered to be in the
development stage and the accompanying financial statements represent those of a
development stage enterprise.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
Cash and cash equivalents
—
The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
Foreign currency translation
— The financial statements of the Company are presented in U.S. dollars and the
Company’s functional currency is the Euro. The Company translates assets and
liabilities into dollars at the rates of exchange in effect at the balance sheet
date. Revenues and expenses are translated using rates that
approximate those in effect during the period. Accordingly,
translation gains or losses are included as a component of accumulated other
comprehensive income. Gains and losses resulting from the translation of
transactions denominated in foreign currencies are included in income. From
inception (August 1, 2008) through December 31, 2008 there were no net foreign
currency transaction gains or losses.
Use of estimates —
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Income Taxes —
The Company
follows the liability method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are determined based on
differences between the financial statement and the income tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company expects to maintain
a full valuation allowance on the net deferred tax assets until an appropriate
level of profitability that generates taxable income is sustained or until we
are able to develop tax strategies that would enable us to conclude that it is
more likely than not that a portion of the deferred tax assets will be
realizable. Any reversal of valuation allowance will favorably impact
our results of operations in the period of the reversal. For the
period from inception (August 1, 2008) through December 31, 2008, tax expense
(benefit), was insignificant. At December 31, 2008, there were no significant
current or deferred taxes or valuation allowance.
In
December 2008, the Financial Accounting Standards Board issued FASB Staff
Position (FSP) FIN 48-3, “
Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises
.” FSP FIN 48-3
permits an entity within its scope to defer the effective date of FASB
Interpretation 48 (Interpretation 48), “
Accounting for Uncertainty in Income
Taxes,
” to its annual financial statements for fiscal years beginning
after December 15, 2008. The Company has elected to defer the application of
Interpretation 48 for the year ended December 31, 2008. The Company evaluates
its uncertain tax positions using the provisions of FASB Statement 5, “
Accounting for
Contingencies.”
Accordingly, a loss contingency is recognized when
it is probable that a liability has been incurred as of the date of the
financial statements and the amount of the loss can be reasonably estimated. The
amount recognized is subject to estimate and management judgment with respect to
the likely outcome of each uncertain tax position. The amount that is ultimately
sustained for an individual uncertain tax position or for all uncertain tax
positions in the aggregate could differ from the amount
recognized.
RUPINVEST
SARL
(A
Development Stage Company)
Notes
to Financial Statements
From
Inception (August 1, 2008) Through December 31, 2008
Comprehensive Loss –
Statement of Financial Accounting Standards No. 130, “
Reporting Comprehensive
Income,”
establishes standards for reporting comprehensive loss and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive loss, as defined, includes all
changes in equity (net assets) during the period from non-owner sources. The
individual components of comprehensive loss are reflected in the statement of
stockholders' equity.
Recently Issued Accounting
Pronouncements
- In September 2006, FASB issued Statement of Financial
Accounting Standards No. 157, “
Fair Value
Measurements
” (“SFAS 157”),
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (“GAAP”) and expands disclosures about
fair value measurements. SFAS 157 applies under other accounting pronouncements
that require or permit fair value measurements, FASB having previously concluded
in those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new fair value
measurements, however, for some entities, application of SFAS 157 will change
current practice. SFAS 157 is effective for financial statements
issued for the first fiscal year beginning after November 15, 2007 and interim
periods within those fiscal years. In February 2008, FASB issued FASB
Staff Position No. 157-2 that defers the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis, to fiscal years beginning after November 15, 2008. In addition, FASB also
agreed to exclude from the scope of SFAS 157 fair value measurements made for
purposes of applying SFAS No. 13, “
Accounting for Leases
” and
related interpretive accounting pronouncements. The adoption of SFAS 157 for
financial assets and liabilities did not have a material effect on the Company’s
financial position, results of operations and cash flows. The Company
is assessing the impact of SFAS 157 on its nonfinancial assets and liabilities,
but does not expect it to have a material impact on its results of operations,
cash flows, or financial position.
In
February 2007, FASB issued SFAS No. 159,
“The Fair Value Option for Financial
Assets and Financial Liabilities”
(“SFAS 159”), which permits entities to
choose to measure many financial instruments and certain other items at fair
value. The objective of SFAS 159 is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective as of an entity’s
first fiscal year that begins after November 15, 2007. The adoption of SFAS 159
did not have a material impact on results of operations, cash flows, or
financial position.
