Attached files
FORM 10-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2010
COMMISSION FILE NUMBER 000-49805
SOLAR3D, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 01-05922991
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(State of Incorporation) (I.R.S. Employer Identification No.)
6500 HOLLISTER AVENUE, SUITE130, GOLETA, CALIFORNIA 93117
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(Address of principal executive offices) (Zip Code)
(805) 690-9000
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Registrant's telephone number, including area code
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK OTC
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes |_| No |X|
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes |_| No |X|
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
|X|
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 definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a 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 |_| No |X|
The aggregate market value of voting stock held by non-affiliates of
the registrant was approximately $14,807,704 as of June 30, 2010 (computed by
reference to the last sale price of a share of the registrant's Common Stock on
that date as reported by OTC Bulletin Board).
There were 104,976,495 shares outstanding of the registrant's Common
Stock as of March 21, 2011.
TABLE OF CONTENTS
PART 1
ITEM 1 Business............................................................2
ITEM 2 Properties..........................................................5
ITEM 3 Legal Proceedings...................................................5
ITEM 4 [Removed and Reserved]..............................................5
PART II
ITEM 5 Market for Registrant's Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities..................6
ITEM 6 Selected Financial Data.............................................7
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................7
ITEM 8 Financial Statements and Supplementary Data........................12
ITEM 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................29
ITEM 9A Controls and Procedures............................................29
ITEM 9B Other Information..................................................30
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance............30
ITEM 11 Executive Compensation.............................................34
ITEM 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters....................................37
ITEM 13 Certain Relationships and Related Transactions, and
Director Independence..............................................38
ITEM 14 Principal Accounting Fees and Services.............................38
ITEM 15 Exhibits, Financial Statement Schedules............................39
SIGNATURES....................................................................40
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PART I
ITEM 1. BUSINESS
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GENERAL
Solar3D, Inc. is a Delaware corporation formed to engage in the
business of developing and marketing a new three-dimensional version of solar
cell technology in order to maximize the conversion of sunlight into
electricity. Conventional solar cells reflect a significant amount of incident
sunlight losing much of the solar energy that could have produced additional
electrical power. Inspired by light management techniques used in fiber optic
devices, Solar3D is designing a new type of solar cell, one that utilizes a
three-dimensional design to trap sunlight inside the photovoltaic structure
where it is reflected multiple times until much more of the energy is absorbed
into the solar cell material. We have applied for patent protection on what we
believe to be a breakthrough design for the next generation in solar cell
technology with increased efficiency and resulting in a lower cost per watt of
electricity produced.
CORPORATE HISTORY
We were originally formed in January 2002 as MachineTalker, Inc. in
order to pursue the development of new wireless process control technology. In
August 2005, we filed a Registration Statement on Form SB-2 which was declared
effective by the Securities and Exchange Commission on December 22, 2005. In
September 2010, we shifted our engineering and research focus to developing a
new means for generating solar-produced electrical power which we plan to patent
and perfect for use in the manufacture of highly efficient solar cells. In July
2010, we changed our company name to Solar3D, Inc. in order to better reflect
our new business plan.
BACKGROUND OF SOLAR CELL TECHNOLOGY
Solar cell efficiency is the measure of how much incident sunlight is
converted into electricity. Most solar cells today are made from silicon, an
inexpensive and abundant raw material. Due to the physics of silicon, the
theoretical maximum efficiency of high-grade crystalline silicon solar cells is
approximately 29%. In commercial practice, the efficiency ranges from 12% to
19%. We anticipate that our 3D solar cell technology will increase the
efficiency of solar cells using low cost processes, in order to decrease the
overall cost per watt of solar electricity.
Traditional solar cells are two-dimensional utilizing a single pass
sunlight conversion mechanism. There are two primary ways that these devices
lose light and electrons, or electron-hole pairs to be precise, which result in
a conversion efficiency much less than the theoretical maximum.
o SURFACE REFLECTION - Due to fundamental physics, approximately
30% of incident sunlight is reflected off the surface of
silicon cells.
o ELECTRON REABSORPTION - When a photon strikes the solar cell,
an electron is "knocked loose" creating an electron-hole pair
that moves through the cell material creating an electrical
current. However, in conventional two-dimensional solar cell
designs, these electron-hole pairs must travel a long distance
before reaching a metal contact wire. As a result, they are
reabsorbed by the material and do not contribute to the
production of electrical current.
OUR 3D SOLAR CELL TECHNOLOGY
We are designing our three-dimensional solar cell from the ground up as
an integrated optoelcetrical device that optimally reduces all primary energy
losses in a solar cell to achieve the highest efficiency. By leveraging the
scalability of conventional solar and semiconductor processes, we believe our 3D
solar cell can deliver an unprecedented level of cost and conversion efficiency.
Unlike conventional solar cells where sunlight passes through one time,
our 3D solar cell design is planned to use a myriad of 3D micro-cells that trap
sunlight inside photovoltaic structures where photons bounce around until they
are all converted into electricity. Our three-dimensional technology is expected
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to combine thin- and thick-film technologies to achieve the high efficiencies of
crystalline at the lower cost per watt of thin film.
We believe the key features and benefits of our 3D solar cell design
are:
o LIGHT COLLECTORS - Instead of allowing sunlight to bounce off
the surface, to the new design uses an array of light
collecting elements to guide all incident sunlight into a
matching array of highly optimized 3D micro-photovoltaic
structures.
o 3D PHOTOVOLTAIC STRUCTURE - Conventional solar cells have one
photon absorbing surface. to the new design uses a
multi-facetted 3D photovoltaic structure where photons can
bounce off many surfaces until all photons that can be
absorbed by the material are absorbed.
o THIN ABSORBING REGIONS - Our 3D photovoltaic structure is
anticipated to be fabricated with very thin absorbing regions
and designed to enhance charge carrier separation. Therefore,
electron-hole pairs will travel short distances before
reaching a contact wire where they will be quickly extracted
to produce current. We believe this approach will lead to an
overall height and silicon material reduction when compared to
conventional crystalline silicon cells.
o BELOW SURFACE CONTACTS - Unlike conventional solar cells where
electrical contact wires run on the top of the cell, blocking
sunlight, our design is expected to use a network of contact
wires that run below the light collectors. We believe this
approach will allow our 3D solar cells to trap and utilize
nearly 100% of the incident light.
o A NEW SOLAR CELL DESIGN - Almost all conventional solar cells
are two-dimensional designs based on wafer or thin film
manufacturing processes. As a result, their performance is
naturally constrained by their physical structure. By
redefining the problem in 3D, we expect that the new design
will be able to break down the 2D constraints and develop a
more efficient solution.
Our initial commercialization objective is to create a low cost, high
efficiency silicon solar cell based on our 3D technology. By keeping our focus
on silicon, we believe we can leverage the tremendous silicon infrastructure and
manufacturing processes of the growing solar industry, as well as the mature and
highly optimized semiconductor industry. However, we anticipate that our 3D
technology will be able to be used to create multi-junction cells with exotic
materials such as gallium arsenide to achieve efficiencies that may be greater
than 50% for use in concentrated solar and high performance applications.
BUSINESS AND REVENUE MODELS
We recently began developing a working version of our proprietary
three-dimensional solar cell technology. Once we complete a working version, we
plan to package the resulting device into solar cell arrays which we will market
to existing manufacturers of conventional solar panels. We believe that these
manufactures will be able to use our device to increase the energy output of
their existing products. We expect to earn revenue from licensing fees and by
partnering or joint venturing with entities who seek to use our proprietary
three-dimensional solar cell technology.
INVESTMENT IN SENSE-COMM TECHNOLOGY LLC
In November 2006, we issued 24,000 shares of our common stock (on a
post reverse stock-split basis) to purchase 10% of Sense-Comm Technology LLC.
Sense-Comm is a limited liability company formed in August 2006 by a small group
of individuals to become a distributor and reseller of our intelligent wireless
network sensor controlling technology to the energy and petroleum industries.
ACQUISITION OF WIDEBAND DETECTION TECHNOLOGIES, INC.
On July 20, 2007, Wideband Detection Technologies, Inc., a Florida
corporation, UTEK Corporation, a Delaware corporation, and Solar3D entered into
an agreement and plan of acquisition pursuant to which Solar3D agreed to acquire
100% of the total issued and outstanding stock of Wideband Detection
Technologies from UTEK in exchange for 120,000 shares of Solar3D's common stock
(on a post reverse stock-split basis) based on a value of $2.00 per share (on a
post reverse stock-split basis) as of the close of business on July 20, 2007.
These shares have piggyback registration rights. Upon the closing of the
agreement and plan of acquisition, which occurred on July 20, 2007, Wideband
Detection Technologies became a wholly owned subsidiary of Solar3D.
ACQUISITION OF MICRO WIRELESS TECHNOLOGIES, INC.
On December 20, 2007, Micro Wireless Technologies, Inc., a Florida
corporation, UTEK Corporation, a Delaware corporation, and Solar3D entered into
an agreement and plan of acquisition pursuant to which Solar3D agreed to acquire
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100% of the total issued and outstanding stock of Micro Wireless Technologies
from UTEK in exchange for 1,860,000 shares of Solar3D's common stock (on a post
reverse stock-split basis) based on a value of $1.00 per share (on a post
reverse stock-split basis) as of the close of business on December 20, 2007.
These shares have piggyback registration rights. Upon the closing of the
agreement and plan of acquisition, which occurred on December 31, 2007, Micro
Wireless Technologies became a wholly owned subsidiary of Solar3D.
INTELLECTUAL PROPERTY
We currently own the following registered trademarks and service marks:
(i) United States Trademark Registration No. 2848438, issued by the United
States Patent and Trademark Office on June 1, 2004 , covering the trademark
"TALKER," (ii) United States Trademark Registration No. 2872244, issued by the
United States Patent and Trademark Office on August 10, 2004, covering the
trademark "SMMP," (iii) United States Trademark Registration No. 2872243, issued
by the United States Patent and Trademark Office on August 10, 2004, covering
the trademark "MACHINETALKER," (iv) United States Trademark Registration No.
2882375, issued by the United States Patent and Trademark Office on September 7,
2004, covering the trademark "MINITALKER," and (v) United States Trademark
Registration No. 2897704, issued by the United States Patent and Trademark
Office on October 26, 2004, covering the trademark "SIMPLE MACHINE MANAGEMENT
PROTOCOL" with no claim made to the exclusive right to use "MACHINE MANAGEMENT
PROTOCOL" apart from the entire mark, (vi) United States Trademark Registration
No. 3004886, issued by the United States Patent and Trademark Office on October
4, 2005, covering the trademark "TAGTALKER," (vii) United States Trademark
Registration No. 3329348, issued by the United States Patent and Trademark
Office on November 6, 2007, covering the trademark "MACHINETALKER IRFID," (viii)
United States Trademark Registration No. 3329347, issued by the United States
Patent and Trademark Office on November 6, 2007, covering the trademark "IRFID"
(word only), (ix) United States Trademark Registration No. 3344070, issued by
the United States Patent and Trademark Office on November 27, 2007, covering the
trademark "IRFID" (stylized), (x) United States Trademark Registration No.
3288781, issued by the United States Patent and Trademark Office on September 4,
2007, covering the trademark "CAP," (xi) United States Trademark Registration
No. 3386280, issued by the United States Patent and Trademark Office on February
19, 2008, covering the trademark "WEBTALKER," and (xii) United States Trademark
Registration No. 77205781, issued by the United States Patent and Trademark
Office on March 19, 2009, covering the trademark "GREENTALKER."
In April 2002, a Patent Application to the United States Patent and
Trademark Office entitled "Self Coordinated Machine Network" application No.
