Attached files
file | filename |
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EX-31.2 - ForceField Energy Inc. | v198587_ex31-2.htm |
EX-31.1 - ForceField Energy Inc. | v198587_ex31-1.htm |
EX-32.1 - ForceField Energy Inc. | v198587_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x
|
Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For the
quarterly period ended August 31, 2010
o
|
Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
|
For the
transition period __________ to __________
Commission
File Number: 333-145910
SunSi
Energies Inc.
|
(Exact name of registrant as specified in its
charter)
|
Nevada
|
20-8584329
|
|||
(State
or other jurisdiction of incorporation
or
organization)
|
(IRS
Employer Identification No.)
|
45
Main Street, Suite 309
Brooklyn,
New York
|
||
(Address
of principal executive offices)
|
646-205-0291
|
||
(Issuer’s
telephone number)
|
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days x
Yes o No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
o Large
accelerated filer
|
o Accelerated
filer
|
o Non-Accelerated
filer
|
x Smaller
reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o Yes x No
State the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date: 27,446,000 common shares as of September 30,
2010.
Page
|
||||
PART
I – FINANCIAL INFORMATION
|
||||
Item
1:
|
Financial
Statements
|
3
|
||
Item
2:
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
4
|
||
Item
3:
|
Quantitative
and Qualitative Disclosures About Market Risk
|
6
|
||
Item
4:
|
Controls
and Procedures
|
6
|
||
PART
II – OTHER INFORMATION
|
||||
Item
1:
|
Legal
Proceedings
|
7
|
||
Item
1A:
|
Risk
Factors
|
7
|
||
Item
2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
7
|
||
Item
3:
|
Defaults
Upon Senior Securities
|
7
|
||
Item
4:
|
[Removed
and Reserved]
|
7
|
||
Item
5:
|
Other
Information
|
7
|
||
Item
6:
|
Exhibits
|
7
|
2
PART
I - FINANCIAL INFORMATION
Our
unaudited financial statements included in this Form 10-Q are as
follows:
|
|
F-1
|
Interim
Unaudited Consolidated Balance Sheets as of August 31, 2010 and May
31, 2010;
|
F-2
|
Interim
Unaudited Consolidated Statements of Operations and Comprehensive (Loss)
for the Three Months ended August 31, 2010 and August 31, 2009
and from Inception to August 31, 2010;
|
F-3
|
Interim
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
August 31, 2010 and August 31, 2009 and from Inception to August 31,
20109;
|
F-4
|
Notes
to Interim Unaudited Consolidated Financial
Statements;
|
3
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Consolidated
Balance Sheets
(Expressed
in US dollars)
August
31,
|
May
31,
|
|||||||
2010
|
2010
|
|||||||
|
(unaudited)
|
|||||||
Assets | ||||||||
Current
assets
|
||||||||
Cash
|
$ | 470,451 | $ | 598,468 | ||||
Total
current assets
|
470,451 | 598,468 | ||||||
Total
Assets
|
$ | 470,451 | $ | 598,468 | ||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 97,589 | $ | 149,538 | ||||
Advances
payable
|
78,680 | 230,981 | ||||||
Compensation
payable-related party
|
- | 5,671 | ||||||
Total
current liabilities
|
176,269 | 386,190 | ||||||
Stockholders'
equity
|
||||||||
Common
stock, $0.001 par value, 75,000,000 shares authorized, 27,446,000 and
27,312,500 issued and outstanding at August 31 and May 31,
2010
|
27,446 | 27,312 | ||||||
Additional
paid in capital
|
1,258,930 | 1,018,764 | ||||||
Accumulated
deficit
|
(992,194 | ) | (833,798 | ) | ||||
Total
stockholders' equity
|
294,182 | 212,278 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 470,451 | $ | 598,468 |
The
accompanying notes make up an integral part of these unaudited financial
statements
F-1
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Consolidated
Statements of Operations and Comprehensive (Loss) (Unaudited)
(Expressed
in US dollars)
Three Months Ended
August 31, 2010
|
Three Months Ended
August 31, 2009
|
From inception
(January 30, 2007)
to August 31, 2010
|
||||||||||
Revenue
|
$ | - | $ | - | $ | - | ||||||