In
December 2007, the FASB issued SFAS No. 141(R), “
Business Combinations”
(“SFAS 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. SFAS 141(R) is prospectively effective to business
combinations for which the acquisition is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. The impact
of SFAS 141(R) on the Company’s results of operations, cash flows or financial
position will be determined in part by the nature and timing of any future
acquisitions completed by it.
RUPINVEST
SARL
(A
Development Stage Company)
Notes
to Financial Statements
From
Inception (August 1, 2008) Through December 31, 2008
In April
2008, FASB issued FSP FAS 142-3,
“Determination of the Useful Life of
Intangible Assets”
(“FSP”), which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
“Goodwill and Other Intangible
Assets”
(“SFAS 142”).
The intent of this FSP
is to improve the consistency between the useful life of a recognized intangible
asset under SFAS 142 and the period of expected cash flows used to measure the
fair value of the asset under SFAS
141(R) and other
accounting principles generally accepted in the United States. This FSP is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption
is prohibited. The Company is currently evaluating the impact of adoption of
this FSP and does not expect adoption to have a material impact on results of
operations, cash flows, or financial position.
In
December 2007, the FASB issued SFAS No. 160, “
Noncontrolling Interests in
Consolidated Financial Statements -
an amendment of ARB No. 51”
(“SFAS 160”), which improves the relevance, comparability, and transparency of
financial information provided to investors by requiring all entities to report
noncontrolling (minority) interests in subsidiaries in the same way as
equity consolidated financial statements. Moreover, SFAS 160 eliminates the
diversity that currently exists in accounting for transactions between an entity
and noncontrolling interests by requiring they be treated as equity
transactions. SFAS 160 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008; earlier
adoption is prohibited. The Company is assessing the impact of SFAS
160, but does not expect it to have a material impact on its results of
operations, cash flows, or financial position.
In March
2008, the FASB issued SFAS No. 161, “
Disclosures about Derivatives
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133”
(“
SFAS 161
”)
.
SFAS 161 requires enhanced disclosures about
a company’s derivative
and hedging activities. SFAS 161 is effective for financial statements issued
for fiscal years beginning after
December 15, 2008. The
Company is assessing the impact of SFAS 161, but does not expect it to have a
material impact on its results of operations, cash flows, or financial
position.
In May
2008, the FASB issued SFAS No. 162, “
The Hierarchy of Generally Accepted
Accounting Principles”
(“SFAS 162”), which identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States of America (the GAAP hierarchy). SFAS No. 162 is effective as of
November 15, 2008. The adoption of SFAS 162 did not have a material
impact on its results of operations, cash flows or financial
position.
SFAS 162
was effectively superseded by FASB No. 168, “
FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles
–
a
replacement of FASB No. 162,
” (“SFAS 168”) which became the single source
of authoritative nongovernmental U.S. generally accepted accounting principles
(GAAP) on July 1, 2009. The Codification is effective for financial statements
that cover interim and annual periods ending after September 15, 2009. The
Codification does not change GAAP, but is intended to help find and research
GAAP. The Codification is a new structure which takes accounting pronouncements
and organizes them into 90 accounting topics. It eliminates the previous levels
of U.S. GAAP. The adoption of SFAS 168 is not expected to have a material impact
on our financial position, results of operations and cash flows.
In June
2008, the FASB ratified EITF Issue No. 07-5 (“EITF 07-5”) “
Determining Whether on Instrument
for an Embedded Feature Is Indexed to an Entity’s Own Stock”
EITF 07-5
provides that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument’s contingent exercise and settlement
provisions. It also clarifies the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal
years beginning after December 31, 2008. The Company is assessing the
impact of EITF 07-5 on its results of operations, cash flows, or financial
position.
RUPINVEST
SARL
(A
Development Stage Company)
Notes
to Financial Statements
From
Inception (August 1, 2008) Through December 31, 2008
In May
2008, the FASB issued FASB Staff Position No. APB 14-1 (“APB 14-1”) “
Accounting for Convertible
Instruments That May be Settled in Cash upon Conversion Including Partial Cash
Settlement”
FASB Staff Position No. APB 14-1 clarifies that convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, “
Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants
.” Additionally, this
FSP specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. This FSP is effective for financial statements
issued for fiscal years beginning after December 15, 2008. The
Company is assessing the impact of FSP APB 14-1 on its results of operations,
cash flows, or financial position.
