Attached files
| file | filename |
|---|---|
| EX-32.1 - SECTION 906 CERTIFICATION - Energiz Renewable, Inc. | f10k09_x321-ener.htm |
| EX-31.1 - SECTION 302 CERTIFICATION - Energiz Renewable, Inc. | f10k09_x311-ener.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
Commission file number 000-27279
|
ENERGIZ RENEWABLE, INC.
|
|
(Exact name of registrant as specified in its charter)
|
|
Florida
|
65-0106255
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
135 First Street
|
||
|
Keyport, New Jersey, USA
|
07735
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant's telephone number including area code (732) 319-9235
|
|
|
___________________________________________
|
|
(Former Name or Former Address, if changed since last report)
|
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value
Indicate by check mark if the registrant is a well-known seasonal 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
Note - Checking the box above will not relieve any resistrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
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 in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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 small reporting company. See the definition of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No x
As of June 30, 2010, the aggregate market value of the Registrant’s voting and none-voting common stock held by non-affiliates of the registrant was approximately: $15,115,500 at $3.00 price per share, based on the closing price of on the OTC Pink Sheets. As of April 18, 2011, there were 30,232,300 shares of common stock of the registrant issued and outstanding.
Documents Incorporated by Reference: None
1
ENERGIZ RENEWABLE, INC.
FORM 10-K
2
Introduction
FORWARD-LOOKING STATEMENTS. This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that involve risks and uncertainties. In addition, the Company (Energiz Renewable, Inc., a Florida corporation) may from time to time make oral forward-looking statements. Actual results are uncertain and may be impacted by many factors. In particular, certain risks and uncertainties that may impact the accuracy of the forward-looking statements with respect to revenues, expenses and operating results include without imitation; cycles of customer orders, general economic and competitive conditions and changing customer trends, technological advances and the number and timing of new product introductions, shipments of products and components from foreign suppliers, and changes in the mix of products ordered by customers. As a result, the actual results may differ materially from those projected in the forward-looking statements.
Because of these and other factors that may affect the Company’s operating results, past financial performance should not be considered an indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Unless the context indicates otherwise, the terms “Company,” “Corporate”, “Energiz Renewable, Inc.,” and “we” refer to Energiz Renewable, Inc. Our executive offices are located at 135 First Street, Unit 2-F, Keyport, New Jersey 07735.
The Company
Energiz Renewable, Inc. is a Florida corporation that became public when its registration statement under the Securities Act of 1933 filed with the Securities and Exchange Commission became effective on July 20, 1990 and closed on December 31, 1990.
The Company was called at that time Sun Reporter, Inc. and was engaged in the publication of a local newspaper business. In 1991, the Company ceased doing business and has not engaged in any enterprises until March 17, 2010 when a an agreement to sell a majority of the outstanding shares of the Company was executed and the Company changed its name to its current name Energiz Renewable, Inc.
3
The Company ceased operations and has not functioned since the later part of 1991 until March 17, 2010. Prior to March 17, 2010, the Company remained as a non-function non-trading public shell corporation with no assets.
On April 6, 2007, the Company changed its name to DEC Capital, Inc., and on June 22, 2007, the Company changed its name again to C&G DEC Capital, Inc. On March 17, 2010, as part of the changer of control described in Note D to the Financial Statements, the Company changed its name to its current name, Energiz Renewable, Inc., and developed a business plan to become an international verically integrated energy company. The cexecution of this business plan is highly dependent upon the Company raising adequate working capital.
The Company is implementing its business plan by initially establishing itself as a vertically integrated solar energy company, from production of solar panels through project acquisition, development, finance, installation and management, up to being an Independent Power Producer (IPP) with over 300 MW of committed projects. The execution of these projects is dependent upon the Company raising adequate working capital.
The Company entered into a Joint Venture Agreement (“JVA”) with three parties – Vincent Industrie, Energiz SA, and Energiz International – to exploit unique patented robotic technology for the assembly of solar panels that will allow them to operate at a higher efficiency rate than our competition due to the patented method of assembly. A fourth company, Apollon Solar, has entered into an agreement with Vincent Industrie, to enable it to be an active and key participant in their efforts through our exclusive use of Apollon’s technology. The technology, known as NICE (New Industrial Cells Encapsulation) is the intellectual property of Apollon Solar (“API”), which is a key partner with Vincent Industrie (“VI”), which created a fully automated robotic assembly line for the NICE technology. This patented technology eliminates much of the manual labor used in the production of solar panels around the world today, and is so flexible that it can produce a panel according to the specific needs of each customer on a project-by-project basis. Other advantages of this robotic system are the unique sealing method that eliminates poor soldering connections, while increasing the electrical output of all the panels in each system. Also participating in the JV is Energiz SA (France), the current license holder, to market the NICE technology worldwide.
The Company will acquire the license from Energiz SA, and the marketing rights from Energiz International, in return for shares in our Company. The Company will sign a new license agreement with Apollon Solar and Vincent Industrie to assure exclusivity in the territories now being served by us and the other joint venture companies. The new License Agreement will grant the Company a first right of refusal to any new facility proposed to be built outside of the exclusive territories. At the same time all the parties are working to grant us total worldwide rights based on our performance. The NICE module process has received the TUV certification and is in process of applying for US certification.
Our Market Opportunity
The Company business plan maximizes the benefits of being an international solar energy company with local solutions. The Company have or plan to establish subsidiaries in five countries: Italy, Romania, Israel, Tunisia and France. Each subsidiary will be responsible for operating our currently planned local operations.
The business plan envisions two functions in each country – panel manufacturing facilities and project development companies. Having small manufacturing facilities near each customer base allows us to control the panel needs of our projects by providing our project developers a top quality tailor-made product in their backyard, removing dependence on lower quality imported products from large Chinese manufacturers and whose flexibility is non-existent. Each project development company will have a pipeline of projects to ensure our consistent revenue flow and ability to produce a steady flow of panels.
The Company estimates production costs to be $1.49 per Wp with an estimated selling price of $1.89 per Wp, providing our factories a gross profit of approximately 18%-22% (on the complete kit). We realize the rate paid by utilities and governments, also known as the Power Purchasers, varies according to local laws. For example, the rate in France is between $0.43 and $0.81 per watt, Italy between $0.51 and $0.73, Israel $0.37, and Romania $0.37. We have estimated that each 20 MW production line will have a breakeven of 6–8 MW with a three-year payback on invested capital.
The relationship with Apollon and their research and development team will allow us to be at the forefront of new developing technology in the solar market. We also will work with Vincent and Apollon to further their ability to be at the forefront of the solar industry.
The Company intends to contract with Vincent Industrie (“VI”) to build the plant. VI offers a turnkey project for building the plant and also will provide technological, marketing and strategic support to insure the development of our solar panels.
4
In-Country Operations
The business plan envisions two functions in each country – panel manufacturing facilities and project development companies. Having small manufacturing facilities near each customer base allows us to control the panel needs of our projects by providing our project developers a top quality tailor-made product in their backyard, removing dependence on lower quality imported products from large Chinese manufacturers and whose flexibility is non-existent. Each project development company will have a pipeline of projects to ensure our consistent revenue flow and ability to produce a steady flow of panels.
France
A special purpose vehicle, Energiz Industrie (“EI”), will be formed to own and operate the factory in France. We will own 40% and Energiz SA will own 51% of this company. The construction of this factory was started after operation and testing of Apollon‘s prototype facility in Lyon, France. The factory will manufacture approximately 115,000 solar panels per year, with a total capacity of 20 MW. Energiz SA will transfer the rights and investment to EI. We will have the right to purchase half (50%) of the solar panel production of this factory up to 10 MW per year. This will allow us to begin supplying solar panels to our own projects this year. The rest of the panels will go to Energiz SA projects in France, where they have 79 MW of selected projects to date.
Israel
We have formed ERI Israel Ltd., a wholly owned subsidiary, for the construction of our first factory in Israel. We have met with several potential partners in Israel, coming from the manufacturing side in the electrical sector, who have expressed interest in this venture. In addition, we have offered to invest in 5MW of solar projects, all in various stages of development, that we can invest in immediately once we raise the needed capital.
Italy and Romania
Energiz International has developed over the last year business opportunities with solar project developers in Italy and Romania that will assure us sustainable business relationships for building factories and developing and implementing additional projects in these countries.
In Italy and Romania, there are plans to build factories in each country. The combined total output is 120 MW of panels/year. The project development pipeline of the partners in these three countries totals over 276 MW as of today. The panels for these projects will be supplied by our factories, preferably local, if the factory is up and running, or, if not, then from one of the other factories in the network.
The Company estimates production costs to be $1.49 per Wp with an estimated selling price of $1.89 per Wp, providing our factories a gross profit of approximately 18%-22% (on the complete kit). We realize the rate paid by utilities and governments, also known as the Power Purchasers, varies according to local laws. For example, the rate in France is between $0.43 and $0.81 per watt, Italy between $0.51 and $0.73, Israel $0.37, Romania $0.37 and in Canada between $0.39 and $0.72. We have estimated that each 20 MW production line will have a breakeven of 6–8 MW with a three-year payback on invested capital.
Partners and Target Markets
The relationship with Apollon and their research and development team will allow us to be at the forefront of new developing technology in the solar market. We also will work with Vincent and Apollon to further their ability to be at the forefront of the solar industry.
The Company intends to contract with Vincent Industrie (“VI”) to build the plant. VI offers a turnkey project for building the plant and also will provide technological, marketing and strategic support to insure the development of our solar panels.
Europe, on the whole and in particular with the rise of the Balkans, presents a new frontier for economic Opportunity with a special need for clean energy producers. Studies show the increased need for energy and the difficulty that the existing systems are having in providing the power necessary. Clean energy solutions are given preferential treatment by local governments, such as establishing a Feed-in Tariff (“FIT”) that insures a consistent long-term return on investment made in clean energy projects. To take advantage of this support Share, we are negotiating agreements with local developers in Macedonia to build a 20 MW solar farm on part of 400 hectares of land. Once signed, these agreements between us, local officials and developers will enable us to expand our base of operation and develop additional clean energy projects that will include the building of a robotic PV panel plant for the region.
The Middle East is a prime location for the development of a Solar Facilities. With the region having a strong radiation output and a need for more energy, the obvious direction to go in is the PV solar solution. Israel, for example, has an approved FIT, depending on the type of project, home, business or commercial, and has set a goal of 10% renewable energy consumption by 2020. These developments will serve to stimulate the PV industry and we intend on being part of this developing market.
The Company also will has the capacity to propose off-grid renewable energy solutions that will enable the Company to aggressively address markets that have not been well served until now. The need for more energy capacity is a worldwide condition. Countries are demanding solutions so that they may provide growth for their people. Industrial and residential consumption will continue to be the driving force for renewable clean energy. Demand will dictate the pricing and laws will ensure payment.
6
Solar Power Market
Rising demand for electric power is evident all over the world. Given this, the demand for solar power also will grow in tandem. The following chart illustrates the ever-growing demand for electric power.
There are many forces pushing forth the increasing opportunities for alternative energy sources such as solar and wind. These include the rising price of fossil fuels due to the gradual depletion of resources, political tensions in supply regions, as well as other issues such as nuclear security, and waste disposal, emissions of greenhouse gases and the resulting challenge of climate change. All these factors result in developed markets looking to alternative and preferably renewable energy – or green power – to meet the increasing demand.
Many important markets such as Eastern Europe have gone undeveloped. Yet movement in these markets is evident by the incentives like Feed-in Tariffs, where the government insures the purchase of electricity produced by the solar farm at a fixed rate over a long-term contract (20-25 years). In addition, United Nations and the World Bank will deploy many billions will be dedicated to underdeveloped countries to ensure that they will grow in a sustainable development model.
The following illustrates the existing and forecast cumulative solar output market and the European Photovoltaic Industry Association’s survey of the potential solar market:
Energiz Power Projects
Collectively, the objective in Europe is to increase for use of photovoltaic energy production in 2020 is an average of 12% of the consumption and 3,550 MW of photovoltaic modules installed. In the countries where we are active, that represents 4,900 MW, which will absorb the production of 2,450 MW of ERI/NICE production lines.
According to a more conservative and short-term scenario of the EPIA, the objective for 2014 is +/- 15,000 MW of new photovoltaic installation. In the countries where we are active in Europe, the moderate projection of the EPIA for 2014 is +/- 9,900 MW of new installation.
Italy
The goal for Italy is to add 6,500 MW over the next 8 years. In addition, the ERI Italy study includes projects in Albania, Macedonia and Croatia. Projects with over 380 MW of potential were presented to ERI for its consideration. From this universe, ERI has selected 156 MW of rooftop and fields for the installation of solar panels to be built over the next three years as follows:
|
·
|
50 MW by December 2011
|
|
·
|
90 MW by December 2012
|
7
Romania
The goal of Romanian authorities over the next 10 years is to install 5,500 MW of photovoltaic power plants. Projects with over 1,100 MW of potential were presented to us for our consideration. From this universe, we have selected 120 MW of rooftop and fields for the installation of solar panels to be built over the next three years as follows:
|
·
|
35.1 MW by December 2011
|
|
·
|
71.5 MW by December 2012
|
France
The goal of French authorities over the next 10 years is to install 15,000 MW of photovoltaic power plants. Projects with over 215 MW of potential were presented to us for our consideration. From this universe, we have selected 80 MW of rooftop and fields for the installation of solar panels to be built over the next three years as follows:
|
·
|
25.3 MW by December 2011
|
|
·
|
40.5 MW by December 2012
|
Israel
Projects with over 330 MW of potential were presented to us for our consideration. From this universe, we have selected 110 MW of rooftop and fields for the installation of solar panels to be built over the next three years as follows:
|
·
|
40 MW by December 2011
|
|
·
|
63 MW by December 2012
|
8
Technology
Apollon Solar’s New Industrial Solar Cell Encapsulation (“NICE”) module technology was first introduced in order to overcome limitations of the state-of-the-art module encapsulation technology based on EVA lamination and to reduce production costs of PV modules. NICE makes use of an air and humidity tight sealing technology known from the insulating glass industry and based on the application of an organic sealing material from the family of poly-isobutylene (“PIB”). Important features of the NICE technology are the absence of EVA lamination and the use of an underpressure inside the module to provide the electrical series connection between solar cell contact lines and metal interconnectors, thus suppressing the soldering of metal interconnectors to the solar cell busbars, which is the most widely used technology today. Other important features include a specially developed metal foil that is used as for the metal rear surface and new external connector that is integrated in the edge-sealing of the module. From a production point of view, the NICE module technology presents a largely simpler module assembling technology since it allows for a complete inline operation that can be fully automated.
NICE / Energiz Module Factory
One of the main advantages of this process is to produce +/- 40 MW of panels (market value +/- $112M) with a production line that needs 15 employees and 500 m2 of plant space. This is a dramatic cost advantage over the competition, where the common current processes require 300 employees and plant space of about 5,000 m2. Another main advantage is the full quality control on all of the steps of the production.
In addition, the fully robotic system allows the use of all new technological developments that will emerge regarding the manufacture of cells. The system also allows an easy adaptation to local cultural and architectural environments, which is becoming increasingly important as the market becomes mature, but is very difficult with the existing process involving large assembly lines and a lot of labor.
The objectives of the Company‘s technology development, which have largely been achieved, include:
|
·
|
50% off on the cost of manufacturing the module;
|
|
·
|
up to 100% automation;
|
|
·
|
manufacturing cycle from 10min> 4min per panel;
|
|
·
|
resistant in time sealing process;
|
9
|
·
|
elimination of all welds of lower reliability;
|
|
·
|
stable performance of electricity up to 30 years; and
|
|
·
|
totally recyclable modules.
|
Furthermore, this unique technology is particularly suited to countries where temperatures are extreme and provides exceptional durability to the modules produced. These features help the Company to establish factories in industrialized countries and to produce its products at most competitive prices. A production line can achieve a high return and exceptional investment yields.
An extension of the process allows integrating the modules into frames incorporating patented connectors that simplify and ensure a quality installation. This system allows for the construction of the green house and skylight format to be made in a quick and efficient way.
The Company offers solutions for the photovoltaic industry and individuals with systems of energy storage battery or compressed air. These solutions enable the development of energy projects totally "green" and independent from the electrical distribution network.
