UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

Amendment No. 1

 

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
   
[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from _________ to ________
   
Commission file number: 333-150692

 

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

 

Nevada 20-8415633

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)
   
398 Lemon Creek Dr., Suite A
Walnut, California
91789
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number: (909) 598-0618

 

Securities registered under Section 12(b) of the Exchange Act:

 

Title of each class Name of each exchange on which registered
None not applicable

 

Securities registered under Section 12(g) of the Exchange Act:

 

Title of each class
None  

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [] No [X]

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

 

Indicate by check mark 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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 232.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [X] No [ ]

 

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

 

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

 

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

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. Approx. $n/a as of June 30, 2010. (No trades until after the end of registrant’s most recently completed second fiscal quarter).

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 803,068,420 as of March 24, 2011.

 

                           
Table of Contents

TABLE OF CONTENTS

 

Page

PART I

 

Item 1. Business 3
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 20
Item 2. Properties 20
Item 3. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of Security Holders 20

 

PART II

 

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities 21
Item 6. Selected Financial Data 23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 29
Item 8. Financial Statements and Supplementary Data 29
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 30
Item 9A(T). Controls and Procedures 30
Item 9B. Other Information 31

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance 31
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 39
Item 13. Certain Relationships and Related Transactions, and Director Independence 40
Item 14. Principal Accountant Fees and Services 40

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules 41

2
Table of Contents

PART I

 

Item 1. Business

 

Principal Place of Business

 

Our principal offices are located at 398 Lemon Creek Dr., Suite A, Walnut, CA 91789.

 

Description of Business

 

We were incorporated as “Western Ridge Minerals, Inc.” on August 16, 2007, in the State of Nevada for the purpose of engaging in mineral exploration. On June 24, 2010, we entered into a Share Exchange Agreement with Sunvalley Solar, Inc. (“Sunvalley”) a California-based solar power technology and system integration company founded in January of 2007. Under the Share Exchange Agreement, we acquired all of the issued and outstanding common stock of Sunvalley.  Following the share exchange with Sunvalley, we changed our name to “Sunvalley Solar, Inc.” As a result of entering into the Exchange Agreement, we abandoned our mineral exploration plans and continued with Sunvalley’s existing business of solar power technology, system design and integration.

 

We are focused on developing its expertise and proprietary technology to install residential, commercial and governmental solar power systems. We offer turnkey solar system solutions for owners, builders and architecture firms that include designing, building, operating, monitoring and maintaining solar power systems. We develop advanced solar technology and deploy to solar power application. Our customers range from small private residences to large commercial solar power users. We have the necessary licenses and expertise to design and install large scale solar power systems. We hold a C-46 Solar License from CBCL (California Board of Contractor License). Some of the large scale commercial solar power systems that we have designed and installed include large office buildings, manufacturing facilities and warehouses. Our proprietary technologies in solar installation provide our customers with a high quality and flexible solar power system solutions at a competitive cost.

 

We seek to develop as an end-to-end solar energy solution provider by providing system solution, post-sale service, customer technical support, solar system design and field installation.

 

In 2007 and 2008, Sunvalley’s revenues came from its solar system design and installation business, including both residential and commercial projects. In 2008, Sunvalley produced $2.63M in revenue from solar system design and installation. Starting in November 2008, Sunvalley expanded its business to include solar equipment distribution. Sunvalley established distribution partnerships with Canadian Solar Inc, CEEG SST, Tianwei Solarfilms and PV Powered Inc., to distribute solar panels, solar inverters and other solar equipments to its clients in the U.S.. In 2009 and 2010, Sunvalley achieved $4.413M and $4.634M in revenues respectively, from its installation and distribution business. Meanwhile, since 2007, the company has spent considerable amount of resources on new solar technology research and development. We have a patent-pending technology that we believe is able to increase the efficiency of a solar panel while barely increasing the cost. Further development of this technology is needed in order to apply it in commercialized mass production of solar panels.

3
Table of Contents

Glossary of Terminology Used In The Solar Power Industry

 

The following is a glossary of terms commonly used in the solar power industry in order to describe the functioning of solar power products, related technologies, and technological developments:

 

Absorber — In a photovoltaic device, the material that readily absorbs photons to generate charge carriers (free electrons or holes).

 

Alternating Current (AC) — A type of electrical current, the direction of which is reversed at regular intervals or cycles. In the United States, the standard is 120 reversals or 60 cycles per second. Electricity transmission networks use AC because voltage can be controlled with relative ease.

 

Acceptor — A dopant material, such as boron, which has fewer outer shell electrons than required in an otherwise balanced crystal structure, providing a hole, which can accept a free electron.

 

Ambient Temperature — The temperature of the surrounding area.

 

Amorphous Silicon — A thin-film, silicon photovoltaic cell having no crystalline structure. Manufactured by depositing layers of doped silicon on a substrate.

 

Ampere (amp) — A unit of electrical current or rate of flow of electrons. One volt across one ohm of resistance causes a current flow of one ampere.

 

Angle of Incidence — The angle that a ray of sun makes with a line perpendicular to the surface. For example, a surface that directly faces the sun has a solar angle of incidence of zero, but if the surface is parallel to the sun (for example, sunrise striking a horizontal rooftop), the angle of incidence is 90°.

 

Antireflection Coating — A thin coating of a material applied to a solar cell surface that reduces the light reflection and increases light transmission.

 

Cell efficiency – The percentage of electrical energy that a solar cell produces (under optimal conditions) as compared to the total amount of energy from the sun falling on the cell.

 

Cell Junction — The area of immediate contact between two layers (positive and negative) of a photovoltaic cell. The junction lies at the center of the cell barrier or depletion zone.

 

Clean Technology— Renewable energy and energy efficiency technologies plus other technologies that make use of resources more environmentally benign and/or reduce carbon emissions.

 

Conversion efficiency – The percentage of electricity that is created by a solar cell as compared to the amount of energy needed to generate that electricity.

4
Table of Contents

Converter — A unit that converts a direct current (dc) voltage to another dc voltage.

 

Crystalline Silicon — A type of photovoltaic cell made from a slice of single-crystal silicon or polycrystalline silicon.

 

Current – The flow of electricity between two points. Measured in amps.

 

Direct Current (DC) — A type of electricity transmission and distribution by which electricity flows in one direction through the conductor, usually relatively low voltage and high current. To be used for typical 120 volt or 220 volt household appliances, DC must be converted to alternating current, its opposite.

 

Distributed Power — Generic term for any power supply located near the point where the power is used. Opposite of central power. See stand-alone systems.

 

Distributed Systems — Systems that are installed at or near the location where the electricity is used, as opposed to central systems that supply electricity to grids. A residential photovoltaic system is a distributed system.

 

Donor — In a photovoltaic device, an n-type dopant, such as phosphorus, that puts an additional electron into an energy level very near the conduction band; this electron is easily exited into the conduction band where it increases the electrical conductivity over than of an undoped semiconductor.

 

Efficiency – The ratio of output energy to input energy.

 

Electrical grid – A large distribution network that delivers electricity over a wide area.

 

Electrode — A conductor that is brought in conducting contact with a ground.

 

Electron — An elementary particle of an atom with a negative electrical charge and a mass of 1/1837 of a proton; electrons surround the positively charged nucleus of an atom and determine the chemical properties of an atom. The movement of electrons in an electrical conductor constitutes an electric current.

 

Energy — The capability of doing work; different forms of energy can be converted to other forms, but the total amount of energy remains the same.

 

Frequency — The number of repetitions per unit time of a complete waveform, expressed in Hertz (Hz).

 

Gigawatt (GW) — A unit of power equal to 1 billion Watts; 1 million kilowatts, or 1,000 megawatts.

 

Greenhouse effect – When heat from the sun becomes trapped in the Earth's atmosphere due to certain gases.

5
Table of Contents

Grid – A distribution network, including towers, poles, and wires that a utility uses to deliver electricity.

 

Grid-connected PV system – A solar system that is tied in to the utility's network. When generating more power than necessary, the system supplies the surplus to the grid. At night, the system draws power from the grid.

 

Heterojunction — A region of electrical contact between two different materials.

 

Hole — The vacancy where an electron would normally exist in a solid; behaves like a positively charged particle.

 

Homojunction — The region between an n-layer and a p-layer in a single material, photovoltaic cell.

 

Incident Light — Light that shines onto the face of a solar cell or module.

 

Interconnect — A conductor within a module or other means of connection that provides an electrical interconnection between the solar cells.

 

Inverter — A device that converts direct current electricity to alternating current either for stand-alone systems or to supply power to an electricity grid.

 

Irradiance — The direct, diffuse, and reflected solar radiation that strikes a surface. Usually expressed in kilowatts per square meter. Irradiance multiplied by time equals insolation.

 

Kilowatt (kW) — A standard unit of electrical power equal to 1000 watts, or to the energy consumption at a rate of 1000 joules per second.

 

Kilowatt-Hour (kWh) — 1,000 thousand watts acting over a period of 1 hour. The kWh is a unit of energy. 1 kWh=3600 kJ.

 

Megawatt (MW) — 1,000 kilowatts, or 1 million watts; standard measure of electric power plant generating capacity.

 

Monocrystalline solar cell – A type of solar cell made from a thin slice of a single large crystal silicon.

 

Multicrystalline — A semiconductor (photovoltaic) material composed of variously oriented, small, individual crystals. Sometimes referred to as polycrystalline or semicrystalline.

 

Multijunction Device — A high-efficiency photovoltaic device containing two or more cell junctions, each of which is optimized for a particular part of the solar spectrum.

6
Table of Contents

Net metering – A practice used in conjunction with a solar electric system where your electric meter tracks your net power usage, spinning forward when you use electricity from the utility, and spinning backward when your system is generating more electricity than you need.

 

Orientation — Placement with respect to the cardinal directions, N, S, E, W; azimuth is the measure of orientation from north.

 

Photoelectric Cell — A device for measuring light intensity that works by converting light falling on, or reach it, to electricity, and then measuring the current; used in photometers.

 

Photon — A particle of light that acts as an individual unit of energy.

 

Photovoltaic(s) (PV) — Pertaining to the direct conversion of light into electricity.

 

Photovoltaic (PV) Array — An interconnected system of PV modules that function as a single electricity-producing unit. The modules are assembled as a discrete structure, with common support or mounting. In smaller systems, an array can consist of a single module.

 

Photovoltaic (PV) Cell — The smallest semiconductor element within a PV module to perform the immediate conversion of light into electrical energy (direct current voltage and current). Also called a solar cell.

 

Photovoltaic (PV) Conversion Efficiency — The ratio of the electric power produced by a photovoltaic device to the power of the sunlight incident on the device.

 

Photovoltaic (PV) Device — A solid-state electrical device that converts light directly into direct current electricity of voltage-current characteristics that are a function of the characteristics of the light source and the materials in and design of the device. Solar photovoltaic devices are made of various semiconductor materials including silicon, cadmium sulfide, cadmium telluride, and gallium arsenide, and in single crystalline, multicrystalline, or amorphous forms.

 

Photovoltaic (PV) Effect — The phenomenon that occurs when photons, the "particles" in a beam of light, knock electrons loose from the atoms they strike. When this property of light is combined with the properties of semiconductors, electrons flow in one direction across a junction, setting up a voltage. With the addition of circuitry, current will flow and electric power will be available.

 

Photovoltaic (PV) Module — The smallest environmentally protected, essentially planar assembly of solar cells and ancillary parts, such as interconnections, terminals, [and protective devices such as diodes] intended to generate direct current power under unconcentrated sunlight. The structural (load carrying) member of a module can either be the top layer (superstrate) or the back layer (substrate).

 

Photovoltaic (PV) Panel — often used interchangeably with PV module (especially in one-module systems), but more accurately used to refer to a physically connected collection of modules (i.e., a laminate string of modules used to achieve a required voltage and current).

7
Table of Contents

Photovoltaic (PV) System — A complete set of components for converting sunlight into electricity by the photovoltaic process, including the array and balance of system components.

 

P/N — A semiconductor photovoltaic device structure in which the junction is formed between a p-type layer and an n-type layer.

 

Polycrystalline — See Multicrystalline.

 

Polycrystalline Silicon — A material used to make photovoltaic cells, which consist of many crystals unlike single-crystal silicon.

 

Power Conversion Efficiency — The ratio of output power to input power of the inverter.

 

Semiconductor — Any material that has a limited capacity for conducting an electric current. Certain semiconductors, including silicon, gallium arsenide, copper indium diselenide, and cadmium telluride, are uniquely suited to the photovoltaic conversion process.

 

Silicon (Si) — A semi-metallic chemical element that makes an excellent semiconductor material for photovoltaic devices. It crystallizes in face-centered cubic lattice like a diamond. It's commonly found in sand and quartz (as the oxide).

 

Solar Energy — Electromagnetic energy transmitted from the sun (solar radiation). The amount that reaches the earth is equal to one billionth of total solar energy generated, or the equivalent of about 420 trillion kilowatt-hours.

 

Solar-Grade Silicon — Intermediate-grade silicon used in the manufacture of solar cells. Less expensive than electronic-grade silicon.

 

Solar Resource — The amount of solar insolation a site receives, usually measured in kWh/m2/day, which is equivalent to the number of peak sun hours.

 

Solar Spectrum — The total distribution of electromagnetic radiation emanating from the sun. The different regions of the solar spectrum are described by their wavelength range. The visible region extends from about 390 to 780 nanometers (a nanometer is one billionth of one meter). About 99 percent of solar radiation is contained in a wavelength region from 300 nm (ultraviolet) to 3,000 nm (near-infrared). The combined radiation in the wavelength region from 280 nm to 4,000 nm is called the broadband, or total, solar radiation.

 

Stand-Alone System — An autonomous or hybrid photovoltaic system not connected to a grid. May or may not have storage, but most stand-alone systems require batteries or some other form of storage.

 

Standard Test Conditions (STC) — Conditions under which a module is typically tested in a laboratory.

8
Table of Contents

Storage Battery — A device capable of transforming energy from electric to chemical form and vice versa. The reactions are almost completely reversible. During discharge, chemical energy is converted to electric energy and is consumed in an external circuit or apparatus.

 

Thin Film — A layer of semiconductor material, such as copper indium diselenide or gallium arsenide, a few microns or less in thickness, used to make photovoltaic cells.

 

Thin Film Photovoltaic Module — A photovoltaic module constructed with sequential layers of thin film semiconductor materials. See amorphous silicon.

 

Tilt Angle — The angle at which a photovoltaic array is set to face the sun relative to a horizontal position. The tilt angle can be set or adjusted to maximize seasonal or annual energy collection.

 

Volt (V) — A unit of electrical force equal to that amount of electromotive force that will cause a steady current of one ampere to flow through a resistance of one ohm.

Voltage — The amount of electromotive force, measured in volts, that exists between two points.

 

Wafer — A thin sheet of semiconductor (photovoltaic material) made by cutting it from a single crystal or ingot.

 

Watt — The rate of energy transfer equivalent to one ampere under an electrical pressure of one volt. One watt equals 1/746 horsepower, or one joule per second. It is the product of voltage and current (amperage).

 

Waveform — The shape of the phase power at a certain frequency and amplitude.

 

Principal Products and Services

 

Our philosophy is to “provide solar electricity directly from the sun in a technology innovation-centric and cost effective way”. Since inception, we have concentrated on serving the solar power needs of residential and commercial customers tied to the electric power grid.  Our business plans are focused in four specific areas:

 

• Solar Systems Design and Installation

• Solar Technology Research and Development

• Solar Equipment Manufacturing and Distribution

• Distributed Power Plant Projects

9
Table of Contents

In 2007 and 2008, 100% of our revenues were generated from our Solar Systems Design and Installation business. In 2009, 87.9% ($3.879 million) of our revenues were generated from our Solar Equipment Distribution business and 12.1% ($0.534 million) were generated from our Solar Systems Design and Installation business. In 2010, 89.23% ($4.135 million) of our revenues were generated from our Solar Equipment Distribution business and 10.77% ($0.499 million) from our Solar Equipment Distribution business. Our Solar Technology Research and Development and our Distributed Power Plant Projects businesses are in the development stage and have not yet generated revenue.

 

We are not currently dependent on one or a few major customers for our revenues. Instead, our total revenues for the last fiscal year were generated from over one hundred different customers.

 

Solar Systems Design and Installation

 

The scope of our solar systems design and installation business includes:

 

• Designing solar systems for commercial, residential, governmental and non-profit customers

• Installing solar power systems and related constructional systems for solar power end users

• Providing technical support and service to solar power end users

• Providing system performance monitoring services to solar power end users

• Providing government permit/incentives application services to solar power end users

 

Since our founding in 2007, we have focused on solar system design and installation. Installation is our core business, and it also provides the company with a platform for solar product supply, new technology development, and other lines of business. Our gross revenues to date have come mostly from the solar systems installation business. Our installation business is focused primarily in Southern California.  We were the first Chinese-American owned solar installation technology company in Southern California and much of the early growth in our systems installation business came from customers in the Chinese-American community of Southern California.

 

We are one of a few companies in California that has the permit and expertise to install large commercial solar systems (over 150K watts).   Design and installation of a solar power system, especially a large commercial solar power system, requires proper licenses, design capabilities in electrical systems and solar systems, and constructional (ground or roof) implementation ability, as well as experienced project management and an understanding of industry regulations. In addition, the ability to procure proper solar equipment is critical to large commercial solar system projects.

 

Sunvalley has obtained a C-46 Solar License from CBCL (California Board of Contractor License). We use engineers and project managers that have Certification of Solar Power System Design and Installation from SEI (Solar Energy International Training School). We have been focusing on developing our expertise and proprietary technology to install large commercial and governmental solar power systems since 2007. We are also able to procure the necessary equipment and supplies through our distribution partnerships. Some of large scale commercial solar power systems that we has designed and installed include large office buildings, manufacturing facilities, warehouses and hotels.

10
Table of Contents

In 2008, we were positioned in the top twenty solar installation companies in terms of total installed solar system size in a list compiled by the California Energy Commission (CEC). In the CEC list, over 90% of companies were doing residential or small size commercial solar systems installation. Only a few companies in the list, including Sunvalley, had designed or installed solar power system projects over 100,000 watts.

 

Our installation business generated all of our revenues in 2007 and 2008, and it remains a significant component of our total revenue structure. Our development efforts in this area focus on the installation of large commercial and governmental solar power systems, as well as residential solar power systems. Our customers in this line of business run the gamut from small private residences to large commercial solar power projects. Some of large scale commercial solar power systems that we have designed and installed include large office buildings, manufacturing facilities, warehouses, and hotels.

 

Solar Technology Research and Development

 

As a reusable and green energy source, the solar cell has been providing an increasing portion of consumed energies, including in household heating and electricity, in commercially available cars, and in centralized solar electricity plants. However, the current solar cell modules or panels suffer severe drawbacks compared to fossil fuel energy sources in terms of cost-per-watt as well as in the efficiency of energy storage. The cost issue is related to the poor energy conversion efficiency and the use of the costly semiconductors as the electricity generation unit, which primarily corresponds to the light absorption of the solar cell module.

 

To improve the efficiency of the solar cell without adding more cost to it, we are developing a new metallic sub-wavelength design to realize the combination of the electrodes as SPP generators.   A typical PV solar cell operates by receiving sun light on an electric conversion unit or active layer. Active layers have typically been a semi-conductor having a p-n junction to produce electron-hole pairs or excitions whenever illuminated with light. In operation, each electron and hole of produced excition pairs are pulled in opposite directions by the internal electric field of the p-n junction resulting in an electric current. The same effect in organic cells is accomplished via either a bi-layer of acceptor and donor materials or a bulk hetero-junction of an acceptor and donor material. The resultant electric current may be extracted by electrodes and delivered to an electric circuit to an electricity storage device.

 

Despite this successful development and implementation, PV solar cell technologies have not yet been completely satisfactory for their intended purpose since manufacturing costs are high and efficiencies are too low for PV solar technologies to compete with non-renewable energies in terms of costs per energy watt produced.

11
Table of Contents

As one of potential solutions, it has been discovered that surface plasmon polariton (SPP) assisted solar technologies may be developed to result in enhanced electricity production due to surface resonant excitation or surface Plasmon resonance (SPR). SPP assisted PV cells have heretofore operated by using the enhanced electrical fields produced by the SPR to either be directly converted to electricity or concentrate the light onto an active layer. With this technology, the efficiency of the solar cell can be increased, therefore the cost of solar power per watt will be reduced also.

 

The innovative design will also consider the variant spectral and angles, to guarantee excitation of the SPP at any angle around the bang gap, or absorption region of the solar cell unit. With the successful development of our new PV cells, we are expecting the efficiency of the organic thin-film-based solar cells to be over 10%, which is close to a 50% increase from that of the current commercially available thin film solar cells.

 

A typical PV solar cell operates by receiving sun light on an electric conversion unit or active layer. Active layers have typically been a semiconductor having a p-n junction to produce an electric current. The efficiency of the conversion depends on purity of the semiconductor, structure of the solar cell, insight spectrum, angle, and power directly to the solar cell, as well as temperature and other environmental conditions.

