UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2012
 
[  ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
 
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) (IRS Employer Identification No.)
     

 

398 Lemon Creek Dr., Suite A, Walnut, CA 91789
(Address of principal executive offices)

 

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

(Former name, former address and former fiscal year, if changed since last report)

 

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] 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.

 

[ ] Large accelerated filer

[ ] Non-accelerated filer

[ ] Accelerated filer

[X] Smaller reporting company


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

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 9,800,623 common shares as of August 17, 2012.

 

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]

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TABLE OF CONTENTS Page
     
PART I – FINANCIAL INFORMATION

Item 1: Financial Statements 3
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
Item 3: Quantitative and Qualitative Disclosures About Market Risk 10
Item 4: Controls and Procedures 10

 

PART II – OTHER INFORMATION

    11
Item 1: Legal Proceedings 11
Item 1A: Risk Factors 11
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 3: Defaults Upon Senior Securities 11
Item 4: Mine Safety Disclosures 11
Item 5: Other Information 12
Item 6: Exhibits 12
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PART I - FINANCIAL INFORMATION

 

Item 1.      Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1 Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011;
F-2 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited);
F-3 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited);
F-4 Notes to Condensed Consolidated Financial Statements .

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2012 are not necessarily indicative of the results that can be expected for the full year.

 

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SUNVALLEY SOLAR, INC.

Condensed Consolidated Balance Sheets

(unaudited) 

 

ASSETS     June 30,   December 31,
    2012   2011
    (unaudited)    
CURRENT ASSETS                
Cash and cash equivalents   $ 148,361     $ 162,403  
Restricted cash     25,000       25,000  
Accounts receivable, net     3,933,256       4,512,198  
Inventory     1,042,946       847,083  
Costs in excess of billings on uncompleted contracts     715,567       168,493  
Other receivables     1,798       1,700  
Prepaid expenses and other current assets     19,798       14,289  
                 
Total current assets     5,886,726       5,731,166  
                 
PROPERTY AND EQUIPMENT, NET     93,319       224,375  
                 
OTHER ASSETS                
Other assets     27,859       28,827  
                 
Total other assets     27,859       28,827  
                 
TOTAL ASSETS   $ 6,007,904     $ 5,984,368  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
CURRENT LIABILITIES                
Accounts payable and accrued expenses   $ 3,873,936     $ 4,135,229  
Customer deposits     698,738       409,801  
Accrued warranty     69,737       68,881  
Current portion of long-term debt     29,460       14,073  
Current portion of capital lease     2,536       2,278  
Convertible debt, net     91,098       124,789  
Related party notes payable     171,308       100,000  
Factoring payable     309,475       325,652  
Derivative liability     128,346       501,626  
                 
Total current liabilities     5,374,634       5,682,329  
                 
LONG-TERM LIABILITIES                
Capital leases     12,350       13,299  
Notes payable     52,927       60,220  
                 
Total long-term liabilities     65,277       73,519  
                 
TOTAL LIABILITIES     5,439,911       5,755,848  
                 
STOCKHOLDERS' EQUITY                
                 
Common stock, $0.001 par value, 5,000,000,000 shares authorized, 4,310,632 and 1,772,080 shares issued and outstanding, respectively     4,311       1,772  
Additional paid-in capital     2,259,901       1,584,538  
Treasury stock     (104,000 )     —    
Accumulated deficit     (1,592,219 )     (1,357,790 )
                 
Total Stockholders' Equity     567,993       228,520  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 6,007,904     $ 5,984,368  

 

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

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SUNVALLEY SOLAR, INC.

Condensed Consolidated Statements of Operations

(unaudited)

 

     For the Three Months Ended   For the Six Months Ended  
    June 30,    June 30, 
    2012   2011   2012   2011
                 
REVENUES   $ 763,612     $ 1,940,573     $ 941,708     $ 2,738,383  
COST OF SALES     383,224       1,496,381       553,184       2,179,827  
                                 
GROSS PROFIT     380,388       444,192       388,524       558,556  
                                 
OPERATING EXPENSES                                
Salary and wage expense     140,930       139,013       316,692       281,915  
Professional fees     20,125       17,006       43,493       43,493  
Selling, general and administrative expenses     121,054       72,343       253,630       216,195  
                                 
