Attached files
As filed with the Securities and Exchange Commission on December 10, 2010
File No.333-169103
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 4 to
Form S-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NOVAGEN SOLAR INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or Other Jurisdiction of Incorporation or Organization)
3600
(Primary Standard Industrial Classification Code Number)
98-0471927
(I.R.S. Employer Identification No.)
3044 Bloor Street West, Suite 1440
Toronto, ON M8X 2Y8
647.628.5375
(Address and telephone number of principal executive offices)
Laughlin International
2533 Carson Street
Carson City, Nevada 89706
775.883.8484
(Name, address and telephone number of agent for service)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated Accelerated Non-accelerated Smaller reporting
filer [ ] filer [ ] filer [ ] company [X]
CALCULATION OF REGISTRATION FEE
===========================================================================
Proposed Proposed Proposed
Title of Maximum Maximum Maximum
Each Class of Number of Offering Aggregate Amount of
Securities to Shares to be Price per Offering Registration
be Registered Registered Share (1) Price (2) Fee
---------------------------------------------------------------------------
Common Stock 22,564,600 $ 0.525 $11,846,415 $ 844.65
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(1) Based on the average of the bid and asked price on the Pink OTC Markets'
OTCQB as of August 26, 2010.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act and based upon
22,564,600 shares of common stock to be sold in this offering.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
NOVAGEN SOLAR INC.
22,564,600 SHARES OF COMMON STOCK
This prospectus relates to the resale by the selling stockholder of up to
22,564,600 shares of common stock of Novagen Solar Inc., a Nevada Corporation,
that may be resold by the selling stockholders named in this prospectus.
Our common stock is traded on the NASD OTC Bulletin Board and the Pink OTC
Markets OTCQB under the symbol "NOVZ". On December 7, 2010, the last reported
closing sale price of our common stock was $0.11 per share.
The shares of our common stock were issued to the selling stockholders in
transactions that were exempt from registration under sections 4(2) and 4(6) of
the Securities Act of 1933 and Regulation S and Regulation D, promulgated
thereunder. The selling stockholders have advised us that they will sell the
shares of common stock from time to time in the open market, in privately
negotiated transactions or a combination of these methods, at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices or at negotiated prices. We will not receive any proceeds from this
offering and have not made any arrangements for the sale of common stock by the
selling stockholders. However, we have received consideration from the sale of
shares of common stock that are presently outstanding. We will pay the expenses
of registering these shares.
Prospective investors should rely only on the information contained in this
prospectus or any prospectus supplement or amendment thereto. We have not
authorized anyone to provide investors with different information. This
prospectus may only be used where it is legal to sell these securities. The
information in this prospectus is only accurate on the date of this prospectus,
regardless of the time of any sale of securities.
An investment in our stock is extremely speculative and involves several
significant risks. Prospective investors are cautioned not to invest unless
they can afford to lose their entire investment. We urge all prospective
investors to read the "Risk Factors" section of this prospectus beginning on
page 4 and the rest of this prospectus before making an investment decision.
We have earned no revenue since inception. We have also incurred significant
operating losses since inception and we expect to continue to incur losses to
implement our business plan. Our auditors have expressed substantial doubt
about our ability to continue as a going concern. If we cannot continue as a
going concern, then our stockholders may lose all of their investment.
The information in this prospectus is not complete and may be changed. This
prospectus is included in the registration statement that was filed by Novagen
Solar Inc. with the Securities and Exchange Commission. The selling
stockholders may not sell these securities until the registration statement
becomes effective. This prospectus is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the sale
is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December 10, 2010.
1
TABLE OF CONTENTS
Page
Page
PROSPECTUS SUMMARY 3
Our Business 3
The Offering 3
Summary of Selected Financial Data 3
RISK FACTORS 4
FORWARD-LOOKING STATEMENTS 10
USE OF PROCEEDS 11
DETERMINATION OF OFFERING PRICE 11
DILUTION 11
SELLING STOCKHOLDERS 11
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 12
Holders 12
Dividend Policy 13
Convertible Securities 13
DESCRIPTION OF BUSINESS 13
Overview 13
Corporate History 13
Products and Services 13
Solar Power Plant Development 14
Manufacturing 14
Competition 15
Suppliers 15
Marketing 15
Regulations 16
Government Subsidies and Incentives 16
Building Codes 17
Research and Development 17
Intellectual Property 17
Environmental 17
Employees 18
PROPERTY 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULT OF 18
Overview 19
Results of Operations 20
Liquidity and Capital Resources. 20
LEGAL PROCEEDINGS 20
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 21
Involvement in Certain Legal Proceedings 21
Committees of the Board 21
Audit Committee Financial Expert 21
Indemnification 22
EXECUTIVE COMPENSATION 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 22
PLAN OF DISTRIBUTION 23
DESCRIPTION OF CAPITAL STOCK 24
Common Stock 24
Preferred Stock 25
Anti-takeover Effects of Our Articles of Incorporation and Bylaws 25
Nevada Anti-Takeover laws 26
Transfer Agent 27
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES 28
LEGAL MATTERS 26
EXPERTS 27
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 27
AVAILABLE INFORMATION 27
INDEX TO FINANCIAL STATEMENTS F-1
2
PROSPECTUS SUMMARY
The following summary is not complete and does not contain all of the
information that may be important to prospective investors. Each prospective
investor is urged to read this prospectus in its entirety before making an
investment decision to purchase our common stock.
As used in this prospectus, unless the context otherwise requires, "the
Company", "we", "us", "our" or "Novagen" refers to Novagen Solar Inc. "SEC"
refers to the Securities Exchange Commission. "Securities Act" refers to the
Securities Act of 1933, as amended. "Exchange Act" refers to the Securities
Exchange Act of 1934, as amended. "NRS" refer to the Nevada Revised Statutes,
as amended.
OUR BUSINESS
Novagen Solar Inc. (formerly Pickford Minerals Inc.) is a development stage
company engaged in the marketing, sale, design and installation of solar energy
plants across North America, with an emphasis on turnkey commercial power
systems, brownfield revitalization, land reclamation and off-grid community
developments. Our business is in the early stages of development. Our
currently available capital and cash flows from operations are insufficient to
execute our business plan and fund business operations long enough to become
cash flow positive or to achieve profitability. Our auditors have expressed
substantial doubt about our ability to continue as a going concern. If we
cannot continue as a going concern, then investors may lose all of their
investment. Our ultimate success will depend upon our ability to raise capital.
We will be required to pursue sources of additional capital through various
means, including joint venture projects and debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, and the issuance of
warrants or other derivative securities, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital and
financing, including investment banking fees, legal fees, accounting fees,
printing and distribution expenses and other costs.
Our ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the renewable energy
industry, and the fact that we have not been profitable, which could impact the
availability or cost of future financings. If the amount of capital we are able
to raise from financing activities, together with our revenue from operations,
is not sufficient to satisfy our capital needs, even to the extent that we
reduce our operations accordingly, we may be required to cease operations.
There is no assurance that we will be able to obtain financing on terms
satisfactory to use, or at all. We do not have any arrangements in place for
any future financing. If we are unable to secure additional funding, we may
cease or suspend operations. We have no plans, arrangements or contingencies in
place in the event that we cease operations.
We currently have no employees other than our sole officer and director, who
devotes five hours per week to our operations.
Please carefully read both this prospectus and any prospectus supplement
together with the additional information described below under the section
entitled "Available Information". Our principal executive offices are located at
3044 Bloor Street West, Suite 1440, Toronto, ON M8X 2Y8. Our telephone number
is (647) 628.5375. Our facsimile number is (647) 439-3785.
THE OFFERING
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Number of shares offered Up to 22,564,600 common shares
by selling stockholder:
Number of shares outstanding 43,675,900 common shares
as of the date of this prospectus:
Offering prices: Determined at the time of sale
by the selling stockholders
Use of proceeds: We will not receive any proceeds
from the sale of the common stock
Over-the-counter Bulletin Board symbol NOVZ
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SUMMARY OF SELECTED FINANCIAL DATA
We are a development stage company. From the date of our inception on June 22,
2005 we have not generated any revenue or earnings from operations. As of
September 30, 2010 our financial data is as follows:
--------------------------------------------------------------------------------
As at or for the period from
June 22, 2005 (inception)
to September 30, 2010
--------------------------------------------------------------------------------
Operations Data
Revenue: $ 0
Net Loss: 484,701
Balance Sheet Data
Total Assets: 21,655
Total Liabilities: 4,054
Net Tangible Book Value: 17,601
Net Tangible Book Value Per Share: (0.00)
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3
RISK FACTORS
ANY INVESTMENT IN OUR COMPANY INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO
THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE
CAREFULLY CONSIDERED IN EVALUATING AN INVESTMENT IN OUR COMMON STOCK. IF ANY OF
THE FOLLOWING RISKS OCCUR, OUR BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION COULD BE SERIOUSLY HARMED AND OUR STOCKHOLDERS COULD LOSE ALL OR PART
OF THEIR INVESTMENT. THIS DISCUSSION ALSO IDENTIFIES IMPORTANT CAUTIONARY
FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE WE
CURRENTLY ANTICIPATE.
(1) IT IS IMPOSSIBLE TO EVALUATE THE INVESTMENT MERITS OF NOVAGEN BECAUSE WE
HAVE NO OPERATING HISTORY.
We are a development stage company with no operating history upon which an
evaluation of our future success or failure can be made. Thus far, our
activities have been primarily limited to organizational matters, taking
delivery of product samples, sales promotion, raising capital, and the
preparation and filing of our securities filings and this prospectus. As a
start-up enterprise, we are subject to all the risks inherent in the initial
organization, financing, expenditures, complications and delays inherent in a
new business. Investors should evaluate an investment in our company in light of
the uncertainties encountered by start-up companies in a competitive
environment. There can be no assurance that our business will be successful or
that we will be able to attain profitability. Our future viability,
profitability and growth will depend upon our ability to successfully implement
our business plan and to expand our operations. There can be no assurance that
any of our efforts will prove successful or that we will not continue to incur
operating losses in the future.
(2) OUR AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE OPERATIONS AS A "GOING CONCERN".
Since inception, we have suffered recurring losses and net cash outflows from
operations, and we expect to continue to incur substantial losses to implement
our business plan. Thus far, we have funded operations through common stock
issuances and related party loans in order to meet our strategic objectives. We
have not established any other source of equity or debt financing. There can be
no assurance that we will be able to obtain sufficient funds to implement our
business plan. As a result of the foregoing, our auditors have expressed
substantial doubt about our ability to continue as a going concern. If we
cannot continue as a going concern, then investors may lose all of their
investment.
(3) WE WILL NEED ADDITIONAL FINANCING TO EXECUTE OUR BUSINESS PLAN AND FUND
OPERATIONS, WHICH MIGHT NOT BE AVAILABLE ON REASONABLE TERMS OR AT ALL.
Our currently available capital and cash flows from operations are insufficient
to execute our business plan and fund business operations long enough to become
cash flow positive or to achieve profitability. Our ultimate success will
depend upon our ability to raise capital. There can be no assurance that
additional funds will be available when needed from any source or, if available,
will be available on terms that are acceptable to us.
We will be required to pursue sources of additional capital through various
means, including joint venture projects and debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, and the issuance of
warrants or other derivative securities, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital and
financing, including investment banking fees, legal fees, accounting fees,
printing and distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities we may issue,
such as convertible notes and warrants, which will adversely impact our
financial condition.
Our ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the renewable energy
industry, and the fact that we have not been profitable, which could impact the
availability or cost of future financings. If the amount of capital we are able
to raise from financing activities, together with our revenue from operations,
is not sufficient to satisfy our capital needs, even to the extent that we
reduce our operations accordingly, we may be required to cease operations.
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(4) WE ARE EXPOSED TO RISKS ASSOCIATED WITH THE ONGOING FINANCIAL CRISIS AND
WEAKENING GLOBAL ECONOMY, WHICH INCREASE THE UNCERTAINTY OF PROJECT FINANCING
FOR COMMERCIAL SOLAR INSTALLATIONS AND THE RISK OF NON-PAYMENT BY CUSTOMERS.
The recent severe tightening of the credit markets, turmoil in the financial
markets, and weakening global economy may cause slowdowns in the solar industry,
which slowdowns could worsen if these economic conditions are prolonged or
deteriorate further. The market for solar power systems depends largely on
commercial capital spending. Economic uncertainty exacerbates negative trends
in these areas of spending, and may negatively affect our ability to complete
sales. Difficulties in obtaining capital and deteriorating market conditions
may also lead to the inability of some customers to obtain affordable financing,
including traditional project financing and tax-incentive based financing,
resulting in lower sales to potential customers with liquidity issues. Further,
these conditions and uncertainty about future economic conditions make it
challenging for us to forecast our operating results, make business decisions,
and identify the risks that may affect our business, financial condition and
results of operations. If we are unable to timely and appropriately adapt to
changes resulting from the difficult macroeconomic environment, our business,
financial condition or results of operations may be materially and adversely
affected.
(5) SINCE OUR SOLE EXECUTIVE OFFICER HAS LIMITED EXPERIENCE WITH SOLAR
ENERGY AND DOES NOT HAVE FORMAL TRAINING SPECIFIC TO SOLAR ENERGY DEVELOPMENT OR
INSTALLATION, THERE IS A HIGHER RISK THAT OUR BUSINESS WILL FAIL.
Our sole executive officer has limited experience with solar energy and does not
have formal training in photovoltaics or in the technical aspects of developing
or installing solar technology. This inexperience presents a higher risk that
we will be unable to complete our business plan. In addition, we will be
required to rely on the technical services of others with expertise in solar
energy in order for us to conduct our planned operations. If we are unable to
contract for the services of such individuals, it will make it difficult and may
be impossible to pursue our business plan. There is thus a higher risk that our
operations, earnings and ultimate financial success could suffer irreparable
harm and that our investors will lose all of their investment.
(6) IF WE ARE UNABLE TO COMPETE EFFECTIVELY IN THE INTENSELY COMPETITIVE
SOLAR POWER INDUSTRY, WE MAY BE UNABLE TO GAIN MARKET SHARE OR GENERATE SALES.
We operate in a competitive environment that is characterized by price
fluctuations, supply shortages and rapid technological change. We compete with
major international and domestic companies. Our major competitors include First
Solar Inc., SunPower, SPG Solar, Akeena Solar, Sun Edison and Global Solar, as
well as numerous other regional players such as Skypower, Pod Generating Group
and CarbonFree Technology Inc., and other similar companies primarily located in
our operating markets. Our competitors may have greater market recognition and
substantially greater financial, technical, marketing, distribution, purchasing,
manufacturing, personnel and other resources than we do. Many of our competitors
are developing and are currently producing products based on new solar power
technologies that may ultimately have costs similar to, or lower than, our
projected costs. Many of our current and potential competitors have longer
operating histories, greater name recognition, access to larger customer bases
and significantly greater financial, sales and marketing, manufacturing,
distribution, technical and other resources than we do. As a result, they may be
able to respond more quickly to changing customer demands or to devote greater
resources to the development, promotion and sales of products than we can.
Some of our competitors own, partner with, have longer term or stronger
relationships with solar cell providers which could result in them being able to
obtain solar cells on a more favorable basis than we can. It is possible that
new competitors or alliances among existing competitors could emerge and rapidly
acquire significant market share, which would harm our business. If we fail to
compete successfully, our business would suffer and we may lose or be unable to
gain market share.
We may in the future compete for potential customers with solar and heating,
ventilation and air conditioning systems installers and service providers,
electricians, utilities and other providers of solar power equipment or electric
power. Competition in the solar power services industry may increase in the
future, partly due to low barriers to entry. In addition, we may face
competition from other alternative energy resources now in existence or
developed in the future. Increased competition could result in price reductions,
reduced margins or loss of market share and greater competition for qualified
technical personnel.
5
(7) EXISTING REGULATIONS AND CHANGES TO SUCH REGULATIONS MAY PRESENT
TECHNICAL, REGULATORY AND ECONOMIC BARRIERS TO THE PURCHASE AND USE OF
PHOTOVOLTAICS, WHICH MAY SIGNIFICANTLY REDUCE DEMAND FOR OUR PRODUCTS AND
SERVICES.
The market for photovoltaics is heavily influenced by foreign, federal,
provincial and local government regulations and policies concerning the electric
utility industry, as well as internal policies and regulations promulgated by
electric utilities. These regulations and policies often relate to electricity
pricing and technical interconnection of customer-owned electricity generation.
In many countries, including Canada and the United States, these regulations and
policies are being modified and may continue to be modified. Customer purchases
of, or further investment in the research and development of, alternative energy
sources, including solar power technology, could be deterred by these
regulations and policies, which could result in a significant reduction in the
potential demand for our solar power products. For example, utility companies
commonly charge fees to larger, industrial customers for disconnecting from the
electric grid or for having the capacity to use power from the electric grid for
back-up purposes. These fees could increase the cost to our customers of using
our solar power products and services, and make them less desirable, which would
harm our business, prospects, results of operations and financial condition. We
anticipate that our solar power products and their installation will be subject
to oversight and regulation in accordance with national and local ordinances
relating to building codes, safety, environmental protection, utility
interconnection and metering and related matters. There is also a burden in
having to track the requirements of individual states and design equipment to
comply with the varying standards. Any new government regulations or utility
policies pertaining to our solar power products may result in significant
additional expenses to us and our resellers and their customers and, as a
result, could cause a significant reduction in demand for our products and
services.