On May
15, 2009, the stockholders of the Company reorganized their ownership interests
in the Company and ARCO Energy, SRL (Arco), a company controlled by the
stockholders of the Company, such that the Company became the parent of Arco. As
the Company and Arco were under common control, the transaction has been treated
as a reorganization with the assets and liabilities of the Company and Arco
continuing to be recorded at their historical costs.
In July
2009, 100% of the issued and outstanding equity ownership of the Company was
sold to Premier Power Renewable Energy, Inc. in exchange for (i) a cash payment
of 12,500 Euros and (ii) the potential transfer of up to three million Premier
Power Renewable Energy, Inc. shares of common stock, with the number of shares
to be transferred, if any, to be calculated based on certain sales and gross
margin goals achieved over a three-year period.
REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the
Stockholders
PREMIER
POWER ITALY S.p.A.
(previously
Arco Energy S.r.l.)
We have
audited the accompanying balance sheet of PREMIER POWER ITALY S.p.A., as of
December 31, 2008, and the related statements of operations, cash flows, and
stockholder’s equity for the year then ended. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with auditing standards generally accepted in
the United States of America as established by the American Institute of
Certified Public Accountants. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of PREMIER POWER ITALY S.p.A. as of
December 31, 2008, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.
September
24, 2009
Ria &
Partners S.p.A.
/s/ Ria
& Partners S.p.A.
Rome,
Italy
PREMIER
POWER ITALY S.p.A. (formerly ARCO Energy, SRL)
BALANCE
SHEET
AS
OF DECEMBER 31, 2008
|
|
|
December 31,
2008
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
238,509
|
|
|
Accounts
receivable, trade
|
|
|
281,481
|
|
|
Inventory
|
|
|
462,395
|
|
|
Prepaid
expenses and other current assets
|
|
|
140,812
|
|
|
Total
current assets
|
|
|
1.123.197
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
19,103
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,142,300
|
|
|
|
|
|
|
|
|
LIABILITIES
AND MEMBERS’ EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
314,042
|
|
|
Accrued
liabilities
|
|
|
23,718
|
|
|
Related
party payable
|
|
|
176,781
|
|
|
Taxes
payable
|
|
|
356,033
|
|
|
Total
current liabilities
|
|
|
870.574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members’
Equity:
|
|
|
|
|
|
Capital
|
|
|
14,487
|
|
|
Retained
earnings
|
|
|
268,883
|
|
|
Accumulated
other comprehensive loss
|
|
|
(11,644
|
)
|
|
Total
equity
|
|
|
271,726
|
|
|
Total
liabilities and members’ equity
|
|
$
|
1,142,300
|
|
PREMIER
POWER ITALY S.p.A. (formerly ARCO Energy, SRL)
STATEMENT
OF OPERATIONS
|
|
|
Year ended
December 31,
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
7,685,250
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(7,027,657
|
)
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
657,593
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
38,728
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
220,007
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
258,735
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
398,858
|
|
|
|
|
|
|
|
|
Other
(expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
Other
income
|
|
|
20
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
163
|
|
|
|
|
|
|
|
|
Total
other expense, net
|
|
|
(249
|
)
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
398,609
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(129,726
|
)
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
268,883
|
|
PREMIER
POWER ITALY S.p.A. (formerly ARCO Energy, SRL)
STATEMENT
OF CASH FLOWS
|
|
|
Year ended
December 31
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
Net
income
|
|
$
|
268,883
|
|
|
Adjustments
to reconcile net income provided by
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3,563
|
|
|
Accounts
receivable
|
|
|
(293,777
|
)
|
|
Inventory
|
|
|
(482,593
|
)
|
|
Prepaid
expenses and other assets
|
|
|
(146,963
|
)
|
|
Accounts
payable
|
|
|
327,759
|
|
|
Accrued
liabilities
|
|
|
24,754
|
|
|
Related
party payable
|
|
|
184,504
|
|
|
Taxes
payable
|
|
|
371,585
|
|
|
Net
cash provided by operating activities
|
|
|
257,715
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
|
(23,500
|
)
|
|
Distributions
|
|
|
-
|
|
|
Net
cash used in investing activities
|
|
|
(23,500
|
)
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
Proceeds
from members’ units
|
|
|
14,487
|
|
|
Net
cash provided by financing activities
|
|
|
14,487
|
|
|
|
|
|
|
|
|
Effect
of foreign currency
|
|
|
(10,193
|
)
|
|
Increase
in cash and cash equivalents
|
|
|
238,509
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
-
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
238,509