     Total operating expenses     282,109       228,362       613,815       541,603  
                                 
INCOME (LOSS) FROM OPERATIONS     98,279       215,830       (225,291 )     16,953  
                                 
OTHER INCOME (EXPENSES)                                
Gain on sale of property     9,481       —         9,481       —    
Gain (loss) on derivative liability     189,126       (9,169 )     460,201       (11,822 )
Loss on conversion of debt     (183,634 )     —         (183,634 )     —    
Interest income     184       7,200       653       9,591  
Interest expense     (89,279 )     (5,251 )     (295,839 )     (8,616 )
                                 
     Total other expenses     (74,122 )     (7,220 )     (9,138 )     (10,847 )
                                 
LOSS BEFORE TAXES     24,157       208,610       (234,429 )     6,106  
                                 
Provision for income taxes     —         —         —         —    
                                 
NET INCOME (LOSS)   $ 24,157     $ 208,610     $ (234,429 )   $ 6,106  
                                 
                                 
BASIC AND DILUTED LOSS PER SHARE   $ 0.02     $ 0.13     $ (0.10 )   $ 0.00  
                                 
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING     1,361,231       1,610,137       2,295,560       1,609,385  



 

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

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SUNVALLEY SOLAR, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

    For the Six Months Ended 
     June 30,
    2012   2011
         
OPERATING ACTIVITIES:                
                 
Net loss   $ (234,429 )   $ 6,106  
Adjustments to reconcile net loss to net cash provided by operating activities:                
Depreciation and amortization     19,101       13,630  
Amortization of discount     271,849       —    
(Gain) loss on re-measurement of derivative     (460,180 )     11,822  
Loss on conversion of debt     183,634       —    
(Gain) loss on sale of property     (9,438 )     —    
Stock-based compensation     —         43,200  
Changes in operating assets and liabilities:                
Accounts receivable     578,942       (1,309,666 )
Inventory     (195,863 )     754,733  
Prepaid expenses and other assets     (5,509 )     (82,583 )
Other receivables     (98 )     5,481  
Costs in excess of billings on uncompleted contracts     (547,074 )     (144,515 )
Factoring line     91,533       —    
Other assets     968       (9,044 )
Accounts payable     (243,495 )     466,504  
Accrued warranty expenses     856       —    
Customer deposits     288,937       (27,277 )
                 
Net Cash (Used) in Operating Activities     (260,266 )     (271,609 )
                 
INVESTING ACTIVITIES:                
                 
Sale of property     121,393       —    
Purchase in property and equipment     —         (37,393 )
                 
Net Cash Provided by (Used in) Investing Activities     121,393       (37,393 )
                 
FINANCING ACTIVITIES:                
                 
Proceeds from related party notes payable     71,308       200,000  
Repayments of long term debt     (7,597 )     (36,616 )
Proceeds from factoring payable     726,217       —    
Proceeds from convertible debt     78,500       —    
Repayment of factoring line     (833,927 )     30,090  
Proceeds from sale of common stock     75,330       —    
Proceeds from notes payable     15,000       —    
                 
Net Cash Provided by Financing Activities     124,831       193,474  
                 
NET DECREASE IN CASH     (14,042 )     (115,528 )
CASH AT BEGINNING OF YEAR     187,403       546,165  
                 
CASH AT END OF YEAR   $ 173,361     $ 430,637  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                
                 
CASH PAID FOR:                
Interest   $ 3,831     $ 2,938  
Income taxes   $ —       $ 1,600  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES                
Derivative liability   $ 78,500     $ 130,544  
Common stock issued for debt   $ 314,983     $ —    
Repuchase of shares for notes payable   $ 104,000     $ —    

 

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

 

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SUNVALLEY SOLAR, INC.

Notes to the Condensed Consolidated Financial Statements

June 30, 2012 and December 31, 2011

 

NOTE 1 – CONDENSED FINANCIAL STATEMENTS

 

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2012, and for all periods presented herein, have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2011 audited financial statements.  The results of operations for the periods ended June 30, 2012 and 2011 are not necessarily indicative of the operating results for the full years.

 

NOTE 2 – GOING CONCERN

 

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

 

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

 

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

 

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

 

Reclassification of Financial Statement Accounts
Certain amounts in the June 30, 2011 financial statements have been reclassified to conform to the presentation in the June 30, 2012 financial statements.

Use of Estimates

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

 

Recent Accounting Pronouncements

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

 

F- 4

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.

