UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
AND EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE
ACT FOR THE TRANSITION PERIOD FROM _________ TO
_________.
COMMISSION FILE NUMBER: 001-32528
SOLARGY SYSTEMS INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NEVADA 20-4357915
(STATE OF OR OTHER JURISDICTION OF (IRS EMPLOYER I.D. NO.)
INCORPORATION OR ORGANIZATION)
1717 N BAYSHORE DRIVE , MIAMI
MIAMI FLORIDA 33312
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(305) 603-8702
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the registrant: (1) has filed all reports required to be filed by
Section by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [ ] NO [ X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's classes of
stock as of September 30, 2010.
570,529.714 COMMON SHARES
Transitional Small Business Disclosure Format:
YES ( ) NO (X)
EXPLANATION
THIS UNAUDITED AND NOT REVIEWED INTERIM STATEMENT IS PRESENTED FOR PRELIMINARY
BASIC INFORMATION ONLY. THE INFORMATION CONTAINED HEREIN WILL BE REVISED AND
CORRECTED IN DUE COURSE. THE FINANCIAL INFORMATION IS NOT INTENDED TO BE USED AS
A BASIS FOR ANY INVESTMENT DECISION, BUT SIMPLY FOR INFORMATION ONLY.
AUDITED AND REVIEWED STATEMENTS WILL BE PUBLISHED IN DUE COURSE.
SOLARGY SYSTEMS INC.
(FORMERLY KNOWN AS SBD INTERNATIONAL, INC. AND SUBSIDIARY)
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION PAGE
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheet as of September 30, 2010 3
Condensed Consolidated Statements of Operations for the six
and nine months ended September 30, 2010 AND 2009 4
Condensed Consolidated Statements of Cash Flows for the three
and nine months ended September 30, 2010 AND 2009 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (including cautionary statement)
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Securities Holders
Item 5. Other Information
Item 6. Exhibits
Signature
Certification
2
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
SOLARGY SYSTEMS INC
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2010
(UNAUDITED)
--------------------------------------------------------------------------------- --- ---------------
ASSETS
------
CURRENT ASSETS:
Cash $ 1,760
Trade receivables (over 120 days old) 73,322
Prepaid 4,750
---------------
Total current assets 79,832
FURNITURE AND EQUIPMENT (net of accumulated depreciation of $6,125) 2,389
DEPOSITS 17,470
NOTES RECEIVABLE 359,650
---------------
TOTAL ASSETS $ 459,341
---------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 104,618
Due to related parties 293,459
Accrued payroll and other liabilities 360,648
---------------
Total current liabilities 758,725
LONG-TERM LIABILITIES
Convertible note payable (net of unamortized discount of $348,361) 1,582,410
Derivative financial instruments and warrant liability 1,328,305
Accrued liabilities 41,187
---------------
Total liabilities 3,710,627
---------------
STOCKHOLDERS' DEFICIT:
Convertible Preferred Stock, Series A, $0.001 par value 20,000,000
shares authorized and 0 shares issued and outstanding 0
Convertible Preferred Stock, Series B, $1.00 par value 20,000,000 shares
authorized and 1.100,000 shares issued and outstanding 1,100,000
Common stock, $0.001 par value, 750,000,000 shares authorized,
570,529,714 shares issued and outstanding 570,530
Additional paid-in-capital 6,629,288
Retained deficit (11,594,172)
---------------
Total stockholders' deficit (875,614)
---------------
TOTAL $ 459,341
===============
================================================================================= === ===============
See notes to consolidated financial statements.
3
SOLARGY SYSTEMS INC
(FORMERLY KNOWN AS SBD INTERNATIONAL, INC. AND SUBSIDIARY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
--------------------------------------------- --- --------------- --- -------------- --- ----------------- --- ------------------
For the For the For the For the
Nine months Nine months three months three months
Ended Sept. Ended Sept. Ended Sept. Ended Sept.
30, 2010 30, 2009 30, 2010 30, 2009
--------------- -------------- ----------------- ------------------
REVENUES $ 24,502 $ 31,864 $ 8,869 $ 23,294
COST OF REVENUES (24,015) (28,507) (3,915) 19,740
--------- -
--------------- -----------------
GROSS PROFIT 486 13,357 4,954 3,554
------- -----
--------------- -----------------
OPERATING EXPENSES:
Stock based employee and consultant
compensation 618,000 856,170 11,000 784,502
General & Administrative 773,928 82,043 262,115 22,738
Marketing 11,502 4,127 5,912 2,300
--------------- -------------- ----------------- ------------------
Total operating expenses 1,403,400 942,340 279,027 809,540
--------------- -------------- ----------------- ------------------
LOSS FROM OPERATIONS (1,402,914) (928,983) (274,073) (805,986)
OTHER EXPENSES:
Derivative (income) expense 156,867 156,867
Interest expense (346,450) (44,742) (272,763) (44,742)
--------------- -------------- ----------------- ------------------
NET LOSS $ (1,592,497) $ (973,725) $ (389,969) $ (850,728)
=============== ============== ================= ==================
LOSS PER COMMON SHARE - BASIC & DILUTED $ (0.01) $ (0.51) $ (0.00) $ (0.17)
=============== ============== ================= ==================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC AND
DILUTED 570,529,714 570,529,714 570,529,714 570,529,714
=============== ============== ================= ==================
--------------------------------------------- --- --------------- --- -------------- --- ----------------- --- ------------------
See notes to consolidated financial statements.
4
SOLARGY SYSTEMS INC
(FORMERLY KNOWN AS SBD INTERNATIONAL, INC. AND SUBSIDIARY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
---------------------------------------------------------------------- --- ----------------- -- ------------------
For the For the
Nine months Nine months
Ended September Ended September
30, 2010 30, 2009
----------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (1,592,497) (973,725)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 9,227 4,752
Stock issued for employee and consultant compensation 0 150,000
Amortization of beneficial interest and change in derivative
value 101,741 44,085
Changes in assets and liabilities, net:
Accounts receivable (95,283) (51,698)
Deposits (5,520)
Accounts payable and other liabilities 346,046 58,249
Accrued and other liabilities 366,405 11,287
----------------- ------------------
NET CASH USED IN OPERATING ACTIVITIES (105,066) (126,307
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments (0)
Purchases of furniture and equipment (0) (0)
----------------- ------------------
CASH USED IN INVESTING ACTIVITIES (0) (5,016)
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of advances
Proceeds from subscription receivable 0
Proceeds from sale of common stock 0
-
Payment of Note 0
Loan from related party 0 -
----------------- ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 0 146,267
----------------- ------------------
NET CHANGE IN CASH 0 14,944
CASH AT BEGINNING OF PERIOD 5,119 5,224
----------------- ------------------
CASH AND RESTRICTED CASH AT END OF PERIOD $ 1,760 $ 20,168
================= ==================
See notes to consolidated financial statements.