 

Our patent-pending technology uses Surface Plasmon Polariton (SPP) assisted solar technologies to enhance electricity production due to surface resonant excitation or Surface Plasmon Resonance (SPR). It will provide an apparatus and related method for efficiently converting solar radiation into electricity wherein the conversion efficiency in thin film active layers is measurable increased.

 

We believe that deployment of our new technology to increase the panel efficiency will reduce solar panel cost per watt as well as the total system cost. As an example, in the current U.S. market, the cost of thin-film solar panel (a-Si) is approximately $1.1/w~$1.4/w. The efficiency of the module is around 7%. For instance, a-Si thin film solar module TW-SF 95W produced by the Tianwei Soalrfilm is rated 95 watts output power. We assume the manufacturing cost for this module is $1/w. With the commercialization and implementation of new solar technologies, such as our patent-pending technology, the efficiency of this module can be increased from 7% to 10%, which in turn will increase the module output power from 95W to 135W with the same module size. So the solar panel cost per watt will be reduced to $0.70/w compared to $1.0/w before. The customer could save $3,000 for a 10,000 watt solar power system based on reduced solar panel cost only. Plus, with higher efficiency solar panels, the racking and electrical accessory cost of the system will be also reduced because fewer panels will be used for the same system size. The total system cost could be reduced over 30%. We expect that implementation of our new technology will reduce the overall cost of the solar power system to a level that is less than or at least comparable with fossil fuel energy sources in the near future.

12
Table of Contents

Though our patent-pending technology is able to increase the efficiency of thin-film-based solar cells to over 10%, commercializing this technology into mass production will involve a trade-off between manufacturing cost per-panel and increased per-panel efficiency. In addition, our new PV cell concept will also need to demonstrate that panels using the technology will have a productive life-span and a tolerance to environmental conditions such as humidity, temperature, wind load that are sufficient for the panels to be used in real life application. Accordingly, there is no guarantee that we will be able to commercially produce and market solar panels using our new PV technology.

 

We have not yet generated revenues from our patent-pending new technology. With additional capital, however, we hope to commercialize our R&D outputs to our PV panels and installation applications. By combining our research and development capability with our existing installation business and planned panel manufacturing operation, we hope to establish a vertically integrated entity that can grow to become a premier supplier of solar panels in the United States.

 

The main points of focus for our R&D operation are as follows:

 

• Keeping and developing a small but strong R&D team in San Diego

• Collaborating with universities in the U.S. and panel manufacturers in China

• Effectively use resources from research institutes and universities in China

• Developing new solar technology and parts, focusing on application technologies

 

We are working together with UCSD (University of California, San Diego) to develop Surface Plasmon Polariton (SPP) assisted solar technologies. The equipment and facilities needed to fabricate the device is accessed from University of California, San Diego. The nano- clean room facilities in the School of Engineering at UCSD are equipped with many state of the art micro and nano- fabrication equipment and facility. The interference pattern that will be recorded in the solar cells will be obtained using an Argon laser operating at 362nm. This laser and its associated equipment, is available to us through special arrangement with the administration of the University of California, San Diego, as well as the Ultrafast and Nano- scale Optics lab in the Department of Electrical and Computer Engineering at UCSD. We are also working together with some panel manufacturers in China to get product line supports to commercialize the patented technology in the panel manufacturing. The panel manufacturers are also providing us some raw materials for lab testing. We are also collaborating with Haerbin Industrial University in China and Shenyang Mechanical Research Institute to develop and prototype a new solar micro-inverter.

 

Our key current R&D topics include:

 

• Developing new coating technology to increase the efficiency of PV panel

• Develop solar PV application technology to reduce system level cost and increase installation flexibility – racking and panel cleaning system

• Commercializing our patented advanced solar technology.

13
Table of Contents

 

In 2009, we had R&D expenses of $35,000 for the development of advanced solar technologies, not including regular salary payment to our research engineers. In 2010, we incurred no R&D expenses except salary payment to our research engineers. None of our R&D costs have been borne directly by our customers.

 

Solar Equipment Manufacturing and Distribution

 

In recent years, we have signed distribution agreements with three of the largest solar panel producers in the world and one large solar inverter suppliers. Our partnerships with these manufacturers in the solar power industry have allowed us to broaden our customer base and to provide our customers with more cost competitive and complete solar system solutions with multiple selective options on PV panels and inverters. In 2009 and 2010, our solar equipment distribution business has grown to constitute the majority of our revenues.

 

Although we have not yet generated revenue from the manufacture of our own solar panels, our R&D team has developed a new type of nano-structured solar cell and filed for patent protection in the U.S. as “New Solar Cell Structure with Increased Efficiency” on March 22, 2010, application number 12/729,201.  We are currently applying for a Phase-I grant from Department of Energy, entitled "Surface Plasmon Enhanced Solar Cells,” in order to fund additional development of its proprietary solar cell.  With proper funding, the new technology could be commercialized and implemented in solar panel manufacture starting from OEM manufactured panels from reputable solar panel manufacturers in China. The manufactured solar panels would use our brand name with its patented technology. We would be responsible for quality control, certification applying, marketing, technical support and services in the United States. Our unique technology, if successfully commercialized and brought to market, would provide the solar panel market with a higher efficiency, lower cost unit than competing panels currently on the market. Our ability to provide after-sale services such as system maintenance, technical support, training, etc. for its customers could add another selling point for promotion of the new panel.

 

Distributed Power Plant Projects

 

We are in the development stage for a new line of business based on the installation of distributed solar power plants.  Although we are not currently generating revenue from the installation of distributed solar power plants, this area is a focus of our ongoing business development. Currently, most proposed solar power plants are stand-alone large scale power plants. Currently, all completed or proposed stand-alone large scale solar power plants were proposed or implemented by large solar panel manufacturers (such as First Solar, Solar Power, etc.) as well as investment bankers, utility companies or large installation companies as a group. We do not have sufficient funds and resources to build stand-alone large scale solar power plant, and we do not intend to develop stand-alone large scale power plants in the near future. Such plants are either solar thermal power plants (using solar panels to generate heat and then using thermal electrical methods to generate electricity) or photovoltaic farms (using PV panels to generate electrical power directly). Stand-alone power plants need to deploy high-voltage transformers, high-voltage power transmission lines, etc. Also, the limiting factor of solar power is that it generates little electricity when skies are cloudy and none at night. Excess power must therefore be produced during sunny hours and stored for use during dark hours. Most energy storage systems such as batteries are expensive or inefficient. Pressurized caverns and hot salt technologies are commonly used right now for these solar power plants, but they will require larger storage room and more complex technology. Due to these reasons, stand-alone power plants naturally are large scale (generally more than 15M Watts), and most of them are built on open public land, such as in a hot desert, due to large installation physical space required and cost of the land.

14
Table of Contents

Building larger solar power plants involves serious issues such as the need for large investments in land and infrastructure including power transmission line and electrical distribution network constructions. Other troublesome issues are customer management independent from current utility company billing systems, three years or even longer environmental impact assessment study (required by federal environmental protection laws), sophisticated application processing for land use permits, different safety and security requirements for open public space, etc. All of these difficulties add up to tremendous investments, efforts and long waiting times. The Bureau of Land Management has taken as long as two years in order to just complete required environmental reviews.

 

By comparison, the small size, tied-to-grid, Distributed Power Plants we are planning to launch would be quite different from stand-alone large scale power plants. Our planned projects won’t use public land.  Instead, our plan is to use free roofs on private commercial buildings or private lands. We plan to build the power plants on private property to avoid environmental issues and easily tie to the grid to avoid power transmission lines and electrical distribution networks construction. We would also use current utility company billing systems to manage the system.

 

Most of environmental issues involved in the use public lands involve costs related to the protection of certain plants and animals and to the maintenance of soil composition, as the public lands that are suitable for large power plants are generally preserved open lands. Private property suitable for smaller distributed power plants generally does not involve in such issues, however since the land is typically smaller tracts in private agricultural use or existing rooftop spaces.

 

Although we do not currently have a distributed power plant under construction, we are working with customers, suppliers, and utility companies to develop a plan for our first such installation. The size of these types of roof-top solar power plants is much smaller than typical solar power plants (1M to 2M watts is typical for roof-top power plants, compared to over 15M watts for typical plants), but we would be able to build many smaller “power plants” on top of different buildings and tie them to utility grid to form a distributed power plant system.

 

Our planned distributed PV power plants are prompted by recent advances in solar technology that reduce the cost of installed photovoltaic generation and federal/state laws that ensure the “oversize to load” (no restriction on homeowners or businesses over-sizing their solar system when compared with their usage, or “load”) and provides greater fairness for consumers by requiring wholesale compensation for surplus power. Building smaller roof solar power plants would avoid most of the difficulties that currently face those who build larger solar power plants.

 

We are currently negotiating with some agricultural farmers who are our existing customers in the Palm Desert, California area to use their private lands to build our power plants. We are also in discussions with local utility companies about the possibility of selling excess solar power to be generated by the plants back to the utilities.

 

As an established solar system designer/installer, we have the requisite technical background, experience, licenses, and other capabilities necessary to build the roof-top distributed power plants. Because of our experience in larger scale commercial solar system design and installation, the planned distributed power plants would closely resemble some relatively larger commercial solar systems we are building today.

15
Table of Contents

Competition and Market Overview

 

The solar power industry is at an early stage of its growth and is highly fragmented with many smaller companies. The prospect for long-term worldwide demand for solar power has attracted many new solar panel manufacturers, as well as a multitude of design/integration companies in our market segment, with no single competitor gaining market dominance. We expect the manufacturing segment of the industry to consolidate as more solar panel manufacturing capacity comes online. We also expect there to be consolidation in the design/integration segment of the industry based mostly on branding, development of new technology and business process improvements.

 

Distribution Methods and Marketing

 

The most important part in a solar power system is the solar panel (PV module). Photovoltaic (PV) devices generate electricity directly from sunlight via an electric process that occurs naturally in certain types of materials. Groups of PV cells are configured into modules and arrays, which can be used to power any number of electrical loads. Crystalline silicon - the same material commonly used by the semiconductor industry - is the material used in a large portion of all PV modules today. PV modules generate direct current (DC) electricity. For residential use, the current is then fed through an inverter to produce alternating current (AC) electricity that can be used to power home appliances.

 

The majority of PV systems today are installed for homes and businesses that remain connected to the electric grid. Consumers use their grid-connected PV system to supply some of the power they need and use utility-generated power when their power usage exceeds the PV system output (e.g., at night). When the owner of a grid connected PV system uses less power than their PV system creates, they can sell the electricity back to their local utility, watch their meter spinning backwards, and receive a credit on their electric bill - a process referred as net metering. The electric grid thus serves as a “storage device” for PV-generated power.

 

The initial market focus for our commercial installation business has been the Chinese-American and broader Asian-American community of Southern California, with special emphasis on the Asian-American commercial market. We have been able to attract the attention of news media serving this market segment. Several newspapers (Chinese Daily News and World Journal), TV stations (Phoenix Satellite Television and DongSen Satellite Television), and local radio stations (AM1300), have had special reports on our company. These reports have generated positive reactions from readers, viewers, and listeners and have driven customer traffic to our office.

 

Today, we are focused on offering solar power solutions for owners, builders and architecture firms, including designing, building, operating, monitoring and maintaining solar power systems. Our customers run the gamut from small private residences to larger commercial solar power projects. In year 2008, we designed and installed a solar system for an office building, which covered 20,000 square feet roof top with 21KW, 112 pieces solar PV panels. The system is expected to save $89,185 in first 5 years for the customer. The end to end solution included roof reconstruction and solar power system. The system will have reduced CO2 emissions by 549,468 pounds which is equivalent to planting 120 acres of trees or removing 50 cars from the road.

16
Table of Contents

In year 2009, we designed and installed one 170KW and one 165KW solar power system for a logistic company and a food & oil manufacturer respectively. These two systems will have saved around $900,000 for customers in the first five years in the form of reduced ongoing energy bills. End to end solutions included design and construction of mental shielding frame, roof reconstruction, and solar power system design/installation. These two systems are expected to reduce CO2 emissions by 3,830,067 pounds and 3,736,567 pounds which is the equivalent to planting around 900 acres of trees or removing around 350 cars from the road.

 

We plan to continue to pursue our media-based marketing and sales strategy in Southern California.  In addition, we are working very closely with our solar panel suppliers and inverter supplier to bid on larger power plants, including government contracts.  

 

Principal Suppliers

 

We currently purchase solar panels primarily from several manufacturers, including Canadian Solar Inc., CEEG SST (which was acquired by China Energy in 2010.) and Tianwei Solarfilms. For the year ended December 31, 2009, these vendors accounted for approximately 92% of our total inventory purchases. We are the preferred distributor in the USA and the exclusive distributor in Southern California, Nevada and New Mexico of Canadian Solar Inc., which is a top-10 PV manufacturer in the world.

 

We maintain good relationships with all of our suppliers, and especially with our primary and important suppliers. In addition, we are continuously adding new alternative suppliers to our supplier list. Due to the standardization of solar equipment, all materials we purchase from our suppliers are available from other sources and suppliers.

 

We are the preferred distributor in the USA and the exclusive distributor in Texas, Nevada and Arizona of CEEG SST (acquired by CSUN in year 2010), one of a few PV panel manufacturers in the world that is able to provide high efficiency mono-crystalline solar panels. We are also the preferred distributor in the USA and the exclusive distributor in Texas, Nevada and Florida of Tianwei Solarfilm, one of the few manufactures in the world that is able to provide high efficiency thin film panels.

 

Our revenues currently derive from solar system design and installation as well as solar equipment distribution. In order to expand our installation business to states other than California, we will be required to comply with local license requirements by acquiring a local installer or by hiring locally-licensed contractors to serve as officers. For our solar equipment distribution business, no local licensures are required in California or other states.

 

As a result of continuing global development at all levels of solar equipment manufacturing, including in the area of raw materials supply, in 2009 and 2010, the risk of disruption in the supply of necessary raw materials for solar panels has been greatly reduced in 2011. In addition, we have established solid relationships with several large solar equipment suppliers, allowing us to access multiple sources. For the immediate future, we therefore believe that raw materials for our products will continue to be readily available.

17
Table of Contents

Solar power companies in China have invested billions of dollars in solar power technology and PV panel manufacturing over the past few years. However, the market for solar power in China is not yet mature. Meanwhile, the European market is overcrowded. As a result, Chinese manufacturers are looking for business opportunities in the United States. As an established technology and system integration company, Sunvalley maintains a unique position to act as the bridge between Chinese manufacturers and their North American end customers while providing superior value-added services to these customers. Sunvalley has established strategic partnerships with several solar equipment manufacturers, solar power technology companies, and research institutes in China. We have signed a distribution agreement with Canadian Solar, Inc., which is a top-10 PV manufacturer. To further broaden our product coverage and provide its customers with more options on solar panels and inverters, We have also signed distribution agreements with CEEG SST (acquired by CSUN in year 2010) and Tainwei Solarfilms.  This will allow us to extend our product coverage from low cost PV panels to high efficiency PV panels and up to thin-film panels. We have also established partnerships with inverter supplier PV Powered, as well as solar racking manufacturers and solar electrical wires providers. The partnership with these manufacturers in the solar power industry allows Sunvalley to provide its customers with a cost competitive, complete solar system solution with multiple selective options on PV panels and inverters.

 

Intellectual Property

 

Our R&D team has developed a new type of nano-structured solar cell and filed for patent protection in the U.S. as “New Solar Cell Structure with Increased Efficiency” on March 22, 2010, application number 12/729,201.  We are currently applying for a Phase-I grant from Department of Energy, entitled "Surface Plasmon Enhanced Solar Cells,” in order to fund additional development of our proprietary solar cell.

 

The specific patent application info is as follows:

 

EFS ID 7261431
Application Number 12729201
Confirmation Number 6760
Title A Surface Plasmon Resonance Enhanced Solar Cell Structure with Broad Spectral and Angular Bandwidth and Polarization Insensitivity
Receipt Date 22-MAR-2010
Application Type Utility under 35 USC 111(a)

 

Personnel

 

We have 20 employees, 16 of whom are full-time employees.  Our current internal departments include the Administration Department, the Engineering Department, the Sales/Marketing Department and the New Technology Development Department.  We are lead by a management team that includes a group of scientists, research/development engineers, a professional marketing/sales team, and an experienced supply chain management team. In addition, our team includes solar power system design engineers, solar power system installation engineers, electrical system design engineers and construction engineers.

18
Table of Contents

Government Regulation

 

The market for solar energy systems is heavily influenced by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as policies adopted by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. For example, there currently exist metering caps in certain jurisdictions, which limit the aggregate amount of power that may be sold by solar power generators into the electric grid. These regulations and policies have been modified in the past and may be modified in the future in ways that could deter purchases of solar energy systems and investment in the research and development of solar energy technology. For example, without a mandated regulatory exception for solar energy systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. Such fees could increase the cost to our customers of using solar energy systems and make them less desirable, thereby harming our business, operating results and financial condition. Changes in net metering policies could also deter the purchase and use of solar energy systems. In addition, electricity generated by solar energy systems competes primarily with expensive peak hour electricity rates rather than with the less expensive average price of electricity. Modifications to the peak hour pricing policies of utilities, such as to a flat rate, would require solar energy systems to achieve lower prices in order to compete with the price of electricity.

 

The importation of a part of the products we sell is subject to tariffs, duties and quotas imposed by the United States.  In addition, other restrictions on the importation of our products are periodically considered by the United States Congress, and may again be considered to protect against “Asian” deflation.  No assurances can be given that tariffs or duties on such goods may not be raised, resulting in higher costs to us or that import quotas with respect to such goods will not be lowered.  Deliveries of products from our foreign suppliers could be restricted or delayed by the imposition of lower quotas or increased tariffs.  We may be unable to obtain similar quality products at equally favorable prices from domestic suppliers or from other foreign suppliers whose quotas have not been exceeded by the supply of goods to existing customers.

 

Research and Development Expenditures

 

In 2009, we had R&D expenses of $35,000 for the development of advanced solar technologies, not including regular salary payment to our research engineers. In 2010, we incurred no R&D expenses except salary payment to our research engineers. None of our R&D costs have been borne directly by our customers.

 

Subsidiaries

 

We do not have any subsidiaries.

19
Table of Contents

Item 1A. Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 1B. Unresolved Staff Comments

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Properties

 

We lease approximately 2,193 sq ft of office space in the Walnut Tech Business Center located at 398 Lemon Creek Drive, Suite A, Walnut CA 91789 for $3,211 per month.  This lease will terminate on May 31, 2011. The property is sufficient for our current business size. We plan to extend our lease for another three years after May 31, 2011.

 

Item 3. Legal Proceedings

 

Trade Secrets Lawsuit

 

On March 3, 2009, we filed a lawsuit against Yuming (Travis) Chou and Chenghsien (Ken) Hsieh for fraud, conversion, violation of the trade secrets act, violations of the business and professions code section 17200, and unjust enrichment.  The lawsuit was filed in the Los Angeles Superior Court, and the case number is BC408968.  Our counsel for this case is The Law Offices of Bin Li, PLC and its associate counsel, Jason J.L. Yang, Esq.  We alleged that Chou and Hsieh, while employed at the Company, wrongfully took our trade secrets (consisting of customer contracts, customer lists, Sunvalley solar system designs, investment agreements, financial reports, and employee records) for the purpose of starting their own competing solar company.  On May 22, 2009, Hsieh filed a cross-complaint against Sunvalley Solar, Inc. for rescission of 70,000 shares purchased by Hsieh (at the cost of $70,000), unpaid wages, and wrongful termination.  Hsieh amended the cross-complaint on July 29, 2009, and withdrew the unpaid wages and wrongful termination claims on October 22, 2009.  After we reached a settlement with Travis Chou, Mr. Chou was dismissed from the case on September 18, 2009.  We amended our complaint on October 13, 2009 by adding two defendants – KYM Construction, Inc. and Tai Hai (Terry) Yu.  On August 26, 2010, we reached a settlement with Chenghsien Hsieh. Mr. Hsien and other defendants were dismissed from the case. The remainder of the suit has subsequently been dismissed.

 

Our agent for service of process in Nevada is Val-U-Corp Services, Inc., 1802 North Carson St., Ste. 108, Carson City, NV 89701.

 

Item 4. Submission of Matters to a Vote of Security Holders

 

No matters were submitted to a vote of the Company's shareholders during the fiscal year ended December 31, 2010.

 

20
Table of Contents

PART II

 

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by FINRA. The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current "bids" and "asks", as well as volume information. Our shares are quoted on the OTCBB under the symbol “SSOL.OB.”

