SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549
____________________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  May 15, 2016

Sunvalley Solar, Inc.
(Exact name of registrant as specified in its charter)


Nevada

333-150692

20-8415633

(State or other jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)


398 Lemon Creek Dr., Suite A

Walnut, CA


91789

(Address of principal executive offices)

(Zip Code)


Registrant s telephone number, including area code:   909-598-0618


__________________________ N/A ________________________

(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


[ ]

Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425)



[ ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



[ ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






1


SECTION 9- FINANCIAL STATEMENTS AND EXHIBITS


Item 9.01 Financial Statements and Exhibits


As previously disclosed in our Quarterly Report on Form 10-Q filed May 23, 2016, we entered into a Securities Purchase Agreement with the shareholders of Rayco Energy, Inc. ( Rayco ) effective May 15, 2016. Under the Agreement, we acquired 100% of Rayco s issued and outstanding shares of capital stock.


Filed herewith are the audited financial statements for Rayco for the fiscal years ended December 31, 2015 and 2014, together with the unaudited financial statements for Rayco for the quarter ended March 31, 2016. In addition, pro forma consolidated financial statements for the periods ended December 31, 2015 and March 31, 2016 are filed herewith.



SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS


Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.

Description

99.1

Audited Financial Statements of Rayco Energy, Inc. for the years ended December 31, 2015 and 2014.

99.2

Unaudited Financial Statements for Rayco Energy, Inc. for the periods ended March 31, 2016 and 2015

99.3

Pro forma consolidated financial statements for the year ended December 31, 2015 and for the period ended March 31, 2016



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 hereunto duly authorized.


SunValley Solar, Inc.


             

Zhijian (James) Zhang __________________________________

Zhijian Zhang
Chief Executive Officer


Date: January 27, 2017








2


RAYCO ENERGY, INC.



FINANCIAL STATEMENTS




For the Years Ended



December 31, 2015 and 2014


[SSOLFORM8KVEDGAR5RAYCOENE001.JPG]




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of

Rayco Energy, Inc.


We have audited the accompanying balance sheets of Rayco Energy, Inc. as of December 31, 2015 and 2014, and the related statements of operations, stockholders deficit, and cash flows for each of the years in the two year period ended December 31, 2015. Rayco Energy, Inc. s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rayco Energy, Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered net losses since inception and has accumulated a significant deficit. These factors raise substantial doubt about its ability to continue as a going concern. Management s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.




/s/ Sadler, Gibb & Associates, LLC


Salt Lake City, UT

January 25, 2017  


RAYCO ENERGY, INC.

Balance Sheets












December 31,


December 31,


 


2015


2014




 




ASSETS









CURRENT ASSETS















Cash and cash equivalents

$

           156,624


$

             73,866


Contracts receivable, net


           101,845



             27,284


Inventory, net


             81,808



                        -


Prepaid expenses and other current assets

 

               1,350


 

               1,000











Total current assets

 

           341,627


 

           102,150


 







PROPERTY AND EQUIPMENT, NET

 

             21,114


 

                        -









OTHER ASSETS















Deposits

 

               3,350


 

                        -











Total other assets

 

               3,350


 

                        -










      

TOTAL ASSETS

$

           366,091


$

           102,150


 



   




LIABILITIES AND STOCKHOLDERS' DEFICIT









CURRENT LIABILITIES















Accounts payable and accrued expenses

$

        1,070,934


$

           185,395


Customer deposits


160,369



5,356


Related party payable


             32,611



                        -


Short-term loans


             12,800



                        -











Total current liabilities

 

        1,276,714


 

           190,751


 








  

TOTAL LIABILITIES

 

        1,276,714


 

           190,751


 







STOCKHOLDERS' DEFICIT


   













Common stock, $0.001 par value, 3,000 shares







authorized, 3,000 shares issued and outstanding


                       3



                       3


Additional paid-in capital


                     (3)



                     (3)


Accumulated deficit

 

         (910,623)


 

           (88,601)











Total Stockholders' Deficit

 

         (910,623)


 

           (88,601)











TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

           366,091


$

           102,150









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


RAYCO ENERGY, INC.

