AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28,
2010
REGISTRATION
STATEMENT NO. 333-________________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
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
Copies
of all communications to:
Kevin
K. Leung, Esq.
|
Richard
H. Gilden, Esq.
|
Rahul
Dange, Esq.
|
Christopher
Auguste, Esq.
|
Jamie
H. Kim, Esq.
|
Kramer
Levin Naftalis & Frankel LLP
|
Richardson
& Patel LLP
|
1177
Avenue of the Americas
|
10900
Wilshire Blvd., Suite 500
|
New
York, NY 10036
|
Los
Angeles, CA 90024
|
(212)
715-9100
|
(310)
208-1182
|
|
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
AS SOON
AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
(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.
¨
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.
¨
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.
¨
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.
¨
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
¨
|
|
Accelerated
filer
¨
|
|
|
Non-accelerated
filer
¨
|
|
Smaller
reporting company
x
|
|
CALCULATION
OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
|
|
Proposed Maximum
Aggregate Offering Price
|
|
|
Amount of
Registration
Fee
|
|
Common
stock, $0.0001 par value per share
|
|
$
|
8,000,000
|
|
|
$
|
446.40
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
446.40
|
|
(1)
|
Calculated pursuant to Rule
457(o) on the basis of the maximum aggregate offering price of all of the
securities to be registered.
|
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. The securities offered pursuant to this prospectus 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 it is not soliciting an offer to buy
these securities in any state or other jurisdiction where the offer or
sale is not
permitted.
|
PROSPECTUS
|
SUBJECT
TO COMPLETION, DATED April [28],
2010
|
____________
shares of Common Stock
We are
offering up to
____________
shares of our
common stock at a public offering price of $___ per share. Our common stock is
quoted on the OTC Bulletin Board under the symbol “PPRW.OB.” On April 27, 2010,
the last reported market price of our common stock was $1.95 per
share.
We are
offering these shares on a best efforts basis. We have retained Merriman Curhan
Ford & Co. to act as our exclusive placement agent in this offering, and we
will pay fees to it in connection with this offering equal to 6.5% of the
proceeds of the offering. We have also agreed to reimburse the placement agent
for certain expenses incurred by it in connection with the offering. The
placement agent is not required to purchase or sell any of the shares offered by
this offering, but will use its commercially reasonable efforts to sell the
shares offered. Because there is no minimum offering amount required as a
condition to closing in this offering, the actual public offering amount,
placement agent’s fee and net proceeds to us, if any, in this offering are not
presently determinable and may be substantially less than the maximum offering
amounts set forth below.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning
on page 7 of this prospectus.
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.
|
|
Per
Share
|
|
|
Total
|
|
Offering
price per share
|
|
$
|
___
|
|
|
$
|
8,000,000
|
|
Placement
agent’s fees (1)
|
|
$
|
___
|
|
|
$
|
___
|
|
Proceeds
to Premier Power Renewable Energy, Inc. (before expenses)
|
|
$
|
___
|
|
|
$
|
___
|
|
|
(1)
|
Assumes
all of the shares offered hereby are sold. See the section
entitled “Plan of Distribution” for a full description of the compensation
to be paid to the placement agent.
|
We
estimate the total expenses of this offering, excluding the placement agent’s
fee, will be approximately $_______.
Delivery
of the shares to purchasers will be made on or about ___________,
2010.
As
Placement Agent
__________,
2010
TABLE
OF CONTENTS
|
|
Page
|
|
|
|
|
|
Special
Note Regarding Forward-Looking Statements
|
|
|
3
|
|
Prospectus
Summary
|
|
|
4
|
|
About
This Prospectus
|
|
|
4
|
|
About
Premier Power
|
|
|
4
|
|
The
Offering
|
|
|
5
|
|
Summary
Consolidated Financial Data
|
|
|
6
|
|
Risk
Factors
|
|
|
7
|
|
Use
of Proceeds
|
|
|
19
|
|
Dilution
|
|
|
19
|
|
Description
of Business
|
|
|
19
|
|
Description
of Property
|
|
|
28
|
|
Management
|
|
|
28
|
|
Security
Ownership of Certain Beneficial Owners and Management
|
|
|
31
|
|
Executive
Compensation
|
|
|
32
|
|
Selected
Condensed Consolidated Financial Data
|
|
|
36
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
|
37
|
|
Certain
Relationships and Related Party Transactions
|
|
|
45
|
|
Market
for Common Equity and Related Stockholder Matters
|
|
|
45
|
|
Dividend
Policy
|
|
|
46
|
|
Description
of Securities
|
|
|
46
|
|
Plan
of Distribution
|
|
|
52
|
|
Legal
Matters
|
|
|
53
|
|
Experts
|
|
|
53
|
|
Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
|
|
|
53
|
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
|
|
54
|
|
Additional
Information
|
|
|
54
|
|
Financial
Statements
|
|
|
54
|
|
Index
to Consolidated Financial Statements
|
|
|
F-1
|
|
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 7
,
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.
PROSPECTUS
SUMMARY
About This
Prospectus
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.” References to “we,” “our,” “us,” the “Company,” or “Premier
Power” refer to Premier Power Renewable Energy, Inc., a Delaware corporation,
and its consolidated subsidiaries.
About Premier
Power
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 and Europe. Additionally, we distribute
solar modules and inverters in certain of our markets, primarily in Italy, to
obtain economies of scale in the purchasing of product for installation
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. 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 Power One,
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
1.1 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.
We operate our business through our subsidiaries. Premier
Power Renewable Energy, Inc., a California corporation (“Premier Power
California”) is one of our two wholly owned subsidiaries. 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.
Rupinvest SARL, a corporation duly
organized and existing under the law of Luxembourg (“Rupinvest”), is our other
wholly owned subsidiary, and Rupinvest wholly owns 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.
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 7
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:
|
·
|
existing
regulations and our ability to adapt to changes in
regulations;
|
|
·
|
the
availability of rebates, tax credits, and other financial
incentives;
|
|
·
|
our
access to sufficient capital to meet working capital requirements for our
operations and for future expansion
efforts;
|
|
·
|
our
ability to efficiently manage out international
operations;
|
|
·
|
our
ability to timely and accurately complete orders for our
products;
|
|
·
|
our
dependence on a limited number of major
customers;
|
|
·
|
our
ability to expand and grow our distribution
channels;
|
|
·
|
general
economic conditions that affect demand for our products and
services;
|
|
·
|
acceptance
in the marketplace of our new
products;
|
|
·
|
foreign
currency exchange rate fluctuations;
and
|
|
·
|
our
ability to identify and successfully execute cost control initiatives.
|
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 7
of this prospectus.
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.
The
Offering
Securities
Offered:
|
|
Up
to _________ shares of common stock, $0.0001 par value per
share.
|
|
|
|
Offering
Price:
|
|
$_______
per share.
|
|
|
|
Common
Stock Outstanding Before the Offering:
|
|
29,099,750
shares as of April 28, 2010
|
|
|
|
Common
Stock Outstanding After the Offering:
|
|
_________
shares
|
|
|
|
Use
of Proceeds
|
|
We
intend to use the net proceeds of this offering for project development
and finance, working capital, and general corporate
purposes. See “Use of Proceeds” beginning on page 19
.
|
|
|
|
Risk
Factors
|
|
The
securities offered by this prospectus are speculative and involve a high
degree of risk and investors purchasing securities should not purchase the
securities unless they can afford the loss of their entire
investment. See “Risk Factors” beginning on page 7
.
|
The total
number of shares of common stock outstanding after this offering is based on
29,099,750 shares outstanding as of April 28, 2010, which includes 3,000,000
shares held in escrow and available for issuance to Esdras Ltd. in connection
with the acquisition of Rupinvest and Premier Power Italy from Esdras Ltd., but
which excludes the following:
|
·
|
1,922,729
shares issuable upon exercise of stock options granted to date under the
2008 Equity Incentive Plan, at a weighted average exercise price of $3.24
per share;
|
|
·
|
50,000
shares issuable upon vesting of stock awards granted to date under the
2008 Equity Incentive Plan;
|
|
·
|
928,146
additional shares of common stock reserved for issuance pursuant to stock
options and stock awards available for grant in the future under the 2008
Equity Incentive Plan;
|
|
·
|
3,500,000
shares of common stock issuable upon conversion of 3,500,000 shares of
Series A Convertible Preferred Stock outstanding;
and
|
|
·
|
2,800,000
shares of common stock issuable upon conversion of 2,800,000 shares of
Series B Convertible Preferred Stock
outstanding.
|
Unless
otherwise specifically stated, information throughout this prospectus does not
assume the exercise of outstanding options to purchase shares of our common
stock or the conversion of our outstanding preferred stock.
Summary Consolidated
Financial Data
The
following tables summarize consolidated financial data regarding our business
and should be read together with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” beginning on page 37 of this
prospectus and our consolidated financial statements and the related notes
included elsewhere in this prospectus. We derived the consolidated
financial data as of December 31, 2009 and 2008 and for the years ended December
31, 2009 and 2008 from our consolidated financial statements included in this
prospectus. The historical results are not necessarily indicative of
the results to be expected for any future period. All monetary
amounts are expressed in U.S. dollars.
|
|
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
|
|
$
|
3,570
|
|
|
$
|
569
|
|
Earnings
Per Share attributable to Premier Power
|
|
|
|
|
|
|
|
|
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
|
|
RISK
FACTORS
An
investment in our common stock is highly speculative and involves a high degree
of risk. Before making an investment decision, you 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
had an operating loss in 2009 and have used increasing amounts of cash for
operations and to fund our project development and future
acquisitions.
We had a
$4.3 million operating loss in 2009. Cash used in operations in
2009 was $6.2 million. We continue to pursue additional solar
projects, acquisitions, and investment opportunities and may need to support the
financing needs of our subsidiaries. We currently have enough cash on
hand to fund our operations for the next 12 months. However, we may
need additional funds to finance future investment and acquisition activity we
wish to undertake. We do not know if such funds will be available if
needed on terms that we consider acceptable. We may have to limit or
adjust our project development and investment/acquisition strategy or sell some
of our assets in order to continue to pursue our corporate goals.
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,
together with our subsidiaries, hold all required licenses in all the areas in
which we operate. Also, we hold all certifications required by the
jurisdictions in which we operate. 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.
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
are currently out of compliance with certain financing covenants under our loan
agreement with Umpqua Bank, which may limit future capital expenditures and
working capital needs.
In July
2009, we entered into a loan agreement with Umpqua Bank for a line of credit of
up to $12 million (of which $1,379,796 is currently outstanding), which is
secured by our assets and the assets of Premier Power California and Bright
Future. We are currently out of compliance with certain covenants under the loan
agreement, primarily as a result of our recording of a contingent consideration
liability of $12 million at the time of the purchase of Rupinvest, which
contingent consideration liability relates to the contingent issuance of 3
million shares of our common stock to the seller of Rupinvest. The bank is aware
of the non-compliance and has not issued a notice of default, nor have they
enforced any default provisions. The bank, however, has also not waived the
non-compliance. We are currently working with the bank to redefine our financial
covenants and believe we have the ability to comply with these covenants once
they are redefined, but without the redefinition, we are unable to comply with
the covenants with which we are out of compliance. The bank has the
right to seek available remedies under the loan agreement for such
noncompliance, including institution of default rates or cutting our funding
under the line. While we believe we have sufficient cash balances to
meet our current working capital needs should the bank issue a notice of default
and demand repayment of all obligations or cut off funding under the line, such
actions by the bank may limit future capital expenditures and our working
capital needs.