(8) THE REDUCTION OR ELIMINATION OF GOVERNMENT ECONOMIC INCENTIVES COULD
PREVENT US FROM ACHIEVING SALES AND EARNING REVENUE.
Currently, the cost of solar power exceeds the cost of power furnished by the
electric utility grid in many locations. As a result, federal, regional and
local government bodies in Canada and the United States have provided incentives
in the form of rebates, tax credits and other incentives to end users,
distributors, system integrators and manufacturers of solar power products to
promote the use of solar energy in on-grid applications and to reduce dependency
on fossil fuels. If any of these subsidies or incentives are discontinued,
reduced or substantially modified, if growth in any such subsidies or incentives
is reduced, or if renewable portfolio standards or similar production
requirements are changed or eliminated, demand for our photovoltaic solar
products and services could decline or never develop, and our results of
operations and financial condition could be materially and adversely affected as
a result.
(9) WE WILL BE DEPENDENT UPON A LIMITED NUMBER OF SUPPLIERS FOR OUR SOLAR
POWER PRODUCTS AND EQUIPMENT IN THE NEAR TERM, WHICH COULD PREVENT US FROM
DELIVERING OUR PRODUCTS AND SERVICES TO OUR CUSTOMERS WITHIN REQUIRED
TIMEFRAMES, RESULTING IN INSTALLATION DELAYS, CANCELLATIONS, LIQUIDATED DAMAGES
AND AN INABILITY TO ACHIEVE MARKET SHARE.
We are currently dependent upon third party suppliers for all the photovoltaic
products and equipment that we sell and use in our installations. If we fail to
develop, maintain, and in many cases, expand our relationships with other
suppliers of photovoltaic products, we may be unable to profitably deliver our
products and services to our customers within required timeframes.
Additionally, the failure of a supplier to supply products in a timely manner,
or to supply products that meet our quality, quantity and cost requirements,
could impair our ability to provide products and services to our customers,
particularly if we are unable to obtain substitute sources of these materials
and components on a timely basis or on terms acceptable to us. Consequently, we
could be prevented from delivering products and services to our customers within
required timeframes, which could result in installation delays, cancellations,
liquidated damages, and have a material adverse effect on our business and
results of operations.
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(10) WE ARE DEPENDENT UPON OUR SUPPLIERS FOR THE COMPONENTS USED IN THE
SYSTEMS WE DESIGN AND INSTALL, AND OUR MAJOR SUPPLIERS ARE DEPENDENT UPON THE
CONTINUED AVAILABILITY AND PRICING OF SILICON AND OTHER RAW MATERIALS USED IN
SOLAR MODULES.
The solar panels, inverters and other components to be used in our systems will
be purchased from a limited number of suppliers. We do not manufacture any of
the components to be used in our solar installations. We do not have supply
agreements with our suppliers, except for purchase orders on a case-by-case
basis, and as such, we are subject to fluctuation in market prices for the
components that we purchase for our installations. We cannot ensure that the
prices charged by our suppliers will not increase because of changes in market
conditions or other factors beyond our control. An increase in the price of
components used in our systems could result in reduced margins and/or an
increase in costs to our customers and could have a material adverse effect on
our revenue and demand for our services. Similarly, our suppliers are dependent
upon the availability and pricing of silicon, one of the main materials used in
manufacturing solar panels. The world market for solar panels recently
experienced a shortage of supply due to insufficient availability of silicon.
This shortage caused the prices for solar modules to increase. Interruptions in
our ability to procure needed components for our systems, whether due to
discontinuance by our suppliers, delays or failures in delivery, shortages
caused by inadequate production capacity or unavailability, or for other
reasons, could limit our sales and growth. In addition, increases in the prices
of modules could make systems that have been sold but not yet installed
unprofitable for us. There is no assurance that we will be able to have
photovoltaic systems manufactured on acceptable terms or of acceptable quality,
the failure of which could lead to a loss of sales and revenues.
(11) WE ARE EXPOSED TO RISKS ASSOCIATED WITH PRODUCT LIABILITY CLAIMS IN THE
EVENT THAT THE USE OR INSTALLATION OF OUR PRODUCTS RESULTS IN INJURY OR DAMAGE.
Since the products we will install are devices that produce electricity and
heat, it is possible that users could be electrocuted, burned or otherwise
injured or even killed by such products, whether by product malfunctions,
defects, improper installation or other causes. As a distributor and installer
of products that are used by consumers, we face an inherent risk of exposure to
product liability claims or class action suits in the event that the use of the
solar power products we sell or install results in injury or damage. Moreover,
we may not have adequate resources in the event of a successful claim against
us. We intend to carry general liability coverage and umbrella liability
coverage. We also plan to obtain certificates of insurance from the property
owners where we operate and require all subcontractors to name us as an
additional insured and as a certificate holder on their policies. The successful
assertion of product liability claims against us could result in material
reputational and monetary damages and, if our insurance protection is
inadequate, could require us to make significant payments.
(12) OUR BUSINESS REQUIRES US TO PLACE OUR EMPLOYEES AND TECHNICIANS ON OUR
CUSTOMERS' PROPERTIES, WHICH COULD GIVE RISE TO CLAIMS AGAINST US.
If we are unsuccessful in our installation of products and provision of services
to customers, we could damage or cause a material adverse change to their
premises or property, which could give rise to claims against us. Any such
claims could be material in dollar amount and could significantly damage our
reputation. In addition, we are exposed to various risks and liabilities
associated with placing our employees and technicians in the homes and
workplaces of others, including possible claims of errors and omissions based on
the alleged actions of our personnel, including harassment, theft of client
property, criminal activity and other claims.
(13) IF PHOTOVOLTAIC TECHNOLOGY IS NOT SUITABLE FOR WIDESPREAD ADOPTION, OR
SUFFICIENT DEMAND FOR PHOTOVOLTAIC PRODUCTS DOES NOT DEVELOP OR TAKES LONGER TO
DEVELOP THAN WE ANTICIPATE, IT WILL IMPAIR OUR ABILITY TO EARN REVENUE AND
ACHIEVE PROFITABILITY.
The market for photovoltaic products is emerging and rapidly evolving, and its
future success is uncertain. If photovoltaic technology proves unsuitable for
widespread commercial deployment or if demand for photovoltaic products fails to
develop sufficiently, we would be unable to generate enough revenue to achieve
and sustain profitability. In addition, demand for photovoltaic products in
Canada and any other markets or geographic regions we target may not develop or
may develop more slowly than we anticipate. Many factors will influence the
widespread adoption of photovoltaic technology and demand for photovoltaic
products, including:
* fluctuations in economic and market conditions that affect the viability
of conventional and other renewable energy sources, such as increases or
decreases in the prices of oil and other fossil fuels;
* cost-effectiveness, performance and reliability of photovoltaic products
compared to conventional and other renewable energy sources and products;
* success of other renewable energy generation technologies such as
hydroelectric, wind, geothermal and biomass;
* deregulation of the electric power industry and broader energy industry;
* availability of government subsidies and incentives;
* capital expenditures by end users of photovoltaic products; and
* availability of raw materials used in the manufacture of photovoltaic
products.
7
(14) OUR GROWTH MAY NOT BE MANAGEABLE AND OUR BUSINESS COULD SUFFER AS A
RESULT.
Even if we are successful in developing our new business, failure to manage the
growth could adversely affect our operations. We may experience extended periods
of very rapid growth, which could place a significant strain on our management,
operating, financial and other resources. Our future performance will depend in
part on our ability to manage growth effectively. We must develop management
information systems, including operating, financial, and accounting systems,
improve project management systems and expand, train, and manage employees to
keep pace with growth. Our inability to manage growth effectively could
negatively affect results of operations and the ability to meet obligations as
they come due.
(15) ACQUISITIONS OF OTHER COMPANIES OR INVESTMENTS IN JOINT VENTURES WITH
OTHER COMPANIES COULD ADVERSELY AFFECT OUR OPERATING RESULTS, DILUTE OUR
STOCKHOLDERS' EQUITY, OR CAUSE US TO INCUR ADDITIONAL DEBT OR ASSUME CONTINGENT
LIABILITIES.
To increase our business and maintain our competitive position, we may in the
future acquire companies or engage in joint ventures. Acquisitions and joint
ventures involve a number of risks that could harm our business and result in
the acquired business or joint venture not performing as expected, including:
* insufficient experience with technologies and markets in which the
acquired business is involved, which may be necessary to successfully
operate and integrate the business;
* problems integrating the acquired operations, personnel, technologies or
products with the existing business and products;
* diversion of management time and attention from the core business to the
acquired business or joint venture;
* potential failure to retain key technical, management, sales and other
personnel of the acquired business or joint venture;
* difficulties in retaining relationships with suppliers and customers of
the acquired business, particularly where such customers or suppliers
compete with us;
* subsequent impairment of the acquired assets, including intangible assets;
and
* assumption of liabilities including, but not limited to, lawsuits, tax
examinations, warranty issues, etc.
To the extent that we invest in upstream suppliers or downstream channel
capabilities, we may experience competition or channel conflict with certain of
our existing and potential suppliers and customers. Specifically, existing and
potential suppliers and customers may perceive that we are competing directly
with them by virtue of such investments and may decide to reduce or eliminate
their supply volume to us or order volume from us.
(16) SINCE OUR BOARD OF DIRECTORS DOES NOT INTEND TO PAY DIVIDENDS ON OUR
COMMON STOCK IN THE FORESEEABLE FUTURE, IT IS LIKELY THAT INVESTORS WILL ONLY BE
ABLE TO REALIZE A RETURN ON THEIR INVESTMENT BY RESELLING SHARES PURCHASED
THROUGH THIS OFFERING.
We intend to retain our future earnings, if any, to support our operations and
to finance the growth and development of our business and do not expect to pay
cash dividends in the foreseeable future. As a result, the success of an
investment in our common stock will likely depend upon any future appreciation
in the value of our common stock. There is no guarantee that our common stock
will appreciate in value or even maintain its current trading price.
(17) IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL, WE MAY NOT BE ABLE
TO IMPLEMENT OUR BUSINESS PLAN AND OUR BUSINESS MAY FAIL.
Our future success depends, to a significant extent, on our ability to attract,
train and retain capable technical, sales and managerial personnel. Recruiting
and retaining capable personnel, particularly those with expertise in the solar
power industry, is vital to our success. There is substantial competition for
qualified technical and managerial personnel, and there can be no assurance that
we will be able to attract or retain the necessary persons. If we are unable to
attract and retain qualified employees, our business may fail and our investors
could lose their investment.
8
(18) A CONTROLLING PERCENTAGE OF OUR VOTING STOCK IS HELD BY TWO
STOCKHOLDERS, WHICH WILL ALLOW THEM TO MAKE KEY DECISIONS AND EFFECT
TRANSACTIONS WITHOUT FURTHER STOCKHOLDER APPROVAL.
Even if all the offered shares of our common stock are sold, two of our
stockholders (including our sole officer and director) will beneficially own, in
the aggregate, 70 per cent of our outstanding voting stock, on a fully diluted
basis. Accordingly, they will be able to control the outcome of stockholder
votes, including votes concerning the election of directors, the adoption or
amendment of provisions in our Articles of Incorporation and our Bylaws, and the
approval of mergers and other significant corporate transactions. These factors
may also have the effect of delaying or preventing a change in our management or
our voting control. Our Articles of Incorporation do not provide for cumulative
voting.
(19) WE MAY ISSUE SHARES OF PREFERRED STOCK WITH GREATER RIGHTS THAN OUR
COMMON STOCK, WHICH MAY ENTRENCH MANAGEMENT AND RESULT IN DILUTION OF OUR
STOCKHOLDERS' INVESTMENT.
Our Articles of Incorporation authorize the issuance of up to 50,000,000 shares
of preferred stock, par value $0.0001 per share. The authorized but unissued
preferred stock may be issued by our board of directors from time to time on any
number of occasions, without stockholder approval, as one or more separate
series of shares comprised of any number of the authorized but unissued shares
of preferred stock, designated by resolution of our board of directors stating
the name and number of shares of each series and setting forth separately for
such series the relative rights, privileges and preferences thereof, including,
if any, the: (i) rate of dividends payable thereon; (ii) price, terms and
conditions of redemption; (iii) voluntary and involuntary liquidation
preferences; (iv) provisions of a sinking fund for redemption or repurchase; (v)
terms of conversion to common stock, including conversion price, and (vi) voting
rights. Such preferred stock may enable our board of directors to hinder or
discourage any attempt to gain control of us by a merger, tender offer at a
control premium price, proxy contest or otherwise. Consequently, the preferred
stock could entrench our management. The market price of our common stock could
be depressed to some extent by the existence of the preferred stock. As of the
date of this prospectus, no shares of preferred stock have been issued.
(20) APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMIT THE
LIQUIDITY OF OUR COMMON STOCK, WHICH COULD MAKE IT DIFFICULT FOR OUR
STOCKHOLDERS TO SELL THEIR SHARES.
As the shares of our common stock are penny stock, many brokers are unwilling to
effect transactions in that common stock which can make it difficult for our
stockholders to sell their shares of our common stock if a market develops for
that common stock. Our common stock is defined as a penny stock pursuant to
Rule 3a51-1 pursuant to the Securities Exchange Act of 1934. Penny stock is
subject to Rules 15g-1 through 15g-10 of the Securities Exchange Act of 1934.
Those rules require broker-dealers, before effecting transactions in any penny
stock, to:
* Deliver to the customer, and obtain a written receipt for, a disclosure
document;
* Disclose certain price information about the penny stock;
* Disclose the amount of compensation received by the broker-dealer or any
associated person of the broker-dealer;
* Send monthly statements to customers with market and price information
about the penny stock; and
* In some circumstances, approve the purchasers account pursuant to certain
standards and deliver written statements to the customer with information
specified in those rules.
Rather than comply with those rules, many broker-dealers refuse to enter into
penny stock transactions which may make it more difficult for investors to sell
their shares of our common stock and thereby liquidate their investments.
9
FORWARD-LOOKING STATEMENTS
Information in this prospectus contains "forward looking statements" which can
be identified by the use of forward-looking words such as "believes",
"estimates", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", or "should" or other variations or similar words.
No assurance can be given that the future results anticipated by the
forward-looking statements will be achieved. These statements constitute
cautionary statements identifying important factors with respect to those
forward-looking statements, including certain risks and uncertainties that could
cause actual results to vary materially from the future results anticipated by
those forward-looking statements. Such statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks in the section titled "Risk Factors". Among the key factors that have a
direct bearing on our results of operations are the effects of various
governmental regulations, the fluctuation of our direct costs and the costs and
effectiveness of our operating strategy. Other factors could also cause actual
results to vary materially from the future results anticipated by those
forward-looking statements.
The forward-looking statements are based upon management's current views and
assumptions regarding future events and operating performance, and are
applicable only as of the dates of such statements. We do not have any
intention or obligation to update publicly any forward-looking statements,
whether as a result of new information, future events, changes in assumptions,
or otherwise.
10
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the account
of the selling stockholders named in this prospectus. As a result, all proceeds
from the sales of the common stock will go to the selling stockholders and we
will not receive any proceeds from the resale of the common stock by the selling
stockholders. We will, however, incur all costs associated with this
registration statement and prospectus.
DETERMINATION OF OFFERING PRICE
The price at which the shares may actually be sold will be determined by the
market price of the common stock as of the date of sale.
DILUTION
The shares to be sold by the selling stockholders are common stock that is
currently issued and outstanding. Accordingly, there will be no dilution to our
existing stockholders.
SELLING STOCKHOLDERS
This prospectus relates to the resale by the selling stockholders named below
from time to time of up to a total of 22,564,600 shares of our common stock that
were issued to the selling stockholders pursuant to transactions exempt from
registration under sections 4(2) and 4(6) of the Securities Act and Regulation D
and Regulation S promulgated thereunder. All of the common stock offered by
this prospectus is being offered by the selling stockholders for their own
accounts.
The following table sets forth certain information regarding the selling
stockholders and the shares offered by them in this prospectus. Beneficial
ownership is determined in accordance with the rules of the SEC. In computing
the number of shares beneficially owned by a selling stockholder and the
percentage of ownership of that selling stockholder, shares of common stock
underlying shares of convertible preferred stock, options or warrants held by
that selling stockholder that are convertible or exercisable, as the case may
be, within 60 days are included. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
selling stockholder. Each selling stockholder's percentage of ownership in the
following table is based upon 43,675,900 shares of common stock outstanding as
of December 7, 2010.