5
SOLARGY SYSTEMS INC
(FORMERLY KNOWN AS SBD INTERNATIONAL, INC. AND SUBSIDIARY)
NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2010 AND 2009
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The condensed consolidated unaudited interim financial statements
included herein have been prepared, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission
("SEC"). The condensed consolidated unaudited financial statements
and notes are presented as permitted on form 10-QSB and do not
contain information included in the Company's annual consolidated
statements and notes. Certain information and footnote disclosures
normally included in the consolidated unaudited financial statements
prepared in accordance with accounting principles generally accepted
in the United States of America have been or omitted pursuant to such
rules and regulations, although the company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated unaudited
financial statements be read in conjunction with the December 31,
2009 audited financial statements and the accompanying notes thereto.
While management believes the procedures followed in preparing these
consolidated unaudited financial statements are reasonable, the
accuracy of the amounts are in some respects dependent upon the facts
that will exist, and procedures that will be accomplished by the
company later in the year.
Basis of Presentation
Our accompanying unaudited consolidated financial statements have
been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and the instructions to Form 10-QSB and Rule 10-1 of
Regulation S-X of the Securities and Exchange Commission (the "SEC").
Accordingly, these consolidated financial statements do not include
all of the footnotes required by accounting principles generally
accepted in the United States of America. In our opinion, all
adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30,
2010 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2010. The accompanying
consolidated financial statements and the notes thereto should be
read in conjunction with our audited consolidated financial
statements as of December 31, 2009 and for the years ended December
31, 2009 and 2004 contained in our Form 10-KSB.
NOTE 2 - DUE TO RELATED PARTY
The Company had outstanding debt of $55,826 to an officer/stockholder
for expenses advanced on behalf of the Company at September 30, 2010.
The Company also received cash advances from a shareholder. The
outstanding debt to this shareholder was $360,648 at September 30,
2010. There are no specific repayment terms on either of these debts.
NOTE 3 - MORTGAGE PAYABLE
The mortgage the company had on the property at Chief land was
retired in June of 2008.
6
SOLARGY SYSTEMS INC
(FORMERLY KNOWN AS SBD INTERNATIONAL, INC. AND SUBSIDIARY)
NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2010 AND 2009
NOTE 4 - PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the liability method
for the temporary differences between the financial reporting basis
and income tax basis of the Company's assets and liabilities.
Deferred income taxes will be measured based on the tax rates
expected to be in effect when the temporary differences are included
in the Company's consolidated tax return. Deferred tax assets and
liabilities are recognized based on anticipated future tax
consequences attributable to differences between financial statement
carrying amounts of assets and liabilities and their respective tax
bases.
At September 30, 2010 the Company had deficits accumulated
approximating $11,627,172 available to offset future taxable income
through 2031. The Company established valuation allowances equal to
the full amount of the deferred tax assets due to the uncertainty of
the utilization of the operating losses in future periods. `
NOTE 5 - CONVERTIBLE NOTES PAYABLE, COMMON STOCK WARRANTS AND DERIVATIVE
FINANCIAL INTRUMENTS
At September 30, 2010, the convertible note payable is comprised of the
following:
8% Callable Secured Convertible Term Notes totaling $1,400,000:
due from September 27, 2009 $ 500,000, 200,000, 200,000, due Jan 2011 150,000
Less: unamortized discount related to closing costs and bifurcated embedded
derivative instruments and freestanding warrants (348,361)
CONVERTIBLE NOTE PAYABLE $ 151,639
On September 28, 2006, we issued a $500,000 8% Callable Secured Convertible Term
Note, due September 27, 2009, unless sooner converted or called as discussed
below and 5,000,000 Common Stock Purchase Warrants ("Warrants"), for aggregate
consideration of $500,000 less $90,000 in closing costs. The Note, together with
accrued and unpaid interest, is convertible at any time at the option of the
holder into shares of our common stock at the lesser of i) $0.06 per share or
ii) the average of the lowest 3 trading days during the last 20 trading days.
Interest is paid quarterly but no interest is due for any month in which the
trading price is greater than $.10 for each trading day of the month. The fixed
conversion price is adjusted for stock splits, stock dividends, merger and
similar events. The company is required to have authorized and reserved shares 2
times the number of shares that are actually issuable upon full conversion of
the notes and warrants.
7
SOLARGY SYSTEMS INC
NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2010 AND 2009
NOTE 5 - CONVERTIBLE NOTES PAYABLE, COMMON STOCK WARRANTS AND
DERIVATIVE FINANCIAL INTRUMENTS (CONTINUED)
The instruments are subject to a Registration Rights Agreement whereby we are
required to file a registration statement with the Securities and Exchange
Commission within 30 days of closing, registering the common stock underlying
the secured convertible notes. The registration statement is to be effective
within 120 days of funding (180 days in the event of SEC comments). We are
required to maintain the effectiveness of the registration statement until all
registered securities have been sold or until they may be sold without
restriction under Rule 144(k). In the event that we fail to do so, we are
obligated to pay, to the holders of the Note, damages of 2% of the face amount
of the Notes per month.
If an Event of Default, as defined in the Note, occurs and is continuing, the
holders of the Note may declare the entire unpaid principal balance of the Note,
together with all interest accrued, due and payable and the interest rate
increases from 8% to 15%. In the event that we breach any representation or
warranty in the Securities Purchase Agreement, we may be required to pay
liquidated damages in shares or cash, at our election, equal to two percent of
the outstanding principal amount of the secured convertible notes per month plus
accrued and unpaid interest.
The company has the option to redeem the note in cash, if the stock is trading
below $.06 or greater than $3.50, by paying
o 125% of the principal, interest and penalty outstanding for prepayments
within 30 days of issue
o 130% of the principal, interest and penalty outstanding for prepayments
within 31 days of issue to 60 days or
o 140% of the principal, interest and penalty outstanding for prepayments
greater 61 days of issue
o Plus an amount equal to the difference between the market price and
$3.50, if the market price is greater than $3.50, times the number of
shares that could have been converted.
o The company has the option, if the market price is below $.06 for each
trading day of the month, to prepay 104% of the outstanding principal
divided by 36 plus one month's interest.
o The Warrants, which are exercisable at any time had initial terms as
follows:
o 50,000,000 warrants, expiring September 28, 2013, at an exercise price
of $0.10/share.