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.
We may
require additional financing in the future in connection with our growth
strategy to fund future capital expenditures and for working
capital. 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:
|
·
|
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.
|
In
addition to the foregoing challenges, our ability to obtain additional financing
may be limited as a result of the fact that we are out of compliance with
certain financing covenants under our loan agreement with Umpqua
Bank. 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;
|
|
·
|
failure
to maintain adequate financial controls across borders;
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.
Additionally,
our inability to repatriate profits from Europe to the United States may limit
our ability to access cash for operations in the United States.
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
internal control over financial reporting has been determined to be deficient.
Failure to remedy this deficiency may reduce our ability to accurately report
our financial results or prevent fraud.
A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Our management has
identified
a
significant deficiency in
our internal control over financial
reporting. Our financial reporting includes various highly complex
technical accounting issues.
As a
result of the previously identified significant deficiency, we have made
significant changes in our internal control over financial reporting to
reasonably ensure that our consolidated financial statements are prepared in
accordance with generally accepted accounting principles in the United States.
Such changes in our internal control structure should fully remediate the
significant deficiency in the fiscal year ending December 31,
2010.
If we fail to develop or maintain an effective system of
internal controls, we may not be able to accurately report our financial results
or prevent fraud. As a result, current and potential stockholders and the market
in general could lose confidence in our financial reporting, which loss of
confidence could harm our business and the trading price of our common
stock.
Because the solar integration
industry is highly competitive and has low barriers to entry,
we may lose market share to larger
companies 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:
|
·
|
the ability of our competitors to
hire, retain and motivate qualified technical
personnel;
|
|
·
|
the ownership by competitors of
proprietary tools to customize systems to the needs of a particular
customer;
|
|
·
|
the price at which others offer
comparable services and
equipment;
|
|
·
|
the extent of our competitors’
responsiveness to client
needs;
|
|
·
|
risk of local economy decline;
and
|
|
·
|
installation
technology.
|
Competition
in the solar power services industry may increase in the future, partly due to
low barriers to entry, as well as from other alternative energy resources now in
existence or developed in the future. Increased competition could
result in price reductions, reduced margins or loss of market share and greater
competition for qualified technical personnel. There can be no
assurance that we will be able to compete successfully against current and
future competitors. If we are unable to compete effectively, or if
competition results in a deterioration of market conditions, our business and
results of operations would be adversely affected.
We
act as the general contractor for our customers in connection with the
installation of our solar power systems and are subject to risks associated with
construction, bonding, cost overruns, delays, and other contingencies, which
could have a material adverse effect on our business and results of
operations.
We act as
the general contractor for our customers in connection with the installation of
our solar power systems. All essential costs are estimated at the
time of entering into the sales contract for a particular project, and these are
reflected in the overall price that we charge our customers for the
project. These cost estimates are preliminary and may or may not be
covered by contracts between us or the other project developers, subcontractors,
suppliers and other parties to the project. In addition, we require
qualified, licensed subcontractors to install some of our
systems. Shortages of such skilled labor could significantly delay a
project or otherwise increase our costs. Should miscalculations in
planning a project or defective or late execution occur, we may not achieve our
expected margins or cover our costs. Also, many systems customers
require performance bonds issued by a bonding agency. Due to the
general performance risk inherent in construction activities, it is sometimes
difficult to secure suitable bonding agencies willing to provide performance
bonding. In the event we are unable to obtain bonding, we will be unable to bid
on, or enter into, sales contracts requiring such bonding. Delays in
solar panel or other supply shipments, other construction delays, unexpected
performance problems in electricity generation or other events could cause us to
fail to meet these performance criteria, resulting in unanticipated and severe
revenue and earnings losses and financial penalties. Construction
delays are often caused by inclement weather, failure to timely receive
necessary approvals and permits, or delays in obtaining necessary solar panels,
inverters or other materials. 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, government
regulations, permitting requirements, and other factors that may be specific to
those territories to which we would be less subject if we were more
geographically diversified. In addition, our reliance on
tariffs and other government incentive programs (which may not always be
available to us) could magnify any adverse consequences associated with such
geographic concentration. 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:
|
·
|
our ability to identify suitable
acquisition candidates at acceptable
prices;
|
|
·
|
our ability to successfully
complete acquisitions of identified
candidates;
|
|
·
|
our ability to compete
effectively for available acquisition
opportunities;
|
|
·
|
potential impairment to our
goodwill and other intangible
assets;
|
|
·
|
increases in asking prices by
acquisition candidates to levels beyond our financial capability or to
levels that would not result in the returns required by our acquisition
criteria;
|
|
·
|
diversion of management’s
attention to expansion
efforts;
|
|
·
|
unanticipated costs and
contingent liabilities associated with
acquisitions;
|
|
·
|
failure of acquired businesses to
achieve expected results;
|
|
·
|
our failure to retain key
customers or personnel of acquired businesses;
and
|
|
·
|
difficulties entering markets in
which we have no or limited
experience.
|
These
risks, as well as other circumstances that often accompany expansion through
acquisitions, could inhibit our growth and negatively impact our operating
results. In addition, the size, timing, and success of any future
acquisitions may cause substantial fluctuations in our operating results from
quarter to quarter. Consequently, our operating results for any
quarter may not be indicative of the results that may be achieved for any
subsequent quarter or for a full fiscal year. These fluctuations
could adversely affect the market price of our common stock.
Our
failure to integrate the operations of acquired businesses successfully into our
operations or to manage our anticipated growth effectively could materially and
adversely affect our business and operating results.
In order
to pursue a successful acquisition strategy, we must integrate the operations of
acquired businesses into our operations, including centralizing certain
functions to achieve cost savings and pursuing programs and processes that
leverage our revenue and growth opportunities. The integration of the
management, operations, and facilities of acquired businesses with our own could
involve difficulties, which could adversely affect our growth rate and operating
results. We may be unable to do any of the following:
|
·
|
effectively complete the
integration of the management, operations, facilities and accounting and
information systems of acquired businesses with our
own;
|
|
·
|
efficiently manage the combined
operations of the acquired businesses with our
operations;
|
|
·
|
achieve our operating, growth and
performance goals for acquired
businesses;
|
|
·
|
achieve additional revenue as a
result of our expanded operations;
or
|
|
·
|
achieve operating efficiencies or
otherwise realize cost savings as a result of anticipated acquisition
synergies.
|
Our rate
of growth and operating performance may suffer if we fail to manage acquired
businesses profitably without substantial additional costs or operational
problems or to implement effectively combined growth and operating
strategies.
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
rules subsequently implemented by the SEC, requires changes in corporate
governance practices of public companies. We expect that full
compliance with such 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 have material weaknesses reported in our independent accountant’s
attestation report on our internal control over financial reporting required by
the Sarbanes-Oxley Act.
Our
business is exposed to risks associated with the weak 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 tightening of the credit markets and turmoil in the financial markets and
the current weak global economy contributed to slowdowns in the solar industry,
which slowdowns may continue and worsen if current 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.
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, to manage our operations. Although we intend to enter into
employment agreements with, and have 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.
Risks
Relating To Our Industry
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. There can
be no assurance that these incentives will continue to be available. 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.
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.
Solar energy is generally a more
expensive source of energy than conventional energy or non-solar alternative
energy sources, and 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. Solar energy is generally a more expensive
source of energy than conventional energy or non-solar alternative energy
sources, especially in the United States. 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.
Adverse
changes in the political and economic policies of European governments could
have a material adverse effect on the overall economic growth of European
markets, which could reduce the demand for our products and materially and
adversely affect our competitive position in Europe.
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 have been significant
changes in Spain’s laws which cap the amount of kilowatts installed by solar
power installers in Spain at 66 MW 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 such European
countries. Any adverse change in such policies could have a material adverse
effect on the overall economic growth in Europe 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.
If the demand for solar power
technology and solar power products does not continue to increase, our sales may
decline, and we may be unable to
achieve or sustain
profitability.
The
market for solar power products is continuing to evolve, and the level of demand
for solar power technology is uncertain. Many factors will influence
the widespread use of solar power technology and demand for solar power
products, including:
|
·
|
cost effectiveness of solar power
technologies as compared with conventional and non-solar alternative
energy technologies;
|
|
·
|
performance and reliability of
solar power products as compared with conventional and non-solar
alternative energy products;
|
|
·
|
the level of capital expenditures
by customers, especially in a weak global economy;
and
|
|
·
|
availability of government
subsidies and incentives.
|
If demand
for solar power products fails to sufficiently grow, we may 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.
Public
opposition toward solar farms may make it more difficult to obtain the necessary
permits and authorizations required to develop or maintain a solar
farm.
Public
attitude towards aesthetic and environmental impacts of solar energy projects
impacts the ability to develop our solar farms. In many jurisdictions, the
environmental impact review process ensures a role for concerned members of the
public who oppose solar energy projects in general or are concerned with
potential environmental, health, or aesthetic impacts, impacts on property
values or the rewards of property ownership, or impacts on the natural beauty of
public lands, which can lead to changes in design or layout, extensive impact
mitigation requirements, or even the rejection of a project. In such areas,
local acceptance is critical to the ability to obtain and maintain necessary
permits and approvals. We cannot assure you that any solar farm projects under
development will be accepted by the affected population. Public opposition can
also lead to legal challenges that may result in the invalidation of a permit
or, in certain cases, the dismantling of an existing solar farm as well as
increased cost and delays. Reduced acceptance of solar farms by local
populations, an increase in the number of legal challenges, or an unfavorable
trend in the outcome of these challenges could prevent us from achieving our
plans, which, in turn, could have a material adverse effect on our business,
results of operations, and financial condition.
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, and our stock price may be depressed by the transfer and
subsequent sale of the 3 million shares held in escrow issuable to Esdras Ltd.
in connection with our purchase of Rupinvest and Premier Power
Italy.
We may
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 Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock issued by us, the conversion of which will dilute
our current stockholders. Further, our current stockholders will face
dilution from the issuance of any portion of the 3 million shares that are held
in escrow and issuable to Esdras Ltd. in connection with our purchase of our
Italian operations from Esdras Ltd.
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 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 Amex 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 Amex 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.
A
large majority of our shares are held by a few stockholders, some of whom are
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
principal stockholders.
Our
principal stockholders include Dean R. Marks, who is our Chairman of the Board,
President, and Chief Executive Officer, and Miguel de Anquin, who is our Chief
Operating Officer 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. Additionally, Bjorn Persson, the Executive Vice President of
European Operations, and Vision Opportunity Master Fund, Ltd. own approximately
8.8% and 9.99%, respectively, 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.
Anti-takeover
rules with respect to business combinations with certain stockholders under
Delaware law could discourage an acquisition of us by others, even if an
acquisition would be beneficial to our stockholders.
We are
subject to Section 203 of the Delaware General Corporation Law, which generally
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with an interested stockholder (or a stockholder who owns
more than 15% of the corporation's voting stock) for a period of three years
following the date on which the stockholder became an interested stockholder,
unless such transactions are approved by our board of directors. This provision
could have the effect of delaying or preventing a change of control, whether or
not it is desired by or beneficial to our stockholders.
