SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to
the Securities Exchange Act of 1934
For the fiscal year ended September 30, 2003
Commission file number: 000-29621
XSUNX, INC.
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(Exact name of registrant as specified in its charter)
Colorado 84-1384159
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(State of incorporation) (I.R.S. Employer
Identification No.)
65 Enterprise, Aliso Viejo, CA 92656
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (949) 330-8060
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
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Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. X
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State issuer's revenues for its most recent fiscal year. $0
Transitional Small Business Disclosure Format:
Yes X No
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Aggregate market value of the authorized voting stock held by non-affiliates of
the registrant as of September 30, 2003: $2,679,247 based on the last sale price
at year end of $.02 as reported by NASDAQ (post reverse split one for twenty).
Number of authorized outstanding shares of the registrant's no par value
common stock, as of September 30, 2003: 111,298,148
TABLE OF CONTENTS
PART I PAGE
Item 1. Description of Business 4
Item 2. Description of Property 25
Item 3. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security Holders 25
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
Item 8A. Controls and Procedures
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
PART IV
Item 13. Exhibits and Reports on Form 8-K
Item 14. Principal Accountant Fees and Services
SIGNATURES
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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COMPANY HISTORY
Sun River Mining Inc. ("Sun River," the "Company" or the "issuer") is a
Colorado corporation incorporated on February 25, 1997 to assume control of two
subsidiaries, Grupo Inversor Rio Del Sol S.A. ("Rio Del Sol"), and North
Bolivian Investment S.A. ("NBI"), respectively 99.6% and 99.9924% then owned by
Sun River. Rio Del Sol and NBI were both Bolivian corporations. Neither Sun
River nor the subsidiaries had any operational history or engaged in significant
business operations, and have not generated revenues since inception. Sun River
and the Bolivian Subsidiaries are herein referred to collectively as "the Sun
River Group."
The Company terminated, in 1998, all attempts at mineral exploration and
any intended mining of prospects, and has abandoned all mineral prospects. The
company had no business operations in the fiscal year ended September 30, 2003,
except for those operations related to the Plan and Agreement of Reorganization
with Xoptix, Inc.
The Plan and Agreement of Reorganization between Sun River Mining, Inc. and
Xoptix, Inc. was completed on September 24, 2003. Pursuant to the Plan, the
Company authorized the issuance of 110,530,000 (post reverse split) common
shares.
NEW BUSINESS
On July 9, 2003, The Company entered into a Plan of Reorganization and
Asset Purchase Agreement with Xoptix, Inc., a California corporation, to acquire
the following three patents for Seventy Million (70,000,000) shares (post
reverse split one for twenty): No. 6,180,871 for Transparent Solar Cell and
Method of Fabrication (Device), granted on January 30, 2001; No. 6,320,117 for
Transparent.
Solar Cell and Method of Fabrication (Method of Fabrication), granted
on November 20, 2001; and No. 6,509,204 for Transparent Solar Cell and Method of
Fabrication (formed with a Schottky barrier diode and method of its
manufacture), granted on January 21, 2003 (collectively, the "Patents"). The
Company's new Business Plan is as contained herein. The Plan provided for the
issuance of 70,000,000 shares for the Patents and 25,500,000 shares for
services, and 230,000 shares to settle old bills (post reverse split one for
twenty), in addition to the shares being sold hereunder. The transaction was
completed on September 30, 2003.
HISTORY OF XOPTIX PATENTS
Xoptix, Inc. was founded in March 1999 to develop and exploit a new
solar-based invention. Between March 1999 and the present, Xoptix focused
primarily on protecting and validating its proprietary process for making a
transparent window glazing which produces electricity.
Specifically, Xoptix has been granted three patents for a process for
making solar electric glass. This yields a new class of thin film and glass
products for use under the trade name "XsunX" (and which will be used hereafter
to describe the technology). These films and glasses can replace a broad
spectrum of common materials. Xoptix ceased business operations in 2001. Xoptix
has sold its technologies and patent assets to the Company as part of a plan of
liquidation of Xoptix and winding up of its corporate existence.
PRODUCT STRATEGY
XsunX has recently acquired the patents to technology for the
manufacture of transparent solar cells. We anticipate that the primary product
opportunity for this technology will be in establishing a viable process for the
commercial manufacture of solar electric glass. This proprietary process will
allow manufacturers to apply a coating, film or glazing to glass, plastic and
other materials, which is transparent and photovoltaic. Because XsunX glazing is
transparent, the general appearance of products manufactured using the XsunX
process is not changed. When XsunX glazing is exposed to light, the light energy
is converted into electrical energy for use as a power source.
APPLICATIONS FOR SOLAR ELECTRIC GLASS AND GLAZINGS
While there are numerous ways to make solar cells, all of these methods
result in a structure that is opaque. Thus, they are not appropriate for many
applications. The need to place cells in areas where they do not obscure vision
or building esthetics also limits deployment to areas of exceedingly small
percentages of total available building surfaces. To date, this limiting factor
has also presented Return On Investment (ROI) inefficiencies associated with
costs per kW produced versus the Balance Of System (BOS) expenditures for
mounting, wiring, power conditioning and grid connection.
On the other hand, XsunX solar electric glass technology provides an
opportunity for a large percentage of a buildings exterior surface to produce
electricity for use by the building. Efficiencies are gained in total kW
produced and ROI on BOS expenditures are anticipated be more rapid. Management
believes these unique properties provide major market potential in the following
areas:
Architectural Glass - Non-Residential and Commercial Buildings
XsunX glazing could be applied to the windows of large buildings,
turning these structures into virtual power plants. Electrical power
generated can be used to run building systems. In the future, the
Company's management believes that a substantial portion of electrical
power can be generated in dense urban areas with XsunX's solar electric
glass. While the total amount spent annually on building products is
over a trillion dollars, the total expenditure for XsunX solar electric
glass could swell into the billions.
Architectural Glass - Residential Buildings
XsunX glazing could be applied to windows in homes to supply a portion
of residential electrical power. The Company's management believes that
these types of windows could eventually be supplied by companies such
as Andersen Windows and could be sold directly at home improvement
stores such as Home Depot. Film produced by companies such as 3M using
the XsunX process could also be applied to new and existing windows.
BUSINESS MODEL
The Company's management believes that the primary target opportunity
for XsunX's technology is makers and fabricators of glass and optical films.
These are very large industries, generating worldwide revenues in the hundreds
of billions of dollars. The Company's strategy is to complete the development
and commercialization of the XsunX process, and then enter into relationships
with channel partners who will manufacture and distribute products made with
XsunX solar electric glazing technology. The Company's management believes that
the most rapid and likely path to success involves licensing the XsunX process
to companies with established manufacturing and distribution facilities.
REVENUE MODEL
The Company's management believes that virtually all of the Company's
revenues will come from the license of its proprietary XsunX solar electric
glazing technology to major manufacturers. Exclusive and non-exclusive know-how
and intellectual property licenses will result in a stream of royalty revenue
for the Company. The Company's management estimates that manufactures of
architectural glass will be willing to pay a royalty of at least 3% of gross
sales for the non-exclusive right to manufacture XsunX flat glass. No contracts
now exist.
BACKGROUND OF THE TRANSPARENT SOLAR CELL
Many different applications benefit greatly from the use of solar
energy. For example, buildings, with their broad surfaces that are exposed to
the sun's energy for much of the day, can use that energy to provide some or all
of their energy needs. Various solar cells have been developed using different
fabrication techniques to take advantage of this energy source.
The Company's management believes that unlike the majority of current
solar cell technologies, XsunX glazing could be incorporated onto the large and
under utilized, or simply unused, portions of a buildings structure in the form
of architectural glass or optical films applied to building materials. This
unique attribute may provide XsunX with a direct path to the market -- a path
where the company does not compete with current opaque solar cell designs for
rooftops and other architecturally limiting locations.
One type of solar cell is formed with crystalline silicon. For these
solar cells, melting silicon and drawing an ingot of crystalline silicon of the
size desired form crystalline silicon. Alternatively, a ribbon of crystalline
silicon can be pulled from molten silicon to form a crystalline silicon solar
cell. A conductor is placed on either side of the crystalline silicon to form
the solar cell. These processes use high temperatures and the solar cells are
expensive to manufacture. Packaging is also difficult and expensive and creates
a rigid structure. The manufacturing process limits their maximum size. It is
difficult to slice the resulting crystalline silicon thin enough to provide a
transparent or flexible solar cell. However, these structures are very efficient
(relative to other types of presently available commercial solar cells). As
such, crystalline solar cells are used primarily for applications where
efficiency is more important than cost and where the structures do not need to
be flexible. For example, these are commonly used on satellites.
Another type of solar cell is formed with polycrystalline silicon.