20040114557 was filed, regarding a self coordinated machine network established
by two or more machines in proximity with each other via a wired or wireless
network infrastructure. The machines are configured to establish an ad hoc
network between them for sharing information related to their common
applications. New machines that come into proximity of the network
infrastructure are configured to join an existing ad hoc network. Machines that
power down or are removed from proximity of the network infrastructure are
eliminated from the ad hoc network. Communications between the constituent
machines of the ad hoc network allow the machines to self coordinate the network
and redundantly store information pertaining to the common and disparate
applications of the various machines that comprise the self coordinated machine
network. An assignment of this application to us from the inventors, Roland F.
Bryan, Mark P. Harris, and Christopher T. Kleveland was filed with the USPTO on
April 23, 2002. The patent was granted on February 27, 2007, as Patent No.: US
7,184,423, B2, entitled "Self Coordinated Machine Network."
All past employees and existing consultants have executed agreements
that impose nondisclosure obligations on them and pursuant to which they have
agreed to assign to us (to the extent permitted by California law) all
copyrights and other inventions created by them during their engagement with
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Solar3D. We have also implemented a trade secret protection policy that
management believes to be adequate to protect our intellectual property and
trade secrets. All researchers maintain laboratory notebooks with dated pages to
support any work done by them in furtherance of the solar energy patents for
which we have applied and any work that produces new invention claims.
COMPETITION
The market for solar cell technology is highly competitive. There are
many companies throughout the world that manufacture solar cell arrays using
existing technology and several other companies pursuing new methods to produce
more energy efficiency using photovoltaic structures. Additionally, researchers
at universities worldwide are currently working on new means to increase
photovoltaic efficiency. Many of these competitors have longer operating
histories, greater name recognition, larger installed customer bases, and
substantially greater financial and marketing resources than Solar3D. Our
ability to compete successfully in this field will depend upon our completion of
development of our proprietary technique for production of more efficient solar
cells and the adoption of our technology by major manufacturers in the field. We
cannot assure that we will be able to compete successfully in the solar cell
technology industry, or that future competition will not have a material adverse
effect on our business, operating results, and financial condition.
GOVERNMENT REGULATION
We are subject to various federal, state and local laws affecting
wireless communication and security businesses. The Federal Trade Commission and
equivalent state agencies regulate advertising and representations made by
businesses in the sale of their products, which apply to us. Our business is
also subject to government laws and regulations governing health, safety,
working conditions, employee relations, wrongful termination, wages, taxes and
other matters applicable to businesses in general. Failure of Solar3D to comply
with applicable government rules or regulations could have a material adverse
effect on our financial condition and business operations.
EMPLOYEES
As of December 31, 2010, we had two full time employees, our chief
executive officer and our chief financial officer. We also relied upon the
services of consultants to assist us with designing photovoltaic receptors to
produce electricity from that incident light energy.
SEASONALITY
Our operations are not expected to be affected by seasonal
fluctuations, although our cash flow may be affected by fluctuations in the
timing of investment capital to support our research and product development.
ITEM 2. PROPERTIES
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We currently lease approximately 522 square feet of office space at
6500 Hollister Avenue, Suite 130, Goleta, California 93117 at a base rental rate
of $2,500 per month pursuant to month to month lease.
ITEM 3. LEGAL PROCEEDINGS
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We are not currently a party to any material legal proceedings.
ITEM 4. [REMOVED AND RESERVED]
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
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COMMON STOCK
Our common stock trades on the OTC Bulletin Board Market under the
symbol "SLTD." The range of high and low bid quotations for each fiscal quarter
within the last two fiscal years was as follows:
YEAR ENDED DECEMBER 31, 2010 HIGH LOW
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First Quarter ended March 31, 2010 $0.10 $0.04
Second Quarter ended June 30, 2010 $0.10 $0.05
Third Quarter ended September 30, 2010 $0.10 $0.01
Fourth Quarter ended December 31, 2010 $0.25 $0.05
YEAR ENDED DECEMBER 31, 2009 HIGH LOW
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First Quarter ended March 31, 2009 $0.05 $0.028
Second Quarter ended June 30, 2009 $0.04 $0.01
Third Quarter ended September 30, 2009 $0.012 $0.01
Fourth Quarter ended December 31, 2009 $0.05 $0.01
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The above quotations reflect inter-dealer prices, without retail
markup, mark-down, or commission and may not necessarily represent actual
transactions.
As of March 21, 2011, there were approximately 291 record holders of
our common stock, not including shares held in "street name" in brokerage
accounts which is unknown. As of March 21, 2011, there were approximately
104,976,495 shares of common stock outstanding on record.
DIVIDENDS
We have not declared or paid any cash dividends on our common stock and
do not anticipate paying dividends for the foreseeable future.
EQUITY COMPENSATION PLAN INFORMATION
Effective February 15, 2002, our board of directors adopted the
MachineTalker, Inc. 2002 Stock Option Plan for Directors, Officers, Employees
and Key Consultants under which a total of 160,000 shares of our common stock
(on a post reverse stock-split basis) have been reserved for issuance pursuant
to the grant and exercise of up to 160,000 stock options (on a post reverse
stock-split basis). The 2002 Stock Option Plan has been approved by the holders
of our outstanding shares.
All of the stock options previously issued by us under our 2002 Stock
Option Plan for Directors, Officers, Employees, and Consultants have expired.
For the fiscal year ended December 31, 2010, we issued no stock options pursuant
to our 2002 Stock Option Plan.
Effective July 22, 2010, we granted nonqualified stock options to
purchase up to 15,000,000 shares of our common stock to James B. Nelson, our
chief executive officer, at an exercise price of $0.05 per share exercisable
until July 22, 2017 in consideration for his services to us. These stock options
vest 1/36th per month, commencing on August 21, 2010, on a monthly basis for as
long as Mr. Nelson is an employee or consultant of Solar3D.
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WARRANTS
For the fiscal year ended December 31, 2010, we issued no warrants to
purchase shares of registered or unregistered common stock.
UNREGISTERED ISSUANCE OF EQUITY SECURITIES
The following is a list of the issuance of securities by us during the
fiscal year ending December 31, 2010 in transactions exempt from registration
that were not previously included in a Quarterly Report on Form 10-Q or in a
Current Report on Form 8-K, the proceeds of which were generally used for
working capital:
NUMBER OF DOLLAR AMOUNT SERVICES OR OTHER EXEMPTION FROM
SHARES OF CONSIDERATION CONSIDERATION DATE OF SALE REGISTRATION
---------- ---------------- ----------------- ----------------- --------------
400,000 $20,000 Cash December 7, 2010 Rule 506
400,000 $20,000 Cash December 7, 2010 Rule 506
2,000,000 $100,000 Cash December 21, 2010 Rule 506
ITEM 6. SELECTED FINANCIAL DATA.
--------------------------------
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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CAUTIONARY STATEMENTS
This Form 10-K contains financial projections and other
"forward-looking statements," as that term is used in federal securities laws,
about Solar3D Inc.'s financial condition, results of operations and business.
These statements include, among others: statements concerning the potential for
revenues and expenses and other matters that are not historical facts. These
statements may be made expressly in this Form 10-K. You can find many of these
statements by looking for words such as "believes," "expects," "anticipates,"
"estimates," or similar expressions used in this Form 10-K. These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause our actual results to be materially different from
any future results expressed or implied by us in those statements. The most
important facts that could prevent us from achieving our stated goals include,
but are not limited to, the following:
(a) inability to complete research and development of the new
Solar3D technology with little or no current revenue;
(b) volatility or decline of our stock price;
(c) potential fluctuation in quarterly results;
(d) our failure to earn revenues or profits;
(e) inadequate capital to continue business;
(f) barriers to raising the additional capital or to obtaining the
financing needed to implement our business plans;
(g) lack of demand for our products and services;
(h) rapid and significant changes in markets;
(i) litigation with or legal claims and allegations by outside
parties;
(j) insufficient revenues to cover operating costs;
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(k) inability to start or acquire new businesses, or lack of
success of new businesses started or acquired by us, if any;
(l) inability to effectively develop or commercialize our new
Solar3D technology; and
(m) inability to obtain patent or other protection for our
proprietary intellectual property.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. We caution you not to place undue reliance on the
statements, which speak only as of the date of this Form 10-K. The cautionary
statements contained or referred to in this section should be considered in
connection with any subsequent written or oral forward-looking statements that
we or persons acting on our behalf may issue.
We do not undertake any obligation to review or confirm analysts'
expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this Form 10-K or to reflect the occurrence of unanticipated events.
The following discussion should be read in conjunction with our
condensed financial statements and notes to those statements. In addition to
historical information, the following discussion and other parts of this
quarterly report contain forward-looking information that involves risks and
uncertainties.
OVERVIEW
On August 5, 2010, the holders of a majority of our outstanding voting
stock voted by written consent to (1) effect a one-for-five reverse stock split,
and (2) change our name to Solar 3D, Inc. Our new business focus will be
centered on the acquisition, development, and commercialization of new
proprietary technology to significantly increase the efficiency and energy
production of solar photovoltaic cells that are currently offered in the market
and that may be developed in the future. In furtherance of our new business
focus, we recently applied for patents covering a novel three-dimensional solar
cell technology that is designed to maximize the conversion of sunlight into
electricity. We believe our new technology will dramatically increase the
efficiency of solar cells.
Almost all conventional solar cells have a two-dimensional design where
up to 30 percent of incident is sunlight reflected off of each solar cell's
surface and more light energy absorbed and lost inside the solar cell materials
than is converted into energy. By contrast, our Solar3D design uses a matrix of
light-collecting elements that guide sunlight into a corresponding array of
three-dimensional, micro-photovoltaic structures. The sunlight, in the form of
photons, is trapped among these micro-structures, where it bounces around until
virtually all of the energy is converted into electricity. Solar3D aims to
create a better solar cell using this innovative technique by eliminating
surface reflection and maximizing the conversion of photons into electrons to
achieve greater efficiency and a lower cost per watt.
We still own all of the MachineTalker technology. In May 2008, we
successfully interconnected our Talker(R) product line to our new "GuardDog"
product which uses Ultra-Wide Band technology to detect any movement or motion
in its vicinity. The combination of Talkers(R) and GuardDog employs Ultra-Wide
Band radar-like signals to detect movement within an area, either in the open
space or inside of a closed chamber like that of a shipping container. In
addition, this new product can detect changes other than movement, such as a
break or hole being made in the side of a container. This product is aimed at a
unique method of protection for goods in transit or in storage, and has been
proposed as part of a package to several potential customers.
We currently have two full time employees, our chief executive officer
and our chief financial officer. We also retain the services of several research
consultants who are responsible for product development
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
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revenues and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of property, plant and equipment, intangible assets,
deferred tax assets and fair value computation using the Black Scholes option
pricing model. We base our estimates on historical experience and on various
other assumptions, such as the trading value of our common stock and estimated
future undiscounted cash flows, that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions; however, we believe that our estimates, including
those for the above-described items, are reasonable.
USE OF ESTIMATES
In accordance with accounting principles generally accepted in the
United States, management utilizes estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. These estimates and assumptions
relate to recording net revenue, collectability of accounts receivable, useful
lives and impairment of tangible and intangible assets, accruals, income taxes,
inventory realization, stock-based compensation expense and other factors.
Management believes it has exercised reasonable judgment in deriving these
estimates. Consequently, a change in conditions could affect these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Our cash, cash equivalents, investments, accounts receivable and
accounts payable are stated at cost which approximates fair value due to the
short-term nature of these instruments.
