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EX-31 - ForceField Energy Inc. | v208044_ex31.htm |
EX-32 - ForceField Energy Inc. | v208044_ex32.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x Quarterly Report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
For the
quarterly period ended November 30, 2010
¨ Transition Report pursuant to 13 or
15(d) of the Securities Exchange Act of 1934
For the
transition period __________ to __________
Commission
File Number: 333-145910
SunSi Energies Inc.
|
(Exact
name of registrant as specified in its
charter)
|
Nevada
|
20-8584329
|
|
(State
or other jurisdiction of
incorporation
or
organization)
|
(IRS
Employer Identification No.)
|
45 Main Street, Suite 309
Brooklyn, New York
|
(Address
of principal executive
offices)
|
646-205-0291
|
(Issuer’s
telephone number)
|
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days x
Yes ¨ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
¨ Large
accelerated filer
|
¨ Accelerated
filer
|
¨ Non-Accelerated
filer
|
x Smaller
reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). ¨ Yes x No
State the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date: 27,731,000 common shares as of January 11,
2011.
Page
|
|||
PART
I – FINANCIAL INFORMATION
|
|||
Item
1:
|
Financial
Statements
|
3
|
|
Item
2:
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
4
|
|
Item
3:
|
Quantitative
and Qualitative Disclosures About Market Risk
|
7
|
|
Item
4:
|
Controls
and Procedures
|
7
|
|
PART
II – OTHER INFORMATION
|
|||
Item
1:
|
Legal
Proceedings
|
8
|
|
Item
1A:
|
Risk
Factors
|
8
|
|
Item
2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
8
|
|
Item
3:
|
Defaults
Upon Senior Securities
|
8
|
|
Item
4:
|
[Removed
and Reserved]
|
8
|
|
Item
5:
|
Other
Information
|
8
|
|
Item
6:
|
Exhibits
|
8
|
2
PART
I - FINANCIAL INFORMATION
Our
unaudited financial statements included in this Form 10-Q are as
follows:
|
|
F-1
|
Consolidated
Balance Sheet as of May 31, 2010 and Interim Unaudited Consolidated
Balance Sheet as of November 30, 2010;
|
F-2
|
Interim
Unaudited Consolidated Statements of Operations and Comprehensive (Loss)
for the Three Months and for the Six Months ended November 30, 2010
and November 30, 2009 and from Inception to November 30,
2010;
|
F-3
|
Interim
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended
November 30, 2010 and November 30, 2009 and from Inception to
November 30, 2010;
|
F-4
|
Notes
to Interim Unaudited Consolidated Financial
Statements;
|
3
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Consolidated
Balance Sheets
(Expressed in US dollars)
|
||||||||
November 30,
|
May 31,
|
|||||||
2010
|
2010
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 467,881 | $ | 598,468 | ||||
Total
current assets
|
467,881 | 598,468 | ||||||
Total
Assets
|
$ | 467,881 | $ | 598,468 | ||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 161,231 | $ | 149,538 | ||||
Advances
payable
|
28,181 | 230,981 | ||||||
Compensation
payable-related party
|
- | 5,671 | ||||||
Total
current liabilities
|
189,412 | 386,190 | ||||||
Stockholders'
equity
|
||||||||
Common
stock, $0.001 par value, 75,000,000 shares authorized, 27,566,000 and
27,312,500 issued and outstanding at November 30 and May 31,
2010
|
27,566 | 27,312 | ||||||
Additional
paid in capital
|
1,474,810 | 1,018,764 | ||||||
Accumulated
deficit
|
(1,223,907 | ) | (833,798 | ) | ||||
Total
stockholders' equity
|
278,469 | 212,278 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 467,881 | $ | 598,468 |
See
accompanying notes to unaudited financial statements
F-1