All information with respect to share ownership has been furnished by the
selling stockholders. The shares being offered are being registered to permit
public secondary trading of the shares and each selling stockholder may offer
all or part of the shares owned for resale from time to time. However, the
selling stockholders are under no obligation to sell all or any portion of such
shares nor are the selling stockholders obligated to sell any shares immediately
upon effectiveness of this prospectus. No selling stockholder is a registered
broker-dealer or an affiliate of a registered broker-dealer.
Except as noted below, none of the selling stockholders has had any position,
office, or other material relationship within the past three years with Novagen
Solar Inc., or any of its predecessors or affiliates.
The term "selling stockholders" also includes any transferees, pledges, donees,
or other successors in interest to the selling stockholders named in the table
below. To our knowledge, subject to applicable community property laws, each
person named in the table has sole voting and investment power with respect to
the shares of common stock set forth opposite such person's name. We will file a
supplement to this prospectus (or a post-effective amendment hereto, if
necessary) to name successors to any named selling stockholders who are able to
use this prospectus to resell the securities registered hereby.
11
--------------------------------------------------------------------------------
SHARES OF PERCENTAGE
BENEFICIAL COMMON BENEFICIAL OF COMMON
OWNERSHIP STOCK OWNERSHIP STOCK
BEFORE THE INCLUDED IN AFTER THE OWNED AFTER
NAME OFFERING PROSPECTUS OFFERING(1) OFFERING (2)
--------------------------------------------------------------------------------
Ophion Management Ltd.(3) 5,855,800 5,855,800 0 0.0%
Aberfoyle Investments LP(4) 2,170,000 1,570,000 600,000 1.4%
Fahrinsland Capital LLC(5) 15,738,800 15,138,800 600,000 1.4%
================================================================================
(1) It is assumed for the purposes of this table that the selling stockholders
will sell all of the shares included in this prospectus, and that none of
the selling stockholders will sell shares of common stock not being
included in this prospectus or purchases additional shares of common stock.
(2) Based on 43,675,900 shares outstanding as of December 7, 2010.
(3) Ophion Management Ltd. is controlled by Thomas Mills, our sole officer and
director, who will beneficially own 20.6% of our common stock after the
offering, assuming that Ophion Management Ltd. sells all of its shares
included in this prospectus.
(4) Aberfoyle Investments LP is controlled by John Allen.
(5) Fahrinsland Capital LLC is controlled by Lavinia Tom.
We may require the selling stockholders to suspend the sales of the securities
offered by this prospectus upon the occurrence of any event that makes any
statement in this prospectus or the related registration statement untrue in any
material respect or that requires the changing of statements in these documents
in order to make statements in those documents not misleading.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our shares trade under the symbol "NOVZ" on the NASD OTCBB and the Pink OTC
Markets OTCQB. Very limited trading activity with our common stock has occurred
during the past two years and the subsequent interim period; therefore, only
limited historical price information is available. The following table sets
forth the high and low bid prices of our common stock for the last two fiscal
years and subsequent interim period, as reported by Pink OTC Markets Inc. and
represents inter dealer quotations, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions:
--------------------------------
QUARTER ENDED HIGH LOW
--------------------------------
September 30, 2010 $0.10 $0.01
--------------------------------
June 30, 2010 $0.15 $0.05
--------------------------------
March 30, 2010 $0.15 $0.15
--------------------------------
December 31, 2009 $0.28 $0.05
--------------------------------
September 30, 2009 $0.50 $0.02
--------------------------------
June 30, 2009 $0.12 $0.01
--------------------------------
March 31, 2009 $0.10 $0.01
--------------------------------
December 31, 2008 $0.10 $0.10
--------------------------------
HOLDERS
On December 7, 2010, the stockholders' list of our shares of common stock showed
37 registered holders of our shares of common stock and 43,675,900 shares of
common stock outstanding. The number of record holders was determined from the
records of our transfer agent and does not include beneficial owners of shares
of common stock whose shares are held in the names of various security brokers,
dealers, and registered clearing agencies.
12
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
CONVERTIBLE SECURITIES
As part of our acquisition of NSC, on July 10, 2009 we issued a non-interest
bearing convertible demand debenture for $30,000 to one of its former
stockholders. The convertible debenture was surrendered, unredeemed and
unconverted, to the Company on December 1, 2009, as part of the rescission of
the acquisition of NSC.
As part of the rescission of our acquisition of NSC, on December 31, 2009 we
issued a non-interest bearing convertible demand note for $50,000 to NSC. We
paid the note in full on August 10, 2010.
We have not otherwise issued and do not have outstanding any other securities
convertible into shares of our common stock or any rights convertible or
exchangeable into shares of our common stock.
DESCRIPTION OF BUSINESS
OVERVIEW
Solar power systems are used in industrial, commercial and residential
applications to convert sunlight directly into electricity. Higher global energy
prices, increased environmental awareness and the desire for energy security are
accelerating the adoption of solar power. Governments around the world have also
implemented various tariffs, tax credits and other incentives designed to
encourage the use of solar power.
Novagen Solar Inc. (the "Company") is a full service solar power developer based
in Toronto, Ontario. Novagen will market, sell, design and install solar energy
plants across North America, with an emphasis on turnkey commercial power
systems, brownfield revitalization, land reclamation and off-grid community
developments. Novagen's flexible business model will utilize best-in-class
products in conjunction with innovative financial solutions to maximize solar
yield and generate substantial value for our stockholders while contributing to
energy security, social equity, and protection of the ecosystem upon which life
depends. Novagen is strategically positioned to capitalize on the
feed-in-tariff rates for photovoltaic energy currently in effect in Ontario,
Canada.
CORPORATE HISTORY
Novagen was incorporated in the State of Nevada on June 22, 2005 under the name
of Pickford Minerals Inc. We were originally engaged in the exploration of
mineral deposits in Labrador, Newfoundland, but due to higher than anticipated
costs were unable to implement our exploration program. Motivated by
developments in solar technology and believing that market conditions and
legislative incentives were favorable, our management made a strategic decision
in April 2009 to pursue opportunities in the solar industry.
On April 27, 2009, we entered into an agreement to acquire all the issued and
outstanding shares of Novagen Solar (Canada) Ltd., a privately held Canadian
corporation formed on February 14, 2009 ("NSC"). At the time of the
acquisition, NSC was engaged in the marketing, sale and distribution of a
portfolio of solar products based on leading technologies. On May 12, 2009, we
changed our name to Novagen Solar Inc. The acquisition of NSC closed on July
10, 2009. Since closing the acquisition of NSC, we have abandoned our mineral
exploration interests and focused our business operations exclusively on solar
energy.
The address for our head office is 1440-3044 Bloor Street West, Toronto, Ontario
M8X 2Y8. Our telephone number is (647) 456-9521. Our facsimile number is (647)
439-3785. Our common stock is quoted on the NASD Over-the-counter Bulletin
Board under the symbol "NOVZ".
13
PRODUCTS AND SERVICES
We intend to offer a number of solar products and services that seek to generate
revenue from initial installation activities, as well as potential recurring
revenue from an installed base of customers.
SOLAR POWER PLANT DEVELOPMENT
Commercial Solar Installations. We plan to develop, finance, construct and
operate commercial solar installations in Ontario and throughout the rest of
North America, with a focus on rooftop and open-space systems that produce one
Megawatt of electricity or less. This is an area of the market that we believe
to be underserved. We believe this sector offers faster deployment and better
prospects for generating additional business from customers with multiple
locations. We will offer property owners a comprehensive range of participation
levels and financing packages, including leasing arrangements, that will have
the broadest possible appeal. As part of our turnkey system, we will design and
specify the appropriate system, manage its installation and maintenance, and
arrange for all of the necessary financing. We will also take care of the
required permitting and apply for subsidies. Additionally, we will arrange for
monitoring and maintenance to ensure installed systems are kept in peak
condition throughout their expected life.
Solar Power Plants. We intend to develop large scale (in excess of one
Megawatt), ground-mounted solar power plants, either alone or in partnership
with others. We plan to seek regulatory approval for a 10 Megawatt installation
in Ontario, Canada, by the end of 2011.
Brownfield Revitalization Brownfields are real property, the expansion,
redevelopment, or reuse of which may be complicated by the presence or potential
presence of a hazardous substance, pollutant, or contaminant. Cleaning up and
reinvesting in these properties protects the environment, reduces blight, and
takes development pressures off greenspaces and working lands. The U.S.
Environmental Protection Authority estimates that there are more than 450,000
brownfields in the U.S. The number of brownfields in Canada is not known, but
according to the Canadian Brownfields Network, many are held by municipalities.
We believe that solar energy technologies are well suited for use at brownfield
sites because they require very little maintenance and can be installed on the
ground without penetrating the surface or disturbing existing contamination. We
intend to work with property owners and municipalities to assist in the
revitalization of brownfields by providing turnkey solar energy solutions
utilizing best-in-class photovoltaic arrays and building integrated solar energy
systems.
Land Reclamation. Land reclamation refers to the restoration of land damaged by
mining, erosion, or some other activity or process. The process of reclamation
includes maintaining water and air quality, minimizing flooding, erosion and
damage to wildlife and aquatic habitats caused by surface mining. In respect of
former mining sites, reclamation generally involves filling in excavations,
grading the land to avoid leaving steep slopes, placing the original topsoil on
the graded surface, and planting the topsoil with vegetation. Through a
collaboration with our industry partners, we plan to provide mining companies
with sustainable solar energy solutions for responsible exploration and mining
practices, such as providing solar power for mining operations and reclamation
activities, and post-reclamation solar power plant development.
Off-Grid Communities. According to Natural Resources Canada, there are over 300
remote communities in Canada with a total population of 200,000. These
communities are not connected to the North American electrical grid or piped
natural gas network and are permanent or long-term settlements. Many of them
are very dependent on imported oil and pay energy costs that can be up to ten
times higher than in the rest of Canada. We intend to assist Canada's remote
communities to deploy solar solutions appropriate for their needs, including the
development of solar power plants to provide clean, reliable energy. In
addition to providing turnkey systems, we will assist communities to establish
and nurture a maintenance support infrastructure for their power plant(s). Such
an infrastructure, while not complex, must be functional and appropriate for the
size, complexity and sophistication of the system deployed. We will provide
training for local residents, documentation matched to local capabilities,
spare-parts inventory and component resupply. By providing communities with
appropriate technology and infrastructure training, we will improve their
self-sufficiency while creating jobs and supporting the local economy.
14
MANUFACTURING
We intend to engage in manufacture of PV products within the next two years of
operations, with a focus on modules, inverters and mounting/tracking systems
utilized in our solar plants. The determination as to which products we will
seek to manufacture will depend on market response, the availability of raw
materials, available capital, and our ability to obtain manufacturing rights on
a profitable basis. There can be no assurance that we will have access to
sufficient capital to develop manufacturing operations. If we are unable to
establish manufacturing operations, we will be entirely dependent upon third
parties for the supply of products, which could limit our growth and results of
operations.
COMPETITION
The solar market is intensely competitive and rapidly evolving. The number of
solar product resellers and integrators has rapidly increased due to the growth
of actual and forecast demand for solar products and the relatively low barriers
to entry. We have only recently commenced operations, and do not presently hold
a significant competitive market position in the solar market. Many of our
competitors are large, well established companies with substantially larger
operating staffs and greater capital resources than we have, which have been
engaged in the solar energy business for a much longer time than we have.
Our ability to compete will depend upon our ability to establish supply
relationships with wholesalers, OEM distributors and independent manufacturers
providing the most efficient solutions. Specifically, we will compete with
major PV module manufacturers, such as Sharp Corporation, Suntech Power, BP
Solar, GE Energy, Mitsubishi, and Sanyo; and integrated manufacturers of PV
products such as First Solar, Inc., Kyocera Corporation, Renewable Energy
Corporation, Solar World AG and Sun Power Corporation. We will also compete
with numerous regional and national solar installation companies, including
First Solar Inc., Skypower, Pod Generating Group and CarbonFree Technology Inc.
We also expect to compete with new entrants to the solar market, including those
that offer more advanced technological solutions or that have greater financial
resources. Furthermore, the entire solar industry also faces competition from
conventional energy and non-solar renewable energy providers.
We believe that we will be able to successfully compete by integrating products
with our installation services to provide turnkey solar power solutions. By
providing strong technical, financial and regulatory expertise, while
capitalizing on our management's relationships with government, suppliers and
enterprise-level end users, we believe that Novagen will be able to establish
itself in North America as a significant full-service solar power developer.
SUPPLIERS
By establishing strategic partnerships with major component suppliers we will
ensure that every new project is designed and installed with the most advanced
technology appropriate for our customers. We will purchase PV panels used in
our solar power systems principally from PowerCom Co. Inc., Green Energy
Technology Inc., Day4Energy Inc., Kyocera Solar and Suntech America and we
purchase inverters principally from SatCon Power Systems, which components will
represent approximately two-thirds of our component requirements. Hardware and
other materials will be readily available for off-the-shelf purchase.
We intend to remain independent of any one technology or equipment vendor to
ensure that we will be able to offer our customers turnkey solutions best suited
to their individual needs. As such, we do not have supply agreements with our
suppliers, except for purchase orders on a case-by-case basis. Although PV
panels are manufactured world-wide, we are subject to market price fluctuation
and vendor lead time and inventory for the components that we purchase.
MARKETING
We will sell our solar power systems directly to commercial, industrial and
governmental customers, through an internal sales and marketing staff. We may
appoint additional sales representatives as independent contractors to solicit
business and identify potential development opportunities. We expect to rely
heavily on the relationships between our management and end users in our target
market.
We believe that, depending upon the size of the projects, it is likely that a
significant portion of our initial business will derive from a small number of
customers. There can be no assurance that the loss of any such customer would
not adversely affect our business or results of operations. We expect that our
customer mix will change as we expand our operations.
15
REGULATIONS
The market for electricity generation products is heavily influenced by
national, regional and local government regulations and policies concerning the
electric utility industry, as well as internal policies and regulations
promulgated by electric utilities. These regulations and policies often relate
to electricity pricing and technical interconnection of customer-owned
electricity generation. In Canada and in a number of other countries, these
regulations and policies are being modified and may continue to be modified.
Customer purchases of, or further investment in the research and development of,
alternative energy sources, including solar power technology, could be deterred
by these regulations and policies, which could result in a significant reduction
in the potential demand for our solar products.
Our operations are subject to a variety of national, federal, regional and local
laws, rules and regulations relating to worker safety and the use, storage,
discharge and disposal of environmentally sensitive materials. Because we
outsource and do not manufacture our solar power systems, we do not use,
generate, store or discharge toxic, volatile or otherwise hazardous chemicals
and wastes. We believe that we are in compliance in all material respects with
all laws, rules, regulations and requirements that affect our business.
Further, we believe that compliance with such laws, rules, regulations and
requirements does not impose a material impediment on our ability to conduct
business.
GOVERNMENT SUBSIDIES AND INCENTIVES
We believe that economic and national security issues, technological advances,
environmental regulations seeking to limit emissions by fossil fuel, air
pollution regulations restricting the release of greenhouse gasses, aging
electricity transmission infrastructure and depletion and limited supply of
fossil fuels, has made reliance on traditional sources of fuel for generating
electricity less attractive. Government policies, in the form of both regulation
and incentives, have accelerated the adoption of solar technologies by
businesses and consumers. For example, in the United States, the 2005 energy
bill enacted a 30% investment tax credit for solar, and in January 2006
California approved the largest solar program in the country's history that
provides for long term subsidies in the form of rebates to encourage use of
solar energy where possible. On October 1, 2009, the Province of Ontario
approved the highest feed-in-tariff subsidies in North America at that time.
Currently, the cost of solar power exceeds the cost of power furnished by the
electric utility grid in many locations. Various subsidies and tax incentive
program exist at the national, regional and local levels to encourage the
adoption of solar power including the following:
Capital Cost Rebates - provide funds to customers based on the cost of size of a
customer's solar power system.
Performance-Based Incentives - provide funding to customers based on the energy
produced by their solar energy system.
Feed-In Tariff Subsidies - government imposed prices set above market rates
(which may differ by system size or application) that utilities are required to
pay for renewable electricity generated by end-users for a guaranteed period of
time.
Tax Credits - reduce a customer's taxes at the time the taxes are due.
Net Metering - enables end-users to sell any excess electricity they generate
from solar energy to their local utility in exchange for a credit against their
utility bills (usually combined with rebates).
Renewable Portfolio Standards - government mandates that a certain portion of
electricity delivered to customers by utilities come from a set of eligible
renewable energy resources, and in some instances, that a portion of the
renewable energy quota must be generated by solar energy.
If any of these subsidies or incentives are discontinued, reduced or
substantially modified, if growth in any such subsidies or incentives is
reduced, or if renewable portfolio standards or similar production requirements
are changed or eliminated, demand for our solar products could decline or never
develop, and our results of operations and financial condition could be
materially and adversely affected as a result.
16
Despite the benefits of solar power, there are also certain risks and challenges
faced by solar power. Solar power is heavily dependent on government subsidies
to promote acceptance by mass markets. We believe that the near-term growth in
the solar energy industry depends significantly on the availability and size of
these government subsidies and on the ability of the industry to reduce the cost
of generating solar electricity. The market for solar energy products is, and
will continue to be, heavily dependent on public policies that support growth of
solar energy. There can be no assurance that such policies will continue. Any
decrease in the level of rebates, incentives or other government support for
solar energy would have an adverse affect on our ability to sell our products.