These may be formed as thin layers on wafers and can thus be made thinner than
crystalline silicon solar cells. As is well known in the art, heating amorphous
silicon can form polycrystalline silicon. Typically, amorphous silicon begins to
crystallize at temperatures greater than about 1400(Degree) C. Because of these
high temperatures, known processes can only use substrates with high melting
points. These processes are not appropriate for substrates made of plastics or
other materials that melt at lower temperatures. In the manufacture of flat
panel displays, it is known to use lasers to form polycrystalline silicon thin
film transistors (TFTs). Such use has not included the formation of P-N
junctions or solar cells that presents its own set of challenges. Moreover,
these manufacturing processes generally formed single transistors and were not
used to form large sheets or areas of polycrystalline silicon. Further, lasers
have been used in the manufacture of solar cells, but only as a tool to
mechanically form (slice, pattern, etch, etc.) the solar cells.
Another type of solar cell has been formed using doped layers of
amorphous silicon. These are not subject to some of the problems inherent in the
previously described crystalline silicon or polycrystalline solar cells. First,
amorphous silicon can be formed using low temperature processes. Thus, it can be
formed on plastic and other flexible substrates. They can also be formed over
large surfaces. Second, the processing techniques are less expensive.
Nevertheless, amorphous solar cells introduce other significant limitations not
found in crystalline silicon or polycrystalline silicon solar cells. For
example, hydrogen is generally added during the manufacturing to increase the
efficiency of the cell. Amorphous silicon solar cells tend however to lose this
hydrogen over time, causing reduced efficiency and reduced usable life.
Moreover, amorphous silicon solar cells are not transparent. Thus, they are not
appropriate for many applications. For example, buildings with solar cells can
be unsightly, and the solar panels may block the view of the outdoors or access
to outside light indoors. Also, portable electronics often place a premium on
size and surface area. Some devices have displays that cover most -- if not all
-- of the exposed surface of the device. Therefore, it is often undesirable or
impossible to mount a traditional amorphous silicon solar cell on the device.
Attempts have been made to solve this transparency problem by making
transparent panels from existing solar cell processes. One method has been to
take advantage of the "window shade effect" whereby solar cells are formed on a
transparent substrate with gaps between adjacent solar cells. This allows some
light to pass through to create a transparent effect. The larger the gaps, the
more transparency the device has. A disadvantage of this technique is that much
of the space is unused; therefore the efficiency of the device is less than it
would be if all of the surface areas were used for solar cells. Of course,
devices of this type also suffer from the problems inherent to the type of cell
used. For example, if based on amorphous silicon, these devices suffer from the
hydrogen loss exhibited in other amorphous silicon devices.
Other work has been done at making transparent solar cells using
materials other than silicon (for example, cadmium telluride (CdTe)). These
cells suffer from the challenges inherit to using materials other than silicon.
THE XSUNX PROCESS
The XsunX technique for making transparent solar cells leverages two
distinctly different technologies -- amorphous solar cell process and flat panel
display process -- that have not previously been linked. By adding known
processing techniques to those commonly used in the solar industry, XsunX has
been able to create and protect a structure that is both transparent and
photovoltaic.
The XsunX Process combines the following advantages:
O It is transparent and therefore can be used in places inapplicable to
Existing solar cells.
o It is cost effective because it uses thin film amorphous silicon.
o It may be readily manufactured because the methods for manufacture uses
commercially available chemical vapor deposition and laser annealing
equipment.
o It can be used on a wide variety of substrates including low temperature
substrates.
THE METHOD OF FABRICATION
It is anticipated that the XsunX Process will provide a method and
structure that will form a substantially transparent solar cell. The solar cell
is anticipated to be thin, flexible, and easy to make and use with conventional
semiconductor processes. The solar cell is also anticipated to operate
effectively as an optical filter.
In a specific embodiment, the XsunX Process includes a method of
forming a solar cell. The method includes steps of providing a substrate, such
as glass, plastic, Mylar and other substrates, including those with low melting
points. The method also includes forming a first conductive layer overlying the
substrate. The method also includes forming a first amorphous silicon layer of a
first dopant type overlying the first conductive layer. A step of annealing the
first amorphous silicon layer is included. The method also forms a second
amorphous silicon layer of a second dopant type, and also anneals the second
amorphous silicon layer. A second conductive layer is formed overlying the
second amorphous silicon layer. A combination of these steps forms a transparent
solar cell structure.
In an alternative aspect, the XsunX Process provides a solar cell
structure that is transparent. The structure includes a transparent substrate,
which can be selected from glass, crystal, plastic, Mylar, and other substrates,
including those that have low melting points. A conductive layer is formed
overlying the transparent substrate. A first polycrystalline silicon layer from
a first amorphous silicon layer of a first dopant type is formed overlying the
first conductive layer. The structure also includes a second polycrystalline
silicon layer from a second amorphous silicon layer of a second dopant type
overlying the first polycrystalline silicon layer, and a second conductive layer
overlying the second polycrystalline silicon layer. The combination of these
layers forms a transparent structure.
In a further aspect, the XsunX Process provides a method for
fabricating a structure comprising a transparent solar cell structure. The
method includes forming a first conductive layer overlying a transparent
substrate, and forming a first amorphous silicon layer overlying the first
conductive layer. The method also includes converting the first amorphous
silicon layer into a first polycrystalline silicon, and forming a second
amorphous silicon layer overlying the first amorphous silicon layer. A step of
converting the second amorphous silicon layer into a second polycrystalline
silicon is included. The method also includes forming a second conductive layer
overlying the second amorphous silicon layer. The combination of these steps
forms a transparent solar cell structure overlying the substrate.
In still a further aspect, the XsunX Process provides a solar cell
comprising a substrate with a melting temperature of less than 450(Degree) C, a
first conductive layer overlying the substrate, a first polycrystalline film
overlying the first conductive layer, a second polycrystalline film overlying
the first polycrystalline film, and a second conductive layer overlying the
second polycrystalline film.
ADVANTAGES OF THE XSUNX PROCESS
The XsunX Process may achieve numerous advantages over conventional
techniques for forming solar cells. For example, the present XsunX method uses
conventional equipment and processes from semiconductor operations to
manufacture the solar cells. In one aspect of the XsunX Process, an Excimer
laser is used to anneal the amorphous silicon layers. Use of this, or a similar
laser, allows the forming of polycrystalline silicon without exposing the
substrate to high temperature that will distort or destroy it. Therefore, low
melting point materials such as plastic may be used. The XsunX solar cells can
be transparent, which makes them desirable for placing over glass and other see
through structures. The present cell structure is extremely thin and efficient
and can be implemented on a variety of applications.
For example, it can be formed on a flexible substrate and substantially
maintain the flexibility of the substrate. Depending upon the embodiment, one or
more of these advantages may exist. Other advantages may also exist depending
upon the embodiment. A transparent solar cell produced with the XsunX Process
will also have a lower efficiency than a standard solar cell.
Conversely, the ability to incorporated larger amounts of XsunX cells
on to a structure provides for significant opportunities to produce greater
amounts of usable energy. Conventional PV technology installation is typically
limited to very small percentages of a buildings usable surface. XsunX PV
technology may see building surface integration of as much as 75% in commercial
applications providing many times the kW production associated with smaller
installations of conventional opaque PV cells.
Management believes that a transparent solar cell produced with the
XsunX Process will have a lower efficiency than a standard solar cell for the
following reasons:
o Poly-crystalline cells are more efficient than amorphous cells.
o At least 25% of the photons will be annihilated within 1000 Angstroms.
o ND1 Solar Filter will be at least 4000 Angstroms - conservative number
is 50% for ND1 filter.
Management estimates that transparent solar cells produced with the
XsunX Process will have a very wide dynamic range depending on the application
and the filter characteristics.
MARKET ANALYSIS
The Company's technology can be applied to the already quite large and
established glass industries. That is, transparent glazing may enable solar
energy-production to enter mainstream markets because it can readily become
integral to the designs of buildings. Builders and manufacturers already use
glass, plastic and other materials, so they may be especially attracted to the
economic benefits of using the same materials that also produce electrical
energy.
In the long view, solar energy production is intrinsically attractive,
not only environmentally but also economically. Sunlight is readily, regularly,
and widely available; it is renewable; and it is easily accessible without the
massive expense of mining, drilling, or constructing huge dams or other
facilities. Tapping the sun directly, rather than through the solar energy
stored in fossil fuels, wood, or ethanol, makes too much economic sense not to
be inevitable.
A major factor in the restricted use of solar energy has been the
technological limitations of large-scale solar energy production, particularly
active production of electricity rather than passive collection of heat. For
buildings, residential and nonresidential, photovoltaic technology has shown it
can significantly reduce the need for electricity generated through other means,
but the additional cost of purchasing and installing photovoltaic systems has
been prohibitive, especially compared to the cost of electricity through other
means.
XsunX's patented technology may make solar energy production
economically and technologically feasible for the building industry because it
allows glass, plastic and other materials to produce electricity while remaining
transparent and thus functional as a window or display surface. The
architectural limiting aspects of current photovoltaic technologies may soon
disappear as XsunX glazing turns commercial and residential structures, and
their vast areas of modern architectural glass, into virtual power plants.
