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EX-32.2 - CERTIFICATION - Solar Energy Initiatives, Inc.solar_10q-ex3202.htm
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EX-31.2 - CERTIFICATION - Solar Energy Initiatives, Inc.solar_10q-ex3102.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2011

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the transition period from _______ to ________

COMMISSION FILE NUMBER     333-148155

Solar Energy Initiatives, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware   
 
3674       
 
20-5241121
(State or other Jurisdiction of Incorporation 
 
(Primary Standard Industrial Classification Code Number)    
 
(I.R.S. Employer Identification No.)
or   Organization)
     
  
 
119 Milliken Drive
Kingstree, SC 29556
 (Address of principal executive offices including zip code)
 
(904) 644-6090
Registrant’s telephone number, including area code
 
Copies to:
Stephen M. Fleming, Esq.
Law Offices of Stephen M. Fleming PLLC
49 Front Street, Suite #206
Rockville Centre, New York 11570
516-833-5034
516-977-1209 (fax)


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 o
 
Indicate by a check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes  o   No o

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o  Accelerated filer o  Non-accelerated filer o  Smaller Reporting Company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  o  No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:  as of December 15, 2011 the Company had 702,171,901 shares of its common stock, par value per share $0.001, issued and outstanding.



 
 

 

SOLAR ENERGY INITIATIVES, INC.
Form 10-Q for the Quarter Ended October 31, 2010
 

 
TABLE OF CONTENTS
 
 
PART I
FINANCIAL INFORMATION
4
     
ITEM 1.
FINANCIAL STATEMENTS (unaudited)
4
     
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
15
     
ITEM 3.
QUANTITATIVE AND QUALITITATIVE DISCLOSURES ABOUT MARKET RISKS
18
     
ITEM 4
CONTROLS AND PROCEDURES
18
     
PART II
OTHER INFORMATION
19
     
ITEM 1.
LEGAL PROCEEDINGS
19
     
ITEM 1A
RISK FACTORS
19
     
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
27
     
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
27
     
ITEM 4.
(REMOVED AND RESERVED)
27
     
ITEM 5.
OTHER INFORMATION
27
     
ITEM 6.
EXHIBITS
28
     
 
SIGNATURES
29

 
2

 

 
Cautionary Statement Regarding Forward-Looking Statements
 
This Report on Form 10-Q contains forward-looking statements. Forward-looking statements are statements that do not represent historical facts. We use words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “continue” and similar expressions to identify forward-looking statements. Forward-looking statements in this Report on Form 10-Q include, but are not limited to, those discussed in the section entitled "Management's Discussion and Analysis or Plan of Operation”, our plans and expectations regarding future financial results, operating results, business strategies, projected costs, products, competitive positions, management’s plans and objectives for future operations, and industry trends. These forward-looking statements are based on information available to us as of the date of this Report on Form 10-Q and current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond our control. Please see “Item 1A: Risk Factors” and our other filings with the Securities and Exchange Commission for additional information on risks and uncertainties that could cause actual results to differ. These forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we are under no obligation to, and expressly disclaim any responsibility to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
 
Estimates of future financial results are inherently unreliable.

From time to time, representatives of Solar Energy Initiatives, Inc. (f/k/a NP Capital Corp.) ("NP Capital,” "Solar Energy,” the ”Company," “we,” “our,” or “us”) may make public predictions or forecasts regarding the Company's future results, including estimates regarding future revenues, expense levels, earnings or earnings from operations. Any forecast regarding the Company's future performance reflects various assumptions. These assumptions are subject to significant uncertainties, and, as a matter of course, many of them will prove to be incorrect. Further, the achievement of any forecast depends on numerous factors (including those described in this discussion), many of which are beyond the Company's control. As a result, there can be no assurance that the Company's performance will be consistent with any management forecasts or that the variation from such forecasts will not be material and adverse. Investors are cautioned not to base their entire analysis of the Company's business and prospects upon isolated predictions, but instead are encouraged to utilize the entire available mix of historical and forward-looking information made available by the Company, and other information affecting the Company and its products, when evaluating the Company's prospective results of operations.  In addition, representatives of the Company may occasionally comment publicly on the perceived reasonableness of published reports by independent analysts regarding the Company's projected future performance. Such comments should not be interpreted as an endorsement or adoption of any given estimate or range of estimates or the assumptions and methodologies upon which such estimates are based. Undue reliance should not be placed on any comments regarding the conformity, or lack thereof, of any independent estimates with the Company's own present expectations regarding its future results of operations. The methodologies employed by the Company in arriving at its own internal projections and the approaches taken by independent analysts in making their estimates are likely different in many significant respects. Although the Company may presently perceive a given estimate to be reasonable, changes in the Company's business, market conditions or the general economic climate may have varying effects on the results obtained through the use of differing analyses and assumptions. The Company expressly disclaims any continuing responsibility to advise analysts or the public markets of its view regarding the current accuracy of the published estimates of outside analysts. Persons relying on such estimates should pursue their own independent investigation and analysis of their accuracy and the reasonableness of the assumptions on which they are based.

The following information should be read in conjunction with the condensed consolidated Financial Statements and the accompanying Notes to condensed consolidated Financial Statements included in this Report on Form 10-Q. Our fiscal year ends on July 31 of the applicable calendar year. All references to fiscal periods apply to our fiscal quarters or year which ends on the last day of the calendar month end.
 
 
3

 

PART I – FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
Solar Energy Initiatives, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
October 31, 2011
   
July 31, 2011
 
ASSETS
     
(Audited)
 
             
Current assets
           
Cash and cash equivalents
  $ 5,064     $ 8,703  
Inventory
    6,692       6,692  
Prepaid and other current assets
    1,889       3,781  
Total current assets
    13,645       19,176  
                 
                 
Fixed assets, net
    15,544       17,509  
Total assets
  $ 29,189     $ 36,685  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
Current liabilities
               
Accounts payable
  $ 974,216     $ 977,826  
Due to related parties
    100,000       100,000  
Accrued expenses
    119,084       87,750  
Convertible debentures, net
    112,196       98,694  
Total current liabilities
    1,305,496       1,264,270  
                 
Commitments and contingencies
               
Stockholders' deficit
               
Preferred stock, $0.001 par; 10,000,000 authorized 0 and 0 issued and outstanding,
    -       -  
Common stock, $0.001 par; 750,000,000 authorized 565,465,189 and 564,840,189 issued and outstanding, respectively
    565,466       564,841  
Paid-in capital
    14,231,910       14,206,188  
Deferred compensation
    (213,416 )     (247,449 )
Accumulated deficit
    (15,860,267 )     (15,751,165 )
Total stockholders' deficit
    (1,276,307 )     (1,227,585 )
Total liabilities and stockholders' deficit
  $ 29,189     $ 36,685  
                 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4

 

Solar Energy Initiatives, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
   
For the Three
Months Ended
   
For the Three
Months Ended
 
   
October 31, 2011
   
October 31, 2010
 
             
Revenues, net
  $ -     $ 482,410  
Cost of sales
    -       342,006  
Gross profit
    -       140,404  
                 
Operating expenses
               
Selling, general and administrative 
    91,106       1,396,768  
Total operating expenses
    91,106       1,396,768  
                 
Loss from operations
    (91,106 )     (1,256,364 )
                 
Other expense
               
Interest expense
    (17,996 )     (96,532 )
Total other expense
    (17,996 )     (96,532 )
                 
Loss before provision for income taxes
    (109,102 )     (1,352,896 )
Provision for income taxes
    -       -  
Net loss
    (109,102 )     (1,352,896 )
                 
Loss attributable to non-controlling interest
    -       (78,585 )
Loss attributable to Solar Energy Initiatives, Inc.
  $ (109,102 )   $ (1,274,311 )
                 
Net loss attributable to Solar Energy Initiatives, Inc. per share – basic and diluted
  $ (0.00 )   $ (0.04 )
                 
Weighted average shares outstanding – basic and diluted
    309,960,896       37,629,095  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 
5

 

Solar Energy Initiatives, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
 
               
Additional
               
Total
 
   
Common Stock
   
Paid-in
   
Deferred
   
Accumulated
   
Stockholders
 
   
Shares
   
Amount
   
Capital
   
Comp
   
Deficit
   
Deficit
 
                                     
Balances July 31, 2011 (audited)
    564,840,189     $ 564,841     $ 14,206,188     $ (247,449 )   $ (15,751,165 )   $ (1,227,585 )
                                                 
Shares issued for payment of services
    625,000       625       562                       1,187  
                                                 
Discount on notes due to beneficial conversion feature
                    25,160                       25,160  
                                                 
Amortization of deferred compensation expense
                            34,033               34,033  
                                                 
Net loss
                                  $ (109,102 )     (109,102 )
                                                 
Balances October 31, 2011, (unaudited)
    565,465,189     $ 565,466     $ 14,231,910     $ (213,416 )   $ (15,860,267 )   $ (1,276,307 )
                                                 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 


 
6

 

Solar Energy Initiatives, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
For the Three Months Ended
   
For the Three Months Ended
 
   
October 31, 2011
   
October 31, 2010
 
         
Restated
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (109,102 )     (1,352,896 )
Adjustments to reconcile net loss to net cash used by operating activities: 
               
Depreciation and amortization
    1,965       1,965  
Amortized discount on note payable
    11,162       85,829  
Stock based compensation
    35,220       667,081  
Stock issued for retroactive treatement on stock
    -       179,490  
Changes in operating assets and liabilities:
               