REVENUE RECOGNITION
We will continue to recognize revenue in accordance with the Securities
and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition
in Financial Statements" ("SAB 104"). We will continue to recognize revenue upon
delivery, provided that evidence of an arrangement exists, title, and risk of
loss have passed to the customer, fees are fixed or determinable, and collection
of the related receivable is reasonably assured. We will continue to record
revenue net of estimated product returns, which is based upon our return policy,
sales agreements, management estimates of potential future product returns
related to current period revenue, current economic trends, changes in customer
composition and historical experience. We will continue to accrue for warranty
costs, sales returns, and other allowances based on our prior experience in
servicing customers and products. We may extend credit to our customers based
upon credit evaluations and do not require collateral. We do not and will not
ship a product until we have either a purchase agreement or rental agreement
signed by the customer with a payment arrangement. This is a critical policy,
because we want our accounting to show only sales which are "final" with a
payment arrangement. We do not and will not make consignment sales or inventory
sales subject to a "buy back" or return arrangement from customers.
PROVISION FOR SALES RETURNS, ALLOWANCES AND BAD DEBTS
We will continue to maintain a provision for sales allowances, returns
and bad debts. Sales returns and allowances result from equipment damaged in
delivery or customer dissatisfaction, as provided by agreement. The provision
will continue to be provided for by reducing gross revenue by a portion of the
amount invoiced during the relevant period. The amount of the reduction will
continue to be estimated based on historical experience.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
REVENUE
Total revenue for the year ended December 31, 2010 decreased by
$(43,327) to $0 compared to $43,327 in the prior year ended December 31, 2009.
This decrease in revenue was a result of our focusing on development of our
product. We are in our development stage.
-9-
COST OF SALES
Cost of sales expenses decreased by $(41,607) to $0 for the year ended
December 31, 2010 compared to $41,607 in the prior year ended December 31, 2009.
This decrease in cost of sales expenses was primarily due to lack of sales
transactions during the year ended December 31, 2010.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses decreased by $(9,761) to $0 for the year
ended December 31, 2010 compared to $9,761 in the prior year ended December 31,
2009. This decrease in selling and marketing expenses was the result of a
decrease in marketing exposure because we are in the process of developing our
three-dimensional solar cell technology so we do not have a completed product to
market.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by $120,707 to $571,895
for the year ended December 31, 2010 compared to $451,188 in the prior year
ended December 31, 2009. This increase in general and administrative expenses
was the result of an increase in non-cash stock compensation expense of
$208,005. Overall, the remaining general and administrative expenses decreased
by $(87,298) due to lower professional fees.
RESEARCH AND DEVELOPMENT
Research and development costs increased by $36,042 to $36,042 for the
year ended December 31, 2010 compared to $0 in the prior year ended December 31,
2009. This increase in research and development costs was the result of an
increase in testing and engineering cost related to the development of our solar
cell technology.
NET LOSS
Net loss decreased by $(399,878) to $(616,906) for the year ended
December 31, 2010, compared to $(1,050,064) in the prior year ended December 31,
2009. This decrease in net loss in the current year was the result of losses on
settlement of debs not occurring during the current year while significant
losses were realized during the prior year. Currently operating costs exceed
revenue because sales are not yet sufficient to cover costs. We cannot assure
when or if revenue will exceed operating costs.
LIQUIDITY AND CAPITAL RESOURCES
We had net cash of $3,311 at December 31, 2010, as compared to $10,002
for the prior year ended December 31, 2009.
During the year ended December 31, 2010, we used $(408,325) of cash for
operating activities, as compared to $(144,779) for the prior year ended
December 31, 2009. The increase of $(263,546) in cash used in operating
activities was a result of increased payments for operating expenses and prepaid
expenses that were partially offset by an increase in accrued expenses.
Cash used in investing activities for the current year ended December
31, 2010, was $(5,366) to purchase equipment, as compared to cash provided of
$1,347 from a return on investment in the prior year ended December 31, 2009.
Cash provided by financing activities during the year ended December
31, 2010 was $407,000 as compared to $150,485 for the prior year ended December
31, 2009. Our capital needs have primarily been met from the proceeds of equity
financing, shareholder loans, and to a lesser extent, sales.
We will have additional capital requirements during 2011 necessary in
order to complete research and development of working prototypes of our
three-dimensional solar cells. We also expect that we will require additional
capital in order to fabricate and market arrays of these 3-D solar cells.
Although we cannot quantify these anticipated costs with specificity, we
estimate that we will require approximately $700,000 in funding over the next 12
-10-
months of operations, split almost evenly between product development and a
concerted marketing and sales efforts. We cannot assure that marketing and
research and development costs in 2011 will not exceed or vary from those costs
expected by management. We intend to meet our cash requirements through the sale
of shares of our common stock. We cannot assure that we will be able to raise
additional capital or obtain additional financing for our business.
We cannot assure that we will have sufficient capital to finance our
growth and business operations or that such capital will be available on terms
that are favorable to us or at all. We are currently incurring operating
deficits that are expected to continue for the foreseeable future.
GOING CONCERN QUALIFICATION
We have incurred significant losses from operations, and such losses
are expected to continue. Our auditors have included a "Going Concern
Qualification" in their report for the year ended December 31, 2010. In
addition, we have limited working capital. The foregoing raises substantial
doubt about our ability to continue as a going concern. Management's plans
include seeking additional capital. We cannot guarantee that additional capital
will be available when and to the extent required, or that if available, it will
be on terms acceptable to us. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. The "Going
Concern Qualification" may make it substantially more difficult to raise
capital.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that are reasonably
likely to have a current or future effect on our financial condition, revenues,
results of operations, liquidity or capital expenditures.
-11-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF SOLAR3D, INC.
--------------------------------------------------------------------
SOLAR3D, INC. AND SUBSIDIARIES
(formerly Machinetalker, Inc.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
CONTENTS
Reports of Independent Registered Public Accounting Firm .....................13
Consolidated Balance Sheets as of December 31, 2010 and 2009..................14
Consolidated Statements of Operations for the years ended
December 31, 2010 and 2009....................................................15
Consolidated Statements of Changes in Shareholders' Deficit for
the years ended December 31, 2010 and 2009....................................16
Consolidated Statements of Cash Flows for the years ended
December 31, 2010 and 2009 ...................................................20
Notes to Consolidated Financial Statements ...................................21
-12-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Solar3D, Inc. and Subsidiaries (formerly MachineTalker, Inc.)
(A Development Stage Company)
Santa Barbara, California
We have audited the accompanying consolidated balance sheets of Solar3D, Inc.
and subsidiaries (formerly MachineTalker, Inc.) (A Development Stage Company) as
of December 31, 2010 and 2009, and the related consolidated statements of
operations, shareholders' deficit, and cash flows for the years then ended, and
for the period from inception of the development stage on January 30, 2002
through December 31, 2010. 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 audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Solar3D, Inc. and
subsidiaries (formerly MachineTalker, Inc.) (A Development Stage Company) as of
December 31, 2010 and 2009, and the results of their operations and their cash
flows for the years then ended and for the period from inception of the
development stage on January 30, 2002 through December 31, 2010, in conformity
with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company does not generate significant revenue, it has
negative cash flows from operations, and its total liabilities exceed its total
assets. This raises substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ HJ Associates & Consultants, LLP
HJ Associates & Consultants, LLP
Salt Lake City, Utah
March 31, 2011
-13-
SOLAR3D, INC. AND SUBSIDIARIES
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, 2010 December 31, 2009
------------------ -------------------
ASSETS
CURRENT ASSETS
Cash $ 3,311 $ 10,002
Prepaid expense 24,822 -
------------------ -------------------
TOTAL CURRENT ASSETS 28,133 10,002
------------------ -------------------
PROPERTY & EQUIPMENT, at cost
Machinery & equipment 13,080 13,080
Computer equipment 55,717 50,351
Furniture & fixture 4,670 4,670
------------------ -------------------
73,467 68,101
Less accumulated depreciation (67,923) (67,423)
------------------ -------------------
NET PROPERTY AND EQUIPMENT 5,544 678
------------------ -------------------
OTHER ASSETS
Security deposit 2,975 2,975
------------------ -------------------
TOTAL OTHER ASSETS 2,975 2,975
------------------ -------------------
TOTAL ASSETS $ 36,652 $ 13,655
================== ===================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 13,444 $ 45,582
Accrued expenses 453,232 401,029
Accrued interest, other 25,025 17,225
Accrued interest, related parties 107,074 110,041
Convertible promissory note 65,000 65,000
Notes payable, related parties - 44,000
------------------ -------------------
TOTAL CURRENT LIABILITIES 663,775 682,877
------------------ -------------------
SHAREHOLDERS' DEFICIT
Common stock, $.001 par value;
550,000,000 authorized shares;
100,689,825 and 36,395,359 shares issued and outstanding, respectively 100,689 36,395
Additional paid in capital 7,815,088 7,220,377
Deficit accumulated during the development stage (8,542,900) (7,925,994)
------------------ -------------------
TOTAL SHAREHOLDERS' DEFICIT (627,123) (669,222)
------------------ -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 36,652 $ 13,655
================== ===================
The accompanying notes are an integral part of
these consolidated financial statements
-14-
SOLAR3D, INC. AND SUBSIDIARIES
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
From Inception
Year Ended January 30, 2002
----------------------------------- through
December 31, 2010 December 31, 2009 December 31, 2010
----------------- ----------------- -----------------
REVENUE $ - $ 43,327 $ 1,127,406
COST OF SERVICES - 41,607 496,177
----------------- ----------------- -----------------
GROSS PROFIT - 1,720 631,229
----------------- ----------------- -----------------
OPERATING EXPENSES
Selling and marketing expenses - 9,761 1,264,814
General and administrative expenses 571,895 451,188 3,653,091
Research and development 36,042 - 1,475,907
Impairment loss - - 1,753,502
Depreciation and amortization expense 500 8,848 120,247
----------------- ----------------- -----------------
TOTAL OPERATING EXPENSES 608,437 469,797 8,267,561
----------------- ----------------- -----------------
LOSS FROM OPERATIONS (608,437) (468,077) (7,636,332)
----------------- ----------------- -----------------
OTHER INCOME/(EXPENSES) BEFORE PROVISION FOR INCOME TAXES
Interest income - 4 10,255
Interest expense (8,469) (16,038) (269,684)
Penalties - - (155)
Gain/(loss) on investment - 1,347 (73,121)
Loss on settlement of debt - (567,300) (567,300)
Gain/(loss) on sale of asset - - (963)
----------------- ----------------- -----------------
TOTAL OTHER INCOME/(EXPENSES) (8,469) (581,987) (900,968)
----------------- ----------------- -----------------
LOSS BEFORE PROVISION FOR INCOME TAXES (616,906) (1,050,064) (8,537,300)
PROVISION FOR INCOME TAXES - - (5,600)
----------------- ----------------- -----------------
NET LOSS $ (616,906)$ (1,050,064) $ (8,542,900)
================= ================= =================