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. Further, the Company has registered for resale shares
of the Company’s common stock issuable upon conversion of the Series A Stock and
Series B Stock. After a contemplated 90-day lock-up period described elsewhere
in this prospectus, Vision may waive the 9.99% limitation and sell a large
number of shares of the Company’s common stock issued to it upon conversion of
the Series A Stock and Series B Stock into the open market, which could result
in a substantial drop in the market price of our common stock.
USE
OF PROCEEDS
We
estimate that we will receive up to $___________ in net proceeds from the sale
of common stock in this offering, based on an assumed price of $___ per share
and after deducting estimated placement agent fees and estimated offering
expenses payable by us.
We intend
to use the net proceeds of the offering as follows:
|
|
Application of Net
Proceeds
|
|
|
Percentage of
Net Proceeds
|
|
Project
Development and Finance
|
|
$
|
|
|
|
|
|
%
|
General
Working Capital
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
|
|
|
The
amounts actually spent by us for any specific purpose may vary significantly and
will depend on a number of factors. Accordingly, our management has
broad discretion to allocate the net proceeds.
DILUTION
Our
reported net tangible book value as of December 31, 2009 was ($1.1) million, or
($0.04) per share of common stock, based upon 29,050,250 shares outstanding as
of that date. Net tangible book value per share is determined by
dividing such number of outstanding shares of common stock into our net tangible
book value, which is our total tangible assets less total
liabilities. After giving effect to the sale by us of up to _________
shares of common stock offered in this offering at an assumed public offering
price of $___ per share, and after deducting the placement agent commissions and
estimated offering expenses, our adjusted net tangible book value as of December
31, 2009 would have been $_________, or $____ per share. This
represents an immediate increase in net tangible book value of approximately
$____ per share to our existing stockholders and an immediate dilution of $_____
per share to new investors purchasing shares at the public offering
price.
The
following table illustrates the per share dilution assuming a sale price of
$______ per common stock share:
Public
offering price per share
|
|
$
|
|
|
Net
tangible book value per share as of December 31, 2009
|
|
$
|
|
|
Increase
per share attributable to new investors
|
|
$
|
|
|
As
adjusted net tangible book value per share after the
offering
|
|
$
|
|
|
Dilution
per share to new investors
|
|
|
|
|
DESCRIPTION
OF 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 and Europe. Additionally, we distribute solar modules
and inverters in our markets, primarily in 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 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, or a total of 7 MW, 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 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 €12,500 (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, €1,125,000 (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 €125,000 (approximately $175,600) made by Esdras if
the remaining 10% was purchased by December 31, 2009.
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
2,826 megawatts (MW) in 2007 to 5,948 MW in 2008, which represented an annual
growth rate, or CAGR, of approximately 110%. Solarbuzz projects
worldwide solar cell production will return to high growth in 2010 and also over
the next 5 years. Even in the slowest growth scenario, the global
market will be 2.5 times its current size by 2014. Under the
Production Led scenario, the fastest growing forecast, annual industry revenues
approach $100 billion by 2014.
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, a residential
solar energy system typically costs about $8-10 per watt. Where government
incentive programs exist, together with lower prices secured through volume
purchases, installed costs as low as $3-4 watt – or 10-12 cents per kilowatt
hour (kWh) – can be achieved. Without incentive programs, solar
energy costs (in an average sunny climate) range between 22-40 cent/kWh for very
large PV systems.
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 grew from 220 MW
in 2007 to 357 MW in 2008, representing a CAGR of 62%. The market has grown 30%
each year over the past 15 years, and Solarbuzz research shows that demand in
the U.S., as well as in Asia and Europe, is expected to have strong growth over
the next 5 years. 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 2.66 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 SolarPlaza, the global independent platform for the solar energy industry,
the market for solar energy in Italy grew by more than 770% and 480% in 2007 and
2008, respectively. Despite the financial crisis, anticipated growth
for this year is 32%. 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. 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 three business segments: U.S., Italy, and
Spain.
U.S.
U.S.
Commercial
Our U.S.
commercial business consists of ground mount or rooftop solar energy projects
generally ranging from 100 kilowatt (kWh) to 1.1 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.
U.S.
Distribution
We also
distribute solar modules and inverters in the U.S. In 2009,
distribution revenue in the U.S. was minimal.
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 a 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.
Global Green Advisors is a major reseller of solar power plants for our Italian
operations, and we are currently contracted to deliver 5 MW’s under an agreement
with this reseller.
Our Italian business also consists of
distribution of solar modules and inverters. In 2009, distribution
revenue in Italy amounted to $4.8 million.
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. Starting in 2010, we perform
distribution services whereby we procure solar modules and invertors and sell
these to other solar integrators or commercial buyers.
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.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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.
|
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
|
|
|
Italy
|
|
|
Spain
|
|
2009
|
|
|
45.5
|
%
|
|
|
35.3
|
%
|
|
|
19.2
|
%
|
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 largest
customers were a municipality, which represented 18% of our total revenue, a
vineyard, which represented 12% of our total revenue, and a U.S. commercial
customer, which represented 12% of our total revenue. 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
Italy have included Global Green Advisors, Nacastri, and
Camardo.
Our
clients in Spain have included BTV, CasaVilla, and Salvi
Cazados.
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 30 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” 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.
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.
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.
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 Power One, 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.
Agreements
with Genesis Capital Advisors
We are
party to an engagement agreement with Genesis Capital Advisors, LLC (“Genesis”)
dated October 31, 2008 for the exclusive services of Genesis in connection with
a possible sale, merger, acquisition, financing, or transactions involving the
Company in exchange for a cash fee equal to 6% of the transaction value for a
sale of equity, merger acquisition, or asset sale by the Company or a
cash fee equal to 2% of the transaction value with respect to a power purchase
agreement financing or debt financing. Genesis has been actively
assisting us since 2007, particularly in connection with our international
expansion. The engagement agreement is terminable by us or Genesis on
90 days prior notice; provided, however, that Genesis will continue to be
entitled to its fee on any transaction that is contracted within 24 months of
the termination date of the agreement. The engagement letter could,
therefore, increase the cost of our entering into certain transactions for a
considerable period of time after its termination.
On April
28, 2010, Genesis provided a waiver of the exclusivity of such services limited
to the engagement of Merriman Curhan Ford & Co. by the Company as placement
agent for this offering. As consideration for this limited waiver,
the Company will pay Genesis $150,000 in cash compensation. Also on
April 28, 2010, we entered into an agreement with Genesis clarifying the terms
of compensation owed by the Company to Genesis for certain services provided by
Genesis. Under this agreement, we must pay a cash fee equal to 6% of
the total revenue we receive from projects relating to the construction of solar
power plants, which projects Genesis provides assistance in developing, and the
financing or sale of such plants or the related special purposes entities of
such plants.
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 helped 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). For our
European operations, we hold the applicable and appropriate licenses to
operate.
Compliance
with Environmental Laws
We are
not required to comply with any environmental laws that are particular to the
solar industry, either in the United States or Europe. However, it is
our policy to be as environmentally conscientious in every aspect of our
operations.
Employees
As of
April 28, 2010, we had approximately 78 employees, all of whom 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, Italy (in Rome and Campobasso), and
Spain (in Barcelona, Pamplona, and Madrid). 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
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
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@)
|
|
|
|
|
|
|
|
We are
party to a non-cancelable lease for operating facilities in Redlands,
California, which expires in 2010. 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. These leases
provide for annual rent increases tied to the Consumer Price Index or equivalent
indices in Italy and Spain. 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
|
|
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
|
Significant
Employees
The
following table contains information on our significant employees:
Name
|
|
Position Held
|
Stephen
Clevett
|
|
Executive
Vice President of Utility Development and Investor
Relations
|
Bjorn
Persson
|
|
Executive
Vice President of European Operations of Premier Power
California
|
Marco
Pulitano
|
|
Chief
Executive Officer of Premier Power
Italy
|
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, Chief Executive Officer, and
President
Dean R.
Marks serves as our Chief Executive Officer and President and is the Chairman of
the Board. In 1981, he joined Servamatic Solar Systems, a solar sales
organization, and eventually served as part of its management. During
his time at Servamatic, which ended in 1984, Mr. Marks was key to its national
growth, helping to attain over 2,000 employees in over 26 markets across the
U.S. From 1983 to 2001, he pioneered multiple applications of solar
energy for Trident Energy Systems, Simply Solar, and Bright Future, including
thermal, radiant floor and space heating, and PV systems for the residential,
commercial, and industrial markets. He has also served as the
President and CEO of Bright Future and Premier Power California since
2001. 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 25 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 our Chief Operating Officer and Corporate Secretary and sits on
our Board. He has also been the Executive Vice President and
President of World Wide Sales at Premier Power California since
2001. His career includes positions such as Director of Marketing for
Nordic Information System and Next Information System. He was a
Technology Advisor for GE and IBM, and he developed the data security auditing
system for Bank of America. Mr. de Anquin 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
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 a 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 two other
private companies.
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.
Set forth
below is a summary of our significant employees’ business experience for the
past 5 years.
Stephen Clevett – Executive Vice
President of Utility Development and Investor Relations
Mr.
Clevett joined the Company in 2008. He currently serves as our
Executive Vice President and manages our utility-scale project development,
project finance, and investor relations activities. Prior to joining
the Company, Mr. Clevett served as President and Chief Executive Officer of the
Optimira Energy Group, an energy services company (ESCO), which he acquired from
Duke Energy in 2006. Prior to acquiring Optimira, Mr. Clevett was
Senior Vice President and General Manager of Noresco's Energy Infrastructure
group. Prior to that, he held various positions within the Bechtel
Enterprises group of companies, including Director of Corporate Development at
U.S. Generating Company and President of EnergyWorks North
America. Mr. Clevett holds an MBA in Finance from Rutgers Graduate
School of Management and a Bachelor of Engineering from the Stevens Institute of
Technology.
Bjorn Persson – Executive Vice
President of European Operations
of Premier Power
California
Mr.
Persson joined the Company in 2006 to help form our Spanish
operations. He started his career with Handelsbanken, a Swedish
commercial bank, and after a few years joined IBM. Mr. Persson later
joined IBS, a multinational Swedish software and consulting firm. He
worked for IBS in several European countries managing sophisticated large scale
software projects. He later launched IBS in the United States, and
participated in the launch of two other software and services companies, Vision
Information Services and Nordic Information Systems. Mr. Persson has
more than 25 years of management and commercial experience in various
countries.
Marco
Pulitano – Chief Executive Officer of Premier Power Italy
Mr.
Pulitano joined the Company in 2009 with the acquisition of Rupinvest and
Premier Power Italy. He has been the Chief Executive Officer of Premier
Power Italy since its inception in January 2008. Concurrent to his role at
Premier Power Italy, Mr. Pulitano manages GFM SRL, an Italian company in the
business of installing seismological stations in Southern Italy, which he
founded in 2001.
Family
Relationships
There
are no family relationships among our directors and executive
officers.
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 Nasdaq.
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.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of our
common stock as of April 9, 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 29,099,750 shares of common stock outstanding on April
9, 2010.