The warrants require that, if we issue common stock or other securities
convertible into common stock at a price per share lower than the market price,
the exercise price of the warrants will be reduced to that lower price.
Because the conversion price of the Note and the exercise price of the warrants
will be lowered if we sell securities at a lower conversion or exercise price,
the number of shares that we may have to issue on conversion of the Note or
exercise of the warrants is not fixed or determinable. As a result, the Note is
not considered to be "conventional convertible debt", as that term is used by
EITF Issue 00-19. Accordingly, the embedded conversion option in the Note is
subject to the requirements of EITF Issue 00-19. Because the number of shares we
may have to issue is indeterminate, we are required by EITF Issue 00-19 to
bifurcate the embedded conversion option of the Note and account for it, as well
as the warrants, as derivative financial instrument liabilities. The derivative
financial instrument liabilities are initially recorded at their fair value and
are then adjusted to fair value at the end of each subsequent period, with any
changes in the fair value charged or credited to income in the period of change.
8
SOLARGY SYSTEMS, INC
(FORMERLY KNOWN AS SBD INTERNATIONAL, INC. AND SUBSIDIARY)
NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2010 AND 2009
NOTE 5- CONVERTIBLE NOTES PAYABLE, COMMON STOCK WARRANTS AND DERIVATIVE
FINANCIAL INTRUMENTS (CONTINUED)
We use the Black-Scholes option pricing model to value the warrants, and the
embedded conversion option component of the bifurcated embedded derivative
instrument. In valuing these derivative instruments, both at inception and at
each quarter end, we use the market price of our common stock on the date of
valuation, an expected dividend yield of 0%, and the remaining period to the
expiration date of the warrants or repayment date of the Note. Because of the
limited historical trading period of our common stock and the change in the
industry of the company, the expected volatility of our common stock over the
remaining life of the warrants and the Note has been estimated at 19.3%, by
comparison to the average volatility of companies considered by management as
comparable. The risk-free rates of return used ranged from 4.60% to 4.62%, based
on constant maturity rates published by the U.S. Federal Reserve, applicable to
the remaining life of the warrants and the Note.
The Note is being accreted using an effective interest method, to its redemption
value of $500,000 over the 36 month period to its maturity on September 28,
2009.
At June 30, 2008, the following liabilities related to the Warrants and the
embedded derivative instruments in the
Note were outstanding:
Fair Value of the warrant is:
Issue Expiry Exercise Value
Date Date Instrument Price/Share 9/30/2006
------------------------------------------------------------------------------------------------------
9/28/2005 9/28/2013 Warrant 5,000,000 $ 0.10 15,594
Fair value of embedded derivatives:
Issue Expiry Exercise Value
Date Date Instrument Price/Share 9/30/2006
------------------------------------------------------------------------------------------------------
9/28/2005 9/28/09 Convertible Note- Conversion Feature $ 0.10 70,915
Convertible Note Interest-
9/28/2005 9/28/09 Conversion Feature $ 0.10 15,232
The carrying value of the note is:
Issue Expiry Value
Date Date Instrument 9/30/2006
------------------------------------------------------------------------------------------------------
9/28/2005 9/28/2009 $ 500,000 Convertible Term Note 151,639
NOTE- 6 ISSUANCE AND CHANGES TO COMMON STOCK
During the six months ended June 30, 2009, The Company issued 60,000,000 shares
of stock at fair value of $128,400 for compensation to an employee. Additionally
the company issued 60,400,000 shares of stock at fair value of $240,600 for
consulting services.
9
On August 1, 2006, the Company merged with SBD International (SBD), with SBD
being the surviving entity. Upon execution of the merger an exchange of one
share of SBD common stock was issued for every 25 shares of The Company's common
stock. This reduced the outstanding shares to approximately 8,794,000 shares of
common stock.
On August 17, 2006 5,100,000 shares, the entire outstanding Series A Preferred
Stock, was converted into 265,200,000 shares of common stock at an exchange
ratio of 1 to 52. These shares were subsequently returned to treasury, and the
preferred reissued in an amount of 5,200,000 in Dec 2007.
On August 31, 2006 an employee shareholder returned 143,000 shares of stock for
no compensation.
NOTE 7- CONTINGENCY/UNCERTAINTY
In June 2005, the Company issued 1,100,000 shares of preferred stock Series B
value at $1.00 a share. The Company also issued 35,000,000 shares of common
stock par value valued at $1,000,000 in order to purchase property from Munich
LLC. The property was appraised at $2,100,000. Subsequent to the purchase, the
Company discovered that the property wasn't free and clear of mortgages and/or
liens. The Company had recorded a contingent liability in the amount of
$1,146,544 for this lien although the holder is current on the payments on this
note. The project was sold in March of 2008 and has repaid all its mortgage debt
including contingencies.
NOTE 8 - GOING CONCERN
As shown in the accompanying consolidated unaudited financial statements, the
Company incurred substantial net losses since inception and doesn't have the
revenue stream to support itself. There is no guarantee as to whether the
Company will be able to generate enough revenue and/or raise capital to support
those operations. This raises substantial doubt about the Company's ability to
continue as a going concern.
Management also states that they are confident that they can acquire projects
and raise the appropriate funds needed either through a debt or equity offering
to operate.
The consolidated unaudited financial statements do not include any adjustments
that might results from the outcome of these uncertainties.
NOTE 9- SUBSEQUENT EVENTS
ON SEPT 30, 2008, THE COMPANY FILED A FORM 14 INDICATING A NAME CHANGE TO
SOLARGY SYSTEMS INC. AND ALSO INDICATING THAT THE COMPANY STOCK WILL BE REVERSED
OF A 2500 TO ONE BASIS.
THIS IS IN KEEPING WITH A FUNDAMENTAL CHANGE IN WHAT THE COMPANY DOES AND HOW IT
WILL OPERATE GOING FORWARD. SOLARGY SYSTEMS INC. IS HAS CHANGED ITS MISSION TO
THAT OF AN ALTERNATIVE ENERGY SYSTEMS INTEGRATOR. SOLARGY WILL ENGAGE IN THE
PRODUCTION OF PHOTOVOLTAIC PANELS AND IN THE SALES AND INSTALLATION OF POWER
SYSTEMS USING ALTERNATIVE ENERGY PRODUCTS, INCLUDING SOLAR, WIND AND WASTE TO
ENERGY.
