SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Disclosure Statement
Pursuant to the Pink Basic
Disclosure Guidelines
Universal Solar Technology,
Inc.
11811 North Freeway, Suite 500
Houston, Texas 77060
________________________________
1- 832-229-7046
www.universalsolartechnology,com
paul.landrew@universalsolartechnology.
com
SIC: 3433
Annual Report
For the fiscal year endedPeriod Ending: December 31,
2013
Commission file number: 333-150768
UNIVERSAL SOLAR TECHNOLOGY, INC.
(Exact name2019
(the "Reporting Period")
As of registrant as specified in its charter)
Nevada | | | | 26-0768064 |
(State or other jurisdiction of
incorporation)
| | | | (I.R.S. Employer Identification
Number)
|
| | | | |
| | No. 1 Pingbei Road 2,
Nanping Science &
Technology Industrial Park
Zhuhai City, Guangdong
Province
The People’s Republic of
China 519060
| | |
| | (Address of principal executive
offices and zip code)
| | |
| | | | |
| | 86-756 8682610 | | |
| | (Registrant’s telephone
12/31/2019 the number including area code) | | |
Securities registered under Section 12(b) of shares outstanding
of our Common Stock was:
600,549,974
As of 12/31/2018 the Exchange Act: None
Securities registered under Section 12(g)number of shares outstanding
of our Common Stock was:
600,549,974
As of 12/31/2019 the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405number of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)shares outstanding
of the Act. Yes x No o
our Common Stock was:
600,549,974
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” or a smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
| Accelerated filer ¨
|
Non-accelerated filer ¨
| Smaller reporting company x
|
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 405 of the
Securities Act of 1933 and Rule 12b-2 of the
Exchange Act). Yes ¨ No x
AsAct of June 30, 2013,1934):
Yes: ? No: ?
Indicate by check mark whether the registrant’s common stock was not trading on active markets and therefore had no readily determinable market value.
The number of shares outstandingcompany's shell
status has changed since the previous reporting
period:
Yes: ? No: ?
Indicate by check mark whether a Change in
Control of the registrant’s Common Stock on April 14, 2014: 22,599,974 shares.
TABLE OF CONTENTS
PART I | 2 |
| ITEM 1. BUSINESS | 2 |
| ITEM 1A.RISK FACTORS | 13 |
| ITEM 1B.UNRESOLVED STAFF COMMENTS | 24 |
| ITEM 2. PROPERTIES | 24 |
| ITEM 3. LEGAL PROCEEDINGS | 25 |
| ITEM 4. MINE SAFETY DISCLOSURES | 25 |
PART II | 26 |
| ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
| 26 |
| ITEM 6. SELECTED FINANCIAL DATE | 26 |
| ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| 26 |
| ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
| 33 |
| ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 33 |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
| 35 |
| ITEM 9A. CONTROLS AND PROCEDURES | 33 |
| ITEM 9B. OTHER INFORMATION | 35 |
PART III | 36 |
| ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
| 36 |
| ITEM 11. EXECUTIVE COMPENSATION | 37 |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
| 38 |
| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
| 39 |
| ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES | 39 |
PART IV | 41 |
| ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 41 |
SIGNATURES | 43 |
INDEX TO FINANCIAL STATEMENTS | 44 |
PART I
SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS
On one or more occasions, we may make forward-looking statements incompany has occurred over this
Annual Report on Form 10-K regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. Words or phrases such as “anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” or similar expressions identify forward-looking statements. These forward-looking statements are only our predictionsreporting period:
Yes: ? No: ?
1) Name of the issuer and involve numerous assumptions, risksits predecessors
(if any)
In answering this item, please also provide any
names used by predecessor entities and uncertainties, including, but not limited to those listed below and those business risks and factors described elsewhere in this report and our other Securities and Exchange Commission filings.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a resultthe dates
of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent annual and periodic reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K.
Unless the context requires otherwise, references to “we,” “us,” “our,” the “Company” and “the Company” refer specifically toname changes.
Universal Solar Technology, Inc.
ITEM 1. BUSINESS
ORGANIZATIONAL HISTORY
Universal Solar Technology, Inc.Date and state (or jurisdiction) of incorporation (also
describe any changes to incorporation since
inception, if applicable) Please also include the
issuer's current standing in its state of incorporation
(e.g. active, default, inactive):
The company was incorporated in the State of
Nevada on July 24, 2007. It operates2007 and is currently active with
the State.
Has the issuer or any of its predecessors been in
bankruptcy, receivership, or any similar proceeding
in the past five years?
Yes: ? No: ?
If this issuer or any of its predecessors have been
the subject of such proceedings, please provide
additional details in the space below:
N/A
2) Security Information
Trading symbol:
UNSS
Exact title and class of securities outstanding:
Common
CUSIP:
913836102
Par or stated value:
$.0001
Total shares authorized:
2,500,000,000 as of date: 12/31/19
Total shares outstanding:
600,549,974 as of date: 12/31/19
Number of shares in the Public Float :
52,579,974 as of date: 12/31/19
Total number of shareholders of record: 60
as of date: 12/31/19
All additional class(es) of publicly traded securities (if
any):
Trading symbol: N/A
Exact title and class of securities outstanding:
CUSIP:
Par or stated value:
Total shares authorized:
as of date:
Total shares outstanding:
as of date:
Transfer Agent
Name: V Stock Transfer, LLC
Phone: 212-828-8436
Email: info@vstocktransfer.com
Is the Transfer Agent registered under the Exchange
Act? Yes: ? No: ?
Describe any trading suspension orders issued by
the SEC concerning the issuer or its predecessors:
None
List any stock split, stock dividend, recapitalization,
merger, acquisition, spin-off, or reorganization either
currently anticipated or that occurred within the past
12 months:
None
3) Issuance History
The goal of this section is to provide disclosure with
respect to each event that resulted in any direct
changes to the total shares outstanding of any class
of the issuer's securities in the past two completed
fiscal years and any subsequent interim period.
Disclosure under this item shall include, in
chronological order, all offerings and issuances of
securities, including debt convertible into equity
securities, whether private or public, and all shares,
or any other securities or options to acquire such
securities, issued for services. Using the tabular
format below, please describe these events.
A. Changes to the Number of Outstanding
Shares
Check this box to indicate there were no changes to
the number of outstanding shares within the past
two completed fiscal years and any subsequent
periods: ?
Shares Outstanding as of Second Most Recent
Fiscal Year End:
Opening Balance
Date 12/31/17
Common: 72,599,974
Preferred: N/A
*Right-click the rows below and select "Insert" to add rows as needed.
Date of
Transaction
Transaction
type (e.g. new
issuance,
cancellation,
shares
returned to
treasury)
Number of
Shares
Issued (or
cancelled)
Class of
Securities
Value of
shares
issued
($/per
share) at
Issuance
Were the
shares
issued at
a discount
to market
price at
the time
of
issuance?
(Yes/No)
Individual/ Entity
Shares were
issued to
(entities must
have individual
with voting /
investment
control
disclosed).
Reason for share
issuance (e.g. for
cash or debt
conversion)
-OR-
Nature of
Services
Provided
Restricted or
Unrestricted
as of this
filing.
Exemption
or
Registration
Type.
01/25/2018
Issuance
20000000
Common
N/A
No
Stephani L.
Bankett
Officer
Restricted
Section
4(a)(2)
01/25/2018
Issuance
200000000
Common
N/A
No
Darrell A
Calloway
Officer
Restricted
Section
4(a)(2)
01/25/2018
Issuance
20000000
Common
N/A
No
Elbert Hamilton
Officer
Restricted
Section
4(a)(2)
01/25/2018
Issuance
200000000
Common
N/A
No
Paul D Landrew
Officer
Restricted
Section
4(a)(2)
01/25/2018
Issuance
30000000
Common
N/A
No
Tracy Wilkerson
Officer
Restricted
Section
4(a)(2)
01/262018
Issuance
1195880
Common
N/A
No
Cede & CO
Restricted
Section
4(a)(2)
04/25/2018
Cancellation
200000000
Common
N/A
No
Darrell A.
Calloway
Officer
Restricted
Section
4(a)(2)
04/25/2018
Cancellation
200000000
Common
N/A
No
Paul D Landrew
Officer
Restricted
Section
4(a)(2)
04/27/2018
Issuance
5000000
Common
N/A
No
Marilyn R
Haynes
Gift
Restricted
Section
4(a)(2)
04/27/2018
Issuance
25000000
Common
N/A
No
Caleb J
Landrew
Gift
Restricted
Section
4(a)(2)
04/27/2018
Issuance
25000000
Common
N/A
No
Corbin J
Landrew
Gift
Restricted
Section
4(a)(2)
04/27/2018
Issuance
25000000
Common
N/A
No
Kimberly R
Landrew
Gift
Restricted
Section
4(a)(2)
04/27/2018
Issuance
50000000
Common
N/A
No
Paul D.
Landrew
Officer
Restricted
Section
4(a)(2)
04/27/2018
Issuance
25000000
Common
N/A
No
LaTeisha J.
Landrew
Gift
Restricted
Section
4(a)(2)
04/27/2018
Issuance
25000000
Common
N/A
No
Johnny Smith
Gift
Restricted
Section
4(a)(2)
04/27/2018
Issuance
10000000
Common
N/A
No
Wayne Nobles
Gift
Restricted
Section
4(a)(2)
04/27/2018
Issuance
10000000
Common
N/A
No
St Stephen
Baptist Church
- Ernest Schell
Control Person
Gift
Restricted
Section
4(a)(2)
05/22/2018
Issuance
160000000
Common
N/A
No
Darrell A
Calloway
Officer
Restricted
Section
4(a)(2)
05/22/2018
Issuance
20000000
Common
N/A
No
John Stokes
Gift
Restricted
Section
4(a)(2)
05/22/2018
Issuance
20000000
Common
N/A
No
Austin A Smith
Gift
Restricted
Section
4(a)(2)
08/03/2018
Cancellation
30000000
Common
N/A
No
Tracy Wilkerson
Officer
Restricted
Section
4(a)(2)
08/03/2018
Issuance
28800000
Common
N/A
No
Tracy Wilkerson
Officer
Restricted
Section
4(a)(2)
08/03/2018
Issuance
200000
Common
N/A
No
Skyler
Wilkerson
Gift
Restricted
Section
4(a)(2)
08/03/2018
Issuance
200000
Common
N/A
No
Tanesia C
Wilkerson
Gift
Restricted
Section
4(a)(2)
08/03/2018
Issuance
200000
Common
N/A
No
Traci S
Wilkerson
Gift
Restricted
Section
4(a)(2)
08/03/2018
Issuance
200000
Common
N/A
No
Trenton S
Wilkerson
Gift
Restricted
Section
4(a)(2)
08/03/2018
Issuance
200000
Common
N/A
No
Tanesia C / C/F
Tristyn S
Wilkerson
Gift
Restricted
Section
4(a)(2)
08/03/2018
Issuance
200000
Common
N/A
No
Tanesia C / C/F
Tia S Wilkerson
Gift
Restricted
Section
4(a)(2)
08/10/2018
Issuance
2000000
Common
N/A
No
Tamiko L Brock
Employee
Restricted
Section
4(a)(2)
08/10/2018
Issuance
85000
Common
N/A
No
Freddie
Hackney III
Gift
Restricted
Section
4(a)(2)
08/10/2018
Issuance
85000
Common
N/A
No
Tyrone Hackney
Gift
Restricted
Section
4(a)(2)
08/10/2018
Issuance
85000
Common
N/A
No
Nicholas
Jefferson
Gift
Restricted
Section
4(a)(2)
08/10/2018
Issuance
160000
Common
N/A
No
Ricky Plair
Gift
Restricted
Section
4(a)(2)
08/10/2018
Issuance
5450000
Common
N/A
No
Stock Vest - Art
Brent Control
Person
Services -
Public Relations
Restricted
Section
4(a)(2)
Shares Outstanding on Date of This Report:
Ending Balance
Ending Balance:
Date 12/31/2019
Common: 600,549,974
Preferred: N/A
Example: A company with a fiscal year end of December
31st, in addressing this item for its quarter ended
September 30, 2019, would include any events that
resulted in changes to any class of its outstanding shares
from the period beginning on January 1, 2017 through
September 30, 2019 pursuant to the tabular format above.
Use the space below to provide any additional details, including
footnotes to the table above:
B. Debt Securities, Including Promissory and
Convertible Notes
Use the chart and additional space below to list and
describe all outstanding promissory notes,
convertible notes, convertible debentures, or any
other debt instruments that may be converted into a
class of the issuer's equity securities.
Check this box if there are no outstanding
promissory, convertible notes or debt arrangements:
?
Date of
Note
Issuance
Outstanding
Balance ($)
Principal
Amount
at
Issuance
($)
Interest
Accrued
($)
Maturity
Date
Conversion Terms (e.g.
pricing mechanism for
determining conversion of
instrument to shares)
Name of Noteholder
(entities must have
individual with voting
/ investment control
disclosed).
Reason for
Issuance (e.g.
Loan, Services,
etc.)
12/03/2016
$20,000
$25,000
N/A
Stated in
note
relative
to the
dismissal
of court
case in
Nevada
- A-16-
74115-C
"At any time before the Maturity
Date, Maker shall have the right
but not the obligation, to cause
the Holder to convert this Note
into Common Stock of the
Maker or any security
convertible into Common Stock
of the Maker (the "Conversion
Shares"), based on a
conversion price equal to the
lesser (1) the average price at
which the Maker sells its
wholly owned subsidiary, Kuong U Science & Technology (Group) Ltd. (“Kuong U”Common Stock during the sixty
(60) days prior to the conversion
or (ii) the par value of the
Maker's Common Stock (the
"Conversion Price"),
The Arminda Group -
Tamiko Plair Control
Person
Loan
Use the space below to provide any additional details, including
footnotes to the table above:
4) Financial Statements
A. The following financial statements were
prepared in accordance with:
? U.S. GAAP
? IFRS
B. The financial statements for this reporting period
were prepared by (name of individual) :
Name: J. Anthony Barr,
CPA, Esq.