Energiz Solarstyl® Frame System
Installation costs, quality and guarantees are big issues in the solar energy field. We solved these issues with our product Solarstyl®. Solarstyl® is a system developed with Arcelor Mittal and licensed to Energiz SA. Solarstyl® is a unique product that allows savings of up to 50% of the installation costs.
Solarstyl® has been developed to:
|
·
|
simplify photovoltaic roof and facade design;
|
|
·
|
offer a wide range of designs;
|
|
·
|
simplify / facilitate installation of the photovoltaic modules on the roof or on façade;
|
|
·
|
reduce the installation cost of the photovoltaic modules;
|
10
|
·
|
ensure water tightness of the entire photovoltaic structure; and
|
|
·
|
ensure an excellent mechanical resistance of the entire structure.
|
The modules have been developed to withstand impact and provide wind resistance and corrosion resistance of the metallic structures. The air and water tightness of the photovoltaic structure is ensured by the overlapping of the frames by means of the flashing strip and the special clip, specifically designed clips that are easy to use to install or fix the panel, and seals that are placed under the special clips. Ventilation of the photovoltaic modules occurs from underneath the Share, providing the possibility of recovering hot air.
Additional features include:
|
·
|
easy changing of photovoltaic modules through a clip system;
|
|
·
|
interchangeable diodes which conform to the IP2X norm;
|
|
·
|
manufacturer‘s warranty for photovoltaic modules;
|
|
·
|
light and rigid frame, high mechanical resistance (5,400 Pa in static pressure / 2,400 Pa in depression); and
|
|
·
|
high corrosion resistance whatever the location.
|
Examples of added value product that NICE/Energiz factories can provide:
With respect to our systems business, we face competition from other providers of renewable energy solutions, including developers of photovoltaic, solar thermal and concentrated solar power systems and developers of other forms of renewable energy projects, including wind, hydropower, geothermal, biomass and tidal projects. To the extent other solar module manufacturers become more vertically integrated, we expect to face increased competition from such companies as well. We also face competition from other engineering, procurement and construction (EPC) companies and joint ventures between EPC companies and solar companies.
Economic Incentives
Government subsidies, economic incentives and other support for solar electricity generation generally include feed-in tariffs, net metering programs, renewable portfolio standards, tax incentives, loan guarantees, grants, rebates, low interest loans and grid access initiatives.
Under a feed-in tariff subsidy, the government sets prices that regulated utilities are required to pay for renewable electricity generated by end-users. The prices are set above market rates and may differ based on system size or application. Net metering programs enable end-users to sell excess solar electricity to their local utility in exchange for a credit against their utility bills. The policies governing net metering vary by state and utility. Some utilities pay the end-user upfront, while others credit the end-user’s bill.
Under a renewable portfolio standard (RPS), the government requires regulated utilities to supply a portion of their total electricity in the form of renewable electricity. Some programs further specify that a portion of the renewable energy quota must be from solar electricity, while others provide no specific technology requirement for renewable electricity generation. RPS-type mechanisms have been adopted in a majority of U.S. states. Regulations vary from state to state, and currently there is no federal RPS mandate. The state of California’s RPS goal of 33% of electricity from renewable sources by 2020 is currently the most significant RPS program in the United States in magnitude, and it is contributing to the expansion of the utility-scale solar systems market in that state.
12
Tax incentive programs exist in the United States at both the federal and state level and can take the form of investment and production tax credits, accelerated depreciation and sales and property tax exemptions. At the federal level, investment tax credits for business and residential solar systems have gone through several cycles of enactment and expiration since the 1980’s. In October 2008, the United States Congress extended the 30% federal investment tax credit (ITC) for both residential and commercial solar installations for eight years, through December 31, 2016. The ITC is a primary economic driver of solar installations in the United States. Its extension through 2016 has contributed to greater medium term demand visibility in the U.S.; however, its expiration at the end of 2016 (unless extended) underscores the need for the levelized cost of electricity from solar systems to continue to decline toward grid parity. In February 2009, the American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law. In addition to adopting certain fiscal stimulus measures that could benefit on-grid solar electricity applications, ARRA created a new program, through the Department of the Treasury, which provides cash grants equal to 30% of the cost of the system for solar installations that are placed into service during 2009 and 2010 and for certain solar installations for which construction begins prior to December 31, 2010. This cash grant is available in lieu of receiving the 30% federal investment tax credit. The intent of this program was to ensure that investors who had historically supported the renewable energy programs would not be constrained from investing in these transactions by tax losses they may have suffered during the recent credit crisis. Other measures adopted by ARRA that could benefit on-grid solar electricity generation include the following: (1) a Department of Energy loan guarantee program for renewable energy projects, renewable energy manufacturing facilities and electric power transmission projects and (2) a 50% bonus depreciation for solar installations placed in service during 2009. Various legislation has been proposed to extend and slightly modify the ITC incentives to continue to ensure short-term investor tax positions do not limit future investment in renewable energy projects. In addition, legislation is being proposed which could extend the bonus depreciation benefit for projects completed in 2010. However, enactment of the extension or enhancement of such incentives is highly uncertain.
Rebate programs for solar installations in California and several other states have increased the quantity of solar energy from distributed photovoltaic systems (typically smaller non-utility scale PV systems co-located with residential or commercial rooftop end-users) and have contributed to demand for PV solar modules and systems.
Regulations and policies relating to electricity pricing and interconnection also stimulate demand for distributed generation from photovoltaic systems. PV systems generate most of their electricity during mid-day and the early afternoon hours when the demand for and cost of electricity is highest. As a result, electricity generated by PV systems mainly competes with expensive peak hour electricity, rather than the lower average price of electricity. Modifications to the peak hour pricing policies of utilities, such as to a flat rate, would require PV systems to achieve lower prices in order to compete with the price of electricity.
In Europe, renewable energy targets in conjunction with feed-in tariffs have contributed to the growth in PV solar markets. Renewable energy targets prescribe how much energy consumption must come from renewable sources, while FiT policies are intended to support new supply development by providing investor certainty. A 2001 European Union (EU) directive for promoting renewable energy use in electricity generation (Directive 2001/77/EC) had set varying national indicative targets for renewable energy production from individual member states. A 2009 EU directive on renewable energy (Directive 2009/28/EC), which replaces the 2001 directive, sets varying targets for all EU member states in support of the directive’s goal of a 20% share of energy from renewable sources in the EU by 2020 and requires national action plans that establish pathways for the development of renewable energy sources. The following is a description of FiT policies adopted in certain critical EU markets in support of renewable energy targets.
13
The German Renewable Energy Law, or the EEG, was last modified by the German government in 2008 with effect on January 1, 2009. At that time, feed-in tariffs were significantly reduced from earlier levels. Further, under the current legislation, Germany feed-in tariffs declined 9% for roof mounted applications and 11% for ground mounted applications on January 1, 2010 and will decline on January 1, 2011 a further 8% to 10% (based on the volume of PV modules deployed in Germany during the 12 months ending on September 30, 2010 and the type of PV system). This compares to an annual decline of between 5% and 6.5% under the prior legislation. The next review of feed-in tariffs for all types of renewable energy was scheduled for 2012. However, following the 2009 election of a new center-right-liberal government in Germany, a further reduction in the PV feed-in tariff is currently under discussion and will most likely come into effect in the second or third quarter of 2010. Such a reduction in the feed-in tariff, including any potential further reductions, could result in a significant decline in demand and price levels for photovoltaic products in Germany, which could have a material adverse effect on our business, financial condition or results of operations.
In France, the government amended its feed-in tariff on January 12, 2010. The new decree became effective January 14, 2010 and does not have an expiry date but can be amended at any time. The new feed-in tariff provides a lower rate than the prior feed-in tariff for all applications while introducing, among other things, a departmental bonus which makes free field projects in the northern regions of France more attractive. In addition, the inflation index that increases the feed-in tariff received by a PV project after its first year of operation was also reduced. The current feed-in tariff will have a 10% annual digression starting on January 1, 2012.
In Italy, the current legislation provides that the existing feed-in tariff will be in effect until the expiration of a 14 month transition period that will begin once 1.2GW of photovoltaic systems are installed under the existing feed-in tariff. Any photovoltaic system that is interconnected before the expiration of the transition period will also receive the feed-in tariff currently in effect. It is expected that the 1.2GW threshold will be reached in 2010. It is further expected that the Italian government will propose and enact a new reduced feed-in tariff before the end of 2010.
In Spain, the government published the feed-in tariff currently in effect for PV systems in September 2008. This feed-in tariff introduced a mechanism that requires a PV system to be registered in a national registry in order to obtain the Spanish feed-in tariff. Critically, under the legislation, only a certain number of MWs of PV systems so registered are granted a feed-in tariff each quarter. Other PV systems applying for a feed-in tariff remain in a queue and will be awarded a feed-in tariff in accordance with their place in the queue. For 2010 and 2011, the legislation limits the number of MW of PV systems that are awarded a feed-in tariff to 560MW and 500MW, respectively. The current legislation is scheduled to be reviewed by January 1, 2012.
In Ontario, Canada, a new feed-in tariff program was introduced in September 2009 and replaced the Renewable Energy Standard Offer Program (RESOP) as the primary subsidy program for future renewable energy projects. In order to participate in the Ontario feed-in tariff program, certain provisions relating to minimum required domestic content and land use restrictions for solar installations must be satisfied. The new domestic content and land restriction rules do not apply to our Sarnia solar projects and the other projects governed by RESOP contracts that we acquired in connection with our acquisition of the solar power project development business of OptiSolar Inc. in April 2009. However, PV solar power systems incorporating our modules would not satisfy the domestic content requirement under the new feed-in tariff program currently in effect.
In Australia, the solar industry is driven by several regulatory initiatives that support the installation of solar PV modules in both rooftop and free-field applications, including the nationwide Renewable Energy Target Scheme that has set a renewable energy goal for Australia of 20% by 2020. In July 2009, the Solar Homes and Communities Plan, which previously provided the primary incentive for rooftop installations, was replaced with the less lucrative Solar Credits Scheme.
In China, governmental authorities have not adopted a feed-in tariff policy and currently award solar projects through either a project tendering process or bi-lateral negotiations.
In 2009, India announced its National Solar Mission, which includes a goal of installing 20GW of solar by 2022. India is expected to announce a feed-in tariff for the first phase of the National Solar Mission in 2010.
For more information about risks related to economic incentives, please see Item 1A: Risk Factors — Reduced growth in or the reduction, elimination or expiration of government subsidies, economic incentives and other support for on-grid solar electricity applications, including the anticipated feed-in core markets, could reduce demand and/or price levels for our solar modules, limit our growth or lead to a reduction in our net sales, and adversely impact our operating results.”
14
Access to Company Information
We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (the “SEC”). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800)-SEC-0330. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.
We make available, free of charge, through our website, and by responding to requests addressed to our investor relations department, the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. These reports are available as soon as reasonably practical after such material is electronically filed or furnished to the SEC. The information contained on our website, or on other websites linked to our website, is not part of this document.
An investment in our stock involves a high degree of risk. You should carefully consider the following information, together with the other information in this Annual Report on Form 10-K, before buying shares of our stock. If any of the following risks or uncertainties occur, our business, financial condition and results of operations could be materially and adversely affected and the trading price of our stock could decline.
Our CEO is the subject of an SEC investigation unrelated to our Company.
Our Company's CEO, CFO and Director Edward T. Whelan received a Wells notice on June 14, 2010 informing him that the staff of Securities and Exchange Commission (“SEC”) intends to recommend that the SEC file a complaint in Federal District Court against him and his company Grace Holding, Inc., a shareholder of this Company, alleging that they both violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 for misappropriation of funds and manipulating a stock unrelated to Energiz Renewable, Inc. While Mr. Whelan believes he is innocent of any wrong doing, should the SEC proceed and file such a complaint in Federal District Court against him and his company Grace Holding, Inc. and should he be found guilty, such actions may adversely affect his ability to run our Company and may adversely affect the price of our stock.
Risks Related to Our Markets and Customers
If solar energy technology is not suitable for widespread adoption, or if sufficient demand for solar energy does not develop or takes longer to develop than we anticipate, our net sales and profit may flatten or decline and we may affect future profitability.
The solar energy market is at a relatively early stage of development and the extent to which solar systems will be widely adopted is uncertain. If solar energy technology proves unsuitable for widespread adoption or if demand for solar energy fails to develop sufficiently, we may be unable to grow our business or generate sufficient net sales to be profitable. In addition, demand for solar energy in our targeted markets — including Italy, Croatia, Romania, Hungary, Moldavia; Canada, and Israel — may not develop or may develop to a lesser extent than we anticipate. Many factors may affect the viability of widespread adoption of out solar technology and demand for solar energy, including the following:
|
·
|
cost-effectiveness of the electricity generated by photovoltaic power systems compared to conventional energy sources and products, including conventional energy sources, such as natural gas, and other non-solar renewable energy sources, such as wind;
|
|
·
|
availability and substance of government subsidies, incentives and renewable portfolio standards to support the development of the solar energy industry;
|
|
·
|
performance and reliability of photovoltaic systems and our technology compared to conventional and other non-solar renewable energy sources and products;
|
|
·
|
success of other renewable energy generation technologies, such as hydroelectric, tidal, wind, geothermal, solar thermal, and biomass;
|
|
·
|
fluctuations in economic and market conditions that affect the price of, and demand for, conventional and non-solar renewable energy sources, such as increases or decreases in the price of oil, natural gas and other fossil fuels; and
|
|
·
|
fluctuations in capital expenditures by end-users of solar energy, which tend to decrease when the economy slows and interest rates increase.
|
16
Reduced growth in or the reduction, elimination or expiration of government subsidies, economic incentives and other support for on-grid solar electricity applications, including the anticipated feed-in tariff reductions in core markets, could reduce demand and/or price levels for our solar energy, and limit our growth or lead to a reduction in our net sales, and adversely impact our operating results.
We believe that the near-term growth of the market for on-grid applications, where solar energy is used to supplement the electricity a consumer purchases from the utility network, depends significantly on the availability and size of government subsidies and economic incentives. Federal, state and local governmental bodies in many countries, most notably Germany, Italy, Spain, France, the United States, Canada, China, India, Australia, Greece and Portugal have provided subsidies in the form of feed-in tariffs, rebates, tax incentives and other incentives to end-users, distributors, systems integrators and manufacturers of photovoltaic products. Many of these jurisdictions, including the majority of U.S. states and numerous European Union countries, have adopted renewable portfolio standards in which the government requires jurisdictions or regulated utilities to supply a portion of their total electricity from specified sources of renewable energy, such as solar, wind and hydroelectric power. Many of these government incentives expire, phase out over time, require renewal by the applicable authority or may be amended. A summary of recent developments in the major government subsidy programs in our core markets follows. We expect the feed-in tariff in Germany and certain other core markets to be reduced earlier than previously expected, and such reductions could reduce demand and/or price levels for our solar systems, lead to a reduction in our net sales and adversely impact our operating results.
In Italy, the current legislation provides that the existing feed-in tariff will be in effect until the expiration of a 14 month transition period that will begin once 1.2GW of photovoltaic systems are installed under the existing feed-in tariff. It is expected that the Italian government will propose and enact a new feed-in tariff before the end of 2010. Current proposals reflect significant FiT reductions, particularly for ground mounted applications. We cannot be certain of the level of such new feed-in tariff. If the level of such feed-in tariff is not adequate to promote the development of the PV industry or PV projects in Italy, our ability to pursue an expansion strategy in Italy would be adversely affected.
In Ontario, Canada, a new feed-in tariff program was introduced in September 2009 and replaced the Renewable Energy Standard Offer Program (RESOP) as the primary subsidy program for future renewable energy projects. In order to participate in the Ontario feed-in tariff program, certain provisions relating to minimum required domestic content and land use restrictions for solar installations must be satisfied. The new domestic content and land restriction rules do not apply to our Sarnia solar project and the other projects governed by RESOP contracts that we acquired in connection with our acquisition of the solar power project development business of OptiSolar Inc. in April 2009. However, our Ontario projects in earlier stages of development that are not governed by RESOP contracts, as well as any potential new projects in Ontario, will be subject to such domestic content and land restriction rules. As these rules are currently written, we will be unable to fully satisfy such rules (in particular the domestic content requirement rules), thus projects incorporating our modules will not qualify for the Ontario feed-in tariff. In the event the Ontario domestic content and land use restriction rules are not sufficiently modified, our ability to participate in the Ontario feed-in tariff program for future projects will be substantially reduced and possibly completely eliminated, and thus our ability to pursue an expansion strategy in Ontario, Canada beyond our existing RESOP projects would be adversely affected.