Accounts receivable
    -       (45,018 )
Inventory
    -       (12,343 )
Prepaid expenses and other current assets
    1,892       (13,948 )
Accounts payable
    (3,610 )     470  
Accounts payable, related party
    -       26,413  
Commissions payable
    -       500  
Accrued expenses
    31,335       (125,493 )
Project development costs
    -       (7,846 )
Deferred revenue
    -       (44,879 )
Due to related party
    -       4,854  
Net cash used by operating activities
    (31,139 )     (635,821 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from converrtible debenture
    -       93,000  
Net proceeds from private placements
    -       325,000  
Proceeds from notes
    27,500       1,222,000  
Restricted cash     -       (874,222
Net cash provided by financing activities
    27,500       1,765,778  
                 
Net increase (decrease) in cash and cash equivalents
    (3,639 )     1,129,957  
                 
Cash and cash equivalents at beginning of year
    8,703       30,153  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 5,064     $ 160,110  
 
 
   
For the Three Months Ended
   
For the Three Months Ended
 
   
October 31, 2011
   
October 31, 2010
 
SUPPLEMENTAL DISCLOSURES
         
Restated
 
Cash operating activities: 
               
Interest paid 
  $ -     $ -  
Taxes paid
  $ -     $ -  
                 
                 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
               
Stock issued for deferred compensation
  $ -     $ 411,040  
Discounts from warrants and beneficial conversion feature
  $ 29,160     $ 43,360  
Stock options granted for intangible assets
  $ -     $ 50,480  
Stock issued for accounts payable
  $ -     $ 30,333  
                 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
7

 
 

Solar Energy Initiatives, Inc.
Notes to Condensed Consolidated Financial Statements
October 31, 2011
(UNAUDITED)

Note 1 – Nature of Operations
 
Solar Energy Initiatives, Inc. was formed on June 20, 2006 and is a Delaware Corporation.  On August 20, 2008, Solar Energy, Inc., a Florida corporation, was formed as a wholly owned subsidiary of Solar Energy Initiatives, Inc. to operate acquired solar assets, which includes the World Wide Web domain name  www.solarenergy-us.com , and the relationship management of an independent solar equipment dealer network.  In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
Throughout this Report, Solar Energy Initiatives, Inc., Solar Energy, Inc. and SNRY Solar, Inc and SNRY Power, Inc. may be individually and collectively hereafter referred to as: the “Company”, “Solar Energy”, “we”, or “us”.
 
Business Description
 
Solar Energy Initiatives, Inc. (OTCBB: SNRY), is a diversified provider of solar solutions with two principal wholly owned subsidiaries focused on large-scale projects.
 
The SNRYPower, Inc. subsidiary is a developer and manager of municipal and commercial scale solar projects.
   
The SNRYSolar Inc subsidiary as a wholesale distributor of branded photovoltaic and thermal (water heating) systems selling via a network of dealers throughout the United States and the Caribbean..
 
Solar Energy Initiatives, Inc. (the “Company”) was formed on June 20, 2006 and is a Delaware Corporation.  On August 20, 2008, Solar Energy, Inc., a Florida corporation, was formed as a wholly owned subsidiary of the Company to operate acquired solar assets, and the relationship management of an independent solar equipment dealer network.  On September 25, 2009, Solar Energy Initiatives, Inc. formed a wholly owned subsidiary Solar Park Initiatives, Inc. (SPI), a Nevada corporation, to develop large utility-scale solar projects.
 
The Company sold its interests in SolarEnergy.com, a domain name and digital property back to its original owner during the 4th quarter of 2010 for cancellation of $400,000 of debt.
 
In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
On January 19, 2011 the Company completed a distribution of 21,326,912 shares it held with Solar Park Initiatives, Inc. (SPI) to the Company’s shareholders, reducing its current ownership in SPI to approximately 11.5%.
 
The Company sold its business for Solar EOS, dedicated to the education and continuous improvement of solar energy trade professionals, during the 3rd quarter of 2011 for Note of $165,450 over three years annual payments and payment of debts of the Company for a total value of $200,000.

During the second quarter and continuing through the fourth quarter of the current fiscal year, the Company continues to experience cash flow difficulties that were exacerbated by the economy, the long development cycle of project development and lack of private capital investment.  As a result, the Company has reduced portions of its operations although it continues to pursue its business model.
 
We are primarily focusing our sales efforts in regions where electricity prices and government incentives are attractive and have accelerated solar power adoption.  The business segments we have identified to pursue can require a significant level of expertise and capital.  Currently the Company has found a very good working business model, working with many states and counties and banks that understand how to make the solar projects successful.  The executive management has currently been focusing on this working business model to improve profit margins, identify viable and bankable projects of significant size, and too install using all efforts towards those financially viable projects. We have obtained the expertise, and continue to seek the necessary capital to further develop our plan and focus on this improved business model.  The management has found the necessary expertise focusing on these strategies, however if we are unable to continue to acquire or develop such expertise or capital, we may not be able to fully develop our planned business and ultimately may be required to cease operations.  We anticipate that the end customers of our sales processes will be homeowners, owners of large commercial and industrial buildings and facilities, municipalities and owners of large tracts of undeveloped land.

 
 
8

 
    
Business Focus
 
Our business is to market and sell solar power projects,  and services. Specifically, we are engaged in the following:
 
 
1) 
 
 
2) 
Develop commercial projects, as the owner and operator, and sell power to the municipality, building owner or tenant
 
3)
Develop its South Carolina plant facility into a solar assembly, warehouse and distribution facility.
 
We offer solar power products including solar panels, inverters and balance of system which convert sunlight into utility quality electricity, and solar thermal systems which utilizes the sun’s radiation to heat water for homes and commercial applications.  Installation and maintenance of these solar power products is performed by either the dealer network or 3rd party vendors identified by us. Our initial solar installation sales efforts are focused on supporting our dealer network’s sales to residential, commercial customers and the sale of solar systems to owner/operators where the energy generated will be sold to municipal customers.
 
In 2009 we entered into a contract with a Western United States municipality where we agreed to build, own and operate a solar electric system we contracted for installation on buildings identified by the municipality.  The successful funding, construction and commissioning of the 800 kilowatt solar electric system has verified this vertical of our business plan. In 2010 we entered into several Letters of Intent to build, own and operate solar arrays on property owned by municipalities in North Carolina, Georgia and Pennsylvania. Although project and term funding were not provided during fiscal year 2010, the Company obtained project funding in October, 2010 to construct 500 KW’s of a 1 MW project in North Carolina for a municipality and sold the project in February 2011. The Company is currently in negotiations with various third parties to provide funding to build out several of its pipeline projects in North Carolina for a combined 2.0 MW’s, as well as, a 1MW project in Pennsylvania and 3.5 MW’s of projects in South Carolina.
 
In connection with our solar park development business, we intend to provide solar power systems to end customers on a turn-key, whole-solution basis by identifying and developing the project, and procuring financing, permits, equipment, construction and operational resources.  As our business matures we may also provide engineering, manage construction, and provide monitoring, operations and maintenance services to the projects.
 
We buy products for our solar sales activities from manufacturers and vendors around the world.  We buy products at wholesale prices based on market rates, and have relationships within the distribution and supply trade.  
    
Note 2 – Going Concern
 
Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have incurred losses from operations since our inception, and at the present time will need additional capital to maintain operations and execute our business plan.  As such, our ability to continue as a going concern is contingent upon us being able to secure an adequate amount of debt or equity capital to enable us to meet our cash requirements.  In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets, the competitive environment in which we operate and the current credit shortage facing world wide markets.
 
Since inception, our operations have primarily been funded through private equity financing, and we expect to continue to seek additional funding through private or public equity and debt financing.
 
However, there can be no assurance that our plans discussed above will materialize and/or that we will be successful in funding our estimated cash shortfalls through additional debt or equity capital and/or any cash generated by our operations. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.
 
We anticipate our operations will be sufficient to provide adequate operating revenue to maintain the business.  Adding at least $1,250,000 in funds will allow us to quickly move forward with projects in hand which, if successful, should provide cash flow allowing for advantageous inventory purchases and the securing of additional projects, potentially increasing our growth and profitability.  With more capital, we would also add additional staff and start development of other projects. Currently we have approximately $8,000 in cash on hand.    The current level of cash is not enough to cover the fixed and variable obligations of the Company, so increased sales performance and the addition of more capital are critical to our success.
 
Assuming we are successful in our sales/development effort, we believe that we will be able to raise additional funds through the sale of our stock to either current or new shareholders. There is no guarantee that we will be able to raise additional funds or to do so at an advantageous price.
 
Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
  
 
9

 

Note 3 – Summary of Significant Accounting Policies
 
Basis of Presentation and principles of consolidation - The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All intercompany transactions are eliminated in final consolidation.
 
Financial Instruments - The Company's financial instruments consist primarily of cash, accounts receivable, accounts payable, and notes receivable and payable. These financial instruments are stated at their respective carrying values, which approximate their fair values.
 
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make. Estimates that are critical to the accompanying financial statements arise from our belief that we will secure an a d equate amount of cash to continue as a going concern, that our allowance for doubtful accounts is adequate to cover potential losses in our receivable portfolio, that all long-lived assets are recoverable.  The markets for our products are characterized by intense competition, rapid technological development, evolving standards, short product life cycles and price competition, all of which could impact the future realization of our assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term with respect to these matters.
 
Revenue Recognition - The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”. The Company generates revenue from the sale of training, photovoltaic panels, photovoltaic roofing systems, solar thermal products, balance of system products, and management system products to our dealer network or other parties. The Company anticipates it will not perform any installations. SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller's price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. Amounts billed or received from customers in advance of performance are recorded as deferred revenue.
 
Allowance for Doubtful Accounts - The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts.    There were no accounts receivable balances at October 31, 2011.
 