Title: CPA
Relationship to Issuer: Professional
Services Provider
Provide the financial statements described below for
the most recent fiscal year or quarter. For the initial
disclosure statement (qualifying for Pink Current
Information for the first time) please provide reports
for the two previous fiscal years and any subsequent
interim periods.
C. Balance sheet;
D. Statement of income;
E. Statement of cash flows;
F. Statement of Changes in Shareholders'
Equity
G. Financial notes; and
H. Audit letter, if audited
You may either (i) attach/append the financial
statements to this disclosure statement or (ii) file the
financial statements through OTCIQ as a separate
report using the appropriate report name for the
applicable period end. ("Annual Report," "Quarterly
Report" or "Interim Report").
If you choose to publish the financial statements in a
separate report as described above, you must state
in the accompanying disclosure statement that such
financial statements are incorporated by reference.
You may reference the document(s) containing the
required financial statements by indicating the
document name, period end date, and the date that
it was posted to OTCIQ in the field below. Financial
Statements must be compiled in one document.
The 2018 Annual Financial Statements are included
in this disclosure.
Financial statement information is considered
current until the due date for the subsequent report
(as set forth in the qualifications section above). To
remain qualified for Current Information, a company
incorporated in Macau, People’s Republicmust post its Annual Report within 90 days from its
fiscal year-end date and Quarterly Reports within 45
days of China (“PRC”each fiscal quarter-end date.
5) Issuer's Business, Products and
Services
The purpose of this section is to provide a clear
description of the issuer's current operations. In
answering this item, please include the following:
A. Summarize the issuer's business operations (If
the issuer does not have current operations,
state "no operations")
on May 10, 2007No Operations
B. Describe any subsidiaries, parents, or affiliated
companies, if applicable, and its subsidiary, Nanyanga description of
such entity's business, contact information for
the business, officers, directors, managers or
control persons. Subsidiary information may be
included by reference
The Arminda Group, LLC is the parent company
of Universal Solar Technology, Co., Ltd. (“NUST”),Inc.
C. Describe the issuers' principal products or
services, and their markets
N/A
6) Issuer's Facilities
The goal of this section is to provide a wholly foreignpotential
investor with a clear understanding of all assets,
properties or facilities owned, enterprise (“WFOE”) registered on September 8, 2008 underused or leased by the
wholly foreign-owned enterprises lawsissuer.
In responding to this item, please clearly describe
the assets, properties or facilities of the PRC.
In 2009, prior to construction of NUST’s factory, which is located in Henan province, PRC, we subcontractedissuer, give
the manufacture of photovoltaic (“PV”) modules and solar lighting systems to Zhuhai Yuemao Laser Facility Engineering Co., Ltd. (“Yuemao Laser”), a related party. In July 2010, NUST’s newly constructed factory started operations, and in September 2010, began shipping silicon wafers to the market in China. Since then, we have been devoting ourselves to extending our product lines to include higher value-added products, expanding production capacity, lowering production costs and increasing our market share.
OVERVIEW OF OUR BUSINESS
We primarily manufacture, market, and sell silicon wafers to manufacturers of solar cells. In addition, we manufacture PV modules with solar cells purchased from third parties.
Product Line 1 - Silicon Wafers
We produce silicon wafers by extracting purified mono-crystalline silicon from virgin poly-silicon feedstock utilizing mono-crystalline silicon ingot growers. Then, we cut the purified mono-crystalline silicon ingots into silicon wafers with multi-wire saws. Silicon wafers are onelocation of the most important components in solar cells.
As of December 31, 2013, we have eleven mono-crystalline silicon ingot growers. The maximum production capacity of each mono-crystalline silicon ingot grower is approximately one ton of mono-crystalline silicon ingots per month. Our current mono-crystalline silicon ingot production capacity is approximately 132 tons per annum.
We are also equipped with five multi-wire saws, each of which can produce approximately 70 silicon wafers per kilogram of mono-crystalline silicon ingot. Based on an estimated 2.8 watts (W) per silicon wafer, our current silicon wafer production capacity is approximately 20MW per annum.
During 2013, due to a significant decrease in the selling price of our products, we were forced to suspend the production of our silicon wafer production.
Product Line 2 – PV Modules
We have two semi-automatic production lines that manufacture PV modules. Our existing production capacity is approximately 20MW of PV modules per annum. During 2013, we did not produce PV module products in commercial quantities.
Overview of Properties, Plantprincipal plants and Equipment
We have acquired land-use rights to 71,346 square meters in Henan Province, PRC for industrial usage. The land use rights expire on July 23, 2060. We began the construction of our manufacturing facilities on this site in 2008. As of December 31, 2013, we have completed the construction of five workshops. Two outother property
of the five workshops are in operation with each comprises of 2,016 square meters.
As of December 31, 2013,issuer and describe the net book value of our property, plant and equipment was $2,914,789.
Operation
In fiscal 2013, we shipped our silicon wafers to customers primarily located in China. We plan to expand sales of our products to the EU, North America and Africa in the future.
We plan to expand the production capacity of our existing product lines through purchasing additional equipment and recruiting more employees. We also plan to produce solar cells by ourselves and provide advanced applications of solar energy to complete the value chain of this industry.
Key Financial Indicators
During fiscal 2013 and 2012, we had net sales of $159,075 and $649,616, respectively, representing a decrease of $490,541 or 76% for the fiscal year of 2013, compared to the prior comparable period. During fiscal 2013, our business generated a gross loss of $334,235; comparably, we realized a gross loss of $704,872 during fiscal year 2012. Losses from operations for fiscal 2013 and 2012 were $797,296 and $5,192,643, respectively. The net losses for fiscal 2013 and 2012 were $1,288,725 and $5,663,510, respectively.
As of December 31, 2013, we had cash of $12,250, and a net book value for property, plant, equipment and land-use rights of $3,339,350. At December 31, 2013, we had total liabilities of $16,250,596 and an accumulated deficit of $11,175,906.
During fiscal 2013, the net cash used in our operating activities was $224,376; we also raised $105,886 through related parties’ loans.
STRATEGY
Our growth strategy covers various aspects of our business.
Operating Strategies
Our operating strategy is to increase our current products’ profitability by doing the following:
(1) | Reduce production cost per unit by increasing existing production capacity and implementing tighter control over production costs; |
(2) | Increase selling price of our products by actively expanding our products to potential markets; and
|
(3) | Lower raw materials purchasing price by increasing the amount of purchase. It is estimated that unit price of raw materials will decrease by 10% if we buy in bulk. |
Expanding our production capacity will require additional equipment which will require significant cash. Also, we will need significant working capital to purchase raw materials and defray production overhead. In addition, increasing our market share will require significant marketing efforts which will also require significant capital. Our current financial condition makes raising the necessary capital extremely difficult and there is no guarantee that we will be able to do so in the near future or at all.
In fiscal 2013, the silicon wafers production industry in China underwent a major re-organization. As a result of this reorganization there are fewer although potentially stronger competitors.
Developing strategies
Our developing strategy aims to complete the value chain of solar energy industry by acquiring the ability to produce solar cells. There are two alternatives to achieve this goal.
(1). | Construct a solar cell production facility. We have reserved a block of land within our existing manufacturing facility in Henan province of the PRC, which can be utilized for three to four new workshops to produce solar cells. The advantages of constructing our own solar cell production facility include: |
| a) | Complete product family – The completion of a solar cell manufacturing facility will enable us to produce a full range of products for the solar energy industry, including silicon ingots, silicon wafers, solar cells, and PV modules. |
| b) | Higher profitability - We will gain access to substantially all added-value of the industry chain. Moreover, our overall profitability will be increased due to lower transportation costs of semi-finished products within the production processes, and better quality control of products. |
Building our own solar cell manufacturing facility will require a significant investment in equipment and workshops. We estimate that we will need approximately $18 million to construct and equip a solar cell production facility. Other barriers also exist, including the lack of advanced technology, for instance, techniques to produce high quality solar cells in commercial quantities; and the shortage of qualified personnel.
(2). | Alternatively, we will look for opportunities to form strategic relationships with existing solar cell manufacturers. Developing strategic relationships in the form of long-term supply agreements with solar cell manufacturers is a quick and flexible way to indirectly gain access to solar cell production capacity. |
OUR MARKET
As worldwide demand for electricity continues to increase, the electric power industry now faces several challenges:
· | Fossil fuel supply constraints: Limited supply and escalating consumption of coal, oil, and natural gas continue to drive up wholesale electricity prices, resulting in higher electricity costs for consumers. |
· | Infrastructure constraints: In many parts of the world, electricity demand exceeds the capacity of existing electricity generation, transmission and distribution infrastructure. |
· | Desire for energy security: As political and economic instability in key oil and natural gas producing regions increases, governments are increasingly focusing on developing reliable and secure energy sources. |
· | Environmental concerns: Long-term use of fossil fuels is associated with a range of environmental issues including global warming, air and water pollution, the increased prevalence of which is driving an increased environmental awareness. |
Electricity Production
The past two decades have witnessed China’s significant increase of electricity production. According to United Nations Statistical Commission, China’s gross electricity production increased from 621,200 million Kilowatt-hours in 1990 to 3,281,553 million Kilowatt-hours in 2007, with compound annual growth rate of 10.3%. Comparably, during the same period, United State’s gross electricity production increased from 3,179,247 million Kilowatt-hours to 4,348,856 million Kilowatt-hours, representing compound annual growth rate of 1.9%. Obviously, China is becoming one of the
world’s largest producers of electricity. The following chart underlines gross electricity production of several major countries duringproperties. If the period of 1990 to 2007.
Data source: United Nations Statistical Commission (http://data.un.org)
Electricity Production Using Solar Power
Solar power, or solar energy is a source of energy that uses radiation emitted by the Sun. It is a renewable energy source that has been used in many traditional technologies for centuries. Solar power is also in widespread use where other power supplies are absent, such as in remote locations and in space. In recent years, solar energy has been used greatly in the generation of electricity.
Producing electricity with solar power has the following benefits:
Environmental Friendliness and Renewability: Solar power is one of the most environmentally friendly renewable resources available for electricity generation. It does not produce air or water emissions, noise, vibrations or any waste generation.
Peak Energy Generation Ability: Solar power is well-suited to match peak energy needs as maximum sunlight hours generally correspond to peak demand periods when electricity prices are at their highest.
Easily Located with End Users: Unlike other renewable resources such as hydroelectric and wind power, solar power can be utilized anywhere that receives sunlight and directly at the site where the power will be shed. As a result, solar power avoids the expense of, and energy losses associated with, transmission and distribution of electricity from large-scale electrical plants to end users.
No Fluctuations in Operating Costs: Unlike fossil or nuclear fuel, solar energyissuer does not have fuel price volatility. Althoughcomplete
ownership or control of the property (for example, if
others also own the property or if there is variability ina
mortgage on the amountproperty), describe the limitations
on the ownership.
If the issuer leases any assets, properties or
facilities, clearly describe them as above and timingthe
terms of sunlight over the day, seasontheir leases.
Office Space at 11811 North Freeway, Suite 500,
Houston, Texas 77060. Six month term with option
if needed.
7) Officers, Directors, and year,Control Persons
The goal of this section is to provide an investor with
a properly sized and configured system can be designed for high reliability while supplying electricity on a long-term, fixed-cost basis.
Reliability and Durability: Without moving parts or the need for periodic maintenance, solar power systems are among the most reliable forms of electricity generation. Accelerated aging tests have shown that solar modules can operate for at least 25 to 30 years without requiring major maintenance.
Modularity: Solar systems are easily modularized and scalable, and therefore can be deployed in many different sizes and configurations to meet the specific needsclear understanding of the user. Solar modulesidentity of all the
persons or entities that are increasingly used to serve as both a power generatorinvolved in managing,
controlling or advising the operations, business
development and the exterior of a building. Like architectural glass, PV modules can be installed on the roofs and facades of residential and commercial buildings.
Given the apparent advantages of solar power-based electricity production, many countries across the world are developing their electricity production capability with solar energy. According to United Nations Statistical Commission, in 1997 Germany produced 8 million Kilowatt-hours with solar power, while it produced 3,075 million Kilowatt-hours in 2007, denoting annual compound annual growth rate of 81.3% but only accounts for 0.5% of Germany’s gross electricity productiondisclosure of the 2007.
Although China has been producing much more electricity than before, its ability of producing electricity with solar power remains weak.
Data source: United Nations Statistical Commission (http://data.un.org)
The market for solar electricity production in China is promising. We believe higher demand for solar energy, furthered by concerns about global warming, will drive increases in the annual revenues of the global solar equipment industry. The interest manifested by many electricity customers in solar cells as a “green” alternative to fossil fuels is also likely to spur increases in production of high-purity silicon required for the cells, according to the report by Photon Consulting, a German research group.
Value Chain of Solar Energy Industry
Currently, Universal Solar plans to emphasize the use of silicon based technologies in its products as a majority of installed solar systems around the world employ crystalline silicon technologies. Crystalline silicon cells are manufactured using mono-crystalline silicon, multi-crystalline silicon or string ribbon technology. The crystalline silicon-based solar power manufacturing value chain starts with the processing of quartz sand to produce metallurgical-grade silicon. This material is further purified into semiconductor-grade or solar-grade polysilicon feedstock.
In the most widely used crystalline silicon-based solar manufacturing process, feedstock is melted in mono-crystalline silicon ingot growers, and then formed into ingots through a crystallization process. Ingots are cut and shaped, then sliced into wafers using high precision cutting techniques. Wafers are manufactured into solar cells through a multiple step manufacturing process that entails etching, doping, coating and applying electrical contacts. Solar cells are then interconnected and packaged to form solar modules, which together with system components such as batteries and inverters, are distributed to installers, systems integrators, service providers or directly to end-users, for installation for on-grid or off-grid systems.
Currently, we are capable of producing silicon ingots with virgin poly-silicon feedstock; cutting silicon ingots into wafers; and manufacturing PV modules with solar cells purchased from outside vendors. We plan to manufacture solar cells and other advanced applications to complete the value chain of this industry.