Emerging subsidy programs may require an extended period of time to attain effectiveness because the applicable permitting and grid connection processes associated with these programs can be lengthy and administratively burdensome.
In addition, if any of these statutes or regulations is found to be unconstitutional, or is reduced or discontinued for other reasons, sales prices and/or volumes of our solar systems in these countries could decline significantly, which could have a material adverse effect on our business, financial condition and results of operations.
Electric utility companies or generators of electricity from fossil fuels or other renewable energy sources could also lobby for a change in the relevant legislation in their markets to protect their revenue streams.
17
Reduced growth in or the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar energy applications, especially those in our target markets, could limit our growth or cause our net sales to decline and materially and adversely affect our business, financial condition and results of operations.
An increase in interest rates or lending rates or tightening of the supply of capital in the global financial markets (including a reduction in total tax equity availability) could make it difficult for end-users to finance the cost of a solar system and could reduce the demand for our solar system and/or lead to a reduction in the average selling price for photovoltaic systems.
Many of potential customers and our systems business depend on debt financing to fund the initial capital expenditure required to develop, build and purchase a solar system. As a result, an increase in interest rates or lending rates could make it difficult for our potential customers or our systems business to secure the financing necessary to develop, build, purchase or install a solar system on favorable terms, or at all, and thus lower demand for our solar system which could limit our growth or reduce our potential net sales. Due to the overall economic outlook, our end-users may change their decision or change the timing of their decision to develop, build, purchase or install a solar system. In addition, we believe that a significant percentage of our end-users install solar systems as an investment, funding the initial capital expenditure through a combination of equity and debt. An increase in interest rates and/or lending rates could lower an investor’s return on investment in a solar system, increase equity return requirements or make alternative investments more attractive relative to solar systems, and, in each case, could cause these end-users to seek alternative investments. A reduction in the supply of project debt financing or tax equity investments could reduce the number of solar projects that receive financing and thus lower demand for solar systems.
Risks Related to Regulations
Existing regulations and policies and changes to these regulations and policies may present technical, regulatory and economic barriers to the purchase and use of photovoltaic products, which may significantly reduce demand for our solar modules.
The market for electricity generation products is heavily influenced by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the United States and in a number of other countries, these regulations and policies have been modified in the past and may be modified again in the future. These regulations and policies could deter end-user purchases of photovoltaic products and investment in the research and development of photovoltaic technology. For example, without a mandated regulatory exception for photovoltaic systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. If these interconnection standby fees were applicable to solar systems, it is likely that they would increase the cost to our end-users of using solar systems which could make them less desirable, thereby harming our business, prospects, results of operations and financial condition. In addition, electricity generated by solar systems mostly competes with expensive peak hour electricity, rather than the less expensive average price of electricity. Modifications to the peak hour pricing policies of utilities, such as to a flat rate for all times of the day, would require solar systems to achieve lower prices in order to compete with the price of electricity from other sources.
We anticipate that our solar systems and their installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. It is difficult to track the requirements of individual states and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to our solar modules may result in significant additional expenses to us, our resellers and their customers and, as a result, could cause a significant reduction in demand for our solar modules.
18
Environmental obligations and liabilities could have a substantial negative impact on our financial condition, cash flows and profitability.
Our operations involve the use, handling, generation, processing, storage, transportation and disposal of hazardous materials and are subject to extensive environmental laws and regulations at the national, state, local and international level. These environmental laws and regulations include those governing the discharge of pollutants into the air and water, the use, management and disposal of hazardous materials and wastes, the cleanup of contaminated sites and occupational health and safety. We will incur significant costs and capital expenditures in complying with these laws and regulations. In addition, violations of, or liabilities under, environmental laws or permits may result in restrictions being imposed on our operating activities or in our being subjected to substantial fines, penalties, criminal proceedings, third party property damage or personal injury claims, cleanup costs or other costs. While we believe we are currently in substantial compliance with applicable environmental requirements, future developments such as more aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery of presently unknown environmental conditions may require expenditures that could have a material adverse effect on our business, results of operations and financial condion.
Risks Related to our Operations, Manufacturing and Technology
We face intense competition from manufacturers of crystalline silicon solar modules, thin film solar modules and solar thermal and concentrated photovoltaic systems; if global supply exceeds global demand, it could lead to a reduction in the average selling price for photovoltaic modules.
The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with the larger electric power industry. Within the global photovoltaic industry, we face competition from crystalline silicon solar module manufacturers, other thin film solar module manufacturers and companies developing solar thermal and concentrated photovoltaic technologies.
Even if demand for solar modules continues to grow, the rapid expansion plans of many solar cell and module manufacturers could create periods where supply exceeds demand. In addition, we believe the significant decrease in the cost of silicon feedstock will provide significant reductions in the manufacturing cost of crystalline silicon solar modules and lead to pricing pressure for solar modules and potentially the oversupply of solar modules.
During any such period, our competitors could decide to reduce their sales price in response to competition, even below their manufacturing cost, in order to generate sales. As a result, we may be unable to sell our solar systems at attractive prices, or for a profit, during any period of excess supply of solar systems, which would reduce our net sales and adversely affect our results of operations. Also, we may decide to lower our average selling price to certain customers in certain markets in response to competition.
19
If our estimates regarding the future cost of collecting and recycling our solar modules are incorrect, we could be required to accrue additional expenses at and from the time we realize our estimates are incorrect and face a significant unplanned cash burden.
We pre-fund our estimated future obligation for collecting and recycling our solar modules based on the present value of the expected future cost of collecting and recycling the modules, which includes the cost of packaging the solar modules for transport, the cost of freight from the solar module’s installation site to a recycling center, the material, labor and capital costs of the recycling process and an estimated third-party profit margin and return on risk for collection and recycling. We base our estimate on our experience collecting and recycling solar modules that do not pass our quality control tests and solar modules returned under our warranty and on our expectations about future developments in recycling technologies and processes and economic conditions at the time the solar modules will be collected and recycled. If our estimates prove incorrect, we could be required to accrue additional expenses at and from the time we realize our estimates are incorrect and also face a significant unplanned cash burden at the time we realize our estimates are incorrect or end-users return their solar modules, which could harm our operating results. In addition, our end-users can return their solar modules at any time. As a result, we could be required to collect and recycle our solar modules earlier than we expect and before recycling technologies and processes improve.
Our failure to further refine our technology and develop and introduce improved photovoltaic products could render our solar modules uncompetitive or obsolete and reduce our net sales and market share.
We will need to invest significant financial resources in research and development to continue to improve our module conversion efficiency and to otherwise keep pace with technological advances in the solar energy industry. However, research and development activities are inherently uncertain and we could encounter practical difficulties in commercializing our research results. We seek to continuously improve our products and processes, and the resulting changes carry potential risks in the form of delays, additional costs or other unintended contingencies. In addition, our significant expenditures on research and development may not produce corresponding benefits. Other companies are developing a variety of competing photovoltaic technologies, including copper indium gallium diselenide and amorphous silicon, which could produce solar modules that prove more cost-effective or have better performance than our solar modules. In addition, other companies could potentially develop a highly reliable renewable energy system that mitigates the intermittent power production drawback of many renewable energy systems, or offers other value-added improvements from the perspective of utilities and other system owners, in which case such companies could compete with us even if the levelized cost of electricity associated with such new system is higher than that of our systems. As a result, our solar modules may be rendered obsolete by the technological advances of our competitors, which could reduce our net sales and market share.
In addition, we often forward price our products and services (including through our Long-Term Supply Contracts and power purchase agreements) in anticipation of future cost reductions, and thus an inability to further refine our technology and execute our long-term cost reduction objectives could adversely affect our margins and operating results.
Our failure to protect our intellectual property rights may undermine our competitive position and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly.
Protection of our proprietary processes, methods and other technology is critical to our business. Failure to protect and monitor the use of our existing intellectual property rights could result in the loss of valuable technologies. We rely primarily on patents, trademarks, trade secrets, copyrights and contractual restrictions to protect our intellectual property. We also rely upon unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position. While we generally enter into confidentiality agreements with our associates and third parties to protect our intellectual property, such confidentiality agreements are limited in duration and could be breached and may not provide meaningful protection for our trade secrets or proprietary manufacturing expertise. Adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and manufacturing expertise. In addition, others may obtain knowledge of our trade secrets through independent development or legal means. The failure of our patents or confidentiality agreements to protect our processes, equipment, technology, trade secrets and proprietary manufacturing expertise, methods and compounds could have a material adverse effect on our business. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in some foreign countries, especially any developing countries into which we may expand our operations. In some countries we have not applied for patent, trademark or copyright protection.
20
Parties may infringe or misappropriate our proprietary technologies or other intellectual property rights, which could have a material adverse effect on our business, financial condition and operating results. Policing unauthorized use of proprietary technology can be difficult and expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. We cannot assure you that the outcome of such potential litigation will be in our favor. Such litigation may be costly and may divert management attention and other resources away from our business. An adverse determination in any such litigation may impair our intellectual property rights and may harm our business, prospects and reputation. In addition, we have no insurance coverage against litigation costs and would have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties.
Many of our key raw materials and components are either sole-sourced or sourced by a limited number of third-party suppliers and their failure to perform could cause manufacturing delays and impair our ability to deliver solar modules to customers in the required quality and quantities and at a price that is profitable to us.
Our failure to obtain raw materials and components that meet our quality, quantity and cost requirements in a timely manner could interrupt or impair our ability to manufacture our solar modules or increase our manufacturing cost. Many of our key raw materials and components are either sole-sourced or sourced by a limited number of third-party suppliers. As a result, the failure of any of our suppliers to perform could disrupt our supply chain and impair our operations. In addition, many of our suppliers are small companies that may be unable to supply our increasing demand for raw materials and components as we implement our planned rapid expansion. We may be unable to identify new suppliers or qualify their products for use on our production lines in a timely manner and on commercially reasonable terms. Raw materials and components from new suppliers may also be less suited for our technology and yield solar modules with lower conversion efficiencies, higher failure rates and higher rates of degradation than solar modules manufactured with the raw materials from our current suppliers. A constraint on our production may cause us to be unable to meet our obligations under our Long-Term Supply Contracts, which would have an adverse impact on our financial results.
Our future success depends on our ability to build new manufacturing plants and add production lines in a cost-effective manner, both of which are subject to risks and uncertainties.
Our future success depends on our ability to significantly increase both our manufacturing capacity and production throughput in a cost-effective and efficient manner. If we cannot do so, we may be unable to expand our business, decrease our cost per watt, maintain our competitive position, satisfy our contractual obligations or sustain profitability. Our ability to expand production capacity is subject to significant risks and uncertainties, including the following:
|
·
|
making changes to our production process that are not properly qualified or that may cause problems with the quality of our solar modules;
|
|
·
|
delays and cost overruns as a result of a number of factors, many of which may be beyond our control, such as our inability to secure successful contracts with equipment vendors;
|
|
·
|
our custom-built equipment taking longer and costing more to manufacture than expected and not operating as designed;
|
|
·
|
delays or denial of required approvals by relevant government authorities;
|
|
·
|
being unable to hire qualified staff;
|
|
·
|
failure to execute our expansion plans effectively; and
|
|
·
|
manufacturing concentration risk resulting from an expected 24 out of 34 announced production lines worldwide by the end of 2012 being located in one geographic area, Malaysia.
|
Some of our manufacturing equipment is customized and sole sourced. If our manufacturing equipment fails or if our equipment suppliers fail to perform under their contracts, we could experience production disruptions and be unable to satisfy our contractual requirements.
Some of our manufacturing equipment is customized to our production lines based on designs or specifications that we provide to the equipment manufacturer, which then undertakes a specialized process to manufacture the custom equipment. As a result, the equipment is not readily available from multiple vendors and would be difficult to repair or replace if it were to become damaged or stop working. If any piece of equipment fails, production along the entire production line could be interrupted and we could be unable to produce enough solar modules to satisfy our contractual requirements under our Long-Term Supply Contracts. In addition, the failure of our equipment suppliers to supply equipment in a timely manner or on commercially reasonable terms could delay our expansion plans and otherwise disrupt our production schedule or increase our manufacturing costs, all of which would adversely impact our financial results.
We may be unable to manage the expansion of our operations effectively.
We expect to continue to expand our business in order to meet our contractual obligations, satisfy demand for our solar modules and maintain or increase market share. However, depending on the amount of additional contractual obligations we enter into and our ability to expand our manufacturing capabilities in accordance with our expectations, we might be unable to produce enough solar modules to satisfy our contractual requirements.
To manage the continued rapid expansion of our operations, we will be required to continue to improve our operational and financial systems, procedures and controls and expand, train and manage our growing associate base. Our management will also be required to maintain and expand our relationships with customers, suppliers and other third parties and attract new customers and suppliers. In addition, our current and planned operations, personnel, systems and internal procedures and controls might be inadequate to support our future growth. If we cannot manage our growth effectively, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.
Our substantial international operations subject us to a number of risks, including unfavorable political, regulatory, labor and tax conditions in foreign countries.
We operate outside the United States. In the future, we expect to expand our operations into other countries in Europe, Asia and the Middle East and elsewhere; as a result, we will be subject to the legal, political, social and regulatory requirements and economic conditions of many jurisdictions. Risks inherent to international operations, include, but are not limited to, the following:
|
·
|
difficulty in enforcing agreements in foreign legal systems;
|
|
·
|
foreign countries may impose additional income and withholding taxes or otherwise tax our foreign operations, impose tariffs or adopt other restrictions on foreign trade and investment, including currency exchange controls;
|
|
·
|
fluctuations in exchange rates may affect product demand and may adversely affect our profitability in U.S. dollars to the extent the price of our solar modules and cost of raw materials, labor and equipment is denominated in a foreign currency;
|
|
·
|
inability to obtain, maintain or enforce intellectual property rights;
|
|
·
|
risk of nationalization of private enterprises;
|
22
|
·
|
changes in general economic and political conditions in the countries in which we operate, including changes in the government incentives we are relying on;
|
|
·
|
unexpected adverse changes in foreign laws or regulatory requirements, including those with respect to environmental protection, export duties and quotas;
|
|
·
|
opaque approval processes in which the lack of transparency may cause delays and increase the uncertainty of project approvals;
|
|
·
|
difficulty in staffing and managing widespread operations;
|
|
·
|
difficulty in repatriating earnings;
|
|
·
|
difficulty in negotiating a successful collective bargaining agreement in France or other jurisdictions;
|
|
·
|
trade barriers such as export requirements, tariffs, taxes, local content requirements and other restrictions and expenses, which could increase the price of our solar modules and make us less competitive in some countries; and
|
|
·
|
difficulty of and costs relating to compliance with the different commercial and legal requirements of the overseas countries in which we offer and sell our solar modules.
|
Our business in foreign markets requires us to respond to rapid changes in market conditions in these countries. Our overall success as a global business depends, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions. We may not be able to develop and implement policies and strategies that will be effective in each location where we do business.
Risks Related to Our Systems Business
Project development or construction activities may not be successful and projects under development may not receive required permits or construction may not commence as scheduled, which could increase our costs and impair our ability to recover our investments.
The development and construction of solar power electric generation facilities and other energy infrastructure projects involve numerous risks. We may be required to spend significant sums for preliminary engineering, permitting, legal, and other expenses before we can determine whether a project is feasible, economically attractive or capable of being built. Success in developing a particular project is contingent upon, among other things:
|
·
|
negotiation of satisfactory engineering, procurement and construction agreements;
|
|
·
|
receipt of required governmental permits and approvals, including the right to interconnect to the electric grid;
|
|
·
|
payment of interconnection and other deposits (some of which are non-refundable);
|
|
·
|
obtaining construction financing; and
|
|
·
|
timely implementation and satisfactory completion of construction.
|
23
Successful completion of a particular project may be adversely affected by numerous factors, including:
|
·
|
delays in obtaining required governmental permits and approvals;
|
|
·
|
uncertainties relating to land costs for projects on land subject to Bureau of Land Management procedures;
|
|
·
|
unforeseen engineering problems;
|
|
·
|
construction delays and contractor performance shortfalls;
|
|
·
|
work stoppages;
|
|
·
|
cost over-runs
|
|
·
|
equipment and materials supply;
|
|
·
|
adverse weather conditions; and
|
|
·
|
environmental and geological conditions.
|
If we are unable to complete the development of a solar power facility, or fail to meet one or more agreed target construction milestone dates, we may be subject to liquidated damages and/or penalties under our agreements relating to the project, and we typically will not be able to recover our investment in the project. If we are unable to complete the development of a solar power project, we may write-down or write-off some or all of these capitalized investments, which would have an adverse impact on our net income in the period in which the loss is recognized.