 

The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

Fiscal Year Ended December 31, 2010
Quarter Ended High $ Low $
December 31, 2010 $0.0479 $0.0044
September 30, 2010 $0.0802 $0.0310
June 30, 2010 $0.0016 $0.0016
March 31, 2010 n/a n/a
Fiscal Year Ending December 31, 2009
Quarter Ended High $ Low $
December 31, 2009 n/a n/a
September 30, 2009 $0.0003 $0.0003
June 30, 2009 n/a n/a
March 31, 2009 n/a n/a

 

On March 24, 2011, the last sales price per share of our common stock was $0.0124.

 

Penny Stock

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

21
Table of Contents

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

 

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

 

Holders of Our Common Stock

 

As of March 25, 2011, we had approximately two hundred seventeen (217) holders of record of our common stock, as well as other stockholders who hold shares in street name.

 

Dividends

 

There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes (the “NRS”) provides that a corporation may pay dividends out of surplus, out the corporation's net profits for the preceding fiscal year, or both provided that there remains in the stated capital account an amount equal to the par value represented by all shares of the corporation's stock raving a distribution preference.

 

We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

To date, we have not adopted a stock option plan or other equity compensation plan and have not issued any stock, options, or other securities as compensation.

 

Recent Sales of Unregistered Securities

 

None.

22
Table of Contents

Item 6. Selected Financial Data

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Business Development Plan

 

The primary components of our growth strategy are as follows:

• Developing and commercializing our proprietary solar technologies including our coating and focusing technologies, racking and panel cleaning system. By deploying these new technologies into our PV panels and solar installation business, we hope to enhance the value provided to our customers and increase our profitability.

 

• Promoting and enhancing our company’s brand and reputation in solar design and integration and expanding our installation business from Southern California to Northern California, Arizona or other states.

 

• Developing a PV panel manufacturing capability to provide high efficiency and low cost solar panels to US market. This will complement our installation business and provide an implementation platform for our R&D.

 

• Getting involved in the private power providing business (Distributed Power Plants).  Developing this line of business will lead to higher profit margins and income to our business. In the future, this line of business could become one of our main income sources.

  

Expansion of Installation Business

 

We are planning to expand its installation business from Southern California to Northern California, Arizona or other states in two to three years. We will continue to execute our marketing and sales strategy in Southern California and, with additional capital, will be able to expand our business to cover Northern California, Arizona or other states.  The planned expansion is expected to occur through acquiring smaller installation companies in these regions and/or through the establishment of subsidiaries in these states and boost our installation profits. Our current intention is to establish two new offices located in Northern California or other states and in San Diego. The estimated start-up cost for each new branch would be approximately $500,000.

23
Table of Contents

If we are able to expand our installation business, it will assist us in gaining favorable terms from OEM international manufacturers of our planned solar panel manufacturing operation.  In addition, an expanded installation business would allow us to accelerate the introduction of our new technologies and solar parts and would generate additional revenue to fund initial investment in our planned Distributed Power Plant business and to further fund our investments in R&D.


Commercialization of Research and Development

 

Prior to initiating our planned OEM manufacturing of Sunvalley-branded solar panels, we will need to commercialize our advanced panel technology through the design, fabrication, and characterization of a prototype solar cell.  The total expense for planned commercialization of our research and development will be approximately $500,000. The necessary equipment and facilities will be accessed from University of California, San Diego. The Nano3 clean room facilities in the school of Engineering at UCSD are equipped with state-of-the-art micro and nano fabrication equipment and facilities, and can be accessed by outside users with a $107 hourly fee.

 

The interference pattern that will be recorded in the solar cells will be obtained using an Argon laser operating at 362nm. This laser and its associated equipment is available to us through a special arrangement with the administration office in the University of California, San Diego, as well as the Ultrafast and Nano-scale Optics lab in the Department of Electrical and Computer Engineering in UCSD.

 

Other equipment will also be required, including coating machine for PV panel testing.

 

24
Table of Contents

Initiate OEM Manufacturing of Solar Panels

 

By leveraging its solar panel installation business and R&D, we plan to procure OEM solar panels from selected Chinese manufacturers and to market them in the U.S. under our brand name. We will be responsible for R&D, quality control, customer service, sales and marketing activities, as well as panel certification in U.S.

 

The estimated OEM panel cost is less than $1.40 per watt. As a reference, currently, the lowest panel price is around $1.80 per watt (Mono-crystalline, Polycrystalline). We can use our own sales and installation platform to showcase the new panels and drive sales of the new panels in the U.S market. Meanwhile, we will continue our R&D effort on panel coating and other advanced technologies and apply the results to its panel manufacturing business. The goal will be to further improve the efficiency, lower the cost of solar panels with our proprietary technologies, and to grow our market share.

 

Our marketing strategy for its planned OEM solar panels is as follows:

 

Set-up a platform to showcase our innovative solar panel technologies and make Sunvalley solar panels a household name.

 

Unlike other merchandise, solar panel is very unique in that it requires very high level of quality assurance and customer satisfaction. Providing satisfactory customer service and technical support is absolutely vital in solar panel sales. As the first step, we will strive to make its brand a household name. The Sunvalley solar panel will be used by our installation business as well as several other installation companies which have partnerships with us. We do not currently have partnerships with other solar installation companies, but we plan to pursue them after introducing the panels to the market through our own installation business. A marketing campaign aimed at other solar installation companies will help to achieve this goal. We will use our own installation business as the platform to showcase the product quality and build up consumer awareness of its brand.

 

• Penetrate into the main stream distribution network

 

By leveraging early successes and customer trust earned from our initial installations, we plan to penetrate into the mainstream distribution network with our OEM solar panels.

 

• Further sale activities

 

Once our brand name solar panels become well known, our sales team will begin an aggressive marketing campaign to connect the individual sales points (distributors and venders) to form a distribution network. The marketing campaigns will also include attending trade shows, advertising in the media (TV commercials and newspaper advertisement) and designating local representatives to boost the market share and brand awareness.

 

• Offer a low cost, high efficiency solar panel derived from advanced research

25
Table of Contents

To boost our solar panel market share, our R&D team will work with our OEM partner to apply selective coating technique and other cutting edge technologies to further reduce the manufacturing cost and improve the panel efficiency.

 

The total capital required to initiate our planned panel manufacturing business would be approximately $2,000,000 which can be categorized into three parts:

 

• Registration and Certification of OEM panels with our brand – $300,000, including UL certification fees, CEC registration fees, and lab testing fees.

 

• Initial Inventory – $1,500,000.  We will need to keep at least 4 containers of PV panels in the warehouse in order to support sales of 5~10M watts per year, which means we will need to have over $1,000,000 in inventory for PV panels only. An additional $300,000 in inventory would be needed in order to keep the requisite amount of inverters and racking and panel cleaning systems. In addition, we anticipate providing variable payment terms to different customers based on their creditworthiness; this will add additional cash flow pressure.

 

• OEM Management costs – $200,000

 

Develop Distributed Power Plan Business

 

With our resources and experience gained from large scale solar power system designs, installation and other related business, we believe we have unique advantages in the design and installation of large roof-top power plant systems. We are aggressively proposing our Distributed Power Plant solution to utility companies in Southern California. We believe that by collaborating with us on this approach, utility companies will benefit in the form of free installation, field space, and our expertise on large commercial solar system designs, installation and maintenance services, as well as our technical and management experience. By collaborating with us, utility companies can help to achieve their alternative energy requirements under California law.

 

We are pursuing substantial contracts with some of our current installation customers who control or own over 2,000,000 square feet of roofs on warehouses or other buildings in Southern California. We are also seeking additional private space agreements with other commercial customers. We are among the few companies in California that has the permit and expertise to install large-scale commercial and/or government solar power systems, together with roof constructional design and building interior/exterior electrical designs. We believe additional advantages are provided by our experience in filing solar power system permit applications and rebate applications and our expertise gained through our experience with governments and utility companies.

26
Table of Contents

Results of Operations for the Years Ended December 31, 2010 and 2009.

 

During the fiscal year ended December 31, 2010, we generated gross revenues of $4,634,140. Total cost of sales was $3,924,330, resulting in gross profit of $709,810. Operating expenses were $1,080,905. We experienced other income in the amount of $11,147 and interest expense of $15,891. The net loss for the fiscal year ended December 31, 2010 was therefore $375,839.

 

By comparison, we generated gross revenues of $4,413,033 during the fiscal year ended December 31, 2009. Total cost of sales was $3,804,905, resulting in gross profit of $608,108. Operating expenses for 2009 were $1,219,905. We experienced other income in the amount of $40,000 and interest expense of 16,062. The net loss for the fiscal year ended December 31, 2009 was therefore $587,859.

 

In 2007 and 2008, the majority of our revenue came from our solar system design and installation business, including both residential and commercial projects. Specifically, in 2008, we produced $2.63 million in revenue from solar system design and installation. The gross profit margin of the solar installation business is approximately 20%.

 

Although we had expected to see an increase of over 150% in our solar installation business in 2009, our solar installation business and the solar industry as a whole was badly affected by the global economic crisis started in late 2008. During 2009 and 2010, because banks and investment institutes were very reluctant to loan money to solar customers, many potential solar power system customers suspended their plans to invest in new solar power systems. This development, in turn, had a negative impact on our solar installation business in 2009 and 2010. In order to reduce the risk to our business presented by these developments, we expanded our operations to include a new solar equipment distribution business beginning in November of 2008. We established distribution partnerships with Canadian Solar Inc., CEEG SST, Tainwei Solarfilms, and PV Powered Inc., to distribute solar panels, solar inverters and other solar equipments to their clients in the U.S. Although the gross margin for our distribution business is less than 10%, this line of business contributed to the majority of our gross revenues in 2009 and 2010.

 

Liquidity and Capital Resources

 

As of December 31, 2010, we had current assets in the amount of 3,097,062, consisting of cash in the amount of $546,164, accounts receivable of $546,388, inventory in the amount of $1,925,233, other receivables of $7,481, and prepaid expenses and other current assets of $71,796. As of December 31, 2010, we had current liabilities in the amount of $2,994,330. These consisted of accounts payable and accrued expenses in the amount of $2,883,316, accrued warranty in the amount of $27,688, customer deposits of $70,070, and the current portion of long term debt in the amount of $13,256. Our working capital as of December 31, 2010 was therefore $102,732.

27
Table of Contents

Our accounts payable and accrued expenses as of December 31, 2010 consisted of the following:

 

Accounts Payable $ 2,780,527
Credit Card payable $ 44,789
Accrued vacation $ 14,905
Other accrued expense $ 22,995
Payroll liabilities $ 1,068
Sales tax payable $ 18,232
State Income tax payable $ 800
Total $ 2,883,316.00

 

As of December 31, 2010, our only long-term liability was a loan owing to East West Bank with a balance of $87,525. The current portion due within the next year is $13,256. The principal amount outstanding accrues annual interest at the bank's variable index rate (approx. 6.00% as of December 31, 2010). The East West Bank loan is collateralized by all business assets.

In order to move forward with our business development plan set forth above, we will require additional financing in the approximate amount of $4,500,000, to be allocated as follows:

 

Initiate OEM Manufacturing $ 2,000,000
R &D Commercialization Costs $ 500,000
Expansion of Installation Business (3 new branches) $ 1,500,000
Additional working capital and general corporate $ 500,000
Total capital needs $ 4,500,000

 

We will require substantial additional financing in the approximate amount of $4,500,000 in order to execute our business expansion and development plans and we may require additional financing in order to sustain substantial future business operations for an extended period of time.  We currently do not have any firm arrangements for financing and we may not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible.

 

We are currently seeking additional financing through the sale of common equity, including the sale of common equity to Auctus Private Equity Fund, LLC through a Draw-Down Equity Financing Agreement, and/or the issuance of debt convertible to common equity. If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.

 

Going Concern

 

We have experienced recurring losses from operations and had an accumulated deficit of $958,924 as of December 31, 2010. To date, we have not been able to produce sufficient sales to become cash flow positive and profitable on an ongoing basis. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. For these reasons, our auditor has raised substantial doubt about our ability to continue as a going concern.

28
Table of Contents

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material.

 

Purchase or Sale of Equipment

 

We do not expect to purchase or sell any plant or significant equipment.

 

I tem 7A. Quantitative and Qualitative Disclosures about Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 8. Financial Statements and Supplementary Data

 

Index to Financial Statements Required by Article 8 of Regulation S-X:

 

Audited Financial Statements:
F-1 Report of Independent Registered Public Accounting Firm
F-2 Consolidated Balance Sheets as of December 31, 2010  and 2009
F-3 Consolidated Statements of Operation for the years ended December 31, 2010 and 2009
F-4 Consolidated Statements of Stockholders’ Equity (Deficit) for period from December 31, 2008 to December 31, 2010
F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009
F-6 Notes to Consolidated Financial Statements
29
Table of Contents

SADLER, GIBB & ASSOCIATES, L.L.C.

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

Sunvalley Solar, Inc.

 

We have audited the accompanying consolidated balance sheets of Sunvalley Solar, Inc., as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Sunvalley Solar, Inc., as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company had losses from operations of $375,839 and accumulated deficit of $958,924, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning 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.

 

SADLER, GIBB AND ASSOCIATES, LLC

 

 

/s/ Sadler, Gibb and Associates, LLC

Salt Lake City, UT

March 25, 2011

F- 1
Table of Contents

SUNVALLEY SOLAR, INC.

Consolidated Balance Sheets

 

ASSETS
    December 31,   December 31,
    2010   2009
         
CURRENT ASSETS                
Cash and cash equivalents   $ 546,164     $ 309,453  
Accounts receivable, net     546,388       295,278  
Inventory     1,925,233       3,344,866  
Other receivables     7,481       65,378  
Prepaid expenses and other current assets     71,796       1,527  
                 
Total current assets     3,097,062       4,016,502  
                 
PROPERTY AND EQUIPMENT, NET     71,208       56,853  
                 
OTHER ASSETS                
Other assets     18,186       16,936  
                 
Total other assets     18,186       16,936  
                 
TOTAL ASSETS   $ 3,186,456     $ 4,090,291  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                 
CURRENT LIABILITIES                
Accounts payable and accrued expenses   $ 2,883,316     $ 3,405,207  
Bank overdraft     —         —    
Accrued warranty     27,688       22,833  
Current portion of long-term debt     13,256       8,178  
Notes payable to related party     —         175,000  
Customer deposits     70,070       93,555  
                 
Total current liabilities     2,994,330       3,704,773  
                 
LONG-TERM LIABILITIES                
Notes payable     74,269       91,822  
                 
Total long-term liabilities     74,269       91,822  
                 
TOTAL LIABILITIES     3,068,599       3,796,595  
                 
STOCKHOLDERS' EQUITY                
                 
Common stock, $0.001 par value, 1,000,000,000 shares                
authorized, 800,068,420 and 485,151,406 shares                
issued and outstanding, respectively     800,068       485,151  
Additional paid-in capital     276,713       391,630  
Accumulated deficit     (958,924 )     (583,085 )
                 
Total Stockholders' Equity     117,857       293,696  
                 
TOTAL LIABILITIES AND                
 STOCKHOLDERS' EQUITY   $ 3,186,456     $ 4,090,291  
                 

 

The accompanying notes are an integral part of these financial statements

F- 2
Table of Contents

SUNVALLEY SOLAR, INC.

Consolidated Statements of Operations

 

  For the Years Ended
  December 31,
  2010   2009
       
REVENUES $ 4,634,140     $ 4,413,033  
COST OF SALES   3,924,330       3,804,925  
               
GROSS PROFIT   709,810       608,108  
               
OPERATING EXPENSES              
Salary and wage expense   547,738       500,014  
Bad debt expense   35,320       44,680  
General and administrative expenses   497,847       675,211  
               
     Total operating expenses   1,080,905       1,219,905  
               
LOSS FROM OPERATIONS   (371,095 )     (611,797 )
               
OTHER INCOME (EXPENSES)              
Interest income   —         —    
Interest expense-related parties   —         —    
Other income   11,147       40,000  
Interest income (expense), net   (15,891 )     (16,062 )
               
     Total other income (expenses)   (4,744 )     23,938  
               
LOSS BEFORE TAXES   (375,839 )     (587,859 )
               
Provision for income taxes   —         —    
               
NET LOSS $ (375,839 )   $ (587,859 )
               
LOSS PER SHARE              
Basic and diluted $ (0.00 )   $ (0.00 )
               
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING              
Basic and diluted   648,323,685       485,844,422  

 

The accompanying notes are an integral part of these financial statements

F- 3
Table of Contents

SUNVALLEY SOLAR, INC.

Consolidated Statements of Stockholders' Equity (Deficit)

 

  Common Stock   Additional
Paid-In
  Accumulated    
  Shares   Amount   Capital   Deficit   Total
                   
Balance at December 31, 2008   488,984,171     $ 488,984     $ 387,797     $ 4,774     $ 881,555  
                                       
Retirement of common stock   (3,832,765 )     (3,833 )     3,833                  
                                       
Net loss for the year                                      
ended December 31, 2009   —         —         —         (587,859 )     (587,859 )
                                       
Balance at December 31, 2009   485,151,406       485,151       391,630       (583,085 )     293,696  
                                       
Repurchase of common stock   (5,110,353 )     (5,110 )     (194,890 )     —         (200,000 )
                                       
Recapiltalization   320,027,367       320,027       (320,027 )     —         —    
                                       
Contributed captial   —         —         400,000       —         400,000  
                                       
Net loss for the year                                      
ended December 31, 2010   —         —         —         (375,839 )     (375,839 )
                                       
Balance at December 31, 2010   800,068,420     $ 800,068     $ 276,713     $ (958,924 )   $ 117,857  

 

The accompanying notes are an integral part of these financial statements

F- 4
Table of Contents

SUNVALLEY SOLAR, INC.

Consolidated Statements of Cash Flows

 

  For the Years Ended
  December 31,
  2010   2009
       
OPERATING ACTIVITIES:              
               
Net income (loss) $ (375,839 )   $ (587,859 )
Adjustments to reconcile net income (loss) to net cash              
provided by operating activities:              
Depreciation and amortization   14,148       15,355  
Changes in operating assets and liabilities:              
Accounts receivable   (251,110 )     (244,830 )
Inventory   1,419,633       (2,848,324 )
Prepaid expenses and other assets   (70,269 )     247,737  
Other receivable   57,897       (60,369 )
Deferred financing costs   —         26,500  
Accounts payable and accrued warranty expenses   (517,036 )     3,346,227  
Other assets   (1,250 )     —    
Customer deposits   (23,484 )     (18,651 )
               
Net Cash Provided by (Used) in Operating Activities   252,690       (124,214 )
               
INVESTING ACTIVITIES:              
               
Purchase in property and equipment   (28,504 )     (8,551 )
               
Net Cash (Used) in Investing Activities   (28,504 )     (8,551 )
               
FINANCING ACTIVITIES:              
               
Proceeds from related party notes payable   —         285,000  
Repayment of related party notes payable   (175,000 )     (310,000 )
Proceeds from notes payable   —         158,000  
Repayments from notes payable   (12,475 )     (58,000 )
Contributed capital   400,000       —    
Repurchase of common stock   (200,000 )     —    
               
Net Cash Provided by Financing Activities   12,525       75,000  
               
NET INCREASE (DECREASE) IN CASH   236,711       (57,765 )
CASH AT BEGINNING OF YEAR   309,453       367,218  
               
CASH AT END OF YEAR $ 546,164       309,453  
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:              
               
CASH PAID FOR:              
Interest $ 24,808     $ 8,021  
Income taxes $ —       $ —    
               
NON-CASH INVESTING AND FINANCING ACTIVITIES $ —       $ —    
None $ —       $ —    
Common stock issued for placement agent services $ —       $ —    

 

The accompanying notes are an integral part of these financial statements

F- 5
Table of Contents

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Organization

Sunvalley Solar, Inc. (the Company) was incorporated on August 16, 2007 under the laws of the State of Nevada as Western Ridge Minerals, Inc. Sunvalley Solar Inc. (the "Subsidiary"), formerly known as West Coast Solar Technologies Corporation, a California corporation, was incorporated on January 30, 2007.

 

On June 24, 2010, in accordance with the Exchange Agreement dated June 24, 2010, Western Ridge Minerals acquired all of the issued and outstanding shares of the Sunvalley, which resulted in Sunvalley becoming a wholly-owned subsidiary.  In exchange for all of the issued and outstanding shares of Sunvalley, the shareholders of the Sunvalley received a total of 480,041,053 (2,514,600 pre-split) shares of Western Ridge Mineral’s common stock, which represented approximately 60% of the Company’s outstanding common stock following the acquisition. There were 1,049,271,312 (5,496,400 pre-split) shares of common stock outstanding before giving effect to the stock issuances in the acquisition and the cancellation of 729,243,944 (3,820,000 pre-split) shares by Mr. Marco Bastidas and certain other shareholders resulted in there being 800,068,420 (4,191,000 pre-split) shares outstanding post acquisition. As a result, the shareholders of the Subsidiary became the controlling shareholders of the combined entity. In connection with the acquisition, $400,000 was contributed to the Company from a Company shareholder.