Name and Position
|
|
Number of Shares of
Common Stock
Beneficially Owned (1)
|
|
|
% of Shares of Common
Stock Beneficially
Owned (1)
|
|
Dean
R. Marks,
Chairman
of the Board, President, and Chief Executive Officer
|
|
|
11,256,601
|
(2)
|
|
|
38.7
|
%
|
Miguel
de Anquin,
Chief
Operating Officer, Corporate Secretary, and Director
|
|
|
6,761,424
|
(3)
|
|
|
23.2
|
%
|
Frank
Sansone,
Chief
Financial Officer
|
|
|
500
|
|
|
|
*
|
|
Kevin
Murray,
Director
|
|
|
16,500
|
|
|
|
*
|
|
Robert
Medearis,
Director
|
|
|
16,500
|
|
|
|
*
|
|
Tommy
Ross,
Director
|
|
|
19,190
|
(4)
|
|
|
*
|
|
Teresa
Kelley,
Former
Chief Financial Officer (5)
|
|
|
200
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
Bjorn
Persson
|
|
|
2,560,699
|
(6)
|
|
|
8.8
|
%
|
Genesis
Capital Advisors, LLC (7)
|
|
|
1,580,598
|
|
|
|
5.4
|
%
|
Vision
Opportunity Master Fund, Ltd. (8)
|
|
|
2,907,065
|
(9)
|
|
|
9.99
|
%(9)
|
|
|
|
|
|
|
|
|
|
All Executive Officers and
Directors as a Group
(6 persons)
|
|
|
18,070,715
|
|
|
|
62.2
|
%
|
* Less
than 1%
(1)
|
Under Rule 13d-3, a beneficial
owner of a security includes any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or
otherwise has or shares: (i) voting power, which includes the power to
vote, or to direct the voting of shares; and (ii) investment power, which
includes the power to dispose or direct the disposition of shares. Certain
shares may be deemed to be beneficially owned by more than one person (if,
for example, persons share the power to vote or the power to dispose of
the shares). In addition, shares are deemed to be beneficially owned by a
person if the person has the right to acquire the shares (for example,
upon exercise of an option) within 60 days of the date as of which the
information is provided. In computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount
of shares beneficially owned by such person (and only such person) by
reason of these acquisition rights. As a result, the percentage of
outstanding shares of any person as shown in this table does not
necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually
outstanding.
|
(2)
|
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, who is one of our employees, 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.
|
(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.
|
(4)
|
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.
|
(5)
|
The address for this stockholder
is 4135 Meadow Wood Drive, El Dorado Hills, CA
95762.
|
(6)
|
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.
|
(7)
|
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.
|
(8)
|
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.
|
(9)
|
This
number includes 2,178,000 shares of common stock and 729,065 shares
of common stock issuable upon conversion of 729,065 shares of our Series A
Preferred Stock, which are presently convertible. This number does not
include (i) 2,770,935 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. If
the stockholder were to waive the limitation and convert its shares of
Series B Preferred Stock and Series A Preferred Stock, as well as exercise
its options, its percentage interest could be as high as 28.3%, diluting
the other stockholders by approximately 18.4%. As of April
28, 2010, however, the Company has not received any such
notice.
|
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)
|
The
amounts shown in this column indicate the grant date fair value of stock
awards granted in the subject year computed in accordance with FASB ASC
Topic 718 (formerly FAS 123R).
|
(2)
|
The
amounts shown in this column indicate the grant date fair value of option
awards granted in the subject year computed in accordance with FASB ASC
Topic 718 (formerly FAS 123R).
|
(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) $7,970 as
compensation earned under the 401(k)
Plan.
|
(7)
|
Mr. Sansone was appointed as our
Chief Financial Officer on November 5,
2009.
|
(8)
|
Ms. Kelley was our Chief
Financial Officer from October 24, 2008 to her resignation on October 30,
2009.
|
Outstanding
Equity Awards
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
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.
|
Retirement
Plans
Except as
described below, we currently have no plans that provide for the payment of
retirement benefits, or benefits that will be paid primarily following
retirement, including but not limited to tax-qualified defined benefit plans,
supplemental executive retirement plans, tax-qualified defined contribution
plans and nonqualified defined contribution plans.
Premier
Power California maintains a 401(k) plan that is tax-qualified for its
employees, including its executive officers. Premier Power California does not
offer employer matching with the 401(k) plan. The 401(k) plan does,
however, offer a discretionary employer contribution at year end.
Potential
Payments upon Termination or Change-in-Control
Except as
described below under “Employment Agreements,” we currently have no contract,
agreement, plan or arrangement, whether written or unwritten, that provides for
payments to a named executive officer at, following, or in connection with any
termination, including without limitation resignation, severance, retirement or
a constructive termination of a named executive officer, or a change in control
of the registrant or a change in the named executive officer’s responsibilities,
with respect to each named executive officer.
Employment
Agreements
The
following are summaries of our employment agreements with our current and former
executive officers whose compensation is listed in the Summary Compensation
Table above.
Premier
Power California entered into an Employment Agreement with Dean R. Marks on
August 22, 2008 for his services as President and Chief Executive
Officer. The term of the agreement is for five years. 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 our annual
EBITDA in excess of $200,000 if the annual EBITDA margin is less than 5%, and
(ii) 1.5% of our annual EBITDA in excess of $200,000 if the annual EBITDA margin
is greater than 5%, both forms of additional compensation of which is due to Mr.
Marks within 90 days of our fiscal year-end and which payments will be
accelerated in a year in which a change of control of the Company occurs such
that a portion of the payment due for that year is due upon the change of
control calculated as of the first day of such year and through the date of the
change of control. Mr. Marks is entitled to a severance payment of
$180,000 upon termination by the Company without cause if such termination
occurs between December 31, 2008 and December 31, 2010, and a severance payment
of $90,000 upon termination by the Company without cause if such termination
occurs between December 31, 2010 and the expiration of the
agreement.
We intend
to enter into an Employment Agreement on the same terms and conditions as those
set forth in the Employment Agreement between Premier Power California and Mr.
Marks.
Premier
Power California entered into an Employment Agreement with Miguel de Anquin on
August 22, 2008 for his services as Chief Operating Officer and Corporate
Secretary. The term of the agreement is for five
years. 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 our annual EBITDA in excess of $200,000 if the annual EBITDA margin is
less than 5%, and (ii) 1.5% of our annual EBITDA in excess of $200,000 if the
annual EBITDA margin is greater than 5%, both forms of additional compensation
of which is due to Mr. de Anquin within 90 days of our fiscal year-end and which
payments will be accelerated in a year in which a change of control of the
Company occurs such that a portion of the payment due for that year is due
upon the change of control calculated as of the first day of such year and
through the date of the change of control. Mr. de Anquin is entitled
to a severance payment of $180,000 upon termination by the Company without cause
if such termination occurs between December 31, 2008 and December 31, 2010, and
a severance payment of $90,000 upon termination by the Company without cause if
such termination occurs between December 31, 2010 and the expiration of the
agreement.
We intend
to enter into an Employment Agreement on the same terms and conditions as those
set forth in the Employment Agreement between Premier Power California and Mr.
de Anquin.
Similar
to the bonus compensation payable to Messrs. Marks and de Anquin, the bonus
payable by Premier Power California to Bjorn Persson, its Executive Vice
President of European Operations, is based on the following (i) 0.5% of European
operations’ EBITDA in excess of €200,000 if European operations’ annual EBITDA
margin is less than 5%, and (ii) 1.5% of European operations’ annual EBITDA in
excess of €200,000 if European operations’ annual EBITDA margin is greater than
5%. Such bonus compensation will also be accelerated upon a change of
control event.
We
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 consists of an annual base salary of
$180,000. He was granted options under our 2008 Equity Incentive Plan
to purchase an aggregate 250,000 shares of our common stock, exercisable at
$2.90 per share. The stock options vest 25% per year for each year of
employment from the date of grant. A sale of over 50% of our 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. We 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. We may terminate the
Employment Agreement without cause upon a sale of over 50% of our common stock
to a third party. In the event we terminate Mr. Sansone without
cause, he 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.
We
entered into an Employment Agreement with Teresa Kelley on October 24, 2008 for
her services as Chief Financial Officer. Ms. Kelley’s annual
compensation was $150,000. Ms. Kelley resigned on October 31, 2009.
Director
Compensation
The
following table provides compensation information for our directors during the
fiscal year ended December 31, 2009:
Name
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
|
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)
|
The amounts shown in this column
indicate the grant date fair value of stock awards granted in the subject
year computed in accordance with FASB ASC Topic 718 (formerly FAS
123R).
|
|
(2)
|
This individual does not receive
compensation for his services as a director. His compensation
as an executive officer is reflected in the Summary Compensation Table
above.
|
We
entered into directors’ agreements with Messrs. Murray, Medearis, and
Ross. Messrs. Murray and Meadaris agreed to serve on the Board until
October 15, 2011, and Mr. Ross agreed to serve on the Board until March 11,
2011, such terms being subject to re-election at our subsequent annual meeting
of shareholders. These directors are each required to attend at least
two Board meetings via teleconference and at least two Board meetings in person
per year, and each 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 each of these directors’ role
on the Board. Each of these directors received 16,500 shares of
common stock after completion of their first year of service on the Board, and
will each receive an additional 16,500 shares of common stock after the second
year of service on the Board and 17,000 shares of common stock 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.
SELECTED
CONDENSED CONSOLIDATED FINANCIAL DATA
The
summary consolidated financial data set forth below should be read in
conjunction with “Management’s Discussion and Analysis of Consolidated Financial
Condition and Results of Operations” and our consolidated financial statements
and the related notes included elsewhere in this prospectus. We
derived the consolidated financial data as of December 31, 2009 and 2008 and for
the years ended December 31, 2009 and 2008 from our consolidated financial
statements included in this prospectus. The historical results are
not necessarily indicative of the results to be expected for any future
period. All monetary amounts are expressed in U.S.
dollars.
|
|
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 (loss)
|
|
|
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
|
|
|
$
|
―
|
|
|
|
|
|
|
|
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 the Consolidated
Financial Statements, and the notes to those financial statements that are
included elsewhere in this prospectus. References to “we,” “our,” or “us” in
this section refers to the Company and its subsidiaries. Our discussion includes
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under the Risk Factors, Forward-Looking
Statements and Business sections in this prospectus. We use words such as
“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.
Overview
We are a
developer, designer, and integrator of solar energy solutions. 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
GE, Sharp, Kyocera, Fronius, Watsun, and SunPower Corporation. Our
profitability is primarily dependent upon revenue from sales to commercial,
governmental, residential, and equity fund customers.
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 €12,500 (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, €1,125,000 (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 each of their
estimated useful life 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. Premier Power Italy provided a ten year warranty covering
the labor and materials associated with its installations. Premier Power Spain
provides a one year warranty for all contracts signed after December 31,
2006. 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 Italy is recognized under
the laws of Italy and is subject to federal and provincial
taxes.