The Company's management believes that the primary target markets for
XsunX's technology are makers and fabricators of glass and optical films. These
are very large industries, generating worldwide revenues in the hundreds of
billions of dollars. It breaks down into two areas relevant to XsunX's
technology:
o Nonresidential construction, primarily architectural glass for large
edifices, such as office buildings, hospitals, schools, retail buildings,
and industrial buildings.
o Residential construction, primarily doors and windows for homes.
The construction industries fluctuate in direct relationship to the growth of
the overall economy. They are, nevertheless, very large, stable markets over the
long term. In addition, the flat glass industry for the construction industry is
geared for technological innovations, including especially those that help
control sunlight for greater energy efficiency.
Other factors indicating favorable market conditions for XsunX include:
o A boom market for nonresidential and residential construction, spurred by
strong low interest rates.
o A growing concern in nonresidential construction with energy efficient
buildings, possibly spurred by recent dramatic hikes in energy costs,
especially oil.
As an innovative, patent technology, the competition for XsunX's
transparent solar cell technology is primarily current modes of producing and
glazing glass and plastic. These include various technologies to control
sunlight and increase heating and cooling efficiency in buildings and cars and
advances in battery-powered technology for electronics.
With its breakthrough process in the solar production of electricity,
XsunX may have clear advantages marketing its technology. XsunX transparent
solar cell technology may enable manufacturers to make buildings more efficient
and ultimately more cost-effective, while also reducing dependency on fossil
fuels and other technologies that harm the environment.
THE UNDERDEVELOPED MARKET FOR PHOTOVOLTAIC PRODUCTS
Electricity produced by photovoltaic products is growing rapidly, but
remains a very small percentage of overall U.S. energy production, and a very
small percentage of its potential. Despite the attraction of clean, renewable,
safe energy production, solar electricity fails to compete with other means of
producing electricity in part because of technological limitations, which often
make solar energy economically unfeasible. This is especially true for
large-scale energy production. XsunX's transparent solar cell technology opens
new markets for solar energy applications in construction and other industries
as it makes the option of solar energy economically feasible.
MARKETING PLAN
XsunX's marketing strategy is to create a favorable environment to
license its solar electric glass technology. The Company intends to enhance,
promote and support the fact that products produced with the XsunX process
provide users with a best of class technology that spans and interconnects
glass, optical film and energy markets market's to provide substantial economic
and environmental benefits.
PRODUCT AND SERVICE DIFFERENTIATION
The differentiating attributes of products produced with the XsunX
process include:
o Energy from a renewable source - solar
o Transparent nature eliminates inhibiting architectural applications
o May be applied to glass or flexible substrates
o Provides distributors with valuable bundling opportunities
o May be applied with low temperature - allows for a variety of
substrates
o High level of reliability
o Reasonable cost
ADVERTISING AND PROMOTION
XsunX recognizes that a key to success will be to undertake focused
advertising and promotion efforts aimed at developing product awareness within
the glass manufactures, fabricators, optical film, and building industries. This
campaign will be performed aggressively and on a scale necessary to meet license
sales goals. To accomplish its licensing goals, the Company requires a capable
advertising agency and public relations firm. Subject to the recommendation of a
marketing director, an agency will be selected and, with their assistance, a
comprehensive advertising and promotion plan will be drafted.
ADVERTISING AND PROMOTION OBJECTIVES
XsunX's overall advertising and promotion objectives are to:
o Position XsunX as a leader building integrated photovoltaic markets.
o Increase Company awareness and brand name recognition among prospective
customers.
o Generate qualified sales leads for the Company's field sales organization.
o Develop, through market research, significant information to create
immediate and long-term marketing plans.
o Create product and service advertising programs supporting the Company's
value proposition.
o Coordinate sales literature, demonstration materials, telemarketing
programs, and direct response promotions in order to present a unified
marketing approach.
SALES AND SUPPORT COLLATERAL MATERIALS
XsunX plans to develop a variety of collateral materials to support its
sales efforts. These items are intended to sell the Company's products and
services.
PLAN OF OPERATIONS
XsunX anticipates the 12-month capital operational requirements of the
company to be $2,250,000 dollars. To finance these requirements the Company is
currently engaged in on going capital formation efforts in the form of one or
more private offerings to accredited investors to fund these capital
requirements for development, commercialization, general and administrative
costs in the current year. The net proceeds from the offering of the Common
Stock are estimated to be utilized as follows:
(i) approximately $718,000 will be used to pay costs associated with
research and preparation of a plan of operations by the company's technical
advisory board for the development of XsunX Process and the completion of
development of a production model for the XsunX Process, (ii) approximately
$623,000 will be used to pay salaries and general administrative costs and for
intellectual property protection, (iii) approximately $87,000 will be used to
pay for testing and development equipment, (iv) approximately $301,000 will be
used to pay for market development research, general competitive research and
publicity costs, and (v) approximately $521,000 will be used for general working
capital.
The Company may change any or all of the budget categories in the
execution of its business attempts. None of the items is to be considered fixed
or unchangeable.
The Company will need substantial additional capital to support its
budget. The Company had no revenues in 2003 and does not anticipate any revenues
in this calendar year. No representation is made that any funds will be
available when needed. In the event funds cannot be raised when needed, the
Company may not be able to carry out its business plan, may never achieve sales
or royalty income, and could fail in business as a result of these
uncertainties.
BACKLOG OF ORDERS
There are currently no orders for sales at this time.
GOVERNMENT CONTRACTS
None at this time.
COMPETITIVE CONDITIONS
Currently, management is not aware of other products Substantially
similar to those of the company on the market. However, larger existing firms
are developing competitive products and may have extensive capital for
development work.
COMPANY SPONSORED RESEARCH AND DEVELOPMENT
No research was done prior to September 30, 2003. Subsequent to
September 30, 2003 the Company has begun research and commercialization
development planning efforts. With proceeds of capital raising efforts, the
Company plans to engage in on going development of its technology for the
purpose of commercializing its proprietary process for licensing. Management
does not anticipate the completion of a licensable commercial process in this
current fiscal year.
COMPLIANCE WITH ENVIROMENTAL LAWS AND REGULATIONS
The operations of the Company are subject to local, state and federal
laws and regulations governing environmental quality and pollution control. To
date, compliance with these regulations by the Company has had no material
effect on the Company's operations, capital, earnings, or competitive position,
and the cost of such compliance has not been material. The Company is unable to
assess or predict at this time what effect additional regulations or legislation
could have on its activities.
NUMBER OF PERSONS EMPLOYED
The Company had no full-time employees in the 2002 fiscal year. As of
October 1, 2003, the Company had one full-time Employee. Other Executive
Officers and Directors work on an as needed basis.
ADMINISTRATIVE OFFICES
As of September 30, 2003 the Company maintained a mailing address at P.
O. Box 723, Evergreen, Colorado 80437. In November 2003 the Company leased
administrative office facilities located at 65 Enterprise, Aliso Viejo CA 92656
for approximately $750 per month pursuant to a six month lease agreement and
month to month thereafter.
EMPLOYEES
The Company is a development stage company and as of September 30, 2003
had no salaried employees. Upon the completion of its reorganization the Company
retained its current President and Chief Executive Officer, Mr. Tom M.
Djokovich, on October 1, 2003. The Company projects that during the next 12
months the Company's workforce is likely to increase to 10, with 3 of the new
employees being in Administrative, 3 in research and development and 3 in
marketing and sales positions. In addition to the retention of these new
employee's the Company expects to use consultants, subcontract labor, attorneys
and accountants as necessary, and may find a need to engage additional full-time
employees as necessary.
TRADEMARKS AND PATENTS
The Company has not been issued any registered trademarks for its
"XsunX" trade name. The Company may file trademark and trade name applications
with the United States Office of Patents and Trademarks for its proposed trade
names and trademarks.
The Company was assigned the rights to three patents as part of an
Asset Purchase Agreement with Xoptix Inc., a California corporation. The patents
acquired were No. 6,180,871 for Transparent Solar Cell and Method of Fabrication
(Device), granted on January 30, 2001; No. 6,320,117 for Transparent Solar Cell
and Method of Fabrication (Method of Fabrication), granted on November 20, 2001;
and No. 6,509,204 for Transparent Solar Cell and Method of Fabrication (formed
with a Schottky barrier diode and method of its manufacture), granted on January
21, 2003 (collectively, the "Patents")
RISK FACTORS
1. Need For Additional Financing. The Company has very limited funds, and such
funds may not be adequate to develop the Company's current business plan. The
ultimate success of the Company may depend upon its ability to raise additional
capital. If additional capital is needed, there is no assurance that funds will
be available from any source or, if available, that they can be obtained on
terms acceptable to the Company. If not available, the Company's operations will
be limited to those that can be financed with its modest capital.