 

Statements of Operations

 









 





For the Period From




For the Year Ended


Inception on March 26, 2014

 


 


December 31,


Through December 31,

 


 


2015


2014

 


 


 

 


 

 

 

REVENUES

$

       2,619,404


$

          822,200

 

COST OF SALES

 

       2,662,064


 

          750,301

 

GROSS PROFIT (LOSS)

 

           (42,660)


 

             71,899

 









 

OPERATING EXPENSES






 









 


Salaries and wages


          390,580



             71,767

 


Selling, general and administrative


          344,071



             31,794

 


Professional fees


             37,545



             56,939

 









 


     Total Operating Expenses


          772,196



          160,500

 




 

 


 

 

 

LOSS FROM OPERATIONS


        (814,856)



           (88,601)

 




 

 


 

 

 

OTHER EXPENSES






 









 


Interest expense

 

             (7,166)


 

                       -

 









 


     Total other expenses


             (7,166)



                       -

 




 

 


 

 

 

LOSS BEFORE TAXES

 

        (822,022)


 

           (88,601)

 









 


Provision for income taxes

 

 -


 

 -

 









 

NET LOSS

$

        (822,022)


$

           (88,601)

 





   




 

BASIC AND DILUTED LOSS PER SHARE

$

           (274.01)


$

             (29.53)

 









 

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER






 


OF COMMON SHARES OUTSTANDING

 

3,000


 

3,000

 








 

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

 


RAYCO ENERGY, INC.

Statement of Stockholders' Deficit





















Additional







 

Common Stock


Paid-in


Accumulated



 

Shares


Amount


Capital


Deficit


Total

 

 


 

 







Balance at Inception on March 26, 2014

                   -



               -


 

                   -


 

                    -


 

                   -















Issuance of Founders Shares

          3,000



              3



                (3)



                    -



                   -















Net loss for the period ended December 31, 2014

                   -


 

               -


 

                   -


 

       (88,601)


 

      (88,601)

 














Balance at December 31, 2014

          3,000



              3



                (3)



       (88,601)



      (88,601)















Net loss for the year ended December 31, 2015

                   -


 

               -


 

                   -


 

     (822,022)


 

    (822,022)

 














Balance at December 31, 2015

          3,000


$

              3


$

                (3)


$

     (910,623)


$

    (910,623)
















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


RAYCO ENERGY, INC.

Statements of Cash Flows

 






For the Period From



 

For the Years Ended


Inception on March 26, 2014



 

December 31,


Through December 31,



 

2015


2014

CASH FLOWS FROM OPERATING ACTIVITIES:





Net loss

$

        (822,022)


$

          (88,601)


Adjustments to reconcile net loss to net cash







provided by operating activities:








Depreciation and amortization


                  103



                       -


Changes in operating assets and liabilities:








Accounts receivable


          (74,561)



          (27,284)



Inventory


          (81,808)



             -



Prepaid expenses and other assets


             (350)



                       (1,000)



Other long-term asset


             (3,350)



                       -



Accounts payable and accrued expenses


          885,539



          166,061



Customer deposits


155,013



5,356



Related party payable

 

32,611


 

            -



Net Cash Provided by Operating Activities

 

            91,175


 

            73,866



 






CASH FLOWS FROM INVESTING ACTIVITIES:







Purchases of equipment

 

          (21,217)


 

                       -



Net Cash Used in Investing Activities

 

          (21,217)


 

                       -



 






CASH FLOWS FROM FINANCING ACTIVITIES:







Proceeds of notes payable


            50,000



                       -


Repayments of notes payable


          (37,200)



                       -



Net Cash Provided by Financing Activities

 

            12,800


 

                       -



 






NET CHANGE IN CASH


            82,758



            73,866

CASH AT BEGINNING OF YEAR

 

            73,866


 

                       -

CASH AT END OF YEAR

$

          156,624


$

            73,866



 






SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:















CASH PAID FOR:








Interest

$

               4,702


$

                       -



Income taxes

$

-


$

                       -


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




7


RAYCO ENERGY, INC.

 Notes to Financial Statements

December 31, 2015 and 2014


NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS


Rayco Energy, Inc. ( the Company ) was incorporated on March 26, 2014 under the laws of the State of California.


The Company markets, sells, designs and installs solar panels for residential and commercial customers. The Company s primary market is in the state of California, however the Company may sell anywhere in the United States.

 

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

 

Going Concern


The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.


In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from the parent company, Sunvalley Solar, to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.


The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


Accounting Method


The Company's financial statements are prepared using the accrual method of accounting.  The Company has elected a December 31, year-end.


Use of Estimates


The preparation of the financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made in preparing the financial statements include the allowance for doubtful accounts, percentage of completion revenue recognition, accrued warranty, convertible debt derivative liabilities and discount expenses. To the extent there are material differences between estimates and the actual results, future results of operations will be affected.


Operating Segments


The Company operates in one operating segment.

 

Cash and Cash Equivalents


Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less when purchased.  The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits.  The Company has not experienced any losses related to this concentration of risk. As of December 31, 2015 and 2014, the Company had $156,624 and $73,866, respectively, in cash in bank deposits which did not exceed the $250,000 federally insured limits.