Premier
Power Spain is organized under the laws of Spain 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 were $30.7 million, a decrease of
$13.5 million, or 30%, from the year ended December 31, 2008. U.S.
net sales were $14.0 million for the year ended December 31, 2009, a decrease of
$17.1 million, or 55%, from the prior year. Our Italian operations
provided $10.8 million of net sales in its first 5 months of
operations. 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. 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 $2.2 million associated
with the cancellation of all of our issued and outstanding Series A Warrants and
Series B Warrants and $4.3 million associated with the adjustment to fair value
of the contingent consideration liability. 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
|
)%
|
Italy
|
|
|
10,844
|
|
|
|
―
|
|
|
|
―
|
|
Spain
|
|
|
5,919
|
|
|
|
13,164
|
|
|
|
(55
|
)%
|
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 in 2009,
we derived minimal sales in the amount of $90,000 from our distribution business
in the U.S. and $4.8 million in sales from our distribution business in Italy,
which accounted for 45% of our total Italian revenue. We did not
start our distribution business in Spain until 2010. The decrease in
net sales in the United States is largely the result of three items: the
financial crisis resulting in tightened lending and access to cash from banks,
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.
in 2008. The growth in Italian net sales is a result of the
acquisition of our Italian subsidiary in the third quarter of
2009. 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. We do not, however, expect the decrease in Spain to continue
in 2010.
Cost
of sales
(Dollars
in thousands)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
Cost
of Sales
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
12,383
|
|
|
$
|
27,229
|
|
|
|
(55
|
)%
|
Italy
|
|
|
8,858
|
|
|
|
―
|
|
|
|
―
|
|
Spain
|
|
|
5,051
|
|
|
|
11,482
|
|
|
|
(56
|
)%
|
Total
cost of sales
|
|
$
|
26,292
|
|
|
$
|
38,711
|
|
|
|
(32
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation included above
|
|
$
|
145
|
|
|
$
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
11.5
|
%
|
|
|
12.4
|
%
|
|
|
―
|
|
Italy
|
|
|
18.3
|
%
|
|
|
―
|
|
|
|
―
|
|
Spain
|
|
|
14.7
|
%
|
|
|
12.8
|
%
|
|
|
―
|
|
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.
Operating
Loss/Income
As a result of the above factors,
operating loss was $4.3 million during 2009 compared to operating income of $0.8
million during 2008. The combined effect of decreased sales revenue
in a challenging economic environment and the increase in costs from our
acquisition of Rupinvest and Premier Power Italy, along with additional legal
and accounting fees required of a public company, resulted in an operating loss
in 2009 as compared to 2008.
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 and changes in the fair value of contingent
consideration liability. 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 $0.1 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 primarily due to
less proceeds from the issuance of preferred stock of $2.5 million as compared
to 2008 offset by proceeds from increased borrowings of $2.4 million in
2009. 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
As of
December 31, 2009, we had $3.8 million of cash and cash
equivalents. We have financed our operations primarily through debt
and equity financings. We have in place a $7.0 million credit
line with Umpqua Bank that is currently available for working capital and
capital expenditures, which expires on July 13, 2011, and Premier Power Spain
has a €100,000 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 and the proceeds from this offering, 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 was $1.5 million outstanding under
the agreement with Umpqua Bank. Additionally, certain financial ratios under the
agreement with Umpqua Bank restricts the amount that we can
borrow.
The loan
agreement with Umpqua Bank contains the following financial condition covenants:
(i) minimum debt service charge, (ii) minimum current ratio, (iii) maximum
debt-to-tangible net worth ratio, and (iv) minimum tangible net
worth. Under the loan agreement, we are also subject to customary
non-financial covenants, including limitations on secured indebtedness and
limitations on dividends and other restricted payments. As of
December 31, 2009, we were out of compliance with the maximum debt-to-tangible
net worth ratio and minimum tangible net worth ratio, and we currently remain
out of compliance with these ratios. These ratios did not take into
account our contingent consideration liability as described in Note 12 of our
footnotes to the financial statements included in this
prospectus. The bank is aware of the non-compliance and has not
waived the non-compliance. The bank has indicated that it does not
intend to issue a notice of default, nor institute default rates, nor cut
funding under the line. We are in discussions with the bank to redefine the
financial covenants to account for the contingent consideration liability; in
the event, however, that the bank does subject the Company to default
provisions, our interest rate would increase to 5% above the then-current rate
and our ability to borrow would be limited. Additionally, the bank
has the right to request repayment of all outstanding obligations. We
believe that our current cash balances are sufficient to meet working capital
needs should the bank issue a notice of default and demand repayment of all
obligations or cut off funding under the line. We do not expect any of these
events to occur, though, and believe we have the ability to comply with these
covenants once the financial covenants are redefined. Without the
redefinition of terms, we are unable to comply with the current ratios with
which we are out of compliance.
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.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth
below are our related party transactions since January 1, 2009:
On June
16, 2009, we entered into a Securities Purchase Agreement with Vision under
which we sold to Vision 2,800,000 shares of our Series B Convertible Preferred
Stock (bearing no liquidation preference, no coupon payments, and no redemption
rights) in exchange for the cancellation of 3,500,000 warrants, held by Vision,
and $3,000,000 in cash. The cancellation of warrants resulted in the
elimination of all our issued and outstanding warrants. The
cancellation of the 3,500,000 warrants included (i) the cancellation by us of
4-year Series A Warrants issued to Vision on September 9, 2008 exercisable for
an aggregate 1,750,000 shares of our common stock at $2.50 per share, and (ii)
the cancellation by us of 4-year Series B Warrants issued to Vision on September
9, 2008 exercisable for an aggregate 1,750,000 shares of our common stock at
$3.00 per share. We recorded $1,470,000 as a gain on share settled
debt from this cancellation
In
connection with this transaction, Vision, a holder of our Series A Preferred
Stock, agreed in writing that no adjustment will be made to
the conversion price of its Series A Preferred Stock shares as would have
been required pursuant to the anti-dilution terms of the Series A Preferred
Stock.
Additionally,
certain stockholders have guaranteed certain obligations under the Company’s
outstanding borrowings and operating leases.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On
January 3, 2008, our shares of common stock commenced trading on the
Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol
“HARY.” On September 8, 2008, in connection with our name change that
went effective September 5, 2008, our symbol changed to “PPRW.”
The
following table sets forth the high and low bid information for our common stock
for each quarter within our last two fiscal years and interim periods, as
reported by 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
|
|
|
|
|
|
|
|
|
March
31, 2010
|
|
$
|
2.88
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
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 12, 2008.
The last
reported closing sales price for shares of our common stock was $1.95 per
share on the OTCBB on April 27, 2010.
Holders
As of
April 28, 2010, we had approximately 53 stockholders of record of our
common stock based upon the stockholder list provided by our transfer
agent.
DIVIDEND
POLICY
We have
never paid cash dividends on our common stock. We intend to keep
future earnings, if any, to finance the expansion of our business, and we do not
anticipate that any cash dividends will be paid in the foreseeable
future. Our future payment of dividends will depend on our earnings,
capital requirements, expansion plans, financial condition and other relevant
factors that our board of directors may deem relevant. Our retained
earnings deficit currently limits our ability to pay dividends.
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 are filed
with the SEC as exhibits.
General
Our
authorized capital stock consists of 500,000,000 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
therefor.
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 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 28, 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 of
untimely filings, effectiveness, or responses to SEC comments in connection with
the Registration Rights Agreement, lapse of effectiveness of a registration
statement required by the Registration Rights Agreement, or failure to satisfy
the current public information requirement of Rule 144 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 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. If the
Company enters into a variable rate transaction, 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, indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms.
In
connection with a sale of our shares of Series B Convertible Preferred stock to
Vision on June 16, 2009, Vision, a holder of our Series A Preferred Stock,
agreed in writing that no adjustment will be made to the conversion
price of its Series A Preferred Stock shares as would have been required
pursuant to the anti-dilution provisions described above.
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 volume weighted average price (“VWAP”) 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 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 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 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 28, 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.
PLAN
OF DISTRIBUTION
We are
offering the shares of our common stock through Merriman Curhan Ford & Co.,
as our placement agent (“Placement Agent”). Subject to the terms and conditions
contained in the placement agent agreement, dated April 27, 2010 (the “Placement
Agent Agreement”), Merriman Curhan Ford & Co. has agreed to act as the
Placement Agent for the sale of up to _________ shares of our common
stock. The Placement Agent is not purchasing or selling any shares by
this prospectus, nor is it required to arrange for the purchase or sale of any
specific number or dollar amount of shares, but have agreed to use commercially
reasonable efforts to arrange for the sale of all _________ shares.
Among
other things, the Placement Agent will assist us in identifying and evaluating
prospective investors and approach prospective investors regarding the
offering. The Placement Agent will offer the securities on a “best
efforts” basis. With our consent, the Placement Agent may engage
sub-placement agents and selected securities dealers for the purpose of placing
securities. The Placement Agent will have no obligation to buy any of
the shares from us, nor are they required to arrange the purchase or sale of any
specific number or dollar amount of the shares. This offering is
being made in some jurisdictions to accredited investors only and in other
permitted jurisdictions to accredited and non-accredited
investors. Accredited investors may also include institutional
investors. Each investor will receive a confirmation of sale from the
placement agent in accordance with Rule 10b-10 of the Exchange
Act. We will also enter into subscription agreements directly with
investors in connection with the offering. Each investor will enter
into one of two forms of subscription agreement, based on its identification as
an institutional investor or an individual investor. All funds we
receive from investors will be deposited in a special non-interest-bearing
escrow account under the name of the escrow agent in this offering.
The terms
of any such offering will be subject to market conditions and private
negotiations between us and prospective purchasers. The Placement Agent
Agreement does not give rise to any commitment by the Placement Agent to
purchase any of our shares, and the Placement Agent will have no authority to
bind us by virtue of the Placement Agent Agreement. Further, the Placement Agent
does not guarantee that it will be able to raise new capital in any prospective
offering.
We will
enter into subscription agreements directly with the purchasers in connection
with this offering, and we will only sell to purchasers who have entered into
subscription agreements. The Placement Agent Agreement provides that the
obligations of the Placement Agent and the investors are subject to certain
conditions precedent, including the absence of any material adverse change in
our business and the receipt of certain opinions, letters and certificates from
our counsel and us.
Confirmations
and definitive prospectuses will be distributed to all investors who agree to
purchase the common stock, informing investors of the closing date as to such
shares. We currently anticipate that closing of the sale of _________ shares of
common stock will take place on or about May __, 2010. Investors will
also be informed of the date and manner in which they must transmit the purchase
price for their shares. All funds received in payment for the shares sold in
this offering will be deposited into an escrow account pursuant to an escrow
agreement between us, the Placement Agent, and an escrow agent, and held until
we and the Placement Agent notify the escrow agent that the offering has closed.
The escrow agent will not accept any investor funds until the date of this
prospectus.
On the
scheduled closing date, we will receive funds in the amount of the gross
proceeds of the sale of shares of common stock in the
offering. Genesis Capital Advisors, LLC (“Genesis”) will receive
consideration of $150,000, and in exchange therefor, agreed to a limited
waiver of the exclusivity Genesis may have under the engagement agreement
dated October 31, 2008 and the Placement Agent Agreement, between us and Genesis
as described above and in the section entitled
“
Description of
Business – Agreements with Genesis Capital Advisors.
”
The
Placement Agent will receive a commission in accordance with the terms
of the Placement Agent Agreement. We will pay the Placement Agent a commission
equal to six and a half percent (6.5%) of the gross proceeds of the sale of
shares of common stock in the offering, plus reimbursements for fees and
expenses. The estimated offering expenses payable by us, in addition
to the Placement Agent’s commission of $
_________
,
are approximately $
_________
,
which includes legal, accounting and printing costs and various other fees
associated with registering the common stock. After deducting the estimated
Placement Agent fees and our estimated offering expenses, we expect the net
proceeds from this offering to be approximately $
_________
million.