 

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The Company’s inventory consisted of the following at June 30, 2012 and December 31, 2011:

 

    2012   2011
Raw materials   $ 216,630     $ 585  
Work in Progress     84,326       12,361  
Finished goods     741,990       834,137  
    $ 1,042,946     $ 847,083  

 

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. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. There were 4,767,480 and 382,471 such potentially dilutive shares excluded as of June 30, 2012 and December 31, 2011, respectively. 

 

NOTE 4 – COSTS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS

 

The Company is currently involved in certain major short-term solar panel installation projects. The Company is accounting for revenue and expenses associated with these two contracts under the completed contract method of accounting in accordance with ASC 605. Under ASC 605, income is recognized on when the contracts are completed or substantially completed and billings and others costs are accumulated on the balance sheet. Under the completed contract method, no profit or income is recorded before completion of substantial completion of the work.

 

As of June 30, 2012 and December 31, 2011, the Company has capitalized $715,567 and $168,493 of costs incurred in relation to installation projects. The Company expects a few major projects to be completed or substantially completed by December 31, 2012.

 

NOTE 5 – CAPITAL LEASE

 

The Company leased equipment in September 2011 and such lease has been classified as a capital lease because it contained a beneficial by-out option at the end of the lease.   The Company has used the discounted value of future payments as the fair value of this asset and has recorded the discounted value of the remaining payments as a liability.

As of June 30, 2012 the net book value of this leased asset is $15,267 as the Company recognizes $14,886 in remaining lease obligations. 

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NOTE 6 – RELATED PARTY TRANSACTIONS

 

During the six months ended June 30, 2012, the Company borrowed $7 1,308 from two of the officers of the Company. The note accrues interest at 6.5 percent per annum, is unsecured and due on demand. As of December 31, 2011, the Company owes $100,000 for short-term related party loans with maturity dates of less than 1 year bearing an interest rate of 6.5%; per annum. During May 2012, the Company converted a total of $104,000 loan payable from these two officers for the issuance of 821,812 shares of common and recorded the loss on conversion of debt in the amount of $183,634. In June 2012, the Company bought back 821,812 shares of common stock from these two officers as treasury stock with the short-term notes of $104,000 which accrue interest at 6.5 percent per annum with maturity dates of less than 1 year. The accrued interest on the related party payables was $3,096 and $178, for the six months ended June 30, 2012 and the year ended December 31, 2011, respectively.

 

NOTE 7 – CONVERTIBLE DEBT

 

On July 21, 2011, the Company borrowed $100,000 in the form of a convertible note payable. The note is convertible at the holder’s option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion feature, the Company recorded a discount on debt in the amount of $100,000 on the note date. The note is due on April 17, 2012, is unsecured, and bears an interest rate of 8%. As of June 30, 2012, the full amount of the note was converted to the Company’s common stock along with $4,280 of accrued interest.

 

On October 3, 2011, the Company borrowed $75,000 in the form of a convertible note payable. The note is convertible at the hold’s option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion feature, the Company recorded a discount on debt in the amount of $30,313 on the note date. The note is due on June 27, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the full amount of the note was converted to the Company’s common stock along with $3,426 of accrued interest.

 

On October 26, 2011, the Company borrowed $75,000 in the form of a convertible note payable. The note is convertible at the holder’s option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion feature, the Company recorded a discount on debt in the amount of $75,000 on the note date. The note is due on July 20, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the Company had recorded $4,077 in accrued interest on the note. As of June 30, 2012 the Company had amortized $11,539 of the debt discount to interest expense, leaving $25,796 in unamortized debt discount at June 30, 2012.

 

On October 28, 2011, the Company borrowed $200,000 in the form of a convertible note. The note is convertible at the holder’s option at 40% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion feature, the Company recorded a discount on debt in the amount of $200,000 on the note date. The convertible debt is due on July 18, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the Company had recorded $868 in accrued interest on the note. As of June 30, 2012 the Company had amortized $29,871 of the debt discount to interest expense, leaving $69,417 in unamortized debt discount at June 30, 2012.

 

On February 22, 2012, the Company borrowed $78,500 of convertible debt. The debt is convertible at the holder’s option at 40% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion feature, the Company recorded a discount on debt in the amount of $78,500 on the note date. The convertible debt is due on November 21, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the Company had recorded $2,220 in accrued interest on the note. As of June 30, 2012 the Company had amortized $22,524 of the debt discount to interest expense, leaving $45,049 in unamortized debt discount at June 30, 2012.