Operation
|
||||||||||||
Mining
exploration
|
- | - | 9,440 | |||||||||
Professional
fees
|
117,237 | 158,406 | 822,653 | |||||||||
General
and administrative
|
41,159 | 3,933 | 160,101 | |||||||||
158,396 | 162,339 | 992,194 | ||||||||||
(Loss)
|
(158,396 | ) | (162,339 | ) | (992,194 | ) | ||||||
Income
taxes
|
- | - | - | |||||||||
Net
(Loss)
|
$ | (158,396 | ) | $ | (162,339 | ) | $ | (992,194 | ) | |||
Net
(Loss) Per Common Share Basic
|
$ | (0.01 | ) | $ | (0.01 | ) | ||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES
|
27,428,995 | 26,760,000 |
The
accompanying notes make up an integral part of these unaudited financial
statements
F-2
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows (Unaudited)
(Expressed
in US dollars)
Three Months Ended
August 31, 2010
|
Three Months Ended
August 31, 2009
|
From inception
(January 30, 2007)
to August 31, 2010
|
||||||||||
Cash
flow from operating activities:
|
||||||||||||
Net
income (loss) for the period
|
$ | (158,396 | ) | $ | (162,339 | ) | $ | (992,194 | ) | |||
Adjustments
to reconcile net loss to net cash provided by (used in)
operations
|
- | - | - | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Accounts
payable
|
(51,950 | ) | (51,475 | ) | 97,588 | |||||||
Accounts
payable-related party
|
- | - | - | |||||||||
Compensation
payable-related party
|
(5,671 | ) | - | - | ||||||||
Net
cash provided by (used in) operating activities
|
(216,017 | ) | (213,814 | ) | (894,606 | ) | ||||||
Cash
flows from investing activities:
|
||||||||||||
Net
cash provided by (used in) investing activities
|
- | - | - | |||||||||
Cash
flows from financing activities:
|
||||||||||||
Issuance
of common stock
|
240,300 | - | 1,272,800 | |||||||||
Proceeds
- advances payable
|
26,700 | 221,901 | 379,984 | |||||||||
Payments
- advances payable
|
(179,000 | ) | - | (301,303 | ) | |||||||
Capital
contributions
|
- | - | 13,576 | |||||||||
Net
cash provided by (used in) financing activities
|
88,000 | 221,901 | 1,365,057 | |||||||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(128,017 | ) | 8,087 | 470,451 | ||||||||
Cash
and cash equivalents at beginning of period
|
598,468 | 4,190 | - | |||||||||
CASH
& CASH EQUIVALENTS AT END OF PERIOD
|
$ | 470,451 | $ | 12,277 | $ | 470,451 | ||||||
SUPPLEMENTAL
NON-CASH
|
||||||||||||
Financing
actiivity
|
||||||||||||
Accrual
of cost of issuance in advances payable
|
$ | 26,700 | $ | - | $ | 137,200 | ||||||
Supplemental
disclosures of cash flow information
|
||||||||||||
Cash
paid during period for
|
||||||||||||
Interest
|
- | - | - | |||||||||
Income
taxes
|
- | - | - |
The
accompanying notes make up an integral part of these financial
statements
F-3
SUNSI
ENERGIES INC.
|
(A
Development Stage Company)
|
Notes
to Unaudited Consolidated financial statements
|
For
Three Months Ended August 31, 2010
|
(Expressed in U.S.
dollars)
|
1.
|
CONDENSED
FINANCIAL STATEMENTS
|
The
accompanying consolidated interim financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at August 31, 2010 and
for all periods presented have been made.
Certain
information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's May 31, 2010 audited consolidated financial statements. The results of
operations for the periods ended August 31, 2010 and August 31, 2009 are not
necessarily indicative of the operating results for the full years.
2.
|
GOING
CONCERN
|
The
Company’s consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. The Company has had no revenues and has generated losses from
operations.
The
Company has incurred losses since inception resulting in an accumulated deficit
of $992,194. Its ability to continue as a going concern is dependent upon the
ability of the Company to generate profitable operations in the future and/or to
obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Management intends
to address the going concern issue by funding future operations through the sale
of equity capital and by director loans, if needed.