OUR PRODUCTS
Currently, we have two primary product lines: (1) silicon wafers and (2) PV modules.
Silicon Wafers
| | Currently, we are producing various types of silicon wafers. Silicon wafers are made of mono-crystalline silicon with purity over 99.9999%. Resistivity varies from one to three ohms.
The shape of silicon wafer is a square with rounded corners. Side length of square is 125mm with diameter of rounded corners of 150mm or 165mm.
|
PV Modules
Our PV modules are designed for large scale, grid-connected solar power plants. Currently, we purchase solar cells from outside vendors to produce PV modules.
| | Solar modules GYSP-160
Characteristics
Open circuit voltage (Voc): 43.2V
Optimum operating voltage (Vmp): 35V
Short circuit current (Isc): 5.1A
Optimum operating current (Imp): 4.59A
Peak power(Pm): 160W
| | Specifications
Monocrystalline silicon
Dimension (mm):
1588×802×45
Tolerance: ± 5%
Weight: 15.6kg
Maximum system voltage:
1000V DC
|
| | Solar modules GYSP-175
Characteristics
Open circuit voltage(Voc): 44.06V
Optimum operating voltage:
(Vmp) 35.5V
Short circuit current (Isc): 5.25A
Optimum operating current(Imp):
4.95A
Peak power(Pm): 175W
| | Specifications
Monocrystalline silicon
Dimension(mm):
1580×808×37
Tolerance: ±5%
Weight: 15.3kg
Maximum system voltage:
1000V DC
|
| | | | |
| | Solar modules GYSP-180
Characteristics
Open circuit voltage(Voc): 44.9V
Optimum operating voltage:
(Vmp) 38.6V
Short circuit current (Isc): 5.1A
Optimum operating current(Imp): 4.68A
Peak power(Pm): 180W
| | Specifications
Monocrystalline silicon
Dimension(mm):
1715×802×45
Tolerance: ±5%
Weight: 16.9kg
Maximum system voltage:
1000V DC
|
OUR PROPERTIES
Land:
On December 1, 2008, NUST acquired approximately 71,345.70 square meters in Fangcheng County, Nanyang City, Henan province of the PRC for a cost of RMB 2,886,300 (approximately $422,843). On July 27, 2010, “Certificate of Right of Use of Land” for this land was issued to NUST.
Factory:
As of December 31, 2013, we have completed five workshops, two of which are in operation. We have also built office building, dormitory and canteen in NUST’s manufacturing facility in Nanyang City, Henan province of the PRC.
RAW MATERIALS
We do not currently have agreements with any suppliers for our raw materials. Currently, the raw materials used in the manufacture of our products are readily available and to date we have not experienced any difficulty in obtaining any raw materials. We believe that these raw materials will continue to be readily available for the foreseeable future, and we do not anticipate any difficulties in obtaining any raw materials.
TARGET MARKETS AND PRINCIPAL CUSTOMERS
Our management team has engineering, product development, and international sales backgrounds in advanced laser technologies, solar cell manufacturing, and solar manufacturing machinery design and sales. We intend to leverage our strong industry contacts and relationships to develop a strong global customer pipeline.
At current stage, we mainly provide our products to meet demand of the Chinese market. We also plan to sell our solar cell and solar PV module products to customers in the EU, North America, Asia and Africa when time is right.
In fiscal 2013, four customers accounted for approximately 48%, 20%, 18% and 11% of sales, no other customer accounted for over 10% of sales. During fiscal 2012, two customers accounted for approximately 52% and 25% of our sales, comparably.
SALES AND MARKETING
We intend to develop several sales channels - direct sales, industry specific / country specific manufacturer’s sales representatives, and international strategic partnerships. The Company’s sales strategy is designed to capitalize its existing strong management relationships, rapidly growing market segments and emerging trends. Currently, the Company is focusing most of its sales efforts on Chinese market and we plan to explore markets in other countries in the future.
Direct Sales
Our executive team has the unique advantage of being able to leverage relationships from our strategic partner, Yuemao, whose business interests include steel trade, silicon laser technologies, water purifying facilities and real estate investments. The team has developed strong domestic and international relationships through their success in launching and developing an advanced laser technology company, Yuemao Laser, which focuses on serving the needs of the solar wafer and solar industry.
The executive team also handles direct sales activities, while managing operations, product line enhancements, customer care,issuer, as well as
vendorthe identity of any significant or beneficial
shareholders.
Using the tabular format below, please provide
information, as of the period end date of this report,
regarding any person or entity owning 5% of more of
any class of the issuer's securities, as well as any
officer, and agent relationships.any director of the company, regardless
of the number of shares they own. If any listed are
corporate shareholders or entities, provide the
name and address of the person(s) beneficially
owning or controlling such corporate
shareholders, or the name and contact
information of an individual representing the
corporation or entity in the note section.
Name of
Officer/Director or
Control Person
Affiliation with
Company (e.g.
Officer/Director/Owner
of more than 5%)
Residential Address
(City / State Only)
Number of
shares
owned
Share
type/class
Ownership
Percentage
of Class
Outstanding
Note
Paul D Landrew
Officer
Houston, Texas
50000000
Common
8%
------------------
Darrell A dedicated direct sales forceCalloway
Officer
Houston, Texas
160000000
Common
26.6%
------------------
The Arminda
Group, LLC -
Tamiko Plair
Control Person
Parent Company
Houston, Texas
200000000
Common
33.3%
These are the shares
associated with the
Note currently held by
The Arminda Group,
LLC
8) Legal/Disciplinary History
A. Please identify whether any of the persons listed
above have, in the past 10 years, been the
subject of:
1. A conviction in a criminal proceeding or
named as a defendant in a pending
criminal proceeding (excluding traffic
violations and senior sales executives will be hiredother minor offenses);
None
2. The entry of an order, judgment, or
decree, not subsequently reversed,
suspended or vacated, by a court of
competent jurisdiction that permanently
or temporarily enjoined, barred,
suspended or otherwise limited such
person's involvement in any type of
business, securities, commodities, or
banking activities;
None
3. A finding or judgment by a court of
competent jurisdiction (in a civil action),
the Securities and Exchange
Commission, the Commodity Futures
Trading Commission, or a state
securities regulator of a violation of
federal or state securities or
commodities law, which finding or
judgment has not been reversed,
suspended, or vacated; or
None
4. The entry of an order by a self-
regulatory organization that permanently
or temporarily barred, suspended, or
otherwise limited such person's
involvement in any type of business or
securities activities.
None
B. Describe briefly any material pending legal
proceedings, other than ordinary routine
litigation incidental to sellthe business, to targeted trade channelswhich the
issuer or any of its subsidiaries is a party or of
which any of their property is the subject.
Include the name of the court or agency in China,which
the USproceedings are pending, the date instituted,
the principal parties thereto, a description of the
factual basis alleged to underlie the proceeding
and Europe. This expanded direct sales team is expectedthe relief sought. Include similar information
as to any such proceedings known to be
contemplated by governmental authorities.
None
9) Third Party Providers
Please provide the major force behind our growth. Emphasis will be given to growingname, address, telephone
number and qualifying large accounts, and/email address of each of the following
outside providers:
Securities Counsel
Name: Andrew Coldicutt
Firm: The Law Offices of Andrew
Coldicutt
Address 1: 1220 Rosecrans Street,
PMB 258
Address 2: San Diego, CA 92106
Phone: 619-228-4970
Email: Andrew@ColdicuttLaw.com
Accountant or high margin products across markets inAuditor
Name: J. Anthony Barr, CPA, Esq.
Firm: Barr Law and CPA Firm
Address 1: 11811 North Freeway, Suite
500
Address 2: Houston, Texas 77060
Phone: 71-836-9601
Email: lawandcpa@outlook.com
Investor Relations
Name:
Firm:
Address 1:
Address 2:
Phone:
Email:
Other Service Providers
Provide the European Union member countries.
Manufacturers’ Sales Representatives
We also intend to align ourselves with a numbername of specialized representatives and performance based contractors. These consist of individualsany other service provider(s)
that that assisted, advised, prepared or small groups, who dedicate their respective sales and marketing efforts to either a limited number of companies or particular industry segments. They are small firms, each with 1-5 salespeople that we may have under contract. They will introduce our higher margin products to potential new customers in new industry segments.
International Distribution & Strategic Partners
We are evaluating potential contracts with a number of strategic distributors and partners in international markets in Asia (outside of China), South America, and Eastern Europe. These distributors will be encouraged to enter into agreements with the Company which require each organization to produce a minimum annual “dollar” sales amount per territory.
Public Relations
We are committed to raising our profile and leveraging additional publicity. To this end, we plan to expand our dialogue with leading industry analysts and trade publications. We plan to have members of our management speak at trade conferences, and contribute articles and press releases to market-specific publications. This will encourage industry analysts to view us as a keen innovator, activist, and campaigner in the promotion of solar power across a variety of applications.
We are planning a communications campaign focusing on trade events, panel discussions, speaking engagements, white papers, pitch letters, press announcements, direct marketing and advertising. The primary goal is to reinforce sales efforts by promoting positive testimonials and success stories from our initial base of clients, while also being an advocate and educator for renewable and sustainable energy sources. By participating in seminars and industry conferences, our management team intends to develop stronger awareness and relationships with current and potential customers.
Advertising
We intend to initiate a conservative, yet effective advertising campaign in major trade publications which will identify us as a quality purveyor of new, innovative, and attractively designed solar modules and technologies.
COMPETITION
The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete within the larger electric power industry. Within the renewable energy industry, Universal Solar believes that the main sources of competition are crystalline silicon solar module manufacturers, other thin film solar module manufacturers and companies that develop solar thermal and concentrated photovoltaic technologies. Among photovoltaic module and cell manufacturers, the principal methods of competition are price per watt, production capacity, conversion efficiency and reliability. We believe that we can compete favorablyprovided
information with respect to these factors; however, we also believe that our growing focus on providing aesthetically pleasing modular solutionsthis disclosure
statement. This includes counsel, advisor(s) or
consultant(s) or provided assistance or services to
the issuer during the reporting period.
Name:
Firm:
Nature of Services:
Address 1:
Address 2:
Phone:
Email:
Name:
Firm:
Nature of Services:
Address 1:
Address 2:
Phone:
Email:
10) Issuer Certification
Principal Executive Officer:
The issuer shall include certifications by the chief
executive officer and an array of value added services and products helps further differentiate us from similar peers.
Our product designs, price points, relationships, infrastructure, quality control standards, and industry contacts represent substantial competitive advantages. We maintain a substantially lower cost structure than competitors based in the US and Europe. Foreign competitors currently cannot match us on pricing, technological innovation, and efficient use of low cost manufacturing resources. Furthermore, our competitive advantage in China is protected by significant knowledge of government regulations, business practices, and strong relationships.
With respect to our Chinese competitors, we view our strong marketing abilities and flexibility in rapidly bringing new products to market as our key advantages. It should be noted that many competitors are larger and have morechief financial resources, larger production capacities and greater brand name recognition which may, as a result, put them in a better position to adapt to changes in the industry or the economy as a whole. Additionally, because global supply of pure silicon is becoming scarce due to high demand in solar-powered appliances and technologies, we are evaluating opportunities to acquire and/or enter into a joint-venture with a silicon mine which will help control cost pressures of related rising silicon prices.
PRINCIPAL OFFICE
Our principal office is located at No. 1 Pingbei Road 2, Nanping Science & Technology Industrial Park, Zhuhai City, Guangdong Province, the People’s Republic of China 519060.
EMPLOYEES AND ORGANIZATION
As of December 31, 2013, we had 12 full-time employees. Senior management includes 2 senior officers. We have 3 employees in our administration and accounting departments and 7 employees dedicated to production at NUST. None of our employees are covered by a collective bargaining agreement and we have never experienced a work stoppage, and we consider our labor relations to be excellent.
RESEARCH AND DEVELOPMENT
Due to financial restraints, we were unable to devote any resources to research and development in 2013 and 2012 as planned.
Subject to receipt of additional financing, we plan to devote continuously a substantial amount of resources to research and development by focusing our efforts on the following areas.
Improving conversion efficiency of solar modules: Oneofficer of the
most promising waysissuer (or any other persons with different titles but
having the same responsibilities).
The certifications shall follow the format below:
I, Paul D. Landrew certify that:
1. I have reviewed this Annual Disclosure
Statement of increasingUniversal Solar Technology,
Inc.;
2. Based on my knowledge, this disclosure
statement does not contain any untrue
statement of a material fact or omit to state a
material fact necessary to make the
conversion efficiency of solar modules is to maximize the number of photons that reach the absorption layerstatements made, in light of the
semiconductor material so that they can be converted into electrons, maximizing the number of electrons that reach the surface of the cadmium telluride and minimizing the electrical losses between the semiconductor layer and the back metal conductor. We believe that our ability to achieve higher module efficiencies is primarily a function of rapidly transferring new technology developments into high-throughput module production and continuously making incremental improvements to the solar module and the manufacturing process internally or in conjunction with outsourced manufactures.
Optimization of Systems: We are planning to commit resources to reduce the cost and optimize the effectiveness of components in its photovoltaic system by collecting filed performance data to identify opportunities for module and process improvement and improve the performance of systems that use our modules. In addition, the Company uses this data to enhance predictive models and simulations for the end-users.
Flexibility in Design & Quick Implementation of Innovations: We are committed to being flexible to meet customer needs and being able to evolve quickly with market innovations and demands. The Company closely monitors trends and developing technologies in order to help insure its ability to meet both current and future customer preferences.
Providing Attractive & Flexible Lighting Systems and Solar Modules: Often overlooked by competitors, we are keen to implement and market new module designs and lighting systems that allow for better building and environmental integration. Staying in tune with architectural preferences and ahead of peers will help the Company thrive and prosper.
GOVERNMENT REGULATION
This section sets forth a summary of the most significant regulations or requirements that affect our business activities in China or our shareholders’ rights to receive dividends and other distributions from us.