We may enter into fixed price contracts in which we act as the general contractor for our customers in connection with the installation of our solar power systems. All essential costs are estimated at the time of entering into the contract for a particular project, and these are reflected in the overall price that we charge our customers for the project. These cost estimates are preliminary and may or may not be covered by contracts between us or the subcontractors, suppliers and other parties to the project. In addition, we require qualified, licensed subcontractors to install most of our systems. Shortages of such skilled labor could significantly delay a project or otherwise increase our costs. Should miscalculations in planning a project or delays in execution occur and we are unable to increase commensurately the sales price, we may not achieve our expected margins or we may be required to record a loss in the relevant fiscal period.
We may be unable to acquire or lease land and/or obtain the approvals, licenses and permits necessary to build and operate power plants in a timely and cost effective manner, and regulatory agencies, local communities or labor unions may delay, prevent or increase the cost of construction and operation of the plants we intend to build.
In order to construct and operate our plants, we need to acquire or lease land and obtain all necessary local, county, state and federal approvals, licenses and permits. We may be unable to acquire the land or lease interests needed, may not receive or retain the requisite approvals, permits and licenses or may encounter other problems which could delay or prevent us from successfully constructing and operating plants.
Many of our proposed plants are located on or require access through public lands administered by federal and state agencies pursuant to competitive public leasing and right-of-way procedures and processes. The authorization for the use, construction and operation of plants and associated transmission facilities on federal, state and private lands will also require the assessment and evaluation of mineral rights, private rights-of-way and other easements; environmental, agricultural, cultural, recreational and aesthetic impacts; and the likely mitigation of adverse impacts to these and other resources and uses. The inability to obtain the required permits and, potentially, excessive delay in obtaining such permits due, for example, to litigation, could prevent us from successfully constructing and operating plants and could result in a potential forfeiture of any deposit we have made with respect to a given project. Moreover, project approvals subject to project modifications and conditions, including mitigation requirements and costs, could affect the financial success of a given project.
24
In addition, local labor unions may increase the cost of, and/or lower the productivity of, project development in Canada and California.
In China our projects are subject to a number of government approvals, including the approval of a pre-feasibility and feasibility study. Individually, the pre-feasibility and feasibility study require many different government approvals at the national, provincial and local levels, and the approval process is discretionary and not fully transparent.
Lack of transmission capacity availability, potential upgrade costs to the transmission grid and other systems constraints could significantly impact our ability to build the plants and generate solar electricity power sales.
In order to deliver electricity from our solar plants to our customers, our projects need to connect to the transmission grid. The lack of available capacity on the transmission grid could substantially impact our projects and cause reductions in project size, delays in project implementation, increases in costs from transmission upgrades and potential forfeitures of any deposit we have made with respect to a given project. These transmission issues, as well as issues relating to the availability of large systems such as transformers and switch gear, could significantly impact our ability to build the plants and generate solar electricity sales.
Our systems business is largely dependent on us and third parties arranging financing from various sources, which may not be available or may only be available on unfavorable terms or in insufficient amounts.
The construction of our large utility-scale solar power projects under development by us is expected in many cases to require project financing, including non-recourse project debt financing in the bank loan market and institutional debt capital markets. Uncertainties exist as to whether our projects will be able to access the debt markets in a sufficient magnitude to finance their construction. If we are unable to arrange such financing or if it is only available on unfavorable terms, we may be unable to fully execute our systems business plan. In addition, we generally expect to sell our projects by raising project equity capital from tax oriented, strategic industry and other equity investors. Such equity sources may not be available or may only be available in insufficient amounts, in which case our ability to sell our projects may be delayed or limited and our business, financial condition or results of operations may be adversely affected.
In addition, for projects in which we provide EPC services but are not the project developer, our EPC activities are in many cases dependent on the ability of third parties to purchase our plant projects, which, in turn, is dependent on their ability to obtain financing for such purchases. Depending on prevailing conditions in the credit markets and other factors, such financing may not be available or may only be available on unfavorable terms or in insufficient amounts. If third parties are limited in their ability to access financing to support their purchase of the power plant projects from us, we may not realize the cash flows that we expect from such sales, and this could adversely affect our ability to invest in our business and/or generate revenue. See also the risk factor above entitled “An increase in interest rates or lending rates or tightening of the supply of capital in the global financial markets (including a reduction in total tax equity availability) could make it difficult for end-users to finance the cost of a solar system and could reduce the demand for our solar modules and/or lead to a reduction in the average selling price for photovoltaic modules.”
Developing solar power projects may require significant upfront investment prior to the signing of a power purchase agreement or an EPC contract, which could adversely affect our business and results of operations.
Our solar power project development cycles, which span the time between the identification of land and the commercial operation of a solar power plant project, vary substantially and can take many months or years to mature. As a result of these long project cycles, we may need to make significant upfront investments of resources (including, for example, large transmission deposits or other payments, which may be non-refundable) in advance of the signing of PPAs and EPC contracts and the receipt of any revenue, much of which is not recognized for several additional months or years following contract signing. Our potential inability to enter into sales contracts with potential customers after making such upfront investments could adversely affect our business and results of operations.
Our liquidity may be adversely affected to the extent the project sale market weakens and we are unable to sell our solar projects on pricing, terms and timing commercially acceptable to us.
25
Other Risks
We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business and management.
We may acquire companies, project pipelines, products or technologies or enter into joint ventures or other strategic initiatives. We may not realize the anticipated benefits of an acquisition and each acquisition has numerous risks. These risks include the following:
|
·
|
difficulty in assimilating the operations and personnel of the acquired company;
|
|
·
|
difficulty in effectively integrating the acquired technologies or products with our current products and technologies;
|
|
·
|
difficulty in maintaining controls, procedures and policies during the transition and integration;
|
|
·
|
disruption of our ongoing business and distraction of our management and associates from other opportunities and challenges due to integration issues;
|
|
·
|
difficulty integrating the acquired company’s accounting, management information and other administrative systems;
|
|
·
|
inability to retain key technical and managerial personnel of the acquired business;
|
|
·
|
inability to retain key customers, vendors and other business partners of the acquired business;
|
|
·
|
inability to achieve the financial and strategic goals for the acquired and combined businesses;
|
|
·
|
incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;
|
|
·
|
potential impairment of our relationships with our associates, customers, partners, distributors or third party providers of technology or products;
|
|
·
|
potential failure of the due diligence processes to identify significant issues with product quality, architecture and development or legal and financial liabilities, among other things;
|
|
·
|
potential inability to assert that internal controls over financial reporting are effective;
|
|
·
|
potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions; and
|
|
·
|
potential delay in customer purchasing decisions due to uncertainty about the direction of our product offerings.
|
Mergers and acquisitions of companies are inherently risky, and ultimately, if we do not complete the integration of acquired businesses successfully and in a timely manner, we may not realize the anticipated benefits of the acquisitions to the extent anticipated, which could adversely affect our business, financial condition or results of operations.
26
Our future success depends on our ability to retain our key associates and to successfully integrate them into our management team.
We are dependent on the services of David Brown, our Chairman, and Edward T. Whelan, our Chief Executive Officer and other members of our senior management team. The loss of David Brown or Edward T. Whelan or any other member of our senior management team could have a material adverse effect on us. There is a risk that we will not be able to retain or replace these key associates. Several of our current key associates, including David Brown or Edward T. Whelan are subject to employment conditions or arrangements that contain post-employment non-competition provisions. However, these arrangements permit the associates to terminate their employment with us upon little or no notice and the enforceability of the non-competition provisions is uncertain.
If we are unable to attract, train and retain key personnel, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train and retain management, operations and technical personnel. Recruiting and retaining capable personnel, particularly those with expertise in the photovoltaic industry and thin film technology, are vital to our success. There is substantial competition for qualified technical personnel and there can be no assurance that we will be able to attract or retain our technical personnel. If we are unable to attract and retain qualified associates, our business may be materially and adversely affected.
We may be exposed to infringement or misappropriation claims by third parties, which, if determined adversely to us, could cause us to pay significant damage awards or prohibit us from the manufacture and sale of our solar modules or the use of our technology.
Our success depends largely on our ability to use and develop our technology and know-how without infringing or misappropriating the intellectual property rights of third parties. The validity and scope of claims relating to photovoltaic technology patents involve complex scientific, legal and factual considerations and analysis and, therefore, may be highly uncertain. We may be subject to litigation involving claims of patent infringement or violation of intellectual property rights of third parties. The defense and prosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties, which may not be available on reasonable terms, or at all, or pay ongoing royalties, require us to redesign our solar module, or subject us to injunctions prohibiting the manufacture and sale of our solar modules or the use of our technologies. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase or use of our solar modules until the resolution of such litigation.
Currency translation and transaction risk may negatively affect our net sales, cost of sales and gross margins and could result in exchange losses.
Although our reporting currency is the U.S. dollar, we conduct our business and incur costs in the local currency of most countries in which we operate. As a result, we are subject to currency translation and transaction risk. We expect a large percentage of our net sales to be outside the United States and denominated in foreign currencies in the future. In addition, our operating expenses for our plants located outside the U.S. will be denominated in the local currency. Changes in exchange rates between foreign currencies and the U.S. dollar could affect our net sales and cost of sales and could result in exchange gains or losses. In addition, we incur currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or a sales transaction using a different currency from our reporting currency. We cannot accurately predict the impact of future exchange rate fluctuations on our results of operations.
We could also expand our business into emerging markets, many of which have an uncertain regulatory environment relating to currency policy. Conducting business in such emerging markets could cause our exposure to changes in exchange rates to increase.
Our ability to hedge foreign currency exposure is dependent on our credit profile with the banks that are willing and able to do business with us. Deterioration in our credit position or a significant tightening of the credit market conditions could limit our ability to hedge our foreign currency exposure; and therefore, result in exchange losses.
27
Unanticipated changes in our tax provisions, the adoption of a new U.S. tax legislation or exposure to additional income tax liabilities could affect our profitability.
We are subject to income taxes in the United States and the foreign jurisdictions in which we operate. Our tax liabilities are affected by the amounts we charge for inventory, services, licenses, funding and other items in intercompany transactions. We are subject to potential tax examinations in these various jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other tax positions and assess additional taxes. We regularly assess the likely outcomes of these examinations in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these potential examinations, and the amounts ultimately paid upon resolution of examinations could be materially different from the amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net income and cash flows. In addition, our future effective tax rate could be adversely affected by changes to our operating structure, loss of our Malaysian tax holiday, changes in the mix of earnings in countries with tax holidays or differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process. In addition, President Obama's administration has recently announced proposals for new U.S. tax legislation that, if adopted, could adversely affect our tax rate. Any of these changes could affect our results of operations.
· we and the joint venture partner may not be able to agree on matters relating to the property; and
Corporate Headquarters
The following properties are used in the operation of our business:
Our principal executive offices are located at 135 First Street, Keyport, New Jersey 07735, in the United States of America. We pay no rent at this time.
None.
No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwisw, during the fourth quarter of the year ended December 31, 2010.
28
On December 31, 2010, there were approximately 211 shareholders of record of our common stock. Our common stock currently is available for trading on the OTC:PK under the symbol “ERIP.”
The following table sets forth the range of high and low bid prices of the Company’s common stock during the periods indicated. Such prices reflect prices between dealers in securities and do not include any retail markup, markdown or commission and may not necessarily represent actual transactions. The information set forth below was provided by Pink Sheets Services.
|
Three Months Ended
|
||||||||||||||||
|
March 31
|
June 30
|
September 30
|
December 31
|
|||||||||||||
| 2010 | ||||||||||||||||
| High | $ | 3.00 | $ | 3.00 | $ | 3.00 | $ | 1.50 | ||||||||
| Low | $ | 3,00 | $ | 3.00 | $ | 3.00 | $ | 1.50 | ||||||||
| 2009 | ||||||||||||||||
| High | $ | 0.05 | $ | 0.02 | $ | 0.02 | $ | 0.02 | ||||||||
| Low | $ | 0.05 | $ | 0.02 | $ | 0.02 | $ | 0.02 | ||||||||
Transfer Agent
The Company’s transfer agent and registrar of the common stock is:
Old Monmouth Stock Transfer Company
200 Memorial Parkway
Atlantic Highlands, NJ 07716
Phone: (732) 872-2727
29
Warrants
The Company has a Warrant to purchase 150,000 shares of common stock at $3.00 per share.
Options
The Company has a 1,000,000 Stock Option exercisable at $0.50 to David Brown the Company's Chairman and to Edward Whelan the Company's Chief Executive Officer.
Penny Stock Considerations
Because our shares trade at less than $5.00 per share, they are “penny stocks” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:
|
o
|
Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commissions relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
|
|
o
|
Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
|
|
o
|
Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and
|
|
o
|
Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.
|
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.
Dividends
We do not anticipate paying dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts as the Board of Directors deems relevant.
30
Recent Sales of Unregistered Securities
The Company has not sold during any shares during its current fiscal year ended December 31, 2010. Information with respect to previously reported sales prior to January 1, 2010 may be found in the Company’s prior year filings.
On April 21, 2010 the Board of Directors approved an amendment to the Articles of Incorporation of the Company to increase its authorized $0.0001 par value common shares from 40,000,000 to 100,000,000. On April 26, 2010 the Articles of Amendment to Articles of Incorporation of Energiz Renewable, Inc. was filed with the Florida Secretary of State.
On May 24, 2010, the Company authorized the issuance of 4,050,000 shares of common stock. Of these shares, 3,000,000 were issued to Environmental Energy Enterprises LTD for the services of David Brown as Chairman of the Company, for bringing business opportunities to the Company, for the execution of an employment agreement, which was subsequently approved by the Board of Directors and for the transfer of the license owned by Energy Enterprises, LTD with Energiz International to the Company. 1,000,000 shares were issued to Pierre Villeneuve, 400,000 shares of which were for the execution of an employment agreement, which was subsequently approved by the Board of Directors and 600,000 of which were for the transfer of the license owned by Pierre Villeneuve with Energiz International to the Company. The remaining 50,000 shares were issued to William Walling for compensation for serving on the Board of Directors of the Company. The 4,050,000 shares were recorded at their fair value of $0.0286 per share, or $115,830. The fair value was determined based upon the $300,000 cash consideration received under the Change of Control (See Note D).
The Company did not allocate any value to the license agreements transferred because (a) the license agreements have a limited term period of three months (b) are renewable for additional three month intervals and (c) should the Company not obtain any funding to finance the projects, the licensors may not renew the licenses.
On August 4, 2010, the Board of Directors approved the issuance of 12,940,000 shares of common stock under various employment and consulting agreements. They approved the issuance of 600,000 shares each to Richard Tanenbaum and Edward Whelan for consulting services performed in facilitating the Stock Purchase Agreement. They further approved the issuance of a total of 3,240,000 shares of common stock to various employees and consultants for services. No formal employment or consulting agreements exist with these individuals. These shares were recorded at their fair value of $0.0286 per share, or $370,084. Of this amount, $217,342 has been recognized during the year ended December 31, 2010 and the remaining $152,742 is being recognized over the remaining lives of the respective consulting agreements.
On October 12, 2010, the Board of Directors approved the issuance of 270,000 shares of common stock under three consulting agreements which were effective during the three months ended September 30, 2010.
The first agreement was with R.F. Lafferty & Co., Inc. (“Lafferty”) which was effective July 7, 2010. As compensation, the Company agreed to pay to Lafferty, or its designees, 150,000 restricted common shares of the Company, a warrant to purchase 150,000 shares of the Company’s stock at an exercise price of $3. This warrant has cashless exercise rights and expires at the latest date of any securities issued under the consulting agreement, but in no event expiring in less than three years from date of issuance. Additionally, Lafferty will be paid stipulated proceeds from any financing that is executed.
The second agreement was with Thomas Hanlon, and was effective September 1, 2010 and has a term of one year. As compensation, the Company agreed to pay to Thomas Hanlon 100,000 common shares of the Company. Additionally, Thomas Hanlon will be paid stipulated proceeds from any financing that is executed.