Incentives vary by country, region, and electric utility. Within the United
States, one national incentive is the federal 30% investment tax credit ("ITC")
and special depreciation rules. The ITC credit is capped at $2,000 for
residential customers while commercial customers are not subjected to any cap
while federally approved accelerated depreciation is limited to commercial
customers. The economic value in each given situation of the ITC and
accelerated depreciation depends on the tax status of the customer.
Additionally, several states offer various tax credits to commercial and
residential customers. Residential customers and commercial customers are often
eligible for different non-tax incentives such as rebates, grants, performance
based incentives and feed-in-tariffs, which vary greatly from state to state and
utility to utility and are often tiered according to a project's size and
eligibility. Support for solar energy projects outside the United States also
vary greatly based on different programs in each country.
Within Canada, the Province of Ontario has implemented a program for
feed-in-tariff subsidies ("FiT"). Under the FiT program, the Provincial
electric utility will purchase power generated through PV at premium rates for a
period of 20 years, guaranteed by the Provincial Government. Additional
provincial policies that will encourage the development of solar energy in
Canada are expected in 2010.
BUILDING CODES
We are required to obtain building permits and comply with local ordinances and
building codes for each project, the cost of which is included in our estimated
costs for each proposal.
RESEARCH AND DEVELOPMENT
We have not undertaken any research or development over the last two fiscal
years. We intend to establish cooperative research and development agreements
with certain universities, customers and suppliers with a view to developing new
solar products to which we will have sales rights. Our participation in any
such arrangement may be limited to financing and administration. We may conduct
the research or development ourselves, or in conjunction with others. When we
collaborate on the development of any intellectual property, we will seek
ownership of the intellectual property or the exclusive worldwide right to
exploit such intellectual property. We have not established a budget for
contributions to research and development. Where appropriate, we may also
acquire, commercialize and improve new or existing technologies.
INTELLECTUAL PROPERTY
We do not own any of the intellectual property rights to any of the products
that we sell.
ENVIRONMENTAL
Our planned operations are currently limited to the development and operation of
solar power stations. As such, we are not aware of any environmental laws that
are applicable to our business, or which could result in any material compliance
costs to us or effects on our business.
EMPLOYEES
We currently have no employees other than our sole officer and director, who
have not been paid for his services. As we implement our business plan, we
expect to add significant numbers of employees. We anticipate that by December
31, 2010, we will have approximately five full-time employees, of which two will
be sales-related, one will be an electrical engineer, one will be executive and
one will be administrative.
By March 31, 2011, we intend to engage the services of a construction
professional to oversee power plant development. We may also retain qualified
persons from time to time on a contract basis to further assist in power plant
development. We plan to keep our operating costs low by using supplemental
contract labor and subcontracting portions of work to installers and other
specialists, as is common in the construction industry.
17
By June 30, 2011, we intend to engage two new executive officers, being the
President and the Chief Financial Officer, and an additional external director.
While we do not presently have any employment agreements with our officers and
directors, we plan to enter into agreements with each of our key employees,
including executive officers, by June 30, 2011. We do not presently have
pension, health, annuity, insurance, stock options, profit sharing or similar
benefit plans; however, we may adopt such plans in the future. There are
presently no personal benefits available to our officers and directors. See
"Executive Compensation".
PROPERTY
We do not presently own or have an interest in any real property.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR PLAN OF OPERATION SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE RELATED NOTES. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE
RISKS AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. OUR ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS,"
"DESCRIPTION OF BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Until July 10, 2009, our business plan was to explore our mineral property to
determine whether it contained commercially exploitable reserves of valuable
minerals. Our plan was to commence a mineral exploration program that would
have involved expanded geological mapping, and geochemical sampling that would
cover previously established grid areas, as well as other prospective sites that
might have been developed to delineate either base metals or industrial
minerals. Due to higher than anticipated fuel costs, we were unable to commence
our exploration program as planned in 2008. By the second quarter of 2009, we
had insufficient capital to initiate and complete our program. In light of
market conditions, our management determined in our second fiscal quarter of
2009 that it was in our best interests to review opportunities in the field of
solar energy.
On April 27, 2009, we entered into the Reorganization Agreement with the
stockholders of NSC to acquire all the issued and outstanding shares of NSC.
NSC was the exclusive sales agent in Canada of RSi, and a non-exclusive sales
agent for RSi everywhere else in the world. The acquisition of NSC was closed
on July 10, 2009. As a result of the acquisition, we abandoned our mineral
exploration interests and began pursuing the marketing, sale and distribution of
PV products as our primary business.
On November 10, 2009, the Company agreed with NSC and RSi to terminate the Sales
License granting NSC the right to sell photovoltaic products distributed by RSi.
The termination released all parties to the sales license from all claims and
obligations arising from the sales license or the termination thereof. On
December 1, 2009, the acquisition of NSC was rescinded, resulting in all issued
and outstanding shares of NSC being returned to the original NSC stockholders in
exchange for all securities issued by the Company as part of the acquisition.
As part of the rescission of our acquisition of NSC, on December 31, 2009 we
issued a non-interest bearing convertible demand note for $50,000 to NSC for the
acquisition of the solar panels. On August 10, 2010, we repaid the demand note
in full.
Our business is in the early stages of development. While we presently have
sufficient funds to sustain minimal operations for the next 12 months, we do not
currently have any cash flows from operations and our available capital is
insufficient to implement our business plan and fund business operations long
enough to become cash flow positive or to achieve profitability. Our management
believes that a minimum of $600,000 will be required to execute our business
plan and secure development and regulatory approvals for solar power stations
over the next twelve months. Our currently available capital and cash flows
from operations are insufficient to execute our current business plan and fund
business operations long enough to become cash flow positive or to achieve
profitability. Our ultimate success will depend upon our ability to raise
capital.
We will be required to pursue sources of additional capital through various
means, including joint venture projects and debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, and the issuance of
warrants or other derivative securities, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital and
financing, including investment banking fees, legal fees, accounting fees,
printing and distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities we may issue,
such as convertible notes and warrants, which will adversely impact our
financial condition.
18
Our ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the renewable energy
industry, and the fact that we have not been profitable, which could impact the
availability or cost of future financings. If the amount of capital we are able
to raise from financing activities, together with our revenue from operations,
is not sufficient to satisfy our capital needs, even to the extent that we
reduce our operations accordingly, we may be required to cease operations.
There is no assurance that we will be able to obtain financing on terms
satisfactory to use, or at all. We do not have any arrangements in place for
any future financing. If we are unable to secure additional funding, we may
cease or suspend operations. We have no plans, arrangements or contingencies in
place in the event that we cease operations.
We have not earned revenue since inception and we presently have no solar power
installations in operation. Since inception, we have suffered recurring losses
and net cash outflows from operations, and our activities have been financed
from the proceeds of share subscriptions and loans from management and
non-affiliated third parties. We expect to continue to incur substantial losses
to implement our business plan. We have not established any other source of
equity or debt financing and there can be no assurance that we will be able to
obtain sufficient funds to implement our business plan. As a result of the
foregoing, our auditors have expressed substantial doubt about our ability to
continue as a going concern in our financial statements for the year ended
December 31, 2009. If we cannot continue as a going concern, then investors may
lose all of their investment.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2009 COMPARED TO THE YEAR ENDED DECEMBER 31, 2008
We recorded a net loss of $396,673 for the year ended December 31, 2009,
compared with a net loss of $29,599 for the year ended December 31, 2008.
Operating expenses consisted of consulting fees, professional fees, interest
expenses and other general corporate expenses. Operating expenses were $396,673
for the year ended December 31, 2009, compared with $29,599 in operating
expenses for the year ended December 31, 2008. The increase was a result of
costs associated with our change of business and consulting fees associated with
the exploration of our mineral properties.
Marketing expenses for the 2009 fiscal year were $184,591, compared to Nil for
fiscal 2008. Marketing expenses included all costs associated with exhibiting
at the ICSC trade show in Las Vegas, Nevada and the Intersolar trade shows in
Munich, Germany and San Francisco, California.
Director fees in fiscal 2009 were $110,000, compared to Nil for the 2008 fiscal
year. The increase was due to issuance of 200,000 common stock at a price of
$0.55 per share to a director of the Company.
Professional fees were $17,905 for the year ended December 31, 2009, compared
with $24,312 for the year ended December 31, 2008. Professional fees incurred
in fiscal year 2009 consist of accounting fees associated with our acquisition
of NSC, and the audited financial statements and periodic reporting obligations.
Consulting fees for the year ended December 31, 2009 were $2,300, compared with
$1,412 for the year ended December 31, 2008. Consulting fees incurred in fiscal
2009 were due to assistance with the preparation of our quarterly financial
reports.
General office expenses were $7,684 for the year ended December 31, 2009,
compared with office expenses of $2,064 for the year ended December 31, 2008.
The increase was due to increase in operating activities in 2009.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2010 COMPARED TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2009
We realized a net loss of $46,448 during the nine month period ended September
30, 2010. Operating expenses during the period consisted of $33,751 in
professional fees, $3,917 in consulting fees, $6,389 in office expenses and a
foreign exchange loss of $2,391.
Operating expenses for the nine month period ended September 30, 2009 were
$407,731 and were attributable to $184,590 in marketing expenses, $112,300 in
consulting fees, the write-off of $50,000 in equipment, $16,583 in travel
expenses, $29,030 in professional fees, and $15,228 in office and other general
corporate expenses.
19
QUARTER ENDED SEPTEMBER 30, 2010 COMPARED TO THE QUARTER ENDED SEPTEMBER 30,
2009
We realized a net loss of $32,484 during the three month period ended September
30, 2010. Operating expenses during the period consisted of $25,132 in
professional fees, $3,917 in consulting fees, $1,654 in office expenses and a
foreign exchange loss of $1,781.
Operating expenses for the three month period ended September 30, 2009 were
$325,232 and were attributable to $130,948 in marketing expenses, $112,300 in
consulting fees, the write-off of $50,000 in equipment, $16,583 in travel
expenses, $8,771 in professional fees, and $6,630 in office and other general
corporate expenses.
LIQUIDITY AND CAPITAL RESOURCES.
As of September 30, 2010, our total liabilities decreased to $4,054 which
comprised of $2,706 in trade debt arising from professional fees and $1,348
owing to a director for expenses incurred on our behalf. As of December 31,
2009, total liabilities were $248,501 which comprised $155,850 in trade debt,
$50,000 in convertible note and $42,651 owning to a director for expenses
incurred on our behalf. On August 10, 2010, we repaid the convertible note
owing to NSC in full.
On August 16, 2010, we issued 22,564,600 shares of our common stock in full and
final satisfaction of $225,646 in debt, of which $58,558 was owed to our sole
director and officer. Our management believes that the retirement of the
outstanding debt obligations will improve Novagen's ability to obtain financing.
On August 16, 2010, Novagen issued a total of 10,000,000 shares of our common
stock at $0.01 per share for gross proceeds of $100,000.
LEGAL PROCEEDINGS
Neither Novagen Solar Inc., nor any of its officers or directors is a party to
any material legal proceeding or litigation and such persons know of no material
legal proceeding or contemplated or threatened litigation. There are no
judgments against Novagen Solar Inc. or its officers or directors. None of our
officers or directors have been convicted of a felony or misdemeanour relating
to securities or performance in corporate office.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following sets forth our directors, executive officers, promoters and
control persons, their ages, and all offices and positions held. Directors are
elected for a period of one year and thereafter serve until their successor is
duly elected by the stockholders. Officers and other employees serve at the
will of the Board of Directors.
--------------------------------------------------------------------------------
TERM PERIOD SERVED AS
NAME AND ADDRESS POSITION AGE DIRECTOR/OFFICER
--------------------------------------------------------------------------------
Thomas Mills Chief Executive Officer, 42 2009 to present
1440-3044 Bloor St. W. President,
Toronto, Ontario Chief Financial Officer
M8X 2Y8 and a director
================================================================================
Thomas Mills is presently our sole officer and a director since July 10, 2009.
Mr. Mills was the co-founder of Thrust Energy Corp., an oil and gas exploration
company in June 2005, and has been its Chief Executive Officer, President, Chief
Financial Officer and a director since inception. Mr. Mills was also the
co-founder of AMP Productions Ltd., a motion picture production company in March
2003, and has served as its Chief Executive Officer, President, Chief Financial
Officer and a director since its inception. Mr. Mills was the co-founder of
Kingston Mines Ltd., a mineral exploration company in June 2005, and was its
Vice-President, Chief Financial Officer and a director until April 2008. Mr.
Mills also served as the President of Kingston Mines Ltd. from January 2008
until April 2008. From 2001 to September 2004, Mr. Mills was the Chief
Executive Officer and President of Torrent Energy Corp., a natural gas
exploration company, acting as its Chief Financial Officer from March 2004 to
September 2004. He received his Bachelor of Laws degree from the University of
British Columbia in 1996, and holds a Bachelor of Arts degree with an emphasis
on management and organizational behavior, obtained from the University of
Waterloo, Waterloo, Ontario in 1992. Mr. Mills was called to the Bar of British
Columbia in 1997, and remains a part-time practicing member.
20
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past ten years none of our directors, executive officers, promoters
or control persons have:
(1) had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
(2) been convicted in a criminal proceeding or subject to a pending criminal
proceeding;
(3) been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) been found by a court of competent jurisdiction in a civil action, the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
COMMITTEES OF THE BOARD
All proceedings of the board of directors for the fiscal year ended December 31,
2009 were conducted by resolutions consented to in writing by our board of
directors and filed with the minutes of the proceedings of our board of
directors. Novagen does not have nominating, compensation or audit committees
or committees performing similar functions nor does our company have a written
nominating, compensation or audit committee charter. Our board of directors does
not believe that it is necessary to have such committees because it believes
that the functions of such committees can be adequately performed by the board
of directors.
Novagen does not have any defined policy or procedure requirements for
stockholders to submit recommendations or nominations for directors. The board
of directors believes that, given the stage of our development, a specific
nominating policy would be premature and of little assistance until our business
operations develop to a more advanced level. Our company does not currently have
any specific or minimum criteria for the election of nominees to the board of
directors and we do not have any specific process or procedure for evaluating
such nominees. The board of directors will assess all candidates, whether
submitted by management or stockholders, and make recommendations for election
or appointment.
A shareholder who wishes to communicate with our board of directors may do so by
directing a written request addressed to our President, Thomas Mills, at the
address appearing on the first page of this registration statement.
AUDIT COMMITTEE FINANCIAL EXPERT
We do not have a standing audit committee. Our directors perform the functions
usually designated to an audit committee. Our board of directors has determined
that we do not have a board member that qualifies as an "audit committee
financial expert" as defined in Item 407(d)(5) of Regulation S-K, nor do we have
a board member that qualifies as "independent" as the term is used in Item
7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as
amended, and as defined by Rule 4200(a)(14) of the NASD Rules.
We believe that our board of directors is capable of analyzing and evaluating
our financial statements and understanding internal controls and procedures for
financial reporting. Our board of directors does not believe that it is
necessary to have an audit committee because management believes that the
functions of an audit committees can be adequately performed by the board of
directors. In addition, we believe that retaining an independent director who
would qualify as an "audit committee financial expert" would be overly costly
and burdensome and is not warranted in our circumstances given the stage of our
development and the fact that we have not generated any positive cash flows from
operations to date.
As we generate revenue in the future, we intend to form a standing audit
committee and identify and appoint a financial expert to serve on our audit
committee.
21
INDEMNIFICATION
Under our Articles of Incorporation and Bylaws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his position, if he acted in good faith and in
a manner he reasonably believed to be in our best interest. We may advance
expenses incurred in defending a proceeding. To the extent that the officer or
director is successful on the merits in a proceeding as to which he is to be
indemnified, we must indemnify him against all expenses incurred, including
attorney's fees. With respect to a derivative action, indemnity may be made only
for expenses actually and reasonably incurred in defending the proceeding, and
if the officer or director is judged liable, only by a court order. The
indemnification is intended to be to the fullest extent permitted by the laws of
the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of
1933, which may be permitted to directors or officers under Nevada law, we are
informed that, in the opinion of the Securities and Exchange Commission,
indemnification is against public policy, as expressed in the Act and is,
therefore, unenforceable.
EXECUTIVE COMPENSATION
To date we have no employees other than our sole officer and director. No
compensation has been awarded, earned or paid to our sole officer and director.
We have no employment agreements with our officer. We do not contemplate
entering into any employment agreements until such time as we have positive cash
flows from operations.
There is no arrangement pursuant to which any of our directors has been or is
compensated for services provided as one of our directors.
There are no stock option plans, retirement, pension, or profit sharing plans
for the benefit of our officers or directors. We do not have any long-term
incentive plans that provide compensation intended to serve as incentive for
performance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of the rescission of the acquisition of NSC, we agreed to reimburse NSC
for $50,000 in costs and expenses incurred by it in the acquisition of its sales
license from RSi. On December 31, 2009, we issued to NSC a non-interest bearing
convertible debenture in an amount equal to $50,000. On August 10, 2010, we
repaid the debenture in full. Thomas Mills, our sole director and officer, was
a controlling shareholder of NSC until July 1, 2010, when he divested himself of
all beneficial ownership of it.