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Consolidated
Statements of Operations and Comprehensive (Loss) (Unaudited)
(Expressed
in US dollars)
Three Months
|
Six Months
|
From inception
|
||||||||||||||||||
Ended
|
Ended
|
(January 30, 2007) to
|
||||||||||||||||||
November 30,
|
November 30,
|
November 30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
Revenue
|
$ | - | $ | $ | $ | - | $ | - | ||||||||||||
Operation
|
||||||||||||||||||||
Mining
exploration
|
- | - | 9,440 | |||||||||||||||||
Professional
fees
|
205,741 | 275,332 | 322,978 | 433,738 | 1,028,393 | |||||||||||||||
General
and administrative
|
25,972 | 2,549 | 67,131 | 6,482 | 186,074 | |||||||||||||||
231,713 | 277,881 | 390,109 | 440,220 | 1,223,907 | ||||||||||||||||
(Loss)
|
(231,713 | ) | (277,881 | ) | (390,109 | ) | (440,220 | ) | (1,223,907 | ) | ||||||||||
Income
taxes
|
- | - | - | - | - | |||||||||||||||
Net
(Loss)
|
$ | (231,713 | ) | $ | (277,881 | ) | $ | (390,109 | ) | $ | (440,220 | ) | $ | (1,223,907 | ) | |||||
Net
(Loss) Per Common Share Basic and Diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES
|
27,483,665 | 26,894,478 | 27,456,180 | 26,826,871 |
See
accompanying notes to unaudited financial statements
F-2
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows (Unaudited)
(Expressed
in US dollars)
Six Months Ended
November 30, 2010
|
Six Months Ended
November 30, 2009
|
From inception
(January 30, 2007)
to August 31, 2010
|
||||||||||
Cash
flow from operating activities:
|
||||||||||||
Net
income (loss) for the period
|
$ | (390,109 | ) | $ | (440,220 | ) | $ | (1,223,907 | ) | |||
Adjustments
to reconcile net loss to net cash provided by (used in)
operations
|
- | - | - | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Accounts
payable
|
11,693 | 71,411 | 161,231 | |||||||||
Accounts
payable-related party
|
- | - | - | |||||||||
Compensation
payable-related party
|
(5,671 | ) | - | - | ||||||||
Net
cash provided by (used in) operating activities
|
(384,087 | ) | (368,809 | ) | (1,062,676 | ) | ||||||
Cash
flows from investing activities:
|
||||||||||||
Net
cash provided by (used in) investing activities
|
- | - | - | |||||||||
Cash
flows from financing activities:
|
||||||||||||
Issuance
of common stock
|
456,300 | 625,000 | 1,488,800 | |||||||||
Proceeds
- advances payable
|
40,200 | 265,651 | 393,484 | |||||||||
Payments
- advances payable
|
(243,000 | ) | (365,303 | ) | ||||||||
Capital
contributions
|
- | - | 13,576 | |||||||||
Net
cash provided by (used in) financing activities
|
253,500 | 890,651 | 1,530,557 | |||||||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(130,587 | ) | 521,842 | 467,881 | ||||||||
Cash
and cash equivalents at beginning of period
|
598,468 | 4,190 | - | |||||||||
CASH
& CASH EQUIVALENTS AT END OF PERIOD
|
$ | 467,881 | $ | 526,032 | $ | 467,881 | ||||||
SUPPLEMENTAL
NON-CASH
|
||||||||||||
Financing
actiivity
|
||||||||||||
Accrual
of cost of issuance in advances payable
|
$ | 40,200 | $ | - | $ | 161,200 | ||||||
Supplemental
disclosures of cash flow information
|
||||||||||||
Cash
paid during period for
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
taxes
|
$ | - | $ | - | $ | - |
See
accompanying notes to unaudited financial statements
F-3
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Notes
to Unaudited Consolidated financial statements
For
Six Months Ended November 30, 2010
(Expressed
in
U.S. dollars)
1.
|
CONDENSED
FINANCIAL STATEMENTS
|
The
accompanying consolidated interim financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at November 30, 2010
and for all periods presented have been made.