BASIC AND DILUTED LOSS PER SHARE $ (0.01)$ (0.04)
================= =================
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 70,364,029 26,974,667
================= =================
The accompanying notes are an integral part of
these consolidated financial statements
-15-
SOLAR3D, INC. AND SUBSIDIARIES
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010
Accumulated
Deficit During
Common stock Additional the
---------------------- Paid-in Development
Shares Amount Capital Stage Total
------------ --------- ------------ ------------ -----------
Balance from original Issuance at January 30, 2002
($0.00425 per share) ($7,650 in cash and a patent at
fair value of $5,100) 3,000,000 $ 3,000 $ 9,750 $ - $ 12,750
Issuance of common stock in February and March 2002
(100,000 shares at $1.25 per share in cash) 100,000 100 124,900 - 125,000
Issuance of common stock in April 2002
(8,000 shares at $1.25 per share in cash) 8,000 8 9,992 - 10,000
Issuance of common stock in April 2002
(8,000 shares as finders fees) 8,000 8 (8) - -
Issuance of common stock in May 2002
(56,000 shares at $1.25 per share in cash) 56,000 56 69,944 - 70,000
Issuance of common stock in May 2002
(8,000 shares as finders fees) 8,000 8 (8) - -
Issuance of common stock in June 2002
(20,000 shares at a price of $2.50 per share in cash) 20,000 20 49,980 - 50,000
Net Loss for the year ended December 31, 2002 - - - (852,600) (852,600)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2002 3,200,000 3,200 264,550 (852,600) (584,850)
Issuance of common stock in January 2003
(420,916 ata price of $0.3041 per share in cash) 420,916 421 127,579 - 128,000
Issuance of common stock in March 2003
(32,884 at a price of $0.3041 per share in cash) 32,884 33 9,967 - 10,000
Net Loss for the year ended December 31, 2003 - - - (394,115) (394,115)
----------- ---------- ------------ ------------ -----------
Balance, December 31, 2003 3,653,800 3,654 402,096 (1,246,715) (840,965)
Issuance of common stock in January 2004
(1,000 shares valued at $6,250 for services 1,000 1 6,249 - 6,250
Issuance of common stock in June 2004
(640,000 shares at $0.625 per share in conversion debt) 640,000 640 399,360 - 400,000
Issuance of common stock in June 2004
(400,000 shares at $0.625 per share for services) 400,000 400 249,600 - 250,000
Issuance of common stock in July
through December 31, 2004 for cash 982,400 982 613,018 - 614,000
Net Loss for the year ended December 31, 2004 - - - (573,454) (573,454)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2004 5,677,200 5,677 1,670,323 (1,820,169) (144,169)
Issuance of common stock in January 2005
(548,800 shares at $0.625 per share for cash) 548,800 549 342,451 - 343,000
Issuance of common stock in March 2005
(12,000 shares at $0.50 per share for cash) 12,000 12 29,988 - 30,000
The accompanying notes are an integral part of
these consolidated financial statements
-16-
SOLAR3D, INC. AND SUBSIDIARIES
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010
Accumulated
Deficit During
Common stock Additional the
---------------------- Paid-in Development
Shares Amount Capital Stage Total
------------ --------- ------------ ------------ -----------
Issuance of 152,680 warrants for services - - 129,550 - 129,550
Issuance of common stock in April 2005
(12,000 shares at $2.50 per share for cash) 12,000 12 29,988 - 30,000
Issuance of common stock in May 2005
(10,682 shares at fair value for services) 10,682 10 8,058 - 8,068
Issuance of common stock in May 2005
(58,000 shares at $2.50 per share for cash) 58,000 58 144,942 - 145,000
Issuance of common stock in June 2005
(42,000 shares at $2.50 per share for cash) 42,000 42 104,958 - 105,000
Issuance of 10,400 warrants for services - - 23,400 - 23,400
Net Loss for the year ended December 31, 2005 - - - (1,068,190) (1,068,190)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2005 6,360,682 6,360 2,483,658 (2,888,359) (398,342)
Common stock warrants exercised in March 2006
(12,600 common stock warrants exercised at $0.625) 12,600 13 7,862 - 7,875
Private Placement in 2nd Qtr 2006
(16,000 shares at $3.75 per share for cash) 16,000 16 59,984 - 60,000
Stock Compensation Cost - - 35,008 - 35,008
Common stock warrants exercised in August 2006
(2,000 common stock warrants exercised at $0.625) 2,000 2 1,248 - 1,250
Issuance of common stock in December 2006
(6,286 shares issued at $1.75 for cash) 6,286 6 10,994 - 11,000
Investment in Sense Comm
(24,000 common stock issued at $3.00 per share at FMV) 24,000 24 71,976 - 72,000
Stock Compensation Cost - - 4,847 - 4,847
Issuance of 24,800 warrants for services - - 46,861 - 46,861
Net Loss for the year ended December 31, 2006 - - - (611,967) (611,967)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2006 6,421,568 6,421 2,722,438 (3,500,326) (771,468)
Common stock warrants exercised in January 2007
(1,273 common stock warrants exercised for cash at $3.00) 1,273 1 3,817 - 3,818
Issuance of common stock in January 2007
(33,143 shares at $1.75 per share for cash) 33,143 33 57,967 - 58,000
Issuance of common stock in February 2007
(8,000 shares at $1.75 per share for cash) 8,000 8 13,992 - 14,000
Issuance of 24,000 warrants for services - - 49,487 - 49,487
Issuance of common stock in April 2007
(32,000 shares at $1.75 per share for cash) 32,000 32 55,968 - 56,000
The accompanying notes are an integral part of
these consolidated financial statements
-17-
SOLAR3D, INC. AND SUBSIDIARIES
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010
Accumulated
Deficit During
Common stock Additional the
---------------------- Paid-in Development
Shares Amount Capital Stage Total
------------ --------- ------------ ------------ -----------
Issuance of common stock in April 2007
(1,530 shares at $2.50 per share for services) 1,530 2 3,824 - 3,826
Exercise of stock options in June 2007
(10,000 shares at $0.625 per share for cash) 10,000 10 6,240 - 6,250
Conversion of note to common stock in June 2007
(114,286 shares at $1.75 per share in conversion of debt) 114,286 114 199,886 - 200,000
Issuance of common stock in June 2007
(16,000 shares at $1.25 per share for cash) 16,000 16 19,984 - 20,000
Issuance of common stock in July 2007
(61,600 shares at $1.25 per share for cash) 61,600 62 76,938 - 77,000
Issuance of common stock in July 2007
(120,000 shares at $2.00 per share for purchase of investment) 120,000 120 239,880 - 240,000
Issuance of common stock in August 2007
(4,000 shares at $1.25 per share for cash) 4,000 4 4,996 - 5,000
Issuance of common stock in September 2007
(19,200 shares at $1.25 per share for cash) 19,200 19 23,981 - 24,000
Issuance of 8,333 warrants for services - - 12,345 - 12,345
Stock compensation cost - - 17,092 - 17,092
Issuance of common stock in October 2007
(40,000 shares at $1.25 per share for cash) 40,000 40 49,960 - 50,000
Issuance of common stock in November 2007
(3,425 shares at $1.50 per share for services) 3,425 3 5,133 - 5,136
Issuance of common stock in December 2007
(345,000 shares at $1.00 per share for license fees) 345,000 345 344,655 - 345,000
Issuance of common stock in December 2007
(1,515,000 shares at $1.00 per share for purchase of subsidiary) 1,515,000 1,515 1,513,485 - 1,515,000
Net Loss for the year ended December 31, 2007 - - - (1,025,773) (1,025,773)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2007 8,746,025 8,745 5,422,068 (4,526,099) 904,714
Issuance of common stock in March 2008
(2,649 shares at $1.25 per share for services) 2,649 3 3,308 - 3,311
Issuance of common stock in July 2008
(14,667 shares at $0.625 per share for services) 14,667 15 9,153 - 9,168
Issuance of common stock in September 2008
(60,000 shares at $0.175 per share for services) 60,000 60 10,440 - 10,500
Stock compensation cost - - 12,831 - 12,831
Issuance of common stock in September 2008
(14,000 shares at $0.2275 per share for services) 14,000 14 3,171 - 3,185
The accompanying notes are an integral part of
these consolidated financial statements
-18-
SOLAR3D, INC. AND SUBSIDIARIES
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010
Accumulated
Deficit During
Common stock Additional the
---------------------- Paid-in Development
Shares Amount Capital Stage Total
------------ --------- ------------ ------------ -----------
Contributed capital by shareholder - - 448,712 - 448,712
Net Loss for the year ended December 31, 2008 - - - (2,349,831) (2,349,831)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2008 8,837,341 8,837 5,909,683 (6,875,930) (957,410)
Issuance of common stock in April 2009
(1,240,000 shares at $0.1625 per share issued for services) 1,240,000 1,240 200,260 - 201,500
Issuance of common stock in May 2009
(18,648,018 shares at $0.0053625 per share issued for cash) 18,648,018 18,648 81,352 - 100,000
Issuance of common stock in May 2009
(350,000 shares at $0.1275 per share issued for services) 350,000 350 44,275 - 44,625
Issuance of common stock in May 2009
(380,000 shares at $0.1275 per share issued for conversion of
promissory note) 380,000 380 48,070 - 48,450
Issuance of common stock in May 2009
(6,940,000 shares at $0.1275 per share issued for conversion of
promissory note) 6,940,000 6,940 877,910 - 884,850
Contributed capital by shareholder - - 58,827 - 58,827
Net Loss for the year ended December 31, 2009 - - - (1,050,064) (1,050,064)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2009 36,395,359 36,395 7,220,377 (7,925,994) (669,222)
Issuance of common stock in February 2010 for cash
(16,000,000 shares of common stock issued at $0.0125 per share) 16,000,000 16,000 184,000 - 200,000
Issuance of common stock in July 2010 for cash
(44,444,444 shares of common stock issued at $0.00225 per share) 44,444,444 44,444 55,556 - 100,000
Issuance of common stock in August 2010 for cash
(1,050,000 shares of common stock issued at $0.010476 per share) 1,050,000 1,050 9,950 - 11,000
Issuance of common stock in December 2010 for cash
(2,800,000 shares of common stock issued at $0.05 per share) 2,800,000 2,800 137,200 - 140,000
Rounding shares 22 - - - -
Stock compensation cost - - 208,005 - 208,005
Net loss for the year ended December 31, 2010 - - - (616,906) (616,906)
----------- ---------- ------------ ------------ -----------
Balance at December 31, 2010 100,689,825 $ 100,689 $ 7,815,088 $(8,542,900) $ (627,123)
=========== ========== ============ ============ ===========
The accompanying notes are an integral part of
these consolidated financial statements
-19-
SOLAR3D, INC. AND SUBSIDIARIES
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From Inception
Year Ended January 30, 2002
------------------------------------- through
December 31, 2010 December 31, 2009 December 31, 2010
----------------- ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (616,906) $ (1,050,064) $ (8,542,900)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 500 8,848 120,247
Issuance of common shares and warrants for services - 166,625 727,713
Issuance of common shares in conversion of debt - - 400,000
(Gain)/loss on investment - (1,347) 73,121
Stock Compensation Cost 208,005 - 277,783
Gain on sale of asset - - 963
Impairment loss - - 1,753,502
Loss on settlement of debt - 567,300 567,300
Changes in Assets and Liabilities
(Increase) Decrease in:
Inventory - 39,598 -
Prepaid expenses (24,822) 904 (24,822)
Patents - 656 -
Deposits and other assets - 5,000 2,025
Increase (Decrease) in:
Accounts payable (32,138) 34,036 92,944
Accrued expenses 57,036 122,482 585,331
Unearned revenue - (38,817) -
----------------- ----------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (408,325) (144,779) (3,966,793)
----------------- ----------------- -----------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (5,366) - (79,120)
Sale of asset - - 3,963
Investment in companies - 1,347 (6,121)
----------------- ----------------- -----------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (5,366) 1,347 (81,278)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable related parties - 47,000 1,127,342
Proceeds from convertible promissory note - - 129,000
Repayment of notes payable related party (44,000) (3,000) (137,000)
Contributed capital by shareholder - 6,485 19,197
Proceeds from subsidiary - - 300,000
Proceeds from issuance of common stock 451,000 100,000 2,605,193
----------------- ----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 407,000 150,485 4,043,732
----------------- ----------------- -----------------
NET INCREASE IN CASH (6,691) 7,053 (4,339)
CASH, BEGINNING OF PERIOD 10,002 2,949 7,650
----------------- ----------------- -----------------
CASH, END OF PERIOD $ 3,311 $ 10,002 $ 3,311
================= ================= =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 3,536 $ - $ 137,484
================= ================= =================
Income taxes $ - $ - $ 5,600
================= ================= =================
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
During the year ended December 31, 2009, the Company issued 1,590,000 shares of common stock for services and accounts payable
at a fair value of $246,125; 7,320,000 shares of common stock with a fair value of $933,300 were issued in conversion of
$366,000 in debt resulting in a $567,300 loss on settlement of debt. Also, a shareholder forgave a loan in the amount of
$52,342, and was recorded as additional paid in capital.