 

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Basic and Diluted Loss per Common Share


Basic loss per share is calculated by dividing the Company s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are -0- common stock equivalents outstanding as of December 31, 2015 and 2014.


Contracts Receivable


The Company s contracts receivable consist primarily of accounts due from wholesale customers, and contracts due from installation customers, with the most significant amounts arising from installation contracts. Receivables are due within 30 days on wholesale contracts, while receivables on installation contracts are due in installments over terms ranging from five to seven years. The Company performs periodic credit evaluations of its customers respective financial conditions and does not require collateral. Credit losses have consistently been within management s expectations. An allowance for doubtful accounts is recorded when it is probable that all or a portion of a contracts receivable balance will not be collected. The Company s allowance for doubtful accounts consisted of the following as of December 31, 2015 and 2014:




December 31, 2015



December 31, 2014

Current portion

$

101,845


$

27,284

Long-term portion


-   



-

Total allowance for doubtful accounts

$

101,845


$

27,284


Inventory


Inventory is stated at the lower of cost or net realizable value. Cost is determined on an average cost basis; and the inventory is comprised of raw materials and finished goods. Raw materials consist of fittings and other components necessary to assemble the Company s finished goods.  Finished goods consist of solar panels ready for installation and delivery to customers.   

 

At each balance sheet date, the Company evaluates its ending inventory for excess quantities and obsolescence. This evaluation includes an analysis of sales levels by product type.  Among other factors, the Company considers current product configurations, historical and forecasted demand, market conditions and product life cycles when determining the net realizable value of the inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventory.  


Property and Equipment


Property and equipment are stated at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets.   Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions.









NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Property and Equipment (Continued)


Maintenance and repairs are charged to expense as incurred; additions and betterments are capitalized. Upon retirement or sale, the cost and related accumulated depreciation of the disposed assets are removed, and any resulting gain or loss is recorded. Fully depreciated assets are not removed from the accounts until physical disposition. The estimated useful lives are as follows:


Classification


Useful life

Software


3 years

Office equipment


5 years


Long-Lived Assets


Long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.


Based on this analysis, the Company believes that no impairment of the carrying value on its long-lived assets existed at December 31, 2015 and 2014.


Customer Deposits


Customer deposits represent advance payments received for installation projects. Typically the Company will receive five percent of a contract total at the commencement of the installation project. These amounts are recorded as liabilities until such time that the Company has performed the majority of its contractually agreed-upon work, at which time the deposits are recognized as revenue in accordance with the Company s revenue recognition policy.


Revenue and Costs of Revenues


The Company s revenue consists of solar and LED installation projects, both to commercial and residential customers.  Revenues from fixed-price and cost-plus contracts are recognized on the percentage of completion method, whereby revenues on long-term contracts are recorded on the basis of the Company s estimates of the percentage of completion of contracts based on the ratio of the actual cost incurred to total estimated costs. This cost-to-cost method is used because management considers it to be the best available measure of progress on these contracts. Revenues from cost-plus-fee contracts are recognized on the basis of costs incurred during the period plus the fee earned, measured on the cost-to-cost method.


Cost of revenues include all direct material, sub-contract, labor, and certain other direct costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changed in job performance, job conditions and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. Claims for additional contract revenue are recognized when realization of the claim in probable and the amount can be reasonably determined.

 


NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Revenue and Costs of Revenues (Continued)


The asset, cost and estimated earnings in excess of billings on uncompleted contracts represents revenues recognized in excess of amounts billed. The liability, billings in excess of costs and estimated earnings on uncompleted contracts, represents billings in excess of revenues recognized. As of December 31, 2015 and 2014, there were no uncompleted contracts or costs in excess of billings.

 

Cost of sales totaled $2,662,064 and $750,301 during the year ended December 31, 2015 and during the period from inception on March 26, 2014 through December 31, 2014, respectively.


Advertising Expenses


Advertising expenses are expensed as incurred. Total advertising expenses amounted to $89,158 and $5,699 for the year ended December 31, 2015 and during the period from inception on March 26, 2014 through December 31, 2014, respectively.

 

Income Taxes


The Company applies the asset and liability method of accounting for income taxes. The asset and liability method requires that the current or deferred tax consequences of all events recognized in the financial statements are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years. Deferred tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that all or some portion of the deferred tax assets will not be recovered.

 

The Company recognizes and measures any uncertain tax positions using a more-likely-than-not approach. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will to be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.


Fair Value Measurements


The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:


Level 1 Quoted prices in active markets for identical assets or liabilities;


Level 2 Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and


Level 3 Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.






NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Recent Accounting Pronouncements


Management has considered all recent accounting pronouncements issued since the last audit of the financial statements. The Company s management believes that these recent pronouncements will not have a material effect on the Company s financial statements.