The third agreement was with Ma’alot Green Ltd. P.C.(“Green”) for assistance in the purchase and development of industrial plant for the manufacture and/or assembly of systems and/or equipment and/or installations in the field of renewable energyin Yeruham, Israel. Under the agreement, the Company is to pay Green 60,000 Israeli Shekels. The 60,000 Shekels, or $20,000, was paid by a third party on behalf of the Company.
The fair value of the above transactions was determined based upon the $300,000 cash consideration received under the Change in Control.
On November 21, 2010, the Company approved the issuance of 200,000 shares of common stock to its’ former Chief Financial Officer for services. These shares were recorded at their fair value of $1.50 per share, or $300,00 and were recognized in the year ended December 31, 2010.
During the year ended December 31, 2010, the Company issued 500,000 shares of common stock under three joint venture agreements. These shares were recorded at their fair value of $0.0286 per share, or $14,300. See Note I for details.
31
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity or three months or less at the date of purchase to be cash equivalents.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, using the asset and liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A full valuation allowance has been established by the Company on its loss carry forwards which came about prior to the Company ceasing operations in 1991.
Earnings Per Share
The Company computes per share amounts in accordance with FASB ASC 260, Earnings per Share. FASB ASC 260 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the period. There were no common stock equivalents outstanding at December 31, 2009 or 2008.
Stock based compensation
The Company accounts for share-based compensation under the provisions of FASB ASC 718, Compensation — Stock Compensation, which requires the Company to measure and recognize compensation expense for all share-based payments at fair value.
Recent Accounting Pronouncements
In July 2009, the FASB) issued Statement of Financial Accounting Standards (“SFAS”) 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 The Hierarchy of Generally Accepted Accounting Principles. SFAS 168 establishes the FASB Accounting Standard Codification (“ASC”) as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Effective July 2009, the FASB ASC is considered the single source of authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the Securities and Exchange Commission (“SEC”). The Company adopted SFAS 168, as codified in ASC 105, Generally Accepted Accounting Principles, as of September 30, 2009. All accounting references within this Annual Report on Form 10-K have been updated and, therefore, previous references to GAAP have been replaced with references to GAAP as codified in the ASC.
In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance set forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Company for the second quarter 2009 reporting. The adoption did not have a significant impact on the subsequent events that the Company reports, either through recognition or disclosure, in the consolidated financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective immediately and the Company therefore removed the disclosure in this Annual Report.
32
This section provides our Management’s Discussion and Analysis of Financial Condition and Results of Operations (‘‘MD&A”).
The following discussion should be read in conjunction with the financial statements and supplementary data appearing in Part II, Item 8.
Liquidity and Capital Resources
For the year ended December 31, 2010, the registrant had a net loss of $3,213,019 resulting from compensation and benefit expense of $2,430,478, professional fees of $399,550 and travel and entertainment expenses of $347,017, resulting in the registrant having net cash used in operating activities of ($414,700) for the year ended December 31, 2010.
For the year ended December 31, 2009, the registrant had a net loss of $397,988 resulting from accrued expenses of $374,400, and accounts payable of $23,100, resulting in the registrant had net cash used in operating activities of ($488) for the year ended December 31, 2009.
For the year ended December 31, 2010, the Company had $418,000 in cash provided by financing activities, consisting of advances from management of $95,000 and proceeds from the issuance of demand notes of $323,000. Of these demand notes, $175,000 was with the spouse of Company's Chairman.
The Company did not have any financing activities in 2009.
Results of Operations
In 1991, the Company ceased doing business and has not engaged in any enterprises through 2009 until March 17, 2010.
For the year ended December 31, 2010, the registrant had no revenues and expenses of $3,213,019 resulting in a net loss of $3,213,019. Expenses consisted of $2,430.478 compensation and benefit expenses, $399,550 professional fees, $347,017 travel and entertainment expenses, $19,502 in interest expense and $16,472 of other operating expenses.
Comparatively, for the year ended December 31, 2009, the registrant had no revenues and expenses of $397,988 resulting in a net loss of $397,988. Expenses consisted of $360,000 in compensation and benefit expenses, $23,100 in professional fees and $14,888 in other operating expenses.
Going Concern and Management's Plans
As indicated in the accompanying financial statements, the registrant incurred net losses of $(4,427,711) for the period January 15, 1988 (Inception) to December 31, 2010 and is considered a company in the development stage. The registrant is seeking to raise additional capital for investment and working capital purposes. There is no assurance that the Company will be able to raise adequate additional capital in the equity markets.
33
Critical Accounting Policies
Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
The most significant accounting policy is the Company’s valuation of stock, options and warrants. The Company values the issuance of stock, options and warrants at their fair value. Due to the limited trading and volatility in the Company’s stock price, the fair value measurements can flucuate significantly.
See Note B to our consolidated financial statements for a summary of our signficant accounting policies.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
At December 31, 2010, the Company had the following contractual obligations relating to employment and consulting agreements:
| Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | ||||||||||||||
| $ | 3,840,000 | $ | 480,000 | $ | 1,440,000 | $ | 1,440,000 | $ | 480,000 | |||||||||
Forward-Looking Statements
This Report contains statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as "may," "will," "expect," "intend," "estimate," "foresee," "project," "anticipate," "believe," "plans," "forecasts," "continue" or "could" or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management's opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.
Not applicable
34
CONTENTS
______________________________________________________________________________________________
|
Report of Independent Registered Public Accounting Firm
|
Page F-1
|
|
Consolidated Balance Sheets
|
F-2
|
|
Consolidated Statements of Operations
|
F-3
|
|
Consolidated Statements of Cash Flows
|
F-4
|
|
Consolidated Statements of Changes in Stockholders’ Deficit
|
F-5
|
|
Notes to Consolidated Financial Statements
|
F-7
|
35
MEYLER & COMPANY, LLC
CERTIFIED PUBLIC ACCOUNTANTS
ONE ARIN PARK
1715 HIGHWAY 35
MIDDLETOWN, NJ 07748
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Energiz Renewable, Inc.
(formerly C&G DEC Capital, Inc.)
We have audited the accompanying consolidated balance sheets of Energiz Renewable, Inc. (formerly C&G DEC Capital, Inc.) (a Development Stage Company) (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' deficit, and cash flows for each of years in the two year period ended December 31, 2010 and the period January 15, 1988 (Inception) to December 31, 2010. Energiz Renewable, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated 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 Energiz Renewable, Inc. (formerly C&G DEC Capital, Inc.) (a Development Stage Company) as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2010 and the period January 15, 1988 (Inception) to December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note C to the consolidated financial statements, the Company has incurred cumulative losses of $4,427,711 since inception, and there are existing uncertain conditions the Company faces relative to its ability to obtain capital and operate successfully. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note C. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
/s/ Meyler & Company, LLC
Middletown, NJ
April 18, 2011
F-1
|
ENERGIZ RENEWABLE, INC.
|
||||||||
|
Formerly C&G DEC Capital, Inc.
|
||||||||
|
(A Development Stage Company)
|
||||||||
|
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS
|
||||||||
|
Cash
|
$ | 3,300 | $ | - | ||||
|
Total Current Assets
|
3,300 | - | ||||||
|
Total Assets
|
$ | 3,300 | $ | - | ||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
|
CURRENT LIABILITIES
|
||||||||
|
Accounts Payable
|
489,197 | 53,663 | ||||||
|
Accrued Expenses
|
625,210 | 1,030,200 | ||||||
|
Advances from management
|
95,000 | 23,963 | ||||||
|
Notes Payable - Demand
|
323,000 | - | ||||||
|
Total Liabilities
|
1,532,407 | 1,107,826 | ||||||
|
Total Liabilities
|
1,532,407 | 1,107,826 | ||||||
|
STOCKHOLDERS' DEFICIT
|
||||||||
|
Common stock, $.0001 Par Value,
|
||||||||
|
40,000,000 shares authorized, 30,232,300 and
|
||||||||
|
12,272,300 shares issued and outstanding
|
||||||||
|
at December 31, 2010 and 2009, respectively
|
3,022 | 1,228 | ||||||
|
Additional paid-in capital
|
2,895,582 | 105,638 | ||||||
|
Deficit accumulated during development stage
|
(4,427,711 | ) | (1,214,692 | ) | ||||
|
Total Stockholders’ Deficit
|
(1,529,107 | ) | (1,107,826 | ) | ||||
|
Total Liabilities and Stockholders’ Deficit
|
$ | 3,300 | $ | - | ||||
|
See accompanying notes to consolidated financial statements.
|
||||||||
F-2
ENERGIZ RENEWABLE, INC.
Formerly C&G DEC Capital, Inc.
(A Development Stage Company)
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||
|
For the Period
|
||||||||||||
|
January 15, 1988
|
||||||||||||
|
For the Year Ended
|
(Inception) to
|
|||||||||||
|
December 31,
|
December 31,
|
|||||||||||
|
2010
|
2009
|
2010
|
||||||||||
|
REVENUES
|
$ | - | $ | - | $ | 20,000 | ||||||
|
COSTS AND EXPENSES
|
||||||||||||
|
Compensation and benefits
|
2,430,478 | 360,000 | 3,437,133 | |||||||||
|
Professional fees
|
399,550 | 23,100 | 465,813 | |||||||||
|
Travel and entertainment
|
347,017 | - | 347,017 | |||||||||
|
Other operating expenses
|
16,472 | 14,888 | 178,246 | |||||||||
|
Total cost and expenses
|
3,193,517 | 397,988 | 4,428,209 | |||||||||
|
OPERATING LOSS
|
(3,193,517 | ) | (397,988 | ) | (4,408,209 | ) | ||||||
|
INTEREST EXPENSE
|
19,502 | - | 19,502 | |||||||||
|
LOSS BEFORE INCOME TAXES
|
(3,213,019 | ) | (397,988 | ) | (4,427,711 | ) | ||||||
|
PROVISION FOR INCOME TAXES
|
- | - | - | |||||||||
|
NET LOSS
|
$ | (3,213,019 | ) | $ | (397,988 | ) | $ | (4,427,711 | ) | |||
|
NET LOSS PER COMMON
|
||||||||||||
|
SHARE (Basic and Diluted)
|
$ | (0.16 | ) | $ | (0.03 | ) | ||||||
|
WEIGHTED AVERAGE SHARES
|
||||||||||||
|
OUTSTANDING
|
20,422,300 | 12,272,300 | ||||||||||
|
See accompanying notes to consolidated financial statements.
|
||||||||||||
F-3
|
ENERGIZ RENEWABLE, INC.
|
||||||||||||
|
(Formerly C&G DEC Capital, Inc.)
|
||||||||||||
|
(A Development Stage Enterprise)
|
||||||||||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||||||
|
For the Period
|
||||||||||||
|
January 15, 1988
|
||||||||||||
|
For the Year Ended
|
(Inception) to
|
|||||||||||
|
December 31,
|
December 31,
|
|||||||||||
|
2010
|
2009
|
2010
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net loss
|
$ | (3,213,019 | ) | $ | (397,988 | ) | $ | (4,427,711 | ) | |||
|
Adjustments to reconcile net loss to net cash
|
||||||||||||
|
used in operating activities-
|
||||||||||||
|
Stock based compensation
|
1,606,529 | - | 1,623,184 | |||||||||
|
Imputed interest
|
3,647 | - | 3,647 | |||||||||
|
Changes in operating assets and liabilities-
|
||||||||||||
|
Accounts payable
|
499,933 | 23,100 | 553,596 | |||||||||
|
Accrued expeneses
|
688,210 | 374,400 | 1,718,410 | |||||||||
|
Advances from shareholders
|
- | - | 24,635 | |||||||||
|
Net cash used in operating activities
|
(414,700 | ) | (488 | ) | (504,239 | ) | ||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Proceeds from Notes Payable - Demand
|
323,000 | - | 323,000 | |||||||||
|
Proceeds from advances from management
|
95,000 | - | 95,000 | |||||||||
|
Net proceeds from issuance of common stock
|
- | - | 89,539 | |||||||||
|
Net cash provided by financing activities
|
418,000 | - | 507,539 | |||||||||
|
Net increase (decrease) in cash
|
3,300 | (488 | ) | 3,300 | ||||||||
|
CASH AT BEGINNING OF YEAR
|
- | 488 | ||||||||||
|
|
||||||||||||
|
CASH AT END OF YEAR
|
$ | 3,300 | $ | - | $ | 3,300 | ||||||
|
SUPPLEMENTAL NON CASH ACTIVITIES:
|
||||||||||||
|
Cash paid for interest
|
$ | - | $ | - | $ | - | ||||||
|
Cash paid for taxes
|
$ | - | $ | - | $ | - | ||||||
|
Forgiveness of amounts due related parties
|
$ | 1,117,163 | $ | - | $ | 1,117,163 | ||||||
|
Payment of accounts payable by management
|
$ | 64,399 | $ | - | $ | 64,399 | ||||||
|
See accompanying notes to consolidated financial statements.
|
||||||||||||
|
ENERGIZ RENEWABLE, INC.
|
||||||||||||||||||||
|
(Formerly C&G DEC Capital, Inc.)
|
||||||||||||||||||||
|
(A Development Stage Company)
|
||||||||||||||||||||
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT -JANUARY 15, 1998 (INCEPTION) TO DECEMBER 31, 2010
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
Deficit
|
|||||||||||||||||||
|
|
Accumulated
|
|||||||||||||||||||
|
|
Additional
|
During
|
||||||||||||||||||
|
Common Stock
|
Paid-in
|
Development
|
||||||||||||||||||
|
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
|||||||||||||||
|
January 15, 1988 (Inception)
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
|
Sale of stock, April 1988
|
90,000 | 9 | 32,930 | - | 32,939 | |||||||||||||||
|
Net loss- 1988
|
- | - | - | (2,550 | ) | (2,550 | ) | |||||||||||||
|
Balance, December 31, 1988
|
90,000 | 9 | 32,930 | (2,550 | ) | 30,389 | ||||||||||||||
|
|
||||||||||||||||||||
|
Capital contribution
|
- | - | 2,600 | - | 2,600 | |||||||||||||||
|
Net loss- 1989
|
- | - | - | (19,243 | ) | (19,243 | ) | |||||||||||||
|
Balance, December 31, 1989
|
90,000 | 9 | 35,530 | (21,793 | ) | 13,746 | ||||||||||||||
|
|
||||||||||||||||||||
|
Sale of stock, November 26, 1990
|
16,300 | 2 | 53,798 | - | 53,800 | |||||||||||||||
|
Net loss- 1990
|
- | - | - | - | - | |||||||||||||||
|
Balance, December 31, 1990
|
106,300 | 11 | 89,328 | (21,793 | ) | 67,546 | ||||||||||||||
|
|
||||||||||||||||||||
|
Net loss- 1991
|
- | - | - | (67,546 | ) | (67,546 | ) | |||||||||||||
|
Balance, December 31, 1991
|
106,300 | 11 | 89,328 | (89,339 | ) | - | ||||||||||||||
|
|
||||||||||||||||||||
|
Stock adjustment
|
400,000 | 40 | (40 | ) | - | - | ||||||||||||||
|
Net loss- 1992 to 1999
|
- | - | - | - | - | |||||||||||||||
|
Balance, December 31, 1998
|
506,300 | 51 | 89,288 | (89,339 | ) | - | ||||||||||||||
|
|
||||||||||||||||||||
|
Stock issued for services, July 2000
|
2,000,000 | 200 | - | - | 200 | |||||||||||||||
|
Net loss- 2000
|
- | - | - | (200 | ) | (200 | ) | |||||||||||||
|
Balance, December 31, 2000
|
2,506,300 | 251 | 89,288 | (89,539 | ) | - | ||||||||||||||
|
|
||||||||||||||||||||
|
Net loss- 2001 to 2006
|
- | - | - | - | - | |||||||||||||||
|
Balance, December 31, 2006
|
2,506,300 | $ | 251 | $ | 89,288 | $ | (89,539 | ) | $ | - | ||||||||||
|
|
||||||||||||||||||||
|
See accompanying notes to consolidated financial statements.
|
||||||||||||||||||||
F-5
|
ENERGIZ RENEWABLE, INC.
|
||||||||||||||||||||
|
(Formerly C&G DEC Capital, Inc.)