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
(432
|
)
|
|
Taxes
paid
|
|
$
|
-
|
|
PREMIER
POWER ITALY S.p.A (formerly ARCO Energy, SRL)
STATEMENT
OF STOCKHOLDER'S EQUITY
FOR
THE YEAR ENDED DECEMBER 31, 2008
|
|
|
Capital
|
|
|
Retained
|
|
|
Accumulated
Other
Comprehensive
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January
23, 2008
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
268,883
|
|
|
|
|
|
|
|
268,883
|
|
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
(11,644
|
)
|
|
|
(11,644
|
)
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257,239
|
|
|
Contribution
|
|
|
14,487
|
|
|
|
|
|
|
|
|
|
|
|
14,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
14,487
|
|
|
|
268,883
|
|
|
|
(11,644
|
)
|
|
|
271,726
|
|
PREMIER
POWER ITALY, S.P.A.
Notes
to Financial Statements
|
1.
|
ORGANIZATION AND NATURE OF
BUSINESS
|
Premier
Power Italy S.p.A. (the “Company”) is an Italian limited organization formed on
January 23, 2008 under the name “ARCO Energy, SRL.” The Company is a
distributor of solar products and developer of solar projects in
Italy. The Company has no predecessors. The Company did
not operate as a subsidiary, division, or line of business of Esdras, Ltd. (its
former parent company) prior to January 23, 2008, and it did not have operations
prior to the beginning of the fiscal year ended December 31, 2008 as it was
formed in January 2008. On July 9, 2009, the Company changed its
corporate structure from an Italian Srl (LTD) company to an Italian Spa (PLC)
company and its name to its current name.
|
2.
|
SIGNIFICANT ACCOUNTING
POLICIES
|
Basis of Presentation —
The
accompanying financial statements as of and for the year ended December 31,
2008 have been prepared in accordance with generally accepted accounting
principles.
Cash and cash equivalents
—
The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
Property and Equipment
-
Property and equipment are recorded at cost and depreciated using
the straight-line method over estimated useful lives, or in the case of
leasehold improvements, the lease term, if shorter. Maintenance and repairs are
expensed as they occur.
Revenue Recognition
- Revenue
for solar product distribution and the development of solar projects is
recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed and determinable and collectability is reasonably
assured. The Company had no revenues from solar project developments
for the year ended December 31, 2008.
Advertising –
The Company
expenses advertising costs as they are incurred. Advertising costs
was $34,049 for the year ended December 31, 2008.
Foreign Currency
– The
Company’s functional currency is the Euro. Its assets and liabilities are
translated at year-end exchange rates, except for certain non-monetary balances,
which are translated at historical rates. All income and expense amounts of the
Company 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 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 year ended December 31, 2008, the foreign
currency transaction loss was zero.
Use of estimates
—
The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Income Taxes
—
The Company follows the
liability method of accounting for income taxes. Under this method,
deferred income tax assets and liabilities are determined based on differences
between the financial statement and the income tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company expects to maintain
a full valuation allowance on the net deferred tax assets until an appropriate
level of profitability that generates taxable income is sustained or until we
are able to develop tax strategies that would enable us to conclude that it is
more likely than not that a portion of the deferred tax assets will be
realizable. Any reversal of valuation allowance will favorably impact
our results of operations in the period of the reversal. For the
period from inception (January 23, 2008) through December 31, 2008, tax expense,
was $129,726. At December 31, 2008 there were no significant current or deferred
taxes or valuation allowance.
Recently
Issued Accounting Pronouncements
In
December 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“FAS”) No. 157,
“
Fair Value
Measurement”
(“FAS 157”), which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP) and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value
measurements. This statement is effective for fiscal years beginning
after November 15, 2007, except for non-financial assets and liabilities
measured at fair value on a non-recurring basis for which the
effective date will be for fiscal years beginning after November 15,
2008. The adoption of FAS 157 for financial assets and liabilities
did not have a material impact on the Company's financial
statements. The adoption of FAS 157 for non-financial assets is not
expected to have a material impact on the Company’s financial
statements.