Warranty Reserves - The Company purchases its products for sale from third parties.  The manufacturer warrants or guarantees the operating integrity, and performance of photovoltaic solar products at certain levels of conversion efficiency for extended periods, up to 25 years. The manufacturer also warrants or guarantees the functionality of inverters and balance of systems up to 10 years.  Therefore, the Company does not recognize warranty expense.
 
Shipping and Handling Fees and Costs - Shipping and handling fees, if billed to customers, are included in net sales. Shipping and handling costs associated with inbound freight are expensed as incurred. Shipping and handling costs associated with outbound freight are classified as cost of sales.
 
Cash and Cash Equivalents - Cash and cash equivalents consist primarily of cash on deposit, and money market accounts that are readily convertible into cash.
   
Inventory - Inventories consist of photovoltaic solar panels, solar thermal panels and components, other component materials for specific customer orders and spare parts, and are valued at lower of cost (first-in, first-out) or market. Management provides a reserve to reduce inventory to its net realizable value. Certain factors could impact the realizable value of inventory, so management continually evaluates the recoverability based on assumptions about customer demand and market conditions. The evaluation may take into consideration expected demand, new product development; the effect new products might have on the sale of existing products, product obsolescence, and other factors. The reserve or write - down is equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required. If actual market conditions are more favorable, reserves or write-downs may be reversed.    As of October 31, 2011 and July 31, 2011 inventory was $6,692, respectively.   
 
 
 
10

 
 
Fixed Assets - Fixed assets are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of equipment and improvements are provided over the estimated useful lives of the assets, or the related lease terms if shorter, by the straight-line method. Useful lives range as follows:
  
Category
 
Useful Lives
Computers and networks
 
3 years
Machinery and equipment
 
5-7 years
Furniture and fixtures
 
5-7 years
Office equipment
 
3-10 years
Leasehold improvements
 
Lesser of lease term or useful life of asset
   
Maintenance and repairs are expensed as incurred. Expenditures for significant renewals or betterments are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in current operations.
 
Stock-Based Compensation - We recognize stock-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest over the requisite service period of the award.   The Company issues stock as compensation for services at the current market fair value.
 
We account for equity instruments issued for services based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable. Stock based compensation was determined using the fair value of the services performed due to the lack of historical fair value of the equity instruments.
 
Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period.
 
Income Taxes - Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.   We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We measure the tax benefits recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to our subjective assumptions and judgments which can materially affect amounts recognized in our consolidated financial statements.
 
Foreign Currency - Gains and losses from foreign exchange transactions will be included in the statements of operations. Currently there are none.
 
Basic and Diluted Net Loss per Share - Basic net loss per share is computed by dividing the loss for the period by the weighted average number of common shares outstanding for the period. Fully diluted loss per share reflects the potential dilution of securities by including other potential issuances of common stock, including shares to be issued upon exercise of stock options and warrants, in the weighted average number of shares of common stock outstanding for a period and is not presented where the effect is anti-dilutive.
 
Concentrations of Credit Risk
 
Cash and cash equivalents - The Company maintains cash balances at a financial institution in Ponte Vedra Beach, Florida. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation up to $250,000. At times, balances may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes that the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.

 
 
11

 
  
Note 4 – Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU, however, management does not expect the adoption of this ASU to have a material impact on the financial statements.
 
In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010. The Company is currently evaluating the impact of this ASU, however, management does not expect the adoption of this ASU to have a material impact on the financial statements.
 
On December 21, 2010, the FASB issued Accounting Standards Update ("ASU") 2010-29, which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010. The Company is currently evaluating the impact of this ASU, however, management does not expect the adoption of this ASU to have a material impact on the financial statements.
  
Note 5 – Inventory

Inventories consist of photovoltaic solar panels, solar thermal panels and components, other component materials for specific customer orders and spare parts, and are valued at lower of cost (first-in, first-out) or market. Management provides a reserve to reduce inventory to its net realizable value.    Inventory consisted of the following as of.
                                                                                                                                                              
   
 
October 31,
2011
   
July 31,
2011
 
Photovoltaic Solar panels and components
 
$
-0-
   
$
-0-
 
Thermal Solar panels and components
   
6,692
     
6,692
 
Other components and materials 
   
-
     
-
 
Total Inventory
 
$
6,692
   
$
6,692
 
 
Note 6 – Fixed Assets

Fixed assets consisted of the following as of :
       
Category
Useful Lives
 
 
October 31,
2011
   
July 31,
2011
 
               
Furniture fixtures and equipment
5-7 years
 
$
39,414
   
$
39,414
 
Less accumulated depreciation
     
23,870
     
21,905
 
Net fixed assets
   
$
15,544
   
$
17,509
 
 
During the quarters ended October 31, 2011, and October 31, 2010 depreciation, totaling $1,965 and $1,965, respectively, was charged to selling, general and administrative expenses.
 
Note 7– Accrued Expenses
 
Accrued expenses consist of the following as of:   
   
October 31,
2011
   
July 31,
2011
 
Interest for notes and convertible debentures
 
$
4,057
   
$
1,739
 
Salaries and taxes payable
   
14,291
     
14,291
 
Supplies
   
100,736
     
71,720
 
   
$
119,084
   
$
87,750
 


 
12

 

Note 8 – Convertible Debentures

On May 25, 2011 and July 8, 2011, the Company entered into two Securities Purchase Agreements with Asher Enterprises, Inc. ("Asher"), for the sale of two 8% convertible notes each in the principal amount of $32,500 (the "Notes").  The Notes bear interest at the rate of 8% per annum.  The Notes were convertible into common stock, at Asher’s option, at a 39% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.  The beneficial conversion feature value accounted for in the discount to notes was $22,526 and $12,421, respectively.

On October 17, 2011, the Company entered into two Amendments to the Notes with Asher, pursuant to which the discount of the conversion price was increased to 65% of the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.  

On October 28, 2011, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $27,500 (the "Note").  The Note bear interest at the rate of 8% per annum.  The Note is convertible into common stock, at Asher’s option, at a 50% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.  The beneficial conversion feature value accounted for in the discount to notes was $25,160.

Note 9 – Stockholders’ Equity

Common Stock - On March 28, 2011, the authorized number of shares of the Company was increased from 100,000,000 to 750,000,000, $0.001 par value per share. 

During August 2011, the Company issued 625,000 to a consultant for services valued at $1,187.

Discount on notes due to beneficial conversions features were valued at $25,160.

Amortization of deferred compensation expense was $34,033.

Note 10 – Commitments and Contingencies

Operating Leases

  The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year.

  Fiscal period ending October 31, 2011
   
-0-
 
         
Thereafter
   
-0-
 
Total
 
$
-0-
 
 
In March, 2010 the Company signed a 3-year lease agreement, with option to purchase, with the Williamsburg County Development Corporation for the use of a building in Kingstree, SC.  Approximately 6,000 sq. ft. of the building will be used for technical and dealer training of solar applicants.  The remaining 230,000 sq. ft. of building space will be used as a distribution and light manufacturing facility.  The annual lease rate for the building is $5.00 per year.  If the Company creates 200 or more permanent jobs as a result of its activities in South Carolina, it will be able to purchase the building for $1.00 at the end of the 3-year lease term. The company is continuing its efforts to create the required number of jobs by the end of the lease term. The company is in negotiations with another company to fulfill its obligations.
 
Rent expense was $0, and $30,690 for the year three months ended October 31, 2011 and 2010, respectively.

 
13

 

Management services - The Company has consulting agreements with its CEO, President/CFO.

The Company has employment agreements with its CEO, President/CFO, and consulting agreements with former Company officers. The Company has entered into a four year employment agreement with David W. Fann as CEO.  The terms of the contract include an initial salary of $150,000. The base salary will increase to $220,000 when the company receives a minimum of $1,000,000.  This increase took place in July 2008. There is an 18 month severance if terminated early. The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and  retainer fee of $7,500.  The Company has accrued compensation under this consulting agreement for $11,000 as of October 31, 2011.

The Company entered into a five year employment agreement with Michael Dodak as VP of Corporate Development. The terms of the contract include an initial salary of $120,000 until specific performance measures are met, at which time the salary is to be increased to $150,000.  Per the agreement, Mr. Dodak elected to convert his contract to a consulting agreement whereby he was paid $10,000, monthly.  The consulting agreement runs thru December, 2013. There is an 18 month severance if terminated early.
 
In August 2009, Mr. Dodak and the Company amended  the agreement whereby Mr. Dodak become the “Director of Solar Park Development” and COO of the Company. His compensation increased to $15,416.66 per month.  Upon stepping down as COO of the Company, his compensation will revert to the $10,000 per month.

Mr. Dodak will receive bonuses for achieving certain milestones in developing Solar Parks and new options in line with the other Company management.  On February 1, 2010, Mr. Dodak was appointed President of the company with a salary of $150,000 per year and then appointed as Interim CFO in March 2010, whereby his annual salary increased to $220,000 per year. The Company has negotiated the termination of this employment agreement for a new consulting agreement as of May 30, 2011, with a 12-month term.  The monthly consulting fee is $5,000 plus additional work at $200/hr and retainer fee of $7,500.  The Company has accrued compensation under this consulting agreement for $11,000 as of October 31, 2011.

Note 11 - Related Party Transactions

As of October 31, 2011 and July 31, 2011, the Company has obligations to related parties for loans and related services totaling $100,000 and  $100,000, respectively. 
 
Note 12 – Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.  The Company has provided a full valuation of deferred taxes as of October 31, 2011.
 