F- 6

NOTE 8 – DERIVATIVE LIABILITY

 

Effective July 31, 2009, the Company adopted ASC Topic No. 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. These debts are convertible at the holder’s option at 61% or 40% of the average of the lowest three trading prices during the 10 days prior to conversion according to different note agreeemnts. The number of shares issuable upon conversion of these debts are 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.

 

The exercise price of these warrants are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced.  As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

 

ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item.  The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the above convertible debts.  At June 30, 2012, the Company revalued the conversion features using the following assumptions: stock price of $0.0001, exercise price of $0.0001, dividend yield of zero, years to maturity vary according to convertible note, risk free rate ranging from 0.04 to 0.16 percent, and annualized volatility ranging from 290 to 660 percent   and determined that, during the six months ended June 30, 2012, the Company’s derivative liability decreased by $373,280 to $128,346. The Company recognized a corresponding gain on derivative liability in conjunction with this revaluation.

 

NOTE 9 – FACTORING LINE PAYABLE

 

During the six months ended June 30 2012, the Company paid $833,926 to its factoring provider, inclusive of accrued fees, and the Company borrowed a total of $726,741 from the factoring provider against its accounts receivable with a discount fee of approximately 0.95% for each 15-day period the accounts receivable remain unpaid. As of June 30, 2012, accrued interest and fees on this factoring line totaled $309,475. The Company’s credit facility with the factoring company was increased to one million in June 2012.

 

NOTE 10 – COMMON STOCK

 

On January 27, 2012, the Company issued 12,000 shares of its common stock for $19,530. On February 9, 2012, the Company issued 8,000 shares of its common stock for $11,160. On March 19, 2012, the Company issued 40,000 shares of its common stock for $45,000.

 

During the six months ended June 30, 2012 the Company issued 2,478,553 shares of the Company’s common stock upon conversion of $602,572 of its debt. On June 25, 2012 the Company purchased 821,812 shares of its common stock for notes payable to related parties of $104,000.

 

F- 7

NOTE 11 – SUBSEQUENT EVENTS

 

Subsequent to June 30, 2012 the Company issued 2,151,750 shares of its common stock upon the conversion of $76,990 of convertible debt.

 

Subsequent to June 30, 2012 the Company cancelled 821,812 shares of treasury stock which were bought back from the two officers of the Company.

 

On July 20, 2012 the Company effected an 1 to 500 reverse stock split, thus all the stock shares were stated as post-split in this footnotes.

 

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

F- 8

Item 2.     Management’s Discussion and Analysis or Plan of Operation

 

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.

 

Company Overview and Plan of Operation

 

We are a California-based solar power technology and system integration company founded in January of 2007. We are focused on developing our 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. 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, low cost and flexible solar power system solutions.

 

We are working 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.

 

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.
- 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.
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Expansion of Installation Business

 

We are planning to expand its installation business. 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.

 

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.

 

Initiate OEM Manufacturing of Solar Panels

 

By leveraging our 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 $0.60 per watt. As a reference, currently, the lowest panel price is around $1.00 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.

 

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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

 

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 4-5 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 Plant 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.

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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.

 

Expected Changes In Number of Employees, Plant, and Equipment

 

We do not currently plan to purchase specific additional physical plant and significant equipment within the immediate future. We do not currently have specific plans to change the number of our employees during the next twelve months.

 

Results of Operations for the three and six months ended June 30, 2012 and 2011

 

During the three months ended June 30, 2012, we generated gross revenues of $763,612. Total cost of sales was $383,224, resulting in gross profit of $380,388. Total operating expenses were $282,109, and consisted of salary and wage expenses of $140,930, selling, general and administrative expenses of $121,054, and professional fees of $20,125. We experienced interest expense of $89,279, interest income of $184, a gain on sale of property of $9,481, a gain of $189,126 due to the change in value of a derivative liability, and a loss on conversion of debt in the amount of $183,634. Our net profit for the three months ended June 30, 2012 was therefore $24,157.

 

By comparison, during the three months ended June 30, 2011, we generated gross revenues of $1,940,573. Total cost of sales was $1,496,381 resulting in gross profit of $444,192. Total operating expenses were $228,362, and consisted of salary and wage expenses of $139,013, selling, general and administrative expenses of $72,343, and professional fees of $17,006. We experienced interest expense of $5,251, interest income of $7,200, and a loss due to the change in value of a derivative liability of $9,169. The net profit for the three months ended June 30, 2011 was therefore $208,610.