The company was required to file a registration statement, by the terms of a
registration rights agreement, with the SEC on October 27, 2006. As of the date
of this filing, the registration statement has filed but subsequently withdrawn
on separate occasions. In the event that we fail to file this statement, we are
obligated to pay, to the holders of the Note, damages of 2% of the face amount
of the Notes per month.
IN APRIL OF 2009 SOLARGY EXECUTED A BUILD OPERATE TURNOVER CONTRACT WITH MARDAN
PROVINCE IN PAKISTAN FOR THE CONSTRUCTION OF A 30 MW ALTERNATIVE ENERGY POWER
PLANT. THE COMPANY IS CURRENTLY ACTIVELY SEEKING FUNDING FOR THE PROJECT. IT IS
EXPECTED A 144A PLACEMENT WILL BE USED.
END OF FINANCIAL STATEMENTS
10
SOLARGY SYSTEMS, INC
(FORMERLY KNOWN AS SBD INTERNATIONAL INC. AND SUBSIDIARY)
NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2010 AND 2009
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPANY OVERVIEW
Solargy Systems Inc. currently traded as an OTC pink sheets (SLGS) , merged with
Site Works Building & Development Co, in August of 2006 .(which was incorporated
in Florida in 2001 as a construction and real estate development company). The
Company currently offers alternative energy systems in emerging markets. The
energy alternatives include waste to energy plants, solar farms, and wind
turbine systems .management believes that there is a vibrant market in emerging
economies for waste to energy plants and alternative energy sources as the cost
of fossil fuel increases.
ALTERNATIVE SYSTEMS INTEGRATION SERVICES
The company has established relationships with manufacturers of alternative
energy equipment suppliers and designers. These relationships enable the company
to offer integrated solution to the high cost of electrical power in emerging
markets. Currently the company is seeking power purchase agreements in the
Caribbean .Solutions proposed to full fill the PP include hybrid systems
including wind with solar and waste to energy with wind turbines. Additional
information can be found at www.solargysystemsinc.com Areas being explored by
the company include waste to energy plants, solar farms and wind turbines.
PRECONSTRUCTION PLANNING SERVICES
As part of its preconstruction services, the Company offers a preconstruction
package that includes: Establishment of a realistic budget; design and
permitting assistance; value engineering alternatives; weekly meetings with all
parties; schedules for both preconstruction and construction stages;
subcontractor pricing; recommendations regarding the purchase of long lead
items; and calculation of a guaranteed maximum price.
CONSTRUCTION MANAGEMENT SERVICES
The Company offers construction management services throughout the building
cycle and such services include, but are not limited to: assistance in all
phases of permit processing; preparation of all subcontractors' and/or
suppliers' purchase orders required in connection with the work; scheduling,
coordination and supervision of the physical construction; establishment of a
realistic budget; monitoring of compliance with assigned responsibilities;
preparation and submission of all necessary documentation; preparation and
maintenance of the project schedule; and training of the owner in mechanical and
other systems operation.
The Company strives to ensure that all parties' roles and responsibilities are
clearly defined and that all parties are focused on completing the project.
Depending on the customer's needs, some of the preconstruction planning services
to be offered by the Company may overlap with the Company's construction
management services.
STRATEGIC PLAN
The Company intends to pursue a strategy of: securing Power purchase agreements
with utility companies, and then using the income stream from the power purchase
agreements to securitized funding from alternative energy funds. Management has
had some success with acquiring term sheets and in fact have acquired a 30 MW
power purchase agreement and has had letters of intent or memorandums of
understanding issued to the company.
11
PROJECTS
The company is currently pursuing a number of Power purchase agreements with
utility services in the Caribbean and South East Asia.
In January of 2009 the Municipality of Mardan, a province in the Northwestern
Provinces of Pakistan , awarded Solargy a power purchase agreement for 30 MW of
Power . The Company has had considerable difficulty securing funding to execute
the contract. Management has suggested to the Municipality of Marwan that a
letter of credit be issued to support the funding. The Municipality has verbally
agreed, but to date the company has not yet received the banking guarantee.
Management is also planning to use 50 acres of land it has access to as a joint
venture to build a solar farm in Chief land Florida. Solargy has secured a term
sheet from a regional utility company for the purchase of up to 20 MW of power
for a period of twenty years, as was previously announced.
In September of 2010, management was informed that there was an interest from
some West African countries in acquiring a number of waste to energy plants.
Management has been led to believe that there is a strong possibility that at
least one waste to energy contract will be awarded and in fact management has
seen an expression of interest in a10 MW WTE $60,000,000 plant. Solargy hopes to
have secured a POWER PURCHASE AGREEMENT (PPA) for the 10 MW facilities by the
end of the year, and a bank guarantee to finance the project.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and the results of our
operations are based upon our financial statements and the data used to prepare
them. Our financials have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and the instructions to Form 10-QSB and Rule 10-1 of Regulation S-X
of the Securities and Exchange Commission (the "SEC"). Estimates that are
critical to our consolidated financial statements relate principally to the
determination and valuation of derivative financial instruments and restricted
securities, and the recoverability of long-lived assets. The markets for our
services are characterized by intense competition which could impact the future
realization of our assets. Estimates and assumptions are reviewed periodically
and the effects of revisions are reflected in the period that they are
determined to be necessary. It is at least reasonably possible that our
estimates could change in the near term with respect to these matters.
REVENUE RECOGNITION:
Our revenue recognition policy is consistent with the criteria set forth in
Staff Accounting Bulletin 104 - Revenue Recognition in Financial Statements
("SAB 104") for determining when revenue is realized or realizable and earned.
In accordance with the requirements of SAB 104 we recognize revenue when (1)
persuasive evidence of an arrangement exists; (2) delivery of our services has
occurred; (3) our price to our customer is fixed or determinable; and (4)
collectability of the sales price is reasonably assured. As such, we recognize
revenues as services are rendered. Sales of real estate are generally recognized
under the full accrual method when each of the criteria in paragraph 5 of SFAS
66 is met. Under that method, gain is not recognized until the collectability of
the sales price is reasonably assured and the earnings process is virtually
complete. When a sale does not meet the requirements for income recognition a
gain is deferred until those requirements are met.