2. Regulation of Penny Stocks. The Company's securities, when available for
trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number
of rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1,
15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company may
constitute "penny stocks" within the meaning of the rules, the rules would apply
to the Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any market that
might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
3. Lack of Operating History. The Company was formed in 1997 and has had an
unsuccessful operating history. The re-organization of the Company and the
acquisition of solar electric glazing patents has provided the Company with a
new opportunity for business development which carries continued special risks
inherent in a new business opportunity. The Company must be regarded as a new or
start-up venture with all of the unforeseen costs, expenses, problems, and
difficulties to which such ventures are subject.
4. No Assurance of Success or Profitability. There is no assurance that the
Company will successfully commercialize its proprietary patented technology.
Even if the Company should successfully commercialize its proprietary patented
technology, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's common stock will be increased thereby.
5. Lack of Diversification. Because of the limited financial resources that the
Company has, it is unlikely that the Company will be able to diversify its
operations. The Company's probable inability to diversify its activities into
more than one area will subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.
6. Dependence upon Management. The Company currently has only two (2)
individuals who are serving as its officers and three (3) as directors. The
Company will be heavily dependent upon their skills, talents, and abilities to
implement its business plan.
7. Indemnification of Officers and Directors. The Colorado Business Corporation
Act provides for the indemnification of its directors, officers, employees, and
agents, under certain circumstances, against attorney's fees and other expenses
incurred by them in any litigation to which they become a party arising from
their association with or activities on behalf of the Company. The Company will
also bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefore
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
8. Director's Liability Limited. The Colorado Business Corporation Act excludes
personal liability of its directors to the Company and its stockholders for
monetary damages for breach of fiduciary duty except in certain specified
circumstances. Accordingly, the Company will have a much more limited right of
action against its directors than otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state
securities laws.
9. Dependence upon Outside Advisors. To supplement the business experience
of its officers and directors, the Company employ's accountants, technical
experts, appraisers, attorneys, or other consultants or advisors. The selection
of any such advisors will be made by the Company's President without any input
from stockholders. Furthermore, it is anticipated that such persons may be
engaged on an "as needed" basis without a continuing fiduciary or other
obligation to the Company. In the event the President of the Company considers
it necessary to hire outside advisors, he may elect to hire persons who are
affiliates, if they are able to provide the required services.
10. Competition. The Company expects to be at a disadvantage when competing
with many firms that have substantially greater financial and management
resources and capabilities than the Company.
11. No Foreseeable Dividends. The Company has not paid dividends on its
common stock and does not anticipate paying such dividends in the foreseeable
future.
ITEM 2. DESCRIPTION OF PROPERTY
------------------------------
In November 2003 the Company leased administrative office facilities
located at 65 Enterprise, Aliso Viejo CA 92656 for approximately $750 per month
pursuant to a six month lease agreement from a non-affilate. The Company owns no
real property.
ITEM 3. LEGAL PROCEEDINGS
-----------------------------------
The Company is not currently a party to any pending legal proceedings,
nor is its property subject to such proceedings, at September 30, 2003.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------------------------
On July 3, 2003, at a shareholders' meeting, the shareholders approved
a reverse split of one for twenty of the issued and outstanding common stock and
a name change. Appropriate amendments to the Articles of Incorporation were
authorized to reflect the items approved.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------
The Company's common stock trades on the NASD OTC Bulletin Board under the
symbol "XSNX." The range of high, low and close trade quotations for the
Company's common stock by fiscal quarter within the last two fiscal years, as
reported by the National Quotation Bureau Incorporated, was as follows:
Year Ended September 30, 2002 HIGH LOW CLOSE
-----------------------------
First Quarter ended December 31, 2001 $.01 $.008 $.008
Second Quarter ended March 31, 2002 $.04 $.01 $.01
Third Quarter ended June 30, 2002 $.04 $.01 $.03
Fourth Quarter ended September 30, 2002 $.02 $.011 $.013
Year Ended September 30, 2003
First Quarter ended December 31, 2002 $.017 $.005 $.006
Second Quarter ended March 31, 2003 $.012 $.007 $.007
Third Quarter ended June 30, 2003 $.025 $.01 $.01
Fourth Quarter ended September 30, 2003 $.07 $.007 $.03
The above quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions. Such prices are shown prior to the completion of the reverse
split one for twenty.
NUMBER OF HOLDERS
As of September 30, 2003, there were 88 record holders of the Company's
common Stock.
DIVIDENDS
The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying dividends for the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------------------------------------------------------------------------------
OF OPERATIONS
-------------
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
In the fiscal year ended September 30, 2002 the Company was a
development stage company without on going business opportunities and no
operations were conducted and no revenues were generated in the fiscal year. The
Company had no income in the year ended September 30, 2003.
The Company did however make equity investments this last year in the
development of intellectual property assets as part of a business-restructuring
plan. The purpose of these investments was to acquire patented solar electric
glazing technology. The Company believes that its patented solar electric
glazing technology has a number of market opportunities in the multi-billion
dollar worldwide architectural glass markets.
The Company intends to continue to make investments in the commercial
development of these patents through the course of the next year. To finance
these development efforts we are currently engaged in on going capital formation
efforts to fund the Company's projected deficits for development costs in the
current year.
Through the successful commercial development of these patents the
Company anticipates being able to take advantage of commercial opportunities to
provide governments, developers, businesses and architects with a commercially
viable method for converting large areas of architectural glass into electrical
power producing systems. Upon the completion of our commercialization process
the Company anticipates the majority of revenues to be derived from the
licensing of our technology.
Management believes the summary data and audit presented herein is a
fair presentation of the Company's results of operations for the periods
presented. Due to the Company's change in primary business focus and new
business opportunities these historical results may not necessarily be
indicative of results to be expected for any future period. As such, future
results of the Company may differ significantly from previous periods.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003, COMPARED TO
FISCAL YEAR ENDED SEPTEMBER 30, 2002
The Company incurred expenses totaling $145,890 in 2003 compared to $47,297
in 2002. The increase of $98,593, resulted primarily from an increase in
consulting services in the amount of $125,200 associated with the Plan of
Reorganization as compared to no expenses for consulting services in 2002. Legal
and accounting expenses decrease from $45,552 in 2002 to $18,320 in 2003. Other
miscellaneous expenses totaled $2,370. The Company had no business operations or
revenues in 2002 or 2003. The net loss for 2002 was $(47,297) and for 2003 the
net loss was ($145,868). The net loss per share was $(0.02).
Due to the Company's change in primary business focus and new business
opportunities these historical results may not necessarily be indicative of
results to be expected for any future period. As such, future results of the
Company may differ significantly from previous periods. Since inception in 1997
the Company has accumulated deficits totaling ($2,819,377) to September 30,
2003.
LIQUIDITY AND CAPITAL RESOURCES
Working capital (deficit) at September 30, 2003 was $2,346 as compared
to $(414,203) at September 30, 2002. There were no cash flows provided by
operations during the twelve months ended September 30, 2003.
We have funded our operations and working capital needs through a series of
private equity offerings pursuant to Section 4(2) of the Act, Regulation D,
which provided $336,970 in non-cash transactions for the payment of services,
and Rule 506 of Regulation D of the Securities Act of 1933, as amended (the
"Act"), which has raised net proceeds of $ 225,450 in cash for an aggregate net
total of $562,420 from these financing activities compared to $0, for the year
ended September 30, 2002.
Cash and cash equivalents at September 30, 2003 were $2,346, an increase of
$2,346 from September 30, 2003. During the year ended, September 30, 2003, the
Company used $223,104 net cash in operating activities as compared to using
$0.00 for the year ended, September 30, 2002. This increase of cash used in
operations of $223,104 was primarily a result of the payment of past services
carried on the books as debt for the fiscal year 2003.
During the year ended, September 30, 2003, we used $3 for investing
activities as compared to $0, for the year ended, September 30, 2002. The
increased use of cash for investing activities resulted from an increase in the
acquisition of assets in the form of three patents purchased pursuant to the
Plan of Reorganization and Asset Purchase Agreement.
We had, at September 30, 2003, working capital of $2,346. We
anticipate that there will be no cash generated from operations in the current
year necessary to fund our current and anticipated cash requirements. We plan to
obtain additional financing from equity and debt placements. We have been able
to raise capital in a series of equity and debt offerings in the past. While
there can be no assurances that we will be able to obtain such additional
financing, on terms acceptable to us and at the times required, or at all, we
believe that sufficient capital can be raised in the foreseeable future.
SUBSEQUENT EVENTS
The Company intends to continue to make investments in the development
and commercialization of its patented solar electric glazing processes. To
finance these efforts the Company is currently engaged in on going capital
formation efforts to fund these capital requirements for development,
commercialization, general and administrative costs in the current year.