Note 13 – Subsequent Events
 
During November the Company issued 11,000,000 Rule 144 restricted shares to consultants as compensation for services valued at approximately $13,000.
 
During November, 2011 the Company has also pursued plans to acquire the assets of an Internet marketing firm.  The company has signed a definitive agreement and the close of the acquisition is scheduled for December 31, 2011.
 
 
14

 

Item 2. Management Discussion and Analysis of Financial Condition or Plan of Operation

This discussion should be read in conjunction with our consolidated financial statements included in this Report on Form 10-Q and the notes thereto, as well as the other sections of this Report on Form 10-Q, including “Certain Risks and Uncertainties” and “Description of Business” sections thereof. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Quarterly Report. Our actual results may differ materially.
 
Limited Operating History

There is limited historical financial information about our Company upon which to base an evaluation of our future performance.  Our company generated $0 in revenues from operations for the quarter ended October 31, 2011.   While we have experienced and anticipate future growth in revenues, we cannot guarantee that we will be successful in our business.  We are subject to risks inherent in a developing enterprise, including; limited capital resources, possible delays or disruptions in establishing key vendor relationships and difficult financial markets remaining from the world-wide economic recession. In many cases these factors are out of our control. There is no assurance that future financing will be available to our Company on acceptable terms. Additional equity financing could result in dilution to existing shareholders.
 
Company Description and Overview
 
Solar Energy Initiatives, Inc. (OTCBB: SNRY), is a diversified provider of solar solutions focused on large-scale projects and distribution of solar products.
 
The SNRYPower subsidiary as a developer and manager of municipal and commercial scale solar projects.
   
The SNRYSolar Inc subsidiary as a wholesale distributor of branded photovoltaic and thermal (water heating) systems selling via a network of dealers throughout the United States and the Caribbean.
 
Solar Energy Initiatives, Inc. was formed on June 20, 2006 and is a Delaware Corporation.  On August 20, 2008, Solar Energy, Inc., a Florida corporation, was formed as a wholly owned subsidiary of Solar Energy Initiatives, Inc. to operate acquired solar assets, which includes the World Wide Web domain name  www.solarenergy-us.com , and the relationship management of an independent solar equipment dealer network.  In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
The Company sold its interests in SolarEnergy.com, a domain name and digital property back to its original owner during the 4th quarter of 2010 for cancellation of $400,000 of debt.
 
In March 2010, Solar Energy Initiatives, Inc. formed SNRY Power, Inc.
 
On January 19, 2011 the Company completed a distribution of 21,326,912 shares it held with Solar Park Initiatives, Inc. (SPI) to the Company’s shareholders, reducing its current ownership in SPI to approximately 22%.
 
The Company sold its business for Solar EOS, dedicated to the education and continuous improvement of solar energy trade professionals, during the 3rd quarter of 2011 for Note of $165,450 over three years annual payments and payment of debts of the Company for a total value of $200,000.
     
During the second quarter and continuing through the fourth quarter of the current fiscal year, the Company continues to experience cash flow difficulties that were exacerbated by the economy, the long development cycle of project development and lack of private capital investment.  As a result, the Company has reduced portions of its operations although it continues to pursue its business model.
 
The Company has also pursued plans to acquire the assets of an Internet marketing firm. The company has signed a definitive agreement and the close of the acquisition is scheduled for December 31, 2011. The Company is intending to restructure its debt and attempt to negotiate settlements on all of its debt holders and seek additional capital. There is no guarantee that we will be able to close the acquisition or the restructuring of the debt.
 
 
We are primarily focusing our sales efforts in regions where electricity prices and government incentives are attractive and have accelerated solar power adoption.  The business segments we have identified to pursue can require a significant level of expertise and capital.  Currently the Company has found a very good working business model, working with many states and counties and banks that understand how to make the solar projects successful.  The executive management has currently been focusing on this working business model to improve profit margins, identify viable and bankable projects of significant size, and too install using all efforts towards those financially viable projects. We have obtained the expertise, and continue to seek the necessary capital to further develop our plan and focus on this improved business model.  The management has found the necessary expertise focusing on these strategies, however if we are unable to continue to acquire or develop such expertise or capital, we may not be able to fully develop our planned business and ultimately may be required to cease operations.  We anticipate that the end customers of our sales processes will be homeowners, owners of large commercial and industrial buildings and facilities, municipalities and owners of large tracts of undeveloped land.

 
 
15

 

The following table sets forth our statements of operations data for the three months ended October 31, 2011, and October 31, 2010.

Summary Income Statement
                               
   
For the Three
 Months Ending
Oct 31, 2011
   
For the Three
 Months Ending
Oct 31, 2010
 
             
Revenues, net
 
$
-
   
$
482,410
 
Gross profit (loss)
   
-
     
140,404
 
Selling, general and administrative expenses
   
91,106
     
1,396,768
 
                 
Total operating expenses
   
91,106
     
1,396,768
 
Loss from operations
   
(91,106
)
   
(1,256,364
)
Other Income (Expense)
   
(17,996
)
   
(96,532
)
Loss from operations before income taxes
   
(109,102
)
   
(1,352,896
)
Income tax provision
   
-
     
-
 
Net loss
   
(109,102
)
   
(1,352,896
)
Less: Loss attributable to non-controlling interest    
   
-
 
   
(78,585
)
Loss attributable to Solar Energy Initiatives, Inc. 
 
$
(109,102
)
   
(1,274,311
)
                                                                                                                                                        
        
 
16

 


THREE MONTHS ENDED OCTOBER 31, 2011 AND OCTOBER 31, 2010
 
 
Results of Operations

 
For the three months ended October 31, 2011, we generated $0 in revenues from operations and we incurred a loss of $109,102 attributable to Solar Energy Initiatives, Inc , of which $35,220 was non-cash stock compensation.  Our operating expenses included significant legal, consulting and accounting expenses, as well as business development. We expect to continue to use cash in our operating activities as we ramp up operations and include greater levels of Inventory. We have financed our operations since inception primarily through private sales of securities. As of October 31, 2011, we had $5,064 in cash, and negative working capital of $(1,291,851).

Revenues
 
For the three months ended October 31, 2011, we had revenues of $0 compared to $482,410 for the three months ended October 31, 2010.  For the three months ended October 31, 2010 revenues relate primarily to sales of solar energy systems and equipment.
 
Cost of sales and gross profit
 
 For the three months ended October 31, 2011 our Cost of Goods Sold were $0 compared to $342,006 for the three months ended October 31, 2010, resulting in a gross profit from operations of $0 compared to $140,404 (29.1%) respectively.   The decrease in cost of sales is a result of no sales of during the period compared to prior year period.
 
Selling, general and administrative
 
Selling, general and administrative (“S, G & A”) expenses for the three months ended October 31, 2011 were $91,106 compared with $1,396,768 for the same period ending October 31, 2010.    Major changes in S, G & A expenses were;
 
 
·
Salaries and wages reduced to $0 in 2011 compared to $209,084 in 2010 primarily related to reductions in staff.
 
·
Travel and entertainment reduced to $0 in 2011 compared with $18,266 in 2010 primarily related to lower travel and procurement related activities
 
·
Cash and stock based consulting and director’s costs decreased to $58,565 in 2011 from $667,081 in 2010 resulting primarily of outside consulting firms compensated in stock
 
·
Subsidiary costs of SG&A have decreased to $0 in 2011 from $261,147 in 2010 results.
 
Other income (expense)
 
For the three months ended October 31, 2011 interest expense was $17,996, due to interest related to, note interest, compared with $96,532 for the same period ending October 31, 2010.  
 
Net Loss
 
Our net loss attributable to Solar Energy Initiatives, Inc. was $109,102 for the three months ended October 31, 2011 compared with $1,274,311 for the period ending October 31, 2010.  The net loss primarily reflects our expenses relating to business activities that have been incurred ahead of our ability to recognize material revenues from our business plan.

Loss from non-controlling interest in Solar Park Initiatives, Inc was $0 for the three months ended October 31, 2011 and $78,585 for the period ending October 31, 2010.

Liquidity and Capital Resources
 
As of October 31, 2011, we had cash of $5,064 and working capital deficit of $(1,291,851), compared with $8,703 in cash and working capital, of ($1,245,094) as of July 31, 2011, as restated.  During the quarter ended October 31, 2011, we funded our operations from convertible debt on a limited basis.  For the same period in 2010, we funded our operations from private sales of equity securities and revenue generated from operations on a limited basis.

 
17

 


As we continue to review our financial restructuring of the Company, we will need to execute on our business plans which include positive cash flow operations, and/or acquire additional financing to supplement cash flows.  Unless we can attain sufficient levels of revenues, and restructure our current debt, we will need to raise additional funds during the next twelve month period.  For the fiscal year ended July 31, 2011 we have been able to obtain approximately $325,000 of capital through equity financing and $212,000 of debt financing.  We may require approximately $1,250,000 of additional capital funding, to allow us to continue the execution of our business plan through July 31, 2012.  If we are not successful in raising the required capital, or begin one or more of the projects in our business pipeline, or restructure our debt, we will need to reduce the breadth of our business.
 
We have reduced staff throughout the previous fiscal year and have curtailed most of the operations of the Company.  We are currently restructuring the Company’s debt to work with vendors and ongoing consultants to provide for an ongoing business operation.  We need additional capital in order to continue operations.
 
Since inception, our operations have primarily been funded through private equity financing, and convertible debt.  We expect to continue to seek additional funding through private or public equity and debt financing as our business expands, and potentially seek a larger funding round to quickly drive the business forward.
 
However, there can be no assurance that our plans discussed above will materialize and/or that we will be successful in funding our estimated cash shortfalls through additional debt or equity capital and/or any cash generated by our operations. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.