Pursuant
to the Placement Agent Agreement, we have agreed that we will not, and pursuant
to separate lock-up agreements, Vision, Genesis, and our existing directors and
executive officers have agreed they will not, for a period of ninety (90) days
from the date of this prospectus (the “Lock-Up Period”), without the prior
written consent of the Placement Agent, directly or indirectly offer, sell,
assign, transfer, pledge, contract to sell, or otherwise dispose of, any shares
of common stock or any securities convertible into or exercisable or
exchangeable for common stock, other than (i) our sale of the shares pursuant to
this Prospectus and (ii) the issuance of restricted common stock or options to
acquire common stock pursuant to our employee benefit plans, qualified stock
option plans or other employee compensation plans as such plans are in existence
on the date hereof and described in the Prospectus and the issuance of common
stock pursuant to the valid exercises of options, warrants or rights outstanding
on the closing date. In addition, certain of our directors and officers have
agreed not to directly or indirectly offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock, not
to engage in any swap or other agreement or arrangement that transfers, in whole
or in part, directly or indirectly, the economic risk of ownership of common
stock or any such securities and not to engage in any short selling of any
common stock or any such securities, during the Lock-Up Period, without the
prior written consent of the Placement Agent. We have also agreed that during
the Lock-Up Period, we will not file any registration statement, preliminary
prospectus or prospectus, or any amendment or supplement thereto, under the
Securities Act for any such transaction or which registers, or offers for sale,
common stock or any securities convertible into or exercisable or exchangeable
for common stock, except for a registration statement on Form S−8 relating to
employee benefit plans. We have agreed that (i) if we issue an earnings release
or material news, or if a material event relating to our company occurs, during
the last seventeen (17) days of the Lock-Up Period, or (ii) if prior to the
expiration of the Lock-Up Period, we announce that we will release earnings
results during the sixteen (16)-day period beginning on the last day of the
Lock-Up Period, the foregoing restrictions shall continue to apply until the
expiration of the eighteen (18)-day period beginning on the issuance of the
earnings release or the occurrence of material news or a material
event.
We have
agreed to indemnify the Placement Agent against certain liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Placement Agent Agreement. We
have also agreed to contribute to payments the Placement Agent may be required
to make in respect of such liabilities.
The
transfer agent for our common stock to be issued in this offering is
Computershare located at 350 Indiana Street, Suite 800, Golden,
Colorado. Their telephone number is (303) 262-0600.
LEGAL
MATTERS
The
validity of the shares sold by us under this prospectus will be passed upon for
us by Richardson & Patel LLP in Los Angeles, California. Kramer
Levin Naftalis & Frankel LLP in New York, New York, has acted as counsel for
the placement agent.
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.
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
Our
certificate of incorporation provides that we must indemnify our officers,
directors, and certain others to the fullest extent permitted by the General
Corporation Law of Delaware (“DGCL”). Section 145 of the DGCL provides that we,
as a Delaware corporation, are empowered, subject to certain procedures and
limitations, to indemnify any person against expenses (including attorney’s
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending, or completed action,
suit, or proceeding (including a derivative action) in which such person is made
a party by reason of his being or having been a director, officer, employee, or
agent of the Companyt (each, an “Indemnitee”); provided that the right of an
Indemnitee to receive indemnification is subject to the following limitations:
(i) an Indemnitee is not entitled to indemnification unless he acted in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful, and
(ii) in the case of a derivative action, an Indemnitee is not entitled to
indemnification in the event that he is judged to be liable to the Company
(unless and only to the extent that the court determines that the Indemnitee is
fairly and reasonably entitled to indemnification for such expenses as the court
deems proper). The statute provides that indemnification pursuant to our
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders, or
disinterested directors, or otherwise.
Pursuant
to Section 145 of the DGCL, we have purchased a $5,000,000 director’s and
officer’s liability insurance policy on behalf of our present and former
directors and officers against any liability asserted against or incurred by
them in such capacity or arising out of their status as such.
In
accordance with Section 102(b)(7) of the DGCL, our certificate of incorporation
eliminates personal liability of our directors to the Company or our
stockholders for monetary damages for breach of their fiduciary duties as a
director, with certain limited exceptions set forth in Section 102(b) (7) of the
DGCL.
Insofar
as indemnification for liabilities arising under 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
We are
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.
FINANCIAL
STATEMENTS
The
consolidated financial statements as of and for the fiscal years ended December
31, 2009 and 2008 commence on the following page.
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 Years Ended December 31, 2009 and 2008
|
|
|
F-4
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2009 and 2008
|
|
|
F-5
|
|
|
|
|
|
|
Consolidated
Statements of Shareholders’ Equity for the Years 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.
|
PREMIER
POWER RENEWABLE ENERGY, INC
Notes
to Unaudited Pro Forma Condensed Consolidated Statement of Operations
1.
|
BASIS
OF PRO FORMA PRESENTATION
|
The
unaudited pro forma condensed consolidated statement of operations for the year
ended December 31, 2009, are based on the historical financial statements of
Premier Power Renewable Energy, Inc. (PPRE), and Rupinvest SARL (Rupinvest) and
its majority owned subsidiary Premier Power Italy (formerly ARCO Energy, SRL)
after giving effect to PPRE’s acquisition of Rupinvest on July 31, 2009 as if it
had occurred on January 1, 2009.
We
account for business combinations pursuant to FASB ASC 805 (Financial
Accounting Standards Board Statement No. 141R,
Business
Combinations)
. In accordance with Statement 141R FASB ASC 805,
we allocate the purchase price of an acquired company to the net tangible assets
and intangible assets acquired based upon their estimated fair
values. We have made significant assumptions and estimates in
determining the preliminary estimated purchase price and the preliminary
allocation of the estimated purchase price in the unaudited pro forma condensed
consolidated financial statements. These preliminary estimates and
assumptions are subject to change during the measurement period (generally one
year from the acquisition date) as we finalize the valuations of the net
tangible assets and intangible assets acquired. In particular, the
final valuations of identifiable intangible assets and associated tax effects
may change significantly from our preliminary estimates. These
changes could result in material variances between our future financial results
and the amounts presented in these unaudited condensed consolidated pro forma
financial statements, including variances in fair values recorded, as well as
expenses and cash flows associated with these items.
The
unaudited pro forma condensed consolidated statement of operations for the year
ended December 31, 2009 present the Company’s noncontrolling interests in less
than wholly owned subsidiaries in accordance with FASB ASC 810 (FASB
Statement No. 160,
Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51),
which is effective for interim periods beginning on January 1, 2009.
The
unaudited pro forma condensed consolidated statement of operations is
not intended to represent or be indicative of our consolidated results of
operations that we would have reported had the acquisition of Rupinvest and its
majority owned subsidiary Premier Power Italy been completed as of January 1,
2009 and should not be taken as a representation of our future consolidated
results of operations or financial position. The unaudited pro forma condensed
consolidated statement of operations does not reflect any operating efficiencies
and/or cost savings that we may achieve with respect to the combined companies.
On May
15, 2009, the common ownership of Rupinvest and Premier Power
Italy effected a legal reorganization of their ownership interests so that
Premier Power Italy became a subsidiary of Rupinvest. As Rupinvest and Premier
Power Italy were under common control, the transaction has been treated as a
reorganization. The historical results of operations for Rupinvest and Premier
Power Italy for the period ended July 31, 2009 are presented
separately with appropriate eliminating entries to properly reflect their
combined results for the period.
The
unaudited pro forma condensed consolidated statement of operations should be
read in conjunction with the historical consolidated financial statements and
accompanying notes of PPRE, Rupinvest, and Premier Power Italy included
herein.
2.
|
ACQUISITION OF RUPINVEST SARL AND
ITS MAJORITY OWNED SUBSIDIARY, PREMIER POWER
ITALY
|
We
acquired Rupinvest and its subsidiary, Premier Power Italy, on July
31, 2009 in exchange for $18,292 in cash and the potential issuance of up to 3
million shares of PPRE’s common stock (“Contingent Consideration”).
In
conjunction with the acquisition of Rupinvest, the Company made a capital
contribution of $1,580,000.
The
Contingent Consideration is to be distributed over a three-year period based
upon Premier Power Italy achieving certain sales and gross margin goals during
such period. Based on projected sales and gross margin levels of
Premier Power Italy, the PPRE determined that all of the Contingent
Consideration would be earned by the sellers. An independent third party
valuation determined the value of the Contingent Consideration to be
$12,026,400. The valuation used a discounted future income
methodology for the years 2009, 2010 and 2011 inclusive and then applied a
discounted cash flow model to the calculation periods. The applicable
results obtained were then incorporated into the universal income projections
for Premier Power for the years 2009 through 2011 and further analyzed from a
cash flow perspective in order to determine the overall value of the PPRE
and the related fair value of the PPRE’s outstanding stock in 2009, 2010 and
2011. The projected 2009, 2010 and 2011 fair value of the PPRE’s stock price was
then multiplied against a yearly estimate of shares earned by
Rupinvest. The specific calculation of the shares earned were
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, [3]
special company risk premium
,
as determined by the
independent third party valuation.
PREMIER
POWER RENEWABLE ENERGY, INC
Notes
to Unaudited Pro Forma Condensed Consolidated Statement of Operations
Preliminary
Purchase Price Allocation
The total
purchase price for Rupinvest SARL of $12,044,692 was allocated to the net
tangible assets and intangible assets acquired based upon their estimated fair
value as of July 31, 2009, as set forth below. The excess of the
purchase price over the net tangible assets and intangible assets was recorded
as goodwill. The preliminary allocation of the purchase price was
based upon a preliminary valuation and our estimates and assumptions are subject
to change.
A summary
of the acquired tangible and intangible assets and liabilities is as
follows:
Cash
|
|
$
|
16,315
|
|
Accounts
receivable
|
|
|
314,702
|
|
Inventory
|
|
|
246,962
|
|
Intangible
assets – customer list
|
|
|
105,009
|
|
Fixed
assets
|
|
|
37,991
|
|
Accounts
payable and accrued liabilities
|
|
|
(381,405
|
)
|
Taxes
payable
|
|
|
(277,243
|
)
|
Goodwill
|
|
|
11,982,361
|
|
Total
purchase consideration
|
|
$
|
12,044,692
|
|
Intangible
Assets
Amortizing
intangible assets consist of the estimated fair value of acquired customer
lists. In estimating the fair value we used an income approach,
utilizing a discount rate of 20%. We have estimated the useful life
of the acquired customer lists to be three years.
3.
|
PRO FORMA FINANCIAL STATEMENT
ADJUSTMENTS
|
The
following pro forma adjustments are included in our unaudited pro forma
condensed consolidated statements of operations:
A.
|
The
basic and diluted weighted average shares were adjusted for the
contingent shares assuming Premier Power Italy would meet or exceed
the revenue and gross margin requirements to earn the maximum number of
shares under the contingent arrangement as of the reporting
date whether they have been distributed or not. Through
December 31, 2009, the maximum number of shares possible to be earned is
1,500,000 shares.
|
B.
|
To amortize the intangible assets
acquired,
consisting
of customer lists with an estimated fair value of $105,009 and an
estimated three year
life.
|
C.
|
Represents
the effect of the 10% noncontrolling interest in Premier Power
Italy's net loss (income), including the effect of the pro forma
amortization of acquired
intangibles.
|
The
Company evaluated the fair value of the acquired tangible assets and determined
that their fair values materially approximated their carrying value.