In furtherance of these financing efforts the Company entered into a
private placement agreement on December 19, 2003 for the sale of up to 3,000,000
shares of common stock pursuant to Regulation S of the Act, commencing in
January 2004. The purchaser will have to and until December 31, 2004 to deliver
one or more purchase notices to the Company. The agreement provided for a
variable purchase price based on a percentage of the five-day average closing
price on the date of a purchase with a floor price of $.25 cents net to the
Company. The Company may terminate this agreement upon 3 days notice to the
purchaser. The Company anticipates, but cannot be assured, that should the
entire 3,000,000 shares be placed the approximate net proceeds to the Company
may total $750,000. The purchaser intends to acquire the shares for their own
account with no then present intention of dividing their interest with others or
of reselling or otherwise disposing of all or any portion of the shares. The
shares were offered in a private transaction, which was not part of a
distribution of the shares.
NET OPERATING LOSS
For federal income tax purposes, we have net operating loss carry forwards
of approximately $2,829,377 as of September 30, 2003. These carry forwards will
expire at various dates through the year and 2010. The use of such net operating
loss carry forwards to be offset against future taxable income, if achieved, may
be subject to specified annual limitations.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------------------------
Please refer to pages F-1 through F-10.
ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
-----------------------------------------------------------------------------
Michael B. Johnson & Company, CPA's of Denver, Colorado were retained in
1997 as auditors for the Company for fiscal year 1997 and thereafter.
ITEM 8A. CONTROLS AND PROCEEDURES
-----------------------------------------------------------------------------
EVALUATION OF INTERNAL DISCLOSURE CONTROLS
The management of the company has evaluated the effectiveness of the
issuer's disclosure controls and procedures as of a date within 90 days prior to
the filing date of the report (evaluation date) and have concluded that the
disclosure controls and procedures are adequate and effective based upon their
evaluation as of the evaluation date.
There were no significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
most recent evaluation of such, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
----------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a)
-----------------------------
The following table lists the executive offices and directors of the
Company as of September 30, 2003:
NAME POSITION HELD TENURE
------------------------------------------------------------------------------
Brian Altounian Secretary, Director Since September 2003
Tom Djokovich President, CEO, Director Since September 2003
Thomas Anderson Director Since August 2001
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions at
the pleasure of the board of directors, absent any employment agreement, of
which none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.
The directors of the Company will devote such time to the Company's
affairs on an "as needed" basis, but less than 20 hours per month. As a result,
the actual amount of time which they will devote to the Company's affairs is
unknown and is likely to vary substantially from month to month.
Tom Anderson resigned as acting CEO effective September 30, 2003. Tom
Djokovich was appointed President and CEO of the Company effective September 30,
2003. Randy McCall and Steve Weathers resigned from the Board of Directors
effective after compliance with Section 14f of the Securities Exchange Act.
Brian Altounian has been appointed as Secretary and as a director effective
September 30, 2003.
Tom Djokovich has been appointed as a director effective ten days after
mailing of Notice to Shareholders pursuant to Section 14f of the Securities
Exchange Act.
BIOGRAPHICAL INFORMATION
BRIAN ALTOUNIAN, age 40, Chairman of the Board, and Secretary as of September
30, 2003;
Mr. Altounian has over 16 years of experience in the area of finance,
administration and operations. Most recently, he served as Executive Vice
President of Plyent, Inc., a provider of a proprietary software solution that
allows dynamic wireless Web access by Web enabled wireless thin clients, such as
cell phones and personal digital assistants (PDAs). Mr. Altounian previously
served as the Vice President of Finance for Lynch Entertainment, a producer of
family television series' for the Nickelodeon and Disney Channels. While at
Lynch, he established subsidiary corporations, purchased and oversaw the
construction of a state-of-the-art television studio facility, and built the
infrastructure of the company. Prior to joining Lynch Entertainment, Mr.
Altounian held key management positions at numerous entertainment companies
including Director of Finance and Administration at Time Warner Interactive;
Finance Manager for National Geographic Television; and Manager of Business
Services for WQED, the nation's first community-owned public television station.
He also founded his own consulting company, BKA Enterprises, a firm that
supported and advised entertainment and multimedia companies in the areas of
financial and business management. Mr. Altounian holds an undergraduate degree
from UCLA and an MBA from Pepperdine University.
TOM DJOKOVICH, age 46, President and Chief Executive Officer as of September 30,
2003, and Director;
Mr. Djokovich was the founder and served from 1995 to 2002 as the Chief
Executive Officer of Accesspoint Corporation, a vertically integrated provider
of electronic transaction processing and e-business solutions for merchants.
Under Mr. Djokovich's guidance, Accesspoint became a member of the
Visa/MasterCard association, the national check processing association NACHA,
and developed one of the payment industry's most diverse set of network based
transaction processing, business management and CRM systems for both Internet
and conventional points of sale. During his tenure, Accesspoint became an early
adopter of WAP based e-commerce capabilities and the industry's first certified
Level 1 Internet payment processing engine. In his last year as executive
manager, Accesspoint grew its processing revenues by over 800% and overall
revenues by nearly 300%. Prior to Accesspoint, Mr. Djokovich founded TMD
Construction and Development in 1979. TMD provided effective cost management of
multimillion-dollar projects incorporating at times hundreds of employees,
subcontractors and international material acquisitions for commercial,
industrial and custom residential construction services as a licensed building
firm in California. In 1995 Mr. Djokovich developed an early Internet based
business-to-business ordering system for the construction industry. Mr.
Djokovich also currently serves as a Director for Roaming Messenger, Inc., a
publicly reporting company that provides a breakthrough software solution for
delivering real-time actionable information for Homeland Security, emergency
response, military and enterprise applications.
THOMAS ANDERSON, age 37, became a director of the Company in August 2001;
Mr. Anderson has spent much of the last 10 years working as a
geologist in the environmental consulting field. His primary focus has been
stratigraphic, hydrogeologic, and geochemical characterization, and remediation
of hazardous waste sites. Mr. Anderson completed a M.S. in Environmental Science
and Engineering at the Colorado School of Mines in 1998. Since 1998, he has
provided consulting services to the Department of Energy and Department of
Defense for complex problems encountered during characterization and remediation
of radioactive and hazardous waste sites. He has been a Senior Environmental
Scientist at Concurrent Technologies Corp. from November 2000 to date. From
March 2000 to November 2000 he was employed as a hydrologist at Stone & Webster
Engineering, Inc. From July 1998 to March 2000 he was employed by Advanced
Integrated Management Services as an Environmental Scientist/Engineer. From 1997
to 1998 he was a research assistant at Colorado School of Mines in Graduate
Program/Environmental Science.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and certain persons who own more than 10% of a registered class of
the Company's equity securities (collectively, "Reporting Persons"), to file
reports of ownership and changes in ownership ("Section 16 Reports") with the
Securities and Exchange Commission (the "SEC"). Reporting Persons are required
by the SEC to furnish the Company with copies of all Section 16 Reports they
file.
Based solely on its review of the copies of such Section 16 Reports
received by it, or written representations received from certain Reporting
Persons, the following persons were required to file forms pursuant to Section
16(a):
Name Form Filed
----------------------------------------------------------------
Tom Djokovich Form 3 October 24, 2003
Brian Altounian Form 3 October 22, 2003
Xoptix, Inc. Form 3 Did not file
NOTE: Xoptix, Inc. was being liquidated pursuant to a Plan of Liquidation, and
the shares were distributed in November, 2003 pro rata to shareholders of
Xoptix, Inc. in liquidation. No shareholder of Xoptix, Inc. receiving shares
holds more than 10% of the issued and outstanding shares of Registrant.
ITEM 10. EXECUTIVE COMPENSATION
---------------------------------------------
DIRECTOR COMPENSATION
Directors received no cash compensation for their service to the
Company as directors, but can be reimbursed for expenses actually incurred in
connection with attending meetings of the Board of Directors.
EXCUTIVE OFFICER COMPENSATION
The Company accrued $0 compensation to the executive officers as a
group for services rendered to the Company in all capacities during the 2003
fiscal year. No cash bonuses were or are to be paid to such persons for services
rendered in the fiscal year ended September 30, 2003.
The Company does not have any employee incentive stock option plans.
There are no plans pursuant to which cash or non-cash compensation was
paid or distributed during the last fiscal year to the executive officers of the
Company. No other compensation not described above was paid or distributed
during the last fiscal year to the executive officers of the Company. There are
no compensatory plans or arrangements, with respect to any executive office of
the Company, which result or will result from the resignation, retirement or any
other termination of such individual's employment with the Company or from a
change in control of the Company or a change in the individual's
responsibilities following a change in control.