Certain
information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's May 31, 2010 audited consolidated financial statements. The results of
operations for the periods ended November 30, 2010 and November 30, 2009 are not
necessarily indicative of the operating results for the full years.
2.
|
GOING
CONCERN
|
The
Company’s consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. The Company has had no revenues and has generated losses from
operations.
The
Company has incurred losses since inception resulting in an accumulated deficit
of $1,223,907. Its ability to continue as a going concern is dependent upon the
ability of the Company to generate profitable operations in the future and/or to
obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Management intends
to address the going concern issue by funding future operations through the sale
of equity capital and by director loans, if needed.
F-4
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Notes
to Consolidated financial statements
For
Six Months Ended November 30, 2010
(Expressed
in
U.S. dollars)
3.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis of
Presentation
The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
and are expressed in U.S. Dollars. The Company’s fiscal year-end is May 31. The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary SunSi Energies Hong Kong Ltd., which had no activity
through November 30, 2010 other than incorporation, legal and professional fees
and start-up costs.
Use of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Financial
Instruments
Cash is
the only asset on the Company’s balance sheet. The carrying value of cash
approximates its fair value.
Concentration of Credit
Risk
Financial
instruments that potentially subject the Company to credit risk consist
principally of cash. Cash is deposited with a high quality credit
institution. On occasion, cash balances exceed the FDIC limit.
Income
Taxes
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted FASB ASC 740 as of
its inception. Pursuant to FASB ASC 740 the Company is required to compute tax
asset benefits for net operating losses carried forward. Potential benefit of
net operating losses have not been recognized in the financial statements
because the Company cannot be assured it is more likely than not it will utilize
the net operating losses carried forward in future years.
F-5
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Notes
to Consolidated financial statements
For
Six Months Ended November 30, 2010
(Expressed
in
U.S. dollars)
3.
|
SIGNIFICANT
ACCOUNTING POLICIES (continued)
|
Basic and Diluted Net Income
(Loss) Per Share
The
Company computes net income (loss) per share in accordance with ASC 260
“Earnings per Share”. ASC 260 requires presentation of both basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS is
computed by dividing net income (loss) available to common stockholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is
anti-dilutive.
Revenue
Recognition
The
Company is a development stage entity and has not recognized any revenues since
inception. The Company expects to begin generating revenue from the sales of TCS
during the three month period ending February 28, 2011. Revenue will be
recognized when all of the following elements are satisfied (i) there are no
uncertainties regarding customer acceptance;(ii) there is persuasive evidence
that an agreement exists; (iii) delivery has occurred; (iv) legal title to the
products has transferred to the customer; (v) the sales price is fixed or
determinable; and (vi) collectability is reasonably
assured.
4.
|
THE
EFFECT OF RECENTLY ISSUED ACCOUNTING
STANDARDS
|
Accounting
Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair
Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605),
Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985),
Certain Revenue Arrangements that include Software Elements, and various other
ASU's No. 2009-2 through ASU No. 2010-29 which contain technical corrections to
existing guidance or affect guidance to specialized industries or entities were
recently issued. These updates have no current applicability to the Company or
their effect on the financial statements would not have been
significant.
F-6
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Notes
to Consolidated financial statements
For
Six Months Ended November 30, 2010
(Expressed
in
U.S. dollars)
5.
|
ADVANCES
PAYABLE
|
During
the period the Company received advances and accruals amounting to $40,200 from
a non-affiliated stockholder to help fund the operations of the Company until
proceeds were received from the Company’s Stock Offering. The advances were made
to the Company on an interest free basis. Therefore no interest has been accrued
in the Company’s financial statements. During the period the Company repaid
advances amounting to $243,000 to two non-affiliated stockholders.
6.
|
INCOME
TAXES
|
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has incurred a net operating
loss of $1,223,907, which expires in 2030. Pursuant to ASC 740 the Company is
required to compute tax asset benefits for net operating losses carried forward.
Potential benefit of net operating losses have not been recognized in these
financial statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward in future
years.