The accompanying notes are an integral part of
these consolidated financial statements
-20-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
1. ORGANIZATION AND LINE OF BUSINESS
ORGANIZATION
Solar3D (formerly MachineTalker, Inc.) (the "Company") was incorporated in
the state of Delaware on January 30, 2002. The Company, based in Santa
Barbara, California, began operations on January 30, 2002. We were
originally formed in January 2002 as MachineTalker, Inc. in order to pursue
the development of new wireless process control technology. In September
2010, we shifted our engineering and research focus to developing a new
means for generating solar-produced electrical power which we plan to
patent and perfect for use in the manufacture of highly efficient solar
cells. In July 2010, we changed our company name to Solar3D, Inc. in order
to better reflect our new business plan.
LINE OF BUSINESS
The Company is currently in the stage of developing and marketing a new
three-dimensional version of solar cell technology in order to maximize the
conversion of sunlight into electricity. Conventional solar cells reflect a
significant amount of incident sunlight losing much of the solar energy
that could have produced additional electrical power. Inspired by light
management techniques used in fiber optic devices, Solar3D is designing a
new type of solar cell, one that utilizes a three-dimensional design to
trap sunlight inside the photovoltaic structure where it is reflected
multiple times until much more of the energy is absorbed into the solar
cell material. We have applied for patent protection on what we believe to
be a breakthrough design for the next generation in solar cell technology
with increased efficiency and resulting in a lower cost per watt of
electricity produced.
GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis of accounting, which contemplates continuity of operations,
realization of assets and liabilities and commitments in the normal course
of business. The accompanying financial statements do not reflect any
adjustments that might result if the Company is unable to continue as a
going concern. The Company does not generate significant revenue, and has
negative cash flows from operations, which raise substantial doubt about
the Company's ability to continue as a going concern. The ability of the
Company to continue as a going concern and appropriateness of using the
going concern basis is dependent upon, among other things, an additional
cash infusion. Management believes the existing shareholders and the
prospective new investors will provide the additional cash needed to meet
the Company's obligations as they become due, and will allow the
development of its core of business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of MachineTalker, Inc. is
presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management, which is responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in
the United States of America and have been consistently applied in the
preparation of the financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries Wideband Detection Technologies, Inc. and Mirco
Wireless Technologies, Inc. All significant inter-company balances and
transactions have been eliminated.
DEVELOPMENT STAGE ACTIVITIES AND OPERATIONS
The Company has been in its initial stages of formation and for the year
ended December 31, 2010, had insignificant revenues. A development stage
activity is one in which all efforts are devoted substantially to
establishing a new business and even if planned principal operations have
commenced, revenues are insignificant.
-21-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
REVENUE RECOGNITION
We recognize revenue upon delivery, provided that evidence of an
arrangement exists, title, and risk of loss have passed to the customer,
fees are fixed or determinable, and collection of the related receivable is
reasonably assured. We record revenue net of estimated product returns,
which is based upon our return policy, sales agreements, management
estimates of potential future product returns related to current period
revenue, current economic trends, changes in customer composition and
historical experience. We accrue for warranty costs, sales returns, and
other allowances based on our experience, which tells us we have less than
$25,000 per year in warranty returns and allowances. Generally, we extend
credit to our customers and do not require collateral. We perform ongoing
credit evaluations of our customers and historic credit losses have been
within our expectations. We do not ship a product until we have either a
purchase agreement or rental agreement signed by the customer with a
payment arrangement. This is a critical policy, because we want our
accounting to show only sales which are "final" with a payment arrangement.
We do not make consignment sales, nor inventory sales subject to a "buy
back" or return arrangement from customers. Accordingly, original equipment
manufacturers do not presently have a right to return unsold products to
us.
We also grant exclusive licenses for the use of the technology required to
operate our products. Software license revenue is recognized over the
contract period, for those contracts that either do not contain a service
component or that have services which are not essential to the
functionality of any other element of the contract.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements. Significant estimates made in preparing these financial
statements include the estimate of useful lives of property and equipment,
the deferred tax valuation allowance, and the fair value of stock options.
Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and are depreciated using the
straight line method over its estimated useful lives:
Machinery & equipment 5 Years
Furniture & fixtures 5-7 Years
Computer equipment 3-5 Years
Depreciation expense as of December 31, 2010 and 2009 was $500 and $8,848
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments requires disclosure of the fair value
information, whether or not recognized in the balance sheet, where it is
practicable to estimate that value. As of December 31, 2010 and 2009, the
amounts reported for cash, accounts receivable, accounts payable, accrued
interest and other expenses, and notes payable approximate the fair value
because of their short maturities.
INVENTORY
Inventories are stated at the lower of cost (first-in, first-out basis) or
market, and consists of raw materials. There was no inventory for the years
ended December 31, 2010 and 2009.
-22-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
STOCK-BASED COMPENSATION
Share based payments applies to transactions in which an entity exchanges
its equity instruments for goods or services, and also applies to
liabilities an entity may incur for goods or services that are to follow a
fair value of those equity instruments. We will be required to follow a
fair value approach using an option-pricing model, such as the
Black-Scholes option valuation model, at the date of a stock option grant.
The deferred compensation calculated under the fair value method would then
be amortized over the respective vesting period of the stock option. The
adoption of share based compensation has no material impact on our results
of operations.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs for
the years ended December 31, 2010 and 2009 were $5,472 and $0,
respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. These costs
consist primarily of salaries and direct payroll related costs. The costs
for the years ended December 31, 2010 and 2009 were $36,042 and $0,
respectively.
LOSS PER SHARE CALCULATIONS
Loss per Share dictates the calculation of basic earnings per share and
diluted earnings per share. Basic earnings per share are computed by
dividing income available to common shareholders by the weighted-average
number of common shares available. Diluted earnings per share is computed
similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have
been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. No shares for employee options or
warrants were used in the calculation of the loss per share as they were
all anti-dilutive. The Company's diluted loss per share is the same as the
basic loss per share for the years ended December 31, 2010 and 2009, as the
inclusion of any potential shares would have had an anti-dilutive effect
due to the Company generating a loss. A reconciliation of the numerators
and denominators used in the computation of loss per share for the years
ended December 31, 2010 and 2009 is as follows:
2010 2009
------------- --------------
Numerators $ (616,906) $ (1,050,064)
Denominators 70,364,029 26,974,667
INCOME TAXES
The Company uses the liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to financial statements carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carry-forwards. The measurement of deferred
tax assets and liabilities is based on provisions of applicable tax law.
The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance based on the amount of tax benefits that, based on
available evidence, is not expected to be realized.
-23-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
GOODWILL
Goodwill represents the excess of the purchase price over the fair value
assigned to identifiable net assets acquired of subsidiary companies.
Goodwill is tested for impairment annually or more frequently if events or
circumstances indicate that the asset might be impaired. The Company does
not have the funds to pursue the technologies, which resulted in
impairment. Goodwill impairment is measured as the excess of the carrying
amount over the implied fair value.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Management reviewed accounting pronouncements issued during the three
months ended December 31, 2010, and no pronouncements were adopted during
the period.
3. INCOME TAXES
The Company files income tax returns in the U.S. Federal jurisdiction, and
the state of California. With few exceptions, the Company is no longer
subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for years before 2008.
Deferred income taxes have been provided by temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes. To the extent allowed by
GAAP, we provide valuation allowances against the deferred tax assets for
amounts when the realization is uncertain. Included in the balances at
December 31, 2010 and 2009, are no tax positions for which the ultimate
deductibility is highly certain, but for which there is uncertainty about
the timing of such deductibility. Because of the impact of deferred tax
accounting, other than interest and penalties, the disallowance of the
shorter deductibility period would not affect the annual effective tax rate
but would accelerate the payment of cash to the taxing authority to an
earlier period.
The Company's policy is to recognize interest accrued related to
unrecognized tax benefits in interest expense and penalties in operating
expenses. During the periods ended December 31, 2010 and 2009, the Company
did not recognize interest and penalties.
4. DEFERRED TAX BENEFIT
The income tax provision differs from the amount of income tax determined
by applying the U.S. federal income tax rate to pretax income from
continuing operations for the year ended December 31, 2010 and 2009 due to
the following:
2010 2009
---------------- -----------------
Book Income $ (253,418) $ (420,026)
Depreciation - 1,373
Meals & Entertainment 105 12
Related Party Accrual - 45,162
Non deductible Impairment Expenses - 15,839
Stock for Services 83,202 66,650
Loss on Settlement of Debt - 226,920
Valuation Allowance 170,111 64,070
---------------- -----------------
Income tax expense $ - $ -
================ =================
-24-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
4. DEFERRED TAX BENEFIT (Continued)
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible differences and operating loss and tax
credit carry-forwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the difference
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Net deferred tax liabilities consist of the following components as of
December 31, 2010 and 2009:
2010 2009
------------- -------------
Deferred tax assets:
NOL carryover $ 1,811,794 $ 1,687,962
R & D 128,369 125,695
Contributions 692 692
Related party accruals 224,122 203,709
Depreciation - 1,813
Deferred tax liabilities:
Depreciation (1,414) -
Less valuation allowance (2,163,563) (2,019,871)
------------- -------------
Net deferred tax asset $ - $ -
============= =============
Due to the change in ownership provisions of the Tax Reform Act of 1986,
net operating loss carry-forwards for Federal income tax reporting purposes
are subject to annual limitations. Should a change in ownership occur, net
operating loss carry-forwards may be limited as to use in future years.
5. CAPITAL STOCK
On August 5, 2010, the holders of a majority of the issued and outstanding
shares of the Company's common stock approved a one-for-five reverse common
stock split, and these financial statements have been adjusted for the
effects of this reverse split.
During the year ended December 31, 2010, the Company issued 16,000,000
shares of common stock at a price of $0.0125 per share for $200,000 in
cash; 44,444,444 shares of common stock at a price of $0.00225 per share
for $100,000 cash; 1,050,000 shares of common stock at a price of $0.010476
per share for cash; 2,800,000 shares of common stock at a price of $0.05
per share for $140,000 cash. During the year ended December 31, 2009, the
Company effected a one for five reverse split of its common stock. Also,
the Company issued 18,648,018 shares of common stock at a price of
$0.0053625 per share for $11,000 cash; 1,590,000 shares of common stock for
services and accounts payable at a fair value of $246,125; 7,320,000 shares
of common stock at a fair value of $933,300 for the conversion of $366,000
in debt resulting in the recognition of a $567,300 loss on settlement of
debt; the Company's President forgave a note payable of $52,342 and cash
contributed during the period of $6,485 to contributed capital. The
financial statements have been retroactively adjusted for the effects of
the stock split.
-25-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
6. STOCK OPTIONS AND WARRANTS
During the year ended December 31, 2010, in consideration for services as a
director of the Company, the Board of Directors issued to Mr. Nelson a
nonqualified stock option to purchase up to 15,000,000 shares of the
Company's common stock. The stock options were granted on July 22, 2010 and
vest 1/36th per month commencing on a monthly basis for as long as he is an
employee or consultant of the Company. The stock options are exercisable
for a period of seven years from the date of grant at an exercise price of
$0.05 per share. These share amounts and exercise price have been adjusted
for the one for five reverse split of the Company's common stock.
2010
----------------
Risk free interest rate 2.38%
Stock volatility factor 229%
Weighted average expected option life 7 years
Expected dividend yield None
A summary of the Company's stock option activity and related information
follows:
12/31/2010
-----------------------------
Weighted
Number average
of exercise
Options price
-----------------------------
Outstanding, beginning of period - $ -
Granted 15,000,000 0.05
Exercised - -
Expired - -
Outstanding, end of period 15,000 000 $ 0.05
=============================
Exercisable at the end of period 2,083,333 $ 0.05
=============================
Weighted average fair value of
options granted during the period $ 0.05
==============
The stock-based compensation expense recognized in the statement of
operations during the period ended December 31, 2010 is $208,005.