F-4
SUNSI
ENERGIES INC.
|
(A
Development Stage Company)
|
Notes
to Consolidated financial statements
|
For
Three Months Ended August 31, 2010
|
(Expressed in U.S.
dollars)
|
3.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis of
Presentation
The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
and are expressed in U.S. Dollars. The Company’s fiscal year-end is May 31. The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary SunSi Energies Hong Kong Ltd., which had no activity
through August 31, 2010 other than incorporation, legal and professional fees
and start-up costs.
Use of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Financial
Instruments
Cash is
the only asset on the Company’s balance sheet. The carrying value of cash
approximates its fair value because of the short-term maturity of these
instruments.
Concentration of Credit
Risk
Financial
instruments that potentially subject the Company to credit risk consist
principally of cash. Cash is deposited with a high quality credit
institution. On occasion, cash balances exceed the FDIC limit.
Income
Taxes
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted FASB ASC 740 as of
its inception. Pursuant to FASB ASC 740 the Company is required to compute tax
asset benefits for net operating losses carried forward. Potential benefit of
net operating losses have not been recognized in the financial statements
because the Company cannot be assured it is more likely than not it will utilize
the net operating losses carried forward in future years.
F-5
SUNSI
ENERGIES INC.
|
(A
Development Stage Company)
|
Notes
to Consolidated financial statements
|
For
Three Months Ended August 31, 2010
|
(Expressed in U.S.
dollars)
|
3.
|
SIGNIFICANT
ACCOUNTING POLICIES (continued)
|
Basic and Diluted Net Income
(Loss) Per Share
The
Company computes net income (loss) per share in accordance with ASC 260
“Earnings per Share”. ASC 260 requires presentation of both basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS is
computed by dividing net income (loss) available to common stockholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is
anti-dilutive.
Revenue
Recognition
The
Company is a development stage entity and has not recognized any revenues since
inception. The Company is in the process of acquiring a facility in China that
produces trichlorosilane (“TCS”) and certain byproducts. In the event this
acquisition is successfully consummated the Company will generate revenues from
the sales of TCS and certain byproducts. Revenue will be recognized when all of
the following elements are satisfied (i) there are no uncertainties regarding
customer acceptance;(ii) there is persuasive evidence that an agreement exists;
(iii) delivery has occurred; (iv) legal title to the products has transferred to
the customer; (v) the sales price is fixed or determinable; and (vi)
collectability is reasonably assured.
4.
|
THE
EFFECT OF RECENTLY ISSUED ACCOUNTING
STANDARDS
|
Accounting
Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair
Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605),
Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985),
Certain Revenue Arrangements that include Software Elements, and various other
ASU's No. 2009-2 through ASU No. 2010-24 which contain technical corrections to
existing guidance or affect guidance to specialized industries or entities were
recently issued. These updates have no current applicability to the Company or
their effect on the financial statements would not have been
significant.
F-6
SUNSI
ENERGIES INC.
|
(A
Development Stage Company)
|
Notes
to Consolidated financial statements
|
For
Three Months Ended August 31, 2010
|
(Expressed in U.S.
dollars)
|
5.
|
ADVANCES
PAYABLE
|
During
the period the Company received advances and accruals amounting to $26,700 for
issuance costs from a non-affiliated stockholder to help fund the
operations of the Company until proceeds were received from the Company’s Stock
Offering. The advances were made to the Company on an interest free basis.
Therefore no interest has been accrued in the Company’s financial statements.
During the period the Company repaid advances amounting to $179,000 to two
non-affiliated stockholder.
6.
|
INCOME
TAXES
|
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has incurred a net operating
loss of $992,194, which expires in 2030. Pursuant to ASC 740 the Company is
required to compute tax asset benefits for net operating losses carried forward.
Potential benefit of net operating losses have not been recognized in these
financial statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward in future
years.