NOTE 3  INVENTORY


The Company s inventory consisted of the following at December 31, 2015 and December 31, 2014:

 



December 31, 2015



December 31, 2014

Raw materials

$

-


$

-

Work in progress


-



-

Finished goods


81,808   



-

Total inventory

$

81,808


$

-


The Company s reserve for excess and obsolete inventory amounted to $-0- and $-0- as of December 31, 2015 and 2014.


NOTE 4 PROPERTY AND EQUIPMENT

 

The following is a summary of property and equipment at December 31, 2015 and 2014:

 



December 31, 2015



December 31, 2014

Computer and equipment

$

1,217


$

-

Software


20,000



-

Total property and equipment


21,217



-

Less: accumulated depreciation


(103)



-

Property and equipment, net


21,114



-


Depreciation expense for the year ended December 31, 2015 and during the period from inception on March 26, 2014 through December 31, 2014, was $103 and $-0-, respectively.


NOTE 5 SHORT TERM LOANS


On April 29, 2015, the Company entered into a loan agreement for $50,000, bearing interest at 24% and with a maturity date of March 9, 2016. During the year ended December 31, 2015, the Company made principal payments of $37,200, leaving a balance due of $12,800. Interest expense incurred and paid on the loan from the period from origination through December 31, 2015 was $4,702.


NOTE 6 STOCKHOLDERS EQUITY


At inception, the Company issued 3,000 shares of common stock as founder s shares. No shares of common stock were issued during the year ended December 31, 2015.








NOTE 7  INCOME TAXES

 

The Company determines whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.


Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Net deferred tax assets consist of the following components:




December 31, 2015



December 31, 2014

Deferred tax asset:






Net operating loss carryforwards

$

(309,428)


$

29,941

Valuation allowance


309,428   



(29,941)

Net deferred tax asset

$

-


$

-


The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income statutory tax rates to pretax income (loss) from continuing operations as follows:




December 31, 2015



December 31, 2014







Tax benefit at statutory rates

$

(279,487)


$

(29,941)

Change in valuation allowance


279,487  



29,941

Net provision for income taxes

$

-


$

-


The Company has accumulated net operating loss carryovers of approximately $910,083 as of December 31, 2015 which are available to reduce future taxable income. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes may be subject to annual limitations. A change in ownership may limit the utilization of the net operating loss carry forwards in future years. The tax losses begin to expire in 2033. The fiscal years 2015 and 2014 remain open to examination by federal tax authorities and other tax jurisdictions.


NOTE 8 RELATED PARTY TRANSACTIONS


The Company has recorded advances from related parties and expenses paid by related parties on behalf of the Company as related party payables. As of December 31, 2014 and December 31, 2015, respectively, the related party payable outstanding balance totaled $0 and $32,611, respectively. These payables are non-interest bearing, unsecured, and are due on demand.

 











NOTE 9 SUBSEQUENT EVENTS


A security purchase agreement was entered into by and among the Shareholders of Rayco Energy, Inc. ( Rayco ), and Sunvalley Solar Inc., ( Sunvalley ) on May 15, 2016. Sunvalley shall purchase 100% of Rayco s issued and outstanding shares of capital stock in exchanged for Sunvalley s seventy five thousand and five hundred (75,500) Series B Preferred Shares which are convertible to 10 shares of Sunvalley s common stock.  In addition, Sunvalley agrees to pay an additional $350,000 in cash to shareholders of Rayco, conditioned upon the 2016 net profit from the operation of Rayco, as a wholly-owned subsidiary of Sunvalley, being in excess of $10,000 (the  Condition ).  Sunvalley also agrees to invest no less than $350,000 working capital into Rayco after closing for its current projects and working capital. To evidence the unpaid balance of the purchase price, Sunvalley shall issue to Rayco s shareholders 6% subordinated promissory notes in the aggregate amount $350,000, payable only upon Rayco s 2016 net operating profit being in excess of $10,000 with interest and principal payable monthly on first day of each month commencing May 1, 2017.  Prepayments may be made at any time as the Company s cash flow allows, as determined by the Sunvalley s Board of Directors.  In the event that the Condition is not met, such notes shall be deemed null and void.  Both Sunvalley and Rayco agree that the acquisition shall be accounted for as if such acquisition had occurred upon the close of the business on May 15, 2016 (the  Effective Date ), regardless of when the closing in fact occurs. 

 

In accordance with ASC 855, Company management reviewed all material events through the date of this report and there are no material subsequent events to report.  






RAYCO ENERGY, INC.