As at August 1, 2010, the Company owed $58,558 to Thomas Mills, our sole officer
and director, for disbursements he incurred on behalf of the Company. On August
4, 2010, we agreed to issue 5,855,800 shares of our common stock to Ophion
Management Ltd., a company controlled by Mr. Mills, at a price of $0.01 per
share, in full and final settlement of the amount owing to Mr. Mills. The
shares were issued on August 16, 2010.
On August 4, 2010, we accepted a subscription for 2,300,000 shares of our common
stock from Gisela Mills at $0.01 per share, for gross proceeds of $23,000. The
shares were issued on August 16, 2010. Gisela Mills is the mother of Thomas
Mills, our sole officer and director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 7, 2010, information concerning
ownership of the Company's securities by (i) each Director, (ii) each executive
officer, (iii) all directors and executive officers as a group; and (iv) each
person known to the Company to be the beneficial owner of more than five percent
of each class:
The number and percentage of shares beneficially owned includes any shares as to
which the named person has sole or shared voting power or investment power and
any shares that the named person has the right to acquire within 60 days.
22
--------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP
COMMON PERCENTAGE
NAME OF BENEFICIAL OWNER SHARES OF CLASS
--------------------------------------------------------------------------------
Thomas Mills 14,855,800 34.0%
--------------------------------------------------------------------------------
All directors and executive officers, as a group 14,855,800 34.0%
--------------------------------------------------------------------------------
Gisela Mills (1) 2,840,000 6.5%
Fahrinsland Capital LLC 15,738,800 36.0%
--------------------------------------------------------------------------------
All beneficial owners of more than
5% of the Company's common stock, as a group 18,578,800 42.5%
================================================================================
(1) Gisela Mills is the mother of Thomas Mills, our sole officer and
director.
The mailing address for all directors, executives officers and beneficial owners
of more than 5% of our common stock is 3044 Bloor Street West, Suite 1440,
Toronto, ON M8X 2Y8.
Unless otherwise noted, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them. For purposes hereof, a person is considered to be
the beneficial owner of securities that can be acquired by such person within 60
days from the date hereof, upon the exercise of warrants or options or the
conversion of convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that any such warrants, options or
convertible securities that are held by such person (but not those held by any
other person) and which can be exercised within 60 days from the date hereof,
have been exercised.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, donees, transferees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded or quoted or in private transactions. These sales
may be at fixed or negotiated prices. The selling stockholders may use any one
or more of the following methods when selling shares:
* ordinary brokerage transactions and transactions in which the
broker-dealer solicits investors;
* block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
* purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
* an exchange distribution in accordance with the rules of the applicable
exchange;
* privately negotiated transactions;
* to cover short sales made after the date that this registration statement
is declared effective by the Commission;
* broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
* a combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with FINRA IM-2440.
23
In connection with the sale of the common stock or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of our
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are involved in
selling the shares registered hereunder may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each selling stockholder has
informed us that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute our common
stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).
We are required to pay all fees and expenses incident to the registration of the
offered shares, but we will not receive any proceeds from the sale of the
shares. We have agreed to indemnify the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.
Because selling stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the selling
stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the date on
which the offered shares may be resold by the selling stockholders without
registration and without regard to any volume or manner-of-sale limitations by
reason of Rule 144, without the requirement for the company to be in compliance
with the current public information under Rule 144 under the Securities Act or
any other rule of similar effect or (ii) all of the shares have been sold
pursuant to this prospectus or Rule 144 under the Securities Act or any other
rule of similar effect. The offered shares will be sold only through registered
or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the offered shares may not be sold unless
they have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and is
complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the offered shares may not simultaneously engage
in market making activities with respect to the common stock for the applicable
restricted period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the common stock by the selling stockholders or any other
person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
We are authorized to issue up to 100,000,000 shares of common stock, par value
$0.0001 per share. Each outstanding share of common stock entitles the holder
thereof to one vote per share on all matters submitted to a stockholder vote.
Holders of our common stock do not have pre-emptive rights to purchase shares in
any future issuance of our common stock. Our common stock does not carry any
conversion rights and there are no redemption provisions.
Our common stock does not carry any cumulative voting rights. As a result,
holders of a majority of the shares of common stock voting for the election of
directors can elect all of our directors. At all meetings of stockholders,
except where otherwise provided by statute or by our Articles of Incorporation
or by our Bylaws, the presence in person or by proxy duly authorized by holders
of not less than twenty percent (20%) of the outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of business. A
vote by the holders of a majority of our outstanding shares is required to
effect certain fundamental corporate changes such as liquidation, merger or an
amendment to our Articles of Incorporation.
24
Holders of our common stock are entitled to share in all dividends that the
board of directors, in its discretion, declares from legally available funds.
In the event of liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock. There are no provisions for a sinking
fund in respect of our common stock.
PREFERRED STOCK
We are authorized to issue up to 50,000,000 shares of preferred stock, par value
$0.0001 per share, in one or more classes or series as may be determined by our
board of directors, who may establish, from time to time, the number of shares
to be included in each series, may fix the designation, powers, preferences and
rights of the shares of each such series and any qualifications, limitations or
restrictions thereof. Any preferred stock so issued by the board of directors
may rank senior to the common stock with respect to the payment of dividends or
amounts upon liquidation, dissolution or winding up of us, or both. Moreover,
under certain circumstances, the issuance of preferred stock or the existence of
the unissued preferred stock might tend to discourage or render more difficult a
merger or other change of control.
No shares of our preferred stock are currently outstanding. The issuance of
shares of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of our outstanding voting stock.
ANTI-TAKEOVER EFFECTS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
Our Articles of Incorporation and bylaws contain certain provisions that may
have anti-takeover effects, making it more difficult for or preventing a third
party from acquiring control of Novagen or changing its board of directors and
management. According to our bylaws and Articles of Incorporation, neither the
holders of our common stock nor the holders of our preferred stock have
cumulative voting rights in the election of our directors. The combination of
the present ownership by a few stockholders of a significant portion of our
issued and outstanding common stock and lack of cumulative voting makes it more
difficult for other stockholders to replace our board of directors or for a
third party to obtain control of Novagen by replacing its board of directors.
NEVADA ANTI-TAKEOVER LAWS
Business Combinations
The "business combination" provisions of Sections 78.411 to 78.444, inclusive,
of the NRS, prohibit a Nevada corporation with at least 200 stockholders from
engaging in various "combination" transactions with any interested stockholder:
for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless the transaction is approved by
the board of directors prior to the date the interested stockholder obtained
such status; or after the expiration of the three-year period, unless:
* the transaction is approved by the board of directors or a majority of the
voting power held by disinterested stockholders, or
* if the consideration to be paid by the interested stockholder is at least
equal to the highest of: (a) the highest price per share paid by the
interested stockholder within the three years immediately preceding the
date of the announcement of the combination or in the transaction in which
it became an interested stockholder, whichever is higher, (b) the market
value per share of common stock on the date of announcement of the
combination and the date the interested stockholder acquired the shares,
whichever is higher, or (c) for holders of preferred stock, the highest
liquidation value of the preferred stock, if it is higher.
25
A "combination" is defined to include mergers or consolidations or any sale,
lease exchange, mortgage, pledge, transfer or other disposition, in one
transaction or a series of transactions, with an "interested stockholder"
having: (a) an aggregate market value equal to 5% or more of the aggregate
market value of the assets of the corporation, (b) an aggregate market value
equal to 5% or more of the aggregate market value of all outstanding shares of
the corporation, or (c) 10% or more of the earning power or net income of the
corporation.
In general, an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 10% or more of
a corporation's voting stock. The statute could prohibit or delay mergers or
other takeover or change in control attempts and, accordingly, may discourage
attempts to acquire our company even though such a transaction may offer our
stockholders the opportunity to sell their stock at a price above the prevailing
market price.
Control Share Acquisitions.
The "control share" provisions of Sections 78.378 to 78.3793, inclusive, of the
NRS, which apply only to Nevada corporations with at least 200 stockholders,
including at least 100 stockholders of record who are Nevada residents, and
which conduct business directly or indirectly in Nevada, prohibit an acquirer,
under certain circumstances, from voting its shares of a target corporation's
stock after crossing certain ownership threshold percentages, unless the
acquirer obtains approval of the target corporation's disinterested
stockholders. The statute specifies three thresholds: one-fifth or more but less
than one-third, one-third but less than a majority, and a majority or more, of
the outstanding voting power. Once an acquirer crosses one of the above
thresholds, those shares in an offer or acquisition and acquired within 90 days
thereof become "control shares" and such control shares are deprived of the
right to vote until disinterested stockholders restore the right. These
provisions also provide that if control shares are accorded full voting rights
and the acquiring person has acquired a majority or more of all voting power,
all other stockholders who do not vote in favor of authorizing voting rights to
the control shares are entitled to demand payment for the fair value of their
shares in accordance with statutory procedures established for dissenters'
rights.
TRANSFER AGENT
Our transfer agent and registrar is Holladay Stock Transfer, Inc., located at
2939 North 67th Place, Scottsdale, Arizona 85251.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the NRS, our Articles
of Incorporation and our Bylaws. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors,
officers and controlling persons pursuant to our Articles of Incorporation or
provisions of the Nevada Business Corporations Act, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question, whether
or not such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
LEGAL MATTERS
The validity of the shares of common stock offered by us was passed upon by
Conrad C. Lysiak, Attorney and Counsellor at law in Spokane, Washington.
EXPERTS
Our financial statements as of December 31, 2009 appearing in this prospectus
and registration statement have been audited by Chang Lee LLP, Chartered
Accountants, an independent registered public accounting firm and are included
in reliance upon the report therein included, given on the authority of such
firm as experts in auditing and accounting.
No expert named in the offering statement, nor any partner, officer, director or
employee thereof, has a material interest in the issuer or any of its parents or
subsidiaries or was connected with the issuer or any of its subsidiaries as a
promoter, underwriter, voting trustee, director, officer or employee.
26
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
In January 2008, we engaged the services of Chang Lee LLP (formerly Vellmer &
Chang) Chartered Accountants, of Vancouver, British Columbia, to provide an
audit of our financial statements for the period from June 22, 2005 (inception)
to December 31, 2007. This is our first auditor. We have no disagreements with
our auditor through the date of this prospectus.
AVAILABLE INFORMATION
We have filed a registration statement on Form S-1 under the Securities Act of
1933 with the Securities and Exchange Commission with respect to the shares of
our common stock offered through this prospectus. This prospectus is filed as a
part of that registration statement and does not contain all of the information
contained in the registration statement and exhibits. For a more complete
description of matters involving us, please refer to our registration statement
and each exhibit attached to it. Anyone may inspect the registration statement
and exhibits and schedules filed with the Securities and Exchange Commission at
the Commission's principal office in Washington, D.C. Copies of all or any part
of the registration statement may be obtained from the Public Reference Section
of the Securities and Exchange Commission, 100 F Street, NE, Washington, D.C.
20549. Please call the Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. The Securities and Exchange
Commission also maintains a web site at http://www.sec.gov that contains
reports, proxy statements and information regarding registrants that file
electronically with the Commission. In addition, we will file electronic
versions of our annual and quarterly reports on the Commission's Electronic Data
Gathering Analysis and Retrieval, or EDGAR System. Our registration statement
and the referenced exhibits can also be found on this site as well as our
quarterly and annual reports. We will not send the annual report to our
stockholders unless requested by the individual stockholders.
27
INDEX TO FINANCIAL STATEMENTS
NOVAGEN SOLAR INC.
(A Development Stage Enterprise)
Pages
FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH
PERIODS ENDED SEPTEMBER 30, 2010 (UNAUDITED)
Balance Sheets F-2
Statements of Stockholders' Equity F-3
Statements of Operations F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 thru F-11
FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2009 AND 2008
Report of Independent Registered Public Accounting Firm F-12
Balance Sheets F-13
Statements of Stockholders' Equity F-14
Statements of Operations F-15
Statements of Cash Flows F-16
Notes to Financial Statements F-17 thru F-22
F-1
NOVAGEN SOLAR INC.
(A development stage company)
Balance Sheets
September 30, 2010
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
-------------------------------------------------------------------------------------------------
September 30 December 31
2010 2009
-------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,072 $ 304
Prepaid Expenses 19,583 -
-------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 21,655 $ 304
=================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 2,706 155,850
Convertible note - related party - 50,000
Due to a related party 1,348 42,651
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 4,054 248,501
-------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL
Authorized:
50,000,000 preferred shares at a par value of $0.0001 per share
Issued and outstanding: Nil
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 43,675,900 common shares 4,367 1,265
(December 31, 2009: 12,651,300)
ADDITIONAL PAID-IN CAPITAL 497,935 188,791
(DEFICIT) ACCUMULATED DURING THE EXPLORATION STAGE (484,701) (438,253)
-------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 17,601 (248,197)
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 21,655 $ 304
=================================================================================================
The accompanying notes are an integral part of these financial statements.
F-2
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Stockholders' Equity (Deficiency)
For the period from June 22, 2005 (inception) to September 30, 2010
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
---------------------------------------------------------------------------------------------------------------------------------
Deficit
accumulated Total
Additional during shareholder's
Preferred Stock Common Stock paid-in exploration equity
Shares Amount Shares Amount capital stage (deficiency)
---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005 - $ - 11,251,300 $ 1,125 $ 18,931 $ (6,418) $ 13,638
---------------------------------------------------------------------------------------------------------------------------------
Net (loss) and comprehensive (loss) for the year - - - - - (5,935) (5,935)
---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2006 - $ - 11,251,300 $ 1,125 $ 18,931 $ (12,353) $ 7,703
---------------------------------------------------------------------------------------------------------------------------------
Net income and comprehensive income for the year - - - - - 372 372
---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2007 - $ - 11,251,300 $ 1,125 $ 18,931 $ (11,981) $ 8,075
---------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash - - 1,200,000 120 59,880 - 60,000
on August 6, 2008 at $0.05 per share
Net (loss) and comprehensive (loss) for the year - - - - - (29,599) (29,599)
---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2008 - $ - 12,451,300 $ 1,245 $ 78,811 $ (41,580) $ 38,476
---------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock - - 3,000,000 300 17,968 - 18,268
on July 10, 2009 at $0.006 per share
Rescind issuance of common stock at $0.006 per share - - (3,000,000) (300) (17,968) - (18,268)
Issuance of common stock for service - - 200,000 20 109,980 - 110,000
on September 8, 2009 at $0.55 per share
Net (loss) and comprehensive (loss) for the year - - - - - (396,673) (396,673)
---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2009 - $ - 12,651,300 $ 1,265 $ 188,791 $ (438,253) $ (248,197)
---------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock - - 10,000,000 1,000 990,000 - 100,000
in August 16, 2010 at $0.01 per share
Issuance of common stock for debt settlement - - 21,224,600 2,122 210,124 - 212,246
in August 16, 2010 at $0.01 per share
Cancellation of common stock - - (200,000) (20) 20 - -
Net (loss) and comprehensive (loss) for the period - - - - - (46,448) (46,448)
---------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2010 - $ - 43,675,900 $ 4,367 $ 497,935 $ (484,701) $ 17,601
=================================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-3
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Operations and Comprehensive (Loss)
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005 Three months ended Nine months ended
(inception) to September 30 September 30
September 30, 2010 2010 2009 2010 2009
--------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Bank charges $ 368 $ 46 $ 18 $ 107 $ 67
Consulting fees 7,629 3,917 112,300 3,917 112,300
Director fees 110,000 - - - -
Interest expenses 1,811 - - - -
Marketing expense 184,591 - 130,948 - 184,590
Office expenses 15,801 1,608 6,833 5,199 6,902
Professional fees 77,608 25,132 8,771 33,751 29,030
Resource property acquisition and exploration costs 7,568 - - - -
Transfer agent 3,039 - (136) 455 733
Travel expenses 17,211 - 16,583 628 16,583
Write-off exploration program security deposit 7,610 - (1) - 7,610
Project investigation 50,000 - - - -
Foreign exchange loss (gain) 1,465 1,781 (84) 2,391 (84)
Write-off equipment - - 50,000 - 50,000
--------------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS 484,701 32,484 325,232 46,448 407,731
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) $ (484,701) $ (32,484) $ (325,232) $ (46,448) $ (407,731)
FOR THE PERIOD
--------------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00)
================================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
- basic and diluted 30,492,628 12,451,300 18,597,096 12,451,300
================================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-4
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Cash Flows
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005
(inception) to Nine months ended Nine months ended
September 30, 2010 September 30, 2010 September 30, 2009
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income (loss) for the period $ (484,701) $ (46,448) $ (407,731)
Adjustment for items not involving cash:
- Project investigation 50,000 - -
- Write off equipment - - 50,000
- consulting fee 110,000 - 110,000
Changes in operating assets and liabilities
- prepaid expenses (19,583) (19,583) -
- accounts payable and accrued liabilities 156,394 544 153,752
- exploration program security deposit - - 7,610
--------------------------------------------------------------------------------------------------------------
NET CASH FROM (USED IN) OPERATING ACTIVITIES (187,890) (65,487) (44,953)
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Convertible debenture - related party (50,000) (50,000) -
Due to a related party 59,906 17,255 41,434
Proceeds from issuance of common stock 180,056 100,000 -
--------------------------------------------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES 189,962 67,225 -
--------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,072 1,768 (44,953)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - 304 45,257
--------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,072 $ 2,072 $ 322
==============================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
INTEREST PAID IN CASH $ - $ - $ -
--------------------------------------------------------------------------------------------------------------
INCOME TAX PAID IN CASH $ - $ - $ -
--------------------------------------------------------------------------------------------------------------
NON-CASH FLOWS INFORMATION
ISSUANCE OF COMMON SHARES FOR SETTLEMENT OF DEBT $ 212,246 $ 212,246 $ -
--------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-5
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Novagen Solar Inc. (hereinafter "the Company"), was incorporated in the State of
Nevada, U.S.A., on June 22, 2005 under the name of Pickford Minerals, Inc. The
Company's fiscal year end is December 31. On May 12, 2009, the Company changed
its name to Novagen Solar Inc.