In
February 2007, the FASB issued FAS No. 159, “
The Fair Value Option for
Financial Assets and Financial
Liabilities — Including an amendment of FASB
Statement No. 115
” (“FAS
159”), which permits entities to choose to measure many financial instruments
and certain other items at fair value at specified election dates. A business
entity is required to report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting
date. This statement is expected to expand the use of fair value measurement.
FAS 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The adoption of FAS 159 did
not have a material effect on our results of operations, cash flows or financial
position.
In
December 2007, the FASB issued FAS No. 141(R),
“Business Combinations”
(“FAS
141(R)”), which requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. FAS 141(R) is prospectively effective to business combinations for
which the acquisition is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The impact of FAS 141(R) on the
Company's financial statements will be determined in part by the nature and
timing of any future acquisition completed.
In
December 2007, the FASB issued FAS No. 160,
“Noncontrolling Interests in
Consolidated Financial Statements (as amended)”
(“FAS 160”), which
improves the relevance, comparability, and transparency of financial information
provided to investors by requiring all entities to report noncontrolling
(minority) interests in subsidiaries in the same way as equity consolidated
financial statements. Moreover, FAS 160 eliminates the diversity that currently
exists in accounting from transactions between an entity and noncontrolling
interests by requiring they be treated as equity transactions. FAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008; earlier adoption is
prohibited.
PREMIER
POWER ITALY, S.P.A.
Notes
to Financial Statements
|
3.
|
PROPERTY AND
EQUIPMENT
|
Property
and equipment consisted of the following:
|
|
|
December
31,
2008
|
|
|
Vehicles
|
|
$
|
18,186
|
|
|
Computers
and Equipment
|
|
|
4,330
|
|
|
|
|
|
22,516
|
|
|
|
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
(3,413
|
)
|
|
|
|
|
|
|
|
Total
fixed assets
|
|
$
|
19,103
|
|
Depreciation
expense was $3,563 for the year ended December 31, 2008.
Accrued
liabilities consisted of the following:
|
|
|
December
31,
2008
|
|
|
Suppliers
|
|
$
|
20,866
|
|
|
Payroll
|
|
|
1,782
|
|
|
Customer
advances
|
|
|
|
|
|
Other
|
|
|
1,070
|
|
|
|
|
$
|
23,718
|
|
On July
31, 2009, the Company and its parent, Rupinvest SARL, were acquired by Premier
Power Renewable Energy, Inc. (“Premier Power”), in exchange for $18,292 and up
to 3,000,000 shares of Premier Power common stock based upon the Company’s sales
and gross margin levels through 2011. In conjunction with the
acquisition, the Company’s supply agreements were amended without penalty to
eliminate any minimum purchase penalty provisions.
The
provision for income taxes for the year ended December 31, 2008, consists of the
following:
|
|
|
December
31,
2008
|
|
|
Current
|
|
|
|
|
Regional
|
|
$
|
19,861
|
|
|
National
|
|
|
109,865
|
|
|
|
|
|
|
|
|
Total
provision for income taxes
|
|
$
|
129,726
|
|
As of
December 31, 2008, the Company had a tax liability of $129,726. As of
December 31, 2008, the company had no material deferred taxes to
report.
|
6.
|
COMMITMENTS AND
CONINGENCIES
|
Premier
Power Italy is party to a non-cancelable renewable lease for operating
facilities in Ripalimosani, Italy, which expires in 2015. The lease requires the
following payments as of December 31, 2008, subject to annual adjustment,
if any:
|
2009
|
|
$
|
12,292
|
|
|
2010
|
|
|
29,502
|
|
|
2011
|
|
|
29,502
|
|
|
2012
|
|
|
29,502
|
|
|
2013
and beyond
|
|
|
76,212
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
177,010
|
|
On May
15, 2009, the members of the Company reorganized their ownership interests in
the Company and Rupinvest SARL (Rupinvest), a company controlled by the members
of the Company, such that the Company became a subsidiary of Rupinvest. As the
Company and Rupinvest were under common control, the transaction has been
treated as a reorganization with the assets and liabilities of the Company and
Rupinvest continuing to be recorded at their historical costs.