CONDENSED FINANCIAL STATEMENTS




For the Quarter Ended


March 31, 2016

RAYCO ENERGY, INC.

Condensed Balance Sheets










ASSETS





March 31,


December 31,


 



2016


2015





(unaudited)




CURRENT ASSETS








Cash and cash equivalents


$

          51,192


$

        156,624


Contracts receivable, net



        333,371



        101,845


Inventory



          36,670



          81,808


Prepaid expenses and other current assets


 

                   -


 

            1,350












Total current assets


 

        421,233


 

        341,627


 








PROPERTY AND EQUIPMENT, NET


 

          19,346


 

          21,114










OTHER ASSETS








Deposits



            3,350



            3,350












Total other assets


 

            3,350


 

            3,350












TOTAL ASSETS


$

        443,929


$

        366,091


 




   




LIABILITIES AND STOCKHOLDERS' DEFICIT










CURRENT LIABILITIES








Accounts payable and accrued expenses


$

898,280


$

     1,070,934


Customer deposits



44,824



160,369


Short-term loans



          85,933



          12,800


Related party payable


 

          32,611


 

          32,611


 









      

TOTAL LIABILITIES


 

     1,061,648


 

     1,276,714


 








STOCKHOLDERS' DEFICIT



   














Common stock, $0.001 par value, 3,000 shares








  authorized, 3,000 shares issued and outstanding



                  3



                  3


Additional paid-in capital



                 (3)



                 (3)


Accumulated deficit


 

       (617,719)


 

       (910,623)












Total Stockholders' Deficit


 

       (617,719)


 

       (910,623)












TOTAL LIABILITIES AND








   

  STOCKHOLDERS' DEFICIT


$

        443,929


$

        366,091


 








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


RAYCO, ENERGY INC.

Condensed Statements of Income

(unaudited)


 












For the Three Months Ended


 



March 31,


 



2016


2015


 



 

 


 

 

REVENUES


$

          965,056


$

          451,199

COST OF SALES


 

          537,136


 

          238,040










GROSS PROFIT


 

          427,920


 

          213,159










OPERATING EXPENSES

















Salaries and wages



            80,231



           86,082


Professional fees



              6,343



           11,253


  General and administrative



            31,558



           20,048





 

 


 

 


     Total Operating Expenses



          118,132



          117,383





 

 


 

 

INCOME FROM OPERATIONS



          309,788



           95,776





 

 


 

 

OTHER INCOME (EXPENSES)








Other income



                   13



                    -


Interest expense



           (16,897)



               (639)


Loss on disposal of assets



                     -



 -





 

 


 

 


     Total other income (expenses)



           (16,884)



               (639)





 

 


 

 

INCOME BEFORE TAXES


 

          292,904


 

           95,137











Provision for income taxes


 

 -


 

 -










NET INCOME

   

$

          292,904


$

           95,137






   




BASIC AND DILUTED EARNINGS PER SHARE


$

              97.63


$

           31.71

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF







  COMMON SHARES OUTSTANDING


 

3,000


 

             3,000









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


RAYCO ENERGY, INC.

Condensed Statements of Cash Flows

(unaudited)



 


For the Three Months Ended



 


March 31,



 


2016


2015



 





OPERATING ACTIVITIES:















Net income


$

        292,904


$

          95,137


Adjustments to reconcile net income (loss) to net cash








provided by operating activities:









Depreciation and amortization



            1,768



                   -


Changes in operating assets and liabilities:






   



Inventory



                   -



            1,000



Accounts receivable



       (231,526)



         (75,702)



Other assets



          45,138



              (632)



Prepaid expenses



            1,350



                   -



Accounts payable and accrued expenses



       (288,199)



         (72,227)



Accrued warranty expenses



                   -



                   -



Customer deposits


 

                   -


 

                   -












Net Cash Used in Operating Activities


 

       (178,565)


 

         (52,424)



 







INVESTING ACTIVITIES:


















Net Cash Used in Investing Activities


 

                   -


 

                   -



 







FINANCING ACTIVITIES:

















Proceeds of notes payable



        106,783



                   -


Repayment of notes payable


 

         (33,650)


 

                   -












Net Cash Used in Financing Activities


 

          73,133


 

                   -



 







NET CHANGE IN CASH



       (105,433)



         (52,424)

CASH AT BEGINNING OF PERIOD


 

        156,624


 

          73,866










CASH AT END OF PERIOD


$

          51,191


$

          21,442



 







SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

















CASH PAID FOR:









Interest


$

          16,897


$

                   -



Income taxes


$

                   -


$

                   -










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





RAYCO ENERGY, INC.

 Notes to Condensed Financial Statements

March 31, 2016 and December 31, 2015


NOTE 1 - CONDENSED FINANCIAL STATEMENTS


The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2016, and for all periods presented herein, have been made.


Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2015 audited consolidated financial statements.  The results of operations for the periods ended March 31, 2016 and 2015 are not necessarily indicative of the operating results for the full years.


NOTE 2 - GOING CONCERN


The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.


In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from the parent company, Sunvalley Solar, to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.


The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


NOTE 3 SIGNIFICANT ACCOUNTING POLICIES


Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


Recent Accounting Pronouncements


Management has considered all recent accounting pronouncements issued since the last audit of the financial statements. The Company s management believes that these recent pronouncements will not have a material effect on the Company s financial statements.









NOTE 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Basic and Diluted Loss per Common Share


Basic loss per share is calculated by dividing the Company s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are -0- common stock equivalents outstanding as of March 31, 2015.


Inventory


Inventory is stated at the lower of cost or net realizable value. Cost is determined on an average cost basis; and the inventory is comprised of raw materials and finished goods. Raw materials consist of fittings and other components necessary to assemble the Company s finished goods.  Finished goods consist of solar panels ready for installation and delivery to customers.


The Company s inventory consisted of the following at March 31, 2016 and December 31, 2015:


 

March 31,

2016


December 31,

2015

Raw materials

$

-


$

-

Work in Progress


-



-

Finished goods


36,670



81,808

  TOTAL

$

36,670


$

81,808


  NOTE 4 PROPERTY AND EQUIPMENT

 

The following is a summary of property and equipment at March 31, 2016 and December 31, 2015:

 



March 31, 2016



December 31, 2015

Computer and equipment

$

1,217


$

1,217

Software


20,000



20,000

Total property and equipment


21,217



21,217

Less: accumulated depreciation


(1,871)



-0-

Property and equipment, net


19,346



21,114


Depreciation expense for the quarter ended March 31, 2016 and the year ended December 31, 2015 was $1,817 and $103, respectively.


NOTE 5 SHORT TERM LOANS


On April 29, 2015, the Company entered into a loan agreement for $50,000, bearing interest at 24.9% and with a maturity date of March 9, 2016. As of December 31, 2015, the principal balance on the note was $12,800. On January 4, 2016, the Company entered into a loan agreement for $120,000, bearing interest at 24.9% and with a maturity date of March 9, 2016 to pay off the remaining principal and interest balance and provide further working capital. After paying off the previous loan and associated fees, the net cash proceeds from the second loan were $102,564. During the three months ended March 31, 2016, the Company made principal payments of $16,631, leaving a balance due of $85,933. Interest expense incurred and paid on the loan the three months ended March 31, 2016 was $16,897.



NOTE 6 RELATED PARTY TRANSACTIONS


The Company has recorded advances from related parties and expenses paid by related parties on behalf of the Company as related party payables. As of March 31, 2016 and December 31, 2015, respectively, the related party payable outstanding balance totaled $32,611 and $32,611, respectively. These payables are non-interest bearing, unsecured, and are due on demand.


NOTE 7 SUBSEQUENT EVENTS


A security purchase agreement was entered into by and among the Shareholders of Rayco Energy, Inc. ( Rayco ), and Sunvalley Solar Inc., ( Sunvalley ) on May 15, 2016. Sunvalley shall purchase 100% of Rayco s issued and outstanding shares of capital stock in exchanged for Sunvalley s seventy five thousand and five hundred (75,500) Series B Preferred Shares which are convertible to 10 shares of Sunvalley s common stock.  In addition, Sunvalley agrees to pay an additional $350,000 in cash to shareholders of Rayco, conditioned upon the 2016 net profit from the operation of Rayco, as a wholly-owned subsidiary of Sunvalley, being in excess of $10,000 (the  Condition ).  Sunvalley also agrees to invest no less than $350,000 working capital into Rayco after closing for its current projects and working capital. To evidence the unpaid balance of the purchase price, Sunvalley shall issue to Rayco s shareholders 6% subordinated promissory notes in the aggregate amount $350,000, payable only upon Rayco s 2016 net operating profit being in excess of $10,000 with interest and principal payable monthly on first day of each month commencing May 1, 2017.  Prepayments may be made at any time as the Company s cash flow allows, as determined by the Sunvalley s Board of Directors.  In the event that the Condition is not met, such notes shall be deemed null and void.  Both Sunvalley and Rayco agree that the acquisition shall be accounted for as if such acquisition had occurred upon the close of the business on May 15, 2016 (the  Effective Date ), regardless of when the closing in fact occurs. 

 

In accordance with ASC 855, Company management reviewed all material events through the date of this report and there are no material subsequent events to report.  






UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

Unaudited Pro forma Combined Balance Sheet as at May 31, 2014


Unaudited Pro forma Combined Statement of Operations for the year ended May 31, 2014


Notes to the Unaudited Pro forma Combined Financial Statements

 


UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS


On May 15, 2016, Sunvalley Solar, Inc. Sunvalley , entered into a purchase agreement with Rayco Energy, Inc., Rayco wherein Sunvalley sold all of the issued and outstanding shares of its common stock.

 

The following Unaudited Pro Forma Combined Financial Statements give effect to the aforementioned acquisition based on the assumptions and adjustments set forth in the accompanying notes to the Unaudited Pro Forma Combined Financial Statements, which management believes are reasonable.  The Unaudited Pro Forma Combined Balance Sheet and Combined Statement of Operations, represents the combined financial position and operations of Sunvalley and Rayco as of March 31, 2016  as if the merger occurred on January 1, 2016. These unaudited Pro Forma Combined Financial Statements and accompanying notes should be read in conjunction with the audited historical financial statements and related notes of NGRC.

 

The Unaudited Pro Forma Combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if the merger of Sunvalley and RAyco had been consummated as of the beginning of the period indicated, nor is it necessarily indicative of the results of future operations.

Sunvalley Solar, Inc.

Proforma Combined Balance Sheet

March 31, 2016





















 









 







Adjusted





Sunvalley


Rayco


Combined


Pro Forma




Pro Forma





 Solar, Inc.


Energy, Inc.


Totals


Adjustments


REF


Totals

ASSETS






































CURRENT ASSETS



















Cash


$

     1,032,740


$

        51,192


$

      1,083,932


$

                   -


 

 

$

     1,083,932


Restricted cash



         37,500



                 -



           37,500



                   -





          37,500


Accounts receivable, net



     2,022,549



      333,371



      2,355,920



                   -





     2,355,920


Inventory



        107,870



        36,670



         144,540



                   -





        144,540


Costs in excess of billings



        161,899



                 -



         161,899



                   -





        161,899


Prepaid exoense and other current assets


 

         97,135


 

                 -


 

           97,135


 

                   -




 

          97,135



Total Current Assets


 

     3,459,693


 

      421,233


 

      3,880,926


 

                   -




 

     3,880,926












   








   

PROPERTY AND EQUIPMENT, net


 

         25,240


 

        19,346


 

           44,586


 

                   -


 


 

          44,586





















OTHER ASSETS



















Deposits



                  -



          3,350



            3,350



                   -





            3,350


Customer base



                  -



                 -



                   -



        693,219


[1]



        693,219


Long-term accounts receivable, net



     2,034,805



                 -



      2,034,805



                   -





     2,034,805


Other assets, net



           7,757



                 -



            7,757



                   -





            7,757





 

 


 

 


 

 


 

 




 

 



Total Other Assets


 

     2,042,562


 

          3,350


 

      2,045,912


 

        693,219


 


 

     2,739,131





















 


TOTAL ASSETS


$

     5,527,495


$

      443,929


$

      5,971,424

 

$

        693,219



 

$

     6,664,643












   









LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)






   




















   









CURRENT LIABILITIES









   










Accounts payable and accrued expenses


$

     3,524,366


$

943,104


$

      4,467,470


$

                   -


 


$

     4,467,470


Short-term loan



                  -



        85,933



           85,933



                   -





          85,933


Related party payable



-



32,611



32,611



-





32,611


Customer deposits



        450,212



                 -



         450,212



                   -


 



        450,212


Accrued warranty



        104,870



        -



104,870



                   -


 



104,870


Advances from contractors



        103,389



                 -



         103,389



                   -


 



        103,389


Current portion of capital lease



           2,412



                 -



            2,412



                   -





            2,412



Total Current Liabilities


 

     4,185,249


 

   1,061,648


 

      5,246,897


 

                   -




 

     5,246,897























TOTAL LIABILITIES


 

     4,185,249

 

 

   1,061,648


 

      5,246,897

 

 

                   -



 

 

     5,246,897












   









STOCKHOLDERS' EQUITY



   



   



   






























Preferred stock - Class A



           1,000



                 -



            1,000



                   -





            1,000


Preferred Stock - Class B



           2,000



                 -



            2,000



                76


[1]

 


            2,076


Common stock



           4,358



                3



            4,361



                   (3)


[1]

 


            4,361


Additional paid-in capital



     5,614,486



               (3)



      5,614,483



          75,427


[1]

 


     5,689,907


Retained earnings



   (4,279,598)



     (617,719)



     (4,897,317)



        617,719


[1]

 


    (4,279,598)





 

 


 

 


 

   


 

 



 

 

 



Total Stockholders' Equity


 

     1,342,246

 

 

     (617,719)


 

         724,527


 

        693,219



 

 

     1,417,746







 





   






 





TOTAL LIABILITIES AND




















STOCKHOLDERS' EQUITY


$

     5,527,495

 

$

      443,929


$

      5,971,424


$

        693,219



 

$

     6,664,643


Sunvalley Solar, Inc.