 

Accordingly, the transaction is accounted for as a recapitalization with the Subsidiary deemed to be the accounting acquirer and the Company the legal acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of the Subsidiary prior to the Merger are reflected in the financial statements and are recorded at the historical cost basis of the Subsidiary. The Company’s consolidated financial statements after completion of the Acquisition include the assets and liabilities of both companies. Following the Acquisition the Company’s fiscal year-end has been changed from March 31 to December 31.

 

Description of Business

The Company markets, sells, designs and installs solar panel for residential and commercial customers. The Company 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

As reflected in the accompanying financial statements, the Company has experienced recurring losses from operations through December 31, 2010 and has an accumulated deficit of $958,924 as of December 31, 2010. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

Management plans to raise additional operating capital through a private placement of the Company’s common stock. Management believes that with sufficient working capital the Company can produce sufficient sales to become cash flow positive and profitable which will allow it to continue as a going concern. There is no assurance that the Company will be successful in its plans.

 

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

F- 6

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

 

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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, sales returns, stock based compensation, inventory reserves, valuation allowances for property and equipment and intangible assets, deferred income tax valuation allowances and litigation. 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.

 

Accounts Receivable

The Company performs periodic credit evaluations of its customers’ financial condition and does not require collateral. Trade receivables generally are due in 30 days. 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 trade receivables balance will not be collected. The Company’s allowance for doubtful accounts totals $80,000 and $44,680, as of December 31, 2010 and 2009.

 

Customer Deposits

Customer deposits represent advance payments received for products and are recognized as revenue in accordance with the Company’s revenue recognition policy.

 

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.  The Company’s reserve for excess and obsolete inventory amounted to $-0- and $-0- as of December 31, 2010 and 2009.

 

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.  The estimated useful lives used in determining depreciation are three to five years for tooling, five years for computers and vehicles, and five to seven years for furniture and equipment. Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions.

F- 7

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

 

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (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:

 

Useful Life
Automobile 5 Years
Furniture 7 Years
Software 5 Years
Office Equipment 5 Years
Machinery 5 Years

 

Long-Lived Assets

In accordance with ASC 360, Accounting for the Impairment or Disposal of 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, 2010 and 2009.

 

Fair Value of Financial Instruments

For certain financial instruments, including accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their relatively short maturities. In the case of the Notes Payable, the interest rate on the notes approximates the market rate of interest for similar borrowings. Consequently the carrying value of the Notes Payable also approximates the fair value. It is not practicable to estimate the fair value of the Notes Payable to Related Party due to the relationship of the counterparty.

 

Revenue Recognition

The completion of a solar installation project ranges from one to six months, thus the Company recognizes revenue of a system installation under the completed contract method of accounting. Revenue from installation of a system or sales of solar panels are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable and (4) collection of the related receivable is reasonably assured.

 

Cost of Sales

Cost of sales is comprised primarily of the cost of purchased product, as well as labor, inbound freight costs and other material costs required to complete products.

 

Product Warranties

The Company warrants its products for various periods against defects in material or installation workmanship. The manufacturers of the solar panels and the inverters provide a warranty period of generally 25 years and l0 years, respectively. The Company will assist its customers in the event that the manufacturers’ warranty needs to be used to replace a defective solar panel or inverter. The Company provides for a l0-year warranty on the installation of a system and all equipment and incidental supplies other than solar panels and inverters that are recovered under the manufacturers’ warranty. Maintenance services such as cleaning the solar panels and checking the systems are offered to customers twice a year without a separate service charge.

F- 8

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The Company records a provision for the installation warranty, an expense included in cost of sales, based on management's best estimate of the probable cost to be incurred in honoring its warranty commitment. The Company's accrued warranty provision was $27,688 and $22,833 at December 31, 2010 and 2009, respectively.

 

Advertising Expenses

Advertising expenses are expensed as incurred.  Total advertising expenses amounted to $27,210 and $20,478 for the years ended December 31, 2010 and 2009, respectively.

 

Research and Development

Research and development costs are expensed as incurred and amounted to approximately $-0- and $35,000 for the years ended December 31, 2010 and 2009, respectively. These costs are included in selling, general and administrative expenses in the accompanying statements of operations.

 

Income Taxes

The Company applies ASC 740, which requires 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 adopted ASC 740, at the beginning of fiscal year 2008. This interpretation requires recognition and measurement of uncertain tax positions using a “more-likely-than-not” approach, requiring the recognition and measurement of uncertain tax positions. The adoption of ASC 740 had no material impact on the Company’s 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 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.

 

Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of outstanding common shares (restricted and free trading) during the periods presented. Basic loss per share and diluted loss per share are the same amount because the impact of additional common shares that might have been issued under the Company’s outstanding and exercisable warrants would be anti-dilutive. There were no potentially dilutive shares that were excluded from the shares used to calculate diluted loss per share for the years ended December 31, 2010 and 2009.

 

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our 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: RESTRICTED CASH

 

In order to comply with the State of California's licensing requirement or contract bonds as of December 31, 2010 and 2009 the Company maintains a certificate of deposit in the amount of $12,500 with a financial institution. The

restricted cash amount is included in other assets in the accompanying December 31 , 2010 and 2009 balance sheets.

F- 9

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

NOTE 4: INVENTORY

 

The Company’s inventory consisted of the following at December 31, 2010 and 2009:

 

  2010   2009
Raw materials $ 8     $ 309,494  
Work in Progress   6,741       13,972  
Finished goods   1,918,484       3,021,400  
Total Inventory $ 1,925,233     $ 3,344,866  

 

NOTE 5: OTHER RECEIVABLES

 

The Company participates in the California Solar Initiative ("CSI") Program launched by Southern California Edison( "SCE"). Other receivables include the Expected Performance Based Buy-down ("EPBB") rebates under the CSI program. Once the Company completes the solar systems which are connected to SCE's power grid and the site passes inspection and all of the required information is submitted the Company will receive the EPBB rebates from SCE.

 

NOTE 6: PROPERTY AND EQUIPMENT

 

The following is a summary of property and equipment at December 31, 2010 and 2009:

 

  2010   2009
Computer equipment $ 32,407     $ 31,253  
Furniture   16,065       16,065  
Software   2,368       2,368  
Vehicles   62,094       34,734  
Gross Property and Equipment   112,934       84,420  
Less: accumulated depreciation   (41,726 )     (27,567 )
Net Property and Equipment $ 71,208     $ 56,853  

 

Depreciation expense for the years ended December 31, 2010 and 2009 was $14,159 and $15,355, respectively.

 

NOTE 7: RELATED PARTY TRANSACTIONS

 

The Company owes $-0- and $175,000 for short-term related party loans with maturity dates less than a year bearing an interest rate of 6.5% per annum to its stockholders as of December 31, 2010 and 2009, respectively. The interest expense incurred for these short-term loans was $9,014 and $15,542, for the years ended December 31, 2010 and 2009, respectively. $175,000 plus $19,147 of interest was paid during 2010. $310,000 plus $6,400 of interest was repaid during 2009.

F- 10

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

NOTE 8: NOTES PAYABLE

 

Notes payable outstanding as of December 31, 2010 and 2009 consisted of the following:

 

  2010   2009
SBA loan payable (1) $ 87,525     $ 100,000  
Total Notes Payable $ 87,525     $ 100,000  

 

(1)    The Company has a loan through a bank with a maximum borrowing of $100,000 is collateralized by all business assets. Any principal amounts outstanding accrue interest at the bank's variable index rate (approximately 6.00% as of December 31, 2010).

 

Future maturities of long-term debt are as follows:

 

2011 $ 13,256  
2012   14,072  
2013   14,940  
2015   15,861  
2016   16,839  
Thereafter   12,557  
Total $ 87,525  

 

NOTE 9: EQUITY TRANSACTIONS

 

Common Stock Issuances

On June 24, 2010, in accordance with the Exchange Agreement dated June 24, 2010, Western Ridge Minerals acquired all of the issued and outstanding shares of the Sunvalley, which resulted in Sunvalley becoming a wholly-owned subsidiary.  In exchange for all of the issued and outstanding shares of Sunvalley, the shareholders of the Sunvalley received a total of 480,041,053 (2,514,600 pre-split) shares of Western Ridge Mineral’s common stock, which represented approximately 60% of the Company’s outstanding common stock following the acquisition. There were 1,049,271,312 (5,496,400 pre-split) shares of common stock outstanding before giving effect to the stock issuances in the acquisition and the cancellation of 729,243,944 (3,820,000 pre-split) shares by Mr. Marco Bastidas and certain other shareholders resulted in there being 800,068,420 (4,191,000 pre-split) shares outstanding post acquisition. As a result, the shareholders of the Subsidiary became the controlling shareholders of the combined entity. In connection with the acquisition, $400,000 was contributed to the Company from a Company shareholder.

 

Accordingly, the transaction is accounted for as a recapitalization with the Subsidiary deemed to be the accounting acquirer and the Company the legal acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of the Subsidiary prior to the Merger are reflected in the financial statements and are recorded at the historical cost basis of the Subsidiary. The Company’s consolidated financial statements after completion of the Acquisition include the assets and liabilities of both companies. Following the Acquisition the Company’s fiscal year-end has been changed from March 31 to December 31.

 

During the year ended December 31, 2009, the Company cancelled a total of 3,832,765 common stock shares returned to it from shareholders.

 

During the year ended December 31, 2010, the Company entered into agreements to repurchase a total of 5,110,353 common stock shares from shareholders at a price of approximately $0.04 per share.

F- 11

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

 

NOTE 9: EQUITY TRANSACTIONS (CONTINUED)

 

On July 20, 2010 the Company’s board of directors approved a 19.0885235 for 1 forward stock split of the Company’s common stock. On August 23, 2010 the Company’s board of directors approved a 10 for 1 forward stock split of the Company’s common stock. The Company’s authorized common stock was increased to 1,000,000,000. This forward splits have been retroactively applied and is reflected in the financial statements for the period ended September 30, 2010.

 

NOTE 10: SIGNIFICANT EVENTS

 

On December 31, 2010, the Company entered into a Drawdown Equity Financing Agreement (the “DEFA”) and an accompanying Registration Rights Agreement (the “RRA”) with Auctus Private Equity Fund, LLC, a Massachusetts limited liability company (“Auctus”).  Under the DEFA, the Company has agreed to issue and sell up to $10,000,000 worth of the Company’s common stock, par value $0.001 per share, over a three year period.

 

The DEFA entitles the Company to request “Advances,” or draw-downs, under the agreement at our election from time to time.  By delivery of a Drawdown Notice under the agreement, the Company can affect the sale of common stock to Auctus valued at a maximum of either (i) $500,000 or (ii) 200% of the average daily volume of the common stock based on the ten (10) trading days preceding the Drawdown Notice Date (as defined in the DEFA), whichever is larger. The purchase price of the common stock for an Advance shall be set at ninety-three percent (93%) of the lowest closing bid price of the common stock during the Pricing Period, which is defined as the five (5) consecutive trading days immediately after the Drawdown Notice Date.  There must be a minimum of five (5) trading days between each Drawdown Notice Date.

 

Under the DEFA, Auctus shall immediately cease selling any shares of the Company’s common stock during a Pricing Period if a) the market price of the Company’s common stock falls below a fixed-price floor that the Company provide per Drawdown or b) the market price of the Company’s common stock falls below seventy-five percent (75%) of the average closing bid price of the common stock over the preceding ten (10) trading days prior to the Drawdown Notice Date (the "Floor"). In the Company’s sole discretion, the Company may waive its right with respect to the Floor and allow Auctus to sell any shares below the Floor Price.  The floor price restriction only applies to the five (5) consecutive trading days immediately after the Drawdown Notice Date.

 

NOTE 11: INCOME TAXES

 

The FASB has issued FASB ASC 740-10 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. This standard requires a company to determine 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.  As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.  

 

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.

F- 12

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

NOTE 11: INCOME TAXES (CONTINUED)

 

Deferred tax assets and the valuation account are as follows:

 

  2010   2009
Deferred tax assets:              
NOL carryover $ 127,786     $ 199,872  
Valuation allowance   (127,786 )     (199,872 )
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 tax rates of 34% to pretax income from continuing operations for the years ended December 31, 2010 and 2009. The components of income tax expense are as follows:

 

  2010   2009
Book income (loss) $ (327,658 )   $ (199,872 )
Valuation allowance   327,658       199,872  
  $ —       $ —    

 

The Company currently has no issues creating timing differences that would mandate deferred tax expense. Net operating losses would create possible tax assets in future years. Due to the uncertainty of the utilization of net operating loss carry forwards, an evaluation allowance has been made to the extent of any tax benefit that net operating losses may generate. A provision for income taxes has not been made due to net operating loss carry-forwards of $963,699 and $587,859 as of December 31, 2009 and 2008, respectively, which may be offset against future taxable income through 2030. No tax benefit has been reported in the financial statements.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

Years Ended
2010 2009
Federal statutory rate -25.00 % -25.00 %
State taxes - net of federal benefit -9.00 % -9.00 %
Meals and entertainment 0.00 % 0.00 %
Contributed Services 0.00 % 0.00 %
Penalties 0.00 % 0.00 %
Change in valuation allowance 34.00 % 34.00 %
0.00 % 0.00 %

 

The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes.  As of December 31, 2010 and 2009, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by major taxing jurisdictions are for the years ended December 31, 2010, 2009, and 2008.

F- 13

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

NOTE 12: COMMITMENTS AND CONTINGENCIES

 

The Company leases an office under an operating lease that expires on May 31, 2011.  Total rent expense amounted to $38,000 and $37,000 for the fiscal years ended December 31, 2010 and 2009, respectively.

 

Future minimum base lease payments are as follows:

 

    Year Ending
December 31,
 
2011 $ 16,000  
 Total $ 16,000  

Legal Proceedings

 

From time to time, the Company is involved in various claims and legal actions arising in the ordinary course of business.  In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

 

  NOTE 13: CONCENTRATIONS OF RISK

 

Supplier Concentrations

The Company purchases solar panels from one manufacturer and one manufacturer during the years ended December 31, 2010 and 2009, respectively. For the years ended December 31, 2010 and 2009, these vendors accounted for approximately 97% and 97%, respectively, of total inventory purchases.

 

Customer Concentrations

For the years ended December 31, 2010 and 2009, one and two customers, respectively, represented more than 10% of the Company’s sales. This translates to approximately 19% and 29%, respectively, of the Company's annual net revenues.

 

NOTE 14: SUBSEQUENT EVENTS

 

On December 30, 2010, the board of directors approved the entry into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc. (“Asher”) and the issuance to Asher of a Convertible Promissory Note (the “Note”) under the SPA in the amount of $100,000.  The SPA and the Note are effective January 7, 2011.  The Note bears interest at an annual rate of 8%, with principal and interest coming due on October 7, 2011.  The Note may be converted in whole or in part, at the option of the holder, to shares of our common stock, par value $0.001, at any time following 180 days after the issuance date of the Note.  The conversion price under the Note is 61% of the Market Price of our common stock on the conversion date.  For purposes of the Note, “Market Price” is defined as the average of the 3 lowest closing prices for our common stock on the 10 trading days immediately preceding the conversion date.  The number of shares issuable upon conversion is limited so that the Holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares. This condition may be waived at the option of the holder upon not less than 61 days notice.

 

Upon conversion of the Note in whole or in part, the Company will be obligated to deliver the conversion stock to the holder within 3 business days of our receipt of notice of conversion.  Failure to timely deliver conversion stock will cause us to incur daily penalties.  The conversion price will be subject to adjustment in the event of certain dilutive issuances of securities, distributions of stock or assets to shareholders, mergers, consolidations, and certain other events. Pre-payment of the Note will result in certain penalties depending on the time of pre-payment, and will not be allowed after 180 days.

F- 14

SUNVALLEY SOLAR, INC.

Notes to the Consolidated Financial Statements

 December 31, 2010 and 2009

NOTE 14: SUBSEQUENT EVENTS (CONTINUED)

 

On January 19, 2011, a majority of the Company’s shareholders and the board of directors approved an amendment to the Articles of Incorporation to increase the total authorized common stock from 1,000,000,000 shares to 1,500,000,000 shares.

 

In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no additional material subsequent events to report.

 

15

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

None

 

Item 9A(T). Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and treasurer, as appropriate to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010. Based on their evaluation, they concluded that our disclosure controls and procedures were ineffective. The ineffectiveness of our disclosure controls and procedures were due to a lack of segregation of duties.

 

Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed by, or under the supervision of, our chief executive officer and chief financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Under the supervision and with the participation of our management, including our chief executive officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation under the criteria established in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was ineffective as of December 31, 2010. The ineffectiveness of our disclosure controls and procedures were due to a lack of segregation of duties.

30
Table of Contents

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

During the most recently completed fiscal year, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The following table sets forth information regarding the members of our board of directors and our executive officers and other significant employees. All of our officers and directors were appointed on the effective date of the Merger. All of our directors hold office until the next annual meeting of stockholders and their successors are duly elected and qualify. Executive officers serve at the request of the board of directors.

 

Name Age Office(s) held
Zhijian (James) Zhang 43 President, CEO, Director
Mandy Chung 42 Chief Financial Officer, Secretary, Treasurer
Hangbo (Henry) Yu 56 General Manager, Director
Fang Xu 44 Chief Technology Officer
Shirley Liao 41 Director of Administration
Anyork Lee 60 Director

 

Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.

 

Zhijian (James) Zhang – Dr. Zhang is our President, CEO, and a member of our board of directors. He has held these positions since January of 2007. Dr. Zhang graduated from Tsinghua University with a Ph.D. in opto-electronics. He has over 15 years of experience in opto-electronics and the semiconductor industry. From 2006 to 2008, he held the position of senior manager at Motorola, a leading telecommunication equipment provider. From 2004 to 2006, he held the position of Director at ZTE San Diego, also a leading telecommunication equipment provider.

 

Dr.Zhang has a strong reputation as an executive in the opto-electronics/semiconductor industry, including the solar energy field. Dr. Zhang has quality leadership experience in business operations, especially in product and program development, product development procedures, and milestone setting and enforcement, and R&D team building.

31
Table of Contents

Mandy Chung -- Ms. Chung is our Chief Financial Officer, Secretary, and Treasurer.  She has held these positions since August of 2008. Ms. Chung co-founded Chung & Chung Accountancy Corporation, CPAs (CCAC) in 2004 and she is licensed as a Certified Public Accountant in California. Ms. Chung is one of the partners in CCAC and she provides audit, review, compilation, consulting, tax services and financial planning to various clients. Ms. Chung has been working for CCAC for the past five years since its establishment.

 

Ms. Chung graduated from Texas A&M University (College Station) with a Master’s degree in Finance and a Bachelor’s degree in Accounting. Ms. Chung has over 15 years of public accounting experience in providing auditing, accounting, business consulting and tax services to a wide range of industries. She has extensive experience in performing reviews and audits for various organizations, including publicly reporting companies. In addition, Ms. Chung helped the former founder of Dietrich Coffee to prepare a ten-year business and financial plan to establish a new series of coffee stores. Ms. Chung also conducted various incurred costs audits for MGM Mirage, Los Angeles County Metropolitan Transportation Authority and Caltrans.

 

Hangbo (Henry) Yu -- Mr. Yu is our General Manager and a member of our Board of Directors. He has served in these positions since January of 2007 and was the founder of our business. From 2004 through 2006, Mr. Yu was the General Manager and a board member of International Transportation Corp., Canada. He graduated from Beijing University of Aeronautics and Astronautics with a Bachelor’s degree in Structure Design. He has run several startup companies in China and Canada, respectively. Over the past 12 months, Mr. Yu has been working to establish relationships with major solar power equipment manufacturers in China. Mr. Yu is an experienced business and operations manager. He has over 20 years of experience in import-export, logistics, international transportation, solar business operation and solar power system project planning and field managing.

 

Fang Xu -- Dr. Xu is our Chief Technology Officer.  He has served in this position since July of 2008. From 2005 through June of 2008, he was a staff design engineer at Via Telecom, Inc. He graduated from the Electrical Department of Beijing University in China, has a Masters Degree in Electronics from the University of Alabama, and a PhD in Photonics from the University of California, San Diego. Dr. Xu is currently in charge of our research and development efforts . Dr. Xu has over 13 years of experience in both in academic and industrial environments. Dr. Xu has extensive knowledge in photonics, and optics, as well as micro and nano-scale device processing technologies. In addition, Dr. Xu has hands on experience in making the nano-scale structure that modifies the effective dielectric properties of optical materials. Dr. Xu has been a pioneer in the use polarization selective materials to construction micro and nanoscale diffractive optical elements.

32
Table of Contents

Shirley Liao -- Mrs. Liao is our Director of Administration.  She has served Sunvalley Solar, Inc. in this position since January of 2007. She graduated from Guangxi University in Art and Financial Management. Before moving to the United States, Shirley Liao worked in an international trading company (Audio & Video Company of Guangxi) as an executive management member. While working there, Mrs. Liao acquired experience in international trade as well as general sales management. From 1997 through 1998, she worked at Trust Bank as a Loan Officer. She has also worked at Coldwell Banker George Realty since 2000 as a real estate broker. Through the real estate sales business, she established a great relationships with local societies, business owners, banks, builders and government agencies. Her excellent market and sales experiences as well as connections to customers bring an exceptional value to the company.