 

During the six months ended June 30, 2012, we generated gross revenues of $941,708. Total cost of sales was $553,184, resulting in gross profit of $388,524. Total operating expenses were $613,815, and consisted of salary and wage expenses of $316,692, selling, general and administrative expenses of $253,630, and professional fees of $43,493. We experienced interest expense of $295,893, interest income of $653, a gain on sale of property of $9,481, a gain of $460,201 due to the change in value of a derivative liability, and a loss on conversion of debt in the amount of $183,634. Our net loss for the six months ended June 30, 2012 was therefore $234,429.

 

By comparison, during the six months ended June 30, 2011, we generated gross revenues of $2,738,383. Total cost of sales was $2,179,287 resulting in gross profit of $558,556. Total operating expenses were $541,603, and consisted of salary and wage expenses of $281,915, selling, general and administrative expenses of $216,195, and professional fees of $43,493. We experienced interest expense of $8,616, interest income of $9,591, and a loss due to the change in value of a derivative liability of $11,822. The net profit for the three months ended June 30, 2011 was therefore $6,106.

 

Our revenues decreased significantly for the three and six months ended June 30, 2012 compared to the first half of last year. This change is due to the fact that we have been implementing several large commercial solar systems which are scheduled to be completed in the later part of 2012. Under the completed contract method of accounting, no profit or income is recorded before substantial completion of the work. The revenue for these projects will therefore be recognized after their completion. Due to the implementation periods for different size of projects, revenue fluctuations like the one experienced during this quarter are a normal occurrence for construction companies, including solar system integration companies.

 

We use the Black-Scholes option pricing model to value our derivative liabilities upon issuing convertible notes with derivatives and the subsequent remeasurement of our convertible notes at each reporting report. Due to these accounting procedures relating to our convertible notes, we recognized $295,893 as interest expenses, a gain on derivative liabilities of $460,201, and a loss on conversion of debt in the amount of $183,635 during the six months ended June 30, 2012.

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During 2011, due to the incentives provided by utility companies’ rebate programs and the Federal Recovery Act’s cash grant program, we were able to obtain more large commercial installation projects than we did in 2010. We implemented over 1M watts in solar installation projects in 2011, We have signed installation contracts for over 1.5M watts in solar systems for 2012 and they are currently under implementation. We expect these projects to be completed before the end of Q4, 2012.

 

Liquidity and Capital Resources

 

As of June 30, 2012, we had current assets in the amount of $5,886,726, consisting of cash in the amount of $148,361, accounts receivable of $3,933,256, inventory in the amount of $1,042,946, costs in excess of billings on uncompleted contracts of $715,567, prepaid expenses and other current assets of $19,798, other receivables of $1,798, and restricted cash of $25,000. As of June 30, 2012, we had current liabilities in the amount of $5,374,634. These consisted of accounts payable and accrued expenses in the amount of $3,873,936, a derivative liability of $128,346, customer deposits of $698,738, a factoring payable of $309,475, convertible debt of $91,098, related party notes payable of $171,308, accrued warranty of $69,737, the current portion of long term debt in the amount of $29,460, and the current portion of a capital lease in the amount of $2,536. Our working capital as of June 30, 2012 was therefore $512,092.

 

Our accounts payable and accrued expenses as of June 30, 2012 consisted of the following:

 

Accounts Payable   $ 3,582,699  
Credit Card payable     26,743  
Accrued vacation     24,193  
Other accrued expense     97,174  
Payroll liabilities     10,400  
Sales tax payable     132,727  
Total   $ 3,873,936  

 

As of June 30, 2012, our long-term liabilities were $65,277, which consisted of a loan owing to East West Bank with a long term portion of $52,927 and the remaining long term obligations of a capital lease in the amount of $12,350. The principal amount outstanding under the East West Bank loan accrues annual interest at the bank's variable index rate. The East West Bank loan is collateralized by all business assets.

 

In September 2011, we entered a lease-to-own purchase agreement. We evaluated the lease at the time of purchase and determined that the agreement contained a beneficial by-out option wherein we have the option to buy the equipment for $1 at the end of the lease term. Under the guidance in ASC 840, we have classified the lease as a capital lease.   We used the discounted value of future payments as the fair value of this asset and have recorded the discounted value of the remaining payments as a liability. As of June 30, 2012 the capital lease payable outstanding was $14,866. 