Renewable Energy Law and Other Government Directives
In February 2005, China enacted its Renewable Energy Law,circumstances under which became effective on January 1, 2006. The Renewable Energy Law sets forth policies to encourage the development and use of solar energy and other non-fossil energy. The renewable energy law sets out the national policy to encourage and support the use of solar and other renewable energy and the use of on-grid generation. It also authorizes the relevant pricing authorities to set favorable prices for the purchase of electricity generated by solar and other renewable power generation systems.
The law also sets out the national policy to encourage the installation and use of solar energy water-heating systems, solar energy heating and cooling systems, solar photovoltaic systems and other solar energy utilization systems. It also provides the general principles regarding financial incentives for the development of renewable energy projects. The projects, as listed in the renewable energy industry development guidance catalogue, may obtain preferential loans from financial institutions and can enjoy tax preferences. The State Council is authorized to stipulate the specific tax preferential treatments. However, so far, no rules have been issued by the State Council pertaining to this matter. In January 2006, China’s National Development and Reform Commission promulgated two implementation directives of the Renewable Energy Law. These directives set out specific measures in setting prices for electricity generated by solar and other renewal power generation systems and in sharing additional expenses occurred. The directives further allocate the administrative and supervisory authorities among different government agencies at national and provincial levels and stipulate responsibilities of electricity grid companies and power generation companiessuch statements
were made, not misleading with respect to
the implementation ofperiod covered by this disclosure
statement; and
3. Based on my knowledge, the Renewable Energy Law.
China’s Ministry of Construction also issued a directive in June 2005, which seeks to expand the use of solar energy in residential and commercial buildings and encourages the increased application of solar energy in different townships. In addition, the State Council promulgated a directive in July 2005 which sets out specific measures to conserve energy resources.
Environmental Regulations
We are subject to a variety of foreign, federal, state and local governmental regulations related to environmental protection. The major environmental regulations applicable to our proposed manufacturing facility include the Environmental Protection Law of the PRC, the Law of PRC on the Prevention and Control of Water Pollution, Implementation Rules of the Law of PRC on the Prevention and Control of Water Pollution, the Law of PRC on the Prevention and Control of Air Pollution, Implementation Rules of the Law of PRC on the Prevention and Control of Air Pollution, the Law of PRC on the Prevention and Control of Solid Waste Pollution, and the Law of PRC on the Prevention and Control of Noise Pollution.
Our proposed research and development activities and manufacturing facility are expected to use, generate and discharge toxic, volatile or otherwise hazardous chemicals and wastes. If we failed to comply with present or future environmental laws and regulations, we could be subject to fines, suspension of production or a cessation of operations. In addition, under some foreign, federal, state and local statutes and regulations, a governmental agency may seek recovery and response costs from operators of property where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for the release or otherwise was not at fault.
Intellectual Property Rights
The Patent Law (1984), as amended by the Decision on Amending the Patent Law (2000), and the Implementing Rules of the Patent Law (2001), as amended by the Decision on Amending the Implementing Rules of the Patent Law (2002) provide the application and protection of patents. An invention patent shall be valid for twenty years and an external design patent and a utility model patent shall be valid for ten years, commencing on their application dates, respectively. Any persons or entities using a patent without the consent of the patent owner, making counterfeits of patented products, or conducting other activities which infringe upon patent rights will be held liable for compensation to the patent owner, fines charged by the administrative authorities and even criminal punishment.
Our success depends, in part, on our ability to conduct business without infringing on the proprietary rights of others. We rely primarily on a combination of trade secrets, as well as employee and third party confidentiality agreements to safeguard our intellectual property.
ITEM 1A. RISK FACTORS
An investment in our common stock is speculative and involves an extremely high degree of risk and uncertainty. You should carefully consider the risks described below, together with the other information contained in this annual report, including the consolidated financial
statements, and notes thereto of our Company, before deciding to investother financial information
included or incorporated by reference in our common stock. The risks described below are notthis
disclosure statement, fairly present in all
material respects the only ones facing our Company. Additional risks not presently known to us or that we presently consider immaterial may also adversely affect our Company. If any of the following risks occur, our business, financial condition, results of operations, and the value of our common stock could be materially and adversely affected.
RISKS RELATED TO OUR COMPANY
We are an early stage company and have limited operating history from which to evaluate our potential for future success.
Our company was formed in July 2007, and has only a short period of formation, planning, analysis and testing. In addition, we have very limited operating history under our proposed business model from which you can evaluate our business and prospects.
There can be no assurance that we will derive significant revenues from products sales.
We are an early stage company. You must consider the risks and uncertainties frequently encountered by early stage companies in new and rapidly evolving markets, including competing technologies, lack of customer acceptance of a new or an improved service or product and obsolescence of the technology before it can be fully commercialized. If we failed to address these risks and uncertainties, our business, results of operations, and financial condition will be materially and adversely affected.
If we do not obtain additional capital, we may be unable to sustain our business.
We are actively seeking additional funding, but to date have not entered into any agreements or other arrangements for such financing. There can be no assurance that the required additional financing will be available on terms favorable to us or at all.
Without additional funding, the company will not be able to pursue its business model. If adequate funds are not available or are not available on acceptable terms when required, we would be required to significantly curtail our operations and would not be able to fund the development of the business envisioned by our business model. These circumstances could have a material adverse effect on our business and ability to continue to operate as a going concern. If additional funds are raised through the issuance of equity or convertible debt securities, our then existing shareholders may experience substantial dilution, and such securities may have rights, preferences, and privileges senior to those of our common stock.
If we need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.
As we implement our growth strategies, we may experience increased capital needs and we may not have enough capital to fund future operations without additional capital investments. Our capital needs will depend on numerous factors, including (1) our profitability; (2) the release of competitive products by competitors; (3) the level of our investment in research and development; and (4) the amount of our capital expenditures. We cannot assure you that we will be able to obtain capital in the future to meet our needs.
If we cannot obtain additional funding, we may be required to:
· | reduce our investments in research and development; |
· | limit our marketing efforts; and |
· | decrease or eliminate capital expenditures. |
Such reductions could have a material adverse effect on our business and our ability to compete.
Even if we do find a source of additional capital, we may not be able to negotiate acceptable terms and conditions for receiving such capital. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
We may have difficulty raising necessary capital to fund operations as a result of market price volatility of our shares of common stock.
If our business development plans are successful, we may require additional financing to continue to develop and exploit existing and new technologies and to expand into new markets. The exploitation of our technologies may, therefore, be dependent upon our ability to obtain equity financing through debt and equity or other means. In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performance, underlying asset values or prospects of such companies.
For these reasons, our shares of common stock can also be expected to be subject to volatility resulting from purely market forces beyond our control. Such volatility may make it more difficult to find investors who are willing to invest in our common stock, or to negotiate equity financing or terms that are acceptable to us.
We have incurred losses in certain prior periods and may incur losses in the future.
We incurred a gross loss of $334,235, representing a gross loss margin of 210% during fiscal 2013; comparably our principal business generated gross loss of $704,872 during 2012, representing a gross loss margin of 109%. We have also incurred net losses of $1,288,725 and $5,663,510 for the years ended December 31, 2013 and 2012, respectively. We may incur losses in the future. We expect our costs and expenses to increase as we expand our operations. Our ability to achieve and maintain profitability depends on the growth rate of the solar power market, the continued global market acceptance of solar power products in general and our future products in particular, the pricing trend of solar power products, the competitiveness of our proposed products as well as our ability to provide new products to meet the demands of our customers and our ability to control our costs and expenses. We may not be able to achieve or sustain profitability on a quarterly or an annual basis.
There are significant risks in executing our business strategy and our business plans could change.
To execute our business plan, we will need to recruit additional employees, complete our manufacturing facility, establish a distribution channel and secure purchase orders from customers. Our ability to manage each of these factors is subject to substantial risks, including our ability to finance the costs. For example, the cost to equip our manufacturing facility and expand solar cells product lines is estimated to be approximately $18 million. If we are unable to successfully execute on our business plan, our business, results of operations, and financial condition will be materially and negatively impacted.
To maximize our potential for future growth and achieve our expected revenues, we need to manage growth in our current operations.
In order to maximize potential growth, we believe that we must establish our manufacturing and marketing operations. This will place a significant strain on our management and our operational, accounting, and information systems. We expect that as we grow we will need to improve our financial controls, operating procedures, and management information systems to handle increased operations. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
We cannot assure you that our organic growth strategy will be successful.
One of our growth strategies is to grow organically by increasing the distribution and sales of our products in new markets outside of China. However, entering new markets faces many obstacles, including the costs to entering into new markets, developing and implementing effective marketing efforts abroad, and maintaining attractive foreign exchange ratios. We cannot assure you that we will be able to successfully overcome such obstacles and establish our products in any additional markets. Our inability to successfully implement our organic growth strategy may have a negative impact on our growth strategy, our future financial condition,
results of operations and cash flows.
We cannot assure you that our acquisition growth strategy will be successful.
In addition to our organic growth strategy, we also expect to grow through strategic acquisitions. We intend to pursue opportunities to acquire businesses that are complementary or related to our existing product lines or may execute a potential joint venture or acquisition with a silicon mine or other strategic partner. We may not be able to locate suitable acquisition or joint venture candidates at prices that we successfully consider appropriate. If we do identify an appropriate candidate, we may not be able to successfully negotiate the terms of an acquisition, finance the acquisition on terms that are satisfactory to us or if the acquisition occurs successfully, integrate the acquired business into our existing business. Acquisitions of businesses or other material operations may require debt financing or additional equity financing, resulting in leverage or dilution of ownership. Integration of acquired business operations could disrupt our business by diverting management away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. We also may not be able to maintain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits we anticipated when selecting our acquisition candidates. In addition, we may need to record write-downs from future impairments of intangible assets, which could reduce our future reported earnings. At times, acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition which will be required to comply with lawsflows of the
People’s Republicissuer as of, China (“PRC”and for, the periods presented
in this disclosure statement.
08/031/2020
/s/Paul D. Landrew [CEO's Signature]
(Digital Signatures should appear as "/s/ [OFFICER NAME]"),
Principal Financial Officer:
I, Paul D. Landrew certify that:
1. I have reviewed this Annual Disclosure
Statement of Universal Solar Technology,
Inc.
2. Based on my knowledge, this disclosure
statement does not contain any untrue
statement of a material fact or omit to the extent applicable. There can be no assurance that any proposed acquisition will be able to comply with PRC requirements, rules and/or regulations, or that we will successfully obtain governmental approvals to the extent required, which may bestate a
material fact necessary to consummate such acquisitions.
If we are not able to implement our strategies to achieve our business objectives, our business operations and financial performance may be adversely affected.
Our business plan and growth strategy are based on currently prevailing circumstances andmake the
assumption that certain circumstances will or will not occur, as well as the inherent risks and uncertainties involvedstatements made, in various stages of development. However, there is no assurance that we will be successful in implementing our strategies or that our strategies, even if implemented, will lead to the successful achievement of our objectives. If we are not able to successfully implement our strategies, our business operations and financial performance may be adversely affected.
We depend on our key management personnel and the loss of their services could adversely affect our business.
Our business management and operations significantly relied on key personnel’s services. If key personnel terminated their services with the Company, we may have risk of inability to identify qualified suitable personnel to replace them in a timely manner, and therefore, our business could be adversely affected should that occur.
Failure to attract and retain personnel could have an adverse impact on our operations.
Our future success depends on our ability to identify, attract, hire, retain and motivate other well-qualified managerial, technical, sales and marketing personnel. There is intense competition for these individuals, and there can be no assurance that these professionals will be available in the market or that we will be able to meet their compensation requirements.
RISKS RELATED TO OUR BUSINESS
If PV technology is not suitable for widespread adoption, or sufficient demand for PV products does not develop or takes longer to develop than we anticipated, our sales may not continue to increase or may even decline, and we may be unable to sustain profitability.
The PV market is at a relatively early stage of development and the extent to which PV products will be widely adopted is uncertain. Market data in the PV industry are not as readily available as those in other more established industries where trends can be assessed more reliably from data gathered over a longer period of time. If PV technology proves unsuitable for widespread adoption or if demand for PV products fails to develop sufficiently, we may not be able to grow our business or generate sufficient revenues to achieve profitability. In addition, demand for PV products in our targeted markets, including China, may not develop or may develop to a lesser extent than we anticipated. Many factors may affect the viability of widespread adoption of PV technology and demand for PV products, including:
· | availability of government subsidies and incentives to support the development of the PV industry; |
· | cost-effectiveness of PV products compared to conventional and other non-solar energy sources and products; |
· | performance and reliability of PV products compared to conventional and other non-solar energy sources and products; |
· | success of other alternative energy generation technologies, such as fuel cells, wind power and biomass; |
· | fluctuations in economic and market conditions that affect the viability of conventional and non-solar alternative energy sources, such as increases or decreases in the prices of oil, coal, natural gas and other fossil fuels; |
· | cost and availability of credit, loans and other funding mechanisms to finance the installation and maintenance of PV systems. For example, a rise in interest rates would likely render existing financings more expensive and be an obstacle for potential financings that would otherwise spur the growth of the PV industry; |
· | capital expenditures by end users of PV products, which tend to decrease when the economy slows down; and |
· | deregulation of the electric power industry and broader energy industry. |
We potentially face intense competition from other companies producing solar energy and other renewable energy products.
The PV market is intensely competitive and rapidly evolving. According to Photon International’s survey in March 2006, aslight of the
end of 2005, 94 companies in the world produced PV cells and 153 companies produced PV modules. The solar PV industry also saw a boom in silicon production facilities around the world, responding to silicon feedstock shortages of recent years. Solar PV manufacturerscircumstances under which such statements
were signing long-term contracts to ensure a growing supply, and silicon manufacturers are consistently announcing plans to build new plants. By the end of 2007, more than 70 silicon manufacturing facilities were being constructed or planned. (http://www.ren21.net/pdf/RE2007_Global_Status_Report.pdf, Page 19). Many of our potential competitors have established more prominent market positions, and if we fail to attract and retain customers and establish successful distribution networks in our target markets for our products, we will be unable to generate sales. Our competitors include PV divisions of large conglomerates such as Royal Sanyo Group and Sharp Corporation, specialized cell manufacturers such as Q-Cells AG, as well as integrated manufacturers of PV products such as Renewable Energy Corporation and SolarWorld AG. Some of our potential competitors have also become vertically integrated, from upstream silicon wafer manufacturing to PV system integration. We expect to compete with future entrants to the PV market that offer new technological solutions. We may also face competition from semiconductor manufacturers, a few of which have already announced their intention to start production of PV cells. Many of our potential competitors are developing or currently producing products based on new PV technologies, including thin film, ribbon, sheet and nano-technologies, which they believe will ultimately cost the same as or less than crystalline silicon technologies similar to ours. In addition, the entire PV industry also faces competition from conventional and non-solar renewable energy technologies. Due to the relatively high manufacturing costs compared to most other energy sources, solar energy is generallymade, not competitive without government incentive programs.