 

Anyork Lee -- Mr. Lee is a member of our Board of Directors.  He graduated from National Taiwan University, Taiwan and got his MBA from California State University, Stanislaus, in 1979. Mr. Lee has extensive connections to various Chinese-American and other organizations and societies. Mr. Lee has been a Director of the Board of Alhambra Medical University since 2005 and served as a Governing Board Member of Walnut Valley from 1997 to 2005. He is the president of CAAM (California Alliance of Acupuncture Medicine), Chairman of Southern California Chapter of APIAPAA (Asian Pacific Island American Public Affair Association), a Planning Committee Member of Susan Samueli Center for Integrative Medicine at University of California, Irvine, a Board Member of the Chinese American Association of Diamond Bar, and a member of the Board of Trustees of Walnut Valley Unified School District. Mr. Lee’s other affiliations include:

 

Jan. 2008 – present Council of Acupuncture & Oriental Medical Association, President
April 2007 – present Asian Pacific Island American Public Affair Association-
Southern California Chapter, Chair
Jan. 2007 – present Ca. Alliance of Acupuncture Medicine, President Emeritus
Aug. 2005 – present University of California, Irvine, Susan Samueli Center for Integrative Medicine, Planning Committee Member
Oct. 2004 – present

DB 4Youth, member

Asian American Acupuncture College, San Diego

 

Directors

 

Our bylaws authorize no less than one (1) and no more than twelve (12) directors. We currently have three directors.   Zhijian (James) Zhang, Hangbo (Henry) Yu, and Anyork Lee, are our current directors.

 

All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.

 

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers other than Shirley Liao and Hangbo (Henry) Yu who are wife and husband.

33
Table of Contents

Committees of the Board

 

We do not currently have a compensation committee, executive committee, or stock plan committee.

 

Audit Committee

 

We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K. Mandy Chung, our CFO, Secretary, and Treasurer, attends all meetings of the Board of Directors, including those meetings at which the board is performing those functions which would generally be performed by an audit committee. Mrs. Chung is licensed as a Certified Public Accountant in California. Mrs. Chung has over 15 years of public accounting experience in providing auditing, accounting, business consulting and tax services to a wide range of industries. She has extensive experience in performing reviews and audits for various organizations including publicly reporting companies. She also had prior audit experience in the filing process for a start-up company that filed with SEC to become a publicly reporting company. We believe that Mrs. Chung’s accounting expertise and audit experience allows her to provide satisfactory counsel to the Board and that, at our current size and stage of development, the addition of a special audit committee financial expert to the Board is not necessary.

 

Nomination Committee

 

Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.

 

When evaluating director nominees, our directors consider the following factors:

 

  The appropriate size of our Board of Directors;
  Our needs with respect to the particular talents and experience of our directors;
  The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;
  Experience in political affairs;
  Experience with accounting rules and practices; and
  The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.

 

Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.

34
Table of Contents

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended June 30, 2006, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended December 31, 2010:

 

Name and principal position

Number of

late reports

Transactions not

timely reported

Known failures to

file a required form

Zhijian (James) Zhang 0 0 0
Mandy Chung 0 0 0
Hangbo (Henry) Yu 0 0 0
Fang Xu 0 0 0
Shirley Liao 0 0 0
Anyork Lee 0 0 0

 

35
Table of Contents

Code of Ethics

 

As of December 31, 2010, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Due to the small size of our organization, we have not, to date, found it necessary to adopt a formal code of ethics or to incur the professional costs involved in preparing such a document.

 

Item 11. Executive Compensation

 

Compensation Discussion and Analysis

 

We presently do not have employment or compensation agreements with any of our named executive officers and have not established any overall system of executive compensation or any fixed policies regarding compensation of executive officers.  Currently, our executive officers receive fixed cash compensation as set forth below.

 

Summary Compensation Table

 

The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.

 

SUMMARY COMPENSATION TABLE

Name and

principal position

Year

Salary

($)

Bonus

($)

Stock Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings ($)

All Other

Compensation

($)

Total

($)

Zhijian (James) Zhang, President, CEO, and Director

2010

2009

98,500

99,400

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

 98,500

99,400

Mandy Chung, CFO, Secretary, and Treasurer

2010

2009

37,500

42,000

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

37,500

42,000

Hangbo (Henry) Yu, General Manager and Director

2010

2009

100,000

96,000

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

100,000

96,000

Fang Xu, CTO

2010

2009

9,300

7,200

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

9,300

7,200

Shirley Liao, Director of Administration

2010

2009

61,502

43,000

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

61,502

43,000

Marco Bastidas, former sole officer

2010

2009

n/a

0

n/a

0

n/a

0

n/a

0

n/a

0

n/a

0

n/a

0

n/a

0

 

Narrative Disclosure to the Summary Compensation Table

 

Currently, our executive officers receive fixed cash compensation as set forth in the Summary Compensation Table. We presently do not have employment or compensation agreements with any of our named executive officers and have not established any overall system of executive compensation or any fixed policies regarding compensation of executive officers.

36
Table of Contents

Stock Option Grants

 

We have not granted any stock options to the executive officers or directors since our inception.

 

 Outstanding Equity Awards At Fiscal Year-end Table

 

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS STOCK AWARDS
Name

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

Number of

Securities

Underlying

Unexercised

Options

 (#)

Unexercisable

Equity

Incentive

 Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

Option

Exercise

 Price

 ($)

Option

Expiration

Date

Number

of

Shares

or Shares

of

Stock That

Have

Not

Vested

(#)

Market

Value

of

Shares

or

Shares

of

Stock

That

Have

Not

Vested

($)

Equity

Incentive

 Plan

Awards:

 Number

of

Unearned

 Shares,

Shares or

Other

Rights

That Have

 Not

Vested

(#)

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Shares or

Other

Rights

That

Have Not

 Vested

(#)

Zhijian (James) Zhang, President, CEO, and Director - - - - - - - - -
Mandy Chung, CFO, Secretary, and reasurer - - - - - - - - -
Hangbo (Henry) Yu, General Manager and Director - - - - - - - - -
Fang Xu, CTO - - - - - - - - -
Shirley Liao, Director of Administration - - - - - - - - -
Marco Bastidas, former sole officer - - - - - - - - -
37
Table of Contents

Compensation of Directors Table

 

The table below summarizes all compensation paid to our directors for our last completed fiscal year.

 

DIRECTOR COMPENSATION
Name

Fees Earned or

Paid in

Cash

($)

 

 

Stock Awards

($)

 

 

Option Awards

($)

Non-Equity

Incentive

Plan

Compensation

($)

Non-Qualified

Deferred

Compensation

Earnings

($)

 

All

Other

Compensation

($)

 

 

 

Total

($)

Zhijian (James) Zhang 0 -0 -0 -0 -0 -0 -0
Hangbo (Henry) Yu 0 -0 -0 -0 -0 -0 -0
Anyork Lee 0 -0 -0 -0 -0 -0 -0
Marco Bastidas, former director - - - - - - -

 

 

Narrative Disclosure to the Director Compensation Table

 

We do not currently provide any compensation to directors for their service as directors.

 

Employment Agreements with Current Management

 

We do not currently have any employment agreements in place with any of our executive officers.

 

38
Table of Contents

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth the beneficial ownership of our capital stock by each executive officer and director, by each person known by us to beneficially own more than 5% of any class of stock and by the executive officers and directors as a group. Except as otherwise indicated, all Shares are owned directly and the percentage shown is based on 803,068,420 shares common stock issued and outstanding as of March 25, 2011.

 

Title of class

Name and address

of beneficial owner (1)

Amount of

beneficial ownership

Percent

of class

Current Executive Officers & Directors:
Common Stock

Zhijian (James) Zhang

12161 Salix Way

San Diego CA 92129

88,075,400 shares 10.97%
Common Stock

Hangbo (Henry) Yu

3309 S. Gauntlet Dr.

West Covina, CA 91792

70,621,050 shares 8.79%
Common Stock

Anyork Lee

1050 Yorba Linda Blvd.

Placentia, CA 92870

30,664,190 shares 3.82%
Common Stock

Shirley Liao

3309 S Gauntlet Dr.

West Covina, CA 91792

17,734,000 shares 2.21%
Common Stock

Mandy Chung

1059 Moreno Way

Placentia, CA 92870

6,899,360 shares 0.86%
Common Stock

Fang Xu

11239 Vandemen Way

San Diego, CA 92131

127,700 shares 0.02%
Total of All Current Directors and Officers:
Common Stock 214,124,700 shares 26.67%
More than 5% Beneficial Owners
Common Stock

Haibo Yu

38499 Berkeley Common

Fremont  CA  94536

59,888,520 shares 7.46%

 

(1) As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
39
Table of Contents

Securities Authorized for Issuance Under Equity Compensation Plans

 

To date, we have not adopted a stock option plan or other equity compensation plan and have not issued any stock, options, or other securities as compensation.

 

Disclosure of Commission Position of Indemnification for Securities Act Liabilities

 

In accordance with the provisions in our articles of incorporation, we will indemnify an officer, director, or former officer or director, to the full extent permitted by law.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Except as set forth below,none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us:

 

1. We previously borrowed the sum of $100,000 from our President, James Zhang. This loan bore interest at a rate of 6.5% per annum. The principal of $100,000, plus interest of $9,941.44, was repaid in 2010.

 

2. We previously borrowed the sum of $75,000 from our General Manager, Hangbo (Henry) Yu. This loan also bore interest at a rate of 6.5% per annum. The principal of $75,000, plus interest of $9,205.68, was repaid in 2010.

 

Director Independence

 

We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we believe that Anyork Lee is our only independent director.

 

Item 14. Principal Accounting Fees and Services

 

Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:

 

Financial Statements for the Year Ended December 31 Audit Services Audit Related Fees Tax Fees Other Fees
2010 $27,000 $0 $0 $0
2009 $13,000 $0 $0 $0
40
Table of Contents

PART IV

 

Item 15. Exhibits, Financial Statements Schedules

 

(a) Financial Statements and Schedules

 

The following financial statements and schedules listed below are included in this Form 10-K.

 

Financial Statements (See Item 8)

 

(b) Exhibits

 

Exhibit Number Description
3.1 Articles of Incorporation
3.2 Bylaws
3.3 Certificate of Amendment filed June 22, 2010
3.4 Articles of Merger filed July 6, 2010
3.5 Certificate of Change filed August 12, 2010
3.6 Certificate of Amendment filed January 21, 2011
10.1 Drawdown Equity Financing Agreement
10.2 Registration Rights Agreement
10.3 Convertible Promissory Note to Asher Enterprises, Inc. (No. 1)
10.4 Convertible Promissory Note to Asher Enterprises, Inc. (No. 2)
10.5 Premises Lease
10.6 Territory Distribution Contract -- Canadian Solar, Inc.
10.7 Distribution Contract -- CEEG SST
10.8 Distribution Contract -- TianWei SolarFilms Co.
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
41
Table of Contents

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Sunvalley Solar, Inc.

 

By: /s/ James Zhang

James Zhang

President, Chief Executive Officer,

and Director

 

May 12 , 2011

 

In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

 

By: /s/ James Zhang

James Zhang

President, Chief Executive Officer,

and Director

 

May 12 , 2011

 

By: /s/ Mandy Chung

Mandy Chung

Chief Financial Officer, Principal Accounting Officer, Secretary, and Treasurer

 

May 12 , 2011

 

By: /s/ Hangbo (Henry) Yu

Hangbo (Henry) Yu

General Manager, Director

 

May 12 , 2011

 

 
 

 

ROSS MILLER

Secretary of State

206 North Carson Street

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

 

Articles of Incorporation  

(PURSUANT TO NRS 78)

 

    ABOVE SPACE IS FOR OFFICE USE ONLY
1. Name of Corporation: Western Ridge Minerals, Inc.
     
2.

Resident Agent

Name and Street Address:

(must be a Nevada address where process may be served)

Val-U-Corp Services, Inc.
  Name      
  1802 North Carson Street, Suite 212 Carson City NV 89701
  Street Address City ST Zip Code
         
  Optional Mailing Address City ST Zip Code
3.

Shares:

(number of shares corporation authorized to issue)

Number of shares

with par value:

75,00,000 Par value: $ .001 Number of shares without par value:  
               
4.

Names &

Addresses

of Board of

Directors/Trustees:

(attach additional page if there is more than 3 directors/trustees)

1.         Daniel A. Kramer
  Name
  1802 North Carson Street, Suite 212 Carson City NV 89701
  Street Address City ST Zip Code
  2.  
    Name  
           
    Street Address City ST Zip Code
    3.  
    Name  
           
    Street Address City ST Zip Code
           
5.

Purpose:

(optional-see instructions)

The purpose of this Corporation shall be: All legal purposes
           
6.

Name, Address and Signature of Incorporator.

(attach additional page if there is more than 1 incorporator)

Daniel A. Kramer /s/Daniel A. Kramer
  Name Signature
  1802 North Carson Street, Suite 212 Carson City NV 89701
  Street Address City ST Zip Code
           
7.

Certificate of

Acceptance of

Appointment of

Resident Agent:

I hereby accept appointment as Resident Agent for the above named corporation.
  /s/ Daniel A. Kramer 08/16/20007
  Authorized Signature of R.A. or On Behalf of R.A. Company Date
                     

 

1
 

 

Articles of Incorporation

 

Of

 

Western Ridge Minerals, Inc.

 

First. The name of the corporation is Western Ridge Minerals, Inc.

 

Second. The registered office of the corporation in the State of Nevada is located at 1802 N. Carson Street, Suite 212, Carson City, Nevada 89701.The corporation may maintain an office, or offices in such other places within or without the State of Nevada as may be from time to time designated by the Board of Directors or the By-Laws of the corporation.  The corporation may conduct all corporation business of every kind and nature outside the State of Nevada As well as within the State of Nevada.

 

Third. The objects for which this corporation is formed are to engage in any lawful activity, including, but not limited to the following:

 

a) Shall have such rights, privileges and powers, when not inconsistent with the purposes and objects for which this corporation is organized.

 

b) May at any time exercise such rights, privileges and powers, when not inconsistent with the purposes and objects for which this corporation is organized.

 

c) Shall have power to have succession by its corporate name for the period limited in its certificate or articles of incorporation, and when no period is limited, perpetually, or until dissolved and its affairs wound up according to law.

 

d) Shall have power to sue and be sued in any court of law or equity.

 

e) Shall have power to make contracts.

 

f) Shall have power to hold, purchase and convey real and personal estate and to mortgage or lease any such real and personal estate with its franchises. The power to hold real and personal estate shall include the power to take the same by devise or bequest in the State of Nevada, or in any other state, territory or country.

 

g) Shall have power to appoint such officers and agents the affairs of the corporation shall require, and to allow them suitable compensation.

 

h) Shall have power to make By-Laws not inconsistent with the constitution or laws of the United States or of the State of Nevada, for the management, regulation and government of its affairs and property. The transfer of its stock, the transaction of its business, and the calling and holding of meetings of its stockholders.

 

i) Shall have power to wind up and dissolve itself, or be wound up or dissolved.

 

j) Shall have power to adopt and use a common seal or stamp, and alter the same at pleasure. The use of a seal or Stamp by the corporation on any corporate documents is not necessary. The corporation may use a seal or stamp, if it desires, but such use or nonuse shall not in any way affect the legality of the document.

 

k) Shall have the power to borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation; to issue bonds, promissory notes, bills of exchange, debentures, and other obligations and evidences of indebtedness, payable at a specified time or times, or payable upon the happening of a specified event or events; whether secured by mortgage, pledge or otherwise, or unsecured for money borrowed, or in payment for property purchased or acquired, or for any other lawful object.

2
 

l) Shall have power to guarantee, purchase, hold, sell, sign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock of, or any bonds, securities or evidences of the indebtedness created by, any other corporation or corporations of the State of Nevada; or any other state or government; and, while owners of such stock, bonds; securities or evidences of indebtedness, to exercise all rights, powers and privileges of ownership, including the right to vote, if any.

m) Shall have power to purchase, hold, sell and transfer shares of its own capita1 stock, and use therefore its capital, capital surplus, surplus, or other property to fund.

 

n) Shall have power to conduct business, have one or more offices, and conduct any legal activity in the State of Nevada, and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia, and any foreign countries.

 

o) Shall have power to do all and everything necessary and proper for the accomplishment of the objects enumerated in its certificate or articles of incorporation or any amendment thereof, or necessary or incidental to the protection and benefit of the corporation, and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the corporation, whether or not such business is similar in nature to the objects set forth in the certificate or articles of incorporation of the corporation, or any amendments thereof.

 

p) Shall have power to make donations for the public welfare or for charitable, scientific or educational purposes.

 

q) Shall have power to enter into partnerships, general or limited, or joint ventures, in connection with any lawful activities, as may be allowed by law.

 

Fourth. That the total number of stock authorized that may be issued by the Corporation is seventy five million (75,000,000) shares of Common stock with a par value of one tenth of one cent ($0.001) per share and no other class of stock shall be authorized. Said shares may be issued by the corporation from time to time for such considerations as may be fixed by the Board of Directors.

 

Fifth. The governing board of the corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the By-Laws of this corporation, providing that the number of directors shall not be reduced to fewer than one (1).

 

The first Board of Directors shall be one (l) in number and the name and post office address of the Director shall be listed as follows:

 

Daniel A. Kramer

1802 N. Carson St., Ste. 212, Carson City. NV 89701

3
 

 

Sixth. The capital stock, after the amount of the subscription price, or par value, has been paid in, shall not be subject to assessment to pay the debts of the corporation.

 

Seventh . The name and post office address of the Incorporator signing the Articles of Incorporation is as follows:

 

Daniel A. Kramer

1802 N. Carson St., Ste. 212, Carson City, NV 89701

 

Eighth. The Registered Agent for this corporation shall be VAL-U-CORP SERVICES, INC. The address of the Registered Agent, and the registered or statutory address of this corporation in the State of Nevada, shall be: 1802 N. Carson Street, Suite 212, Carson City, Nevada 89701.

 

Ninth. The corporation is to have perpetual existence.

 

Tenth. In furtherance and not in limitation of the power conferred by the statute, the Board of Directors is expressly authorized:

 

a) Subject to the By- Laws, if any, adopted by the stockholders, to make, alter or amend the By-Laws of the corporation.
b) To fix the amount to be reserved as working capital over and above its capital stock paid in; to authorize and cause to be executed, mortgages and liens upon the real and personal property of this corporation.

c) By resolution passed by a majority of the whole Board, to designate one (l) Or more committees, each committee to consist of one or more of the Directors of the corporation, which, to the extent provided in the resolution, or in the By-Laws of the corporation, shall have and may exercise the powers of the  Board of Directors in the management of the business and affairs of the corporation.  Such committee, or committees., shall have such name, or names as may be stated in the By-Laws of the corporation, or as may be determined from time to time by resolution adopted by the Board of Directors
d) When and as authorized by the affirmative vote of the Stockholders holding stock entitling them to exercise at least a majority of the voting power given at a Stockholders meeting called for that purpose, or when, authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions as its Board of Directors deems expedient and for the best interests of the corporation.

 

Eleventh. No shareholder shall be entitled as a matter of right to subscribe for or receive additional shares of any class of stock of the corporation, whether now or hereafter authorized, or any bonds, debentures or securities convertible into stock, but such additional shares of stock or other securities convertible into stock may be issued or disposed of by the Board of Directors to such persons and on such terms as in its discretion it shall deem advisable.

 

Twelfth. No Director or Officer of the corporation shall be personally liable to the corporation or any of its stockholders for damages for breach of fiduciary duty as a Director or Officer involving any act or omission of any such Director or Officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a Director or Officer (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of the law, or (ii) the payment of dividends in violation of 78.300 of the Nevada Revised Statutes; Any repeal or modification of this Article by the Stockholders of the corporation shall be prospective only, and shall not adversely affect any limitations on the personal liability of a Director, or Officer of the corporation for acts or omissions prior to such repeal or modification.

 

Thirteenth. This corporation reserves the right to amend, alter, change or repeal any provision contained in the Articles of Incorporation, in the manner now or hereafter prescribed by statute, or by the Articles of Incorporation, and all rights conferred upon Stockholders herein are granted subject to this reservation . I, the undersigned, being the Incorporator hereinbefore named for the purpose of forming a corporation pursuant to General Corporation Law of the State of Nevada, do make and file these Articles of Incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set my hand this August 16, 2007.

 

/s/ Daniel A. Kramer

Daniel A. Kramer

Incorporator

 
 

BY-LAWS

OF

WESTERN RIDGE MINERALS, INC.

(A NEVADA CORPORATION)

 

ARTICLE I

OFFICES

 

Section 1. Registered Office. The registered office of the corporation in the State of Nevada shall be at such place as the board shall resolve.