WARRANTS
A summary of the Company's warrant activity and related information
follows:
2010 2009
------------------------------------------------------------
Weighted Weighted
Number average Number average
of exercise of exercise
Warrants price Warrants price
------------------------------------------------------------
Outstanding, beginning of period 173,280 $ 0.11 173,280 $ 0.11
Granted - - - -
Exercised - - - -
Expired (41,666) (0.06) - -
Outstanding, end of period 131,614 $ 0.12 173,280 $ 0.11
============================= =============================
Exercisable at the end of period 131,614 $ 0.12 173,280 $ 0.11
============================= =============================
Weighted average fair value of
options granted during the period $ - $ -
============== ==============
-26-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
6. STOCK OPTIONS AND WARRANTS (Continued)
WARRANTS (Continued)
---------
At December 31, 2010, the weighted average remaining contractual life of
warrants outstanding:
Weighted
Average
Remaining
Exercisable Warrants Warrants Contractual
Prices Outstanding Exercisable Life (years)
------------------- ------------------ ------------------------------------
$ 0.12 7,614 7,614 0.75
$ 0.12 100,000 100,000 0.85
$ 0.12 20,000 20,000 1.00
$ 0.15 4,000 4,000 1.02
------------------ -------------------
131,614 131,614
================== ===================
7. CONVERTIBLE PROMISSORY NOTES
During the year ended December 31, 2007, the Company entered into a two (2)
year convertible promissory note that matured October 16, 2009. The
principal amount of the note is $65,000, and bears interest at 12% per
annum. The principal is convertible into shares of common stock at $0.25
per share. The Company is in default and the promissory note is due.
During the year ended December 31, 2009, the Company received a loan of
$37,000 from an investor. The loan bears interest at 6% per annum. The
principal of $37,000 was paid in full during the year ended December 31,
2010.
8. RENTAL LEASE
The Company moved to a new facility on October 1, 2010 and leases its
premises on a month-to-month basis. The rent expense for the years ended
December 31, 2010 and 2009 amounted to $15,494 and $12,873, respectively
for each year.
9. RELATED PARTY TRANSACTIONS
During the year ended December 31, 2009, the Company's President forgave a
note payable of $52,342 and cash of $6,485 to contributed capital.
During the year ended December 31, 2009, the Company's President loaned
$7,000 to the Company for operating expenses. During prior years, the
Company's President and Chief Executive officer loaned the Company
$349,342. The note bore interest at 6% per annum. The outstanding principal
balance of this loan was settled during the year ended December 31, 2009,
through the issuance of 6,940,000 shares of common stock. No accrued
interest was settled in this transaction. The balance of interest due as of
December 31, 2010 and 2009 was $107,074 and $108,962, respectively.
During the year ended December 31, 2009, an investor loaned the Company
$37,000 for operating expenses. The note bears interest at 6% per annum,
and is due and payable upon demand. This loan and all accrued interest were
paid in full during the year ended December 31, 2010.
-27-
SOLAR3D, INC. AND SUBSIDIARY
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
10. SUBSEQUENT EVENTS
Management has evaluated subsequent events according to the requirements of
ASC TOPIC 855, and has reported the following:
During January and February, an investor loaned the Company $47,000 for
operating expenses, which was repaid during the same period.
As of March 2011, the Company issued 4,286,670 shares of common stock at
prices of $0.05 and $0.075 per share for a total of $284,000 in cash.
-28-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
--------------------------------------------------------------------------------
None.
ITEM 9A. CONTROLS AND PROCEDURES
--------------------------------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the
participation of our management, including our principal executive officer and
principal financial officer, of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based
upon that evaluation, our principal executive officer and principal financial
officer concluded that, as of the end of the period covered in this report, our
disclosure controls and procedures were not effective to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
required time periods and is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal
financial officer, does not expect that our disclosure controls and procedures
or our internal controls will prevent all error or fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected. To address the material weaknesses, we
performed additional analysis and other post-closing procedures in an effort to
ensure our consolidated financial statements included in this annual report have
been prepared in accordance with generally accepted accounting principles.
Accordingly, management believes that the financial statements included in this
report fairly present in all material respects our financial condition, results
of operations and cash flows for the periods presented.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended. Our management assessed the
effectiveness of our internal control over financial reporting as of December
31, 2010. In making this assessment, our management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
in Internal Control-Integrated Framework. Based on this assessment, management
believes that, as of December 31, 2010, our internal control over financial
reporting was effective based on those criteria. There have been no changes in
internal control over financial reporting since December 31, 2010 that have
materially affected or are reasonably likely to materially affect our internal
control over financial reporting.
NO ATTESTATION REPORT BY INDEPENDENT REGISTERED ACCOUNTANT
The effectiveness of our internal control over financial reporting as
of December 31, 2010 has not been audited by our independent registered public
accounting firm by virtue of our exemption from such requirement as a smaller
reporting company.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial
reporting through the date of this report or during the quarter ended December
31, 2010, that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
-29-
CORRECTIVE ACTION
Management plans to make future investments in the continuing education
of our accounting and financial staff. Specifically, we plan to seek specific
public company accounting training during 2011. Improvements in our disclosure
controls and procedures and in our internal control over financial reporting
will, however, depend on our ability to add additional financial personnel and
independent directors to provide more internal checks and balances, and to
provide qualified independence for our audit committee. We believe we will be
able to commence achieving these goals once our sales and cash flow grow and our
financial condition improves.
ITEM 9B. OTHER INFORMATION
--------------------------
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
----------------------------------------------------------------
The following table lists our executive officers and directors as of
December 31, 2010:
NAME AGE POSITION
------------------- --- ------------------------------------------------
Roland F. Bryan (1) 76 President, Chief Financial Officer, Secretary,
and Chairman of the Board of Directors
James B. Nelson 58 Chief Executive Officer and Director
Mark J. Richardson 56 Director
----------------
(1) Member of audit committee. Mr. Bryan is not an independent director and he
may not qualify as a financial expert for the purposes of satisfying the
requirements of the Securities and Exchange Commission that audit
committees be comprised of independent directors, at least one of whom is a
financial expert. Management believes that our small size and limited
resources has so far hindered us from attracting a fourth director who can
serve on the audit committee as an independent financial expert.
Nevertheless, we will continue to seek such a candidate.
ROLAND F. BRYAN has been the president and chairman of the board of
directors of Solar3D since our inception in January 2002, the chief financial
officer of Solar3D since November 2003, the secretary of Solar3D since May 2006,
and the chief executive officer of Solar3D from inception to October 2010. For
the six years prior to founding Solar3D, Mr. Bryan was self employed as an
independent advisor to several high-tech companies on corporate organization,
management, marketing and product development. Mr. Bryan's professional
background is in the areas computer science research and process control through
computer automation. During the last 25 years he has built up and sold several
high-tech companies in the fields of telecommunications networking, military
computer systems and commercial equipment for network access. In 1974, he
founded Associated Computer Consultants, Inc., a company that implemented
interconnections to the first packet network for many United States government
agencies. In 1983, the name of the company was changed to Advanced Computer
Communications, Inc. and continued to produce networking products for both
military and commercial applications. Advanced Computer Communications made the
Inc. 500 List of Fastest Growing Companies in 1984. In 1991, the company was
split into two separate businesses, one to concentrate on military products, the
other to concentrate on commercial products. Advanced Computer Communications
was acquired by Ericsson in 1998 for $265 million. In September 1994, WIRED
MAGAZINE honored Mr. Bryan and 18 others, as the "Creators of the Internet."
Mr. Bryan's qualifications:
o Leadership experience - Chairman of the board, founder and
chief executive officer of Solar3D since our inception in
January 2002.
-30-
o Finance experience - As founder and president, and chief
financial officer, Mr. Bryan has supervised our financial
management since our inception.
o Industry experience - Mr. Bryan is the founder of Solar3D who
has developed and implemented our business plan since
inception.
o Government experience - Mr. Bryan has secured a number of
long-term government contracts for the provision of products
and consulting engineering services to the U.S. military and
other government agencies.
o Technology and education experience - Mr. Bryan is an inventor
of our proprietary MachineTalker technology and an advisor to
the researchers involved in development of our new 3-D solar
cell technology. Mr. Bryan holds a number of patents in
computer science and communications technology.
JAMES B. NELSON has been a director and chief executive officer of
Solar3D since October 2010. Mr. James Nelson began his executive career 30 years
ago at Bain and Company, a business strategy consulting firm, where he managed a
team of consultants on four continents solving CEO-level programs for global
companies. Prior to joining Solar3D, he spent 20 years working in the private
equity industry as both a capital partner and operating CEO to portfolio
companies. Mr. Nelson was a general partner at Peterson Partners (2007-2009) and
at Millennial Capital Partners (1991-2010--previously known as Invest West
Capital). In addition to his responsibilities in acquisition and divestiture,
Mr. Nelson worked as an executive of a number of portfolio companies. He served
as chief executive officer of Euro-Tek Store Fixture, LLC, chairman of the board
of American Retail Interiors, chairman of the board and chief executive officer
of Panelview Inc. and chairman of the board of Critical Power Exchange, as well
as sitting on numerous boards both in and out of the private equity funds'
portfolios. Prior to his years in private equity, Mr. Nelson served as Vice
President of Marketing at Banana Republic/The Gap, where he managed company-wide
marketing, as well as the initial international expansion of Banana Republic. He
was also general manager for Banana Republic's highly profitable catalog
division. He also served as Vice President of Marketing and Corporate
Development at Saga Corporation, a multi-billion dollar food service company.
Mr. Nelson received his MBA from Brigham Young University, where he graduated
summa cum laude and was named the Outstanding Master of Business Administration
Graduate.
Mr. Nelson's qualifications:
o Leadership experience - Chief executive officer since October
2010, and previously general partner at Peterson Partners
(2007-2009) and at Millennial Capital Partners
(1991-2010--previously known as Invest West Capital). He has
also served as the chief executive officer of Euro-Tek Store
Fixture, LLC and Panelview Inc.
o Industry experience - Mr. Nelson has worked in the solar
industry since October 2010.
o Education experience - Mr. Nelson received his MBA from
Brigham Young University, where he graduated summa cum laude
and was named the Outstanding Master of Business
Administration Graduate.
MARK J. RICHARDSON has been a director of Solar3D since October 2008.
Mr. Richardson has been a business lawyer since he graduated from the University
of Michigan Law School in 1978. He practiced as an associate and partner in
large law firms until 1993, when he established his own practice under the name
Richardson & Associates. He has been the principal securities counsel on a
variety of equity and debt placements for corporations, partnerships, and real
estate companies. His practice includes public and private offerings, venture
capital placements, debt restructuring, compliance with federal and state
securities laws, representation of publicly traded companies, Nadsaq filings,
corporate law, partnerships, joint ventures, mergers, asset acquisitions, and
stock purchase agreements. As a partner in a major international law firm in the
1980's, Mr. Richardson participated in the leveraged buyout and recapitalization
of a well known producer of animated programming for children, financed by
Prudential Insurance and Bear Stearns, Inc. He was also instrumental in
restructuring the public debentures of a real estate company without resorting
to a bankruptcy proceeding. From 1986 to 1993 Mr. Richardson was a contributing
author to State Limited Partnerships Laws - California Practice Guide, Prentice
Hall Law and Business. Prior to receiving his juris doctor degree cum laude from
the University of Michigan Law School in 1978, Mr. Richardson received a
bachelor of science degree summa cum laude in Resource Economics from the
University of Michigan School of Natural Resources in 1975, where he earned the
Bankstrom Prize for academic excellence and achieved Phi Beta Kappa honors. Mr.