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For
the Year Ended December 31, 2009
|
|
|
|
|
|
Combined Rupinvest SARL and Premier Power Italy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Premier Power
|
|
|
Rupinvest
|
|
|
Premier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renewable Energy,
|
|
|
SARL
|
|
|
Power Italy
|
|
|
Eliminating
|
|
|
|
|
|
Pro Forma
|
|
|
|
Pro Forma
|
|
|
|
|
Inc.
|
|
|
(2)
|
|
|
(2)
|
|
|
Entries
|
|
|
Combined
|
|
|
Adjustments
|
|
Notes
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
30,750
|
|
|
$
|
-
|
|
|
$
|
2,782
|
|
|
$
|
-
|
|
|
$
|
2,782
|
|
|
$
|
-
|
|
|
|
$
|
33,532
|
|
|
Cost
of sales
|
|
|
(26,292
|
)
|
|
|
-
|
|
|
|
(2,329
|
)
|
|
|
-
|
|
|
|
(2,329
|
)
|
|
|
-
|
|
|
|
|
(28,621
|
)
|
|
Gross
profit
|
|
|
4,458
|
|
|
|
-
|
|
|
|
453
|
|
|
|
-
|
|
|
|
453
|
|
|
|
-
|
|
|
|
|
4,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
2,910
|
|
|
|
-
|
|
|
|
163
|
|
|
|
-
|
|
|
|
163
|
|
|
|
|
|
|
|
|
3,073
|
|
|
General
and administrative
|
|
|
5,808
|
|
|
|
12
|
|
|
|
343
|
|
|
|
-
|
|
|
|
355
|
|
|
|
20
|
|
3B
|
|
|
6,183
|
|
|
Total
operating expenses
|
|
|
8,718
|
|
|
|
12
|
|
|
|
506
|
|
|
|
-
|
|
|
|
518
|
|
|
|
20
|
|
|
|
|
9,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(4,260
|
)
|
|
|
(12
|
)
|
|
|
(53
|
)
|
|
|
-
|
|
|
|
(65
|
)
|
|
|
(20
|
)
|
|
|
|
(4,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(89
|
)
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
|
(95
|
)
|
|
Other
income
|
|
|
23
|
|
|
|
239
|
|
|
|
16
|
|
|
|
(237
|
)(1)
|
|
|
18
|
|
|
|
-
|
|
|
|
|
41
|
|
|
Change
in fair value of financial instruments
|
|
|
6,485
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
6,485
|
|
|
Interest
income
|
|
|
44
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
44
|
|
|
Total
other income (expense), net
|
|
|
6,463
|
|
|
|
238
|
|
|
|
11
|
|
|
|
(237
|
)
|
|
|
12
|
|
|
|
-
|
|
|
|
|
6,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
2,203
|
|
|
|
226
|
|
|
|
(42
|
)
|
|
|
(237
|
)
|
|
|
(53
|
)
|
|
|
(20
|
)
|
|
|
|
2,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit (expense)
|
|
|
1,452
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
3,655
|
|
|
|
226
|
|
|
|
(42
|
)
|
|
|
(237
|
)
|
|
|
(53
|
)
|
|
|
(20
|
)
|
|
|
|
3,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Net income attributable to the noncontrolling
interest
|
|
|
(85
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
3C
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premier
Power Renewable Energy, Inc. shareholders
|
|
$
|
3,570
|
|
|
$
|
226
|
|
|
$
|
(42
|
)
|
|
$
|
(237
|
)
|
|
$
|
(53
|
)
|
|
$
|
(14
|
)
|
|
|
$
|
3,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share attributed to Premier Power Renewable Energy,
Inc. shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.13
|
|
|
Diluted
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
3A
|
|
|
27,550
|
|
|
Diluted
|
|
|
31,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
|
32,817
|
|
|
(1)
|
Reflects
the elimination of dividend distribution from Premier Power
Italy to Rupinvest SARL.
|
|
|
|
|
(2)
|
The
results of operations for Rupinvest SARL and Premier Power Italy are for
the period from January 1 to July 31, 2009 (date of
acquisition). Revenue and expense of $10,843,369 and
$10,077,780, respectively, for the period from August 1 to December 31,
2009, have been included in the consolidated results of operations of
Premier Power Renewable Energy,
Inc.
|