Most of our potential competitors have substantially greater financial, technical, manufacturing and other resources than we do. Greater size in some cases provides them with a competitive advantagemisleading with respect to
manufacturing costs because of their economies of scalethe period covered by this disclosure
statement; and
their ability to purchase raw materials at lower prices. For example, those companies that also manufacture semiconductors may source both semiconductor grade silicon wafers and solar grade silicon wafers from3. Based on my knowledge, the same supplier. As a result, those companies may have stronger bargaining power with the supplier and have an advantage over us in negotiating favorable pricing, as well as securing silicon ingot and silicon wafer supplies at times of shortages. Many of our potential competitors also have greater brand name recognition, more established distribution networks and larger customer bases. In addition, many of our potential competitors have well-established relationships with our current and potential distributors and have extensive knowledge of our target markets. As a result, they may be able to devote greater resources to the research, development, promotion and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Our failure to adapt to changing market conditions and to compete successfully with existing or new entrants may materially and adversely affect our financial
condition and results of operations. Our failure to develop and introduce new PV products could render our products uncompetitive or obsolete, and reduce our sales and market share.
The PV industry is rapidly evolving and competitive. We will need to invest significant financial resources in research and development to keep pace with technological advances in the PV industry and to effectively compete in the future. However, research and development activities are inherently uncertain, and we might encounter practical difficulties in commercializing our research results. Our significant expenditures on research and development may not reap corresponding benefits. A variety of competing PV technologies that other companies may develop could prove to be more cost-effective and have better performance than our PV products. Therefore, our development efforts may be rendered obsolete by the technological advances of others. Breakthroughs in PV technologies that do not use crystalline silicon could mean that companies such as us that currently rely entirely on crystalline silicon would encounter a sudden, sharp drop in sales. Our failure to develop and introduce new PV products could render our products uncompetitive or obsolete, and result in a decline in our market share.
Intense competition from existing and new entities may adversely affect our revenues and profitability.
We compete with other companies, many of whom are developing, or can be expected to develop, products similar to ours. Some of our competitors are more established than we are, and have significantly greater financial, technical, marketingstatements, and other resources than we presently possess. Some of our competitors have greater name recognition and a larger customer base. These competitors may be able to respond more quickly to newfinancial information
included or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. We intend to create greater brand awareness for our brand name so that we can successfully compete with our competitors. We cannot assure you that we will be able to compete effectively with current or future competitors or thatincorporated by reference in this
disclosure statement, fairly present in all
material respects the competitive pressures we face will not harm our business.
Our dependence on a limited number of customers may cause significant fluctuations or declines in our revenues.
We plan to sell a substantial portion of our wafers and PV modules to a limited number of customers, including distributors, engineering design firms, system integrators, other value-added resellers, as well as integrated manufacturers of PV modules. To date, we have not had any customers or any sales. We plan to conduct our sales to customers typically through non-exclusive, short-term arrangements where the contract prices are typically agreed upon between our customers and us on a quarterly basis, and as such, our actual revenues can vary significantly. We anticipate that our dependence on a limited number of customers would continue for the foreseeable future. Consequently, any one of the following events may cause material fluctuations or declines in our revenues and have a material adverse effect on our results of operations:
· | reduction, delay or cancellation of orders from one or more significant customers; |
· | selection by one or more significant customers of products competitive with ours; |
· | loss of one or more significant customers and our failure to identify additional or replacement customers; and |
· | failure of any significant customers to make timely payment for our products. |
Changes to existing regulations over the utility sector and the PV industry may present technical, regulatory and economic barriers to the purchase and use of PV products, which may significantly reduce demand for our products.
The market for power generation products is heavily influenced by government regulations and policies concerning the electric utility industry, as well as the internal policies of electric utilities companies. These regulations and policies often relate to electricity pricing and technical interconnection of end user-owned power generation. In a number of countries, these regulations and policies are being modified and may continue to be modified. End users’ purchases of alternative energy sources, including PV products, could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for our PV products. For example, utility companies commonly charge fees to larger, industrial customers for disconnecting from the electricity transmission grid or for having the capacity to use power from the electricity transmission grid for back-up purposes. These fees could increase end users’ costs of using our PV products and make our PV products less desirable, thereby having an adverse effect on our business, prospects,financial condition,
results of operations and financial condition.
We anticipate that our PV products and their installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters in various countries. It is also burdensome to track the requirements of individual localities and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to our PV products may result in significant additional expenses to us, our distributors and end users and, as a result, could cause a significant reduction in demand for our PV products.
The reduction or elimination of government subsidies and economic incentives for on-grid solar energy applications could cause demand for our products and our revenues to decline.
Almost all of our solar cells sold are eventually utilized in the on-grid market, where the solar power systems are connected to the utility grid and generate electricity to feed into the grid. We believe that the near-term growthcash flows of the
market for on-grid applications depends in large part on the availabilityissuer as of, and size of government subsidies and economic incentives. The reduction or elimination of subsidies and economic incentives may adversely affect the growth of this market or result in increased price competition, either of which could cause our revenues to decline.
Today, when upfront system costs are factored into cost per kilowatt, the cost of solar power substantially exceeds the cost of power furnished by the electric utility grid in many locations. As a result, national and local governmental bodies in many countries, most notably in Germany, Spain, Italy, the United States and China, have provided subsidies and economic incentives in the form of feed-in tariffs, rebates, tax credits and other incentives to distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependence on other forms of energy. These government economic incentives could potentially be reduced or eliminated altogether. The solar power industry is currently moving towards the economies of scale necessary for solar power to become cost-effective in a non-subsidized market. Reductions in, or eliminations of, subsidies and economic incentives for on-grid solar energy applications could result in decreased demand for our products and cause our revenues to decline.
We may incur significant costs to ensure compliance with U.S. corporate governance and accounting requirements.
We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements and other rules implemented by the Securities and Exchange Commission and the NASDAQ OTCBB. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
We have limited insurance coverage and may incur losses resulting from product liability claims or business interruptions.
If we secure any PV product sales, we would be exposed to risks associated with product liability claims in the event that the use of the PV products sold results in injury. Since our proposed products are electricity producing devices, it is possible that users could be injured or killed by the products, whether by product malfunctions, defects, improper installation or other causes. We have not sold any products and, due to limited historical experience, we are unable to predict whether product liability claims will be brought against us in the future or the effect of any resulting adverse publicity on our business. Moreover, we may have only limited product liability insurance and may not have adequate resources to satisfy a judgment in the event of a successful claim against us. The successful assertion of product liability claims against us could result in potentially significant monetary damages and require us to make significant payments. In addition, as the insurance industry in China is still in an early stage of development, business interruption insurance available in China offers limited coverage compared to that offered in many other countries.
Acts of terrorism, responses to acts of terrorism and acts of war may impact our business and our ability to raise capital.
Future acts of war or terrorism, national or international responses to such acts, and measures taken to prevent such acts may harm our ability to raise capital or our ability to operate, especially to the extent we depend upon activities conducted in foreign countries, such as China. In addition, the threat of future terrorist acts or acts of war may have effects on the general economy or on our business that are difficult to predict. We are not insured against damage or interruption of our business caused by terrorist acts or acts of war.
RISKS RELATED TO DOING BUSINESS IN CHINA
Currency conversion and exchange rate volatility could adversely affect our financial condition.
The PRC government imposes control over the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People's Bank of China publishes an exchange rate, which we refer to as the People’s Bank of China exchange rate, based on the previous day's dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the People’s Bank of China exchange rate according to market conditions. Pursuant to the Foreign Exchange Control Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises, for use on current account items, including the distribution of profits to foreign investors, is permissible. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on recurring international payments and transfers under current account items.
Enterprises in the PRC (including Foreign Investment Enterprises) which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks by providing valid receipts and proofs.
China’s economic policies could affect our business.
To the extent our assets will be located in China and to the extent our revenue will be derived from our operations in China, our results of business and prospects would be subject to the economic, political and legal developments in China.
While China’s economy has experienced a significant growth in the past twenty years, growth has been irregular, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of China, but may also have a negative effect on us. For example, our sales results and financial condition may be adversely affected by the government control over capital investments or changes in tax regulations with our future customers.
The economy of China has been transitioning from a planned economy to a more market-oriented economy. In recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership of productive assets and the establishment of corporate governance in business enterprises; however, a substantial portion of productive assets in China are still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over China's economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
Because our assets and operations might be located in China, you may have difficulty enforcing any civil liabilities against us under the securities and other laws of the U.S. or any state.
We are a holding company, and all of our assets might be located in the Republic of China. In addition, our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon these non-residents, or to enforce against them judgments obtained in United States courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state.
There is uncertainty as to whether courts of the Republic of China would enforce:
l | Judgments of United States courts obtained against us or these non-residents based on the civil liability provisions of the securities laws of the United States or any state; or |
l | In original actions brought in the Republic of China, liabilities against us or non-residents predicated upon the securities laws of the United States or any state. Enforcement of a foreign judgment in the Republic of China also may be limited or otherwise affected by applicable bankruptcy, insolvency, liquidation, arrangement, moratorium or similar laws relating to or affecting creditors' rights generally and will be subject to a statutory limitation of time within which proceedings may be brought. |
The PRC legal system embodies uncertainties, which could limit law enforcement availability.
The PRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedence. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past 33 years has significantly enhanced the protections afforded to various forms of foreign investment in China. Each of our PRC operating subsidiaries and affiliates is subject to PRC laws and regulations. However, these laws and regulations change frequently and the interpretation and enforcement involve uncertainties. For instance, we may have to resort to administrative and court proceedings to enforce the legal protection that we are entitled to by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting statutory and contractual terms, it may be difficult to evaluate the outcome of administrative court proceedings and the level of law enforcement that we would receive in more developed legal systems. Such uncertainties, including the inability to enforce our contracts, could affect our business and operation. In addition, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC legal system, particularly with regard to the industries in which we operate, including the promulgation of new laws. This may include changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the availability of law enforcement, including our ability to enforce our agreements with the government entities and other foreign investors.
Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us or otherwise materially adversely affect us.
In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular 75, which required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for, the purpose of engagingperiods presented
in an equity financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (knownthis disclosure statement.
08/031/2020
/s/Paul D. Landrew [CFO's Signature]
(Digital Signatures should appear as Notice 106), expanded the reach of Circular 75 by (1) purporting"/s/ [OFFICER NAME]")
Notes to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire "control" over domestic companies or assets, even in the absence of legal ownership; (2) adding requirements relating to the source of the PRC resident's funds used to establish or acquire the offshore entity; (i) covering the use of existing offshore entities for offshore financings; (3) purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and (4) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was established, and which acquired a related domestic company or assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006; this date was subsequently extended indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations. Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV’s affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.
We believe our stockholders who are PRC residents as defined in Circular 75 have registered with the relevant branch of SAFE, as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiaries. However, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiaries' ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect stockholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries' ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.
The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and RMB, and between those currencies and other currencies in which our sales may be denominated. For example, if we need to convert U.S. dollars into RMB for our operational needs and the RMB appreciates against the U.S. dollar at that time, our financial position, our business, and the price of our common stock may be harmed. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of declaring dividends on our common stock or for other business purposes and the U.S. dollar appreciates against the RMB, the U.S. dollar equivalent of our earnings from our subsidiaries in China would be reduced.
We may be exposed to liabilities under the foreign corrupt practices act, and any determination that we violated the foreign corrupt practices act could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. We have operations, agreements with third parties and we make sales in China. Our activities in China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents or distributors of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
RISKS RELATED TO CORPORATE AND STOCK MATTERS
Our stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations which may limit a stockholder's ability to buy and sell our stock.
Our stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation.
In addition, Rule 15g-2 requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii)reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
Shares eligible for future sale may adversely affect the market price of our common stock, as the future sale of a substantial amount of our restricted stock in the public marketplace could reduce the price of our common stock.
From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act ("Rule 144"), subject to certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who has satisfied a one-year holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading -volume of the class during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our company that has satisfied a two-year holding period. Any substantial sale of common stock pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse effect on the market price of our securities.
We have a high concentration of stock ownership and control, and a small number of shareholders have the ability to exert significant control in matters requiring shareholder votes and may have interests that conflict with yours.
Our common stock ownership is highly concentrated. See “Principal Shareholders.” As a result, a relatively small number of shareholders, acting together, have the ability to control all matters requiring shareholder approval, including the election of directors and approval of mergers and other significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our company. It could also deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and it may affect the market price of our common stock. In deciding how to vote on such matters, those shareholders’ interests may conflict with yours.
ITEM 1B UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
Our principal executive offices are located at No. 1 Pingbei Road 2, Nanping Science &Universal Solar
Technology, Industrial Park, Zhuhai City, Guangdong Province, the People’s Republic of China 519060. This is the office of our Chairman and CEO, Mr. Wensheng Chen. Our telephone number at our principal executive office is 86-756-8682610.
We are in the process of constructing manufacturing facilities in Nanyang City, Henan Province in China. We currently have two product lines: silicon wafers and PV modules. As ofInc.
Financial Statements (Unaudited)
Year Ending December 31, 2013, five workshops, one office building, one dormitory2019 and one canteen had been completed.