The
components of the net deferred tax asset at August 31, 2010, the statutory tax
rate, the effective tax rate and the elected amount of the valuation allowance
are indicated below:
August
31, 2010
|
||||
$
|
||||
Net
Operating Loss
|
992,194 | |||
Statutory
Tax Rate
|
35 | % | ||
Effective
Tax Rate
|
— | |||
Deferred
Tax Asset
|
347,268 | |||
Valuation
Allowance
|
(347,268 | ) | ||
Net
Deferred Tax Asset
|
— |
F-7
SUNSI
ENERGIES INC.
|
(A
Development Stage Company)
|
Notes
to Consolidated financial statements
|
For
Three Months Ended August 31, 2010
|
(Expressed in U.S.
dollars)
|
6.
|
INCOME
TAXES (continued)
|
The
Company follows the provisions of uncertain tax positions as addressed in FASB
ASC 740-10-65-1. The Company recognized approximately no increase in the
liability for unrecognized tax benefits.
The
Company has no tax positions at August 31, 2010 and May 31, 2010 for which the
ultimate deductibility is highly certain but for which there is uncertainty
about the timing of such deductibility. The Company recognizes interest accrued
related to unrecognized tax benefits in interest expense and penalties in
operating expenses. No such interest or penalties were recognized during
the periods presented. The Company had no accruals for interest and penalties at
August 31, 2010 or May 31, 2010.
7.
|
STOCKHOLDERS’
EQUITY
|
The
Company is authorized to issue 75 million shares of common stock at a par value
of $0.001 and had 27,446,000 shares of common stock issued and outstanding as of
August 31, 2010. On March 24, 2009, the Board of Directors approved a 12 for 1
forward stock split. The split has been reflected in the consolidated financial
statements for all periods presented.
The
Company has been conducting a private placement of its common stock since
September 10, 2009 at a price of $2.00 per share, with a maximum issuance of
8,000,000 shares (‘Offering’). During the quarter ended August 31, 2010, the
Company accepted subscription agreements from investors and correspondingly
issued 133,500 shares of its common stock pursuant to the Offering, and received
$267,000 in gross proceeds. The cost of this issuance was $26,700.
8.
|
RELATED
PARTY TRANSACTIONS
|
During
the quarter ended August 31, 2010, $28,100 was paid to its Chief Financial
Officer for compensation and expenses.
F-8
SUNSI
ENERGIES INC.
|
(A
Development Stage Company)
|
Notes
to Consolidated financial statements
|
For
Three Months Ended August 31, 2010
|
(Expressed in U.S.
dollars)
|
9.
|
COMMITMENTS
|
SunSi
Energies Inc. entered into various engagement agreements for advisory and
consulting services on a non-exclusive basis to obtain equity capital. In the
event that the Company completes a financing from a funding source provided by
one of the consultants, then such consultant will receive a finders or referral
fee at closing ranging from seven percent (7%) to ten percent (10%) of the
amount received by the Company. The total financing sought is in the amount of
$16,000,000 in equity. The maximum potential amount of fee paid that can be paid
amounts to $1,600,000. These fees have been accrued as advances payable at
August 31, 2010. The terms and condition of financing are subject to Company
approval.
On
November 10, 2009 and February 9, 2010 the Company entered in agreements with
its Director of Business Development and Chief Financial Officer, respectively,
to pay each of these individuals $60,000 per year plus any documented out of
pocket business expenses.
10.
|
OTHER
EVENTS
|
The
Company incorporated on April 7, 2009 a wholly-owned subsidiary in Hong Kong in
the name of “SunSi Energies Hong Kong Limited” (“Sunsi HK”) and the Company
entered into two (2) Joint Venture Agreements with a Chinese Company
respectively on June 18 and June 19, 2009. SunSi Energies Hong Kong had no
activity from the date of incorporation through August 31, 2010 other than
incorporation, legal and professional fees and start-up costs.
In June
2009, subject to the successful completion of due diligence and other
conditions, SunSi Energies Hong Kong committed to invest a total of $10,000,000
in exchange for 90% of the capital stock in the newly formed PRC Joint Venture
Company which would have received all of the assets, expertise and technology of
an existing Trichlorosilane (TSC) production facility in Zibo, China, as well as
its affiliated trucking and transportation company. On July 31, 2010,
the Company discontinued its efforts to purchase the ZBC production facility in
Zibo, China.
On August
3rd 2010, SunSi HK signed a letter of intent with Wendeng He Xie Silicon Co.