 

Section 2. Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Nevada as the Board of Directors may from time to time determine or the business of the corporation may require.

 

ARTICLE II

CORPORATE SEAL

 

Section 3. Corporate Seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, "Corporate Seal-Nevada." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

ARTICLE III

STOCKHOLDERS' MEETINGS

 

Section 4. Place of Meetings. Meetings of the stockholders of the corporation shall be held at such place, either within or without the State of Nevada, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the corporation required to be maintained pursuant to Section 2 hereof.

 

Section 5. Annual Meeting.

 

(a) The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors.

 

 

(b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting.  To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (C) otherwise properly brought before the meeting by a stockholder.  For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation.  To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholder to be timely must be so received not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or, in the event public announcement of the date of such annual meeting is first made by the corporation fewer than seventy (70) days prior to the date of such annual meeting, the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the corporation.  A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a proponent to a stockholder proposal.  Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder's meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (b).  The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (b), and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

 

(c) Only persons who are confirmed in accordance with the procedures set forth in this paragraph (c) shall be eligible for election as directors.  Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (c).  Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation in accordance with the provisions of paragraph (b) of this Section 5.  Such stock¬holder's notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (c) the class and number of shares of the corporation which are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (b) of this Section 5.  At the request of the Board of Directors, any person nominated by a stockholder for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in the stockholder's notice of nomination which pertains to the nominee.  No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (c).  The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded.

2
 

 

(d) For purposes of this Section 5, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

 

Section 6. Special Meetings.

 

(a) Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption), and shall be held at such place, on such date, and at such time, as the Board of Directors shall determine.

 

(b) If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by tele-graphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. If the notice is not given within sixty (60) days after the receipt of the request, the person or persons requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

3
 

 

Section 7.Notice of Meetings. Except as otherwise provided by law or the Articles of Incorporation, written notice of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, date and hour and purpose or purposes of the meeting. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

 

Section 8.Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Articles of Incorporation, or by these Bylaws, the presence, in person or by proxy duly authorized, of the holder or holders of not less than fifty percent (50%) of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, all action taken by the holders of a majority of the votes cast, excluding abstentions, at any meeting at which a quorum is present shall be valid and binding upon the corporation; provided, however, that directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Articles of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and, except where otherwise provided by the statute or by the Articles of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of the votes cast, including abstentions, by the holders of shares of such class or classes or series shall be the act of such class or classes or series.

 

Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares casting votes, excluding abstentions. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

4
 

 

Section 10. Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person or by an agent or agents authorized by a proxy granted in accordance with Nevada law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

 

Section 11. Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Nevada Court of Chancery for relief as provided in the General Corporation Law of Nevada, Section 217(b).  If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

 

Section 12. List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where the meeting is to be held.  The list shall be produced and kept at the time and place of meeting during the whole time thereof and may be inspected by any stockholder who is present.

 

Section 13. Action Without Meeting.   No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Bylaws, or by the written consent of the stockholders setting forth the action so taken and signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote upon were present and voted.

 

Section 14. Organization.

 

(a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

5
 

 

(b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

 

ARTICLE IV

DIRECTORS

 

Section 15. Number and Qualification. The authorized number of directors of the corporation shall be not less than one (1) nor more than thirteen (13) as fixed from time to time by resolution of the Board of Directors; provided that no decrease in the number of directors shall shorten the term of any incumbent directors. Directors need not be stockholders unless so required by the Articles of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.

 

Section 16. Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Articles of Incorporation.

 

Section 17. Election and Term of Office of Directors. Members of the Board of Directors shall hold office for the terms specified in the Articles of Incorporation, as it may be amended from time to time, and until their successors have been elected as provided in the Articles of Incorporation.

 

Section 18. Vacancies. Unless otherwise provided in the Articles of Incorporation, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholder vote, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director's successor shall have been elected and qualified.  A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

6
 

 

Section 19. Resignation. Any director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his successor shall have been duly elected and qualified.

 

Section 20. Removal . Subject to the Articles of Incorporation, any director may be removed by the affirmative vote of the holders of a majority of the outstanding shares of the Corporation then entitled to vote, with or without cause.

 

Section 21. Meetings.

 

(a) Annual Meetings. The annual meeting of the Board of Directors shall be held immediately after the annual meeting of stockholders and at the place where such meeting is held. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it.

 

(b) Regular Meetings. Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the office of the corporation required to be maintained pursuant to Section 2 hereof. Unless otherwise restricted by the Articles of Incorporation, regular meetings of the Board of Directors may also be held at any place within or without the state of Nevada which has been designated by resolution of the Board of Directors or the written consent of all directors.

 

(c) Special Meetings. Unless otherwise restricted by the Articles of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Nevada whenever called by the Chairman of the Board, the President or any two of the directors.

 

(d) Telephone Meetings. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

(e) Notice of Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, facsimile, telegraph or telex, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting, or sent in writing to each director by first class mail, charges prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

7
 

 

(f) Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present shall sign a written waiver of notice. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 22.Quorum and Voting.

 

(a) Unless the Articles of Incorporation requires a greater number and except with respect to indemnification questions arising under Section 43 hereof, for which a quorum shall be one-third of the exact number of directors fixed from time to time in accordance with the Articles of Incorporation, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Articles of Incorporation provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

 

(b) At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Articles of Incorporation or these Bylaws.

 

Section 23. Action Without Meeting. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

 

Section 24. Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors.  Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefore.

8
 

 

Section 25.Committees.

 

(a) Executive Committee.  The Board of Directors may by resolution passed by a majority of the whole Board of Directors appoint an Executive Committee to consist of one (1) or more members of the Board of Directors.  The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, including without limitation the power or authority to declare a dividend, to authorize the issuance of stock and to adopt a certificate of ownership and merger, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Articles of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation.

 

(b) Other Committees.  The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall such committee have the powers denied to the Executive Committee in these Bylaws.

 

(c) Term. Each member of a committee of the Board of Directors shall serve a term on the committee coexistent with such member's term on the Board of Directors. The Board of Directors, subject to the provisions of subsections (a) or (b) of this Bylaw may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors.  The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee.  The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

 

(d) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

9
 

 

Section 26. Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or if the President is absent, the most senior Vice President, or, in the absence of any such officer, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting.  The Secretary, or in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

 

ARTICLE V

OFFICERS

 

Section 27. Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the Controller, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

 

Section 28. Tenure and Duties of Officers.

 

(a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

 

(b) Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28.

10
 

 

(c) Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless some other officer has been elected Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

 

(d) Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

(e) Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation.  The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice.  The Secretary shall perform all other duties given him in these Bylaws and other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.  The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

(f) Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President.  The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

11
 

 

Section 29. Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

Section 30. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

 

Section 31. Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.

 

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING

OF SECURITIES OWNED BY THE CORPORATION

 

Section 32. Execution of Corporate Instrument. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

 

Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, or the President or any Vice President, and by the Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiting the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors.

 

All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person .or persons as the Board of Directors shall authorize so to do.

 

Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

12
 

 

Section 33. Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

 

ARTICLE VII

SHARES OF STOCK

 

Section 34.  Form and Execution of Certificates. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Articles of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

 

Section 35. Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

13
 

 

Section 36. Transfers.

 

(a) Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

 

(b) The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Nevada.

 

Section 37. Fixing Record Dates.

 

(a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

(b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is filed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

Section 38. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada.

14
 

 

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

 

Section 39. Execution of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

 

ARTICLE IX

DIVIDENDS

 

Section 40. Declaration of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Articles of Incorporation.

 

Section 41. Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

15
 

 

ARTICLE X

FISCAL YEAR

 

Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

ARTICLE XI

INDEMNIFICATION

 

Section 43. Indemnification of Directors, Executive Officers, Other Officers, Employees and Other Agents.

 

(a) Directors Officers. The corporation shall indemnify its directors and officers to the fullest extent not prohibited by the Nevada General Corporation Law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Nevada General Corporation Law or (iv) such indemnification is required to be made under subsection (d).

 

(b) Employees and Other Agents. The corporation shall have power to indemnify its employees and other agents as set forth in the Nevada General Corporation Law.

 

(c) Expense. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said mounts if it should be determined ultimately that such person is not entitled to be indemnified under this Bylaw or otherwise.

16
 

 

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

 

(d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or officer. Any right to indemnification or advances granted by this Bylaw to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standard of conduct that make it permissible under the Nevada General Corporation Law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed in the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Nevada General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Article XI or otherwise shall be on the corporation.

 

(e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.  The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the Nevada General Corporation Law.

 

(f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

17
 

 

(g) Insurance. To the fullest extent permitted by the Nevada General Corporation Law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw.

 

(h) Amendments. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

 

(i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law.

 

(j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:

 

(i) The term "proceeding" shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

(ii) The term "expenses" shall be broadly construed and shall include, without limitation, court costs, attorneys' fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

(iii) The term the "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent or another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

 

(iv) References to a "director," "executive officer," "officer," "employee," or "agent" of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

(v) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Bylaw.

18
 

 

ARTICLE XII

NOTICES

 

Section 44. Notices.

 

(a) Notice to Stockholders. Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, it shall be given in writing, timely and duly deposited in the United States mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the corporation or its transfer agent.

 

(b) Notice to directors. Any notice required to be given to any director may be given by the method stated in subsection (a), or by facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

 

(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

 

(d) Time Notices Deemed Given. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing, and all notices given by facsimile, telex or telegram shall be deemed to have been given as of the sending time recorded at time of transmission.

 

(e) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

 

(f) Failure to Receive Notice. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him ill the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such director to receive such notice.

 

(g) Notice to Person with Whom Communication Is Unlawful.  Whenever notice is required to be given, under any provision of law or of the Articles of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be require and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person.  Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given.  In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Nevada General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

19
 

 

(h) Notice to Person with Undeliverable Address. Whenever notice is required to be given, under any provision of law or the Articles of Incorporation or Bylaws of the corporation, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve-month period, have been mailed addressed to such person at his address as shown on the records of the corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated.  In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Nevada General Corporation Law, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to this paragraph.

 

ARTICLE XII

AMENDMENTS

 

Section 45. Amendments.

 

The Board of Directors shall have the sole power to adopt, amend, or repeal Bylaws as set forth in the Articles of Incorporation.

 

ARTICLE XIV

LOANS TO OFFICERS

 

Section 46. Loans to Officers. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

20
 

 

ARTICLE XV

BOARD OF ADVISORS

 

Section 47. Board of Advisors. The Board of Directors, in its discretion, may establish a Board of Advisors consisting of individuals who may or may not be stockholders or directors of the corporation. The purpose of the Board of Advisors would be to advise the officers and directors of the corporation with respect to such matters as such officers and directors shall choose, and any other such matters which the members of such Board of Advisors deem appropriate in furtherance of the best interest of the corporation.  The Board of Advisors shall meet on such basis as the members thereof may determine. The Board of Directors may eliminate the Board of Advisors at any time. No member of the Board of Advisors, nor the Board of Advisors itself, shall have any authority within the corporation or any decision making power and shall be merely advisory in nature. Unless the Board of Directors determines another method of appointment, the President shall recommend possible members to the Board of Directors, who shall approve or reject such appointments.

 

Declared and certified as the Bylaws of Western Ridge Minerals, Inc.

 

Signature of Officer: /s/Marco Bastidas

 

Name of Officer: Marco Bastidas

 

Position of Officer: President, CEO

 

21
 

ROSS MILLER

Secretary of State

206 North Carson Street

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

 

Certificate of Amendment

 

 (PURSUANT TO NRS 78.385 and 78.390)

 

USE BLACK INK ONLY-DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY
Certificate of Amendment to Articles of Incorporation
For Nevada Corporations
(Pursuant to NRS 78.385 and 78.390—After Issuance of Stock)
1. Name of corporation: Western Ridge Minerals, Inc.
   
2. The articles have been amended as follows (provide article numbers, if available):
  Fourth. That the total number of stock authorized that may be issued by the Corporation is one hundred billion million (100,000,000) shares of Common stock with a par value of one tenth of one cent ($0.001) per share and no other class of stock shall be authorized. Said shares may be issued by the corporation from time to time for such consideration as maybe be fixed by the Board of Directors.
   
3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is: majority
   
4. Effective date of filing (optional)
   
5. Signatures (required)
   
  X /s/ Marco Bastidas    
  Signature    

 

* If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof. 

 
 

 
 

ROSS MILLER

Secretary of State

206 North Carson Street

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

 
 
Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 1
 
   
USE BLACK INK ONLY – DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY
   
(Pursuant to Nevada Revised Statutes Chapter 92A) (excluding 92A.200(4b))
 
1) Name and jurisdiction of organization of each constituent entity (NRS 92A.200). If there are more than four merging entities, check box [ ] and attached an 8 ½” X 11” blank sheet containing the required information for each additional entity.
   
Sunvalley Solar, Inc.  
Name of merging entity  
California corporation
Jurisdiction Entity type*
   
Western Ridge Minerals, Inc.  
Name of surviving entity  
Nevada corporation
Jurisdiction Entity type*
   

 

* Corporation, non-profit corporation, limited partnership, limited-liability company or business trust.

 
 

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 2

1)        Forwarding address where copies of process may be sent by the Secretary of State of Nevada (If a foreign entity is the survivor in the merger-NRS 92A.190):
Attn:
c/o:
 
2)        (Choose one)
[ ]  The undersigned declars that a plan of merger has been adopted by each constituent entity (NRS 92A.200).
[X]   The undersigned declares that a plan of merger has been adopted by the parent domestic entity (NRS 92A.180).
 
3)        Owner’s approval (NRS 92A.200)(options a,b, or c must be used, as applicable for each entity) (If there are more than four merging entities, check box [ ] and attached an 8 ½” X 11” blank sheet containing the required information for each additional entity.):
(a)      Owner’s approval was not required from
Sunvalley Solar, Inc.
Name of merging entity, if applicable
 
and, or:
 
Western Ridge Minerals, Inc.
Name of surviving entity, if applicable

 

 
 

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 3

(b)      The plan was approved by the required consent of the owners of *:
 
Name of merging entity, if applicable
 
and, or:
 
Name of surviving entity, if applicable

 

* Unless otherwise provided in the certificate of trust or governing instrument of a business trust, a merger must be approved by all the trustees and beneficial owners of each business trust that is a constituent entity in the merger.

 

 
 

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 4

(c)      Approval of plan of merger for Nevada non-profit corporation (NRS 92A.160):

 

The plan of merger has been approved by the directors of the corporation and by each public officer or other person whose approval of the plan of merger is required by the articles of incorporation of the domestic corporation.

 
Name of merging entity, if applicable
 
and, or:
 
Name of surviving entity, if applicable

 

 
 

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 5

4)        Amendments, If any, to the articles of certificate of the surviving entity. Provide article numbers, if avaliable. (NRS 92A.200)*:
Article 1 is amended to change the name of the corporation to “Sunvalley Solar, Inc.”
 
5)        Location of Plan of Merger (check a or b):
[ ] (a) The entire plan of merger is attached;
[ X ] (b) The entire plan of merger is on file at the registered office of the surviving corporation, limited-liability company or business trust, or at the records office address if a limited partnership, or other place of business of the surviving entity (NRS 92A.200).
 
6)        Effective date (optional)**:

 

* Amended and restated articles may be attached as an exhibit or integrated into the articles of merger. Please entitle them "Restated" or "Amended and Restated," accordingly. The form to accompany restated articles prescribed by the secretary of state must accompany the amended and/or restated articles. Pursuant to NRS 92A.180 (merger of subsidiary into parent - Nevada parent owning 90% or more of subsidiary), the articles of merger may not contain amendments to the constituent documents of the surviving entity except that the name of the surviving entity may be changed.

** A merger takes effect upon filing the articles of merger or upon a later date as specified in the articles, which must not be more than 90 days after the articles are filed (NRS 92A.240).

 
 

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 6

7)        Signatures - Must be signed by: An officer of each Nevada corporation; All general partners of each Nevada limited partnership; All general partners of each Nevada limited-liability limited partnership; A manager of each Nevada limited-liability company with managers or one member if there are no managers; A trustee of each Nevada business trust (NRS 92A.230)*

 

(If there are more than four merging entities, check box [ ] and attached an 8 ½” X 11” blank sheet containing the required information for each additional entity.):

 
Sunvalley Solar Inc.
Name of merging entity
     
X /s/ Zhijian (James) Zhang President 7-6-10
Signature Title Date
 
Western Ridge Minerals, Inc.
Name of surviving entity
     
X /s/ Zhijian (James) Zhang President 7-6-10
Signature Title Date

 

* The articles of merger must be signed by each foreign constituent entity in the manner provided by the law governing it (NRS 92A.230). Additional signature blocks may be added to this page or as an attachment, as needed.

 
 

ROSS MILLER

Secretary of State

206 North Carson Street

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

 

 
Certificate of Change Pursuant
to NRS 78.209

 

USE BLACK INK ONLY – DO NOT HIGHLIGHT

ABOVE SPACE IS FOR OFFICE USE ONLY

 

Certificate of Change filed Pursuant to NRS 78.209

For Nevada Profit Corporations

1. Name of corporation:
Sunvalley Solar, Inc.
 
2. The board of directors have adopted a resolution pursuant to NRS 78.209 and have obtained any required approval of the stockholders.
 
3. The current number of authorized shares at the par value, if any, of each class or series, if any, of shares before the change:
100,000,000 common shares, par value $0.001
 
4. The number of authorized shares and the par value, if any, of each class or series, if any, of shares after the change:
100,000,000 common shares, par value $0.001
 
5. The number of shares of each affected class or series, if any, to be issued after the change in exchange for each issue share of the same class or series:
10 shares to be issued in exchange for each share currently issued and outstanding.
 
6. The provisions, if any, for the issuance of fractional shares, or for the payment of money or the issuance of scrip to stockholders otherwise entitled to a fraction of a share and the percentage of outstanding shares affected thereby:
Rounded to the nearest whole share
 
7. Effective date of filing (optional): August 23, 2010
 
8. Officer Signature: X /s/ Zhijian (James) Zhang

 
 

ROSS MILLER

Secretary of State

206 North Carson Street

Carson City, Nevada 89701-4299

(775) 684 5708

Website: secretaryofstate.biz

 

Certificate of Amendment

 

(PURSUANT TO NRS 78.385 and 78.390)

 

USE BLACK INK ONLY-DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY
Certificate of Amendment to Articles of Incorporation
For Nevada Corporations
(Pursuant to NRS 78.385 and 78.390—After Issuance of Stock)
 
1. Name of corporation: Sunvalley Solar, Inc.
   
2. The articles have been amended as follows (provide article numbers, if available):
   
  Fourth. That the total number of stock authorized that may be issued by the Corporation is one billion, five hundred million (1,500,000,000) shares of Common stock with a par value of one tenth of one cent ($0.001) per share and no other class of stock shall be authorized. Said shares may be issued by the corporation from time to time for such consideration as maybe be fixed by the Board of Directors.
   
3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is: majority
   
4. Effective date of filing (optional):
   
5. Signatures (required)
  X /s/ Zhijian (James) Zhang    
  Signature    

 

* If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.

 
 

DRAWDOWN EQUITY FINANCING AGREEMENT
 
THIS AGREEMENT dated as of the   day of December 31, 2010 (the “ Agreement ”) between Auctus Private Equity Fund, LLC a Massachusetts corporation   (the “ Investor ”), and Sunvalley Solar, Inc.   a corporation organized and existing under the laws of the Nevada (the “ Company ”).
 
WHEREAS , the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company up to Ten Million  Dollars ($10,000,000) of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”); and
 
WHEREAS , such investments will be made in reliance upon the provisions of Regulation D (“ Regulation D ”) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder (the “ Securities Act ”), and or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments to be made hereunder.
 
WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto (the "Registration Rights Agreement") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws.
 
NOW , THEREFORE , the parties hereto agree as follows:
 
ARTICLE I.
Certain Definitions
 
Section 1.1     “ Advance ” shall mean the portion of the Commitment Amount requested by the Company in the Drawdown Notice.
 
Section 1.2     “ Advance Date ” shall mean the first (1 st ) Trading Day after expiration of the applicable Pricing Period for each Advance.
 
 
1

 
 
Section 1.3     “ Drawdown Notice ” shall mean a written notice in the form of Exhibit A attached hereto to the Investor executed by an officer of the Company and setting forth the Advance amount that the Company requests from the Investor.
 
Section 1.4     “ Drawdown Notice Date ” shall mean each date the Company delivers (in accordance with Section 2.2(b) of this Agreement) to the Investor a Drawdown Notice requiring the Investor to advance funds to the Company, subject to the terms of this Agreement.  No Drawdown Notice Date shall be less than five (5) Trading Days after the prior Drawdown Notice Date.
 
Section 1.5     “ Bid Price ” shall mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of the Common Stock on the Principal Market or if the Common Stock is not traded on a Principal Market, the highest reported bid price for the Common Stock, as furnished by the National Association of Securities Dealers, Inc.
 