On December 1, 2008, NUST acquired land-use rightsamended
and restated for a piece of land in the size of 71,345.70 square meters for fifty years for RMB 2,886,300 ($422,843). The land-use cost of RMB 2,886,300 ($422,843 converted at the currency exchange rate of US$1 = RMB 6.825 as of December 31, 2009) is being amortized using2018
To correct this material error the
straight line method overCompany amended and restated the
fifty years. On July 27, 2010, the “Certificate of Right of Use of Land” has been issued to NUST, which will expire on July 23, 2060.
We maintain an Internet website at www.ustnevada.com in both Chinesereceivables and English. Information on our website is not part of this report.
ITEM 3. LEGAL PROCEEDINGS
We are currently not involved in any litigation that could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of the Company’s subsidiaries or of the Company's subsidiaries' officers or directors in their capacitiesequity as such, in which an adverse decision could have a material adverse effect.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Prior to August 21, 2009, there was no active market for our securities. On August 21, 2009, our common stock began to be quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “UNSS.” The following table sets forth for the indicated periods, the highfollows:
Receivables
(unaudited)
%
Change
$
(a) 2018 as Reported receivables
22,352,877
0
(b) 2018 as Amended and low bid prices as reported on the OTCBB. The quotations represent inter-dealer prices without retail markup, mark down or commission, and may not necessary represent actual transactions.
2013 | | High | | | Low | |
Q1 | | $ | 0.01 | | | $ | 0.01 | |
Q2 | | $ | 0.01 | | | $ | 0.01 | |
Q3 | | $ | 0.01 | | | $ | 0.01 | |
Q4 | | $ | 0.01 | | | $ | 0.01 | |
| | | | | | |
2012 | | High | | | Low | |
Q1 | | $ | 0.012 | | | $ | 0.012 | |
Q2 | | $ | 0.012 | | | $ | 0.012 | |
Q3 | | $ | 0.012 | | | $ | 0.012 | |
Q4 | | $ | 0.012 | | | $ | 0.012 | |
SHAREHOLDERS OF RECORD
As of March 28, 2014, there were 31 holders of record of our common stock, not including holders who hold their shares in street name.
DIVIDENDS
We have never paid cash dividend on our common stock. We intend to keep future earnings, if any, to finance the expansion of our business, and we do not anticipate that any cash dividend will be paid in the foreseeable future. Our future payment of dividend will depend on our earnings, capital requirements, expansion plans, financial condition, and other relevant factors.
ITEM 6. SELECTED FINANCIAL DATE
Not required for smaller reporting company.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW OF OUR BUSINESS
We primarily manufacture, market and sell silicon wafers to manufacturers of solar cells. In addition, we produce PV modules utilizing solar cells purchased from outside vendors.
Product Line 1 - Silicon Wafers
We produce silicon wafers by extracting purified mono-crystalline silicon from virgin poly-silicon feedstock utilizing mono-crystalline silicon ingot growers. Then we cut the purified mono-crystalline silicon ingots into silicon wafers with multi-wire saws. Silicon wafers are one of the most important components of solar cells.
As of December 31, 2013, we had eleven mono-crystalline silicon ingot growers. Maximum production capacity of each mono-crystalline silicon ingot grower is approximately one ton of mono-crystalline silicon ingots per month. Thus, our current production capacity is approximately 132 tons of mono-crystalline silicon ingots per annum.
We are also equipped with five multi-wire saws, each of which can produce approximately 70 silicon wafers per kilogram of mono-crystalline silicon ingot. Based on an estimated 2.8W per silicon wafer, our current production capacity is approximately 20MW per annum.
During fiscal 2013, due to a significant decrease in the selling price of our products, we were forced to suspend the production of silicon wafer.
Product Line 2 - PV Modules
We have two semi-automatic PV module production lines. Our existing production capacity is approximately 20MW of PV modules per annum. During fiscal 2013, we did not produce commercial quantities of PV modules.
Overview of Properties, Plant and Equipment
We have acquired land-use rights to 71,346 square meters in Henan province, PRC for industrial use. The land use rights expire on July 23, 2060. In 2008, we began construction of our manufacturing facilities on this site. As of December 31, 2013, we completed the construction of five workshops, two out of five are in operation.
As of December 31, 2013 and 2012, net book value of our property, plant and equipment was $2,914,789 and $3,003,289, respectively.
Operations
In fiscal 2013, we did not manufacture silicon wafers. We sold our products from existing inventory to customers primarily located in China.
Due to a significant decrease in demand of solar energy products in China, we were forced to reduce the selling price of our products by approximately 60%. This significant price decrease materially impaired our profitability. During fiscal 2013, we incurred a gross loss of $334,235, representing a gross loss margin of 210%.
During fiscal 2013 and 2012, net cash used in operating activities was $224,376 and $1,289,137, respectively.
In fiscal 2014 we plan to promote our current products’ profitability through reducing cost per unit and increasing selling price of our products. We also plan to expand our market to other countries and/or regions when time is right.
RESULTS OF OPERATIONS
Comparison of Years ended December 31, 2013 to December 31, 2012:
Revenue. Our revenue forrestated receivables
0
(100)
(a) For the year ended December 31, 2013 decreased by $490,541 or 76%2018
receivables as reported in the
Company's Annual Report on the
OTC Disclosure Statement filed on
April 23, 2019.
(b) Amended and restated receivables
value to $159,075, compared to $649,616 for the prior comparable period. The decrease was mainly due to a decreased amount of products sold, resulted from unexpectedly low selling price of our products.
Cost of Sales. Our cost of sales decreased by $861,178 from $1,354,488 forzero based on non-
realization.
Opening
Equity
(unaudited)
%
Change
$
(c) 2018 as Reported opening equity
22,197,377
0
(d) 2018 as Amended and restated opening equity
(155,500)
101
(c) For the year ended December 31, 2012 to $493,310 for the same period in 2013. The decrease in cost of sales was mainly due to a decreased amount of products sold, resulting from a reduction2018
value as reported in the average selling price of our products during fiscal 2013. Gross loss margin increased from 109%Company's
Annual Report on the OTC
Disclosure Statement filed on April
23, 2019.
(d) Amended and restated equity value
to (155,500).
In sum, the Company reduced both
the receivables and equity by $22.4
million in
2012order to 210% in 2013.correct the material accounting
error.
Amended and Restated Effects on
Common Shares
The significant increase of gross loss margin is mainly resulting from a reductionCompany shows the effects on
earnings (loss) per share in the average selling price of our products.
Generaltable that
follows. According to ASC 250-10-50-7
when financial statements are restated to
correct an error, the Company shall
disclose the effect on each financial
statement line item, and Administrative Expenses. Generalany per-share
amounts affect for each prior period
presented.
Loss Per
Common
Share
(unaudited)
%
Change
$
(e) 2018 as Reported net loss
(262,537)
0
(f) 2018 as Amended and administrative expenses consist primarily of salaries and other personnel-related costs, professional fees, etc. General and administrative expenses were $459,513 forrestated loss per share
(0.0004)
0
(e) For the year ended December 31, 20132018
net loss as reported in the
Company's Annual Report on the
OTC Disclosure Statement filed on
April 23, 2019.
(f) Adjusted value based on amendment
and restatement.
To calculate the loss per common
share the Company divided net loss
(262,537) by 600,549,974 the average
weighted outstanding shares.
As a decreaseresult of $250,442 or 35%, comparedthe amendment and
restatement, the Company's 2018
receivables and equity accounts were
materially impacted. At the same time,
there was no impact to $709,955net loss and loss
per common share.
2019 Financial Statements
The Company did not file its
Annual Report on the OTC Disclosure
Statement for the same period in 2012. The decrease was mainly due to tight cash flow status, which resulted in a reduction of operation.
Selling expenses. Selling expenses include salaries of sales personnel, advertising, and other selling expenses. Selling expense for thecalendar year ended
December 31, 2013 and 20122019, ("2019 financial
statements) by the due date. The delay
was $3,548 and $22,400, respectively. The decreased amount of selling expenses was mainly dueattributed to the restraintlength of ourtime taken
to review, amend and restate the
Company's 2018 financial resources.
Impairment loss. At the end of 2012, we determined that we could no longer justify recording the book value of our equipment at its carrying value, since the reductionstatements.
The unaudited 2019 financial states are
included in the average selling price of our products, gross loss from salesthis filing and continuing losses from operation putpresented in question our prior estimation of the anticipated cash flows from the factory. As a
result, we recorded an impairment charge of $3,755,416 on the book value of the equipment. This added that amount to our operating expenses for the year. No impairment loss charged during 2013.
Non-operating Income. Non-operating income includes income generated from sales of scrap, such as worn-out carton boxes and steel wire. Non-operating income for the fiscal year of 2013 and 2012 was $8,829 and $16,132.
Interest expenses. Interest expense increased by $13,259 or 3% from $486,999 in fiscal 2012 to $500,258 in fiscal 2013. The increase in interest expense was mainly due to increased amounts borrowed from related parties.
Net Loss. The net loss decreased by $4,374,785 or 77% from $5,663,510 for the year ended December 31, 2012 to $1,288,725 for 2013. The decrease in net loss is mainly due to the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2013, we had total assets of $5,587,490 and total liabilities of $16,250,596. Cash and cash equivalents at December 31, 2013 were $12,250.
During the year ended December 31, 2013, the net cash used in operations was $224,376 and $1,289,137, for fiscal year ended 2013 and 2012, representing a decrease of $1,064,761 or 83%. The decrease was mainly due to the following: (1) during fiscal 2012, we spent $852,813 building up inventory, compared to decreased inventory of $285,136 for 2013; (2) we used $55,728 to pay accounts payable to our suppliers in fiscal 2012, comparing with $134,505 paid to our suppliers during fiscal 2013; (3) during 2013 and 2012, the Company’s depreciation of property and equipment wewe $194,127 and $644,573, respectively; and (4) during 2013 and 2012, changes of bad debt provision resulted $25,008 cash outflow and $60,614 cash inflow, respectively.
The net cash used in investing activities was $20,840 during the year ended December 31, 2013, which was used to purchase property and equipment. During the same period of 2012, the Company invested $106,508 in acquisition of property and equipment and received $150,572 from government subsidiary on property and equipment.
The net cash provided by financing activities in the fiscal year of 2013 was $105,886, a 92% decrease from $1,353,837 for the year in 2012. This decrease was mainly due to a decrease in advances received from related parties. During fiscal 2013, the Company received $105,886 from related parties, compared to $1,829,328 for the same period of 2012. However, the Company repaid $475,491 to a local financial institution during fiscal 2012.
As of December 31, 2013 and 2012, the Company had a stockholders’ deficiency of $10,663,106 and 9,191,918, respectively. Further, the Company had accumulated deficit of $11,175,906 since inception. The Company’s difficult financial position, continuous losses and low share price and inactive stock trading volume have caused difficulties for raising funds from financial market.
Related Party Loans
| | | | | | | December 31, | |
Related parties | | Maturity date | | Interest rate | | | 2013 | | | 2012 | |
Mr. Wensheng Chen, Chief Executive Officer, Chairman of Board | | December 31, 2016 | | | 3.5% | | | $ | 3,201,752 | | | $ | 3,204,603 | |
Ms. Ling Chen, President | | December 31, 2016 | | | 3.5% | | | | 1,167,964 | | | | 1,134,893 | |
Zhuhai Yuemao Laser Facility Engineering Co., Ltd. (“Yuemao Laser”) | | December 31, 2016 | | | 3.5% | | | | 481,242 | | | | 475,284 | |
Yuemao Science & Technology Group (“Yuemao Technology”) | | December 31, 2016 | | | 3.5% | | | | 9,638,498 | | | | 9,262,609 | |
Total | | | | | | | | | 14,489,456 | | | | 14,077,389 | |
Mr. Wensheng Chen, Chairman and Chief Executive Officer of the Company.
As of December 31, 2013 and 2012, the amount due to Mr. Wensheng Chen was $3,201,752 and $3,204,603, respectively. During fiscal 2013 and 2012, all loans borrowed from Mr. Wensheng Chen bear an interest at the rate of 3.5% per annum, and the Company accrued interest on these loans of $117,773 and $116,775, respectively. Mr. Chen has agreed the Company can pay the accrued interest when the Company’s cash flow allows.
Ms. Ling Chen, President of the Company
During fiscal 2012, Ms. Ling Chen paid various expenses on behalf of the Company, the amount due to Ms. Ling Chen was $1,167,964 and $1,134,893 as of December 31, 2013 and 2012, respectively. During fiscal 2013 and 2012, all loans borrowed from Ms. Ling Chen bear an interest at the rate of 3.5% per annum, and the Company accrued interest on these loans of $40,253 and $29,440, respectively. Ms. Chen has agreed that the Company can pay the accrued interest when its cash flow status allows.
Yuemao Science & Technology Group (“Yuemao Technology”)
Yuemao Technology is a private company established under the laws of the PRC and controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen. As of December 31, 2013 and 2012, the amount due to Yuemao Technology was $9,638,498 and $9,262,609, respectively. During fiscal 2013 and 2012, Yuemao Technology paid various expenses on behalf of the Company and all loans borrowed from Yuemao Technology bear an interest at the rate of 3.5% per annum. The Company accrued interest on these loans of $324,342 and $301,197, respectively. Yuemao Technology has agreed the Company can pay the accrued interest when the Company’s cash flow allows.
Zhuhai Yuemao Laser Facility Engineering Co., Ltd. (“Yuemao Laser”)
Yuemao Laser is a private company established under the laws of the PRC and controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen. As of December 31, 2013 and 2012, the amount due to Yuemao Laser was $481,242 and $475,284, respectively. During fiscal 2013 and 2012, Yuemao Laser paid various expenses on behalf of the Company, and all loans borrowed from Yuemao Laser bear an interest at the rate of 3.5% per annum. The Company accrued interest on these loans of $16,727 and $16,499, respectively. Yuemao Laser has agreed the Company can pay the accrued interest when the Company’s cash flow allows.
Future Cash Requirements
During fiscal 2013, the Company completed the construction of three new workshops, thus NUST has five workshops in total. During fiscal 2014, the Company plans to raise approximately $18 million to complete construction of a solar cell production facility. As a result, the Company expects to require significantly greater capital resources compared to the previous fiscal year.