The Company was originally engaged in the exploration of mineral deposits in
Labrador, Newfoundland, but was unable to implement its exploration program. In
April 2009, the Company began to pursue business opportunities relating to
photovoltaic solar energy.
On April 27, 2009, the Company entered into a Share Purchase Agreement (the
"Reorganization Agreement") with Novagen Solar (Canada) Ltd., a privately held
Canadian corporation formed on February 14, 2009 ("NSC"). Upon the closing of
the Reorganization Agreement on July 10, 2009, the shareholders of NSC delivered
all of their equity interests in NSC to the Company in exchange for 3,000,000
shares of common stock in the Company and 3,000,000 convertible securities of
the Company, as a result of which NSC became a wholly-owned subsidiary of the
Company (the "Reorganization"). The note is non-interest bearing, convertible
at the rate of $0.01 per share at the option of the holder. NSC is a sales
company engaged in the business of selling a variety of photovoltaic products.
At the time of the Reorganization, NSC had the exclusive right in Canada and the
non-exclusive right elsewhere to sell a line of photovoltaic products
distributed by Rainbow Solar Inc, a Delaware corporation ("RSI"). The RSI sales
license was terminated by mutual consent on November 10, 2009.
On December 1, 2009, the Reorganization Agreement was rescinded, with the former
shareholders of NSC exchanging all securities received under the Reorganization
Agreement for all the issued and outstanding shares of NSC (the "Rescission").
As part of the Rescission, on December 1, 2009 the Company issued a non-interest
bearing convertible demand note for $50,000 to NSC for the sample solar panels
used by the Company. The Company paid the note in full on August 10, 2010.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America applicable to a
going concern which assume that the Company will realize its assets and
discharge its liabilities in the normal course of business. The Company has
incurred accumulated losses of $484,701 since inception and has not generated
any revenue. The future of the Company is dependent upon its ability to develop
profitable sales and distribution operations. These factors create doubt as to
the ability of the Company to continue as a going concern. Realization values
may be substantially different from the carrying values as shown in these
financial statements should the Company be unable to continue as a going
concern. Management is in the process of identifying sources for additional
financing, or will provide the necessary financial support, to fund the ongoing
development of the Company's business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
the generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates that have been made using careful judgment. The
financial statements have, in management's opinion been properly prepared within
reasonable limits of materiality and within the framework of the significant
accounting policies summarized below:
Accounting Method
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses for the reporting period. The
Company reviews its estimates on an ongoing basis. The estimates were based on
historical experience and on various other assumptions that the Company believes
to be reasonable under the circumstances. Actual results could differ from
these estimates. The Company believes the judgments and estimates required in
its accounting policies to be critical in the preparation of the Company's
financial statements.
F-6
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments and short-term debt instruments with original maturities of
three months or less to be cash equivalents. As at September 30, 2010 and
December 31, 2009, there were no cash equivalents.
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality
financial institutions in uninsured accounts.
Foreign Currency Transactions
The Company is located and operating outside of the United States of America.
It maintains its accounting records in U.S. Dollars as follows:
At the transaction date each asset, liability, revenue and expense is translated
into U.S. dollars by the use of the exchange rate in effect at that date. At
the period end, monetary assets and liabilities are re-measured by using the
exchange rate in effect at that date. The resulting foreign exchange gains and
losses are included in operations.
Fair Value of Financial Instruments
The Company's financial instruments as defined by Accounting Standards
Codification ("ASC") 825, "Disclosures about Fair Value of Financial
Instruments," include cash and cash equivalents, accounts payable and accrued
liabilities, convertible note and due to a related party. Fair values were
assumed to approximate carrying value for these financial instruments, except
where noted. Management is of the opinion that the Company is not exposed to
significant interest or credit risks arising from these financial instruments.
The Company is operating outside the United States of America and has
significant exposure to foreign currency risk due to the fluctuation of currency
in which the Company operates and U.S. dollars.
Mineral Property Payments and Exploration Costs
The Company expenses all costs related to the acquisition, maintenance and
exploration of mineral claims in which it has secured exploration rights prior
to establishment of proven and probable reserves. When it has been determined
that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs incurred to develop such
property are capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable reserve. To
date, the Company has shifted its focus on the solar panel and therefore, all
costs are being expensed.
Long-lived assets impairment
Long-lived assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360, Accounting for the
Impairment or Disposal of Long-Lived Assets.
Management considers assets to be impaired if the carrying value exceeds the
future projected cash flows from related operations (undiscounted and without
interest charges). If impairment is deemed to exist, the assets will be written
down to fair value. Fair value is generally determined using a discounted cash
flow analysis.
Assets Retirement Obligations
The Company has adopted ASC 410, Accounting for Assets Retirement Obligations
which requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. ASC 410 requires
the Company to record a liability for the present value of the estimated site
restoration costs with corresponding increase to the carrying amount of the
related long-lived assets. The liability will be accreted and the asset will be
depreciated over the life of the related assets. Adjustments for changes
resulting from the passage of time and changes to either the timing or amount of
the original present value estimate underlying the obligation will be made. As
at September 30, 2010 the Company does not have any asset retirement
obligations.
F-7
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
The Company adopted ASC 718, "Share-Based Payment", to account for its stock
options and similar equity instruments issued. Accordingly, compensation costs
attributable to stock options or similar equity instruments granted are measured
at the fair value at the grant date, and expensed over the expected vesting
period. ASC 718 requires excess tax benefits be reported as a financing cash
inflow rather than as a reduction of taxes paid.
The Company did not grant any stock options during the periods ended September
30, 2010 and 2009.
Comprehensive Income
The Company adopted ASC 220, Reporting Comprehensive Income, which establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. The Company is disclosing this information on its
Statement of Stockholders' Equity. Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. The
Company has no elements of "other comprehensive income" for the periods ended
September 30, 2010 and 2009.
Income Taxes
The Company has adopted ASC 740, Accounting for Income Taxes, which requires the
Company to recognize deferred tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the Company's financial
statements or tax returns using the liability method. Under this method,
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
Basic and Diluted Loss Per Share
In accordance with ASC 260 - "Earnings Per Share", the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would be outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. As at September 30, 2010, the basic
loss per share was equal to diluted loss per share as there was no dilutive
instrument.
Business Combinations
ASC 805 applies the acquisition method of accounting for business combinations
established in ASC 805 to all acquisitions where the acquirer gains a
controlling interest, regardless of whether consideration was exchanged. ASC
805 establishes principles and requirements for how the acquirer: a) recognizes
and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree; b)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase; and c) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. The adoption of the standard did not have
a material impact on the Company
Non-controlling Interests in Consolidated Financial Statements
ASC 160 requires companies with noncontrolling interests to disclose such
interests clearly as a portion of equity but separate from the parent's equity.
The noncontrolling interest's portion of net income must also be clearly
presented on the Income Statement.
Disclosure about Derivative Instruments and Hedging Activities
ASC 815-10 requires companies with derivative instruments to disclose
information that should enable financial-statement users to understand how and
why a company uses derivative instruments, how derivative instruments and
related hedged items are accounted for under ASC 815 "Accounting for Derivative
Instruments and Hedging Activities" and how derivative instruments and related
hedged items affect a company's financial position, financial performance and
cash flows.
F-8
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Determination of the Useful Life of Intangible Assets
The Company adopted FSP No. 142-3, "Determination of the Useful Life of
Intangible Assets" ("FSP 142-3"), as codified in ASC subtopic 350-30,
Intangibles - Goodwill and Other: General Intangibles Other than Goodwill (ASC
350-30) and ASC topic 275, Risks and Uncertainties (ASC 275), which amends the
factors an entity should consider in developing renewal or extension assumptions
used in determining the useful life of recognized intangible assets under FASB
Statement No. 142, as codified in ASC topic 350, Intangibles Goodwill and Other
(ASC 350). This new guidance applies prospectively to intangible assets that are
acquired individually or with a group of other assets in business combinations
and asset acquisitions.
Accounting for Convertible Debt Instruments
The Company adopted FASB Staff Position ("FSP") APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)", as coded in ASC 470 "debt". ASC 470
specifies that issuers of convertible debt instruments that may be settled in
cash upon conversion (including partial cash settlement) should separately
account for the liability and equity components in a manner that will reflect
the entity's nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods.
Accounting for Financial Guarantee Insurance Contracts
The Company adopted ASC 944-20, "Accounting for Financial Guarantee Insurance
Contracts" (formerly SFAS No. 163, Accounting for Financial Guarantee Insurance
- an interpretation of FASB Statement No. 60, Accounting and Reporting by
Insurance Enterprises). ASC 944-20 requires that an insurance enterprise
recognize a claim liability prior to an event of default (insured event) when
there is evidence that credit deterioration has occurred in an insured financial
obligation. The adoption of ASC 944-20 has no effect on the Company's financial
reporting at this time.
Share-Based Payments Transactions
The Company adopted ASC 260-10, "Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities." ASC 260-10
provides that unvested share-based payment awards that contain non-forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. Upon adoption, a company is required
to retrospectively adjust its earnings per share data (including any amounts
related to interim periods, summaries of earnings and selected financial data)
to conform with the provisions of ASC 260-10.
Equity Method Investment Accounting Considerations
On April 1, 2009, the Company adopted ASC 323-10, "Equity Method Investment
Accounting Considerations" that addresses how the initial carrying value of an
equity method investment should be determined, how an impairment assessment of
an underlying indefinite-lived intangible asset of an equity method investment
should be performed, how an equity method investee's issuance of shares should
be accounted for, and how to account for a change in an investment from the
equity method to the cost method. The adoption of ASC 323-10 did not have a
material impact on our financial condition or results of operations.
Fair Value Measurement and Disclosures
The Company adopted ASC 820 Fair Value Measurements and Disclosures ("ASC 820").
As defined in ASC 820, fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In order to increase
consistency and comparability in fair value measurements, ASC 820 establishes a
fair value hierarchy that prioritizes observable and unobservable inputs used to
measure fair value into three broad levels, which are described below:
- Level 1: Quoted prices (unadjusted) in active markets that are accessible
at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
- Level 2: Inputs other than quoted prices within Level 1 that are
observable for the asset or liability, either directly or indirectly.
- Level 3: Unobservable inputs that are used when little or no market data
is available. The fair value hierarchy gives the lowest priority to Level 3
inputs
In determining fair value, the Company utilizes valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible as well as considers counterparty credit risk in
its assessment of fair value.
F-9
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company's financial instruments consist principally of cash and cash
equivalents, accounts payable and accrued liabilities, convertible note, and due
to a related party. Pursuant to ASC 820, the fair value of cash and cash
equivalents is determined based on "Level 1" inputs, which consist of quoted
prices in active markets for identical assets. The recorded values of all other
financial instruments approximate their current fair values because of their
nature and respective maturity dates or durations.
New Accounting Pronouncements
In October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605),
Multiple-Deliverable Revenue Arrangements amending ASC 605. ASU 2009-13 requires
entities to allocate revenue in an arrangement using estimated selling prices of
the delivered goods and services based on a selling price hierarchy. ASU 2009-13
eliminates the residual method of revenue allocation and requires revenue to be
allocated using the relative selling price method. ASU 2009-13 is effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. The Company is currently
evaluating the impact of ASU 2009-13, but does not expect its adoption to have a
material impact on the Company's financial position or results of operations.
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements,
amending ASC 820. ASU 2010-06 requires entities to provide new disclosures and
clarify existing disclosures relating to fair value measurements. The new
disclosures and clarifications of existing disclosures are effective for interim
and annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in Level 3 fair
value measurements, which are effective for fiscal years beginning after
December 15, 2010 and for interim periods within those fiscal years. The Company
does not expect the adoption of ASU 2010-06 will have a material impact on the
Company's financial position or results of operations.
In February 2010, the FASB issued ASC No. 2010-09, "Amendments to Certain
Recognition and Disclosure Requirements", which eliminates the requirement for
SEC filers to disclose the date through which an entity has evaluated subsequent
events. ASC No. 2010-09 is effective for its fiscal quarter beginning after 15
December 2010. The adoption of ASC No. 2010-09 is not expected to have a
material impact on the Company's financial statements.
ASU No. 2010-13 was issued in April 2010, and clarified the classification of an
employee share based payment award with an exercise price denominated in the
currency of a market in which the underlying security trades. This ASU will be
effective for the first fiscal quarter beginning after December 15, 2010, with
early adoption permitted. The adoption of ASU No. 2010-13 is not expected to
have a material impact on the Company's financial statements.
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the Company's financial statements
upon adoption.
NOTE 3 - PREPAID EXPENSES
On August 24, 2010, the Company entered into a consulting agreement with a
shareholder of the Company for corporate development services and fund raising
for a period of six months commencing on September 1, 2010. The Company agreed
to pay $23,500 for the service in advance. As at September 30, 2010, the Company
made the payment of $23,500 which $3,917 was expensed in consulting fee.
NOTE 4 - CONVERTIBLE NOTE - RELATED PARTY
The Company issued a non-interest bearing note in an amount equal to $50,000
that is convertible at the rate of the average volume weighted closing price of
the common shares on the NASD over-the-counter bulletin board for a period of 10
business days prior to the surrender date and the conversion is deemed to have
been effected on the 61st day following the surrender date. In accordance with
EITF 98-5 "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios", the Company determined
that the convertible notes contained no embedded beneficial conversion feature
as the convertible notes were issued with a conversion price the same as the
fair market value of the Company's common shares at the time of issuance, being
$0.53 per share. The carrying value of the convertible notes is equal to the
fair value as they are non-interest bearing and due on demand. The note was
paid in full by the Company on August 10, 2010.
F-10
NOTE 5 - PREFERRED AND COMMON STOCK
The Company has 50,000,000 shares of preferred stock authorized and none issued.
The Company has 100,000,000 shares of common stock authorized, of which
43,675,900 shares are issued and outstanding. All shares of common stock are
non-assessable and non-cumulative, with no preemptive rights.
On September 8, 2009, the Company issued 200,000 common shares to a director of
the Company as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000. On March 31, 2010 the former
director surrendered these shares to the Company.
Under the terms of the Reorganization, on July 10, 2009, the Company issued
3,000,000 common shares at deemed value of $0.006 per share to the shareholders
of Novagen Solar (Canada) Ltd. The shares were surrendered to the Company on
December 1, 2009, as part of the Rescission.
On August 16, 2010, the Company issued 21,224,600 shares of common stock to
three of its creditors at a price of $0.01 per share, in full and final
settlement of a debt of $212,246 owed to the creditors. One of the creditors
was the sole director of the Company, and he received 5,855,800 shares of common
stock in full and final settlement of $58,558 owed to him by the Company for
expenses incurred on the Company's behalf.
On August 16, 2010 the Company issued 10,000,000 shares of common stock at a
price of $0.01 per share to five purchasers for total cash proceeds of $100,000.
NOTE 5 - SEGMENT INFORMATION
The Company currently conducts all of its operations in Canada.
NOTE 6 - RELATED PARTY TRANSACTIONS
During the fiscal year 2009, the Company issued 200,000 common stock to one of
its directors as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000. On March 31, 2010 these
shares were surrendered to the Company and recorded as additional paid-in
capital.
On August 16, 2010, the Company issued 5,855,800 shares of common stock to its
sole director at a price of $0.01 per share, in full and final settlement of a
debt of $58,558 owed to him by the Company for expenses incurred on the
Company's behalf.
In connection with the issuance of 10,000,000 common shares at a price of $0.01
to five purchasers, 2,300,000 shares of common stock were issued to the mother
of our sole director for total proceeds of $23,000.
On August 16, 2010 the Company issued 15,368,800 shares of common stock at a
price of $0.01 per share to a creditor in full and final settlement of a debt of
$153,688. Upon the issuance, the creditor owned 35% of the Company.