The
components of the net deferred tax asset at November 30, 2010, the statutory tax
rate, the effective tax rate and the elected amount of the valuation allowance
are indicated below:
November 30, 2010
|
||||
$
|
||||
Net
Operating Loss
|
1,223,907 | |||
Statutory
Tax Rate
|
35 | % | ||
Effective
Tax Rate
|
— | |||
Deferred
Tax Asset
|
428,367 | |||
Valuation
Allowance
|
(428,367 | ) | ||
Net
Deferred Tax Asset
|
— |
F-7
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Notes
to Consolidated financial statements
For
Six Months Ended November 30, 2010
(Expressed
in
U.S. dollars)
6.
|
INCOME
TAXES (continued)
|
The
Company follows the provisions of uncertain tax positions as addressed in FASB
ASC 740-10-65-1. The Company recognized approximately no increase in the
liability for unrecognized tax benefits.
The
Company has no tax positions at November 30, 2010 and May 31, 2010 for which the
ultimate deductibility is highly certain but for which there is uncertainty
about the timing of such deductibility. The Company recognizes interest accrued
related to unrecognized tax benefits in interest expense and penalties in
operating expenses. No such interest or penalties were recognized during
the periods presented. The Company had no accruals for interest and penalties at
November 30, 2010 or May 31, 2010.
7.
|
STOCKHOLDERS’
EQUITY
|
The
Company is authorized to issue 75 million shares of common stock at a par value
of $0.001 and had 27,566,000 shares of common stock issued and outstanding as of
November 30, 2010. On March 24, 2009, the Board of Directors approved a 12 for 1
forward stock split. The split has been reflected in the consolidated financial
statements for all periods presented.
The
Company has been conducting a private placement of its common stock since
September 10, 2009 at a price of $2.00 per share, with a maximum issuance of
8,000,000 shares (‘Offering’). During the six months ended November 30, 2010,
the Company accepted subscription agreements from investors and correspondingly
issued 253,500 shares of its common stock pursuant to the Offering, and received
$507,000 in gross proceeds. The cost of this issuance was $50,700.
8.
|
RELATED
PARTY TRANSACTIONS
|
During
the quarter ended November 30, 2010, $31,158 was paid to its Chief Financial
Officer for compensation and expenses.
F-8
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Notes
to Consolidated financial statements
For
Six Months Ended November 30, 2010
(Expressed
in
U.S. dollars)
9.
|
COMMITMENTS
|
SunSi
Energies Inc. entered into various engagement agreements for advisory and
consulting services on a non-exclusive basis to obtain equity capital. In the
event that the Company completes a financing from a funding source provided by
one of the consultants, then such consultant will receive a finders or referral
fee at closing ranging from seven percent (7%) to ten percent (10%) of the
amount received by the Company. The total financing sought is in the amount of
$6,000,000 in equity. The maximum potential amount of fee paid that can be paid
on the remaining amounts to be raised, is approximately $600,000. These fees
have been accrued as advances payable at November 30, 2010. The terms and
condition of financing are subject to Company approval. At November 30, 2010
unpaid fees are $28,181.
On
November 10, 2009 and February 9, 2010 the Company entered in agreements with
its Director of Business Development and Chief Financial Officer, respectively,
to pay each of these individuals $60,000 per year plus any documented out of
pocket business expenses.
10.
|
OTHER
EVENTS
|
The
Company incorporated on April 7, 2009 a wholly-owned subsidiary in Hong Kong in
the name of “SunSi Energies Hong Kong Limited” (“SunSi HK”) and the Company
entered into two (2) Joint Venture Agreements with a Chinese Company
respectively on June 18 and June 19, 2009. SunSi Energies Hong Kong had no
activity from the date of incorporation through November 30, 2010 other than
incorporation, legal and professional fees and start-up costs.