Section 1.6     “ Closing ” shall mean one of the closings of a purchase and sale of Common Stock pursuant to Section 2.3.
 
Section 1.7     “ Commitment Amount ” shall mean the aggregate amount of up to Ten Million Dollars ($10,000,000) which the Investor has agreed to provide to the Company in order to purchase the Company’s Common Stock pursuant to the terms and conditions of this Agreement.
 
Section 1.8     “ Commitment Period ” shall mean the period commencing on the earlier to occur of (i) the Effective Date, or (ii) such earlier date as the Company and the Investor may mutually agree in writing, and expiring on the earliest to occur of (x) the date on which the Investor shall have made payment of Advances pursuant to this Agreement in the aggregate amount of the Commitment Amount, (y) the date this Agreement is terminated pursuant to Section 10.2 or (z) the date occurring thirty-six (36) months after the Effective Date.
 
 
2

 
 
Section 1.9     “ Common Stock ” shall mean the Company’s common stock, par value $0.001 per share.
 
Section 1.10   “ Condition Satisfaction Date ” shall have the meaning set forth in Section 7.2.
 
Section 1.11   “ Damages ” shall mean any loss, claim, damage, liability, reasonable costs and expenses (including, without limitation, reasonable attorney’s fees and disbursements and reasonable costs and expenses of expert witnesses and investigation).
 
Section 1.12   “ Effective Date ” shall mean the date on which the SEC first declares effective a Registration Statement registering the resale of the Registrable Securities as set forth in Section 7.2(a).
 
Section 1.13   “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
 
Section 1.14.  “ Floor ” The “Floor Price” shall be defined as a) a fixed-price floor provided by the Company or b) as Seventy-Five (75%) of the average closing bid price over the preceding ten (10) trading days prior to the Drawdown Notice Date. The “Floor” can be waived at the discretion of the Company (a) The Company, in its sole and absolute discretion, may waive its right with respect to the Floor and allow the Investor to sell any shares below the Floor Price. In the event that the Company does not waive its right with respect to the Floor, the Investor shall immediately cease selling any shares within the Drawdown Notice if the price falls below the Floor Price.
 
Section 1.15.   “ Material Adverse Effect ” shall mean any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement or the Registration Rights Agreement in any material respect.
 
 
3

 
 
Section 1.16.    “ Market Price ” shall mean the lowest closing Bid Price of the Common Stock during the Pricing Period.
 
Section 1.17.    “ Maximum Advance Amount ” shall not exceed Five Hundred Thousand Dollars ($500,000) or two hundred (200%) percent of the average daily volume based on the trailing ten (10) days preceding the Drawdown Notice date whichever is of a larger value. 
 
Section 1.18.     “ NASD ” shall mean the National Association of Securities Dealers, Inc.
 
Section 1.19.     “ Person ” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
 
Section 1.20.     “ Pricing Period ” shall mean the five (5) consecutive Trading Days after the Drawdown Notice Date.
 
Section 1.21.     “ Principal Market ” shall mean the Nasdaq National Market, the Nasdaq Capital Market, the American Stock Exchange, the OTC Bulletin Board, OTC Pink Sheets or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.
Section 1.22.      “ Purchase Price ” shall be set at Ninety-Three (93%) percent of the lowest closing bid   price of the common stock during the Pricing Period.
Section 1.23.      “ Registrable Securities ” shall mean the shares of Common Stock, to be issued hereunder   (i) in respect of which the Registration Statement has not been declared effective by the SEC, (ii) which have not been sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“ Rule 144 ”) or (iii) which have not been otherwise transferred to a holder who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend.
 
 
4

 
 
Section 1.24.      “ Registration Rights Agreement ” shall mean the Registration Rights Agreement dated the date hereof, regarding the filing of the Registration Statement for the resale of the Registrable Securities, entered into between the Company and the Investor.
 
Section 1.25.      “ Registration Statement ” shall mean a registration statement on Form S-1  (if use of such form is then available to the Company pursuant to the rules of the SEC and, if not, on such other form promulgated by the SEC for which the Company then qualifies and which counsel for the Company shall deem appropriate, and which form shall be available for the resale of the Registrable Securities to be registered thereunder in accordance with the provisions of this Agreement and the Registration Rights Agreement, and in accordance with the intended method of distribution of such securities), for the registration of the resale by the Investor of the Registrable Securities under the Securities Act.
 
Section 1.26.       “ Regulation D ” shall have the meaning set forth in the recitals of this Agreement.
 
Section 1.27.       “ SEC ” shall mean the United States Securities and Exchange Commission.
 
Section 1.28.       “ Securities Act ” shall have the meaning set forth in the recitals of this Agreement.
Section 1.29.       “ SEC Documents ” shall mean Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and   Current Reports on Form 8-K and Proxy Statements of the Company as supplemented to the date hereof, filed by the Company for a period of at least twelve (12) months immediately preceding the date hereof or the Advance Date, as the case may be, until such time as the Company no longer has an obligation to maintain the effectiveness of a Registration Statement as set forth in the Registration Rights Agreement.
 
Section 1.30.        “ Trading Day ” shall mean any day during which the New York Stock Exchange shall be open for business.
 
 
5

 
 
ARTICLE II
Advances
 
Section 2.1      Advances .
 
(a)     Subject to the terms and conditions of this Agreement (including, without limitation, the provisions of Article VII hereof), the Company, at its sole and exclusive option, may issue and sell to the Investor, and, except for conditions outside of the Investor’s control, the Investor shall be obligated to purchase from the Company, shares of the Company’s Common Stock by the delivery, in the Company’s sole discretion, of Drawdown Notices.  The number of shares of Common Stock that the Investor shall purchase pursuant to each Advance shall be determined by dividing the amount of the Advance by the Purchase Price.  No fractional shares shall be issued. Fractional shares shall be rounded to the next higher whole number of shares.  The aggregate maximum amount of all Advances that the Investor shall be obligated to make under this Agreement shall not exceed the Commitment Amount.
(b)     The Investor shall immediately cease selling any shares within the Drawdown Notice if the price falls below the Floor Price. The Company, in its sole and absolute discretion, may waive its right with respect to the Floor and allow the Investor to sell any shares below the Floor Price.  Only when the closing bid price of the stock is above the Floor Price (the price at the time when the Investor must immediately cease selling shares) may the Investor reinitiate selling of any shares without such waiver from the Company required under this subsection. 
 
Section 2.2     Mechanics .
 
      Drawdown Notice .  At any time during the Commitment Period, the Company may request the Investor to purchase shares of Common Stock by delivering a Drawdown Notice to the Investor, subject to the conditions set forth in Section 7.2; provided, however, the amount for each Advance as designated by the Company in the applicable Drawdown Notice shall not be more than the Maximum Advance Amount and the aggregate amount of the Advances pursuant to this Agreement shall not exceed the Commitment Amount.  The Company acknowledges that the Investor may sell shares of the Company’s Common Stock corresponding with a particular Drawdown Notice after the Drawdown Notice is received by the Investor.  There shall be a minimum of five (5) Trading Days between each Drawdown Notice Date.
 
     Date of Delivery of Drawdown Notice .  A Drawdown Notice shall be deemed delivered on: (i) the Trading Day it is received by email to louposner@auctusfund.com . if such notice is received prior to 5:00 pm Eastern Time; or (ii) the Trading Day prior to the Trading Day it is received if the Drawdown notice is received by email to louposner@auctusfund.com prior to the start of trading on the Trading Day it is received; or (iii) the immediately succeeding Trading Day if Drawdown Notice is received by facsimile or otherwise after 5:00 pm Eastern Time on a Trading Day or at any time on a day which is not a Trading Day.  No Drawdown Notice may be deemed delivered on a day that is not a Trading Day or if positive receipt is not acknowledged by Auctus.
 
 
6

 
 
Section 2.3     Closings .  On each Advance Date (i) the Company shall deliver to the Investor such number of shares of the Common Stock registered in the name of the Investor as shall equal (x) the amount of the Advance specified in such Drawdown Notice pursuant to Section 2.1 herein, divided by (y) the Purchase Price and (ii) upon receipt of such shares, the Investor shall deliver to the Company the amount of the Advance specified in the Drawdown Notice by wire transfer of immediately available funds.  In addition, on or prior to the Advance Date, each of the Company and the Investor shall deliver to the other all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein.  To the extent the Company has not paid the fees, expenses, and disbursements of the Investor in accordance with Section 12.4, the amount of such fees, expenses, and disbursements may be deducted by the Investor (and shall be paid to the relevant party) directly out of the proceeds of the Advance with no reduction in the amount of shares of the Company’s Common Stock to be delivered on such Advance Date. 
(a)   Company’s Obligations Upon Closing .
 
(i)     The Company shall use all reasonable efforts to become DTC eligible within a reasonable time of the date of this Agreement.  Upon approval of DTC eligibility, the Company shall deliver to the Investor, through the use of a Deposit/Withdrawal at Custodian from a Deposit Trust Company method or commonly referred to as “DWAC/DTC” of the Investor’s choosing, the shares of Common Stock applicable to the Advance in accordance with Section 2.3.  The certificates evidencing such shares shall be free of restrictive legends.  Upon receipt, Investor will perform a wire transfer on the same business day provided that the shares have been received in sufficient time to perform such transfer.  In the event that the Investor is no longer able, due to time constraints beyond his control, to perform a wire on the day of receipt, the wire will be promptly executed the following business day.
 
(ii)     the Company’s Registration Statement with respect to the resale of the shares of Common Stock delivered in connection with the Advance shall have been declared effective by the SEC;
 
(iii)   the Company shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the Registrable Securities, or shall have the availability of exemptions therefrom.  The sale and issuance of the Registrable Securities shall be legally permitted by all laws and regulations to which the Company is subject;
 
(iv)   the Company shall file with the SEC in a timely manner all reports, notices and other documents required of a “reporting company” under the Exchange Act and applicable Commission regulations;
 
(v)    the fees as set forth in Section 12.4 below shall have been paid or can be withheld as provided in Section 2.3; and
 
(vi)   The Company’s transfer agent shall be DWAC eligible.
 
       (b)    Investor’s Obligations Upon Closing .                Upon receipt of the shares referenced in Section 2.3(a)(i) above and provided the Company is in compliance with its obligations in Section 2.3, the Investor shall deliver to the Company the amount of the Advance specified in the Drawdown Notice by wire transfer of immediately available funds. 
 
 
7

 
Section 2.4.    Hardship .  In the event the Investor sells shares of the Company’s Common Stock after receipt of an Drawdown Notice and the Company fails to perform its obligations as mandated in Section 2.3, and specifically the Company fails to deliver to the Investor on the Advance Date the shares of Common Stock corresponding to the applicable Advance pursuant to Section 2.3(a)(i), the Company acknowledges that the Investor shall suffer financial hardship and therefore shall be liable for any and all losses, commissions, fees, interest, legal fees or any other financial hardship caused to the Investor.
 
The Company understands that a delay in the delivery of the securities in the form required pursuant to this registration statement beyond the Closing could result in economic loss to the Investor.  After the Effective Date, as compensation to the Investor for late issuance of such shares (delivery of securities after the applicable closing), the Company agrees to make payments to the Investor in accordance with the schedule below where the number of days overdue is defined as the number of business days beyond the close with amount due being cumulative. 
 
The Company shall pay any payments incurred under this Section in immediately available funds upon demand.  Nothing herein shall limit the right of the Investor to pursue damages for the Company’s failure to comply with the issuance and delivery of securities to the Investor.
 
Payments for Each Number of Days Overdue
For each $10,000 Worth of Common Stock
   
1
$100
2
$200
3
$300
4
$400
5
$500
6
$600
7
$700
8
$800
9
$900
10
$1000
Over 10
$1000 + $200 for each Business Day beyond the tenth day
 
 
8

 
 
ARTICLE III
Representations and Warranties of Investor
 
Investor hereby represents and warrants to, and agrees with, the Company that the following are true and correct as of the date hereof and as of each Advance Date:
 
Section 3.1     Organization and Authorization .  The Investor is duly incorporated or organized and validly existing in the jurisdiction of its incorporation or organization and has all requisite power and authority to purchase and hold the securities issuable hereunder.  The decision to invest and the execution and delivery of this Agreement by such Investor, the performance by such Investor of its obligations hereunder and the consummation by such Investor of the transactions contemplated hereby have been duly authorized and requires no other proceedings on the part of the Investor.  The undersigned has the right, power and authority to execute and deliver this Agreement and all other instruments (including, without limitations, the Registration Rights Agreement), on behalf of the Investor.  This Agreement has been duly executed and delivered by the Investor and, assuming the execution and delivery hereof and acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms.
 
Section 3.1.1     Evaluation of Risks .  The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests in connection with this transaction.  It recognizes that its investment in the Company involves a high degree of risk.
 
Section 3.2    No Legal Advice From the Company .  The Investor acknowledges that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors.  The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.
 
 
9

 
 
Section 3.3   Investment Purpose . The securities are being purchased by the Investor for its own account, for investment purposes, and not with a view to distribution of the securities.  The Investor agrees not to assign or in any way transfer the Investor’s rights to the securities or any interest therein and acknowledges that the Company will not recognize any purported assignment or transfer except in accordance with applicable Federal and state securities laws.  No other person has or will have a direct or indirect beneficial interest in the securities.  The Investor agrees not to sell, hypothecate or otherwise transfer the Investor’s securities unless the securities are registered under Federal and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Company, an exemption from such laws is available.
 
Section 3.4     Accredited Investor .  The Investor is an “ Accredited Investor ” as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
 
Section 3.5     Information .  The Investor and its advisors (and its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information it deemed material to making an informed investment decision.  The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management.  Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.  The Investor understands that its investment involves a high degree of risk.  The Investor is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and enables such Investor to obtain information from the Company in order to evaluate the merits and risks of this investment.  The Investor has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to this transaction.
 
Section  3.6    Receipt of Documents . The Investor and its counsel have received and read in their entirety:  (i) this Agreement and the Exhibits annexed hereto; (ii) all due diligence and other information necessary to verify the accuracy and completeness of such representations, warranties and covenants; and (iii) answers to all questions the Investor submitted to the Company regarding an investment in the Company; and the Investor has relied on the information contained therein and has not been furnished any other documents, literature, memorandum or prospectus.  Investor represents and warrants that, to the best of its knowledge, Investor has not received any material non-public information regarding the Company.
 
 
10

 
 
Section 3.7    Registration Rights Agreement .  The parties have entered into the Registration Rights Agreement dated the date hereof.
 
Section 3.8     No General Solicitation .  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the shares of Common Stock offered hereby.
 
Section  3.9    Not an Affiliate .  The Investor is not an officer, director or a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with the Company or any “ Affiliate ” of the Company (as that term is defined in Rule 405 of the Securities Act).
 
Section 3.10    Trading Activities .  The Investor’s trading activities with respect to the Company’s Common Stock shall be in compliance with all applicable federal and state securities laws, rules and regulations and the rules and regulations of the Principal Market on which the Company’s Common Stock is listed or traded and Investor will comply with any requests that the SEC makes in connection with the Filing of the Registration Agreement to ensure such compliance. Neither the Investor nor its affiliates has an open short position in the Common Stock of the Company, the Investor agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the Common Stock, provided that the Company acknowledges and agrees that upon receipt of an Drawdown Notice the Investor has the right to sell the shares to be issued to the Investor pursuant to the Drawdown Notice during the applicable Pricing Period. 
 
Section 3.11    No Registration as a Dealer . The Investor is not and will not be required to be registered as a "dealer" under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise.
 
Section 3.12    Good Standing . The Investor is a limited liability company, duly organized, validly existing and in good standing under the laws of its state of formation and any jurisdiction in which it is conducting business.
 
 
11

 
 
ARTICLE IV.
Representations and Warranties of the Company
 
Except as stated below, on the disclosure schedules attached hereto or in the SEC Documents (as defined herein), the Company hereby represents and warrants to, and covenants with, the Investor that the following are true and correct as of the date hereof:
 
Section   4.1     Organization and Qualification .  The Company is duly incorporated or organized and validly existing in the jurisdiction of its incorporation or organization and has all requisite corporate power to own its properties and to carry on its business as now being conducted.  Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole.
 
Section  4.2      Authorization, Enforcement, Compliance with Other Instruments .  (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, and any related agreements, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement, and any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) this Agreement, the Registration Rights Agreement, and any related agreements have been duly executed and delivered by the Company, (iv) this Agreement, , the Placement Agent Agreement and assuming the execution and delivery thereof and acceptance by the Investor and any related agreements constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.
 
Section   4.2.1     Capitalization .  The authorized capital stock of the Company consists of 800,068,420 shares of Common Stock   $0.001 par value per share. Except as disclosed in the SEC Documents, no shares of Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company.  Except as disclosed in the SEC Documents, as of the date hereof , (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities ( iii) there are no outstanding registration statements other than on Form S-1and (iv) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except pursuant to the Registration Rights Agreement).  There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein.  This section shall not prevent the Company, after the date hereof, from obtaining other funding or other means of financing.
 
The Company has furnished to the Investor   via the SEC's live EDGAR filing service   true and correct copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “ Certificate of Incorporation ”), and the Company’s By-laws, as in effect on the date hereof (the “ By-laws ”), and via conference call the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.
 
 
12

 
 
Section 4.3      No Conflict .  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not (i) result in a violation of the Certificate of Incorporation, any certificate of designations of any outstanding series of preferred stock of the Company or By-laws or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market on which the Common Stock is quoted) applicable to the Company or any of its subsidiaries or by which any material property or asset of the Company or any of its subsidiaries is bound or affected and which would cause a Material Adverse Effect.  Except as disclosed in the SEC Documents, neither the Company nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively, or, to the best of the Company’s knowledge, any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries.  To the best of the Company’s knowledge, the business of the Company and its subsidiaries is not being conducted in violation of any material law, ordinance, regulation of any governmental entity.  Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company and its subsidiaries are unaware of any fact or circumstance which might give rise to any of the foregoing.
 
Section 4.4      SEC Documents; Financial Statements .  As of the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act.   As of their respective dates, to the Company’s knowledge, the financial statements of the Company disclosed in the SEC Documents (the “Financial Statements”) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and, fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  To the best of the Company’s knowledge, no other information provided by or on behalf of the Company to the Investor which is not included written in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
 
 
13

 
 
Section 4.5    No Default .  Except as disclosed in Exhibit 4.7, to the best of the Company’s knowledge, the Company is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it is or its property is bound and neither the execution, nor the delivery by the Company, nor the performance by the Company of its obligations under this Agreement or any of the exhibits or attachments hereto will conflict with or result in the breach or violation of any of the terms or provisions of, or constitute a default or result in the creation or imposition of any lien or charge on any assets or properties of the Company under its Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other material agreement applicable to the Company or instrument to which the Company is a party or by which it is bound, or any statute, or any decree, judgment, order, rules or regulation of any court or governmental agency or body having jurisdiction over the Company or its properties, in each case which default, lien or charge is likely to cause a Material Adverse Effect on the Company’s business or financial condition.
 
Section 4.6     Absence of Events of Default .  Except for matters described in Exhibit 4.8 and/or this Agreement, no Event of Default, as defined in the respective agreement to which the Company is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (as so defined), has occurred and is continuing, which would have a Material Adverse Effect on the Company’s business, properties, prospects, financial condition or results of operations.
 
Section 4.7    Intellectual Property Rights .  To the best of the Company’s knowledge, the Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted.   The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. 
 
 
14

 
 
Section 4.8       Employee Relations .  Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened.  None of the Company’s or its subsidiaries’ employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good.
 
Section 4.9       Environmental Laws .  To the best of the Company’s knowledge, the Company and its subsidiaries are (i) in compliance with any and all applicable material foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“ Environmental Laws ”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval.
 
Section 4.10     Title .  Except as set forth in Exhibit 4.10, the Company has good and marketable title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the Company.  Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.
 
Section 4.11    Insurance . Except as set forth in Exhibit 4.11, the Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged.  Neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole.
 
Section 4.12     Regulatory Permits .  The Company and its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
 
 
15

 
 
Section 4.13      Internal Accounting Controls .  Except as disclosed in the SEC documents, the Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Representation by the company relating to internal controls will be made at such time the registration filing has been approved.
 
Section 4.14      No Material Adverse Breaches, etc .  Except as set forth in Exhibit 4.16, neither the Company nor any of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries.  Except as set forth in the SEC Documents, neither the Company nor any of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries.
 
Section 4.15      Absence of Litigation .  Except as set forth in Exhibit 4.17, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a Material Adverse Effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) except as expressly disclosed in the SEC Documents, have a Material Adverse Effect on the business, operations, properties, financial condition or results of operation of the Company and its subsidiaries taken as a whole.
 
Section 4.16       Subsidiaries .  Except as disclosed in Exhibit 4.18, the Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, association or other business entity.
 
Section 4.17      Tax Status .  Except as disclosed in Exhibit 4.19, the Company and each of its subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.
 