As at September 30, 2010 the Company owed $1,348 (December 31, 2009 - $42,651)
to the sole director of the Company, for expenses he paid on behalf of the
Company.
See Note 3.
F-11
CHANG LEE LLP
Chartered Accountants
505-815 Hornby Street
Vancouver, B.C., V6Z 2E6
Tel: 604-687-3776
Fax: 604-688-3373
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
NOVAGEN SOLAR INC.
(A development stage company)
We have audited the accompanying balance sheets of Novagen Solar Inc. (a
development stage company) as at December 31, 2009 and 2008 and the related
statements of stockholders' equity, operations and cash flows for the years then
ended and for the period from June 22, 2005 (date of inception) to December 31,
2009. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as at December 31,
2009 and 2008 and the results of its operations and its cash flows for the years
then ended and for the period from June 22, 2005 (date of inception) to December
31, 2009, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company incurred losses from operations since inception, has not
attained profitable operations and is dependent upon obtaining adequate
financing to fulfil its intended business venture. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Vancouver, Canada "Chang Lee LLP"
March 29, 2010 Chartered Accountants
F-12
NOVAGEN SOLAR INC.
(A development stage company)
Balance Sheets
December 31, 2009 and 2008
(Expressed in U.S. Dollars)
------------------------------------------------------------------------------------------------
December 31 December 31
2009 2008
------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 304 $ 45,257
Exploration program security deposit - 7,610
------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 304 $ 52,867
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 155,850 14,391
Convertible Debenture 50,000 -
Owing to related parties 42,651 -
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 248,501 14,391
------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL
Authorized:
50,000,000 preferred shares at a par value of $0.0001 per share
Issued and outstanding: Nil
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 12,651,300 common shares 1,265 1,245
(December 31, 2008: 12,451,300)
ADDITIONAL PAID-IN CAPITAL 188,791 78,811
(DEFICIT) ACCUMULATED DURING THE EXPLORATION STAGE (438,253) (41,580)
------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (248,197) 38,476
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 304 $ 52,867
================================================================================================
The accompanying notes are an integral part of these financial statements.
F-13
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Stockholders' Equity (Deficiency)
For the period from June 22, 2005 (inception) to December 31, 2009
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------------------------------
Deficit
accumulated Total
Additional during shareholder's
Preferred Stock Common Stock paid-in exploration equity
Shares Amount Shares Amount capital stage (deficiency)
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005 - $ - 11,251,300 $ 1,125 $ 18,931 $ (6,418) $ 13,638
-----------------------------------------------------------------------------------------------------------------------
Net (loss) and comprehensive (loss) - - - - - (5,935) (5,935)
for the year
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2006 - $ - 11,251,300 $ 1,125 $ 18,931 $ (12,353) $ 7,703
-----------------------------------------------------------------------------------------------------------------------
Net income and comprehensive income - - - - - 372 372
for the year
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2007 - $ - 11,251,300 $ 1,125 $ 18,931 $ (11,981) $ 8,075
-----------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash - - 1,200,000 120 59,880 - 60,000
on August 6, 2008 at $0.05 per share
Net (loss) and comprehensive (loss) - - - - - (29,599) (29,599)
for the year
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2008 - $ - 12,451,300 $ 1,245 $ 78,811 $ (41,580) $ 38,476
-----------------------------------------------------------------------------------------------------------------------
Issuance of common stock for shares - - 3,000,000 300 17,968 - 18,268
on July 10, 2009 at $0.006 per share
Rescind issuance of common stock - - (3,000,000) (300) (17,968) - (18,268)
for shares at $0.006 per share
Issuance of common stock for service - - 200,000 20 109,980 - 110,000
on September 8, 2009 at $0.55 per share
Net (loss) and comprehensive (loss) - - - - - (396,673) (396,673)
for the year
-----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2009 - $ - 12,651,300 $ 1,265 $ 188,791 $ (438,253) $ (248,197)
=======================================================================================================================
The accompanying notes are an integral part of these financial statements
F-14
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Operations
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005
(inception) to Year ended Year ended
December 31, 2009 December 31, 2009 December 31, 2008
--------------------------------------------------------------------------------------------------------------------------
EXPENSES
Bank charges $ 261 $ 67 $ 152
Consulting fees 3,712 2,300 1,412
Director fees 110,000 110,000 -
Interest expenses 1,811 - 1,811
Marketing expenses 184,591 184,591 -
Office expenses 10,602 6,920 132
Professional fees 42,217 17,905 24,312
Resource property acquisition and exploration costs 7,568 - -
Transfer expenses 2,584 803 1,781
Travel expenses 16,583 16,583 -
Write-off Exploration program security deposit 7,610 7,610 -
Project investigation 50,000 50,000 -
Foreign exchange loss (gain) (316) (106) (1)
--------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS 438,253 396,673 29,599
--------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD $ (438,253) $ (396,673) $ (29,599)
--------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE $ (0.03) $ (0.00)
==========================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
- Basic and diluted 12,513,766 11,828,349
==========================================================================================================================
The accompanying notes are an integral part of these financial statements
F-15
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Cash Flows
(Expressed in U.S. Dollars)
---------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005
(inception) to Year ended Year ended
December 31, 2009 December 31, 2009 December 31, 2008
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income (loss) for the period $ (438,253) $ (396,673) $ (29,599)
Adjustment for items not involving cash:
- Project investigation 50,000 50,000 -
- consulting fee 110,000 110,000 -
- Write-off Exploration program security deposit - 7,610 -
Changes in operating assets and liabilities
- (increase) decrease in prepaid expenses - - 1,222
- accounts payable and accrued liabilities 155,850 141,459 14,391
- due to a related party 42,651 42,651 -
- exploration program security deposit - - (2,801)
---------------------------------------------------------------------------------------------------------
NET CASH FROM (USED IN) OPERATING ACTIVITIES (79,752) (44,953) (16,787)
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 80,056 - 60,000
---------------------------------------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES 80,056 - 60,000
---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 304 (44,953) 43,213
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - 45,257 2,044
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 304 $ 304 $ 45,257
=========================================================================================================
The accompanying notes are an integral part of these financial statements
F-16
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Novagen Solar Inc. (hereinafter "the Company"), was incorporated in the State of
Nevada, U.S.A., on June 22, 2005 under the name of Pickford Minerals, Inc. The
Company's fiscal year end is December 31. On May 12, 2009, the Company changed
its name to Novagen Solar Inc.
The Company was originally engaged in the exploration of mineral deposits in
Labrador, Newfoundland, but was unable to implement its exploration program. In
April 2009, the Company began to pursue business opportunities relating to
photovoltaic solar energy.
On April 27, 2009, the Company entered into a Share Purchase Agreement (the
"Reorganization Agreement") with Novagen Solar (Canada) Ltd., a privately held
Canadian corporation formed on February 14, 2009 ("NSC"). Upon the closing of
the Reorganization Agreement on July 10, 2009, the stockholders of NSC delivered
all of their equity interests in NSC to the Company in exchange for 3,000,000
shares of common stock in the Company and 3,000,000 convertible securities of
the Company, as a result of which NSC became a wholly-owned subsidiary of the
Company (the "Reorganization"). The debenture is non-interest bearing,
convertible at the rate of $0.01 per share at the option of the holder. NSC is
a sales company engaged in the business of selling a variety of photovoltaic
products. At the time of the Reorganization, NSC had the exclusive right in
Canada and the non-exclusive right elsewhere to sell a line of photovoltaic
products distributed by Rainbow Solar Inc, a Delaware corporation ("RSI"). The
RSI sales license was terminated by mutual consent on November 10, 2009. (See
also Note 9).
On December 1, 2009, the Reorganization Agreement was rescinded, with the former
stockholders of NSC exchanging all securities received under the Reorganization
Agreement for all the issued and outstanding shares of NSC (the "Rescission").
As part of the Rescission, on December 1, 2009 the Company issued a non-interest
bearing convertible demand note for $50,000 to NSC for the sample solar panels
used by the Company. NSC may convert the principal amount owing into common
shares of our capital stock. The conversion rate will be the average volume
weighted closing price of the Company's stock on the NASD over-the-counter
bulletin board for the 10 business days prior to the surrender date and the
conversion is deemed to have been effected on the 61st day following the
surrender date.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America applicable to a
going concern which assume that the Company will realize its assets and
discharge its liabilities in the normal course of business. The Company has
incurred accumulated losses of $438,253 since inception and has not generated
any revenue. The future of the Company is dependent upon its ability to develop
profitable sales and distribution operations. These factors create doubt as to
the ability of the Company to continue as a going concern. Realization values
may be substantially different from the carrying values as shown in these
financial statements should the Company be unable to continue as a going
concern. Management is in the process of identifying sources for additional
financing, or will provide the necessary financial support, to fund the ongoing
development of the Company's business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
the generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates that have been made using careful judgment. The
financial statements have, in management's opinion been properly prepared within
reasonable limits of materiality and within the framework of the significant
accounting policies summarized below:
Accounting Method
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses for the reporting period. The
Company reviews its estimates on an ongoing basis. The estimates were based on
historical experience and on various other assumptions that the Company believes
to be reasonable under the circumstances. Actual results could differ from
these estimates. The Company believes the judgments and estimates required in
its accounting policies to be critical in the preparation of the Company's
financial statements.
F-17
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments and short-term debt instruments with original maturities of
three months or less to be cash equivalents. As at December 31, 2009 and 2008,
there were no cash equivalents.
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality
financial institutions. As of December 31, 2009, the Company had $nil in a bank
beyond insured limit (December 31, 2008: $nil).
Foreign Currency Transactions
The Company is located and operating outside of the United States of America.
It maintains its accounting records in U.S. Dollars as follows:
At the transaction date each asset, liability, revenue and expense is translated
into U.S. dollars by the use of the exchange rate in effect at that date. At
the period end, monetary assets and liabilities are re-measured by using the
exchange rate in effect at that date. The resulting foreign exchange gains and
losses are included in operations.
Fair Value of Financial Instruments
The Company's financial instruments as defined by Accounting Standards
Codification ("ASC") 825, "Disclosures about Fair Value of Financial
Instruments," include cash and cash equivalents and accounts payable and accrued
liabilities. Fair values were assumed to approximate carrying value for these
financial instruments, except where noted. Management is of the opinion that
the Company is not exposed to significant interest or credit risks arising from
these financial instruments. The Company is operating outside the United States
of America and has significant exposure to foreign currency risk due to the
fluctuation of currency in which the Company operates and U.S. dollars.
Mineral Property Payments and Exploration Costs
The Company expenses all costs related to the acquisition, maintenance and
exploration of mineral claims in which it has secured exploration rights prior
to establishment of proven and probable reserves. When it has been determined
that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs incurred to develop such
property are capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable reserve. To
date, the Company has shifted its focus on the solar panel and therefore, all
costs are being expensed.
Long-lived assets impairment
Long-lived assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360, Accounting for the
Impairment or Disposal of Long-Lived Assets.
Management considers assets to be impaired if the carrying value exceeds the
future projected cash flows from related operations (undiscounted and without
interest charges). If impairment is deemed to exist, the assets will be written
down to fair value. Fair value is generally determined using a discounted cash
flow analysis.
Assets Retirement Obligations
The Company has adopted ASC 410, Accounting for Assets Retirement Obligations
which requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. ASC 410 requires
the Company to record a liability for the present value of the estimated site
restoration costs with corresponding increase to the carrying amount of the
related long-lived assets. The liability will be accreted and the asset will be
depreciated over the life of the related assets. Adjustments for changes
resulting from the passage of time and changes to either the timing or amount of
the original present value estimate underlying the obligation will be made. As
at December 31, 2009 and 2008 the Company does not have any asset retirement
obligations.
F-18
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
The Company adopted ASC 718, "Share-Based Payment", to account for its stock
options and similar equity instruments issued. Accordingly, compensation costs
attributable to stock options or similar equity instruments granted are measured
at the fair value at the grant date, and expensed over the expected vesting
period. ASC 718 requires excess tax benefits be reported as a financing cash
inflow rather than as a reduction of taxes paid.
The Company did not grant any stock options during the years ended December 31,
2009 and 2008.
Comprehensive Income
The Company adopted ASC 220, Reporting Comprehensive Income, which establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. The Company is disclosing this information on its
Statement of Stockholders' Equity. Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. The
Company has no elements of "other comprehensive income" for the years ended
December 31, 2009 and 2008.
Income Taxes
The Company has adopted ASC 740, Accounting for Income Taxes, which requires the
Company to recognize deferred tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the Company's financial
statements or tax returns using the liability method. Under this method,
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
Basic and Diluted Loss Per Share
In accordance with ASC 260 - "Earnings Per Share", the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would be outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. The Company's potentially dilutive
shares, which include convertible securities, have not been included in the
computation of diluted loss per share as the result would be anti-dilutive.
Newly Adopted Accounting Pronouncements and New Accounting Pronouncements
On January 1, 2009, the Company adopted ASC 805, "Business Combinations". ASC
805 applies the acquisition method of accounting for business combinations
established in ASC 805 to all acquisitions where the acquirer gains a
controlling interest, regardless of whether consideration was exchanged.
Consistent with ASC 805 requires the acquirer to fair value the assets and
liabilities of the acquiree and record goodwill on bargain purchases, with main
difference the application to all acquisitions where control is achieved. The
adoption of this statement did not have a material effect on the Company's
financial position or results of operations.
On January 1, 2009, the Company adopted ASC 160, (prior authoritative
literature: SFAS 160, Non-controlling Interests in Consolidated Financial
Statements - An amendment of ARB No. 51). ASC 160 requires companies with
noncontrolling interests to disclose such interests clearly as a portion of
equity but separate from the parent's equity. The noncontrolling interest's
portion of net income must also be clearly presented on the Income Statement.
The adoption of this statement did not have a material effect on the Company's
financial position or results of operations.
On January 1, 2009, the Company adopted ASC 815-10 (prior authoritative
literature: SFAS 161, Disclosures about Derivative Instruments and Hedging
Activities-an amendment of FASB Statement No. 133). ASC 815-10 requires
companies with derivative instruments to disclose information that should enable
financial-statement users to understand how and why a company uses derivative
instruments, how derivative instruments and related hedged items are accounted
for under ASC 815 "Accounting for Derivative Instruments and Hedging Activities"
and how derivative instruments and related hedged items affect a company's
financial position, financial performance and cash flows. The adoption of this
statement did not have a material effect on the Company's financial position or
results of operations.
F-19
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On January 1, 2009, the Company adopted FSP No. 142-3, "Determination of the
Useful Life of Intangible Assets" ("FSP 142-3"), as codified in ASC subtopic
350-30, Intangibles - Goodwill and Other: General Intangibles Other than
Goodwill (ASC 350-30) and ASC topic 275, Risks and Uncertainties (ASC 275),
which amends the factors an entity should consider in developing renewal or
extension assumptions used in determining the useful life of recognized
intangible assets under FASB Statement No. 142, as codified in ASC topic 350,
Intangibles Goodwill and Other (ASC 350). This new guidance applies
prospectively to intangible assets that are acquired individually or with a
group of other assets in business combinations and asset acquisitions. The
adoption of this statement did not have a material effect on the Company's
financial statements.
On January 1, 2009, the Company adopted FASB Staff Position ("FSP") APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)", as coded in ASC 470 "debt".
ASC 470 specifies that issuers of convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement) should
separately account for the liability and equity components in a manner that will
reflect the entity's nonconvertible debt borrowing rate when interest cost is
recognized in subsequent periods. The adoption of this statement did not have a
material effect on the Company's financial statements.
On April 1, 2009, the Company adopted ASC 944-20, "Accounting for Financial
Guarantee Insurance Contracts" (formerly SFAS No. 163, Accounting for Financial
Guarantee Insurance - an interpretation of FASB Statement No. 60, Accounting and
Reporting by Insurance Enterprises). ASC 944-20 requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation. The adoption of ASC 944-20 has no effect on the
Company's financial reporting at this time.
On April 1, 2009, the Company adopted ASC 260-10, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities." ASC 260-10 provides that unvested share-based payment awards that
contain non-forfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and shall be included in the
computation of earnings per share pursuant to the two-class method. Upon
adoption, a company is required to retrospectively adjust its earnings per share
data (including any amounts related to interim periods, summaries of earnings
and selected financial data) to conform with the provisions of ASC 260-10. The
adoption of this statement did not have a material effect on the Company's
future financial position or results of operations.
In December 2008, the FASB issued FSP FAS 132(R)-1, "Employers' Disclosures
about Postretirement Benefit Plan Assets", as coded in ASC 715-20. This new
standard requires enhanced disclosures about plan assets in an employer's
defined benefit pension or other postretirement plan. Companies will be required
to disclose information about how investment allocation decisions are made, the
fair value of each major category of plan assets, the basis used to determine
the overall expected long-term rate of return on assets assumption, a
description of the inputs and valuation techniques used to develop fair value
measurements of plan assets, and significant concentrations of credit risk. This
statement is effective for fiscal years ending after December 15, 2009. The
adoption of this statement is not expected to have a material effect on the
Company's future financial position or results of operations.