The Company recorded the sale of property under the cost recovery method. When
this method is used, no profit is recognized on the sales transaction until the
cost of the property sold is recovered.
12
Revenues from fixed-price and modified fixed-priced construction contracts are
anticipated to be recognized on the percentage-of-completion method, measured by
the percentage of costs incurred to date compared to estimated total costs for
each contract.
Contract costs will include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs depreciation. General and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are recognized in the period in which such losses are determined.
Changes in job performance, job conditions and estimated profitability may
result in revisions to costs and income, which are recognized in the period in
which the revisions are determined.
Revenues from time and material contracts are recognized currently as the work
is performed.
STOCK BASED COMPENSATION
Prior to December 31, 2005, we used Statement of Financial Accounting Standards
No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure"
(SFAS No. 148) to account for our stock based compensation arrangements. This
statement amended the disclosure provisions of FASB statement No. 123 to require
prominent disclosure about the effects on reported net income of an entity's
accounting policy decisions with respect to stock-based employee compensation.
As permitted by SFAS No. 123 and amended by SFAS No. 148, we would have used the
intrinsic value method under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," to account for any of our
stock-based employee compensation arrangements (no such arrangements were
applicable through September 30, 2006).
In December 2004, the Financial Accounting Standards Board issued Statement
Number 123 ("FAS 123 (R)"), Share-Based Payments, which became effective on
January 1, 2006. The statement requires us to recognize compensation expense in
an amount equal to the fair value of share-based payments such as stock options
granted to employees. Since we have not issued any stock options through
September 30, 2006, the adoption of this statement did not have an effect on our
consolidated financial statements.
13
RESULTS OF OPERATIONS
NINE AND SIX MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO NINE AND SIX MONTHS
ENDED SEPTEMBER 30, 2009
REVENUES
The 2010 revenues to date are 24,502, primarily from our CEO acting as a
consultant, The Company has secured a construction contract for the construction
of a 30 MW project but operations have not yet begun. Revenues totaled $31,864
and $23,294 for the nine and three months ended September 30, 2009.
COST OF REVENUES
Cost of revenues consists of preparation of quotes, and general and
administrative expenses .. Cost of revenues totaled $24,015 and $3,915 for the
nine and three months ended Sept 30, 2010. The cost of revenues for the same
periods last year, 2009, was 28,507 and 19,740 respectively . The significant
fall off in revenues from the 2009 revenues were directly attributable to the
failing economy and the lack of finance.
OPERATING EXPENSES
General and administrative expense consists, office expenses, rent, phones was
for the period ending Sept 30 2010, $29,650 compared to $10,086 in the six
months ended June 30, 2009.
Included in stock based employee and consultant compensation is the expense of
issuing stock to an employee. of $161,900 and $56,610 for the six and three
months ended June 30, 2009. Consultants also received stock based compensation
of $124,800 and $56,410 for the six and three months ended June 30, 2009 which
is included in General and Administrative Expense.
OTHER EXPENSES
Interest expense for the nine and three months ended September 30, 2009 of
$6,404.00 and $4670 is primarily attributable to interest on credit lines. A
non-cash derivative income was recognized in the amount of $156,867 for the
quarter and the year. This income was primarily caused by the decrease in the
fair value of the conversion due to the market price dropping below the
conversion price at the end of the quarter. Due to the adjustable conversion
price of the note, this amount will most likely reverse in the next quarter.
LIQUIDITY AND CAPITAL RESOURCES
At SEPT 30, 2010, we had cash of approximately $1,760, a decrease of $2,400 from
September 30, 2009.
We believe that we will need to raise between $75,000,000 and $150,000,000
through the sale of 144A debt and/or equity securities in order to fund working
capital needs of the Company. If we are successful in raising these funds in a
timely manner, we anticipate our revenues to exceed $1,000,000 and our general
and administrative expense we be approximately $900,000. However, this estimate
is a forward-looking statement that involves risks and uncertainties and is
subject to a number of factors so there can be no assurance of such.
We are optimistic about our long term business prospects, however, raising these
funds is not guaranteed. We cannot assure you that we will be able to raise such
funds or that such funds will be available to us on favorable terms. If we raise
additional funds for the issuance of our securities, such securities may have
rights, preferences or privileges senior to those of the rights of our common
stock and our stockholders may experience additional dilution.
14
MANAGEMENT'S GOALS
In our opinion we need to complete the following;
o Complete a 144a secured bond offering as soon as possible.
Management has identified a joint venture partner who has a shelf
offering of 144a bonds, backed by Life settlement policies. The
company has to bear the cost of having a prospectus written and has
been engaged in the process of raising capital for the issuance of
these bonds. However management believes that given the size and the
nature of the energy projects being contemplated, 144a hybrid bond
offering, which offers investors security of a guaranteed interest
and principal payment until the bonds mature are the only option
available to finance the projects currently contemplated. Potential
projects exceed 200,000,000.
o Start Construction a project in fiscal 2011.
RISK FACTORS AND RELATED DISCLOSURES
Unless the context indicated otherwise, all references to "we," "us," "our" or
the "Company" in this subsection "Risk Factors" refer to the Company. We are
subject to a number of risks listed below, which could have a material adverse
effect on our financial condition, results of operations and value of our Common
Stock.
RISKS AND RELATED DISCLOSURES RELATING TO OUR BUSINESS
Because of losses incurred by us to date and our general financial condition, we
received a going concern qualification in the auditors' report related to our
financial statements for the fiscal year ended December 31, 2009, and 2010 that
raises doubt about our ability to continue our operations during the next 12
months.
We had gross revenues/losses of approximately $39,622 and $.4,100,000 for the
fiscal years ended December 31, 2009 and 2008, respectively. The decrease in
revenues were as a result of the collapse of the housing market and was a
catalyst in the decision to reposition the company as an alternative energy
provider. Our auditors will include a going concern qualification in their
report on our financial statements for the fiscal year ended December 31, 2009
and 2010. We cannot assure you that we will be able to generate enough revenue
or raise sufficient capital to operate our business during the next 12 months.
Our existence is dependent upon our management's ability to develop profitable
operations and resolve our liquidity problems. We cannot assure you that we will
ever achieve profitable operations or generate significant revenues. We may
continue to have operating losses in the foreseeable future. If we are unable to
continue as a going concern, we may cease to operate and our investors may lose
some or all of their investment.
We may be unable to obtain adequate financing to implement our business plan,
which will negatively impact our liquidity and ability to continue our
operations.