Ltd. (“Wendeng”) for the acquisition of 60% of its existing 20,000 MT TCS
facility, plus an increase of Wendeng’s capacity by an additional 40,000 MT. The
Company estimates that it will have to raise $6.5 million to consummate the
acquisition, and an additional $8.8 million to increase the
capacity.
Currently,
SunSi Energies is in the process of evaluating additional acquisition
opportunities in China including one candidate with high growth potential. One
of the targeted facilities comes with an off-take agreement for the sale of over
20,000 MT of TCS per year to one of China’s largest polysilicon
makers.
F-9
SUNSI
ENERGIES INC.
|
(A
Development Stage Company)
|
Notes
to Consolidated financial statements
|
For
Three Months Ended August 31, 2010
|
(Expressed in U.S.
dollars)
|
11.
|
SUBSEQUENT
EVENTS
|
Subsequent
to August 31, 2010 the Company has received $25,000 from the sale of 12,500
shares of common stock.
On April
29th
2010, SunSi HK signed a definitive agreement to acquire 90% of Zibo Baokai
Commerce and Trade Co. (“Zibo Baokai”). At the date of this report, the company
is waiting for the issuance of a business license in order to consummate this
acquisition. All other terms necessary to complete the acquisition were
completed on July 31, 2010, when the Articles of Association and Joint Venture
Agreement were signed. When completed, this acquisition will enable SunSi to
generate revenue and to create a presence within the Chinese and other
international TCS markets.
The
Company has evaluated subsequent events from the balance sheet through the date
the financial statements were issued, and determined there are no other events
to disclose.
F-10
Forward-Looking
Statements
Certain
statements in this quarterly report, other than purely historical information,
including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those
statements are based, are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements generally are identified
by the words “believes,” “project,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will
continue,” “will likely result,” and similar expressions. We intend
such forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and are including this statement for purposes of complying with
those safe-harbor provisions. Forward-looking statements are based on
current expectations and assumptions that are subject to risks and uncertainties
which may cause actual results to differ materially from the forward-looking
statements. Our ability to predict results or the actual effect of future plans
or strategies is inherently uncertain. Factors which could have a
material adverse affect on our operations and future prospects on a consolidated
basis include, but are not limited to: changes in economic conditions,
legislative/regulatory changes, availability of capital, interest rates,
competition, and generally accepted accounting principles. These risks and
uncertainties should also be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or
otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
Overview
SunSi
Energies (“SunSi,” “the Company,” we” “us” our”) goal is to acquire and develop
a portfolio of high quality trichlorosilane (“TCS”) distribution rights and
producing facilities that are strategically located and possess a potential for
future growth and expansion. TCS is the main feedstock of the solar energy
industry, used in the production of silicon, which in turn is used in the
production of solar PV energy producing panels.
4
Acquisition
of TCS Distribution Rights and Production Facilities
Recently,
we determined that despite our best efforts over the past year, we could not
acquire as planned the Zibo Commerce and Trade Co (“ZBC”)TCS production factory
on terms that would be beneficial to SunSi’s shareholders; therefore we changed
directions, ended our efforts to acquire ZBC and instead obtained distribution
rights to all of ZBC’s TCS production in the following manner:
On
December 12, 2009, SunSi Hong Kong(“SunSi HK”) secured the exclusive
distribution rights for ZBC’s TCS production for the international market. We
believe exportation of TCS out of China is minimal, as most of the Chinese
production is used to supply the country’s demand. The lower cost of production
in China is advantageous when competing over the globe; one that SunSi intends
to capitalize on.
On April
29th 2010, SunSi HK signed a definitive agreement to acquire 90% of Zibo Baokai
Commerce and Trade Co. (“Zibo Baokai”), a company with the right to distribute
ZBC’s TCS production in the China market. At the date of this report, we are
waiting for the issuance of a business license in order to consummate this
acquisition. All other terms necessary to complete the acquisition
were completed on July 31, 2010, when the Articles of Association and Joint
Venture Agreement were signed. When completed this acquisition will enable SunSi
to generate revenue and to create a presence within the Chinese and other
international TCS markets.
Additionally,
on August 3rd 2010,
SunSi HK signed a letter of intent with Wendeng He Xie Silicon Co. Ltd.