In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active, as coded in ASC
820-10, The standard addresses the application of Statement of Financial
Accounting Standards ("SFAS") No.157 for illiquid financial instruments. ASC
820-10 clarifies that approach to determining fair value other than the market
approach may be appropriate when the market for a financial asset is not active.
ASC 820-10 was effective upon issuance, including prior periods for which
financial statements have not been issued. The adoption of ASC 820-10 had no
impact on the Company's results of operations, financial condition or cash
flows.
On April 1, 2009, the Company adopted ASC 323-10, "Equity Method Investment
Accounting Considerations" that addresses how the initial carrying value of an
equity method investment should be determined, how an impairment assessment of
an underlying indefinite-lived intangible asset of an equity method investment
should be performed, how an equity method investee's issuance of shares should
be accounted for, and how to account for a change in an investment from the
equity method to the cost method. The adoption of ASC 323-10 did not have a
material impact on our financial condition or results of operations.
In April, 2009, the FASB issued ASC subtopic 820-10 (formerly Staff Position No.
FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly). ASC 820-10 provides additional guidance for estimating
fair value when the volume and level of activity for the asset or liability have
significantly decreased. This ASC subtopic also includes guidance on identifying
circumstances that indicate a transaction is not orderly. The adoption of ASC
820-10 will not have a material impact on the Company's financial statements.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On January 1, 2009, the Company adopted ASC 820 Fair Value Measurements and
Disclosures ("ASC 820"). The Company's adoption of ASC 820 did not materially
affect the Company's financial position, results of operations or liquidity. As
defined in ASC 820, fair value is based on the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. In order to increase consistency
and comparability in fair value measurements, ASC 820 establishes a fair value
hierarchy that prioritizes observable and unobservable inputs used to measure
fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the
measurement date for assets or liabilities. The fair value hierarchy gives the
highest priority to Level 1 inputs.
Level 2: Inputs other than quoted prices within Level 1 that are observable for
the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs that are used when little or no market data is
available. The fair value hierarchy gives the lowest priority to Level 3 inputs
In determining fair value, the Company utilizes valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible as well as considers counterparty credit risk in
its assessment of fair value.
The Company's financial instruments consist principally of cash and cash
equivalents, accounts payable and accrued liabilities, convertible debentures,
and amounts owing to related parties. Pursuant to ASC 820, the fair value of
cash and cash equivalents is determined based on "Level 1" inputs, which consist
of quoted prices in active markets for identical assets. The recorded values of
all other financial instruments approximate their current fair values because of
their nature and respective maturity dates or durations.
In April, 2009, the FASB issued ASC 820-10-50 (formerly Staff Position No. FAS
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments) that expands to interim periods the existing annual requirement to
disclose the fair value of financial instruments that are not reflected on the
balance sheet at fair value. The new guidance could potentially require
additional disclosures in interim periods after the Company's fiscal year ending
2010. Adoption of this FSP will not have a material impact on the Company's
financial statements.
On April 1, 2009, the FASB issued ASC 320-10-65 (formerly Staff Position No. FSP
FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments). ASC 320-10-65 amends the other-than-temporary impairment guidance
in U.S. GAAP for debt securities to make the guidance more operational and to
improve the presentation and disclosure of other-than-temporary impairments on
debt and equity securities in the financial statements. ASC 320-10-65 does not
amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. The Company adopted ASC
320-10-65 on October 1, 2009. The adoption of this FSP did not have a material
impact on the Company's financial statements.
In June 2009, the FASB issued ASC 860, Transfers and Servicing. ASC 860
requires more information about transfers of financial assets, including
securitization transactions, and where entities have continuing exposure to the
risks related to transferred financial assets. It eliminates the concept of a
"qualifying special-purpose entity," changes the requirements for derecognizing
financial assets, and requires additional disclosures. It also enhances
information reported to users of financial statements by providing greater
transparency about transfers of financial assets and an entity's continuing
involvement in transferred financial assets. ASC 860 is effective for fiscal
years beginning after November 15, 2009.
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the Company's financial statements
upon adoption.
NOTE 3 - MINERAL PROPERTY INTEREST
On October 31, 2005 the Company acquired a 100% interest in two non-contiguous
properties located between Paradise River and Eagle River, approximately 22 km.
west-southwest of the community of Paradise River, Labrador, Canada. The claims
were acquired from a non-affiliated third party for a total consideration of
$4,026, which covered an exploration program security deposit and staking and
other related costs of $441 (CAD$500) and $3,585, respectively. The Company
expensed the staking and other related costs of $3,585 in connection with the
acquisition of the mineral claims.
In connection with above noted mineral properties, the Company was required to
pay exploration program security deposits of $7,610 (CAD$9,300) and $4,809
(CAD$4,950) in fiscal years 2008 and 2007, respectively. Following the
Reorganization, the Company elected to abandon its interest in its mineral
properties and has forfeited the exploration program deposit.
F-21
NOTE 4 - CONVERTIBLE DEBENTURE
The Company issued a non-interest bearing debenture in an amount equal to
$50,000 that is convertible at the rate of the average volume weighted closing
price of the common shares on the NASD over-the-counter bulletin board for a
period of 10 business days prior to the surrender date and the conversion is
deemed to have been effected on the 61st day following the surrender date. In
accordance with EITF 98-5 "Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios", the Company
determined that the convertible debentures contained no embedded beneficial
conversion feature as the convertible debentures were issued with a conversion
price the same as the fair market value of the Company's common shares at the
time of issuance, being $0.53 per share. The carrying value of the convertible
debentures is equal to the fair value as they are non-interest bearing and due
on demand. As of the date of this report, the debenture has not been redeemed
or converted by the holder.
NOTE 5 - PREFERRED AND COMMON STOCK
The Company has 50,000,000 shares of preferred stock authorized and none issued
The Company has 100,000,000 shares of common stock authorized, of which
12,651,300 shares are issued and outstanding. All shares of common stock are
non-assessable and non-cumulative, with no pre-emptive rights.
On September 8, 2009, the Company issued 200,000 common shares to a director of
the Company as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000.
Under the terms of the Reorganization, on July 10, 2009, the Company issued
3,000,000 common shares at deemed value of $0.006 per share to the stockholders
of Novagen Solar (Canada) Ltd. The shares were surrendered to the Company on
December 1, 2009, as part of the Rescission.
During the year ended December 31, 2008, the Company issued 1,200,000 common
shares at $0.05 per share pursuant to a registered public offering for gross
proceeds of $60,000.
NOTE 6 - INCOME TAXES
At December 31, 2009, the Company had deferred tax assets of approximately
$153,400 principally arising from net operating loss carryforwards for income
tax purposes. As our management cannot determine that it is more likely than not
that we will realize the benefit of the deferred tax asset, a valuation
allowance equal to the deferred tax asset has been established at December 31,
2009. The significant components of the deferred tax asset at December 31, 2009
and 2008 were as follows:
--------------------------------------------------------------------------
December 31, 2009 December 31, 2008
Net operating loss carryforwards $ 153,400 $ 14,600
Valuation allowance (153,400) (14,600)
Net deferred tax asset $ - $ -
--------------------------------------------------------------------------
At December 31, 2009, we had net operating loss carryforwards of approximately
$438,300, which expire in the year 2025 through to 2029.
NOTE 7 - SUBSEQUENT EVENTS, COMMITMENT AND CONTINGENCY
None noted.
NOTE 8 - SEGMENT INFORMATION
The Company currently conducts all of its operations in Canada.
NOTE 9 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2009, the Company issued 200,000 common stock
to one of its directors as consideration for his services as a director at the
fair market value of $0.55 per share for a total of $110,000.
As at December 31, 2009, the Company owed $42,651 (2008: $6,494) to a director
of the Company, for the expenses he paid on behalf of the Company.
F-22
22,564,600 SHARES
NOVAGEN SOLAR INC.
COMMON STOCK
PROSPECTUS
We have not authorized any dealer, salesperson or other person to give anyone
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. Prospective investors must not rely on
unauthorized information. This prospectus is not an offer to sell these
securities or a solicitation of an offer to buy the securities in any
jurisdiction where that would not be permitted or legal. Neither the delivery
of this prospectus nor any sales made hereunder after the date of this
prospectus shall create an implication that either the information contained
herein or the affairs of Novagen Solar Inc. have not changed since the date
hereof.
Until ______________, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
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PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses we will pay in
connection with the offering described in this registration statement:
-------------------------------------
AMOUNT
-------------------------------------
Accounting fees and expenses 5,000
Legal fees and expenses 25,000
-------------------------------------
Total $30,000
=====================================
All expenses are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Nevada law provides for discretionary indemnification for each person who serves
as one of our directors or officers. We may indemnify such individuals against
all costs, expenses and liabilities incurred in a threatened, pending or
completed action, suit or proceeding brought because such individual is one of
our officers or directors. Such individual must have conducted himself in good
faith and reasonably believed that his conduct was in, or not opposed to, our
best interests. In a criminal action, he must not have had a reasonable cause
to believe his conduct was unlawful.
Article Twelfth of our Articles of Incorporation states that no director or
officer of the Corporation shall be personally liable to the Corporation or any
of its stockholders for damages for breach of fiduciary duty as a director or
officer involving any act or omission of any such director or officer; provided,
however, that the foregoing provision shall not eliminate or limit the liability
of a director or officer (i) for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) the payment of
dividends in violation of Section 78.300 of the NRS. Any repeal or modification
of this Article by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director or officer of the Corporation for acts or omissions prior to such
repeal or modification.
Under Article IX, our bylaws provide the following indemnification:
01. Indemnification
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was a Director,
Trustee, Officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, Trustee, Officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgment, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action proceeding, had reasonable cause to believe that such person's
conduct was unlawful.
02. Derivative Action
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in the
Corporation's favor by reason of the fact that such person is or was a Director,
Trustee, Officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, Trustee, Officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees) and amount paid in
settlement actually and reasonably incurred by such person in connection with
the defense or settlement of such action or suit if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
II-1
the best interests of the Corporation, and, with respect to amounts paid in
settlement, the settlement of the suit or action was in the best interests of
the Corporation; provided, however, that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for gross negligence or wilful misconduct in the
performance of such person's duty to the Corporation unless and only to the
extent that, the court in which such action or suit was brought shall determine
upon application that, despite circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses as such court shall deem
proper. The termination of any action or suit by judgment or settlement shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or not opposed to
the best interests of the Corporation.
03. Successful Defense
To the extent that a Director, Trustee, Officer, employee or Agent of the
Corporation has been successful on the merits or otherwise, in whole or in part
in defense of any action, suit or proceeding referred to in Paragraphs .01 and
.02 above, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
04. Authorization
Any indemnification under Paragraphs .01 and .02 above (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the Director, Trustee, Officer,
employee or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Paragraphs .01 and .02 above. Such
determination shall be made (a) by the Board of Directors of the Corporation by
a majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (b) is such a quorum is not obtainable, by a
majority vote of the Directors who were not parties to such action, suit or
proceeding, or (c) by independent legal counsel (selected by one or more of the
Directors, whether or not a quorum and whether or not disinterested) in a
written opinion, or (d) by the Stockholders. Anyone making such a determination
under this Paragraph .04 may determine that a person has met the standards
therein set forth as to some claims, issues or matters but not as to others, and
may reasonably prorate amounts to be paid as indemnification.
05. Advances
Expenses incurred in defending civil or criminal action, suit or proceeding
shall be paid by the Corporation, at any time or from time to time in advance of
the final disposition of such action, suit or proceeding as authorized in the
manner provided in Paragraph .04 above upon receipt of an undertaking by or on
behalf of the Director, Trustee, Officer, employee or agent to repay such amount
unless it shall ultimately be by the Corporation is authorized in this Section.
06. Nonexclusivity
The indemnification provided in this Section shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any law,
bylaw, agreement, vote of stockholders or disinterested Directors or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a Director, Trustee, Officer, employee or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
07. Insurance
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a Director, Trustee, Officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a Director, Trustee, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
assessed against such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability.
08. "Corporation" Defined
For purposes of this Section, references to the "Corporation" shall include, in
addition to the Corporation, an constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had the power and authority to
indemnify its Directors, Trustees, Officers, employees or agents, so that any
person who is or was a Director, Trustee, Officer, employee or agent of such
constituent corporation or of any entity a majority of the voting Shares of
which is owned by such constituent corporation or is or was serving at the
request of such constituent corporation as a Director, Trustee, Officer,
employee or agent of the corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving Corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.
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09. Further Bylaws
The Board of Directors may from time to time adopt further Bylaws with specific
respect to indemnification and may amend these and such Bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Nevada.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On July 19, 2009, we issued 5,000,000 restricted common shares at $0.01 per
share to the former stockholders of NSC in exchange for all of their shares in
NSC in connection with our acquisition of all the issued and outstanding shares
of NSC. The shares were issued without registration in reliance on an exemption
provided by Regulation S promulgated under the Securities Act. No general
solicitation was made in connection with the offer or sale of these securities.
The common shares were surrendered to the Company on December 1, 2009, as part
of the rescission of the acquisition of NSC.
On September 8, 2009, the Company issued 200,000 common shares to a director of
the Company as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000. The shares were issued
without registration in reliance on an exemption provided by Regulation S
promulgated under the Securities Act. No general solicitation was made in
connection with the offer or sale of these securities. On March 31, 2010 the
director surrendered these shares to the Company.
On December 31, 2009, we issued to NSC a non-interest bearing note in an amount
equal to $50,000 that was convertible at the rate of the average volume weighted
closing price of the common shares on the NASD over-the-counter bulletin board
for a period of 10 business days prior to the surrender date and the conversion
is deemed to have been effected on the 61st day following the surrender date.
The note was issued as part of the rescission of our acquisition of NSC, to
reimburse NSC for $50,000 in costs and expenses incurred by it in the
acquisition of its sales license from RSi. The note was issued without
registration in reliance on an exemption provided by Regulation S promulgated
under the Securities Act. On August 10, 2010 we repaid the note in full. NSC
was formerly controlled by our sole officer and director, but on July 1, 2010,
he divested all his interest in the NSC and does not retain any beneficial
ownership of NSC whatsoever.
On August 16, 2010, we issued 15,138,800 shares of our common stock to a
creditor of Novagen at a price of $0.01 per share, in full and final settlement
of a debt of $151,388 owed by Novagen to the creditor. The shares were issued
without registration in reliance upon exemptions provided by Sections 4(2) and
4(6) of the Securities Act and Regulation D promulgated thereunder.
On August 16, 2010, we issued 230,000 shares of our common stock to a creditor
of Novagen at a price of $0.01 per share, in full and final settlement of a debt
of $2,300 owed by Novagen to the creditor. The shares were issued without
registration in reliance on an exemption provided by Regulation S promulgated
under the Securities Act.
On August 16, 2010, we issued 5,855,800 shares of our common stock to Ophion
Management Ltd., a company controlled by our sole officer and director, at a
price of $0.01 per share, in full and final settlement of a debt of $58,558 owed
by Novagen to our sole officer and director. The shares were issued without
registration in reliance on an exemption provided by Regulation S promulgated
under the Securities Act.
On August 16, 2010 we issued 10,000,000 shares of our common stock at a price of
$0.01 per share to five purchasers for total cash proceeds of $100,000. The
shares were issued without registration in reliance on an exemption provided by
Regulation S promulgated under the Securities Act. No general solicitation was
made in connection with the offer or sale of these securities. One of the
purchasers, who acquired 2,300,000 shares through the offering, is the mother of
our sole officer and director.
II-3
ITEM 16. EXHIBITS
Exhibit No. Document
--------------------------------------------------------------------------------
3.1 Articles of Incorporation, Novagen Solar Inc., incorporated by
reference from the amended Form 10-K filed May 17, 2010 (1)
3.2 Amended and Restated Bylaws, Novagen Solar Inc., incorporated by
reference from the amended Form 10-K filed May 17, 2010 (1)
5.1 Legal opinion of Conrad Lysiak, Attorney and Counselor at law (2)
23.1 Consent of Chang Lee, LLP, Chartered Accountants
23.2 Consent of Conrad Lysiak, Attorney and Counselor at law (2)
================================================================================
(1) Previously included as an exhibit to the Registration Statement on
Form S-1 filed August 27, 2010
(2) Previously included as an exhibit to the Registration Statement on
Form S-1/A filed October 13, 2010
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
iii. To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
4. That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant undertakes
that in a primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any
of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
i. Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant
to Rule 424;
ii. Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used or
referred to by the undersigned registrant;
II-4
iii. The portion of any other free writing prospectus relating to
the offering containing material information about the
undersigned registrant or its securities provided by or on behalf
of the undersigned registrant; and
iv. Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Toronto, Ontario, Canada,
on December 10, 2010.
NOVAGEN SOLAR INC.
By:/s/ Thomas Mills
Thomas Mills
President, Chief Executive Officer
Chief Financial Officer,
Principal Accounting Officer
and a director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
By:/s/ Thomas Mills
Thomas Mills
President, Chief Executive Officer
Chief Financial Officer,
Principal Accounting Officer
and a director