|
||||||||||||||||||||
|
(A Development Stage Company)
|
||||||||||||||||||||
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT -JANUARY 15, 1998 (INCEPTION) TO DECEMBER 31, 2010
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
|
Deficit
|
|||||||||||||||||||
|
|
Accumulated
|
|||||||||||||||||||
|
|
Additional
|
During
|
||||||||||||||||||
|
Common Stock
|
Paid-in
|
Development
|
||||||||||||||||||
|
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
|||||||||||||||
|
Balance, December 31, 2006
|
2,506,300 | $ | 251 | $ | 89,288 | $ | (89,539 | ) | $ | - | ||||||||||
|
Shares issued to management and directors at par, March 22, 2007
|
6,716,000 | 672 | - | - | 672 | |||||||||||||||
|
Shares issued to management and directors at par, April 11, 2007
|
1,500,000 | 150 | - | - | 150 | |||||||||||||||
|
Shares issued to director at par, June 14, 2007
|
50,000 | 5 | - | - | 5 | |||||||||||||||
|
Shares issued to management and directors at par, December 20, 2007
|
1,500,000 | 150 | 16,350 | - | 16,500 | |||||||||||||||
|
Net loss for the year ended December 31, 2007
|
- | - | - | (347,102 | ) | (347,102 | ) | |||||||||||||
|
Balance, December 31, 1988
|
12,272,300 | 1,228 | 105,638 | (436,641 | ) | (329,775 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Net loss for the year ended December 31, 2008
|
- | - | - | (380,063 | ) | (380,063 | ) | |||||||||||||
|
Balance, December 31, 2008
|
12,272,300 | 1,228 | 105,638 | (816,704 | ) | (709,838 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Net loss for the year ended December 31, 2009
|
- | - | - | (397,988 | ) | (397,988 | ) | |||||||||||||
|
Balance, December 31, 2009
|
12,272,300 | 1,228 | 105,638 | (1,214,692 | ) | (1,107,826 | ) | |||||||||||||
|
Shares issued for services
|
17,960,000 | 1,794 | 651,060 | - | 652,852 | |||||||||||||||
|
Options and warrrant issued for services
|
- | - | 953,675 | - | 953,675 | |||||||||||||||
|
Forgivenses of debt by Management
|
- | - | 1,117,163 | - | 1,117,163 | |||||||||||||||
|
Payment of expenses by Management
|
- | - | 64,399 | - | 64,399 | |||||||||||||||
|
Imputed interest on loan from Management
|
- | - | 3,647 | - | 3,647 | |||||||||||||||
|
Net loss for the year ended December 31, 2010
|
- | - | - | (3,213,019 | ) | (3,213,019 | ) | |||||||||||||
|
Balance, December 31, 2010
|
30,232,300 | $ | 3,022 | $ | 2,895,582 | $ | (4,427,711 | ) | $ | (1,529,107 | ) | |||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
See accompanying notes to consolidated financial statements.
|
||||||||||||||||||||
F-6
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE A- NATURE OF BUSINESS:
Energiz Renewable, Inc. (formerly C&G DEC Capital, Inc.), the "Company", is a Florida corporation which became public when it's Registration Statement under the Securities Act of 1933 filed with the Securities and Exchange Commission became effective on July 20, 1990 and closed on December 31, 1990.
The company was engaged in the publication of a local newspaper. In 1991, the company ceased doing business and has not engaged in any enterprises since that time. The company has remained as a nonfunctioning non-trading public shell corporation with no assets to date. In 2010, as part of the changes in control described in Note D, the Company developed a business planto become an international vertically integrated energy company. The execution of this business plan is highly dependendant upon the Company raised adequate working capital. In 2010, the Company formed a subsidiary, ERI Israel, Ltd, which is wholly owned by the Company. ERI Israel, Ltd. had no activity in 2010.
NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes. Actual results could differ from those estimates.
Basis of Presentation
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America applicable for a Developmental Stage Company, as defined by the Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 915, and are expressed in U.S. dollars.
Certain reclassifications have been made to the historical financial statements in order to be comparable to the current year,
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity or three months or less at the date of purchase to be cash equivalents.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, using the asset and liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A full valuation allowance has been established by the Company on its loss carry forwards which came about prior to the Company ceasing operations in 1991.
Earnings Per Share
The Company computes per share amounts in accordance with FASB ASC 260, Earnings per Share. FASB ASC 260 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss)
Consolidated Financial Statements
The consolidated financial statements for the year ended December 31 2010 include accounts of Energiz Renewable, Inc., and its wholly owned subsidiary. All intercompany balances and transactions were eliminated in consolidation.
F-7
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE B- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings Per Share (Continued)
available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the period. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Stock based compensation
The Company accounts for share-based compensation under the provisions of FASB ASC 718, Compensation — Stock Compensation, which requires the Company to measure and recognize compensation expense for all share-based payments at fair value.
Recent Accounting Pronouncements
In July 2009, the FASB) issued Statement of Financial Accounting Standards (“SFAS”) 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 The Hierarchy of Generally Accepted Accounting Principles. SFAS 168 establishes the FASB Accounting Standard Codification (“ASC”) as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Effective July 2009, the FASB ASC is considered the single source of authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the Securities and Exchange Commission (“SEC”). The Company adopted SFAS 168, as codified in ASC 105, Generally Accepted Accounting Principles, as of September 30, 2009. All accounting references within this Annual Report on Form 10-K have been updated and, therefore, previous references to GAAP have been replaced with references to GAAP as codified in the ASC.
In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance set forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Company for the second quarter 2009 reporting. The adoption did not have a significant impact on the subsequent events that the Company reports, either through recognition or disclosure, in the consolidated financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance.
F-8
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE C- GOING CONCERN:
As indicated in the accompanying consolidated financial statements, the Company has incurred net losses of $4,427,711 for the period January 15, 1988 (Inception) to December 31, 2010 and is considered a company in the development stage. The Company has developed a business plan to become a international vertically integrated energy company and is attempting to raise additional capital for investment and working capital purposes. There is no assurance that the Company will find a successful merger candidate nor is there any assurance that if a merger is successful that the Company will be able to raise adequate additional capital in the equity markets. These matters raise substantial doubt about the Company's ability to continue as a going concern. However, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE D- CHANGE IN CONTROL:
On March 17, 2010, shareholders of the Company who owned 11,658,300 shares out of a total of 12,272,300 issued and outstanding common shares of the Company, entered into an agreement to sell to various new shareholders an aggregate of 10,492,470 of their common shares of the Company for an aggregate price of $300,000 with closing to take place on or before July 18, 2010. Under this agreement, David Brown, the Company’s Chairman would own 8,789,400 of said shares and therefore a change of control of the Company would take place at that time.
On May 10, 2010 a Stock Purchase Agreement Addendum was executed to the above Stock Purchase Agreement which clarified that Edward T. Whelan and Richard H. Tanenbaum shall forgive any debt owed by the Company as of December 31, 2009, so that the Buyer had no further liability to either for any obligations incurred by the Company arising prior to January 1, 2010. The only remaining obligations were for accounting and legal services and for services rendered by Edward T. Whelan and/or Richard H. Tanenbaum to the Company after December 31, 2009.
On August 4, 2010, the Board of Directors of the Company approved the closing of the stock purchase agreement. As a result, $300,000 in gross proceeds was received from David Brown and distributed,less $100,000 which was utilized to settle debt of the Company, to the shareholders of the Company in exchange for 10,492,470 shares of common stock. Of the $100,000 in debt settled by the Company, $35,601 was paid to the former Management and principal shareholders.
In connection with the closing of the stock purchase agreement, the former Management and principal shareholders agreed to forgive a total of $1,117,163 in accrued expenses and advances and to pay $64,399 in accounts payable of the Company.
NOTE E- STOCKHOLDERS' DEFICIT:
The Company completed a public offering on November 26, 1990.
On July 9, 2000, the Company issued 2,000,000 shares of its common stock for services rendered by various individuals at par. The shares were valued at par as the Company had no operations and had nominal value.
F-9
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE E- STOCKHOLDERS' DEFICIT (CONTINUED):
On March 22, 2007, the Company approved and issued 6,716,000 shares of stock to officers and directors or their assigns for a par value of $0.0001.
On April 1, 2007, the Company entered into employment agreements with two individuals to serve as its Chairman/Chief Executive Officer and its President/Chief Operating Officer. The terms of these agreements are for three years and are automatically renewable for two additional three year periods. The employment agreements call for base salaries of $180,000 each and bonuses of 3% of operating cash flow. The Board of Directors may increase the base salary each year. The Company will also reimburse each individual up to $2,000 in reasonable and necessary business expenses each month. Each individual is also entitled to vacation and sick days, which may be carried forward from year to year but will not be paid if unused.
On April 11, 2007, the Company approved and issued 1,500,000 shares of stock to officers and directors or their assigns for par value or $0.0001. Additionally, the Company approved and issued 50,000 shares to a director for par value or $0.0001.
On December 20, 2007, the Company approved the issuance of 1,500,000 shares of stock for par value to officers and directors since they had not been paid for services performed. The shares were valued at par value of $0.0001 or $150.
On April 21, 2010 the Board of Directors approved an amendment to the Articles of Incorporation of the Company to increase its authorized $0.0001 par value common shares from 40,000,000 to 100,000,000. On April 26, 2010 the Articles of Amendment to Articles of Incorporation of Energiz Renewable, Inc. was filed with the Florida Secretary of State.
On May 24, 2010, the Company authorized the issuance of 4,050,000 shares of common stock. Of these shares, 3,000,000 were issued to Environmental Energy Enterprises LTD for the services of David Brown as Chairman of the Company, for bringing business opportunities to the Company, for the execution of an employment agreement, which was subsequently approved by the Board of Directors and for the transfer of the license owned by Energy Enterprises, LTD with Energiz International to the Company. 1,000,000 shares were issued to Pierre Villeneuve, 400,000 shares of which were for the execution of an employment agreement, which was subsequently approved by the Board of Directors and 600,000 of which were for the transfer of the license owned by Pierre Villeneuve with Energiz International to the Company. The remaining 50,000 shares were issued to William Walling for compensation for serving on the Board of Directors of the Company. The 4,050,000 shares were recorded at their fair value of $0.0286 per share, or $115,830. The fair value was determined based upon the $300,000 cash consideration received under the Change of Control (See Note D).
The Company did not allocate any value to the license agreements transferred because (a) the license agreements have a limited term period of three months (b) are renewable for additional three month intervals and (c) should the Company not obtain any funding to finance the projects, the licensors may not renew the licenses.
On August 4, 2010, the Board of Directors approved the issuance of 12,940,000 shares of common stock under various employment and consulting agreements. These shares were recorded at their fair value of $0.0286 per share, or $370,084. Of this amount, $217,342 has been recognized during the year ended December 31, 2010 and the remaining $152,742 is being recognized over the remaining lives of the respective consulting agreements. See Note H for details.
F-10
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE E- STOCKHOLDERS' DEFICIT (CONTINUED):
During the year ended December 31, 2010, the Company issued 500,000 shares of common stock under three joint venture agreements. These shares were recorded at their fair value of $0.0286 per share, or $14,300. See Note I for details.
On October 12, 2010, the Board of Directors approved the issuance of 270,000 shares of common stock under three consulting agreements, effective September 30, 2010. These shares were recorded at their fair value of $0.0286 per share, or $7,722. Of this amount, $5,382 has been recognized during the year ended December 31, 2010 and the remaining $2,340 is being recognized over the remaining lives of the respective consulting agreements. See Note H for details.
The fair value of the above transactions was determined based upon the $300,000 cash consideration received under the Change in Control (See Note D.)
On November 21, 2010, the Company approved the issuance of 200,000 shares of common stock to its’ former Chief Financial Officer for services. These shares were recorded at their fair value of $1.50 per share, or $300,00 and were recognized in the year ended December 31, 2010.
NOTE F- NOTES PAYABLE- DEMAND
On April 12, 2010, the Company received $100,000 from an investor under a Promissory Note dated April 8, 2010. The Note was payable on demand or before October 8, 2010. The Note bears interest at 8% per annum. If the Note was not paid prior to December 31, 2010, the interest rate would rise to 12% per annum. On December 22, 2010, the investor agreed to extend this Promissory Note for the period October 8, 2010 through June 15, 2011. The interest rate on this Note over the extension period is 12%.
On various dates in 2010, the Company received a total of $175,000 from the spouse of the Chairman of the Company under a Promissory Note. This Promissory Note was formalized in writing on July 14, 2010. The Note was payable on demand or before December 20, 2010. The Note bears interest at 10% per annum. If the Note was not paid prior to December 31, 2010, the interest rate would rise to 12% per annum. On April 8, 2011, the spouse of the Chairman agreed to extend this Promissory Note for the period December 20, 2010 through December 20, 2011. The interest rate on this Note over the extension period is 12%.
On November 24, 2010, the Company received $48,000 from an investor under a Promissory Note dated November 24, 2010. The Note is payable on demand or before November 24, 2011. The Note bears interest at 8% per annum. If the Note is not paid prior to December 1, 2011, the interest rate will rise to 10% per annum.
Interest expense of $15,855 has been accrued on these notes as of December 31, 2010.
NOTE G- RELATED PARTY TRANSACTIONS
During the year ended December 31, 2010, the Company borrowed at total of $95,000 from a Company controlled by its’ Chief Executive Officer. These loans are non interest bearing and have no repayment terms. The Company has imputed interest at 10% amounting to $3,647 during the year ended December 31, 2010.
Combined, the Chairman and the CEO of the Company own over 52% of the outstanding common stock of the Company at December 31, 2010. Ats such, the Chairman and the CEO have thew effective power to control the vote on substantially all significant matters without the approval of other shareholders.
F-11
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE G- EMPLOYMENT AND CONSULTING AGREEMENTS
On March 25, 2010, the Company engaged the Law Offices of SEC Attorneys, LLC. The Company agreed to pay an annual fee of $66,000, payable at $5,550 per month.
On May 2, 2010, the Board of Directors approved an employment agreement with Pierre Villeneuve. The agreement was approved retroactive to February 2, 2010, for a base salary of $120,000 for a three year term. The agreement renews automatically for two additional three year terms. The agreement allows for up to $5,000 as an automobile allowance. The agreement can be terminated without cause by either party, however the employee will receive 3 years compensation as severance if the agreements are terminated by the Company. Under the agreement, the employee received 400,000 shares for the execution of the employment agreement and 600,000 of which were for the transfer of the license owned by Pierre Villeneuve with Energiz International to the Company.
On August 4, 2010, the Board of Directors approved a consulting agreement with Richard Tanenbaum, the former President of the Company, for legal services. The agreement was approved retroactively to January 1, 2010. The agreement covers the following services: (1) drafting of Stock Purchase Agreement and facilitating sale of the Company, (2) the preparation of a Private Placement Memorandum in conjunction with others: (3) drafting of contracts, joint venture agreements, etc., with Apollon Solar, Energiz SA and Vincent Industries; (4) drafting of such other documents as may be required in the efforts of the Company to finance and operate a company which is intended to be a major participant in the solar energy industry, a partner in new technologies in the domain, a manufacturing company and other projects in various countries throughout the world, including, but not limited to Israel, United States, France, Italy and others; (5) service on the Advisory Committee of ERI and (6) such other matters on an as requested basis. Compensation for the first item above was 600,000 shares of common stock immediately upon closing of the Stock Purchase Agreement. The attorneys’ fees for the performance of items two through four above shall be a fixed rate retainer of $12,000 per month, payable on the first of each month, for up to 60 hours per month of time/services rendered by Richard H. Tanenbaum. This option is exercisable only upon execution hereof and shall be deemed effective as of January 1, 2010 and may not be canceled absent lack of performance by Richard H. Tanenbaum for a period of 12 months. As of January 1, 2011 it shall automatically be extended for another 12 month period, absent termination by either party on or before December 31, 2010. If less than 60 hours of service are required in any given month there shall be no credit therefore. If more than 60 hours of service are required in any given month such shall be billed at 90% of the attorneys’ normal hourly rates. In addition, for performing item five above, Richard H. Tanenbaum shall be paid such stock or provided stock options in ERI on a basis similar to that provided to David Brown, Pierre Villeneuve, Edward T. Whelan and other key employees.