Specifically, the Company notes the following:
|
·
|
Accounts
Receivable – No allowance for doubtful accounts had been recorded prior to
the acquisition of Rupinvest, all accounts were current,
and customers were considered to have good credit
histories. As the Company determined that the recorded value
was not materially different from fair value as a result of the factors
noted above and the small amount of accounts receivable, no fair value
adjustment was recorded.
|
|
·
|
Inventory
– Inventory was associated with specific orders and generally not held for
stocking purposes, there were no obsolete or slow moving items as of the
acquisition date, and market prices were not significantly different
from recorded costs. Based on the above factors and the Company’s
estimate of profit margins associated with distribution activities, the
Company determined that the recorded value was not materially different
from the estimated fair
value.
|
|
·
|
Property
and Equipment – Acquired amounts were insignificant at approximately
$38,000 and had all been purchased within one year of the acquisition of
Rupinvest and were not of a specialized or unique nature. As a
result, the Company determined that the carrying value approximated
estimated fair value.
|
$8,000,000
__________
Shares of Common Stock
PREMIER POWER RENEWABLE ENERGY,
INC.
PROSPECTUS
__________,
2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth the costs and expenses payable by the Company in
connection with the sale of common stock being registered. All
amounts are estimates except the SEC registration fee:
Securities
and Exchange Commission registration fee
|
|
$
|
446.40
|
|
Placement
agent fees and expenses
|
|
|
___
|
|
Printing
and engraving expenses
|
|
|
___
|
|
Legal
fees and expenses
|
|
|
___
|
|
Accounting
fees and expenses
|
|
|
___
|
|
Miscellaneous
costs
|
|
|
___
|
|
|
|
|
|
|
Total
|
|
$
|
___
|
|
Item
14. Indemnification of Directors and Officers.
Delaware
Law
Our
certificate of incorporation provides that we must indemnify our officers,
directors, and certain others to the fullest extent permitted by the General
Corporation Law of Delaware (“DGCL”). Section 145 of the DGCL provides that we,
as a Delaware corporation, are empowered, subject to certain procedures and
limitations, to indemnify any person against expenses (including attorney’s
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending, or completed action,
suit, or proceeding (including a derivative action) in which such person is made
a party by reason of his being or having been a director, officer, employee, or
agent of the Company (each, an “Indemnitee”); provided that the right of an
Indemnitee to receive indemnification is subject to the following limitations:
(i) an Indemnitee is not entitled to indemnification unless he acted in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful, and
(ii) in the case of a derivative action, an Indemnitee is not entitled to
indemnification in the event that he is judged to be liable to the Company
(unless and only to the extent that the court determines that the Indemnitee is
fairly and reasonably entitled to indemnification for such expenses as the court
deems proper). The statute provides that indemnification pursuant to our
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders, or
disinterested directors, or otherwise.
Pursuant
to Section 145 of the DGCL, we have purchased a $5,000,000 director’s and
officer’s liability insurance policy on behalf of our present and former
directors and officers against any liability asserted against or incurred by
them in such capacity or arising out of their status as such.
In
accordance with Section 102(b)(7) of the DGCL, our certificate of incorporation
eliminates personal liability of our directors to the Company or our
stockholders for monetary damages for breach of their fiduciary duties as a
director, with certain limited exceptions set forth in Section 102(b) (7) of the
DGCL.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted for our directors, officers, and controlling persons pursuant to the
foregoing provisions or otherwise, we have been advised that in the opinion of
the SEC, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Item
15. Recent Sales of Unregistered Securities.
The
following is a summary of our transactions during the last three years involving
sales of our securities that were not registered under the Securities Act of
1933, as amended (the “Securities Act”):
On June
16, 2009, we issued 2,800,000 shares of our Series B Convertible Preferred Stock
to Vision Opportunity Master Fund Ltd. (“Vision”) in consideration for (i)
the cancellation of all Series A Warrants and Series B Warrants we issued to
Vision and (ii) $3,000,000 in gross proceeds. The investor
represented that it was an “accredited investor” as defined in Rule 501 under
the Securities Act. We relied upon the exemption from registration as
set forth in Section 4(2) of the Securities Act for the issuance of these
securities.
On June
3, 2009, we agreed to issue and transfer up to three million (3,000,000)
restricted shares of our common stock, par value $0.0001 per share, to Esdras
Ltd. (“Esdras”) in addition to additional compensation of a cash payment by us
to Esdras in the amount of twelve thousand five hundred Euros (€12,500, or
approximately $18,292) and in exchange for our acquisition of 100% of the issued
and outstanding equity ownership interest in Rupinvest SARL. The
shares were issued on July 10, 2009 and are held by an escrow agent in trust in
connection with a share exchange agreement we entered into on June 3, 2009, with
the number of shares to be transferred, if any, to be calculated based on sales
achieved by Premier Power Italy, or the escrow agent may return a portion of or
all of the shares to the Company. The issuance and transfer of the
shares to Esdras was exempt from registration under the Securities Act, pursuant
to Section 4(2) and Regulation S thereof. We made this determination
based on Esdras’ representations in the exchange agreement, which included, in
pertinent part, that Esdras is not a "U.S. person" as that term is defined in
Rule 902 of Regulation S under the Securities Act, and that it was acquiring the
shares for investment purposes for its own respective account and not as a
nominee or agent and not with a view to the resale or distribution thereof, and
that it understood that the shares may not be sold or otherwise disposed of
without registration under the Securities Act or an applicable exemption
therefrom.
On
December 31, 2008, we issued two options to purchase up to an aggregate 250,000
shares of common stock to Capital Group Communications, Inc. (“CGC”) in
conjunction with an agreement to provide compensation for investor
communications and public relations services. This issuance was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. We made this determination based on the representations of
CGC, which included, in pertinent part, that such stockholder was an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act, and that such stockholder was acquiring our securities for
investment purposes for its own respective accounts and not as nominees or
agents and not with a view to the resale or distribution thereof, and that the
stockholder understood that our securities may not be sold or otherwise disposed
of without registration under the Securities Act or an applicable exemption
therefrom. On August 17, 2009, we cancelled these options.
On
December 4, 2008, we issued 30,000 restricted shares of common stock to Capital
Group Communications, Inc. (“CGC”) in conjunction with an agreement to provide
compensation for investor communications and public relations
services. This issuance was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof. We made this
determination based on the representations of CGC, which included, in pertinent
part, that such stockholder was an "accredited investor" within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act, and that such
stockholder was acquiring our securities for investment purposes for its own
respective accounts and not as nominees or agents and not with a view to the
resale or distribution thereof, and that the stockholder understood that our
securities may not be sold or otherwise disposed of without registration under
the Securities Act or an applicable exemption therefrom.
On
September 9, 2008, in connection with a Share Exchange Agreement (“Exchange
Agreement”) by and among the Company, our majority stockholder, Premier Power
Renewable Energy, Inc., a California corporation (“Premier Power California”),
and the stockholders of Premier Power California, consisting of four individuals
and one entity, who, immediately prior to the closing of the transactions
contemplated by the Exchange Agreement, collectively held 100% of Premier Power
California’s issued and outstanding share capital (the “PPG Owners”), we issued
24,218,750 shares of our common stock to the PPG Owners in exchange for 100% of
the capital stock of Premier Power California (the “Share
Exchange”). The issuance of the common stock to the PPG Owners
pursuant to the Exchange Agreement was exempt from registration under the
Securities Act pursuant to Section 4(2) and Regulation D thereof. We
made this determination based on the representations of the PPG Owners, which
included, in pertinent part, that such stockholders were "accredited investors"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act, and that such stockholders were acquiring our common stock for investment
purposes for their own respective accounts and not as nominees or agents and not
with a view to the resale or distribution thereof, and that each owner
understood that the shares of our common stock may not be sold or otherwise
disposed of without registration under the Securities Act or an applicable
exemption therefrom. In connection with and prior to the Share
Exchange, Vision, the pre-Share Exchange majority stockholder of the Company,
agreed to cancel 25,448,000 of its shares of our common stock in consideration
for the agreement by the PPG Owners to enter into the Share Exchange transaction
with the majority stockholder of the Company and the
Company. Immediately prior to the Share Exchange, we had 1,800,000
shares of common stock issued and outstanding. Immediately after the
issuance of the shares to the PPG Owners, we had 26,018,750 shares of common
stock issued and outstanding.
On
September 9, 2008, in connection with a financing pursuant to a Securities
Purchase Agreement, we issued a total of 3,500,000 units, each unit consisting
of one share of our Series A Preferred Stock, one-half of one Series A Warrant,
and one-half of one Series B Warrant, to one investor in connection with the
closing of the financing. The issuance of the units to the investor pursuant was
exempt from registration under the Securities Act pursuant to Section 4(2) and
Regulation D thereof. We made this determination based on the
representations of the investor, which included, in pertinent part, that such
person was an "accredited investor" within the meaning of Rule 501 of Regulation
D promulgated under the Securities Act, and that such person was acquiring our
common stock for investment purposes for its own respective account and not as a
nominee or agent and not with a view to the resale or distribution thereof, and
that the investor understood that the shares of our Series A Preferred Stock and
our Series A Warrants and Series B Warrants may not be sold or otherwise
disposed of without registration under the Securities Act or an applicable
exemption therefrom.