The annual compensation for the executive officers of the Company
for the post reorganization operations has not yet been determined, but is
expected to be established by a resolution of the Company's Board of Directors
in the near future. The following table and notes set forth the cash
compensation due Tom Djokovich, a member of the Board, President and Chief
Executive Officer of the Company as of October 1, 2003.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Fiscal Annual Compensation Awards
Name & Principal Year Salary Bonus Other Annual Restricted Securities
Position ($) ($) Compensation Stock Underlying
($) Award(s) Options/
($) SARS (#)
--------------------------------------------------------------------------------------------------------------------------
Tom Djokovich, 2003 $0 0 0 0 0
President 2002 $0 0 0 0 0
2001 $0 0 0 0 0
Brian Altounian, 2003 $0 0 0 0 0
Secretary 2002 $0 0 0 0 0
2001 $0 0 0 0 0
Tom Anderson, 2003 $0 0 0 0 0
Acting CEO (2003) 2002 $0 0 0 0 0
(resigned as CEO 9/30/03) 2001 $0 0 0 0 0
Stephen W. Weathers, 2003 $0 0 0 0 0
Former Secretary 2002 $0 0 0 0 0
(resigned 9/30/03) 2003 $0 0 0 0 0
(1) The Company has agreed to pay Mr. Djokovich $10,000 per month for
services provided as Chief Executive Officer up to and until the
Company determines executive compensation pursuant to an employment
agreement as determined by the Board. When necessitated by the
Company's adverse financial condition Mr. Djokovich has agreed to the
deferment of his monthly salary up to and until such time that the
Company can repay any such deferred amounts.
Directors' Compensation
Name Annual Meeting Consulting Number Number of
Retainer Fees ($) Fees/Other of Securities
Fee($) Fees ($) Shares Underlying
(#) Options
SARS (#)
----------------------------------------------------------------------------------------------------------------
A. Director, Tom Djokovich $0 $0 0 0 0
B. Director, Brian Altounian $0 $0 0 20,000,000 0
C. Director, Randy A. McCall $1,000 $100 0 25,000 0
(Resigned 2003)
D. Director, Thomas Anderson $0 $0 0 45,000 0
E. Director, Steve Weathers $0 $0 0 45,000 0
(Resigned 2003)
---------------------------------------------------------------- ---------------- ----------------------------
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
No officer or director has received any other remuneration in the two
year period prior to the filing of this report. The Company has no stock option,
retirement, pension, or profit-sharing programs for the benefit of directors,
officers or other employees, but the Board of Directors may recommend adoption
of one or more such programs in the future.
Option/SAR Grants Table
Name Number of Securities % of Total Exercise Expiration
Underlying Options/SARs or Price Date
Options/SARs Granted to Employees ($/Sh)
Granted (#) in Fiscal Year
-------------------------------------------------------------------------------------------------------------------
None
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR value
Name Shares Value Number of Securities Value of Unexercised
Acquired Realized Underlying In the Money
on ($) Unexercised Options/SARs at FY-
Exercise Options/SARs at FY- End ($) Exercisable/
(#) End (#) Exercisable/ Unexercisable
Unexercisable
---------------------------------------------------------------------------------------------------------------------
None
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------------
The following table sets forth, as of January 14, 2004, the number of
shares of common stock owned of record and beneficially by executive officers,
directors and persons who hold 5.0% or more of the outstanding common stock of
the Company. Also included are the shares held by all executive officers and
directors as a group.
SHAREHOLDERS/ NUMBER OF SHARES OWNERSHIP
BENEFICIAL OWNERS PERCENTAGE
---------------------------------------------------------------------------
Tom Djokovich 17,978,000 16.19%
President & Director
65 Enterprise
Aliso Viejo, CA 92656
Brian Altounian 4,000,000 3.5%
Secretary, Director
65 Enterprise
Aliso Viejo, CA 92656
Thomas Anderson, Director 11,900 .01%
1020 21st Street
Golden, Colorado 80401
All directors and executive
officers as a group (3 persons) 21,989,900 19.7%
Each principal shareholder has sole investment power and sole voting power over
the shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
---------------------------------------------------------------
As part of a Plan of Reorganization and Asset Purchase Agreement with
Xoptix, Inc., a California corporation, to acquire three patents, the Company
issued 70,000,000 shares. The shares were approved to be issued by Board minutes
dated Sept 30, 2003, pursuant to contract dated July 9, 2003, on a post reverse
split basis, but were not issued by the transfer agent until after the
effectuation of the reverse split, and name change. The Company did not publicly
offer any securities and no underwriter was utilized and we paid no finder's
fees, discounts or commissions in connection with the above offer and sale. The
offer and sale was exempt pursuant to Section 4(2) of the Act, Regulation D.
In a private placement of the Company's common stock made by the
Company from August 1, 2003 to September 24, 2003 pursuant to Rule 506 of
Regulation D of the Securities Act of 1933, as amended (the "Act"), the Company
sold 9,000,000 shares (post reverse split one for twenty) of common stock, at an
aggregate price of $.025 per share, which raised gross proceeds of approximately
$225,000. The shares were approved to be issued by Board minutes dated Sept 30,
2003, pursuant to a Private Placement Memorandum on a post reverse split basis,
but were not issued by the transfer agent until after the effectuation of the
reverse split, and name change. The Company did not publicly offer any
securities and no underwriter was utilized and we did not pay any finder's fees,
discounts or commissions in connection with the above offer and sale. The
purchasers acquired the shares for their own account for investment with no then
present intention of dividing their interest with others or of reselling or
otherwise disposing of all or any portion of the shares. The shares were
purchased in a private transaction(s), which was not part of a distribution of
the shares.
The Company authorized the issuance of 115,000 (post reverse split one
for twenty) shares of common voting stock to service providers. These shares
were issued in relation to the retirement of $121,828 dollars of invoicing for
services carried on the books as debt. The shares were approved for issuance,
subject to the filing of an S8 Registration, by Board minutes dated Sept 30,
2003, pursuant to the Plan of Reorganization dated July 9, 2003, on a post
reverse split basis, but will not be issued by the transfer agent until after
the effectuation of the registration statement. No registration statement has
been filed to complete this transaction, but it is intended that they be
registered on Form S-8.
The Company authorized the issuance of 115,000 (post reverse split one
for twenty) shares of common voting stock to service providers. These shares
were issued in relation to the retirement of $89,939 dollars of invoicing for
services carried on the books as accrued debt. The shares were approved for
issuance, subject to the filing of an S8 Registration, by Board minutes dated
Sept 30, 2003, pursuant to the Plan of Reorganization dated July 9, 2003, on a
post reverse split basis, but will not be issued by the transfer agent until
after the effectuation of registration statement. No registration statement has
been filed to complete this transaction, but it is intended that they be
registered on Form S-8.
The Company issued 20,800,000 shares of common voting stock to Brian
Altounian, an individual. The shares were approved to be issued by Board minutes
dated Sept 30, 2003, pursuant to contract dated May 1, 2003, on a post reverse
split basis, but were not issued by the transfer agent until after the
effectuation of the reverse split, and name change. These shares were issued for
corporate development services rendered to Xoptix pursuant to a Corporate
Services Development Agreement dated May 1st, 2003 and valued at a price of
$.004 per share for a total valuation of $83,200. The Company did not pay any
finder's fees, discounts or commissions in connection with the above offer. The
offer was exempt pursuant to Section 4(2) of the Act, Regulation D under the
Act. Mr. Altounian acquired the shares for his own account for services. The
shares were offered in a private transaction, which was not part of a
distribution of the shares.
The Company issued 10,500,000 shares of common voting stock to
Corporate Strategies Incorporated, a Nevada corporation. The shares were
approved to be issued by Board minutes dated Sept 30, 2003, pursuant to contract
dated May 1, 2003, on a post reverse split basis, but were not issued by the
transfer agent until after the effectuation of the reverse split, and name
change. These shares were issued in exchange for consulting services rendered to
Xoptix, Inc. pursuant to a Corporate Services Development Agreement dated May
1st, 2003 and valued at a price of $.004 per share for a total valuation of
$42,000. No underwriter was utilized, and the Company did not pay any finder's
fees, discounts or commissions in connection with the above offer. The offer was
exempt pursuant to Section 4(2) of the Act, Regulation D under the Act. The
shareholders of Corporate Strategies acquired the shares for their own account
for services. The shares were offered in a private transaction, which was not
part of a distribution of the shares.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------------
The following documents are filed as part of this report:
1. Reports on Form 8-K:
8-K filed 5/28/03
8-K filed 7/16/03
8K/A filed 7/25/03
8-K filed 7/25/03
8-K filed 10/2/03
8-K/A filed 10/29/03
2. Exhibits:
32 Sarbanes-Oxley Certification
33 Sarbanes-Oxley Certification
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
-------------------------------------------------------
General. Michael Johnson & Co., LLC, CPAs ("MJC") is the Company's principal
auditing accountant firm. The Company's Board of Directors has considered
whether the provisions of audit services is compatible with maintaining MJC's
independence.
Audit Fees. MJC billed the Company $3,000 for the following
professional services: audit of the annual financial statement of the Company
for the fiscal year ended September 30, 2003, and review of the interim
financial statements included in quarterly reports on Form 10-QSB for the
periods ended December 31, 2002, March 31, 2003, and June 30, 2003. MJC billed
the Company $4,250 for the 2002 audit.