We have very limited financial resources. We will need to obtain funding for our
working capital needs and business development. Our ability to obtain financing
depends, in part, upon prevailing capital market conditions as well as our
operating results which may impact our efforts to arrange financing on terms
satisfactory to us. Moreover, we may not be able to obtain additional financing
by the issuance of additional shares of our capital stock due to the fact that
our authorized capital stock may not have been properly approved by our
shareholders. Certain shares of our stock issued by us since incorporation may
be invalidly issued under the Florida Business Corporation Act and, as a result,
our shareholders may have rescission rights under federal and/or state
securities laws." If adequate funds are not available, or are not available on
acceptable terms, we may not be able to make future investments, take advantage
of other opportunities, or otherwise respond to competitive challenges. Our
failure to obtain capital on acceptable terms will also negatively impact our
liquidity and our ability to continue our operations.
15
We depend on the services of our President to implement our business strategy
and the loss of his services will have an adverse effect on our business.
The extensive experience and contacts of our President, Mr. Nurse, within the
construction industry are a critical component of our business strategy. The
growth of our operations is dependent upon the personal efforts and abilities of
our President to evaluate and pursue our business opportunities. The loss of the
services of our President, for any reason, will adversely affect our business.
We may be unable to hire and retain qualified employees which will have an
adverse effect on our financial condition and result of operations.
We believe that our business strategy is substantially dependent upon our
ability to attract, hire, retain and motivate qualified employees. We cannot
assure you that we will be successful in hiring or retaining the services of
qualified managerial, technical or administrative personnel necessary to support
our business. Our inability to hire and retain qualified employees will have an
adverse effect on our financial condition and results of operations.
We will encounter intense competition from substantially larger and better
financed companies which may have a negative impact on our ability to achieve
profitable operations.
Our success depends upon our ability to penetrate the market for general
contracting, pre-construction management and construction management services.
Our company will compete with more established entities with greater financial
resources, longer operating histories and more recognition in the market place
than we do. It is also possible that previously unidentified competitors may
enter the market place and decrease our chance of acquiring the requisite market
share. Our future success will depend upon our ability to penetrate the market
quickly and efficiently. Our ability to respond to the evolving demands of the
marketplace will play a key role in our success. If we are unable to respond and
compete in these markets, it will have a material adverse effect on our results
of operations and financial condition and will negatively impact our ability to
achieve profitable operations.
If we fail to maintain an effective system of internal control over financial
reporting and disclosure controls and procedures, we may be unable to accurately
report our financial results and comply with the reporting requirements under
the Exchange Act. As a result, current and potential shareholders may lose
confidence in our financial reporting and disclosure required under the Exchange
Act, which could adversely affect our business and we could be subject to
regulatory scrutiny.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), we
will be required, beginning with our annual report on Form 10-KSB for the fiscal
year ending December 31, 2009, to include in our annual reports on Form 10-KSB,
our management's report on internal control over financial reporting and the
registered public accounting firm's attestation report on our management's
assessment of our internal control over financial reporting. We are in the
process of preparing an internal plan of action for compliance with the
requirements of Section 404. As a result, we cannot guarantee that we will not
have any "significant deficiencies" or "material weaknesses" reported by our
independent registered public accounting firm. Compliance with the requirements
of Section 404 is expected to be expensive and time-consuming. If we fail to
complete this evaluation in a timely manner, or if our independent registered
public accounting firm cannot timely attest to our evaluation, we could be
subject to regulatory scrutiny and a loss of public confidence in our internal
control over financial reporting. In addition, any failure to establish an
effective system of disclosure controls and procedures could cause our current
and potential shareholders and customers to lose confidence in our financial
reporting and disclosure required under the Exchange Act, which could adversely
affect our business.
We may be unable to implement our business and growth strategy which will
negatively impact our financial condition and results of operations.
16
Our growth strategy and ability to generate revenues is largely dependent upon
our ability to: (i) develop and provide general contracting, pre-construction
planning and construction management services; (ii) hire highly skilled
subcontractors; (iii) obtain adequate financing on acceptable terms to fund our
growth strategy; (iv) develop and expand our customer base; and (v) negotiate
agreements on terms that will permit us to generate adequate profit margins. Our
failure with respect to any or all of these factors could impair our ability to
successfully implement our growth strategy, which will have an adverse effect on
our financial condition and results of operations.
If we are unable to accurately estimate the overall risks, revenues or costs on
a contract, we may incur a loss on the contract which will have an adverse
effect on our financial condition and results of operations.
We expect that will mostly enter into fixed price contracts which require us to
perform the contract for a fixed price irrespective of our actual costs. As a
result, we may realize a profit on these contracts only if we successfully
control our costs and avoid cost overruns. We may also enter into cost plus
award fee contracts which provide for reimbursement of the costs required to
complete a project, but generally have a lower base fee and an incentive fee
based on cost and/or schedule performance. If our costs exceed the revenues
available under such a contract or are not allowable under the provisions of the
contract, we may not receive reimbursement for these costs. Guaranteed maximum
price contracts that we may enter into provide for a cost plus fee arrangement
up to a maximum agreed-upon price. These contracts also place the risk on us for
cost overruns that exceed the guaranteed maximum price. Pre-construction
planning and construction management contracts are those under which we agree to
manage a project for the customer for an agreed upon fee, which may be fixed or
may vary based upon negotiated factors. Profitability on these types of
contracts is driven by changes in the scope of work, which could cause cost
overruns beyond our control and limit profits on these contracts. Cost overruns,
whether due to inefficiency, faulty estimates or other factors, result in lower
profit or a loss on a project. We expect that our contracts will be based, in
part, on cost estimates that are subject to a number of assumptions. If our
estimates of the overall risks, revenues or costs prove inaccurate or
circumstances change, we may incur a lower profit or a loss on the contract
which will negatively impact our financial condition and results of operations.
We may fail to meet schedule requirements of our contracts which could adversely
affect our reputation and/or expose us to financial liability.
The construction services industry is highly schedule driven and our contracts
are likely to be subject to specific completion schedule requirements with
liquidated damages charged to us in the event the construction schedules are not
achieved. Failure to meet any such schedule requirements could cause us to
suffer damage to our reputation within the construction industry and customer
base, as well as pay significant liquidated damages which will have an adverse
effect on our financial condition and results of operation.
Compliance with regulations affecting our business could cause us to incur
substantial costs both in time and money.