(“Wendeng”) for the acquisition of 60% of its existing 20,000 metric ton (MT)
TCS facility. If the acquisition of Wendeng is successfully consummated, SunSi
plans to invest an additional RMB 60,000,000 (approximately $8.8 million USD) to
increase Wendeng’s capacity by an additional 40,000 MT, making it a 60,000 MT
ton facility. Sunsi has commenced its due diligence process. There
can be no assurances that Sunsi can negotiate an acceptable purchase price on
the facility; and can raise the sufficient capital necessary to purchase
Wendeng. Additionally, there can be no assurances that if the
acquisition is successfully consummated, that Sunsi can raise the necessary
funds to expand plant capacity.
We expect
to complete the acquisition of Wendeng by December 31, 2010 if Wendeng
successfully meets our acquisition criteria, and we have raised sufficient
capital to purchase Wendeng. However, due to historic delays in our acquisition
process in China and the complexity of the transaction, there can be no
assurances that the transaction can close by December 31, 2010 and will not be
delayed until 2011.
Results
of Operations for the three months ended August 31, 2010 and 2009
Revenues.
We have
not earned any revenues from the inception of our Company through the period
ending August 31, 2010. As noted above under the section “Acquisition of
TCS Distribution Rights and Production Facilities”, on April 29th 2010, SunSi HK
signed a definitive agreement to acquire 90% of Zibo Baokai. We
anticipate to begin earning revenues commencing in October 2010 from the
acquisition of Zibo Baokai, however, there can be no assurances on the timing of
commencing revenue, or that we will be able obtain the business license
necessary to consummate the acquisition.
Operating
Expenses.
We
incurred operating expenses for the three months ended August 31, 2010 and 2009
of $158,396 and $162,339, respectively. Operating expenses for the three months
ended August 31, 2010 included general and administrative expenses of $41,159
and professional fees expenses of $117,237. Operating expenses for the three
months ended August 31, 2009 included general and administrative expenses of
$3,933 and professional fees of $158,406. General and administrative expenses
increased in 2010 over 2009 levels due to the addition of two employees, a
business development director and the addition of a chief financial officer.
The decrease in professional fees from 2010 to 2009 is attributable
to a decrease in acquisition related activity in 2010. Professional fees will
increase going forward in 2010 due to the due diligence process underway related
to Wendeng –see “Acquisition of TCS Distribution Rights and Production
Facilities”, above.
Loss
We
incurred a net loss for the three months ended August 31, 2010 and 2009 of
$158,396 and $162,339, respectively. Our losses for all periods are attributable
to operating expenses and our lack of revenue.
Liquidity
and Capital Resources
The
accompanying consolidated financial statements have been prepared on a
going-concern basis, which contemplates the realization of assets and
satisfaction of liabilities and other commitments in the normal course of
business.
As of
August 31, 2010, we had cash of $470,451 and current liabilities of $176,279. We
therefore had a working capital surplus of $294,182. This compares to a working
capital deficit of $322,726 as of August 31, 2009 and a working capital surplus
of $212,278 at May 31, 2010. The considerable improvement over 2009
levels is attributable to our fund raising activities during the year ended
2010.
We have
not recorded any revenues since inception and continue generating losses from
operations. Since inception we have an accumulated deficit of $992,194. Our
ability to continue as a going concern is dependent upon our ability to generate
profitable operations in the future and/or to obtain the necessary financing to
meet our obligations and repay our liabilities arising from normal business
operations when they come due. We believe that the Zibo Baokai acquisition if
successfully consummated combined with future fund raising activities will
enable us to successfully address our going concern issue, however, there can be
no assurances we will be successful.
Critical
Accounting Policies
Basis of
Presentation
The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
and are expressed in U.S. Dollars. The Company’s fiscal year-end is May 31. The
consolidated financial statements include the accounts of the Company and our
wholly-owned subsidiary SunSi Energies Hong Kong Ltd., which had no activity
through August 31, 2010 other than incorporation, legal and professional fees
and start-up costs.
Use of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Financial
Instruments
Cash is
the only asset on our balance sheet. The carrying value of cash approximates its
fair value because of the short-term maturity of these instruments.
Concentration of Credit
Risk
Financial
instruments that potentially subject us to credit risk consist principally of
cash. Cash is deposited with a high quality credit institution. On
occasion, cash balances exceed the FDIC limit.