The Company’s cash requirements can be divided into two categories.
| (1) | Capital demand in daily operations. This includes costs associated with being a public company, including legal fees, audit/review fees and other professional fees; and costs incurred by the Company’s operating subsidiary, including wages, utilities and other operating costs. The Company expects its cash requirements under this category to be approximately $120,000 per month. |
| (2) | Capital demand for the construction of its solar cell production facility or acquiring a company with existing solar cell production capacity. For example, if the Company’s cash flow allows, it plans to invest $18 million in NUST to further expand the Company’s current workshops in order to enable the Company to produce solar cells. |
As of December 31, 2013, the Company does not have sufficient capital to meet its planned expansion. In the short-term, due to low profit margins, the Company does not expect to achieve positive cash flow. In addition, given the Company’s short operating history, it is difficult to predict when the Company would begin to generate sufficient cash to support its operations. Therefore, in the foreseeable future related-parities including the Company’s CEO, Mr. Wensheng Chen and companies that he controls intend to provide financial resources to meet the Company’s daily cash needs, as referred to in categories (1) above. The Company plans to raise funds from domestic and foreign banks and/or financial institutions to increase working capital in order to meet capital demands described in category (2) above.
Going forward, the Company anticipates that it will require an additional $18 million to build new solar cells manufacturing facilities if the Company is able to raise the funds.
Without additional funding, the Company will not be able to pursue its business model. If adequate funds are not available or are not available on acceptable terms when required, we would be required to significantly curtail our operations and would not be able to fund the development of the business envisioned by our business model. These circumstances could have a material adverse effect on our business and result in our ability to continue to operate as a going concern.
CRITICAL ACCOUNTING POLICIES
Basis of presentation
The consolidatedcomparative format.
NOTE 3. GOING CONCERN
UNCERTAINTY
Our unaudited 2019 financial
statements include the accounts of the Company and all of its subsidiaries. All significant inter-company accountsunaudited amended and
transactions have been eliminated. Theserestated 2018 financial statements have
been prepared as a going concern basis
in conformityaccordance with generally accepted
accounting principles generally accepted in the United
StatesStates. The going concern basis assumes
that we will continue in operations for
the next 12 months and will be able to
realize our assets and discharge our
liabilities and commitments in the
normal course of America.business.
Our functional currencylack of revenue, recurring
losses, negative cash flows from
operating activities, stockholders'
deficit, need for additional financing and
the uncertainties surrounding our ability
to obtain such financing raise substantial
doubt about our ability to continue as a
going concern. The Company's
anticipated merger with Entrex will
position the Company to generate
revenue from a more diverse strategic
investment approach. Likewise, we are
in the final stages of negotiations for a
partnership with a waste to energy
company which will position us for
revenue generation within the next 12
months.
The achievement of these goals
is paramount to the mitigation of the
factors described. To fail in completing
these actions will cast substantial doubt
as to our ability to continue as a going
concern for a period of 12 months after
the date our financial statements
included in this Annual Report on OTC
Disclosure Statement are issued. If we
become unable to continue as a going
concern, we may have to liquidate our
assets, and potentially realize
significantly less than the values at
which they are carried on our financial
statements, and the holders of our
securities could lose all or part of their
investment.
NOTE 4. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The Company's unaudited 2019
financial statements and unaudited
amended and restated 2018 financial
statements, were approved by the Board
of Directors on June 19, 2020 and have
been prepared in accordance and
conformity with generally accepted
accounting principles as issued by the
Financial Accounting Standards Board
(FASB) using the accounting policies
described herein.
Basis of Measurement
These financial statements are
presented in US dollars which is the
Chinese Renminbi (RMB); however, the accompanyingfunctional and reporting currency. The
financial statements are prepared on a
historical cost basis. In addition, these
financial statements have been translatedprepared
using the accrual basis of accounting.
Estimates and presented in United States dollars (USD).
Certain amounts included in the 2012 financial statement have been reclassified to conform to the 2013 financial statement presentation.
Uses of estimates in theAssumptions
The preparation of financial statements
The preparation ofthe condensed
financial statements in conformity with
generally accepted accounting
principles, generally accepted in the United States, (“U.S. GAAP”) requires
management to make estimates and
assumptions that affect the reported
amounts of assets and liabilities and
disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
net revenuerevenues and expenses during eachthe
reporting period. The most significant
estimates in the Company's financial
statements relate to fixed assets. Actual
results could differ from those estimates.
Inventories
Inventories are statedUpon consultation, the Company
recognized that while fixed assets were
presented at historical costs, depreciation
was not accumulated. As a result the
lowerCompany adopted the Straight-line
Depreciation Method for fixed assets
with a useful life of cost, determined on the weighted average method, and net realizable value. Work in progress and finished goods are composed of direct material, direct labor and a portion of manufacturing overhead. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to complete and dispose.
Property and equipment
Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight line method for financial reporting purposes, whereas accelerated methods are used for tax purposes.
Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
Research and development costs
Research and development costs are charged to expenses as incurred.
Income Taxes
five years. The
Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
Currency translation
Since the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (”RMB”). Revenue and expense accounts are translated at the average rates during the period, and balance sheet items are translated at year-end rates. Translation adjustments arising from the use of differing exchange rates from period to period are included as a separate component of shareholders’ equity. Gains and losses from foreign currency transactions are recognized in current operations.
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.
Income (loss) per common share
Basic income (loss) per common share amounts are calculated by dividing net income (loss) by weighted-average common stock outstanding during the period. Diluted income (loss) per common share are calculated using weighted-average shares outstanding, adjusted for the dilutive effect of shares issuable upon the assumed exercise of common stock equivalents. As of December 31, 2013 and 2012 there were no common stock equivalents outstanding.
Comprehensive income
Comprehensive income is defined to include all changes in equity except those resulting from investments by shareholders and distributions to shareholders. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation gain, net of tax.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2013, the FASB issued Accounting Standards Update No. 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05), to resolve a diversity in accounting for the cumulative translation adjustment of foreign currency upon derecognition of a foreign subsidiary or group of assets. ASU 2013-05 requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 is effective prospectively for the Company in its first quarter of fiscal 2014, with early adoption permitted. The Company does not expect ASU 2013-05 to have a significant impact on its consolidated results of operations and financial condition.
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)(ASU 2013-11). The amendments in this update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial
statements to reflect accumulated
depreciation for 2017 and 2018
combined as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except tofollows:
Accumulated
Depreciation
(unaudited)
$
(g) 2018 as Reported accumulated depreciation
0
(h) 2018 as prior period adjustment
(11,149)
(g) For the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available atyear ended December 2018
value as reported in the reporting date to settle any additional income taxes that would result from disallowance of a tax position, orCompany's
Annual Report on the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted.OTC
Disclosure Statement filed on April
23, 2019.
(h) The Company does not expect ASU 2013-11 to have a significant impact on its consolidated results of operations and financial condition.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The full text of our audited financial statements as of December 31, 2013 and 2012 begins on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as definedrecorded $27,871 in
SEC Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Annual Report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management including our CEO and CFO, to allow timely decisions regarding required disclosures. Based on their evaluation, our CEO and CFO have concluded that, as of December 31, 2013, our disclosure controls and procedures were not effective.
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published consolidated financial statements. Internal control over financial reporting is promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.
Our management has conducted, with the participation of our CEO and CFO, an assessment, including testing of the effectiveness, of our internal control over financial reporting as of December 31, 2012. Management’s assessment of internal control over financial reporting was conducted using the criteria in Internal Control over Financial Reporting - Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on such evaluation, management identified deficiencies that were determined to be a material weakness.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because of the material weakness described below, management concluded that our internal control over financial reporting was ineffective as of December 31, 2013.
The specific material weakness identified by the Company’s management as of December 31, 2013 is described as follows:
· | The current staff in the accounting department are inexperienced in U.S. GAAP and they were primarily engaged in ensuring compliance with PRC accounting and reporting requirements. Since our operating subsidiaries are based in China, and in accordance to PRC laws and regulations, they are required to apply PRC GAAP, rather than U.S. GAAP. Our internal accounting staff need substantial training in US GAAP in order to fully meet the requirements as a U.S. public company. The accounting skills and understanding necessary to fulfill the requirements of U.S. GAAP-based reporting, including the preparation of financial statements and consolidation, are inadequate. The Company did not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of U.S. GAAP commensurate with the Company’s financial reporting requirements, which was determined to be a material weakness. |
· | The Company lacks qualified resources to perform the internal audit functions properly. In addition, the scope and effectiveness of the Company’s internal audit function are yet to be developed. |
· | We currently do not have an audit committee. |
Remediation Initiative
· | We are committed to identifying and hiring personnel with accounting knowledge and experience to fulfill the requirements of U.S. GAAP-based reporting including the preparation of financial statements and consolidation. |
· | We are committed to establishing the internal audit functions but due to limited qualified resources in the region, we were not able to hire sufficient internal audit resources before the end of 2013. However, internally we established a central management center to recruit more senior qualified people in order to improve our internal control procedures. Externally, we are looking forward to engage an accounting firm to assist the Company in improving the Company’s internal control system based on COSO Framework. In the future, we also will increase our efforts to hire the qualified resources. |
· | We intend to establish an audit committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. |
Conclusion
The Company does not have adequate staffing and supervision within the bookkeeping and accounting operations of our Company. The relatively small number of employees who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.
As we are not aware of any instance in which the company failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, we determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use of our resources at this time and not in the interest of shareholders.
Despite the material weakness and deficiencies reported above, the Company’s management believes that its consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations, and cash flowsfixed assets for the periods presented and that this report does not contain any untrue statement of a material fact or omit a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal year ended
December 31, 2013 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
MANAGEMENT AND BOARD OF DIRECTORS
The following table sets forth the names2018 and ages of our current directorsDecember
31, 2017.
Accumulated depreciation
adjustment was calculated as: $27,871
divided by 5 years equals $5,574.
However, since depreciation was not
recorded in 2017 and executive officers, their principal offices and positions and the date each such person became a director or executive officer of our company. Our executive officers are elected annually by the Board of Directors. Our directors serve one year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. In addition, there were no arrangements or understanding between any executive officer and any other person pursuant to which any person was selected as2018 an
executive officer. Currently, directors are not compensated for serving on the Board of Directors. We have not established compensation or executive committees. Currently, our entire board of directors serves as our audit committee. Because of the small size of the Company and the risk attendant to a small public company, we are currently unable to attract an audit committee financial expert to our Board of Directors. None of our directors are independent within the meaning set forthadjustment in the rulesamount of NASDAQ as currently in effect.
Name | | Age | | Position | | Date of
Appointment
|
Wensheng Chen | | 81 | | Chief Executive Officer and Chairman of the Board | | July 25, 2007 |
Ling Chen | | 50 | | President, Treasurer, Secretary and Board Director | | July 25, 2007 |
Weilei Lv | | 29 | | Chief Financial Officer | | December 29, 2011 |
BIOGRAPHIES OF OFFICERS AND DIRECTORS
Wensheng Chen, Chief Executive Officer & Chairman of the Board
Mr. Wensheng Chen is the founder of Universal Solar$11,149
was recorded.
The adoption and currently serves as the Company’s Chief Executive Officer and Chairman. On December 28, 2010, our Board of Directors appointed Mr. Wensheng Chen as Interim Acting Chief Financial Officer of the Company and he served in that capacity until March 28, 2011.
Mr. Chen has over 40 years executive experience in technology manufacturing, sales, and product innovation. He is also the Founder and a current Board Member of Yuemao Laser which supplies laser scribing, cutting, welding, and grooving to solar cell and modules manufacturers such as SunTech Power Holdings. Mr. Chen worked as manager and executive at Shenyang Liming Machine Making Company from 1958 to 1984. In 1984 he founded a trading company in Beijing. In 1999, Mr. Chen established Yuemao Laser in Zhuhai City. He studied at Liaoning University and majored in TV Broadcasting from 1964 to 1967. In 1967 he continued his education by majoring in politics and philosophy. As the founder of the Company, Mr. Chen has a wealth of experience in running businesses in China, which has given him broad management expertise and a knowledge and understanding of business issues in China.
Ling Chen, President and Director
Ms. Ling Chen currently serves as the President, Treasurer, Secretary and member of the Board of Directors of Universal Solar.
Ms. Ling Chen has over twenty-five years of business consulting and advisory experience. She is the daughter of Mr. Wensheng Chen and has been a shareholder and advisor to Yuemao Laser since 1999. Ms. Ling Chen held various management positions with Shenyang Associates, a retail shopping mall company from October 1982 to November 1990. From November 1991 to 1997 she held various positions with Shenyang Shopping Mall. Ms. Chen’s experience of exploring new markets in China enables her to provide the Board with an understanding of the operation of the Chinese markets.
Mr. Weilei Lv, Chief Financial Officer
Mr. Weilei Lv, age 27, has served since December 2009 as Vice General Manager of Nanyang Universal Solar Technology Co., Ltd. (“NUST”), the Company’s wholly owned subsidiary. As the Vice General Manager of NUST, Mr. Lv was responsible (after the General Manager)adjustment for
the company’s day to day operations, including purchasing, production, sales and administrative and financial operations. Prior to joining NUST from August 2008 to November 2009 Mr. Weilei Lv was the administrative assistant to the CEO of Zhuhai Yuemao Laser Facility Engineering Co., Ltd. Mr. Weilei Lv graduated from Nanchang Institute of Technology in July 2008. Mr. Lv’s extensive knowledge of solar energy and experience in marketing enables him to provide the Board with insights of solar energy industry that the Company is operating in.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our articles of incorporation limit the liability of directors to the maximum extent permitted by Nevada law. This limitation of liability is subject to exceptions including intentional misconduct, obtaining an improper personal benefit and abdication or reckless disregard of director duties. Our articles of incorporation and bylaws provide that we may indemnify its directors, officer, employees and other agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the bylaws would permit indemnification. We currently do not have such an insurance policy.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Director Compensation
Currently, the Company’s Board of Directors does not include any independent members and the Company does not compensate any member for his or her service on the Company's Board.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires executive officers and directors and persons who own more than 10% of a registered class of equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities on forms 3, 4 and 5 respectively. We dodepreciation did not have a class of securities registered undermaterial
effect on net loss, the Securities Exchange Act of 1934. As a result, our officers and directors and 10% shareholders are not subjectprior period
adjustment to the reporting requirements of Section 16(a).