 
16

 
 
Section 4.18      Certain Transactions .  Except as set forth in Exhibit 4.20 none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
 
Section 4.19      Fees and Rights of First Refusal .  The Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties.
 
Section 4.20      Use of Proceeds .  The Company shall use the net proceeds from this offering for general corporate purposes, including, without limitation, the payment of loans incurred by the Company.  However, in no event shall the Company use the net proceeds from this offering for the payment (or loan to any such person for the payment) of any judgment, or other liability, incurred by any executive officer, officer, director or employee of the Company, except for any liability owed to such person for services rendered, or if any judgment or other liability is incurred by such person originating from services rendered to the Company, or the Company has indemnified such person from liability.
 
Section 4.21      Further Representation and Warranties of the Company .  For so long as any securities issuable hereunder held by the Investor remain outstanding, the Company acknowledges, represents, warrants and agrees that it will maintain the listing of its Common Stock on the Principal Market. The Company’s common stock is currently dually quoted on the OTC Bulletin Board and the Pink Sheets.  In the event that the Company’s common stock is dropped from quotation on the OTC Bulletin Board and such action is not taken as a result of any action or failure to act on the part of the Company, the Company shall be considered in compliance with this section so long as it remains current and in full compliance with all reporting obligations under the 1934 Act.  In the event that the Company’s common stock becomes quoted solely on the Pink Sheets, the Company shall maintain the Pink Sheets market tier designation “OTCQB” or its equivalent.
 
Section 4.22     Opinion of Counsel .  Investor shall receive an opinion letter from counsel to the Company on the date hereof regarding the effectiveness of the Registration Statement to be filed regarding Investor’s re-sale of the securities issuable hereunder and the Investor’s ability to re-sell such securities pursuant to the Registration Statement. The Company will obtain for the Investor, at the Company’s expense, any and all opinions of counsel which may be reasonably required in order to sell the securities issuable hereunder without restriction.
 
Section 4.23     Dilution .  The Company is aware and acknowledges that issuance of shares of the Company’s Common Stock could cause dilution to existing shareholders and could significantly increase the outstanding number of shares of Common Stock. 
 
 
17

 
 
ARTICLE  V.
Indemnification
 
The Investor and the Company represent to the other the following with respect to itself:
 
Section 5.1     Indemnification .
 
       (a)        In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor, and all of its officers, directors, partners, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “ Investor Indemnitees ”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “ Indemnified Liabilities ”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Investor Indemnitee not arising out of any action or inaction of an Investor Indemnitee, and based on  misrepresentations or due to a  breach by the Company and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Investor Indemnitees.  To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.
 
        (b)      In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Investor’s other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “ Company Indemnitees ”) from and against any and all Indemnified Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement, the Registration Rights Agreement, or any instrument or document contemplated hereby or thereby executed by the Investor, (b) any breach of any covenant, agreement or obligation of the Investor(s) contained in this Agreement,  the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby executed by the Investor, or (c) any cause of action, suit or claim brought or made against such Company Indemnitee based on  misrepresentations or due to a  breach by the Investor and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Company Indemnitees.  To the extent that the foregoing undertaking by the Investor may be unenforceable for any reason, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.
 
(c)      The obligations of the parties to indemnify or make contribution under this Section 5.1 shall survive termination.
 
 
18

 
 
ARTICLE VI.
Covenants of the Company
 
Section 6.1     Registration Rights .  The Company shall cause the Registration Rights Agreement to remain in full force and effect and the Company shall comply in all material respects with the terms thereof.
 
Section 6.2     Listing of Common Stock .  The Company shall maintain the Common Stock’s authorization for quotation on the Principal Market.  . The Company’s common stock is currently dually quoted on the OTC Bulletin Board and the Pink Sheets.  In the event that the Company’s common stock is dropped from quotation on the OTC Bulletin Board and such action is not taken as a result of any action or failure to act on the part of the Company, the Company shall be considered in compliance with this section so long as it remains current and in full compliance with all reporting obligations under the 1934 Act.  In the event that the Company’s common stock becomes quoted solely on the Pink Sheets, the Company shall maintain the Pink Sheets market tier designation “OTCQB” or its equivalent.
 
Section 6.3       Exchange Act Registration .  The Company will cause its Common Stock to continue to be registered under Section 12(g) of the Exchange Act, will file in a timely manner all reports and other documents required of it as a reporting company under the Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Exchange Act.
 
Section 6.4       Transfer Agent Instructions .  Upon effectiveness of the Registration Statement the Company shall deliver instructions to its transfer agent to issue shares of Common Stock to the Investor free of restrictive legends on or before each Advance Date.
 
Section 6.5        Corporate Existence .  The Company will take all steps necessary to preserve and continue the corporate existence of the Company.
 
Section 6.6        Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance .  The Company will immediately notify the Investor as soon as practible, upon its becoming aware of the occurrence of any of the following events in respect of a registration statement or related prospectus relating to an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the registration statement or related prospectus; (ii) the issuance by the SEC or any other Federal or state governmental authority of  any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus of any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and the Company will promptly make available to the Investor any such supplement or amendment to the related prospectus.  The Company shall not deliver to the Investor any Drawdown Notice during the continuation of any of the foregoing events.
 
 
19

 
 
Section  6.7       Restriction on Sale of Capital Stock .  During the Commitment Period, the Company shall not, without 10 days written notice to the Investor, (i) issue or sell any Common Stock or Preferred Stock without consideration or for a consideration per share less than the Bid Price of the Common Stock determined immediately prior to its issuance, (ii) issue or sell any Preferred Stock warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire Common Stock without consideration or for a consideration per share less than the Bid Price of the Common Stock determined immediately prior to its issuance, or (iii) file any registration statement on Form S-8.
 
Section 6.8.       Consolidation; Merger .  The Company shall not, at any time after the date hereof, effect any merger or consolidation of the Company with or into, or a transfer of all or substantially all the assets of the Company to another entity (a “ Consolidation Event ”) unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligation to deliver to the Investor such shares of stock and/or securities as the Investor is entitled to receive pursuant to this Agreement prior to the closing date of any merger.
 
Section 6.9.        Issuance of the Company’s Common Stock.   The sale of the shares of Common Stock shall be made in accordance with the provisions and requirements of Regulation D and any applicable state securities law.
 
Section 6.10.      Review of Public Disclosures .  All SEC filings (including, without limitation, all filings required under the Exchange Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other public disclosures made by the Company, including, without limitation, all press releases, investor relations materials, and scripts of analysts meetings and calls, shall be reviewed and approved for release by the Company’s attorneys and, if containing financial information, the Company’s independent certified public accountants. 
 
Section 6.11.    Market Activities .  The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Common Stock or (ii) sell, bid for or purchase the Common Stock, or pay anyone any compensation for soliciting purchases of the Common Stock.
 
 
20

 
 
ARTICLE VII.
Conditions for Advance and Conditions to Closing
 
Section 7.1.       Conditions Precedent to the Obligations of the Company.   The obligation hereunder of the Company to issue and sell the shares of Common Stock to the Investor incident to each Closing is subject to the satisfaction, or waiver by the Company, at or before each such Closing, of each of the conditions set forth below.
 
     (a)     Accuracy of the Investor’s Representations and Warranties .  The representations and warranties of the Investor shall be true and correct in all material respects.
 
     (b)    Performance by the Investor .  The Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing.
 
Section 7.2        Conditions Precedent to the Right of the Company to Deliver an Drawdown Notice .  The right of the Company to deliver an Drawdown Notice is subject to the fulfillment by the Company, on such Drawdown Notice (a “ Condition Satisfaction Date ”), of each of the following conditions:
 
      (a)     Registration of the Common Stock with the SEC .  The Company shall have filed with the SEC a Registration Statement with respect to the resale of the Registrable Securities in accordance with the terms of the Registration Rights Agreement.  As set forth in the Registration Rights Agreement, the Registration Statement shall have previously become effective and shall remain effective on each Condition Satisfaction Date and (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to the Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened to do so, and (ii) no other suspension of the use or withdrawal of the effectiveness of the Registration Statement or related prospectus shall exist.  The Registration Statement must have been declared effective by the SEC prior to the first Drawdown Notice Date.
 
      (b)       Authority .  The Company shall have obtained all permits and qualifications required by any applicable state in accordance with the Registration Rights Agreement for the offer and sale of the shares of Common Stock, or shall have the availability of exemptions therefrom.  The sale and issuance of the shares of Common Stock shall be legally permitted by all laws and regulations to which the Company is subject.
 
      (c)     Fundamental Changes . There shall not exist any fundamental changes to the information set forth in the Registration Statement, which would require the Company to file a post-effective amendment to the Registration Statement. 
 
 
21

 
 
      (d)      Performance by the Company .  The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or prior to each Condition Satisfaction Date.
 
      (e)       No Injunction .  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly and adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement.
 
      (f)      No Suspension of Trading in or Delisting of Common Stock .  The trading of the Common Stock is not suspended by the SEC or the Principal Market (if the Common Stock is traded on a Principal Market).  The issuance of shares of Common Stock with respect to the applicable Closing, if any, shall not violate the shareholder approval requirements of the Principal Market (if the Common Stock is traded on a Principal Market).  The Company shall not have received any notice threatening the continued listing of the Common Stock on the Principal Market (if the Common Stock is traded on a Principal Market). The Company’s common stock is currently dually quoted on the OTC Bulletin Board and the Pink Sheets.  In the event that the Company’s common stock is dropped from quotation on the OTC Bulletin Board and such action is not taken as a result of any action or failure to act on the part of the Company, the Company shall be considered in compliance with this section so long as it remains current and in full compliance with all reporting obligations under the 1934 Act.  In the event that the Company’s common stock becomes quoted solely on the Pink Sheets, the Company shall maintain the Pink Sheets market tier designation “OTCQB” or its equivalent.
 
     (g)      Maximum Advance Amount .  The amount of an Advance requested by the Company shall not exceed the Maximum Advance Amount.  In addition, in no event shall the number of shares issuable to the Investor pursuant to an Advance cause the aggregate number of shares of Common Stock beneficially owned by the Investor and its affiliates to exceed four and 99/100 percent (4.99%) of the then outstanding Common Stock of the Company.  For the purposes of this section beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.
 
     (h)       No Knowledge .  The Company has no knowledge of any event which would be more likely than not to have the effect of causing such Registration Statement to be suspended or otherwise ineffective.
 
     (i)       Executed Drawdown Notice .  The Investor shall have received the Drawdown Notice executed by an officer of the Company and the representations contained in such Drawdown Notice shall be true and correct as of each Condition Satisfaction Date.
 
 
22

 
 
ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information
 
Section 8.1.       Non-Disclosure of Non-Public Information .
 
       (a)      The Company covenants and agrees that it shall refrain from disclosing, and shall cause its officers, directors, employees and agents to refrain from disclosing, any material non-public information to the Investor without also disseminating such information to the public, unless prior to disclosure of such information the Company identifies such information as being material non-public information and provides the Investor with the opportunity to accept or refuse to accept such material non-public information for review.
 
       (b)      Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, promptly   notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading.  Nothing contained in this Section 8.2 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.
 
 
23

 
 
ARTICLE XI.
Choice of Law/Jurisdiction
Section 9.1        Governing Law .  This Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts   without regard to the principles of conflict of laws.  The parties further agree that any action between them shall be heard in Boston, MA. for the adjudication of any civil action asserted pursuant to this paragraph.
 
 
ARTICLE X.
Assignment; Termination
 
Section 10.1     Assignment .  Neither this Agreement nor any rights of the Company hereunder may be assigned to any other Person. 
 
Section 10.2      Termination
 
(a)     The obligations of the Investor to make Advances under Article II hereof shall terminate thirty-six (36) months after the Effective Date.
 
(b)     The obligation of the Investor to make an Advance to the Company pursuant to this Agreement shall terminate permanently (including with respect to an Advance Date that has not yet occurred) in the event that (i) there shall occur any stop order or suspension of the effectiveness of the Registration Statement for an aggregate of fifty (50) Trading Days, other than due to the acts of the Investor, during the Commitment Period, or (ii) the Company shall at any time fail materially to comply with the requirements of Article VI and such failure is not cured within thirty (30) days after receipt of written notice from the Investor, provided , however , that this termination provision shall not apply to any period commencing upon the filing of a post-effective amendment to such Registration Statement and ending upon the date on which such post effective amendment is declared effective by the SEC.
 
 
24

 
 
ARTICLE XI.
Notices
 
a.      Section 11.0.0.1     Notices .  Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:
 
If to the Company, to:
Sunvalley Solar, Inc.
398 Lemon Creek Drive, Suite A
 
Walnut, CA 91789
 
Attention: James Zhang, CEO
 
Telephone: (909)598-0618
 
Facsimile: (909)598-6633
   
   
If to the Investor, to:
Auctus Private Equity Fund, LLC
One Beacon St. 34 th Floor
Boston, MA 02108
ATTN: Lou Posner
Telephone: 617-532-6408
Facsimile: 617-532-6402
   
With a copy to: 
 
 
 
Each party shall provide five (5) days’ prior written notice to the other party of any change in address or facsimile number.
 
 
25

 
 
ARTICLE XII.
Miscellaneous
 
Section 12.1.       Counterparts .  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.  In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery hereof, though failure to deliver such copies shall not affect the validity of this Agreement.
 
Section 12.2.      Entire Agreement; Amendments .  This Agreement supersedes all other prior oral or written agreements between the Investor, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.
 
Section 12.3.      Reporting Entity for the Common Stock .  The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto.  The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.
 
 
26

 
 
Section 12.4.      Fees and Expenses .  The Company hereby agrees to pay the following fees:
 
       (a)       Fees .  Each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby.
 
      (b)        Origination Fee . The Company has paid the Investor a non-refundable origination fee equal to Fifteen Thousand Dollars ($15,000) in cash.
 
Section 12.5.     Confidentiality .  If for any reason the transactions contemplated by this Agreement are not consummated, each of the parties hereto shall keep confidential any information obtained from any other party (except information publicly available or in such party’s domain prior to the date hereof, and except as required by court order) and shall promptly return to the other parties all schedules, documents, instruments, work papers or other written information without retaining copies thereof, previously furnished by it as a result of this Agreement or in connection herein.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
 
 
27

 
 
IN WITNESS WHEREOF , the parties hereto have caused this Drawdown Equity Financing Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.
 
 
COMPANY:
 
Sunvalley Solar, Inc.
   
 
 
 
By:        /s/ James Zhang                                                                  
 
Name: James Zhang
 
Title:    CEO
   
   
 
INVESTOR:
 
Auctus Private Equity Fund, LLC
   
 
 
 
By:      /s/ Lou Posner
 
Name: Lou Posner
 
Title:   Director
   
 
 
28

 
 
EXHIBIT A
 
DRAWDOWN NOTICE
Sunvalley Solar, Inc.
 
The undersigned, _______________________ hereby certifies, with respect to the sale of shares of Common Stock of Sunvalley Solar, Inc. (the “ Company ”) issuable in connection with this Drawdown Notice, delivered pursuant to the Drawdown Equity Financing Agreement (the “ Agreement ”), as follows:
 
1.              The undersigned is the duly elected ______________ of the Company.
 
2.              There are no fundamental changes to the information set forth in the Registration Statement which would require the Company to file a post effective amendment to the Registration Statement.
 
3.              The Company has performed in all material respects all covenants and agreements to be performed by the Company and has complied in all material respects with all obligations and conditions contained in the Agreement on or prior to the Drawdown Notice Date, and shall continue to perform in all material respects all covenants and agreements to be performed by the Company through the applicable Advance Date.  All conditions to the delivery of this Drawdown Notice are satisfied as of the date hereof.
 
4.              The undersigned hereby represents, warrants and covenants that it has made all filings (“ SEC Filings ”) required to be made by it pursuant to applicable securities laws (including, without limitation, all filings required under the Securities Exchange Act of 1934, which include Forms 10-Q or 10-QSB, 10-K or 10-KSB, 8-K, etc.).  All SEC Filings and other public disclosures made by the Company, including, without limitation, all press releases, analysts meetings and calls, etc. (collectively, the “ Public Disclosures ”), have been reviewed and approved for release by the Company’s attorneys and, if containing financial information, the Company’s independent certified public accountants.  None of the Company’s Public Disclosures contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
 
5.              The Advance requested is _____________________.
 
The undersigned has executed this Certificate this ____ day of _________________.
 
Sunvalley Solar, Inc.
 
 
By:      /s/ James Zhang
Name: James Zhang
Title:   CEO   
  
 
29

 
REGISTRATION RIGHTS AGREEMENT
 
 
REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of December 31, 2010, by and between Sunvalley Solar, Inc. a Nevada   corporation (the “ Company ”), and Auctus Private Equity Fund, LLC , Massachusetts   corporation (the “ Investor ”).
 
WHEREAS:
 
A.     In connection with the Drawdown Equity Financing Agreement by and between the parties hereto of even date herewith (the “ Drawdown Equity Financing Agreement ”), the Company has agreed, upon the terms and subject to the conditions of the Drawdown Equity Financing Agreement, to issue and sell to the Investor that number of shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”), which can be purchased pursuant to the terms of the Drawdown Equity Financing Agreement for an aggregate purchase price of up to Ten Million   Dollars ($10,000,000).  Capitalized terms not defined herein shall have the meaning ascribed to them in the Drawdown Equity Financing Agreement.
 
B.     To induce the Investor to execute and deliver the Drawdown Equity Financing Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “ Securities Act ”), and applicable state securities laws.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
 
1.      DEFINITIONS .
 
As used in this Agreement, the following terms shall have the following meanings:
 
a.     “ Person ” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
 
b.      Register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis (“ Rule 415 ”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the “ SEC ”).
 
c.     “ Registrable Securities ” have the meaning provided in definition 1c. of the Drawdown Equity Financing Agreement.
 
d.     “ Registration Statement ” means a registration statement under the Securities Act which covers the Registrable Securities.
 
 
1

 
 
2.     REGISTRATION .
 
a.     Mandatory Registration .  The Company shall prepare and file with the SEC a Registration Statement on Form S-1, or on such other form as is available, no later than  ninety (90) calendar days from the date hereof (the “ Scheduled Filing Deadline ”).  The Company shall use all commercially reasonable efforts to have the Registration Statement(s) declared effective by the SEC within one hundred and twenty (120) calendar days.  The Company shall cause the Registration Statement to remain effective until the full completion of the Commitment Period (as such term is defined in the Drawdown Equity Financing Agreement).eighty (180) calendar days. 
 
     In the event that the Company has: (i) timely filed a Registration Statement on Form S-1, or on such other form as is available, prior to the Scheduled Filing Deadline, and (ii) has used all commercially reasonable efforts to respond promptly to the SEC’s comments on the Registration Statement by way of appropriate amendments to the Registration Statement and responsive correspondence, and (iii) the Registration Statement has not been declared effective SEC, the Company shall be considered in compliance with this section for so long as its continues to use all commercially reasonable efforts to respond to the SEC’s comments to attempt to have the Registration Statement declared effective.
 
     In the event that the Company is advised by the SEC, either through correspondence or by telephone, to withdraw the Registration Statement prior to the Registration Statement being declared effective, the Company may, in its discretion, withdraw the Registration Statement and the parties will have no further obligation under this section.
 
b.     Sufficient Number of Shares Registered .  In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover all of the Registrable Securities pursuant to the Drawdown Equity Financing Agreement as result of the limitations imposed by the SEC pursuant to Rule 415 of the Securities Act, the Company shall amend the Registration Statement, or file a new Registration Statement (on the short form available therefore, if applicable), or both, so as to cover all of such Registrable Securities pursuant to the Drawdown Equity Financing Agreement as soon as practicable, but in any event no later than fifteen (15) days after the necessity therefore arises.  The Company shall use it best efforts to cause such amendment and/or new Registration Statement to become effective   commercially reasonable   as soon as practicable following the filing thereof.  For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of Registrable Securities issuable on an Advance Notice Date is greater than the number of shares available for resale under such Registration Statement.
 
 
2

 
 
3.      RELATED OBLIGATIONS .
 
a.     The Company shall keep the Registration Statement effective pursuant to Rule 415 at all times until the completion of the Commitment Period (as such term is defined in the Drawdown Equity Financing Agreement) (the “ Registration Period ”), which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.
 
b.      The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company’s filing a report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), the Company shall have incorporated such report by reference into the Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration Statement.
 
c.      To the extent such documents are unavailable via the SEC's live EDGAR website, the Company shall furnish to the Investor without charge, (i) at least one copy of such Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) ten (10) copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.
 
d.       The Company shall use its reasonable efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its certificate of incorporation or by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.  The Company shall promptly notify the Investor of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
 
 
3

 
 
e.        As promptly as practicable after becoming aware of such event or development, the Company shall notify the Investor in writing of the happening of any event as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to each Investor.  The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by facsimile on the same day of such effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.
 
f.        The Company shall use its commercially resonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
 
g.        At the reasonable request of the Investor, the Company shall furnish to the Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as the Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investor.
 
 
4