Richardson is an active member of the Los Angeles County and California State
Bar Associations, including the Section on Corporations, Business and Finance
and the Section on Real Estate. Richardson & Associates is outside corporate
legal counsel for Solar3D and certain of our affiliates.
-31-
Mr. Richardson's qualifications:
o Leadership experience - Established his own law practice under
the name Richardson & Associates in 1993.
o Industry experience - Mr. Richardson's practice includes
public and private offerings, venture capital placements, debt
restructuring, compliance with federal and state securities
laws, representation of publicly traded companies, Nasdaq
filings, corporate law, partnerships, joint ventures, mergers,
asset acquisitions, and stock purchase agreements.
o Education experience - Mr. Richardson received his juris
doctor degree cum laude from the University of Michigan Law
School in 1978 and a bachelor of science degree summa cum
laude in Resource Economics from the University of Michigan
School of Natural Resources in 1975, where he earned the
Bankstrom Prize for academic excellence and achieved Phi Beta
Kappa honors.
No officer or director is required to make any specific amount or
percentage of his business time available to us. Each of our officers intends to
devote such amount of his or her time to our affairs as is required or deemed
appropriate by us.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Delaware General Corporation Law and our articles of
incorporation, our directors will have no personal liability to us or our
stockholders for monetary damages incurred as the result of the breach or
alleged breach by a director of his "duty of care." This provision does not
apply to the directors' (i) acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) acts or omissions
that a director believes to be contrary to the best interests of the corporation
or our shareholders or that involve the absence of good faith on the part of the
director, (iii) approval of any transaction from which a director derives an
improper personal benefit, (iv) acts or omissions that show a reckless disregard
for the director's duty to the corporation or our shareholders in circumstances
in which the director was aware, or should have been aware, in the ordinary
course of performing a director's duties, of a risk of serious injury to the
corporation or our shareholders, (v) acts or omissions that constituted an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation or our shareholders, or (vi) approval of an unlawful
dividend, distribution, stock repurchase or redemption. This provision would
generally absolve directors of personal liability for negligence in the
performance of duties, including gross negligence.
The effect of this provision in our articles of incorporation is to
eliminate the rights of Solar3D and our stockholders (through stockholder's
derivative suits on behalf of Solar3D) to recover monetary damages against a
director for breach of his fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (vi) above. This provision does not
limit nor eliminate the rights of Solar3D or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. In addition, our Articles of Incorporation provide
that if Delaware law is amended to authorize the future elimination or
limitation of the liability of a director, then the liability of the directors
will be eliminated or limited to the fullest extent permitted by the law, as
amended. Delaware General Corporation Law grants corporations the right to
indemnify their directors, officers, employees and agents in accordance with
applicable law. Our bylaws provide for indemnification of such persons to the
full extent allowable under applicable law. These provisions will not alter the
liability of the directors under federal securities laws.
We intend to enter into agreements to indemnify our directors and
officers, in addition to the indemnification provided for in our bylaws. These
agreements, among other things, indemnify our directors and officers for certain
expenses (including attorneys' fees), judgments, fines, and settlement amounts
incurred by any such person in any action or proceeding, including any action by
or in the right of Solar3D, arising out of such person's services as a director
or officer of Solar3D, any subsidiary of Solar3D or any other company or
enterprise to which the person provides services at the request of Solar3D. We
believe that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Solar3D
pursuant to the foregoing provisions, Solar3D has been informed that in the
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opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
BOARD COMMITTEES
Our board of directors has appointed an audit committee. As of March
15, 2011, the sole member of the audit committee is Roland F. Bryan, who may not
be considered to be independent as defined in Rule 4200 of Nasdaq's listing
standards. The board of directors has adopted a written charter of the audit
committee. The audit committee is authorized by the board of directors to
review, with our independent accountants, our annual financial statements prior
to publication, and to review the work of, and approve non-audit services
performed by, such independent accountants. The audit committee will make annual
recommendations to the board for the appointment of independent public
accountants for the ensuing year. The audit committee will also review the
effectiveness of the financial and accounting functions and our organization,
operations and management. The audit committee was formed on February 8, 2005.
The audit committee held one meeting during fiscal year ended December 31, 2010.
Our board of directors does not have a compensation committee so all
decisions with respect to management compensation are made by the whole board.
Our board of directors does not have a nominating committee. Therefore, the
selection of persons or election to the board of directors was neither
independently made nor negotiated at arm's length.
REPORT OF THE AUDIT COMMITTEE
Our audit committee has reviewed and discussed our audited financial
statements for the fiscal year ended December 31, 2010 with senior management.
The audit committee has also discussed with HJ Associates & Consultants, LLP,
Certified Public Accountants, our independent auditors, the matters required to
be discussed by the statement on Auditing Standards No. 61 (Communication with
Audit Committees) and received the written disclosures and the letter from HJ
required by Independence Standards Board Standard No. 1 (Independence Discussion
with Audit Committees). The audit committee has discussed with HJ the
independence of HJ as our auditors. Finally, in considering whether the
independent auditors provision of non-audit services to us is compatible with
the auditors' independence for HJ, our audit committee has recommended to the
board of directors that our audited financial statements be included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for
filing with the United States Securities and Exchange Commission. Our audit
committee did not submit a formal report regarding its findings.
AUDIT COMMITTEE
ROLAND F. BRYAN
Notwithstanding anything to the contrary set forth in any of our
previous or future filings under the United States Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate this report in future filings with the Securities and Exchange
Commission, in whole or in part, the foregoing report shall not be deemed to be
incorporated by reference into any such filing.
CODE OF CONDUCT
We have adopted a code of conduct that applies to all of our directors,
officers and employees. The text of the code of conduct has been posted on
Solar3D's internet website and can be viewed at www.Solar3D.com. Any waiver of
the provisions of the code of conduct for executive officers and directors may
be made only by the audit committee and, in the case of a waiver for members of
the audit committee, by the board of directors. Any such waivers will be
promptly disclosed to our shareholders.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Section 16(a) of the Exchange Act requires our officers and directors,
and certain persons who own more than 10% of a registered class of our equity
securities (collectively, "Reporting Persons"), to file reports of ownership and
changes in ownership ("Section 16 Reports") with the Securities and Exchange
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Commission. Reporting Persons are required by the SEC to furnish us with copies
of all Section 16 Reports they file.
Based solely on our review of the copies of such Section 16 Reports
received by us, or written representations received from certain Reporting
Persons, all Section 16(a) filing requirements applicable to our Reporting
Persons during and with respect to the fiscal year ended December 31, 2010 have
been complied with on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes the
material elements of compensation for our executive officers identified in the
Summary Compensation Table ("Named Executive Officers"), and executive officers
that we may hire in the future. As more fully described below, our board of
directors makes all decisions for the total direct compensation of our executive
officers, including the Named Executive Officers. We do not have a compensation
committee, so all decisions with respect to management compensation are made by
the whole board.
COMPENSATION PROGRAM OBJECTIVES AND REWARDS
Our compensation philosophy is based on the premise of attracting,
retaining, and motivating exceptional leaders, setting high goals, working
toward the common objectives of meeting the expectations of customers and
stockholders, and rewarding outstanding performance. Following this philosophy,
in determining executive compensation, we consider all relevant factors, such as
the competition for talent, our desire to link pay with performance in the
future, the use of equity to align executive interests with those of our
stockholders, individual contributions, teamwork and performance, and each
executive's total compensation package. We strive to accomplish these objectives
by compensating all executives with total compensation packages consisting of a
combination of competitive base salary and incentive compensation.
While we have only hired one additional executive since inception
because our business has not grown sufficiently to justify additional hires, we
expect to grow and hire in the future. One of our Named Executive Officers has
been with us for many years and his compensation has basically been static,
based primarily on the level at which we can afford to retain him and his
responsibilities and individual contributions. To date, we have not applied a
formal compensation program to determine the compensation of the Named
Executives Officers. In the future, as we and our management team expand, our
board of directors expects to add independent members, form a compensation
committee comprised of independent directors, and apply the compensation
philosophy and policies described in this section of the 10K.
The primary purpose of the compensation and benefits described below is
to attract, retain, and motivate highly talented individuals when we do hire,
who will engage in the behaviors necessary to enable us to succeed in our
mission while upholding our values in a highly competitive marketplace.
Different elements are designed to engender different behaviors, and the actual
incentive amounts which may be awarded to each Named Executive Officer are
subject to the annual review of the board of directors. The following is a brief
description of the key elements of our planned executive compensation structure.
o Base salary and benefits are designed to attract and retain
employees over time.
o Incentive compensation awards are designed to focus employees
on the business objectives for a particular year.
o Equity incentive awards, such as stock options and non-vested
stock, focus executives' efforts on the behaviors within the
recipients' control that they believe are designed to ensure
our long-term success as reflected in increases to our stock
prices over a period of several years, growth in our
profitability and other elements.
o Severance and change in control plans are designed to
facilitate a company's ability to attract and retain
executives as we compete for talented employees in a
marketplace where such protections are commonly offered. We
currently have not given separation benefits to any of our
Name Executive Officers.
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BENCHMARKING
We have not yet adopted benchmarking but may do so in the future. When
making compensation decisions, our board of directors may compare each element
of compensation paid to our Named Executive Officers against a report showing
comparable compensation metrics from a group that includes both publicly-traded
and privately-held companies. Our board believes that while such peer group
benchmarks are a point of reference for measurement, they are not necessarily a
determining factor in setting executive compensation as each executive officer's
compensation relative to the benchmark varies based on scope of responsibility
and time in the position. We have not yet formally established our peer group
for this purpose.
THE ELEMENTS OF SOLAR3D'S COMPENSATION PROGRAM
BASE SALARY
Executive officer base salaries are based on job responsibilities and
individual contribution. The board reviews the base salaries of our executive
officers, including our Named Executive Officers, considering factors such as
corporate progress toward achieving objectives (without reference to any
specific performance-related targets) and individual performance experience and
expertise. None of our Named Executive Officers have employment agreements with
us. Additional factors reviewed by the board of directors in determining
appropriate base salary levels and raises include subjective factors related to
corporate and individual performance. For the year ended December 31, 2010, all
executive officer base salary decisions were approved by the board of directors.
Our board of directors determines base salaries for the Named Executive
Officers at the beginning of each fiscal year, and the board proposes new base
salary amounts, if appropriate, based on its evaluation of individual
performance and expected future contributions. We do not have a 401(k) Plan, but
if we adopt one in the future, base salary would be the only element of
compensation that would be used in determining the amount of contributions
permitted under the 401(k) Plan.
INCENTIVE COMPENSATION AWARDS
The Named Executives have not been paid bonuses and our board of
directors has not yet established a formal compensation policy for the
determination of bonuses. If our revenue grows and bonuses become affordable and
justifiable, we expect to use the following parameters in justifying and
quantifying bonuses for our Named Executive Officers and other officers of
Solar3D: (1) the growth in our revenue, (2) the growth in our earnings before
interest, taxes, depreciation and amortization, as adjusted ("EBITDA"), and (3)
our stock price. The board has not adopted specific performance goals and target
bonus amounts for any of our fiscal years, but may do so in the future.
EQUITY INCENTIVE AWARDS
Effective February 15, 2002, our board of directors adopted the
MachineTalker, Inc. 2002 Stock Option Plan for Directors, Officers, Employees
and Key Consultants (the "Plan") under which a total of 160,000 shares of our
common stock (on a post reverse stock-split basis) have been reserved for
issuance pursuant to the grant and exercise of up to 160,000 stock options (on a
post reverse stock-split basis). The Plan has been approved by the holders of
our outstanding shares. We believe that stock option awards motivate our
employees to work to improve our business and stock price performance, thereby
further linking the interests of our senior management and our stockholders. The
board considers several factors in determining whether awards are granted to an
executive officer, including those previously described, as well as the
executive's position, his or her performance and responsibilities, and the
amount of options, if any, currently held by the officer and their vesting
schedule. Our policy prohibits backdating options or granting them
retroactively.