There were no audit related fees in 2002 or 2003. There were no tax
fees or other fees in 2002 or 2003.
The Company's Board acts as the audit committee and had no
"pre-approval policies and procedures" in effect for the auditors' engagement
for the audit year 2002 and 2003.
All audit work was performed by the auditors' full time employees.
INDEX
Form 10-KSB
Regulation Consecutive
S-K Number Exhibit Page Number
3.1 Articles of Incorporation Incorporated by reference
to Registration Statement
Form 10SB12G #000-29621
3.2 Bylaws Incorporated by Reference
to Registration Statement
Form 10SB12G #000-29621
3.3 Amendments to Articles of Incorporated by Reference
of Incorporation to Registration Statement
Form 10SB 12G #000-29621
in 8-K dated 10/29/03
SIGNATURES
Pursuant to the requirements of Section 12 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.
Dated: January 14, 2003
XsunX, INC.
/s/ Tom Djokovich
---------------------------------
Tom Djokovich
President & Acting CFO
DIRECTORS:
/s/ Tom Djokovich
--------------------------------
/s/ Brian Altounian
---------------------------------
/s/ Thomas Anderson
---------------------------------
XSUNX, INC.
(FORMERLY SUN RIVER MINING, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
September 30, 2003 and 2002
Michael Johnson & Co., LLC.
9175 Kenyon Ave., #100
Denver, CO 80237
Phone: 303-796-0099
Fax: 303-796-0137
INDEPENDENT AUDITOR'S REPORT
Board of Directors XSUNX, INC.
Arvada, CO
We have audited the accompanying balance sheets of XSUNX, Inc., (formerly Sun
River Mining, Inc). (A Development Stage Company) as of September 30, 2003 and
2002, and the related statements of operations, cash flows, and stockholders'
equity for the years ended September 30, 2003 and 2002 and for the period from
February 25, 1997 (inception) to September 30, 2003. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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 XSUNX, INC., (formerly Sun
River Mining, Inc.) at September 30, 2003 and 2002 and the results of their
operations and their cash flows for the years ended September 30, 2003 and 2002
and for the period from February 25, 1997 (inception) to September 30, 2003 in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, conditions exist which raise substantial doubt about the
Company's ability to continue as a going concern unless it is able to generate
sufficient cash flows to meet its obligations and sustain its operations.
Management's plans in regard to these matters are also described in Note 4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Michael Johnson & Co., LLC
Michael Johnson & Co., LLC
Denver, Colorado
December 13, 2003
F-1
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
September 30,
2003 2002
---- ----
ASSETS:
Current assets:
Cash $ 2,346 $ -
----------------- -----------------
Total current assets 2,346 -
----------------- -----------------
Other Assets:
Patents 3 -
----------------- -----------------
Total other assets 3 -
----------------- -----------------
TOTAL ASSETS $ 2,349 $ -
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts Payable $ - $ 199,616
Accrued Expenses - 18,858
Notes Payable - 195,729
----------------- -----------------
Total current liabilities - 414,203
----------------- -----------------
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 50,000,000
shares authorized; no shares issued and outstanding - -
Common Stock, no par value; 500,000,000 shares authorized;
111,248,148 shares issued and outstanding in 2003, 768,148 2,821,726 2,259,306
shares issued and outstanding in 2002.
Deficit accumulated during the exploration stage (2,819,377) (2,673,509)
----------------- -----------------
Total stockholders' deficit 2,349 (414,203)
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,349 $ -
================= =================
The accompanying notes are an integral part of these financial statements.
F-2
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Statements of Operations
Deficit
Accum. During
Common Stock Development
----------------------------
# of Shares Amount Stage Totals
-------------- ------------ ----------------- ------------
Inception February 25, 1997 - $ - $ - $ -
Issuance of stock for cash 3/97 5,000 100 - 100
Issuance of stock for cash 3/97 5,590 111,800 - 111,800
Issuance of stock to Founders 3/97 14,110 - - -
Issuance of stock for Consolidation 4/97 445,000 312,106 - 312,106
Issuance of stock for cash 8/97 2,900 58,000 - 58,000
Issuance of stock for cash 9/97 2,390 47,800 47,800
Net Loss for year - - (193,973) (193,973)
-------------- ------------ ----------------- ------------
Balance - September 30, 1997 474,990 529,806 (193,973) 335,833
-------------- ------------ ----------------- ------------
Issuance of stock for services 11/97 1,500 30,000 - 30,000
Issuance of stock for cash 9/98 50,000 200,000 - 200,000
Consolidation stock cancelled 9/98 (60,000) (50,000) - (50,000)
Issuance of stock for cash9/98 200 4,000 - 4,000
Net Loss for year - - (799,451) (799,451)
-------------- ------------ ----------------- ------------
Balance - September 30, 1998 466,690 713,806 (993,424) (279,618)
-------------- ------------ ----------------- ------------
Issuance of stock for cash 10/98 21,233 159,367 - 159,367
Issuance of stock for services 1/99 40,000 40,000 - 40,000
Issuance of stock for cash 1/99 37,500 296,125 - 296,125
Issuance of stock for services 1/99 25,000 276,500 - 276,500
Issuance of stock for cash 2/99 7,500 70,313 - 70,313
Issuance of stock for cash 4/99 45,225 122,108 - 122,108
Issuance of stock for services 6/99 70,000 147,000 - 147,000
Issuance of stock for cash 9/99 40,000 69,200 - 69,200
Net Loss for year - - (1,482,017) (1,482,017)
-------------- ------------ ----------------- ------------
Balance - September 30, 1999 753,148 1,894,419 (2,475,441) (581,022)
-------------- ------------ ----------------- ------------
Issuance of stock for cash 9/00 15,000 27,000 - 27,000
Net Loss for year - - (118,369) (118,369)
-------------- ------------ ----------------- ------------
Balance - September 30, 2000 768,148 1,921,419 (2,593,810) (672,391)
-------------- ------------ ----------------- ------------
Extinquishment of debt - 337,887 - 337,887
Net Loss for year - - (32,402) (32,402)
-------------- ------------ ----------------- ------------
Balance - September 30, 2001 768,148 2,259,306 (2,626,212) (366,906)
-------------- ------------ ----------------- ------------
Net Loss for year - - (47,297) (47,297)
-------------- ------------ ----------------- ------------
Balance - September 30, 2002 768,148 2,259,306 (2,673,509) (414,203)
-------------- ------------ ----------------- ------------
Issuance of stock for Assets 7/03 70,000,000 3 - 3
Issuance of stock for Cash 8/03 9,000,000 225,450 - 225,450
Issuance of stock for Debt 9/03 115,000 121,828 - 121,828
Issuance of stock for Accruals 9/03 115,000 89,939 - 89,939
Issuance of stock for Services 9/03 31,300,000 125,200 - 125,200
Net Loss for year - - (145,868) (145,868)
-------------- ------------ ----------------- ------------
Balance - September 30, 2003 111,298,148 $2,821,726 $ (2,819,377) $ 2,349
============== ============ ================= ============
The accompanying notes are an integral part of these financial statements.
F-3
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
February 25, 1997
Year Ended (Inception) to
September 30, September 30,
------------------------------------
2003 2002 2003
---- ---- ----
-------------- --------------- -------------------
Cash Flows from Operating Activities:
Net Loss $ (145,868) $ (47,297) $ (2,819,377)
Issuance of Common Stock for Services 336,970 - 1,237,557
Adjustments to reconcile net loss to net
net cash used in operations.
Increase (Decrease) in Accounts Payable (199,616) 156,317 -
Increase (Decrease) in Accrued Liabilities (18,858) (112,390) -
-------------- --------------- -------------------
Net Cash Flows Used by Operations (27,372) (3,370) (1,581,820)
-------------- --------------- -------------------
Cash Flows from Investing Activities:
Purchase of Intangible Assets (3) - (3)
-------------- --------------- -------------------
Net cash used by investing activities (3) - (3)
-------------- --------------- -------------------
Cash Flows from Financing Activities:
Proceeds from Notes payable - 3,370 -
Payments on Notes payable (195,729)
Issuance of Common Stock 225,450 - 1,584,169
-------------- --------------- -------------------
Net Cash Flows Provided by Financing Activities 29,721 3,370 1,584,169
-------------- --------------- -------------------
Net Increase (Decrease) in Cash 2,346 - 2,346
-------------- --------------- -------------------
Cash at Beginning of Period - - -
-------------- --------------- -------------------
Cash at End of Period $ 2,346 $ - $ 2,346
============== =============== ===================
Supplemental Disclosure of Cash Flow Information
Cash paid for Interest $ - $ 15,411 $ 71,346
============== =============== ===================
Cash paid for income taxes $ - $ - $ -
============== =============== ===================
NON-CASH TRANSACTIONS
Stock issued for compensation $ 336,970 $ - $ 1,237,557
============== =============== ===================
The accompanying notes are an integral part of these financial statements.