Income
Taxes
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. We adopted FASB ASC 740 as of our
inception. Pursuant to FASB ASC 740 we are required to compute tax asset
benefits for net operating losses carried forward. Potential benefit of net
operating losses have not been recognized in the financial statements because we
cannot be assured it is more likely than not it will utilize the net operating
losses carried forward in future years.
Basic and Diluted Net Income
(Loss) Per Share
We
compute net income (loss) per share in accordance with ASC 260 “Earnings per
Share”. ASC 260 requires presentation of both basic and diluted earnings per
share (EPS) on the face of the income statement. Basic EPS is computed by
dividing net income (loss) available to common stockholders (numerator) by the
weighted average number of shares outstanding (denominator) during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period using the treasury stock method and convertible preferred
stock using the if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted EPS excludes
all dilutive potential shares if their effect is anti-dilutive. We have not
issued any options or warrants since the inception of the Company.
Revenue
Recognition
We are a
development stage entity and have not recognized any revenues since inception.
We are in the process of acquiring distribution rights of a facility in China
that produces trichlorosilane (“TCS”). In the event this acquisition is
successfully consummated we will generate revenues from the sales of TCS and
certain byproducts. Revenue will be recognized when all of the following
elements are satisfied (i) there are no uncertainties regarding customer
acceptance;(ii) there is persuasive evidence that an agreement exists; (iii)
delivery has occurred; (iv) legal title to the products has transferred to the
customer; (v) the sales price is fixed or determinable; and (vi) collectability
is reasonably assured.
5
Off
Balance Sheet Arrangements
As of
August 31, 2010, there were no off balance sheet arrangements.
A smaller
reporting company is not required to provide the information required by this
Item.
Disclosure Controls and
Procedures. Our management has evaluated, under the supervision and with
the participation of our chief executive officer and chief financial officer,
the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report pursuant to Rule 13a-15(b) and 15d-15 under the
Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation,
our chief executive officer and chief financial officer have concluded that, as
of the end of the period covered by this report, our disclosure controls and
procedures are effective in ensuring that information required to be disclosed
in our Exchange Act reports is (1) recorded, processed, summarized and reported
in a timely manner, and (2) accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Control Over
Financial Reporting. There have been no changes in our internal control
over financial reporting that occurred during the period covered by this report
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
6
PART
II – OTHER INFORMATION
None.
A smaller
reporting company is not required to provide the information required by this
Item.
During
the quarter ended August 31, 2010, the Company accepted subscription agreements
from investors and correspondingly sold 133,500 shares of its common stock
pursuant to its current private placement offering, and received $267,000 in
gross proceeds. The offer and sale of the securities was exempt from
registration under the Securities Act of 1933 pursuant to Rule 506 of Regulation
D.
None
Form 8-K
Item 5.07 Submission of Matters to a Vote of Security Holders.
On
October 6, 2010, a majority of the holders of the Company’s capital stock took
the following actions by written consent:
1. Elect
Kebir Ratnani, Michel Laporte, and Richard St.-Julien as members of the Board of
the Directors of the Company to serve until their respective successor is
elected and qualified, or until resignation or removal.
2. Ratify
the appointment of Child, Van Wagoner & Bradshaw PLLC, as the Company’s
Independent Accountants for the fiscal year ended May 31, 2011 and its resulting
audit.
Exhibit
|
Description
of Exhibit
|
|
Number
|
||
31.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002
|
7
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SUNSI
ENERGIES INC.
|
|||
By:
|
|||
/s/ Michel
G. Laporte
|
|||
Michel
G. Laporte
|
|||
President,
Chief Executive Officer, and Director
|
|||
October
12, 2010
|
By:
|
|||
/s/ David
Natan
|
|||
David
Natan
|
|||
Chief
Accounting Officer
|
|||
October
12, 2010
|
In
accordance with Section 13 or 15(d) of the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
By:
|
|
/s/
Kebir Ratnani
|
|
Kebir
Ratnani
|
|
Director
|
|
October
12, 2010
|
|
/s/
Richard St-Julien
|
|
Richard
St-Julien
|
|
Secretary
and Director
|
|
October
12, 2010
|
8