To operate our current business groups, we may need up to $1.25 million in funds over the next twelve months. Part of this funding may be needed as the time required to realize revenues and cash from large commercial projects can be lengthy, with costs to develop these projects incurred up front. As of October 31, 2011 we had approximately $5,064 in cash on hand, which means there will be an anticipated shortfall of $1.25 million as we project our current cash requirements for the next twelve months.  To sustain operations and continue development, we expect that will need to raise additional capital.  As of October 31, 2011, there were no known demands or commitments, other than the notes to the seller and consulting agreements, that will necessitate liquidation of the Company.  The current level of cash is not enough to cover the notes and consulting agreements for the next twelve months.
   
Assuming we are successful in our restructuring debt and new marketing development efforts we believe that we will be able to raise additional funds through the sale of our stock to either current or new shareholders. Of course there is no guarantee that we will be able to raise additional funds or to do so at an advantageous price.

Significant Capital Expenditures
 
During the three months ended October 31, 2011, we acquired $0 of business assets, and furniture and equipment for office purposes.   We use these assets in our business operations.  As we continue to grow it will be necessary to purchase additional equipment.
 
Item 3.  Quantitative and Qualitative Disclosure About Market Risk

Pursuant to Item 305(e) of Regulation S-K the Company, as a smaller reporting company, is not required to provide the information required by this item.

Item 4. Controls and Procedures
 
(a) Evaluation of Disclosure Controls and Procedures
 
As of October 31, 2011, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information 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.
 
 (b) Changes in Internal Controls.
 
There was no change in our internal controls over financial reporting that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting during the quarter covered by this Report.
 

 
18

 
 

PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
Other than routine litigation arising in the ordinary course of business that we do not expect, individually or in the aggregate, to have a material adverse effect on us, and except as noted below, as far as we are aware, no governmental authority is contemplating any proceeding to which we may be a party or to which any of our properties is subject.
 
We have received notice of a claim from a previous employee based on compensation matters in the amount of $892,500 plus interest from 2009.  The matter is being reviewed by our legal staff and no determination has been made as to is merits.  Offer for settlement has been made for an amount of $100,000 consistent with discussions with claimant.  Currently the Company has reserved for these amounts and will continue to work toward a settlement.
 
There have been judgments on the Company in the amounts of approximately $11,000, which have been reserved for within the financial statements as of October 31, 2011.
 
ITEM 1A.  RISK FACTORS
 
Although not required to include risk factors as the Company is a Smaller Reporting Company, the Company is voluntarily providing risk factors.   This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the value of our stock could decrease. This means you could lose all or a part of your investment.
 
We have a limited operating history, there is no certainty that we will ever generate revenue and achieve profitability.
 
We generated revenue of $0 for our three months ended October 31, 2011.  We have incurred significant losses from development and operations. As shown in our financial statements, as of the three month period ended October 31, 2011 and the year ended July 31, 2011, we have incurred a cumulative net loss of $15,860,267 and $15,751,165, respectively, from operations.  We will continue to incur operating losses in the future, primarily due to the cost of our operations. Negative cash flow from operations may also continue into future. Our ability to achieve profitability depends upon our ability to; continue to restructure our debt and increase our cash flow for our business, significantly expand the solar component and system sell-through to our dealer network, convert opportunities to sell large municipal and commercial projects, and successfully complete development of one or more solar project(s).  If we are unable to generate positive cash flows or reduce our debt, we will be required to cease operations.
 
We may be unable to manage our growth or implement our expansion strategy.
 
We may not be able to implement our proposed product and service offerings, develop an active dealer network base and markets, or implement the other features of our business strategy at the rate or to the extent presently planned.  Our projected growth will place a significant strain on our administrative, operational and financial resources. If we are unable to successfully manage our future growth, establish and continue to upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially and adversely affected.
 
We have a significant amount of outstanding debt and if we are unable to restructure this debt we will cease operations.  We currently have a significant amount of debt including outstanding payables.  If we are unable to restructure such debt/payable, we will cease operations.
 
Additional financing will be necessary for the implementation of our growth and restructuring debt strategy.
 
We will require additional equity and/or debt financing to pursue our growth strategy. Given our limited operating history and existing losses, there can be no assurance that we will be successful in obtaining additional financing. Lack of additional funding could force us to curtail substantially our growth plans. Furthermore, the issuance by us of any additional securities pursuant to any future fundraising activities undertaken by us would dilute the ownership of existing shareholders and may reduce the price of our common stock.
 
Debt and/or project financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business, development of projects and operations.  If we do not raise additional capital, we will be required to cease operations in the next 30 days.
 

 
19

 


The loss of our current directors and executive officers or our inability to attract and retain the necessary personnel could have a material adverse effect upon our business, financial condition or results of operations
 
Our success is heavily dependent on the continued active participation of our current directors and officers listed under “Directors and Management.” Loss of the services of our directors and officers could have a material adverse effect upon our business, financial condition or results of operations. Further, our success and achievement of our growth plans depend on our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among companies in the technology industry is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the expansion of our activities, could have a materially adverse effect on us. The inability on our part to attract and retain the necessary personnel and consultants and advisors could have a material adverse effect on our business, financial condition or results of operations.  Finally, we need to identify and engage independent directors to join the board and serve on the Audit Committee, including one that qualifies as an “accounting expert” to meet the public company listing qualifications of Sarbanes-Oxley, section 301.  Without the addition of directors and an accounting expert, we will not be able to be listed on the National Association of Securities Dealers Automated Quotations (NASDAQ) exchange or other primary stock exchange.
 
We are influenced by current officers, directors and principal stockholders.
 
Our directors, executive officers and principal five percent stockholders and their affiliates beneficially own approximately 25.8% of the outstanding shares of Common Stock. Accordingly, our executive officers, directors, principal stockholders and certain of their affiliates will have the ability to significantly influence the election of our Board of Directors of the Company and the outcome of issues submitted to our stockholders.
 
  If there is a shortage of components and/or key components rise significantly in price, that may constrain our revenue growth.  The market for photovoltaic installations has slowed recently, the result of world-wide financial and economic problems.  The introduction of significant production capacity, however, has continued increasing supply and reducing the cost of solar panels.  If demand increases and supply contracts, the resulting likely price increase could adversely affect sales and profitability.  Additionally, we may not have sufficient financial resources to take advantage of supply opportunities as they may arise.
 
During 2010 and into 2011, there was a tremendous increase in the capacity to produce solar modules, primarily from China, which in the face of the most severe, world-wide, economic downturn in nearly a century, significantly reduced the price of solar panels.  As demand for solar panels will likely increase with an economic recovery, demand and pricing for solar modules on a per watt basis could increase, potentially limiting access to solar modules and reducing our selling margins for panels.
  
Our dependence on a limited number of third party suppliers for components could prevent us from delivering our proposed products to our customers within required timeframes, which could result in order cancellations and substantial harm to our business.
 
We purchase our products using materials and components procured from a limited number of third-party suppliers.  If we fail to establish or maintain our relationships with these suppliers, or to secure additional supply sources from other suppliers, we may be unable to provide our products or our products may be available only at a higher cost or after a long delay, which could prevent us from delivering our products to our customers within required timeframes, and we may experience order cancellations and our business may fail. We currently have supply agreements with suppliers to allow us to buy products at market rates and procure sufficient product quantities to assemble and sell our products on acceptable commercial terms. The failure of a supplier to supply materials and components in a timely manner, or to supply materials and components that meet our quality, quantity and cost requirements could impair our ability to purchase our products or increase their costs, particularly if we are unable to obtain substitute sources of these materials and components on a timely basis or on terms acceptable to us.  In order to obtain required supplies, we may need to make large inventory purchases on short notice, and prior to having purchase orders or deposits from our customers for product using the full amount of silicon required to be purchased. We may not have sufficient financial resources to make these purchases, which may exacerbate supply shortages.
 
Our business depends on the implementation of our current and future agreements with foreign and domestic manufacturers, securing contracts with other suppliers and orders with customers and ensuring products to sell.
 
To date, we have worked with suppliers to accept best price offers with solar panel suppliers.  We intend to pursue other competitive price offer arrangements with component and balance of system suppliers to attempt to manage the cost of materials and supply allocations.  If we are unable to maintain our supply relationships, establish competitive additional supply sources or we are unable to develop adequate sales, we may be forced to cease operations.
 

 
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Our operating results will be subject to fluctuations and are inherently unpredictable; if we fail to meet the expectations of securities analysts or investors, our stock price may decline significantly.
 
Our quarterly revenue and operating results will be difficult to predict from quarter to quarter. It is possible that our operating results in some quarters will be below market expectations. Our quarterly operating results will be affected by a number of factors, including:
   
 
the average selling price of the solar products that we purchase including  PV and Thermal systems;
 
the availability, pricing and timeliness of delivery of third party sources products,  components and systems, particularly solar panels and balance of systems components, including steel, necessary for solar power products to function;
 
the rate and cost at which we are able to expand to meet customer demand, including costs and timing of adding personnel;
 
the amount and timing of sales of our  systems, especially medium and large-scale projects, which may individually cause severe fluctuations in our revenue;
 
our ability to meet project completion schedules and the corresponding revenue impact under such contractual devises as percentage-of-completion method of recognizing revenue for projects which may apply;
 
construction cost overruns, including those associated with the introduction of new products;
 
incentives play a major roll in the buying/decision making process for our potential customers, significant changes in regulation or incentives may adversely effect our business;
 
the impact of seasonal variations in demand and/or revenue recognition linked to construction cycles and weather conditions;
 
unplanned additional expenses such as manufacturing failures, defects or downtime;
 
acquisition and investment related costs;
 
unpredictable volume and timing of customer orders, some of which are not fixed by contract but vary on a purchase order basis;
 
unpredictable sales cycle time lines inherent with new solutions and products;
 
geopolitical turmoil within any of the countries in which we operate or sell products;
 
foreign currency fluctuations, particularly in the Euro or the Chinese Yuan;
 
the effect of currency hedging activities;
 
our ability to establish and expand customer relationships;
 
changes in our manufacturing costs;
 
changes in the relative sales mix of our solar cells, solar panels and imaging detectors;
 
the availability, pricing and timeliness of delivery of other products, such as inverters necessary for our solar power products to function;
 
our ability to successfully procure and sell new or enhanced solar power products in a timely manner;
 
the timing of new product or technology affiliations or agreements by our competitors and other developments in the competitive environment;
 
the willingness of solar panel suppliers to continue product sales to us;
 
increases or decreases in electric rates due to changes in fossil fuel prices or other factors; and
 
labor shortages, expertise shortages, shipping and other factors causing business delays.
          