On August 4, 2010, the Board of Directors approved Employment Agreements with David Brown, Chairman of the Board and Secretary, and Edward Whelan, President and Board Member. Each of these agreements was approved retroactive to January 1, 2010, and are for a base salary of $180,000 each for a three year term. Each agreement renews automatically for two additional three year terms. Each base salary shall be increased, but not decreased, by the percentage increase in the Company’s stock price during the preceding year, with a maximum increase of 50%. Each individual shall receive 1,500,000 options, 500,000 to be issued on December 31, 2010 and exercisable at $0.50, 500,000 to be issued on December 31, 2011 and exercisable at $1.50 and 500,000 to be issued on December 31, 2010 and exercisable at $0.50, 500,000 each to be issued on December 31, 2012 and exercisable at $2.50. Each individual is allowed up to $5,000 for an automobile allowance. These agreements can be terminated without cause by either party, however each individual shall receive 3 years compensation as severance if the agreements are terminated by the Company. Additionally, Edward Whelan was issued 8,000,000 shares of common stock under his employment agreement.
F-12
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE G- EMPLOYMENT AND CONSULTING AGREEMENTS (CONTINUED)
On August 4, 2010, the Board of Directors also approved the issuance of 600,000 shares each to Richard Tanenbaum and Edward Whelan for consulting services performed in facilitating the Stock Purchase Agreement.
On August 4, 2010, the Board of Directors also approved the issuance of a total of 3,240,000 shares of common stock to various employees and consultants for services. No formal employment or consulting agreements exist with these individuals.
On October 12, 2010, the Board of Directors approved the issuance of 270,000 shares of common stock under three consulting agreements which were effective during the three months ended September 30, 2010.
The first agreement was with R.F. Lafferty & Co., Inc. (“Lafferty”) which was effective July 7, 2010. As compensation, the Company agreed to pay to Lafferty, or its designees, 150,000 restricted common shares of the Company, a warrant to purchase 150,000 shares of the Company’s stock at an exercise price of $3. This warrant has cashless exercise rights and expires at the latest date of any securities issued under the consulting agreement, but in no event expiring in less than three years from date of issuance. Additionally, Lafferty will be paid stipulated proceeds from any financing that is executed.
The second agreement was with Thomas Hanlon, and was effective September 1, 2010 and has a term of one year. As compensation, the Company agreed to pay to Thomas Hanlon 100,000 common shares of the Company. Additionally, Thomas Hanlon will be paid stipulated proceeds from any financing that is executed.
The third agreement was with Ma’alot Green Ltd. P.C.(“Green”) for assistance in the purchase and development of industrial plant for the manufacture and/or assembly of systems and/or equipment and/or installations in the field of renewable energyin Yeruham, Israel. Under the agreement, the Company is to pay Green 60,000 Israeli Shekels. The 60,000 Shekels, or $20,000, was paid by a third party on behalf of the Company.
NOTE H- JOINT VENTURE AGREEMENTS
On May 3, 2010, the Company entered into a Joint Venture Agreement with Corville Development GMBH for the development of up to 5 sites in Italy. The Company will have the option to develop each of these sites. The development of these sites is contingent on receiving government grants and private financing. The Company has agreed to issue 250,000 shares of common stock within 30 days of closing the agreement, 100,000 shares of stock within 30 days of any plants connecting 10 megawatts (“MW”) to the electrical grid, and 100,000 shares of stock within 30 days of any plants connecting 20 MW to the electrical grid.
In June 2010, the Company entered into a Joint Venture Agreement with Energiz America for the development of up to 5 sites in Canada. The Company will have the option to develop each of these sites. The development of these sites is contingent on receiving government grants and private financing. The Company has agreed to issue 100,000 shares of common stock within 30 days of closing the agreement and 100,000 shares of stock within 30 days of any plants connecting 10 MW to the electrical grid.
On July 2, 2010, the Company entered into a Joint Venture Agreement with WREG SLR for the development of up to 5 sites in Romania. The Company will have the option to develop each of these sites. The development of these sites is contingent on receiving government grants and private financing. The Company has agreed to issue 150,000 shares of common stock within 30 days of closing the agreement and 150,000 shares of stock within 30 days of any plants connecting 10 MW to the electrical grid.
F-13
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE I - COMMITMENTS AND CONTINGENCIES
In relation to employment and consulting agreements noted above, the following are the future commitments:
| Year | Amount | ||
| 2011 | $ | 480,000 | |
| 2012 | 480,000 | ||
| 2013 | 480,000 | ||
| 2014 | 480,000 | ||
| 2015 | 480,000 | ||
| Thereafter | 1,440,000 | ||
| $ | 3,840,000 |
NOTE J- WARRANTS
In connection with the Lafferty consulting agreement, the Company issued a warrant to purchase 150,000 shares of the Company’s common stock at $3.00 per share. The following summarizes the activity for the year ended December 31, 2010:
|
Outstanding
|
Exercisable
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Life
|
||||||||
|
Outstanding, December 31, 2009
|
-
|
-
|
|||||||||
|
Issued
|
150,000
|
150,000
|
$
|
3.00
|
3 years
|
||||||
|
Exercised
|
-
|
-
|
|||||||||
|
Cancelled/ Forfeited
|
-
|
-
|
|||||||||
|
Outstanding, December 31, 2010
|
150,000
|
150,000
|
$
|
3.00
|
2.52 years
|
||||||
The Company determined the fair value of the warrants to be $3,675, or $0.0245 per warrant, at the date of grant using the Black-Scholes option pricing model. The following assumptions were used to calculate the fair value of the warrants:
| Dividend yield | 0% |
| Volatility | 377% |
| Risk-free interest rate | 2.20% |
| Expected life | 1.5 years |
| Grant date stock price | $0.0245 |
NOTE K- STOCK OPTIONS
On April 11, 2011, the Board of Directors approved the issuance of 500,000 options each to its’ Chairman and Chief Executive Officer, effective December 31, 2010. These options were issued in accordance with the employment contracts with these individuals. The options vest immediately, are exercisable at $0.50 and expire on December 31, 2013.
F-14
ENERGIZ RENEWABLE, INC.
(Formerly C&G DEC Capital, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
NOTE K- STOCK OPTIONS (CONTINUED)
The following summarizes the activity for the year ended December 31, 2010:
|
Outstanding
|
Exercisable
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Life
|
||||||||
|
Outstanding, December 31, 2009
|
-
|
-
|
|||||||||
|
Issued
|
1,000,000
|
1,000,000
|
$
|
0.50
|
3 years
|
||||||
|
Exercised
|
-
|
-
|
|||||||||
|
Cancelled/ Forfeited
|
-
|
-
|
|||||||||
|
Outstanding, December 31, 2010
|
1,000,000
|
1,000,000
|
$
|
0.50
|
3 years
|
||||||
The aggregate intinsic value of the execisable options was $700,000 at December 31, 2010. The Company determined the fair value of the warrants to be $950,000, or $0.95 per option, at the date of grant using the Black-Scholes option pricing model. The following assumptions were used to calculate the fair value of the options:
| Dividend yield | 0% |
| Volatility | 111% |
| Risk-free interest rate | 1.50% |
| Expected life | 3 years |
| Grant date stock price | $1.20 |
NOTE l - INCOME TAXES
ThThe Company follows FASB ASC 740, Income Taxes and recognizes a deferred tax liability or asset for temporary differences between the tax basis of an asset or liability and the related amount reported on the financial statements. The principal types of differences, which are measured at the current tax rates, are net operating loss carry forwards. At DeDecember 31, 2010 and 2009, these differences resulted in a deferred tax asset of approximately $700,000 and $276,000, respectively. FASB ASC 740 requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Since realization is not assured, the Company has recorded a valuation allowance for the entire deDeferred tax asset, and the accompanying financial statements do not reflect any net asset for deferred taxes at December 31, 2010.
ThThe Company's net operating loss carry forwards amounted to approximately $2,712,000 and $1,121,000 at December 31, 2010 and 2009, respectively and will expire between 2015 and 2025.
NOTE J- SUBSEQUENT EVENTS
On January 27, 2011, the Company received $50,000 from an investor under a Promissory Note dated January 27, 2011. The Note is payable on demand or before January 27, 2012. The Note bears interest at 8% per annum. If the Note is not paid prior to January 27, 2012, the interest rate will rise to 10% per annum.
On March 2, 2011, the Company borrowed $500 from a Company controlled by its’ Chief Executive Officer.
F-15
All decisions to change accountants were approved by our Board of Directors.
There have been no disagreements between the Company and Meyler & Company, LLC (“MC”) in connection with any services provided to us by each of them for the periods of their engagement on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
No accountant’s report on the financial statements for the past two years contained an adverse opinion or a disclaimer of opinion or was qualified or modified as to uncertainty, audit scope or accounting principles, except such reports did contain a going concern qualification; such financial statements did not contain any adjustments for uncertainties stated therein. In addition, MC did not advise the Company with regard to any of the following:
1. That internal controls necessary to develop reliable financial statements did not exist; or
2. That information has come to their attention, which made them unwilling to rely on management’s representations, or unwilling to be associated with the financial statements prepared by management; or
3. That the scope of the audit should be expanded significantly, or information has come to the accountant’s attention that the accountant has concluded will, or if further investigated might, materially impact the fairness or reliability of a previously issued audit report or the underlying financial statements, or the financial statements issued or to be issued covering the fiscal periods subsequent to the date of the most recent audited financial statements, and the issue was not resolved to the accountant’s satisfaction prior to its resignation or dismissal. During the most recent two fiscal years and during any subsequent interim periods preceding the date of each engagement, we have not consulted MC regarding any matter requiring disclosure under Regulation S-K, Item 304(a)(2).
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Interal control over financial reporting is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act as a process designed by, or under the supemsion of a Company's principal executive and principal financal officer and effected by a Company's Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals.
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2010, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2010, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
51
In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated 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.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following three material weaknesses that have caused management to conclude that, as of December 31, 2010, our disclosure controls and procedures were not effective at the reasonable assurance level:
1. We do not have formalized documentation related to our internal control policies and procedures; however, there are informal policies and procedures that cover the recording and reporting of financial transactions. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act and was applicable to us for the year ending December 31, 2008. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. We do not have sufficient personnel working on our accounting functions to ensure we can timely file our quarterly and annual reports, as indicated by the filing of this annual report after the original due date (but within the extension period). Management evaluated the impact of our lack of internal accounting personnel to ensure we can timely file our required quarterly and annual reports and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Remediation of Material Weaknesses
To remediate the material weaknesses in our disclosure controls and procedures identified above, we have continued to refine our internal procedures to begin to implement segregation of duties and to seek additional internal accounting personnel.
52
Management’s Report On Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
|
·
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
|
|
·
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
|
|
·
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
We assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Based on its assessment, we concluded that, as of December 31, 2010, our internal control over financial reporting is not effective based on those criteria.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.
Changes in Internal Control over Financial Reporting
Except as noted above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
None.
53
The directors and officers of the Company and its subsidiaries, as of December 31, 2009, are set forth below. The directors hold office for their respective term and until their successors are duly elected and qualified. Vacancies in the existing Board are filled by a majority vote of the remaining directors. The officers serve at the will of the Board of Directors.
The following table and text sets forth the names and ages of all directors and executive officers of the Company and the key management personnel as of December 31, 2009. The Board of Directors of the Company is comprised of only one class. All of the directors will serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors and are appointed to serve until the first Board of Directors meeting following the annual meeting of stockholders. Also provided is a brief description of the business experience of each director and executive officer and the key management personnel during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.
|
Name
|
Age
|
With Company
Since
|
Director/Position
|
||||
|
David Brown
|
70
|
02/2010
|
Chairman of the Board, and Director
|
||||
|
Richard H. Tanenbaum
|
62
|
01/2006 to 2/2010
|
former President and Director
|
||||
| Edward T. Whelan | 59 | 04/2007 | Chief Executive Officer, Chief Financial Officer and Director | ||||
| George Jochum | 77 | 04/2007 to 2/2010 | former Director | ||||
| Theodore W. Urban | 60 | 04/2007 to 2/2010 | former Director | ||||
| William N. Walling, Jr. | 74 | 04/2007 | Director |
THE OFFICERS AND DIRECTORS OF THE COMPANY ARE SET FORTH BELOW.
DAVID BROWN – Chairman of the Board from February 10, 2010 to Present. Mr. Brown is the Founding Partner of Euro Partners, a corporate finance and investment banking boutique with activities ranging from seed and mezzanine funding for early stage companies to private placements and flotation. He has successfully taken 4 companies public over the last 15 years. With over 30 years of experience in venture capital and investment banking in both the US and Europe, David is a seasoned financier and business builder. He has held a number of senior executive posts at major corporations, having served as CEO of Capezio (later to become US Shoe Corporation) and Director of Corporate Development for International Industries, a major NYSE company. He has served on the boards of numerous private and public companies, and as an international trade commissioner in a developing country. Mr. Brown brings a variety of assets to the company, including his ability to structure and negotiate complex transactions with multiple stakeholders and his considerable network of fundraising contacts. David serves as the Chairman of EIG Renewable Energy Company, a company with a 42% holding in an Israeli solar company, as well as a portfolio of 660MW of wind energy in Poland. his latest initiative is the founding of Environmental Energy Enterprises (ERI), a private initiative in the field of renewable energy, specifically targeting the Balkans.
EDWARD T. WHELAN. - Director from April 1, 2007 to Present. Chief Executive Officer and Chief Financial Officer from February 12, 2010 to Present. Served as Chief Operating Officer from April 1, 2007 to February 12, 2010. Mr. Whelan served as Chairman and Chief Executive Officer of Military Resale Group, Inc. He negotiated and financed the acquisition of a private company with revenue of $750,000, completed a reverse merger into a publicly traded shell, with a twelve-fold growth rate of which revenues increased to just under $10 million. From April 1998 until October 2003, Mr. Whelan served as the President and a principal stockholder of Xcel Associates, Inc., a company engaged in providing financial consulting to small and medium-sized companies, and to high net worth individuals. From 1989 to December 2001, Mr. Whelan served as President and a principal shareholder of Shannon Investments, Inc., a consulting firm to small and medium-sized companies. From 1984 to 1989 Mr. Whelan was a co-founder of Physicians Pharmaceutical Services, Inc. a publicly traded company that made the Inc. Magazine's fastest growing companies in America list. From 1968 to 1971, Mr. Whelan attended St. Peters College in Jersey City, New Jersey, where he majored in Economics. Mr. Whelan is the subject of a SEC investigation unrelated to our Company. For further detail see section titles Risk Factors.
54
RICHARD H. TANENBAUM. - Director and President from January 1, 2006 to February 12, 2010. Mr. Tanenbaum received a Bachelor of Science degree from Bradley University in 1969 and a Juris Doctorate degree from the Columbia Law School of the Catholic University of America in 1974, where he was Managing Editor of the Law Review. He has practiced law in Washington, D.C. and Bethesda, MD since 1974, having worked with the White House Executive Office of the President, an international law firm (Jones, Day, Revis & Pogue), local law firm (Lerch, Early & Brewer), and since 1984 in his own entrepreneurial sole practice, with an emphasis on contract negotiations, the purchase and sale of businesses, loan and real estate acquisitions, hospital development and management and related tax matters. He was a founder of Military Resale Group, Inc. in October 1997, as a former Director and General Counsel and assumed the same positions after the Reverse Acquisition in November 2001. He also is founder, Chairman and General Counsel of American Masterworks Development Company. In the past, Mr. Tanenbaum has started, operated and managed many diverse businesses and served as a member of the Board of Directors of numerous companies. He also is active in local civic affairs, having served as Chairman of the local Citizens Advisory Board, co-founder and officer of Bethesda Urban Partnership, a downtown management corporation, director of the Chamber of Commerce, Rotary Club member/officer, founder and chairman of mentoring program for needy children and coach of children's baseball and basketball teams for many years.
GEORGE JOCHUM – Director from April 11, 2007 to February 12, 2010. Mr. Jochum served as Chairman of the Board, President and CEO of MAMSI, a holding Company for MD-IPA, OCI, Alliance, MAPSI & MD-IPA Common. When Mr. Jochum joined MAMSI and its predecessor companies in 1987, the company was very close to bankruptcy, with 120 employees. During the next five years MAMSI increased income from a loss in 1986 to an income of over $15,000,000. Under Mr. Jochum MAMSI increased the number of employees to over 2,000, the revenues to over $1,000,000,000, the doctor network to over 30,000 and the hospitals network to over 350. During this period, the number of insured companies grew from 100 to 1,700. MAMSI provided health insurance to 1,700,000 individuals in 1998. Upon retiring from MAMSI, Mr. Jochum assisted numerous other small developing companies. He became CEO of Zone Labs and worked with that company from 2002 to 2006. Under Mr. Jochum's guidance, Zone Labs became profitable within 10 months. When Mr. Jochum retired from Zone Labs after 4 years, Zone Labs had retained earnings of over a million dollars and an annual profit of approximately $1,200,000 on revenues of $14,000,000.