In June
2009, subject to the successful completion of due diligence and other
conditions, SunSi Energies Hong Kong committed to invest a total of $10,000,000
in exchange for 90% of the capital stock in the newly formed PRC Joint Venture
Company which would have received all of the assets, expertise and technology of
a TSC production facility, Zibo Commerce and Trade Co. (“ZBC”) in Zibo, China.
On July 31, 2010, the Company discontinued its efforts to purchase the ZBC
production facility in Zibo, China.
On August
3rd 2010, SunSi HK signed a letter of intent with Wendeng He Xie Silicon Co.
Ltd. (“Wendeng”) for the acquisition of 60% of its existing 20,000 metric ton
(MT) TCS facility, with the intent to increase Wendeng’s capacity by
an additional 40,000 MT.
F-9
SUNSI
ENERGIES INC.
(A
Development Stage Company)
Notes
to Consolidated financial statements
For
Six Months Ended November 30, 2010
(Expressed
in
U.S. dollars)
11.
|
SUBSEQUENT
EVENTS
|
On
November 30, 2010 the Company entered into definitive agreements to
purchase Wendeng from Liu Dongqiang, a Chinese individual, and to have Wendeng
re-formed as a joint venture under Chinese law. Wendeng produces 20,000 MT of
TCS, annually. The Company expects to close the Wendeng acquisition in the first
quarter of 2011.
On
December 8, 2010, the Company completed its acquisition of 90% of Zibo Baokai
Trade Co., (“Zibo”) a company with the right to globally distribute, without
restriction, the TCS production of ZBC, the production facility that the Company
had unsuccessfully attempted to purchase in 2009 and 2010.
Also on
December 8, 2010, David Natan, the Company’s Chief Financial Officer was
appointed to the additional positions of Chief Executive Officer and Director.
Mr. Natan replaced Michel Laporte who is remaining with the Company as a
consultant.
Subsequent
to November 30, 2010 the Company has received $330,000 from the sale of 165,000
shares of common stock.
The
Company has evaluated subsequent events from the balance sheet through the date
the financial statements were issued, and determined there are no other events
to disclose.
F-10
Forward-Looking
Statements
Certain
statements in this quarterly report, other than purely historical information,
including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those
statements are based, are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements generally are identified
by the words “believes,” “project,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will
continue,” “will likely result,” and similar expressions. We intend
such forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and are including this statement for purposes of complying with
those safe-harbor provisions. Forward-looking statements are based on
current expectations and assumptions that are subject to risks and uncertainties
which may cause actual results to differ materially from the forward-looking
statements. Our ability to predict results or the actual effect of future plans
or strategies is inherently uncertain. Factors which could have a
material adverse affect on our operations and future prospects on a consolidated
basis include, but are not limited to: changes in economic conditions,
legislative/regulatory changes, availability of capital, interest rates,
competition, and generally accepted accounting principles. These risks and
uncertainties should also be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or
otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
Overview
SunSi
Energies (“SunSi,” “the Company,” we” “us” our”) goal is to acquire and develop
a portfolio of high quality trichlorosilane (“TCS”) distribution rights and
producing facilities that are strategically located and possess a potential for
future growth and expansion. TCS is the main feedstock of the solar energy
industry, used in the production of silicon, which in turn is used in the
production of solar PV energy producing panels.
4
Acquisition of
Baokai
On
December 12, 2009, SunSi Hong Kong (“SunSi HK”) secured the exclusive
distribution rights for Zibo Commerce and Trade Co. (“ZBC”) TCS production for
the international market. ZBC is located in China and produces 25,000 metric
tons of TCS annually.
On April
29th 2010, SunSi HK signed a definitive agreement to acquire 90% of Zibo Baokai
Commerce and Trade Co. (“Zibo Baokai”), a company with the right to distribute
ZBC’s TCS production in the China market.
On
December 8, 2010, we completed acquisition of 90% of Zibo Baokai Trade Co.,
(“Baokai”) a company with the right to globally distribute, without restriction
all of the TCS production of ZBC. This is same production facility that we had
unsuccessfully attempted to purchase in 2009 and 2010 because we believed the
terms of acquisition were not beneficial to Sunsi shareholders.