We plan to base our operating expenses in part on our expectations of future revenue, and a significant portion of our expenses will be relatively fixed in the short term. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would harm our operating results for that quarter. This may cause us to miss discussed future expectations, current analysts’ guidance or any future guidance announced by us. If we fail to meet or exceed analyst or investor expectations or our own future guidance, even by a small amount, our stock price could decline, perhaps substantially.
 
Existing regulations and policies and changes to these regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products.
 
The market for electricity generation products is heavily influenced by foreign, U.S. 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 U.S. and in a number of other countries, these regulations and policies are being modified and may continue to be modified. Customer purchases of, or further investment in the research and development of, alternative energy sources, including solar power technology, could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for the solar power products of Solar Energy Initiatives, Inc.. For example, without certain major incentive programs and or the regulatory mandated exception for solar power systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility network. These fees could increase the cost to our customers of using our solar power products and make them less desirable, thereby harming our business, prospects, results of operations and financial condition.
 
We anticipate that our solar power products and their installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. 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 power products may result in significant additional expenses to us and our resellers and their customers and, as a result, could cause a significant reduction in demand for our solar power products.
 
The reduction or elimination of government economic incentives could prevent us from achieving sales and market share.
 
We believe that the near-term growth of the market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, depends in large part on the availability and size of government and economic incentives. Because a significant portion of our sales are expected to involve the on-grid market, the reduction or elimination of government and economic incentives may adversely affect the growth of this market or result in increased price competition, both of which could cause our revenue to decline.
 
 
 
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Today, the cost of solar power exceeds retail electric rates in many locations. As a result, federal, state and local government bodies in many countries, most notably Canada, Germany, Japan, Spain, Italy, Portugal, South Korea and the United States, have provided incentives in the form of feed-in tariffs, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. These government economic incentives could be reduced or eliminated altogether. For example, Germany has been a strong supporter of solar power products and systems and political changes in Germany could result in significant reductions or eliminations of incentives, including the reduction of feed-in tariffs more rapidly than required by current law. Some solar program incentives expire, decline over time, are limited in total funding or require renewal of authority. Net metering and other operational policies in California, Japan or other markets could limit the amount of solar power installed there. Reductions in, or eliminations or expirations of, governmental incentives could result in decreased demand for and lower revenue from our products. Changes in the level or structure of a renewable portfolio standard could also result in decreased demand for and lower revenue from our products.
 
Problems with product quality or product performance we distribute could result in a decrease in customers and revenue, unexpected expenses and loss of market share.
 
The solar products we plan to purchase are complex and must meet stringent quality requirements. Products this complex may contain undetected errors or defects, especially when first introduced. For example, solar panels may contain defects that are not detected until after they are shipped or are installed because we cannot test for all possible scenarios. These defects could cause us to, or may cause us to request that suppliers incur significant re-engineering costs, divert the attention of our personnel from product selling efforts and significantly affect our customer relations and business reputation. If we deliver solar panels with errors or defects, or if there is a perception that such solar panels contain errors or defects, our credibility and the market acceptance and sales of its solar power systems could be harmed.
 
The possibility of future product failures could cause us to incur substantial expense to repair or replace defective products. Furthermore, widespread product failures may damage our market reputation and reduce our market share and cause sales to decline. We may need to indemnify dealers in the network and customers in some circumstances against liability from defects in our solar products. A successful indemnification claim against us could require us to make significant damage payments, which would negatively affect our financial results.
 
Since the solar products we plan to purchase and sell cannot be tested for the duration of their standard multi-year warranty period, we may be subject to unexpected warranty expense; if we are subject to installation, warranty and product liability claims, such claims could adversely affect our business and results of operations.
 
The current standard product warranty for the solar products we intend to sell includes a warranty period (up to ten-years) for defects in material and workmanship and a warranty period (up to twenty five-years) for declines in power performance as well as a typically one-year warranty on the functionality of solar cells (for electricity producing solar products).  Due to the long warranty period and even though we intend to pass through the warranty from the manufacturer, we may bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. Any warranty claims that the manufacturer does not cover would cause us to increase the amount of warranty reserves and have a corresponding negative impact on our results. Although the manufacturers represent that they conduct accelerated testing of their solar cells, our solar panels have not and cannot be tested in an environment simulating the full warranty period. As a result of the foregoing, we may be subject to unexpected warranty expense, which in turn would harm our financial results.

Like other retailers, distributors and manufacturers of products that are used by consumers, we face an inherent risk of exposure to product liability claims in the event that our solar products cause or their use result in injury. Our business may be subject to warranty and product liability claims in the event that its solar power systems fail to perform as expected or if a failure of its solar power systems results, or is alleged to result, in bodily injury, property damage or other damages. Since our planned solar energy products are electricity and heat producing devices, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. Moreover, we may not have adequate resources in the event of a successful claim against us. We have evaluated the potential risks we face and believe that we can obtain appropriate levels of insurance for product liability claims. We will rely on our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. However, a successful warranty or product liability claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages. In addition, quality issues can have various other ramifications, including delays in the recognition of revenue, loss of revenue, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and reputation, which could also adversely affect our business and operating results. Our business’ exposure to warranty and product liability claims is expected to increase significantly in connection with its planned expansion into the new home market.
 
Warranty and product liability claims may result from defects or quality issues in certain third party technology and components that we or our suppliers incorporate into their/our solar power systems, particularly solar cells and panels, over which we have no control. While our agreements with our suppliers would generally include warranties, such provisions may not fully compensate us for any loss associated with third-party claims caused by defects or quality issues in such products. In the event we seek recourse through warranties, we will also be dependent on the creditworthiness and continued existence of the suppliers to our business.
 
We anticipate that our current standard warranty will differ by geography and end-customer application and will include such instruments as one-, two- or five-year comprehensive parts and workmanship warranties, after which the customer may typically extend the period covered by its warranty for an additional fee. Due to the warranty period, our business bears the risk of extensive warranty claims long after it has completed a project and recognized revenues. Future product failures could cause our business to incur substantial expenses to repair or replace defective products. While our business generally passes through manufacturer warranties it receives from its suppliers to its customers, it is responsible for repairing or replacing any defective parts during its warranty period, often including those covered by manufacturers warranties. If the manufacturer disputes or otherwise fails to honor its warranty obligations, our  business may be required to incur substantial costs before it is compensated, if at all, by the manufacturer. Furthermore, the ‘business’ warranties may exceed the period of any warranties from our suppliers covering components included in its systems, such as inverters.
 
 
 
22

 
 
The products we intend to distribute may not gain market acceptance, which would prevent us from achieving sales and market share.
 
The development of a successful market for the products we intend to distribute may be adversely affected by a number of factors, some of which are beyond our control, including:
   
 
our failure to offer products that compete favorably against other solar power products or providers on the basis of cost, quality and performance;
 
our failure to offer products that compete favorably against conventional energy sources and alternative distributed-generation technologies, such as wind, biomass and solar thermal, on the basis of cost, quality and performance;
 
our failure to develop and maintain successful relationships with vendors, distributors, systems integrators and other resellers, as well as strategic partners.
 
If the products we intend to distribute fail to gain market acceptance, we will be unable to achieve sales and market share.
 
Technological changes in the solar power industry could render the products we intend to distribute uncompetitive or obsolete, which could prevent us from achieving market share and sales.
 
Our failure to seek new technologies and to be at the forefront of new product offerings could cause us to become uncompetitive promoting less competitive or obsolete systems, which could prevent us from achieving market share and sales. The solar power industry is rapidly evolving and highly competitive. We may need to invest significant financial resources to keep pace with technological advances in the solar power industry and to compete in the future and we may be unable to secure such financing. We believe that a variety of competing solar power technologies may be under development by many companies that could result in lower manufacturing costs or higher product performance than those products selected by us. These development efforts may render obsolete the products we have selected to offer, and other technologies may prove more advantageous for the commercialization of solar power products.
 

If solar power technology is not suitable for widespread adoption or sufficient demand for solar power products does not develop or takes longer to develop than we anticipate, we would be unable to achieve sales and market share.
 