ITEM 11. EXECUTIVE COMPENSATION
Mr. Wensheng Chen received no compensationretained earnings
account was follows:
Retained
Earnings
(unaudited)
%
Change
$
(i) 2018 as Chief Executive Officer during fiscal 2013 and 2012.
Mr. Weilei Lv received a salary of RMB 10,000 per month (approximately $1,600) during years ended December 31, 2013 and 2012. Mr. Lv is also entitled to a three (3) month severance package of salary and benefits if his employment is terminated without cause orReported retained earnings
(243,263)
0
(j) 2018 as prior period adjustment
(254,412)
(5)
(i) Retained earnings as reported in
the event of a merger, sale of assets, or dissolution of the Company.
Ms. Ling Chen served as President, Treasurer and Secretary and received no compensation2018.
(j) Retained earnings prior period
adjustment for accumulated
depreciation for the years ended
December 31, 20132018 and 2012.
No other executive officer earned more than $100,000 during 2013 or 2012.
Option exercises and vested stock
None of our executive officers exercised any options or vested in any restricted stock in 2013.
Outstanding equity awards
None of our executive officers has any outstanding options, unvested stock or equity incentive plan awards.
Employment Agreements; Termination of Employment and Change of Control Arrangements
On December
29, 2011, our Board of Directors appointed Weilei Lv as Chief Financial Officer.
On April 14, 2014,31, 2017.
Advertising Expense
In accordance with ASC 720-35-
05-1, the Company extended its employmentexpensed advertising
costs as they were incurred.
Contractors Expense
The Company recorded
administrative support and third-party
vendors in this account.
Dues and Subscription Expenses
The Company recorded fees
associated with OTC Markets,
professional publications, software
services in this account.
Other Business Expenses
The Company recorded non-
capitalized equipment, office supplies,
reimbursements, bank charges, postage,
printing services and utilities in this
account.
Lease Expense & Accrued Lease
Liability
On January 1, 2019, we adopted
Accounting Standards Update ("ASU")
No. 2016-02, Leases, as amended
by ASU 2018-10, Codification
Improvements to Topic 842, ASU 2018-
11, Targeted Improvements, and 2019-
01, Codification Improvements. These
ASUs required the recognition of lease
assets and lease liabilities for virtually
all leases and required disclosure of key
information about leasing
arrangements. We elected to adopt these
new standards prospectively.
The Company had a two-year sub-
lease agreement with Mr. Weilei Lv for two years, whicha company that had
surplus space. The lease began March
2017 and ended March 2019. The
monthly payments were $3,200 per
month. Upon inquiry, the Company
will pay Mr. Lv a salarydisclosed that while it paid $58,460 for
leasing, there was an outstanding
balance of RMB 10,000 per month (approximately $1,600). Mr. Lv$18,340 ("outstanding
balance") which is also entitledpayable by December
31, 2020. Of the outstanding balance,
$9,600 is attributable to a three (3) month severance package of salary2019, and
benefits if his employment$8,740 is terminated without cause or inattributed to 2018.
In 2018, the event of a merger, sale of assets, or dissolution ofCompany did not
properly expense and accrue for the
Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding beneficial ownership of common stock as of March 28, 2014 by each of our directors, each of our named executive officers; all executive officers and directors as a group and each person who is known by us to beneficially own more than 5% of our outstanding common stock. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares of Common Stock, exceptlease liability applicable to the extent that authority is shared by spouses under applicable law,period.
With the adoption of ASU 2018-10 and
(ii) record and beneficial ownership with respect to their shares of stock. The percentage of beneficial ownership is based upon 22,599,974 shares of Common Stock outstanding as of March 28, 2014. Unless otherwise identified, the address of the directors, officers ofcorrect this accounting error, the
Company listed above is the company’s principal business address.
Name | Position Held | | Shares Owned | | | % Owned | |
Officers and Directors | | | | | | | |
Wensheng Chen | Chief Executive Office and Chairman of the Board | | | 15,000,000 | (1) | | | 66.4 | % |
Ling Chen | President | | | 193,233 | (2) | | | * | % |
Weilei Lv | Chief Financial Officer | | | - | | | | - | |
| All executive officers and directors as a group (3 persons) | | | 15,193,233 | | | | 67.2 | % |
5% Shareholder | | | | | | | | | |
Hui Chen | | | | 5,000,000 | | | | 22.1 | % |
* Less than 1%.
(1) Includes 5,000,000 shares held by Yumin Liu, Mr. Chen’s wife.
(2) Shares are held by Xiaodong Wu, Ms. Chen’s husband.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Founders of Universal Solarrecorded expenses and
Kuong U were previously engagedaccrued lease liability for 2018 as
follows:
L
e
a
s
e
E
x
p
e
n
s
e
(
u
n
a
u
d
i
t
e
d
)
%
C
h
a
n
g
e
$
(k) 2018 as
Reported
lease
expense
2
6
,
2
0
0
0
(l) 2018 as
prior
period
adjustment
8
,
7
4
0
3
3
(k) Rent and Lease Expense as reported
in developing PV modules and PV applications through the solar energy department at Yuemao Laser. Yuemao Laser's parent company is Yuemao Science & Technology Group (“Yuemao Technology”). Yuemao Technology’s shareholders are our Chairman and largest shareholder, Mr. Wensheng Chen with 50% ownership, Ms. Hui Chen 25% ownership, and Ms. Ling Chen 25% ownership. Hui Chen and Ling Chen (our President and member of the Board) are daughters of Wensheng Chen (our Chairman of the Board and Chief Executive Officer).
Mr. Wensheng Chen, Chairman and Chief Executive Officer of the Company.
As of December 31, 2013 and 2012,2018.
(l) Retained earnings prior period
adjustment for lease expense $8,740
the amount due to Mr. Wensheng Chen was $3,201,752 and $3,204,603, respectively. During fiscal 2013 and 2012, all loans borrowed from Mr. Wensheng Chen bear an interest at the rate of 3.5% per annum, and the Company accrued interest on these loans of $117,773 and $116,775, respectively. Mr. Chen has agreed the Company can pay the accrued interest when the Company’s cash flow allows.
Ms. Ling Chen, President of the Company
During fiscal 2012, Ms. Ling Chen paid various expenses on behalf of the Company, the amount due to Ms. Ling Chen was $1,167,964 and $1,134,893 as of December 31, 2013 and 2012, respectively. During fiscal 2013 and 2012, all loans borrowed from Ms. Ling Chen bear an interest at the rate of 3.5% per annum, and the Company accrued interest on these loans of $40,253 and $29,440, respectively. Ms. Chen has agreed that the Company can pay the accrued interest when its cash flow status allows.
Yuemao Science & Technology Group (“Yuemao Technology”)
Yuemao Technology is a private company established under the laws of the PRC and controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen. As of December 31, 2013 and 2012, the amount due to Yuemao Technology was $9,638,498 and $9,262,609, respectively. During fiscal 2013 and 2012, Yuemao Technology paid various expenses on behalf of the Company and all loans borrowed from Yuemao Technology bear an interest at the rate of 3.5% per annum. The Company accrued interest on these loans of $324,342 and $301,197, respectively. Yuemao Technology has agreed the Company can pay the accrued interest when the Company’s cash flow allows.
Zhuhai Yuemao Laser Facility Engineering Co., Ltd. (“Yuemao Laser”)
Yuemao Laser is a private company established under the laws of the PRC and controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen. As of December 31, 2013 and 2012, the amount due to Yuemao Laser was $481,242 and $475,284, respectively. During fiscal 2013 and 2012, Yuemao Laser paid various expenses on behalf of the Company, and all loans borrowed from Yuemao Laser bear an interest at the rate of 3.5% per annum. The Company accrued interest on these loans of $16,727 and $16,499, respectively. Yuemao Laser has agreed the Company can pay the accrued interest when the Company’s cash flow allows.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDITOR FEES AND SERVICES IN OUR 2013 AND 2012 FISCAL YEARS
Our registered independent public accounting firm is Paritz & Company, P.A. The fees billed by Paritz & Company, P.A. in 2013 and 2012 are as follows:
| | 2013 | | | 2012 | |
Audit Fees | | $ | 29,000 | | | $ | 29,000 | |
Audit-Related Fees | | | - | | | | - | |
Total Audit and Audit-Related Fees | | $ | 29,000 | | | $ | 29,000 | |
Tax Fees | | | 1,350 | | | | 1,350 | |
All Other Fees | | | - | | | $ | - | |
Total for independent public audit firms | | $ | 30,350 | | | $ | 30,350 | |
Audit Fees consist of fees billed for professional services rendered for the audit of the Company’s consolidated annual financial statements, and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Paritz & Company, P.A. in connection with statutory and regulatory filings or engagements.
AUDIT-RELATED FEES
Audit-Related Fees include accounting consultations related to accounting, financial reporting or disclosure matters not classified as “Audit Fees.”
TAX FEES
Tax Fees include tax compliance, tax advice and tax planning services. These services related to the preparation of various state and federal tax returns and review of Section 409A compliance.
ALL OTHER FEES
We incurred no other fees for the 2013 and 2012 fiscal years.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS
Since we did not have a formal audit committee, our board of directors served as our audit committee. We have not adopted pre-approval policies and procedures with respect to our accountants in fiscal 2013. All of the services provided and fees charged by our independent registered accounting firms in fiscal 2012 were approved by the board of directors.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
Set forth below is a list of our audited financial statements included in Item 8 of this annual report on Form 10-K.
Statement | | Page* |
| | |
Index to Financial Statements | | 44 |
| | |
Report of Independent Registered Public Accounting Firm | | F-1 |
| | |
Consolidated Balance Sheets | | F-2 |
| | |
Consolidated Statements of Comprehensive Loss | | F-3 |
| | |
Consolidated Statement of Changes in Stockholder’s Deficiency | | F-4 |
| | |
Consolidated Statements of Cash Flows | | F-5 |
| | |
Notes to Financial Statements | | F-6 |
*Page F-1 follows page 44 to this annual report on Form 10-K. | | |
(2) Financial Statement Schedules
Schedule I: Parent Only Financial Statements (page S-1)
(b) Index to Exhibits required by Item 601 of Regulation S-K.
Exhibit No. | | Description |
3.1 | | Articles of Incorporation(1) |
3.2 | | Bylaws of the Company(1) |
10.1 | | Agreement between Kuong U Science & Technology (Group) Ltd. and the Arizona Board of Regents on behalf of Arizona State University(1) |
10.2 | | Prototype Product Development Agreement between Kuong U Science & Technology (Group) Ltd. and Zhuhai Yuemao Laser Facility Engineering Co., Ltd.(1) |
10.3 | | Land Purchase Agreement dated December 1, 2008(2) |
10.4 | | Sales contracts by and between the Company and Kotak Urja Private Limited dated February 26, 2009(3) |
10.5 | | Loan Agreement dated December 1, 2009 by and between Nanyang Universal Solar Technology Co., Ltd. and Zhuhai Yuemao Laser Facility Engineering Co., Ltd.(3) |
10.6 | | Form of Sales Contract dated June 18, 2010 (English Version) (4) |
10.7 | | Employment Agreement, dated March 28, 2011, between Universal Solar Technology Inc. and Xin Ma. (5) |
10.8 | | Letter of Confirmation of Interest of Related Party Loans (6) |
10.9 | | Letter of Confirmation of Interest of Related Party Loans (6) |
10.10 | | Fengcheng Hong Yu Industrial Development and Investment Co. Loan Agreement (7) |
10.11 | | Employment Agreement, dated December 29, 2011, between Universal Solar Technology, Inc. and Weilei Lv. (8) |
10.12 | | Letter of Confirmation of Related Party Loans (9) |
10.13 | | Letter of Confirmation of Related Party Loans (10) |
10.14* | | Employment Agreement, dated April 14, 2014, between Universal Solar Technology, Inc. and Weilei Lv. |
21.1 | | List of Subsidiaries (11) |
31.1* | | Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended* |
31.2* | | Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended* |
32.1* | | Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive Officer)* |
32.2* | | Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial Officer)* |
*Filed herewith
(1) Filed as an exhibit to the Company’s Registration Statement on Form S-1 on May 9, 2008.
(2) Filed as an exhibit to the Company’s Annual Report on Form 10-K on March 31, 2010.
(3) Filed as an exhibit to the Company’s Annual Report on Form 10-K/A on December 30, 2010.
(4) Filed as an exhibit to the Current Report on Form 8-K on June 23, 2010.
(5) Filed as an exhibit to the Current Report on Form 8-K on March 28, 2011.
(6) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q on May 6, 2011.
(7) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q on August 12, 2011.
(8) Filed as an exhibit to the Current Report on Form 8-K on December 30, 2011.
(9) Filed as an exhibit to the Company’s Annual Report on Form 10-K on March 28, 2013.
(10) Filed as an exhibit to the Company’s Annual Report on Form 10-K on March 28, 2013.
(11) Filed as an exhibit to the Company’s Annual Report on Form 10-K on March 30, 2011.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: April 14, 2014
Universal Solar Technology, Inc. |
| |
By | /s/ Wensheng Chen |
| Wensheng Chen |
| Chief Executive Officer, Chairman of the Board of Directors |
| (Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE | | TITLE | | |
| | | | |
By | /s/ Wensheng Chen | | Chief Executive Officer, Chairman of the
Board of Directors
| | April 14, 2014 |
Wensheng Chen | | (Principal Executive Officer) | | |
| | | | |
By | /s/ Weilei Lv | | Chief Financial Officer | | |
Weilei Lv | | (Principal Financial and Accounting Officer) | | April 14, 2014 |
| | | | |
By | /s/ Ling Chen | | Director | | April 14, 2014 |
Ling Chen | | | | |