THEODORE W. URBAN - Director from April 11, 2007 to February 12, 2010. Mr. Urban graduated from Cornell University in 1971 with a B.S. in Electrical Engineering. He received his J.D. in 1974 from the Columbus School of Law at Catholic University, where he served as an Editor of the Law Review. Mr. Urban served as General Counsel to Ferris, Baker Watts, Inc. and its predecessor, Ferris & Company, Inc. since 1984 until his retirement in March, 2007. He was an Executive Vice President of the Firm, and served as a member of its Board of Directors since 1985. He also was a member of the Firm's Executive Committee and the Investment Screening Committee, and served as Trustee of the Firm's Employee Stock Ownership Plan and its 401K Employee Savings Plan. Mr. Urban also was Chairman of the Board of TCA TrustCorp America, a trust company affiliate of Ferris, Baker Watts, Inc. Prior to joining Ferris, Mr. Urban was Deputy Director of the Commodity Futures Trading Commission's Division of Trading and Markets and served as the Commission's Liaison to the National Futures Association. He previously had served as an Assistant Director of the Securities and Exchange Commission's Division of Market Regulation, with responsibility for the Division's oversight of both exchange and NASD self-regulatory practices. Mr. Urban serves on the Board of Directors of the Maryland Chamber of Commerce and as Vice Chairman of the Board of Investment Trustees for the Montgomery County Public Schools' Employees Pension and Retirement System. He has participated in the Montgomery County Corporate Partnership for Managerial Excellence, Montgomery SUCCESS, and Leadership Maryland (1996). Mr. Urban currently serves as a member of the District of Columbia's Securities Advisory Committee and has served as a member of the NASDR's National Adjudicatory Council, on the NASD's District Committee for District 9 (as Chairman in 1997). He has served on a number of other securities industry committees and periodically serves as an arbitrator for the NYSE, NASD and NFA.
WILLIAM N. WALLING, JR. – Director from April 11, 2007 to Present. Mr. William N. Walling, Jr. received a Bachelor of Arts degree in economics (honors) from Michigan State University in 1957. Mr. Walling earned a M.B.A. in corporate finance (honors) from New York University in 1962 and became a Chartered Financial Analyst in 1964. Since January 2002, Mr. Walling has been self-employed as a securities analyst. In February and March 2003, Mr. Walling was also employed as a transaction analyst for a broker/dealer.
55
Family Relationships
None.
Board Committees
We currently have no compensation committee, audit committee or other board committee performing equivalent functions. Currently, all members of our board of directors participate in all discussions concerning the company.
Legal Proceedings
No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in legal proceedings that would be material to an evaluation of our management.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of beneficial ownership and changes in beneficial ownership of our securities with the SEC on Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership of Securities). Directors, executive officers and beneficial owners of more than 10% of our Common Stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms that they file. Except as otherwise set forth herein, based solely on review of the copies of such forms furnished to us, or written representations that no reports were required, we believe that for the fiscal year ended December 31, 2008 all required forms have been filed as of the date of filing of this Form 10K.
See “Executive Officers of the Registrant” in Part I of this report for information regarding the executive officers of the company, which is incorporated by reference in this section.
The following table sets forth compensation paid to the most highly compensated executive officers for the fiscal years ended December 31, 2010.
|
Name / Position
|
Year
|
Salary
|
Bonus
|
Stock
|
Other
|
Total
|
|||||||||||||||
|
Edward T. Whelan
|
|||||||||||||||||||||
|
Director, Chief Executive Officer and Chief Financial Officer
|
2010
|
$ |
180,000
|
$ |
0
|
$93,218
|
1 | $ |
475,000
|
1 | $ |
748,218
|
|||||||||
|
2009
|
180,000
|
0
|
0 | 0 |
180,000
|
||||||||||||||||
| 2008 | 180,000 | 0 | 180,000 | ||||||||||||||||||
| Steve Swagel | 2010 | $ | 12,000 | $ | 0 | $300,000 | 0 | $ | 312,000 | ||||||||||||
| former Chief Financial Officer | 2009 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
| 2008 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||
1. Edward T. Whelan received $245,960 in in stock, $93,218 recognized in 2010. The remainder is being amortized. In addition, he received $475,000 in stock options, all of which are recognized in 2010. The options were valued at $.45 using the Black Scholes option pricing model, assuming a 0% dividend yield, 111% volatility, a 1.50% risk free rate and an expected life of 3 years.
56
Compensation Agreements
On May 2, 2010, the Board of Directors approved an employment agreement with Pierre Villeneuve. The agreement was approved retroactive to February 2, 2010, are for a base salary of $120,000 for a three year term. The agreement renews automatically for two additional three year terms. The agreement allows for up to $5,000 as an automobile allowance. The agreement can be terminated without cause by either party, however the employee will receive 3 years compensation as severance if the agreements are terminated by the Company. Under the agreement, the employee shall receive 400,000 shares for the execution of the employment agreement and 600,000 of which were for the transfer of the license owned by Pierre Villeneuve with Energiz International to the Company.
On August 4, 2010, the Board of Directors approved a consulting agreement with Richard Tanenbaum, the former President of the Company, for legal services. The agreement was approved retroactively to January 1, 2010. The agreement covers the following services: (1) drafting of Stock Purchase Agreement and facilitating sale of the Company, (2) the preparation of a Private Placement Memorandum in conjunction with others: (3) drafting of contracts, joint venture agreements, etc., with Apollon Solar, Energiz SA and Vincent Industries; (4) drafting of such other documents as may be required in the efforts of the Company to finance and operate a company which is intended to be a major participant in the solar energy industry, a partner in new technologies in the domain, a manufacturing company and other projects in various countries throughout the world, including, but not limited to Israel, United States, France, Italy and others; (5) service on the Advisory Committee of ERI and (6) such other matters on an as requested basis. Compensation for the first item above shall be 600,000 shares of common stock immediately upon closing of the Stock Purchase Agreement. The attorneys’ fees for the performance of items two through four above shall be a fixed rate retainer of $12,000 per month, payable on the first of each month, for up to 60 hours per month of time/services rendered by Richard H. Tanenbaum. This option is exercisable only upon execution hereof and shall be deemed effective as of January 1, 2010 and may not be canceled absent lack of performance by Richard H. Tanenbaum for a period of 12 months. As of January 1, 2011 it shall automatically be extended for another 12 month period, absent termination by either party on or before December 31, 2010. If less than 60 hours of service are required in any given month there shall be no credit therefore. If more than 60 hours of service are required in any given month such shall be billed at 90% of the attorneys’ normal hourly rates. In addition, for performing item five above, Richard H. Tanenbaum shall be paid such stock or provided stock options in ERI on a basis similar to that provided to David Brown, Pierre Villeneuve, Edward T. Whelan and other key employees.
On August 4, 2010, the Board of Directors approved Employment Agreements with David Brown, Chairman of the Board and Secretary, and Edward Whelan, President and Board Member. Each of these agreements was approved retroactive to January 1, 2010, and are for a base salary of $180,000 each for a three year term. Each agreement renews automatically for two additional three year terms. Each base salary shall be increased, but not decreased, by the percentage increase in the Company’s stock price during the preceding year, with a maximum increase of 50%. Each individual shall receive 1,500,000 options, 500,000 to be issued on December 31, 2010 and exercisable at $0.50, 500,000 to be issued on December 31, 2011 and exercisable at $1.50 and 500,000 to be issued on December 31, 2010 and exercisable at $0.50, 500,000 each to be issued on December 31, 2012 and exercisable at $2.50. Each individual is allowed up to $5,000 for an automobile allowance. These agreements can be terminated without cause by either party, however each individual shall receive 3 years compensation as severance if the agreements are terminated by the Company. Additionally, Edward Whelan is to be issued 8,000,000 shared of common stock under his employment agreement.
On August 4, 2010, the Board of Directors also approved the issuance of 600,000 shares each to Richard Tanenbaum and Edward Whelan for consulting services performed in facilitating the Stock Purchase Agreement.
On August 4, 2010, the Board of Directors also approved the issuance of a total of 3,240,000 shares of common stock to various employees and consultants for services. No formal employment or consulting agreements exist with these individuals.
On October 12, 2010, the Board of Directors approved the issuance of 270,000 shares of common stock under three consulting agreements which were effective during the three months ended September 30, 2010.
The first agreement was with R.F. Lafferty & Co., Inc. (“Lafferty”) which was effective July 7, 2010. As compensation, the Company agreed to pay to Lafferty, or its designees, 150,000 restricted common shares of the Company, a warrant to purchase 150,000 shares of the Company’s stock at an exercise price of $3. This warrant has cashless exercise rights and expires at the latest date of any securities issued under the consulting agreement, but in no event expiring in less than three years from date of issuance. Additionally, Lafferty will be paid stipulated proceeds from any financing that is executed.
The second agreement was with Thomas Hanlon, and was effective September 1, 2010 and has a term of one year. As compensation, the Company agreed to pay to Thomas Hanlon 100,000 common shares of the Company. Additionally, Thomas Hanlon will be paid stipulated proceeds from any financing that is executed.
57
The third agreement was with Ma’alot Green Ltd. P.C.(“Green”) for assistance in the purchase and development of industrial plant for the manufacture and/or assembly of systems and/or equipment and/or installations in the field of renewable energyin Yeruham, Israel. Under the agreement, the Company is to pay Green 60,000 Israeli Shekels.
Indemnification
Under the Company’s Articles of Incorporation and its Bylaws, the Company may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a matter he reasonably believed to be in the Company’s best interest. The Company may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, the Company must indemnify him against all expenses incurred, including attorney’s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Delaware.
Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Delaware law, the Company is informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
The following table sets forth as of December 31, 2010, information with respect to the beneficial ownership of the Company’s Common Stock by (i) each person known by the Company to own beneficially 5% or more of such stock, (ii) each Director of the Company who owns any Common Stock, and (iii) all Directors and Officers as a group, together with their percentage of beneficial holdings of the outstanding shares.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.
58
|
Title of Class
|
Name
|
Shares
|
Percent
|
||||||||||
|
Common Stock
|
David Brown (1)
|
10,948,800
|
36.20
|
% | |||||||||
| Edward T. Whelan (2) | 4,980,000 | 16.50 | % | ||||||||||
|
|
15,928,800
|
|
52.70
|
% | |||||||||
(1) Based on shares owned by David Brown individually and by Barbara Brown, his wife and by Environmental Energy Enterprises Ltd. as of April 18, 2010.
(2) Based on shares owned by Grace Holdings, Inc. and Atlantic Investment Trust whom he controls.
Security Ownership of Management:
|
Title of Class
|
Name
|
Shares
|
Percent
|
||||||||||
|
Common Stock
|
Richard H. Tanenbaum
|
2,465,000
|
8.20 | % | |||||||||
|
Edward T. Whelan
|
4,980,000
|
16.50 | % | ||||||||||
| David Brown | 10,948,000 | 36.20 | % | ||||||||||
| Theodore W. Urban | 400,000 | 1.30 | % | ||||||||||
| George Jochum | 275,000 | 0.91 | % | ||||||||||
| Steven Swagel | 200.000 | 0.70 | % | ||||||||||
| William Walling | 55,000 | 0.20 | % | ||||||||||
|
All Directors and Executive Officers as a group (7 persons)
|
19,323,000
|
63.90 | % | ||||||||||
59
Changes in Control
On Wednesday, March 17, 2010 a Stock Purchase Agreement was entered into by and between Environmental Energy Enterprises Limited an entity registered in the United Kingdom (House # 5094072) represented by its President David Brown, the Chairman of the Board of the Registrant as agent for various buyers and Edward T. Whelan, the CEO, CFO and Director of the the Company as agent for various shareholders of the Company that own a total of 11,658,300 common shares out of a total of 12,272,300 issued and outstanding common shares of the Company. Under said Agreement, the Buyers agreed to purchase an aggregate of 10,492,470 common shares of the Company from the Sellers for an aggregate price of $300,000 to be paid to the Sellers on or before July 18, 2010 at the office of the Company. As a consequence of this Agreement, David Brown may when closed, own or control a total of 8,789,400 common shares of the Company, which constitutes 71.6% of the total outstanding shares as April 13, 2010.
Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. We have not and do not intend in the future to formulate a policy for the resolution of such conflicts.
At the current time, there are no related party transactions.
Auditors' Fees
Aggregate fees for professional services rendered to the Company by Meyler & Company LLC as of, and for, the years ended December 31, 2009 and 2008 were as follows:
|
Type of Services
|
2010
|
2009
|
||||||
|
Audit Fees(1)
|
$ | 62,000 | $ | 10,000 | ||||
|
Audit Related Fees(2)
|
||||||||
|
Tax Fees(3)
|
||||||||
|
All Other Fees(4)
|
||||||||
|
Total
|
$ | 62,000 | $ | 10,000 | ||||
(1) Audit Fees. These fees include services performed by Meyler & Company LLC in connection with the audit of our annual financial statements included in our annual filing on Form 10-K; the review of our interim financial statements as included in our quarterly reports on Form 10-Q; the audit of our internal controls over financial reporting; the attestation of management's report on the effectiveness of internal controls over financial reporting; and services that are normally provided by Meyler & Company LLC in connection with statutory and regulatory filings or engagements. (2)Audit-Related Fees. These fees are for services provided by Meyler & Company LLC such as accounting consultations, plan audits, and any other audit and attestation services not required by applicable law. (3)Tax Fees. These fees include all services performed by Meyler & Company LLC for non-audit related tax advice, planning and compliance services. (4)All Other Fees.
The Company currently does not have a designated Audit Committee, and accordingly, the Company’s Board of Directors’ policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, and tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Company’s Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.
60
1. Financial Statements
The financial statements along with the report from Meyler & Company LLC dated April 18, 2011, appear in Part II, Item 8.
2. Financial Statement Schedules
The financial statement Schedules along with the report from Meyler & Company LLC dated April 18, 2011, appear in Part II, Item 8.
3. Exhibits
Exhibit No. Document Description
|
|
3.1
|
Certificate of Incorporation of Sun Reporter, Inc. as filed with the Florida Secretary of State on January 14, 1988, incorporated by reference to the Company’s Registration Statement on Form 10SB12G filed with the Securities and Exchange Commission on Septermber 8, 1999.
|
|
|
3.2
|
Amended Certificate of Incorporation of Sun Reporter, Inc. to change name to DEC Capital, Inc. as filed with the Florida Secretary of State on April 6, 2007
|
|
|
3.3
|
Amended Certificate of Incorporation of DEC Capitlal, Inc. to change name to C&G Dec Capital, Inc. as filed with the Florida Secretary of State on June 22, 2007
|
|
|
3.4
|
Amended Certificate of Incorporation of C&D DEC Capital, Inc. to change name to Energiz Renewable, Inc. as filed with the Florida Secretary of State on February 24, 2010, incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 17, 2010.
|
|
|
3.5
|
By Laws, incorporated by reference to the Company’s Registration Statement on Form 10SB12G filed with the Securities and Exchange Commission on Septermber 8, 1999.
|
|
|
31.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
|
|
|
32.1
|
Certification of Chief Executive Officer and Chirf Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
|
61
4. Reports on Form 8-K:
A Form 8-K was filed on December 21, 2010 regarding the change in trading symbol.
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| ENERGIZ RENEWABLE, INC. | ||
| (Registrant) | ||
| Date: April 18, 2011 | By: /s/ EDWARD T. WHELAN | |
| Edward T. Whelan | ||
| Chief Executive Officer and | ||
| Chief Financial Officer | ||
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
SIGNATURE
|
NAME
|
TITLE
|
DATE
|
|||
|
/s/David Brown
|
David Brown
|
Chairman of the Board
|
April 18, 2011
|
|||
|
/s/Edward T. Whelan
|
Edward T. Whelan
|
Chief Executive Officer, Chief Financial officer & Director
|
April 18, 2011
|
|||
|
|
||||||
| /s/William Walling | William Walling | Director | April 18, 2011 | |||
62