As a
result of the consummation of the Baokai acquisition, we expect to begin
generating revenues during our third fiscal quarter ending on February 28,
2011.
Definitive Agreement to
Purchase Wendeng
On August
3rd
2010, SunSi HK signed a letter of intent with Wendeng He Xie Silicon Co. Ltd.
(“Wendeng”) for the acquisition of 60% of Wendeng’s existing 20,000 metric ton
(MT) TCS facility located in China. On November 30, 2010 we entered into a
definitive agreement to purchase Wendeng. Under the terms of this agreement, we
will acquire a 60% equity interest in Wendeng; and subsequent to consummation of
the acquisition, we expect to increase Wendeng's capacity to a total of 60,000MT
by the end of calendar 2011. The existing shareholders of Wendeng will
contribute to this planned expansion on a pro-rata basis to maintain their
equity interest of 40%. Additionally, the current executive management team of
Wendeng will provide its technical expertise for the construction, training and
operation of the facility and its expansion. All of the management and employees
are expected to remain employed by Wendeng. Wendeng's current customer base
includes some of the largest polysilicon producers in China. Legal and financial
due diligence, which has been underway since mid-September when SunSi entered
into a Letter of Intent to acquire Wendeng facility, is progressing
well.
There can
be no assurances that we can negotiate an acceptable purchase price on the
facility; and can raise the sufficient capital necessary to purchase
Wendeng. Additionally, there can be no assurances that if the
acquisition is successfully consummated, that we can raise the necessary funds
to expand plant capacity.
We expect
to complete the acquisition of Wendeng by February 28, 2011 however there can be
no assurances.
Results
of Operations for the three months and six months ended November 30, 2010 and
2009
Revenues.
We have
not earned any revenues from the inception of our Company through the period
ending November 30, 2010. As noted above under the section “Acquisition of
Baokai”, in December 2010 we completed the acquisition of Baokai, and anticipate
to begin earning revenues commencing in December 2010, however, there can be no
assurances on the timing of commencing revenue or the amount of revenue that
will be generated.
Operating
Expenses.
We
incurred operating expenses for the three months and six months ended November
30, 2010 of $231,713 and $390,109 respectively, compared to $ 277,881 and
$440,220 for the same periods ended in 2009. Operating expenses for the six
months ended November 30, 2010 included general and administrative expenses of
$67,131, and professional fees expenses of $322,978. Operating expenses for the
six months ended November 30, 2009 included general and administrative expenses
of $6,482 and professional fees of $433,738. General and administrative expenses
increased in 2010 over 2009 levels due to the addition of two employees, a
business development director and the addition of a chief financial officer.
The decrease in professional fees from 2010 to 2009 is attributable
to a decrease in acquisition related expenses in 2010.
Loss
We
incurred net losses for the six months ended November 30, 2010 and 2009 of
$390,109 and $440,220 respectively. Our losses for all periods are attributable
to operating expenses and our lack of revenue.
Liquidity
and Capital Resources
The
accompanying consolidated financial statements have been prepared on a
going-concern basis, which contemplates the realization of assets and
satisfaction of liabilities and other commitments in the normal course of
business.
As of
November 30, 2010, we had cash of $467,881 and current liabilities of $189,412.
We, therefore, had working capital of $278,469.
5
We have
not recorded any revenues since inception and continue generating losses from
operations. Since inception we have an accumulated deficit of $1,223,907. Our
ability to continue as a going concern is dependent upon our ability to generate
profitable operations in the future and/or to obtain the necessary financing to
meet our obligations and repay our liabilities arising from normal business
operations when they come due. We believe that the Baokai acquisition combined
with future fund raising activities will enable us to successfully address our
going concern issue, however, there can be no assurances.