We are subject to extensive and complex laws and regulations that affect the
construction industry, including, but not limited to, laws and regulations
related to zoning, permitted land uses, levels of density, building design,
warranties, storm water and use of open spaces. We generally may be required to
obtain permits and approvals from local authorities to commence and complete
various construction projects. Such permits and approvals may, from
time-to-time, be opposed or challenged by local governments, neighboring
property owners or other interested parties, adding delays, costs and risks of
non-approval to the process. This process is further complicated by the fact
that certain of our projects may be located in foreign countries where we may be
unfamiliar with all regulatory requirements and approvals established by foreign
governments. Economic, political and other risks associated with our
international operations involve risks that could adversely affect our financial
condition and results of operations." Our obligation to comply with the laws and
regulations under which we operate, and the obligation of our subcontractors and
other agents to comply with these and other laws and regulations, could result
in delays in the performance of our service, and cause us to incur substantial
costs.
We could incur significant costs as a result of liability under environmental
laws which will have an adverse effect on our financial condition and results of
operations.
17
Our operations are subject to environmental laws and regulations governing,
among other matters, the discharge of pollutants into air and water, the
handling, storage and disposal of solid or hazardous materials or wastes and the
remediation of contamination, sometimes associated with leaks or releases of
hazardous substances. Various federal, state and local environmental laws and
regulations may impose liability for the entire cost of investigation and
clean-up of hazardous or toxic substances. These laws may impose liability
without regard to ownership at the time of the contamination or whether or not
we caused the presence of contaminants. Violations of these environmental laws
and regulations could subject us and our management to fines, civil and criminal
penalties, cleanup costs and third party property damage or personal injury
claims which will have an adverse affect on our financial condition and results
of operations.
Work stoppages and other labor problems could adversely affect our financial
condition and results of operations.
We intend to rely mostly on subcontractors in providing our general contracting
services. Certain subcontractors in the construction industry are members of
various labor unions. If the unionized workers engage in a strike or other work
stoppage, or other subcontractors become unionized, we could experience a
disruption of our operations and higher ongoing labor costs, which could
adversely affect our financial condition and results of operations.Timing of the
award of a new contract and performance of a new contract may have an adverse
effect on our financial condition and results of operation in a particular
fiscal quarter.
It is generally very difficult to predict whether and when we will receive an
award of a new contract as these contracts frequently involve a lengthy and
complex bidding and selection process which is affected by a number of factors,
including, but not limited to, market conditions, financing arrangements and
governmental approvals. Our results of operations can fluctuate from quarter to
quarter depending on the timing of new contract awards.
In addition, timing of the revenues and cash flows from our projects can be
delayed by a number of factors, including, but not limited to, weather
conditions, delays in receiving material and equipment from vendors and changes
in the scope of work to be performed. Such delays, if they occur, could have an
adverse effect on our financial condition and operating results for a particular
fiscal quarter.
We may not be able to fully realize the revenue reported in our backlog which
will have an adverse affect on our financial condition and results of operation.
We include a construction project in our backlog at such time as a contract is
awarded or a firm letter of commitment is obtained and funding is in place. The
revenue projected in our backlog may not be realized or, if realized, may not
result in profits. For example, if a project reflected in our backlog is
terminated, suspended or reduced in scope, it would result in a reduction to our
backlog which would reduce, potentially to a material extent, the revenue and
profit we actually receive from contracts in backlog. If a customer cancels a
project, we may be reimbursed for certain costs but typically have no
contractual right to the total revenues reflected in our backlog. Significant
cancellations or delays of projects in our backlog could have an adverse effect
on our financial condition and results of operations.
Deterioration in economic conditions generally or in the market regions where we
intend to operate could decrease demand and pricing in these areas and adversely
affect our financial condition and results of operations.
The construction industry is sensitive to changes in regional and national
economic conditions such as job growth, interest rates and consumer confidence.
Material adverse changes in any of these conditions generally, or in the market
regions where we intend to operate, could decrease demand and pricing for new
construction projects in these areas or result in customer defaults on pending
contracts, which could adversely affect the number of deliveries we make or
reduce the prices we can charge, either of which could adversely affect our
financial condition and results of operations.
Natural disasters and adverse weather conditions could delay deliveries or
increase costs of construction projects in affected areas.
18
The occurrence of natural disasters or adverse weather conditions in the areas
in which we intend to operate can delay deliveries, increase costs and
negatively impact the demand for construction projects in affected areas. When
natural disasters such as hurricanes, tornadoes, earthquakes, floods and fires
affect an area in which we intend to operate or one nearby, there can be a
diversion of labor and materials in such area from existing construction
projects to rebuilding or repairing the buildings that were either destroyed or
damaged in the natural disaster. This can cause delays in construction and
delivery of projects in which we may be involved and reduce our revenues, if
any.
Economic, political and other risks associated with our international operations
involve risks that could adversely affect our financial condition and results of
operations.
We intend to be involved as a general contractor in non-U.S. construction
projects. Our international operations may expose us to risks inherent in doing
business outside the United States, including, but not limited to:
o political risks, including risks of loss due to civil disturbances,
acts of terrorism or acts of war;
o unstable economic, financial and market conditions;
o potential incompatibility with foreign joint venture partners;
o foreign currency controls and fluctuations in currency exchange
rates;
o trade restrictions;
o increases in taxes and the effect of local regulations; and
o Changes in labor conditions, labor strikes and difficulties in
staffing and managing international operations.
Any of these factors could harm our potential international operations.
Specifically, failure to successfully manage international growth could result
in higher operating costs than anticipated or could delay or preclude altogether
our ability to generate revenues which will have an adverse effect on our
results of operations and financial condition and results of operations.
RISKS RELATING TO OUR COMMON STOCK
Our stock price has been and may continue to be volatile and may result in
substantial losses for investors.
The trading price of our Common Stock could be subject to wide fluctuations in
response to:
o our prospects as perceived by others;
o our operating results;
o differences between our reported results and those expected by
investors;
o announcements of new contracts by us or our competitors; and
o General economic or stock market conditions unrelated to our
operating performance.
Fluctuations in our stock price as a result of any of the foregoing factors may
result in substantial losses for investors.
19
Limited trading volume of our Common Stock may contribute to its price
volatility.
Through September 30, 2010, the average daily trading volume during 2009 for our
Common Stock was approximately 400,000 shares. We cannot assure you that a more
active trading market in our Common Stock will develop. As a result, relatively
small trades may have a significant impact on the price of our Common Stock.
We have never paid dividends and do not anticipate paying any in the foreseeable
future.