 

In addition, we have received debt financing from Asher Enterprises, Inc. under a series of Convertible Promissory Notes. The notes, both converted and currently outstanding, are as follows:

 

Amount   Issue date   Due date   Shares issued upon conversion   Conversion date (s)   Principal amount outstanding
$75,000     10/03/11       6/27/12       94,313,186       April 16 ---May 21, 2012        $ 0
$75,000     10/26/11       7/20/12       504,000,000       May 29 – August 8, 2012      $ 44,000
$78,500     02/15/12       11/21/12       —         —       $ 78,500
                                   

 

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All Notes issued to Asher Enterprises, Inc. bear interest at a rate of 8% per year and are convertible at a conversion price equal to 61% or 40% of the Market Price of our common stock on the conversion date according to different note agreements.  For purposes of the Notes, “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 of the Notes 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.

 

We have determined that the conversion feature of these notes is not considered to be solely indexed to our own stock and is therefore not afforded equity treatment. In accordance with ASC 815, we have bifurcated the conversion feature of the notes and recorded a derivative liability. As of June 30, 2012 the value of the derivative liability was $128,346 and we recognized a gain on the derivative of $460,201 for the quarter ended June 30, 2012.

 

In addition, we have also recently received debt financing from Tonaquint, Inc. in the amount of $200,000 under a Convertible Promissory Note as follows:

 

Amount   Issue date   Due date   Shares issued upon conversion   Conversion date (s)   Principal amount outstanding
$200,000     10/28/11       7/18/12       1,103,747,367       April 30 – August 6, 2012     $ 108,860
                                   

 

The note issued to Tonaquint, Inc. bears interest at a rate of 8% per year and is convertible at a conversion price equal to 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 of the Note is limited so that the holder’s total beneficial ownership of our common stock may not exceed 9.99% 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.

 

On November 10, 2011, we entered into a Factoring and Security Agreement (the “Agreement”) with CapFlow Funding Group Managers LLC (“CapFlow”). The Agreement is a credit facility for the purpose of factoring our accounts receivable. The cost of this funding is a discount of 1.85% of the gross amount of each receivable factored for the first 30 days, and an additional 0.95% for each additional 15 day period thereafter until the factored account receivable is closed. Under the Agreement, 20% to 25% of the amount of the purchased invoices is reserved. Our obligations to CapFlow under the Agreement are secured by substantially all of our assets. The total available credit line under the Agreement is $1,000,000. As of June 30, 2012, we had received total advances under the Agreement of $1,041,381 on factored invoices totaling $1,321,838. As of June 30, 2012, accrued interest and fees on this factoring line totaled $309,475. Our current available credit under the Agreement is $1,000,000. To date, discount rates for invoices factored to CapFlow under the Agreement have ranged from 1.85% to 8.50%.

 

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.

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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 an existing Draw-Down Equity Financing Agreement, and/or the issuance of short-term debt convertible to common equity as discussed above. 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.

 

Off Balance Sheet Arrangements

 

As of June 30, 2012, there were no off balance sheet arrangements.

 

Going Concern

 

We have experienced recurring losses from operations and had an accumulated deficit of $1,592,219 as of June 30, 2012. 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.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not believe that any accounting policies currently fit this definition.

 

Recently Issued Accounting Pronouncements

 

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

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

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

 

Item 4. Controls and Procedures


We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2012. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Zhijian (James) Zhang and our Chief Financial Officer, Mandy Chung. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2012, our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2012.

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Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Limitations on the Effectiveness of Internal Controls

 

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.   Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A. Risk Factors

 

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

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

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Item 5. Other Information

 

After the reporting period, on July 24, 2012, our board of directors and a majority of our shareholders approved an amendment to our Articles of Incorporation which increased our authorized common stock to 7.5 billion shares. In addition, our board of directors and a majority of our shareholders approved a reverse split of our issued an outstanding common stock on a basis of 1 for 500. The reverse split was effective August 10, 2012. In connection with the reverse split, our common stock was assigned the following new CUSIP number: 86802Y203 .

 

Item 6. Exhibits

 

Exhibit Number Description of Exhibit
3.1 Certificate of Amendment
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, 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

 

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SIGNATURES

 

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

 

Sunvalley Solar, Inc.
 