The market for solar power products is emerging and rapidly evolving, and its future success is uncertain. If solar power technology proves unsuitable for widespread commercial deployment or if demand for solar power products fails to develop sufficiently, we would be unable to achieve sales and market share. In addition, demand for solar power products in the markets and geographic regions we target may not develop or may develop more slowly than we anticipate. Many factors will influence the widespread adoption of solar power technology and demand for solar power products, including:
   
 
cost-effectiveness of solar power technologies as compared with conventional and competitive alternative energy technologies;
 
performance and reliability of solar power products as compared with conventional and non-solar alternative energy products;
 
success of alternative distributed generation technologies such as hydrogen fuel cells, wind turbines, bio-diesel generators and large-scale solar thermal technologies;
 
fluctuations in economic and market conditions that impact the viability of conventional and competitive alternative energy sources;
 
increases or decreases in the prices of oil, coal and natural gas;
 
capital expenditures by customers, which tend to decrease when the domestic or foreign economies slow;
 
continued deregulation of the electric power industry and broader energy industry; and
 
availability and or effectiveness of government subsidies and incentives.
         
We face intense competition from other companies producing solar power, system integrators and other energy generation products. If we fail to compete effectively, we may be unable to increase our market share and sales.
 
The mainstream power generation market and related product sectors are well established and we are competing with power generation from more traditional process that can generate power at lower costs than most renewable or environmentally driven processes.  Further, within the renewable power generation and technologies markets we face competition from other methods of producing renewable or environmentally positive power. Then, the solar power market itself is intensely competitive and rapidly evolving. Our competitors have established market positions more prominent than ours, and if we fail to attract and retain customers and establish a successful distribution network for our solar products, we may be unable to achieve sales and market share. There are a number of major multi-national corporations that produce solar power products, including; Suntech, Sunpower, FirstSolar, BP Solar, Kyocera, Sharp, GE, Mitsubishi, Solar World AG and Sanyo. Also established integrators are growing and consolidating, including groSolar, Sunwize, Sunenergy and Real Goods Solar and we expect that future competition will include new entrants to the solar power market. Further, many of our competitors are developing and are currently producing products based on new solar power technologies that may have costs similar to, or lower than, our projected costs.
 
Most of our competitors are substantially larger than we are, have longer operating histories and have substantially greater financial, technical, manufacturing and other resources than we do. Our competitors' greater sizes in some cases provides them with competitive advantages with respect to manufacturing costs due to their ability to allocate fixed costs across a greater volume of production and purchase raw materials at lower prices. They also have far greater name recognition, an established distribution network and an installed base of customers. In addition, many of our competitors have well-established relationships with current and potential resellers, which have extensive knowledge of our target markets. As a result, our competitors will be able to devote greater resources to the research, development, promotion and sale of their products and may be able to respond more quickly to evolving industry standards and changing customer requirements than we can.
 
 
 
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We may not address successfully the problems encountered in connection with any potential future acquisitions.
 
We expect to consider future opportunities to acquire or make investments in other technologies, products and businesses that could enhance our capabilities, complement our products, or expand the breadth of our markets or customer base. We have limited experience in acquiring other businesses and technologies. Potential and completed acquisitions and strategic investments involve numerous risks, including:
   
 
problems assimilating the purchased technologies, products or business operations;
 
problems maintaining uniform standards, procedures, controls and policies;
 
problems arising from non-performance of acquired entities or assets;
 
problems arising from overvaluation or with securing the required financing to close and/or make the acquisition operational;
 
unanticipated costs associated with an acquisition;
 
diversion of management's attention from our core business;
 
adverse effects on existing business relationships with suppliers and customers;
 
risks associated with entering new markets in which we have no or limited prior experience;
 
potential loss of key employees of acquired businesses; and
 
increased legal and accounting costs as a result of the newly adopted rules and regulations related to the Sarbanes-Oxley Act of 2002 and other such regulation such as increased internal control and reporting requirements.
 
We are subject to corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.
 
Under the current rules, an attestation report on our internal controls from our independent registered public accounting firm is not required as part of our annual report for the fiscal year ending in 2011. Additionally, we well be required to file our first 10-Q subsequent to June 15, 2011 on an XBRL basis, or the October 31, 2011 filing.  We currently review and maintain on a regular basis a process of evaluating our control structure to help ensure that we will be able to comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules and regulations is expected to be substantial. We cannot assure you that we will be able to fully comply with these laws, rules and regulations that address corporate governance, internal control reporting and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition and the value of our securities.
 
Because the markets in which we compete are highly competitive and many of our competitors have greater resources than us, we may not be able to compete successfully and we may lose or be unable to gain market share.
 
Our solar business competes with a large number of competitors in the solar power market, including integrators such as groSolar, Sunwize, Sunenergy and Real Goods Solar, and manufacturers that may also directly supply projects at costs we cannot compete with, including Suntech, BP Solar, FirstSolar, SolarWorld AG and others. In addition, alternative technologies such as thin films and concentrators, which may compete with our technology in certain applications, continue to make market penetration. We expect to face increased competition in the future. Further, many of our competitors are developing and are currently producing products based on new solar power technologies that may ultimately have costs similar to, or lower than, our projected costs.
 
Our solar power products and services compete against other power generation sources including conventional fossil fuels supplied by utilities, other alternative energy sources such as wind, biomass, concentrated solar power “CSP” and emerging distributed generation technologies such as micro-turbines, sterling engines and fuel cells. In the large-scale on-grid solar power systems market, we will face direct competition from a number of companies that manufacture, distribute, or install solar power systems.  Our primary competitors in the United States include Arizona Public Service Company, BP Solar International, Inc., a subsidiary of BP p.l.c., Conergy Inc., Dome-Tech Group, Eastwood Energy, EI Solutions, Inc., Florida Power and Light, GE Energy, a subsidiary of General Electric Corporation, Global Solar Energy, Inc., a subsidiary of Solon, groSolar, Power-Fab, Real Goods Solar, Schott Solar, Inc., Solar Integrated Technologies, Inc., SPG Solar, Inc., Sun Edison LLC, Suntech, SunTechnics Installation & Services, Inc., Sunwize, Sunenergy, Thompson Technology Industries, Inc. and WorldWater & Power Corporation. Our primary competitors in Europe include BP Solar, Conergy (through its subsidiaries AET Alternitive Energie Technik GmbH, SunTechnics Solartechnik GmbH and voltwerk AG), PV-Systemtechnik Gbr, SAG Solarstrom AG, Solon AG and Taufer Solar GmbH. Additionally, our business will occasionally compete with distributed generation equipment suppliers such as Caterpillar, Inc. and Cummins Inc. Other existing and potential competitors in the solar power market include universities and research institutions. We also expect that future competition will include new entrants to the solar power market offering new technological solutions. As we enter new markets and pursue additional applications for our products and services, we expect to face increased competition, which may result in price reductions, reduced margins or loss of market share.
 
Competition is intense, and many of our competitors have significantly greater access to financial, technical, manufacturing, marketing, management and other resources than we do. Many also have greater name recognition, a more established distribution network and a larger installed base of customers. In addition, many of our competitors have well-established relationships with our potential suppliers, resellers and their customers and have extensive knowledge of our target markets. As a result, these competitors may be able to devote greater resources to the research, development, promotion and sale of their products and respond more quickly to evolving industry standards and changing customer requirements than we will be able to. Consolidation or strategic alliances among such competitors may strengthen these advantages and may provide them greater access to customers or new technologies. To the extent that government funding for research and development grants, customer tax rebates and other programs that promote the use of solar and other renewable forms of energy are limited, we will compete for such funds, both directly and indirectly, with other renewable energy providers and their customers.
    
If we cannot compete successfully in the solar power industry, our operating results and financial condition will be adversely affected. Furthermore, we expect competition in the targeted markets to increase, which could result in lower prices or reduced demand for our product and service offerings and may have a material adverse effect on our business and results of operations.
 
 
 
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The demand for products requiring significant initial capital expenditures such as our solar power products and services are affected by general economic conditions.
 
The United States and countries world wide have recently experienced a period of declining economies and unprecedented turmoil in financial markets. A sustained economic recovery is uncertain. In particular, terrorist acts and similar events, continued unrest in the Middle East or war in general could contribute to a slowdown of the market demand for products that require significant initial capital expenditures, including demand for solar power systems and new residential and commercial buildings. In addition, increases in interest rates may increase financing costs to customers, which in turn may decrease demand for our solar power products. If an economic recovery is slowed as a result of the recent economic, political and social events, or if there are further terrorist attacks in the United States or elsewhere, we may experience decreases in the demand for our solar power products, which may harm our operating results.
 
We will rely primarily upon copyright and trade secret laws and contractual restrictions to protect our proprietary rights, and, if these rights are not sufficiently protected, our ability to compete and generate revenue could suffer.
 
We will seek to protect our proprietary supplier and operational processes, documentation and other written materials primarily under trade secret and copyright laws. We also typically require employees and consultants with access to our proprietary information to execute confidentiality agreements. The steps taken by us to protect our proprietary information may not be adequate to prevent misappropriation of our technology. In addition, our proprietary rights may not be adequately protected because:
   
 
people may not be deterred from misappropriating our operational assets despite the existence of laws or contracts prohibiting it;
 
policing unauthorized use of our intellectual property may be difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use; and
 
the laws of other countries in which we access and or market our solar cells, such as some countries in the Asia/Pacific region, may offer little or no protection for our proprietary technologies.
   
Unauthorized copying or other misappropriation of our proprietary assets could enable third parties to benefit from our property without paying us for doing so. Any inability to adequately protect our proprietary rights could harm our ability to compete, to generate revenue and to grow our business.
 
We rely on suppliers to comply with intellectual property, copywrite, hazardous materials and processes and trade secrecy laws and regulations and, if such laws and regulations are not sufficiently followed, our business could suffer substantially.
 
We endeavor to comply with all law and regulation regarding intellectual property law manufacturing process law and regulation, however, in many cases it is our supplier that must comply with such regulations and laws.  While we make efforts to ensure that products sourced from third parties comply with required regulation and law and that the operation of our suppliers do as well, our business could suffer if a supplier was, or suppliers were, found to be non compliant with regulation and law in our, our customers’ or our suppliers’ jurisdictions.
 
Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines for us.
 
We are required to comply with all foreign, U.S. federal, state and local laws and regulations regarding pollution control and protection of the environment. In addition, under some statutes and regulations, a government agency, or other parties, may seek recovery and response costs from operators of property where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for such release or otherwise at fault. In the course of future business we may use, generate and discharge toxic, volatile and otherwise hazardous chemicals and wastes in our operations or related research and development and manufacturing activities. Any failure by us to control the use of, or to restrict adequately the discharge of, hazardous substances could subject us to potentially significant monetary damages and fines or suspensions in our business operations. In addition, if more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial. If we fail to comply with present or future environmental laws and regulations we may be required to pay substantial fines, suspend production or cease operations.
 
There are restrictions on the transferability of the securities.
 
Until registered for resale, investors must bear the economic risk of an investment in the Shares for an indefinite period of time. Rule 144 promulgated under the Securities Act (“Rule 144”), which provides for an exemption from the registration requirements under the Securities Act under certain conditions, requires, among other conditions, a six month holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act and that the Company is current in its filings.  There is no guarantee that we will continue to maintain our public filings.
 
If we violated certain securities laws, we may not now be able to privately offer our equity securities for sale.
 
Any offering of our equity securities in or from the United States must be registered with the SEC or be exempt from registration. If our prior offers and sales were not exempt from registration, it is likely that they would be deemed integrated with future offerings unless we do not offer equity securities for at least six months. In the event of such integration, we would only be permitted to offer and sell equity securities after we file one or more new registration statements with the SEC and the registration statements have become effective. The registration process is both expensive and can be expected to take at least several months and would substantially hinder our efforts to obtain funds.
 
If the Company uses its stock in acquisitions of other entities there may be substantial dilution at the time of a transaction.
 
If the price of our common stock used for an acquisition is less than the amount paid by our shareholders, substantial dilution may be experienced.  Additional dilution may be experienced by the sale of additional shares of common stock or other securities, or if the Company’s shares are issued to purchase other entities assets.
 
 
 
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Our common stock is subject to the “Penny Stock” rules of the SEC.
 
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
   
 
that a broker or dealer approve a person's account for transactions in penny stocks; and   the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
  
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
   
 
obtain financial information and investment experience objectives of the person; and   make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
    
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
   
 
sets forth the basis on which the broker or dealer made the suitability determination; and
 
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
       
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
 
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
 
If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
 
Companies trading on the Over-The-Counter Bulletin Board, and must be current in their reports with the Securities and Exchange Commission, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.   In addition, we may be unable to get re-listed on the OTC Bulletin Board, which may have an adverse material effect on our Company.
 
Our common stock may be adversely affected by limited trading volume and the market price may fluctuate significantly, which may negatively affect our stockholders’ ability to sell their shares.
 
While the trading time and average stock volumes have increased over time, there can be no assurance that an active trading market will be sustained. An absence of an active trading market can be expected to adversely affect our stockholders’ ability to sell their shares. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market from time to time in the belief that our share price will decline. We cannot predict whether the market for our shares will be stable or appreciate over time.
 
Because of the concentration of ownership of our common stock by a small number of stockholders, it is unlikely that any other holder of common stock will be able to affect our management or direction.
 
On October 28, 2011, our directors, officers and certain of their affiliates were deemed to beneficially own approximately 25.8% of our outstanding common stock.  Accordingly, if these stockholders act together as a group, they would most likely be able to control the outcome of stockholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our certificate of incorporation and bylaws and the approval of significant corporate transactions. The existence of ownership concentrated in a few persons may have the effect of delaying or preventing a change in management or voting control. Furthermore, the interests of our controlling stockholders could conflict with those of our other stockholders.
 
Because each of our executive officers may voluntarily terminate his employment with us at any time on at least 30 days prior written notice to us, we can not be sure if any of them will maintain their position with us for the foreseeable future.
 
In the event any of our executive officers terminate their employment with us, we may not be able to find suitable replacements on similar terms, if at all.
 
Although we plan on maintaining commercial insurance to reduce some operating hazard risks, such insurance may not be available to us at economically feasible rates, if at all.
 
In the absence of suitable insurance, we may be exposed to claims and litigation which we will not be financially able to defend or we may be subject to judgments which may be for amounts greater than our ability to pay.
 
 
26

 
 
Future sales by our stockholders may adversely affect our stock price and our ability to raise funds in future equity offerings.
 
Sales of our common stock in the public market, including sales made by the selling stockholders identified in the registration statement we have filed with the SEC, may lower the market price of our common stock. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable or at all. Of the 511,154,557 shares held by persons who are not our affiliates on July 31, 2011 approximately 176,084,642 shares were freely tradable without restriction or further registration under the Securities Act of 1933. In addition, approximately 2,496,000 additional shares were sold in accordance with Rule 144 under that Act and approximately 47,828,099 more shares will be able to be sold within the ensuing twelve month period.
 
Anti-takeover provisions could make a third-party acquisition of us difficult which may adversely affect the market price and the voting and other rights of the holders of our common stock.
 
Certain provisions of the Delaware General Corporation Law may delay, discourage or prevent a change in control. The provisions may discourage bids for our common stock at a premium over the market price. Furthermore, the authorized but unissued shares of our common stock are available for future issuance by us without our stockholders' approval. These additional shares may be utilized for a variety of corporate purposes including but not limited to future public or direct offerings to raise additional capital, corporate acquisitions and employee incentive plans. The issuance of such shares may also be used to deter a potential takeover of us that may otherwise be beneficial to our stockholders. A takeover may be beneficial to stockholders because, among other reasons, a potential suitor may offer stockholders a premium for their shares above the then market price.
 
The existence of authorized but unissued and unreserved shares may enable the Board of Directors to issue shares to persons friendly to current management which would render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of our management.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Common Stock - On March 28, 2011, the authorized number of shares of the Company was increased from 100,000,000 to 750,000,000, $0.001 par value per share. 

During August 2011, the Company issued 625,000 to a consultant for services valued at $1,187.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. REMOVED AND RESERVED

Not applicable

ITEM 5. OTHER INFORMATION
 
None.
 
 
 
27

 
 
 

ITEM 6. EXHIBITS
 
Exhibit Number
 
Description of Exhibit
3.1
 
Certificate of Incorporation.(1)
3.2
 
By-Laws. (1)
3.3
 
Certificate of Amendment dated August 2, 2006(1)
3.4
 
Certificate of Amendment dated February 2, 2007(1)
3.5
 
Certificate of Amendment to the Certificate of Incorporation (6)
3.6
 
Certificate of Amendment to the Certificate of Incorporation (8)
4.1
 
0784655 B.C. LTD Promissory Note with the Company.(2)
4.2
 
Amended Convertible Debenture Purchase and Sale Agreement between 0784655 B.C. LTD, Envortus and the Company. (2)
4.3
 
Agreement for distribution of solar panels between an Asian Solar Photovoltaic Manufacturer and the Company*(9)
4.4
 
Form of Warrant issued to the April and May 2009 Investors (10)
4.5
 
Form of Subscription Agreement entered into by the April and May 2009 Investors (10)
4.6
 
Form of Securities Purchase Agreement (11)
4.7
 
Form of Common Stock Purchase Warrant (11)
10.1
 
Employment Agreement by and between Brad Holt and the Company(4)
10.2  
 
Employment Agreement by and between David Fann and the Company(4)
10.3  
 
Employment Agreement by and between David Surette and the Company(4)
10.4  
 
Employment Agreement by and between Michael Dodak and the Company(4)
10.5
 
Website Purchase Agreement by and among NP Capital Corp, SEI Acquisition, Inc., Solar Energy, Inc., David H. Smith Revocable Trust dated June 16, 1993 and David Smith (7)
31.1
 
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
 
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.2
 
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
101.INS
XBRL Instance Document**
101.SCH
XBRL Schema Document**
101.CAL
XBRL Calculation Linkbase Document**
101.DEF
XBRL Definition Linkbase Document**
101.LAB
XBRL Label Linkbase Document**
101.PRE
XBRL Presentation Linkbase Document**
 
* Portions of this exhibit have been redacted pursuant to a request for confidential treatment submitted to the Securities Exchange Commission.
** TO BE FILED BY AMENDMENT
(1) Incorporated by reference to the Form SB-2 Registration Statement filed with the Securities Exchange Commission on December 17, 2007.
 
(2) Incorporated by reference to the Form SB-2 Registration Statement filed with the Securities Exchange Commission on February 1, 2008.
 
(3) Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on March 6, 2008.
 
(4)  Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on April 1, 2008.

(5) Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on April 25, 2008.

(6) Incorporated by reference to the Form 8K Current Report filed with the Securities Exchange Commission on August 1, 2008.

(7) Incorporated by reference to the Form 8K Current Report filed with the Securities Exchange Commission on August 27, 2008.

(8) Incorporated by reference to the Form 8K Current Report filed with the Securities Exchange Commission on September 25, 2008.

(9) Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on May 21, 2008.

(10) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on May 22, 2009.
 
(11) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on March 8, 2010.

 

 
28

 


  
 
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
SOLAR ENERGY INITIATIVES, INC.
 
 
 
 
Dated: December 15, 2011
By:
/s/ David Fann
   
David Fann
   
Chief Executive Officer
   
(Principal Executive Officer)
     
Dated: December 15, 2011
   
 
By:
/s/ Pierre Besuchet
   
Pierre Besuchet
   
Director
     
     
     
     
     
     
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
29