Proforma Combined Statements of Operations

For the Year Ended December 31, 2015


















Pro-Forma





 










Adjusted





Sunvalley


Rayco


Combined


Pro Forma


Combined





Solar, Inc.


Energy, Inc.


Totals


Adjustments


Totals

REVENUES


$

      5,788,177


$

    2,619,404


$

       8,407,581


$

                 -


$

      8,407,581

COST OF SALES



      4,268,743



    2,662,064



       6,930,807



                 -



      6,930,807





 

 


 

 


 

   


 

 


 

   

GROSS PROFIT (LOSS)


 

      1,519,434


 

       (42,660)


 

       1,476,774


 

                 -


 

      1,476,774












   






   

OPERATING EXPENSES









   






   












   






   


Salaries and wages



                   -



      390,580



          390,580



                 -



         390,580


General and administrative



      1,322,360



      344,071



       1,666,431



                 -



      1,666,431


Professional fees



                   -



        37,545



            37,545



                 -



          37,545





 

 


 

 


 

   


 

 


 

   



Total Costs and Expenses


 

      1,322,360


 

      772,196


 

       2,094,556


 

                 -


 

      2,094,556












   






   



OPERATING INCOME (LOSS)


 

         197,074


 

     (814,856)


 

        (617,782)


 

                 -


 

       (617,782)












   






    

OTHER INCOME (EXPENSE)









   






   












   






   


Other income



            1,438



                 -



             1,438



                 -



            1,438


Other expense


 

           (2,701)


 

         (7,166)


 

            (9,867)


 

                 -


 

           (9,867)












   






   



Total Other Income (Expense)


 

           (1,263)


 

         (7,166)


 

            (8,429)


 

                 -


 

           (8,429)





















LOSS BEFORE INCOME TAXES



         195,811



     (822,022)



        (626,211)



                 -



       (626,211)



PROVISION FOR INCOME TAXES


 

                   -


 

                 -


 

                    -


 

                 -


 

                   -



















NET INCOME (LOSS)


$

         195,811


$

     (822,022)


$

        (626,211)


$

                 -


$

       (626,211)


Sunvalley Solar, Inc.

Proforma Combined Statements of Operations

For the Three Months Ended March 31, 2016


















Pro-Forma















Adjusted





Sunvalley


Rayco


Combined


Pro Forma


Combined





Solar, Inc.


Energy, Inc.


Totals


Adjustments


Totals

REVENUES


$

                  -


$

      965,056


$

      965,056


$

                 -


$

      965,056

COST OF SALES



                  -



      537,136



      537,136



                 -



      537,136





 

 


 

 


 

   


 

 


 

   

GROSS PROFIT (LOSS)


 

                  -


 

      427,920


 

      427,920


 

                 -


 

      427,920












   






   

OPERATING EXPENSES









   






   












   






   


Salaries and wages



                  -



        80,231



        80,231



                 -



        80,231


General and administrative



       831,295



        31,558



      862,853



                 -



      862,853


Professional fees



                  -



          6,343



          6,343



                 -



          6,343





 

 


 

 


 

   


 

 


 

   



Total Costs and Expenses


 

       831,295


 

      118,132


 

      949,427


 

                 -


 

      949,427












   






   



OPERATING INCOME (LOSS)


 

      (831,295)


 

      309,788


 

     (521,507)


 

                 -


 

     (521,507)












   






    

OTHER INCOME (EXPENSE)









   






   












   






   


Other income



           2,096



               13



          2,109



                 -



          2,109


Other expense



            (147)



       (16,897)



       (17,044)



                 -



       (17,044)


Loss on disposal of assets


 

            (415)


 

                 -


 

           (415)


 

                 -


 

           (415)












   






   



Total Other Income (Expense)


 

           1,534


 

       (16,884)


 

       (15,350)


 

                 -


 

       (15,350)





















INCOME (LOSS) BEFORE INCOME TAXES



      (829,761)



      292,904



     (536,857)



                 -



     (536,857)



PROVISION FOR INCOME TAXES


 

                  -


 

                 -


 

                 -


 

                 -


 

                 -



















NET INCOME (LOSS)


$

      (829,761)


$

      292,904


$

     (536,857)


$

                 -


$

     (536,857)






Notes to Unaudited Pro Forma Combined Financial Statements



1.