F-4
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Stockholders' Equity (Deficit)
September 30, 2003
Deficit
Accum. During
Common Stock Development
----------------------------
# of Shares Amount Stage Totals
-------------- ------------ ----------------- ------------
Inception February 25, 1997 - $ - $ - $ -
Issuance of stock for cash 3/97 5,000 100 - 100
Issuance of stock for cash 3/97 5,590 111,800 - 111,800
Issuance of stock to Founders 3/97 14,110 - - -
Issuance of stock for Consolidation 4/97 445,000 312,106 - 312,106
Issuance of stock for cash 8/97 2,900 58,000 - 58,000
Issuance of stock for cash 9/97 2,390 47,800 47,800
Net Loss for year - - (193,973) (193,973)
-------------- ------------ ----------------- ------------
Balance - September 30, 1997 474,990 529,806 (193,973) 335,833
-------------- ------------ ----------------- ------------
Issuance of stock for services 11/97 1,500 30,000 - 30,000
Issuance of stock for cash 9/98 50,000 200,000 - 200,000
Consolidation stock cancelled 9/98 (60,000) (50,000) - (50,000)
Issuance of stock for cash9/98 200 4,000 - 4,000
Net Loss for year - - (799,451) (799,451)
-------------- ------------ ----------------- ------------
Balance - September 30, 1998 466,690 713,806 (993,424) (279,618)
-------------- ------------ ----------------- ------------
Issuance of stock for cash 10/98 21,233 159,367 - 159,367
Issuance of stock for services 1/99 40,000 40,000 - 40,000
Issuance of stock for cash 1/99 37,500 296,125 - 296,125
Issuance of stock for services 1/99 25,000 276,500 - 276,500
Issuance of stock for cash 2/99 7,500 70,313 - 70,313
Issuance of stock for cash 4/99 45,225 122,108 - 122,108
Issuance of stock for services 6/99 70,000 147,000 - 147,000
Issuance of stock for cash 9/99 40,000 69,200 - 69,200
Net Loss for year - - (1,482,017) (1,482,017)
-------------- ------------ ----------------- ------------
Balance - September 30, 1999 753,148 1,894,419 (2,475,441) (581,022)
-------------- ------------ ----------------- ------------
Issuance of stock for cash 9/00 15,000 27,000 - 27,000
Net Loss for year - - (118,369) (118,369)
-------------- ------------ ----------------- ------------
Balance - September 30, 2000 768,148 1,921,419 (2,593,810) (672,391)
-------------- ------------ ----------------- ------------
Extinquishment of debt - 337,887 - 337,887
Net Loss for year - - (32,402) (32,402)
-------------- ------------ ----------------- ------------
Balance - September 30, 2001 768,148 2,259,306 (2,626,212) (366,906)
-------------- ------------ ----------------- ------------
Net Loss for year - - (47,297) (47,297)
-------------- ------------ ----------------- ------------
Balance - September 30, 2002 768,148 2,259,306 (2,673,509) (414,203)
-------------- ------------ ----------------- ------------
Issuance of stock for Assets 7/03 70,000,000 3 - 3
Issuance of stock for Cash 8/03 9,000,000 225,450 - 225,450
Issuance of stock for Debt 9/03 115,000 121,828 - 121,828
Issuance of stock for Accruals 9/03 115,000 89,939 - 89,939
Issuance of stock for Services 9/03 31,300,000 125,200 - 125,200
Net Loss for year - - (145,868) (145,868)
-------------- ------------ ----------------- ------------
Balance - September 30, 2003 111,298,148 $2,821,726 $ (2,819,377) $ 2,349
============== ============ ================= ============
All shares have been adjusted to the 1 for 20 reverse split.
The accompanying notes are an integral part of these financial statements.
F-5
XSUNX, INC.
(FORMERLY SUN RIVER MINING, INC.)
(A Development Stage Company)
Notes to Financial Statements
September 30, 2003
Note 1 - Organization and Summary of Significant Accounting Policies:
------------------------------------------------------------
Organization:
On February 25, 1997, Sun River Mining, Inc. (the Company) was
incorporated under the laws of Colorado. The Company is in the business
of raising capital to acquire or merge with any entity which has an
interest in being acquired by, or merging into the company. In May 1999
management decided to write-off the Sun River Bolivian subsidiaries and
to take the subsequent loss, of all investments associated with the
subsidiaries. On July 9, 2003 Sun River Mining, Inc. signed a Plan of
Reorganization and Asset Purchase with Xoptix, Inc.. This was a
purchase agreement for the intangible assets of Xoptix, Inc. and the
name was then changed to Xsunx, Inc.
Basis of Presentation - Development Stage Company:
The Company has not earned significant revenues from planned principal
operations or raising capital for exploration and acquisition of mining
property. Accordingly, the Company's activities have been accounted for
as those of a "Development Stage Enterprise" as set forth in Financial
Accounting Standards Board Statement No. 7 ("SFAS 7"). Among the
disclosures required by SFAS 7 are that the Company's financial
statements be identified as those of a development stage company, and
that the statements of operations, stockholders' equity (deficit) and
cash flows disclose activity since the date of the Company's inception.
Basis of Accounting:
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with accounting principles generally
accepted in the United States.
Cash and Cash Equivalents:
For purposes of the statements of cash flows, cash and cash equivalents
include cash in banks and money markets with an original maturity of
three months or less.
Use of Estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from those
estimates.
Net Loss Per Share:
Net loss per share is based on the weighted average number of common
shares and common shares equivalents outstanding during the period.
F-6
XSUNX, INC.
(FORMERLY SUN RIVER MINING, INC)
(A Development Stage Company)
Notes to Financial Statements
September 30, 2003
Note 1 - Organization and Summary of Significant Accounting Policies (cont):
-------------------------------------------------------------------
Other Comprehensive Income
The Company has no material components of other comprehensive income
(loss) and accordingly, net loss is equal to comprehensive loss in all
periods.
Note 2 - Federal Income Tax:
The Company accounts for income taxes under SFAS No. 109, which
requires the asset and liability approach to accounting for income
taxes. Under this approach, deferred income taxes are determined based
upon differences between the financial statement and tax bases of the
Company's assets and liabilities and operating loss carryforwards using
enacted tax rates in effect for the year in which the differences are
expected to reverse. Deferred tax assets are recognized if it is more
likely than not that the future tax benefit will be realized.
Significant components of the Company's deferred tax liabilities and
assets are as follows:
Deferred Tax Liability $ 2,829,377
==============
Deferred Tax Assets
Net Operating Loss Carryforwards
Book/Tax Differences in Bases of Assets 0
--------------
Less Valuation Allowance
Total Deferred Tax Assets $ 2,829,377
===============
Net Deferred Tax Liability $ 0
===============
At September 30, 2003, the Company had net operating loss carryforwards of
approximately, $2,829,377 for federal income tax purposes. These carryforwards
if not utilized to offset taxable income will begin to expire in 2010.
F-7
XSUNX, INC.
(FORMERLY SUN RIVER MINING, INC)
(A Development Stage Company)
Notes to Financial Statements
September 30, 2003
Note 3 - Forgiveness of Debt:
In August 2001 the former officer's and director's signed Company
Settlement Agreements, which were to forgive all accrued salaries and directors
fees up to and including August, 2001. These payables amounted to $337,887. In
August 2000 a balance owed to Community Bank of Boulder in the amount of $40,397
was forgiven by the bank, as it was more than 3-years old. This was a disputed
amount and the bank forgave the indebted.
Note 4 - Going Concern:
The financial statements of the Company have been presented on the
basis that they are a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of
business. The Company has no assets, generated no revenue and has an
accumulated deficit at September 30, 2003 of $2,829,377.
The future success of the Company is likely dependent on its ability to
attain additional capital, or to find an acquisition to add value to
its present shareholders and ultimately, upon its ability to attain
future profitable operations. There can be no assurance that the
Company will be successful in obtaining such financing, or that it will
attain positive cash flow from operations. Management believes that
actions presently being taken to revise the Company's operating and
financial requirements provide the opportunity for the Company to
continue as a going concern.
The Company has made substantial investments this last year in the
development of intellectual property assets as part of a business-restructuring
plan. The purpose of these investments was to acquire patented solar electric
glass technology. The Company believes that its patented solar electric glass
technology has a number of market opportunities in the multi-billion dollar
worldwide architectural glass markets.
Note 5 - Capital Stock Transactions:
The authorized capital stock of the Company was established at
500,000,000 with no par value. On September 29, 2003 the Board of
Directors authorized a reverse split of 1 for 20 shares of stock. The
stocks issued in 2003 were for accrued directors fees and salaries and
to paid off past debt to investors. 70,000,000 shares of stock were
issued to obtain the patent rights from Xoptix, Inc. Also shares of
stock were issued in 2003 for consulting fees in arranging the
formation of the new Corporation.
F-8