We have never declared or paid a cash dividend and we do not expect to have any
cash with which to pay cash dividends in the foreseeable future. If we do have
available cash, we intend to use it to grow our business.
We will be subject to the penny stock rules which may adversely affect trading
in our Common Stock.
On September 30, 2009, the closing price of Common Stock was $0.0012 bid. Our
Common Stock is a "penny stock" security under the rules promulgated under the
Exchange Act. In accordance with these rules, broker-dealers participating in
certain transactions involving penny stocks must first deliver a disclosure
document that describes, among other matters, the risks associated with trading
in penny stocks. Furthermore, the broker-dealer must make a suitability
determination approving the customer for penny stock transactions based on the
customer's financial situation, investment experience and objectives.
Broker-dealers must also disclose these determinations in writing to the
customer and obtain specific written consent from the customer. The effect of
these restrictions will probably decrease the willingness of broker-dealers to
make a market in our Common Stock, decrease liquidity of our Common Stock and
increase transaction costs for sales and purchases of our Common Stock as
compared to other securities.
CAUTIONARY STATEMENT
This Form 10-QSB, press releases and certain information provided periodically
in writing or orally by our officers or our agents contain statements which
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act, as amended and Section 21E of the Securities Exchange Act of
1934. The words expect, anticipate, believe, goal, plan, intend, estimate and
similar expressions and variations thereof if used are intended to specifically
identify forward-looking statements. Those statements appear in a number of
places in this Form 10-QSB and in other places, particularly, Management's
Discussion and Analysis or Results of Operations, and include statements
regarding the intent, belief or current expectations us, our directors or our
officers with respect to, among other things: (i) our liquidity and capital
resources; (ii) our financing opportunities and plans and (iii) our future
performance and operating results. Investors and prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties and those actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. The factors that might cause such differences
include, among others, the following: (i) the validity of the Company's issued
shares of stock; (ii) the Company's ability to continue as a going concern;
(iii) The availability of financing on terms acceptable to the Company; (IV) the
management's ability to implement the Company's business and growth strategy;
(v) the validity of the underlying assumptions and estimates of projected costs
and revenues on a contract; (vi) the management's ability to maintain an
effective system of internal control over financial reporting and disclosure
controls and procedures; (vii) any inability of us to successfully conduct our
business in new markets; and (viii) other risks including those identified in
our filings with the Securities and Exchange Commission. We undertake no
obligation to publicly update or revise the forward looking statements made in
this Form 10-QSB to reflect events or circumstances after the date of this Form
10-QSB or to reflect the occurrence of unanticipated events.
ITEM 3. CONTROLS AND PROCEDURES
20
(a) Evaluation of disclosure controls and procedures.
Within ninety (90) days prior to the filing of this report, under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operations of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as of September 30, 2006. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were effective such that
the material information required being included in our Securities and Exchange
Commission ("SEC") reports is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms, and that such
information is accumulated and communicated to our management and our Board of
Directors, as appropriate, to allow timely decisions regarding disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
objectives, and management necessarily is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Our management, including the principal executive officer and principal
financial officer, do not expect that our disclosure controls and procedures
will prevent all error and fraud. A control system, no matter how well conceived
and operated, can only provide reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within our Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, collusion of two or
more people, or by management override of the control. The design of any system
of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.
(b) Changes in internal controls over financial reporting.
There were no significant changes in our internal control over financial
reporting that could significantly affect our controls during quarter end
September 30, 2010. We have not identified any significant deficiency or
material weaknesses in our internal controls, and therefore there were no
corrective actions taken.
21
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS -
Solargy System Inc. does not have any current legal proceedings.
ITEM 2. CHANGES IN SECURITIES -
During the nine months ended September 30, 2010, The Company has not issued any
additional shares.
On August 1, 2006, the Company merged with SBD International (SBD), with SBD
being the surviving entity. Upon execution of the merger an exchange of one
share of SBD common stock was issued for every 25 shares of The Company's common
stock. This reduced the outstanding shares to approximately 8,794,000 shares of
common stock.
On August 17, 2006 5,100,000 shares, the entire outstanding Series a Preferred
Stock, was converted into 265,200,000 shares of common stock at an exchange
ratio of 1 to 52.
On August 31, 2006 an employee shareholder returned 143,000 shares of stock for
no compensation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . THE COMPANY HAS DEFAULTED ON ITS
CONVERTIBLE NOTES TO ONE ITS LENDERS. THE COMPANY HAS SUSPENDED CONVERSIONS OF
ITS CONVERTIBLE NOTES UNTIL THE COMPANY CAN REFINANCE THE TOTAL OUTSTANDING DUE.
MANAGEMENT BELIEVES THAT PRIOR CONVERSIONS HAVE RESULTED IN THE LOW STOCK PRICE
AND BELIEVES THE COMPANY WILL NEVER BE ABLE TO HAVE A QUOTE REFLECTIVE OF ITS
BOOK VALUE AND LONG AS IT ALLOWS CONVERSIONS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS
EXHIBITS
31 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Acting Chief
Accounting Officer, Carl Nurse
32 Section 1350 Certification, Carl Nurse - Chief Executive Officer and Chief
Accounting Officer
22
Exhibits
--------
31 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Acting
Chief Accounting Officer, Carl Nurse
32 Section 1350 Certification, Carl Nurse - Chief Executive Officer and
Chief Accounting Officer
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOLARGY SYSTEMS INC
By /s/ Carl Nurse
-----------------
Carl Nurse, Chief Executive Officer and
Chief Financial Officer
October 11, 2010
23
EXHIBIT 31
CERTIFICATION
BY CHIEF EXECUTIVE OFFICER AND ACTING CHIEF ACCOUNTING OFFICER
PURSUANT TO RULE 13A-14
I, Carl Nurse, certify that:
I have reviewed this quarterly report on Form 10-QSB of SOLARGY SYSTEMS
INC.;
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and (c) Disclosed in
this report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information;
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
October 11, 2010
/s/ Carl Nurse
----------------------------------------
Carl Nurse
Chief Executive Officer and Chief
Accounting Officer
24
EXHIBIT 32
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of SOLARGY SYSTEMS INC. (the
"Company") on Form 10-QSB for the period ended September 30, 2010 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Carl Nurse as Chief Executive Officer and Chief Accounting Officer of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
By /s/ Carl Nurse
Carl Nurse
Chief Executive Officer and Chief Accounting Officer
October 11, 2010
2