Critical
Accounting Policies
Basis of
Presentation
The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
and are expressed in U.S. Dollars. The Company’s fiscal year-end is May 31. The
consolidated financial statements include the accounts of the Company and our
wholly-owned subsidiary SunSi Energies Hong Kong Ltd., which had no activity
through November 30, 2010 other than incorporation, legal and professional fees
and start-up costs.
Use of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Financial
Instruments
Cash is
the only asset on our balance sheet. The carrying value of cash approximates its
fair value.
Concentration of Credit
Risk
Financial
instruments that potentially subject us to credit risk consist principally of
cash. Cash is deposited with a high quality credit institution. On
occasion, cash balances exceed the FDIC limit.
Income
Taxes
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. We adopted FASB ASC 740 as of our
inception. Pursuant to FASB ASC 740 we are required to compute tax asset
benefits for net operating losses carried forward. Potential benefit of net
operating losses have not been recognized in the financial statements because we
cannot be assured it is more likely than not it will utilize the net operating
losses carried forward in future years.
Basic and Diluted Net Income
(Loss) Per Share
We
compute net income (loss) per share in accordance with ASC 260 “Earnings per
Share”. ASC 260 requires presentation of both basic and diluted earnings per
share (EPS) on the face of the income statement. Basic EPS is computed by
dividing net income (loss) available to common stockholders (numerator) by the
weighted average number of shares outstanding (denominator) during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period using the treasury stock method and convertible preferred
stock using the if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted EPS excludes
all dilutive potential shares if their effect is anti-dilutive. We have not
issued any options or warrants since the inception of the Company.
Revenue
Recognition
The
Company is a development stage entity and has not recognized any revenues since
inception. The Company expects to begin generating revenue from the sales of TCS
during the three month period ending February 28, 2011. Revenue will be
recognized when all of the following elements are satisfied (i) there are no
uncertainties regarding customer acceptance;(ii) there is persuasive evidence
that an agreement exists; (iii) delivery has occurred; (iv) legal title to the
products has transferred to the customer; (v) the sales price is fixed or
determinable; and (vi) collectability is reasonably
assured.
6
Off
Balance Sheet Arrangements
As of
November 30, 2010, there were no off balance sheet arrangements.
A smaller
reporting company is not required to provide the information required by this
Item.
Disclosure Controls and
Procedures. Our management has evaluated, under the supervision and with
the participation of our chief executive officer and chief financial officer,
the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report pursuant to Rule 13a-15(b) and 15d-15 under the
Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation,
our chief executive officer and chief financial officer have concluded that, as
of the end of the period covered by this report, our disclosure controls and
procedures are effective in ensuring that information required to be disclosed
in our Exchange Act reports is (1) recorded, processed, summarized and reported
in a timely manner, and (2) accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Control Over
Financial Reporting. There have been no changes in our internal control
over financial reporting that occurred during the period covered by this report
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
7
PART
II – OTHER INFORMATION
None.
A smaller
reporting company is not required to provide the information required by this
Item.
During
the six months ended November 30, 2010, the Company accepted subscription
agreements from investors and correspondingly sold 253,500 shares of its common
stock pursuant to its current private placement offering, and received $507,000
in gross proceeds. The offer and sale of the securities was exempt
from registration under the Securities Act of 1933 pursuant to Rule 506 of
Regulation D.
None
None
Exhibit
Number
|
Description of Exhibit | |
31 |
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32 |
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
8
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SUNSI
ENERGIES INC.
|
||
By:
|
||
/s/ David Natan
|
||
David
Natan
|
||
Chief
Executive Officer
|
||
January
14, 2011
|
In
accordance with Section 13 or 15(d) of the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
By:
|
/s/ Kebir Ratnani
|
Kebir
Ratnani
|
Director
|
January
14, 2011
|
/s/ Richard St-Julien
|
Richard
St-Julien
|
Secretary,
Vice President and Director
|
January
14, 2011
|
/s/ David
Natan
|
David
Natan
|
Chief
Executive Officer, Chief Financial and Accounting Officer,
Director
|
January
14, 2011
|
9