BENEFITS AND PREREQUISITES
At this stage of our business we have limited benefits and no
prerequisites for our employees other than health insurance and vacation
benefits that are generally comparable to those offered by other small private
and public companies or as may be required by applicable state employment laws.
We do not have a 401(k) Plan or any other retirement plan for our Named
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Executive Officers. We may adopt these plans and confer other fringe benefits
for our executive officers in the future if our business grows sufficiently to
enable us to afford them.
SEPARATION AND CHANGE IN CONTROL ARRANGEMENTS
We do not have any employment agreements with our Named Executive
Officers or any other executive officer or employee of Solar3D. None of them are
eligible for specific benefits or payments if their employment or engagement
terminates in a separation or if there is a change of control.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the total compensation paid in all forms
to the executive officers and directors of Solar3D during the periods indicated:
SUMMARY COMPENSATION TABLE
---------------------- ------- ------------ -------- ---------- --------------- ---------------- ------------- ----------
Non-Equity Non-Qualified
Name and Incentive Deferred
Principal Position Option Plan Compensation All Other
(1) Year Salary Bonus Awards Compensation Earnings Compensation Total
---------------------- ------- ------------ -------- ---------- --------------- ---------------- ------------- ----------
James B. Nelson, 2009 $0 0 0 0 0 0 $0
Chief Executive 2010 $50,000 (1) 0 $208,005 0 0 0 $258,005
Officer
Roland F. Bryan, 2009 $120,000 (2) 0 0 0 0 0 $120,000
President and Chief 2010 $ 90,000 (2) 0 0 0 0 0 $90,000
Financial Officer
Officers as a Group 2009 $120,000 0 0 0 0 0 $120,000
2010 $140,000 0 $208,005 0 0 0 $348,005
---------------------------
(1) Based on an annual salary of $200,000 per year.
(2) Mr. Bryan deferred and accrued the entire amount of his salary
in 2009 and $54,000 of his salary in 2010. Effective July 1,
2010, Mr. Bryan's annual salary decreased from $120,000 per
year to $60,000 per year.
EMPLOYMENT AGREEMENTS
We have not entered into any employment agreements with our executive
officers to date. We may enter into employment agreements with them in the
future.
OUTSTANDING EQUITY AWARDS
The following table sets forth information with respect to unexercised
stock options, stock that has not vested, and equity incentive plan awards held
by our executive officers at December 31, 2010.
OPTION AWARDS
--------------------------------------------------------------------------------------------------------------
Number of Securities Number of Securities
Underlying Unexercised Underlying Unexercised
Options Options Option Option Expiration
Name Exercisable Unexercisable Exercise Price Date
--------------------------------------------------------------------------------------------------------------
James B. Nelson, 2,083,335(1) 12,916,665 $0.05 July 22, 2017
Chief Executive Officer
--------------------------------------------------------------------------------------------------------------
--------------------
(1) On July 22, 2010, Mr. Nelson received nonqualified stock
options to purchase 15,000,000 shares of our common stock at
an exercise price of $0.05 per share exercisable until July
22, 2017 in consideration for his services to us. These stock
options vest 1/36th per month, commencing on August 21, 2010,
on a monthly basis for as long as Mr. Nelson is an employee or
consultant of Solar3D.
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OPTION EXERCISES AND STOCK VESTED
None of our executive officers exercised any stock options or acquired
stock through vesting of an equity award during the fiscal year ended December
31, 2010.
DIRECTOR COMPENSATION
No compensation was paid to our directors and no stock or option awards
for directors were outstanding on December 31, 2010.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------
The following table sets forth the names of our executive officers and
directors and all persons known by us to beneficially own 5% or more of the
issued and outstanding common stock of Solar3D at March 15, 2011. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. In computing the number of shares beneficially owned by a
person and the percentage of ownership of that person, shares of common stock
subject to options held by that person that are currently exercisable or become
exercisable within 60 days of March 15, 2011 are deemed outstanding even if they
have not actually been exercised. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person. The percentage ownership of each beneficial owner is based on
104,416,495 outstanding shares of common stock. Except as otherwise listed
below, the address of each person is c/o Solar3D, Inc., 6500 Hollister Avenue,
Suite 130, Goleta, California 93117. Except as indicated, each person listed
below has sole voting and investment power with respect to the shares set forth
opposite such person's name as of March 15, 2011.
NAME, TITLE, AND ADDRESS OF STOCKHOLDER NUMBER OF SHARES PERCENTAGE
BENEFICIALLY OWNED (1) OWNERSHIP
----------------------------------------- ----------------------- -------------
Roland F. Bryan, President, Chief 15,722,495(2) 15.03%
Financial Officer, and Chairman
James B. Nelson, Chief Executive 3,750,000(3) 3.47%
Officer and Director
Mark J. Richardson, Director 2,304,000 2.20%
1453 Third Street Promenade, Suite 315
Santa Monica, California 90401
All Current Executive Officers as a 21,776,495 20.09%
Group (Three Persons)
Cumorah Capital, Inc. 26,695,950 25.79%
Pearl Innovations, LLC 23,565,950 22.77%
-------------------------------
(1) Except as pursuant to applicable community property laws, the
persons named in the table have sole voting and investment
power with respect to all shares of common stock beneficially
owned. The total number of issued and outstanding shares and
the total number of shares owned by each person does not
include unexercised warrants and stock options, and is
calculated as of March 15, 2011.
(2) Includes 940,000 shares owned by the Bryan Family Trust. Mr.
Bryan holds an option to purchase 216,000 shares from two
existing shareholders at $2.50 per share, after accounting for
reverse stock splits.
(3) Includes 3,750,000 shares which may be purchased pursuant to
stock options that are exercisable within 60 days of March 15,
2011.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
--------------------------------------------------------------------------------
As of March 15, 2011, our sole member of the audit committee is Roland
F. Bryan, who may not be considered to be independent as defined in Rule 4200 of
the National Association of Securities Dealers' listing standards.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
-----------------------------------------------
HJ Associates & Consultants, LLP, Certified Public Accountants is our
principal auditing accountant firm. HJ has provided other non-audit services to
us. The audit committee approved the engagement of HJ before HJ rendered audit
and non-audit services to us.
Each year the independent auditor's retention to audit our financial
statements, including the associated fee, is approved by the Board before the
filing of the previous year's Annual Report on Form 10-K.
HJ FEES
2010 2009
----------------------------
Audit Fees(1) $23,500 $27,500(1)
Audit Related Fees -0- -0-
Tax Fees(2) 751 1,618(2)
All Other Fees -0- -0-
----------------------------
$24,251 $29,118
============================
-------------------------------
(1) Audit fees consist of fees for the audit of our financial
statements and review of the financial statements included in
our quarterly reports.
(2) Tax fees consist of fees for the preparation of original
federal and state income tax returns and fees for
miscellaneous tax consulting services.
PRE-APPROVAL POLICIES AND PROCEDURES OF AUDIT AND NON-AUDIT SERVICES OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee's policy is to pre-approve, typically at the
beginning of our fiscal year, all audit and non-audit services, other than de
minimis non-audit services, to be provided by an independent registered public
accounting firm. These services may include, among others, audit services,
audit-related services, tax services and other services and such services are
generally subject to a specific budget. The independent registered public
accounting firm and management are required to periodically report to the full
board of directors regarding the extent of services provided by the independent
registered public accounting firm in accordance with this pre-approval, and the
fees for the services performed to date. As part of the board's review, the
board will evaluate other known potential engagements of the independent
auditor, including the scope of work proposed to be performed and the proposed
fees, and approve or reject each service, taking into account whether the
services are permissible under applicable law and the possible impact of each
non-audit service on the independent auditor's independence from management. At
audit committee meetings throughout the year, the auditor and management may
present subsequent services for approval. Typically, these would be services
such as due diligence for an acquisition, that would not have been known at the
beginning of the year.
The audit committee has considered the provision of non-audit services
provided by our independent registered public accounting firm to be compatible
with maintaining their independence. The audit committee will continue to
approve all audit and permissible non-audit services provided by our independent
registered public accounting firm.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
------------------------------------------------
EXHIBITS
Exhibit No. Description
----------- -------------------------------------------------------------------------------------------------------------------
3.1 Certificate of Incorporation (1)
3.2 Amendments to Certificate of Incorporation (1)
3.3 Amendment to Certificate of Incorporation (7)
3.4 Bylaws (1)
4.1 Specimen Certificate for Common Stock (1)
4.2 2002 Stock Option Plan (1)
4.3 Form of Incentive Stock Option Agreement (1)
4.4 Form of Non Qualified Stock Option Agreement (1)
4.5 Form of Lock-Up Agreement entered into by us with Wings Fund, Inc., Roland F. Bryan, Mark
J. Richardson, and Chris Outwater, dated as of May 2, 2009 (6)
4.6 Stock Option Agreement with James B. Nelson (8)
10.1 Lease Agreement by and between MachineTalker, Inc. and SecureCoin, Inc., dated August 20, 2003 (1)
10.2 Agreement No. CA-00062 by and between MachineTalker, Inc. and Kellogg, Brown & Root Services, Inc., dated
December 20, 2004 (2)
10.3 Agreement by and between MachineTalker, Inc. and Science Applications International Corporation, dated
July 1, 2004 (1)
10.4 Acquisition Agreement for Wideband Detection Technologies, Inc. dated July 20, 2007 (4)
10.5 Acquisition Agreement for Micro Wireless Technologies, Inc. dated December 28, 2007 (5)
10.6 Stock Purchase Agreement with Wings Fund, Inc., a Nevada corporation, and Pearl Innovations, LLC, a Nevada limited
liability company, dated as of May 5, 2009 (6)
14.1 Code of Conduct (3)
31.1 Section 302 Certification of Principal Executive Officer
31.1 Section 302 Certification of Principal Accounting Officer
32.1 Section 906 Certification of Principal Executive Officer
32.2 Section 906 Certification of Principal Accounting Officer
---------------
(1) Incorporated by reference to the Form SB-2 Registration
Statement filed with the Securities and Exchange Commission
dated August 1, 2005.
(2) Incorporated by reference to Amendment No. 4 to the Form SB-2
Registration Statement filed with the Securities and Exchange
Commission dated November 2, 2005.
(3) Incorporated by reference to the Form 10-KSB filed with the
Securities and Exchange Commission dated April 14, 2007.
(4) Incorporated by reference to the Form 8K filed with the
Securities and Exchange Commission dated July 20, 2007.
(5) Incorporated by reference to the Form 8K filed with the
Securities and Exchange Commission dated January 3, 2008.
(6) Incorporated by reference to the Form 8K filed with the
Securities and Exchange Commission dated May 13, 2009.
(7) Incorporated by reference to the Form 10K filed with the
Securities and Exchange Commission dated July 15, 2009.
(8) Incorporated by reference to the Form 10K filed with the
Securities and Exchange Commission dated October 4, 2010.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 31, 2011 SOLAR3D, INC.
By: /s/ James B. Nelson
------------------------------------------
James B. Nelson, Chief Executive
Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, 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/ James B. Nelson Dated: March 31, 2011
------------------------------------------------------
James B. Nelson, Director and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Roland F. Bryan Dated: March 31, 2011
------------------------------------------------------
Roland F. Bryan, Chairman of the Board, President, and
Chief Financial Officer (Principal Accounting Officer)
By: /s/ Mark J. Richardson Dated: March 31, 2011
------------------------------------------------------
Mark J. Richardson, Director
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