Date:

August 20, 2012

 

   
 

By:        /s/ Zhijian (James) Zhang

             Zhijian (James) Zhang

Title:     Chief Executive Officer and Director

 
Date:

August 20, 2012

 

   
 

By:        /s/ Mandy Chung

             Mandy Chung

Title:     Chief Financial Officer

 

13

 

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 seven billion five hundred one million (7,501,000,000) shares, consisting of two classes to be designated, respectively, "Common Stock" and "Preferred Stock," with all such shares having a par value of $0.001per share. The total number of shares of Common Stock that the Corporation shall have authority to issue is seven billion five hundred million (7,500,000,000) shares. The total number of shares of Preferred Stock that the Corporation shall have authority to issue is one million (1,000,000) shares 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. SEE ATTACHED

 
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.

 
 

Fourteenth. Preferred Stock.     

(a)     Designation.     The board of directors is hereby vested with the authority from time to time to provide by resolution for the issuance of shares of Preferred Stock in one or more series not exceeding the aggregate number of shares of Preferred Stock authorized by these Articles, and to prescribe with respect to each such series the voting powers, if any, designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions relating thereto, including, without limiting the generality of the foregoing: the voting rights relating to the shares of Preferred Stock of any series (which voting rights, if any, may be full or limited, may vary over time, and may be applicable generally or only upon any stated fact or event); the rate of dividends (which may be cumulative or noncumulative), the condition or time for payment of dividends and the preference or relation of such dividends to dividends payable on any other class or series of capital stock; the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution, or winding up of the affairs of the Corporation; the rights, if any, of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other class or series of capital stock or for any other securities, property, or assets of the Corporation or any subsidiary (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange shall be applicable, and the time or times during which a particular price or rate shall be applicable); whether the shares of any series of Preferred Stock shall be subject to redemption by the Corporation and if subject to redemption, the times, prices, rates, adjustments and other terms and conditions of such redemption. The powers, designations, preferences, limitations, restrictions and relative rights may be made dependent upon any fact or event which may be ascertained outside the Articles or the resolution if the manner in which the fact or event may operate on such series is stated in the Articles or resolution. As used in this section "fact or event" includes, without limitation, the existence of a fact or occurrence of an event, including, without limitation, a determination or action by a person, government, governmental agency or political subdivision of a government. The board of directors is further authorized to increase or decrease (but not below the number of such shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. Unless the board of directors provides to the contrary in the resolution which fixes the characteristics of a series of Preferred Stock, neither the consent by series, or otherwise, of the holders of any outstanding Preferred Stock nor the consent of the holders of any outstanding Common Stock shall be required for the issuance of any new series of Preferred Stock regardless of whether the rights and preferences of the new series of Preferred Stock are senior or superior, in any way, to the outstanding series of Preferred Stock or the Common Stock.

 

(b)     Certificate.     Before the Corporation shall issue any shares of Preferred Stock of any series, a certificate of designation setting forth a copy of the resolution or resolutions of the board of directors, and establishing the voting powers, designations, preferences, the relative, participating, optional, or other rights, if any, and the qualifications, limitations, and restrictions, if any, relating to the shares of Preferred Stock of such series, and the number of shares of Preferred Stock of such series authorized by the board of directors to be issued shall be made and signed by an officer of the corporation and filed in the manner prescribed by the NRS.

 
 

CERTIFICATIONS

 

I, Zhijian James Zhang, certify that;

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2012 of SunValley Solar, Inc. (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 20, 2012

 

/s/ Zhijian James Zhang

By: Zhijian James Zhang

Title: Chief Executive Officer

CERTIFICATIONS

 

I, Mandy Chung, certify that;

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2012 of SunValley Solar, Inc. (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 20, 2012

 

/s/ Mandy Chung

By: Mandy Chung

Title: Chief Financial Officer

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

 

In connection with the quarterly Report of SunValley Solar, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2012 filed with the Securities and Exchange Commission (the “Report”), I, Zhijian James Zhang, Chief Executive Officer of the Company, and I, Mandy Chung , Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

 

By: /s/ Zhijian James Zhang
Name: Zhijian James Zhang
Title: Principal Executive Officer, Principal Financial Officer and Director
Date: August 20, 2012

 

 

 

 

 

 

 

 

 

  

By: /s/ Mandy Chung
Name: Mandy Chung
Title: Principal Financial Officer
Date: August 20, 2012

 

 

 

 

 

 

 

 

 

 

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.