Item
16. Exhibits and Financial Statement Schedules.
(a)
Exhibits
EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
Share
Exchange Agreement by and among the Company, its majority stockholder,
Premier Power Renewable Energy, Inc., and its stockholders, dated
September 9, 2008 (3)
|
|
|
|
2.2
|
|
Share
Exchange Agreement between the Registrant, Rupinvest Sarl, and Esdras
Ltd., dated June 3, 2009 (11)
|
|
|
|
3.1
|
|
Certificate
of Incorporation (1)
|
|
|
|
3.2
|
|
Bylaws
(1)
|
|
|
|
3.3
|
|
Certificate
of Amendment of the Certificate of Incorporation, filed August 19, 2008
with the Secretary of State of the State of Delaware
(2)
|
|
|
|
3.4
|
|
Certificate
of Amendment of the Certificate of Incorporation, filed August 29, 2008
and effective September 5, 2008 with the Secretary of State of the State
of Delaware (3)
|
|
|
|
3.5
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series A
Convertible Preferred Stock, filed September 10, 2008 with the Secretary
of State of the State of Delaware (3)
|
|
|
|
3.6
|
|
Amendment
to Certificate of Incorporation, filed November 24, 2008 with the
Secretary of State of Delaware (5)
|
|
|
|
3.7
|
|
Amendment
to Bylaws (7)
|
|
|
|
3.8
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series B
Convertible Preferred Stock, filed with the Delaware Secretary of State on
June 12, 2009 (11)
|
|
|
|
5.1
|
|
Opinion
of Richardson & Patel LLP **
|
|
|
|
10.1
|
|
Form
of Securities Purchase Agreement (3)
|
|
|
|
10.2
|
|
Form
of Registration Rights Agreement
(3)
|
10.3
|
|
Form
of Lock-up Agreement (3)
|
|
|
|
10.4
|
|
Purchase
and Sale Agreement between Harry’s Trucking, Inc. and Haris Tajyar and
Omar Tajyar, dated September 9, 2008 (3)
|
|
|
|
10.5
|
|
First
Amendment to Registration Rights Agreement between Premier Power Renewable
Energy, Inc., Genesis Capital Advisors, LLC, and Vision Opportunity Master
Fund, Ltd., dated October 31, 2008 (4)
|
|
|
|
10.6
|
|
Voting
Agreement between Dean Marks and Miguel de Anquin, signed June 16, 2008
(and addendum) (8)
|
|
|
|
10.7
|
|
Voting
Agreement between Dean Marks and Miguel de Anquin, dated January 21, 2009
(8)
|
|
|
|
10.8
|
|
Voting
Agreement between Dean Marks, Sarilee Marks, and Miguel de Anquin, dated
January 21, 2009 (8)
|
|
|
|
10.9
|
|
Voting
Agreement between Dean Marks and Miguel de Anquin, dated January 2, 2006
(9)
|
|
|
|
10.10
|
|
Second
Amendment to Registration Rights Agreement between Premier Power Renewable
Energy, Inc., Genesis Capital Advisors, LLC, and Vision Opportunity Master
Fund, Ltd., dated May 1, 2009 (10)
|
|
|
|
10.11
|
|
Securities
Purchase Agreement between the Registrant and Vision Opportunity Master
Fund, Ltd., dated June 16, 2009 (11)
|
|
|
|
10.12
|
|
Waiver
of Anti-Dilution Rights of Series A Preferred Stock by Vision Opportunity
Master Fund, Ltd., dated June 16, 2009 (11)
|
|
|
|
10.13
|
|
Loan
Agreement (Asset Based) between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (12)
|
|
|
|
10.14
|
|
Promissory
Note (Line of Credit Note) between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (12)
|
|
|
|
10.15
|
|
Form
of Modification to Promissory Note (Line of Credit Note) and Loan
Agreement between Umpqua Bank and Premier Power Renewable Energy, Inc.
(12)
|
|
|
|
10.16
|
|
Commercial
Security Agreement between Umpqua Bank and Premier Power Renewable Energy,
Inc., dated July 13, 2009 (12)
|
|
|
|
10.17
|
|
Commercial
Security Agreement (Premier Power California) between Umpqua Bank and
Premier Power Renewable Energy, Inc., dated July 13, 2009
(12)
|
|
|
|
10.18
|
|
Rider
to Security Agreement Executed by Non-Borrower Grantor (Premier Power
California) between Umpqua Bank and Premier Power Renewable Energy, Inc.,
dated July 13, 2009 (12)
|
|
|
|
10.19
|
|
Commercial
Security Agreement (Bright Futures Technologies, LLC) between Umpqua Bank
and Bright Futures Technologies, LLC, dated July 13, 2009
(12)
|
|
|
|
10.20
|
|
Rider
to Security Agreement Executed by Non-Borrower Grantor (Bright Futures
Technologies, LLC) between Umpqua Bank and Bright Futures Technologies,
LLC, dated July 13, 2009 (12)
|
|
|
|
10.21
|
|
Commercial
Security Agreement (Premier Power, Sociedad Limitada) between Umpqua Bank
and Premier Power, Sociedad Limitada, dated July 13, 2009
(12)
|
|
|
|
10.22
|
|
Rider
to Security Agreement Executed by Non-Borrower Grantor (Premier Power,
Sociedad Limitada) between Umpqua Bank and Premier Power, Sociedad
Limitada, dated July 13, 2009 (12)
|
|
|
|
10.23
|
|
Agreement
to Provide Insurance between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (12)
|
|
|
|
10.24
|
|
Disbursement
Request and Authorization between Umpqua Bank and Premier Power Renewable
Energy, Inc., dated July 13, 2009 (12)
|
10.25
|
|
Landlord’s
Release and Waiver among Umpqua Bank, Premier Power Renewable Energy, Inc.
and Wagner Family ILP, dated July 13, 2009 (12)
|
|
|
|
10.26
|
|
Landlord’s
Release and Waiver among Umpqua Bank, Premier Power Renewable Energy,
Inc., and MKJ - McCalla Investments, LLC dated July 13, 2009
(12)
|
|
|
|
10.27
|
|
Landlord’s
Release and Waiver among Umpqua Bank, Premier Power Renewable
Energy, Inc. and 33 Partners, Inc., dated July 13, 2009
(12)
|
|
|
|
10.28
|
|
Escrow
Agreement between the Registrant, Rupinvest SARL, Esdras Ltd., and Capita
Trust Company Limited, dated July 9, 2009 (13)
|
|
|
|
10.29
|
|
Escrow
Agreement Amendment No. 1 between the Registrant, Rupinvest SARL, Esdras
Ltd., and Capita Trust Company Limited, dated July 22, 2009
(14)
|
|
|
|
10.30
|
|
Waiver
and Amendment between the Registrant, Rupinvest SARL, Esdras Ltd., and
Capita Trust Company Limited, dated July 30, 2009 (15)
|
|
|
|
10.31
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc. and Frank Sansone,
dated November 5, 2009 (16)
|
|
|
|
10.32
|
|
Second
Amended and Restated Agreement to Serve as Member of the Board of
Directors between the Registrant and Kevin Murray, dated March 25, 2010
(17)
|
|
|
|
10.33
|
|
Second
Amended and Restated Agreement to Serve as Member of the Board of
Directors between the Registrant and Robert Medearis, dated March 25, 2010
(17)
|
|
|
|
10.34
|
|
Amended
and Restated Director Agreement between the Registrant and Tommy Ross,
dated March 25, 2010 (17)
|
|
|
|
10.35
|
|
Solar
Installation Agreement between Premier Power Italy, S.p.A. and Global
Green Advisors, dated September 28, 2009 *
|
|
|
|
10.36
|
|
Engagement
Agreement between Genesis Capital Advisors, LLC and Premier Power
Renewable Energy, Inc., dated October 31, 2008 *
|
|
|
|
10.37
|
|
Limited
and Temporary Waiver Agreement between Registrant and Genesis Capital
Advisors, LLC, dated April 28, 2010 *
|
|
|
|
10.38
|
|
Clarification
Agreement between Registrant and Genesis Capital Advisors, LLC, dated
April 28, 2010 *
|
|
|
|
10.39
|
|
Escrow
Agreement Amendment No. 3 between Registrant, Rupinvest Sarl, Esdras Ltd.,
and Capita Trust Company Limited, dated April 24, 2010
(18)
|
|
|
|
10.40
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc., a California
corporation, and Dean R. Marks, dated August 22, 2008
(3)
|
|
|
|
10.41
|
|
Employment
Agreement between Premier Power Renewable Energy, Inc., a California
corporation, and Miguel de Anquin, dated August 22, 2008
(3)
|
|
|
|
10.42
|
|
Employment
Agreement between Registrant and Dean R. Marks **
|
|
|
|
10.43
|
|
Employment
Agreement between Registrant and Miguel de Anquin **
|
|
|
|
10.44
|
|
Engagement
Letter between Registrant and Merriman Curhan Ford & Co., dated April
27, 2010 *
|
|
|
|
14.1
|
|
Code
of Business Conduct and Ethics (6)
|
|
|
|
21.1
|
|
List
of Subsidiaries (3)
|
|
|
|
23.1
|
|
Consent
of Macias Gini & O’Connell LLP *
|
|
|
|
23.2
|
|
Consent
of Richardson & Patel LLP (included in Exhibit 5.1)
|
|
|
|
23.3
|
|
Consent
of Macias Gini & O'Connell LLP *
|
|
|
|
23.4
|
|
Consent
of Ria & Partners S.p.A. *
|
|
|
|
24.1
|
|
Power
of Attorney (see signature page of this registration
statement)
|
* Filed
herewith.
** To be
filed by amendment.
(1)
|
Filed
on February 13, 2007 as an exhibit to our Registration Statement on Form
SB-2/A, and incorporated herein by
reference.
|
(2)
|
Filed
on August 29, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(3)
|
Filed
on September 11, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(4)
|
Filed
on November 6, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(5)
|
Filed
on November 26, 2008 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(6)
|
Filed
on November 7, 2008 as an exhibit to our Registration Statement on Form
S-1, and incorporated herein by
reference.
|
(7)
|
Filed
on January 16, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(8)
|
Filed
on February 5, 2009 as an exhibit to our Amendment No. 1 to Registration
Statement on Form S-1/A, and incorporated herein by
reference.
|
(9)
|
Filed
on March 31, 2009 as an exhibit to our Annual Report on Form 10-K, and
incorporated herein by reference.
|
(10)
|
Filed
on May 4, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(11)
|
Filed
on June 18, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(12)
|
Filed
on July 13, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(13)
|
Filed
on July 15, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(14)
|
Filed
on July 23, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(15)
|
Filed
on August 5, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(16)
|
Filed
on November 5, 2009 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(17)
|
Filed
on March 25, 2010 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by reference.
|
(18)
|
Filed
on April 27, 2010 as an exhibit to our Current Report on Form 8-K, and
incorporated herein by
reference.
|
Item
17. Undertakings.
The
undersigned registrant hereby undertakes that:
|
1.
|
For
determining liability under the Securities Act, treat the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant under Rule 424(b)(1) or
(4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it
effective.
|
|
2.
|
For
determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those
securities.
|
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to trustees, directors, officers and controlling
persons of the registrant pursuant to the provisions described under
Item 14 of this registration statement, or otherwise (other than
insurance), the registrant has been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of El Dorado Hills, State of
California, on April 28, 2010.
|
PREMIER POWER RENEWABLE
ENERGY,
INC.
|
|
|
|
|
By:
|
/s/ Dean R. Marks
|
|
|
Dean
R. Marks
Chief Executive Officer
and President
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Frank J. Sansone
|
|
|
Frank
J. Sansone
Chief Financial Officer
(Principal
Financial and Accounting Officer)
|
POWER
OF ATTORNEY
Each
person whose signature appears below hereby constitutes and appoints, jointly
and severally, Dean R. Marks and Frank J. Sansone, and each of them, as his or
her attorney-in-fact, with full power of substitution, for him or her in any and
all capacities, to sign any and all amendments, including post-effective
amendments, to this registration statement, and any and all registration
statements related to the offering covered by this registration statement and
filed under the Securities Act of 1933, as amended, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by his or her attorney to any and all
amendments to said registration statement.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Dean R. Marks
|
|
|
|
April
28, 2010
|
Dean
R. Marks
|
|
Chairman
of the Board, Chief Executive Officer, and President
|
|
|
|
|
|
|
|
/s/ Miguel de Anquin
|
|
|
|
April
28, 2010
|
Miguel
de Anquin
|
|
Chief
Operating Officer, Corporate Secretary, and Director
|
|
|
|
|
|
|
|
/s/ Frank J. Sansone
|
|
|
|
April
28, 2010
|
Frank
J. Sansone
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert Medearis
|
|
|
|
April
28, 2010
|
Robert
Medearis
|
|
Director
|
|
|
Premier Power Renewable ... (CE) (USOTC:PPRW)
Historical Stock Chart
From May 2024 to Jun 2024
Premier Power Renewable ... (CE) (USOTC:PPRW)
Historical Stock Chart
From Jun 2023 to Jun 2024