UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM _______ to _______
COMMISSION FILE NUMBER 000-21571
SES SOLAR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware | 33-0860242 |
| (STATE OR OTHER JURISDICTION OF | (IRS EMPLOYER |
| INCORPORATION OR ORGANIZATION) | IDENTIFICATION NUMBER) |
129, route de Saint-Julien, 1228 Plan-les-Ouates, Geneva, Switzerland
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
+41-22-884-1484
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
The number of shares outstanding of each of the issuer's classes of stock as of May 15, 2008 is 73,081,168 shares of common stock, par value $.001 per share.
TABLE OF CONTENTS
SES SOLAR INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in $, except per share amounts)
| | March 31st 2008 | | December 31st 2007 | |
| | | (unaudited) | | | |
ASSETS (in $) | | | | | |
| Current Assets: | | | | | |
| Cash and cash equivalents | | | 3,399,369 | | | 3,429,033 | |
| Receivables, net of allowance for doubtful accounts of $0 for the periods ended 2008 and 2007 | | | 105,487 | | | 47,356 | |
| Due from related party | | | 96,136 | | | 84,938 | |
| Inventory | | | 307,627 | | | 271,794 | |
| Other current assets | | | 785,149 | | | 639,763 | |
Total current assets | | | 4,693,768 | | | 4,472,884 | |
| Long-Term Assets: | | | | | | | |
| Deferred expense | | | 120,000 | | | 180,000 | |
| Advance payments for machinery | | | 425,273 | | | 396,432 | |
Total other long-term assets | | | 545,273 | | | 576,432 | |
| Property and Equipment, at cost, | | | 497,715 | | | 437,493 | |
| Solar Plant | | | 4,284,593 | | | 3,785,521 | |
| Building construction | | | 6,495,759 | | | 5,398,153 | |
| Less accumulated depreciation and amortization | | | (455,281 | ) | | (339,014 | ) |
Total fixed assets | | | 10,822,786 | | | 9,282,153 | |
Total long-term assets | | | 11,368,059 | | | 9,858,585 | |
| | | | | | | | |
Total assets | | | 16,061,827 | | | 14,331,469 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | | | | |
| Current Liabilities: | | | | | | | |
| Short-term loan | | | 7,423,796 | | | 6,147,728 | |
| Accounts payable | | | 609,114 | | | 3,711,775 | |
| Billings in excess of cost and estimated earnings | | | 562,985 | | | 507,044 | |
Total current liabilities | | | 8,595,895 | | | 10,366,547 | |
| Long-Term Liabilities: | | | | | | | |
| Loan payable | | | 0 | | | 0 | |
| Construction loan | | | 4,073,801 | | | 7,563 | |
Total long-term liabilities | | | 4,073,801 | | | 7,563 | |
| Stockholders' Equity: | | | | | | | |
| Common stock, $0.001 par value; | | | 73,081 | | | 73,081 | |
| 100,000,000 shares authorized; | | | | | | | |
| 73,081,168 shares issued and outstanding | | | | | | | |
| Additional paid-in capital | | | 8,050,093 | | | 8,050,093 | |
| Accumulated other comprehensive income (loss) | | | | | | | |
| Translation adjustment | | | (748,150 | ) | | (395,447 | ) |
| Year end accumulated deficit | | | (3,982,893 | ) | | (3,770,368 | ) |
Total stockholders' equity (deficit) | | | 3,392,131 | | | 3,957,359 | |
| | | | | | | | |
Total Liabilities and Stockholders' Equity | | | 16,061,827 | | | 14,331,469 | |
See accompanying summary of accounting policies and the notes to the financial statements.
SES SOLAR INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in $, except per share amounts)
| | | Three Months Ended March 31 | |
| | | 2008 | | 2007 | |
| | | (unaudited) | | (unaudited) | |
| Revenue: | | | | | |
| Revenue | | | 83,138 | | | 0 | |
| | | | | | | | |
| Cost of goods sold (exclusive of depreciation shown separately below) | | | 0 | | | 0 | |
| Costs and Expenses: | | | | | | | |
| Personnel | | | 138,427 | | | 85,385 | |
| Rent and Leases Expenses | | | 36,751 | | | 32,770 | |
| Research and Development | | | 152,832 | | | 110,473 | |
| Other general and administrative | | | 201,042 | | | 190,625 | |
| Depreciation and amortization | | | 66,656 | | | 12,596 | |
| Total costs and expenses | | | 595,708 | | | 431,849 | |
| Other Income and Expense: | | | | | | | |
| Interest expense | | | (118,143 | ) | | (12,969 | ) |
| Interest income | | | 22,645 | | | 48,500 | |
| Foreign Exchange Gain | | �� | 395,543 | | | 4,701 | |
| Total Other Income | | | 300,045 | | | 40,232 | |
| Loss before taxes | | | (212,525 | ) | | (391,617 | ) |
| Income taxes | | | 0 | | | 0 | |
| Net Loss | | | (212,525 | ) | | (391,617 | ) |
| Other Comprehensive Loss/Income: | | | | | | | |
| Translation adjustment | | | (352,703 | ) | | (3,716 | ) |
| Comprehensive loss | | | (565,228 | ) | | (395,334 | ) |
| | | | | | | | |
| Basic and diluted Weighted Average Shares | | | 73,081,168 | | | 48,937,761 | |
| | | | | | | | |
| Basic and diluted Net Loss Per Share | | | (0.003 | ) | | (0.008 | ) |
See accompanying summary of accounting policies and the notes to the financial statements.
SES SOLAR INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in $, except per share amounts)
| | | Three Months Ended March 31, | |
| | | 2008 | | 2007 | |
| | | (unaudited) | | (unaudited) | |
| Cash Flows from Operating Activities: | | | | | |
| Net loss | | | (212,525 | ) | | (391,617 | ) |
| Adjustments to reconcile net loss to cash used in operating activities: | | | | | | | |
| Depreciation and amortization | | | 66,656 | | | 12,596 | |
| | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | |
| (Increase) decrease in: | | | | | | | |
| Receivables, including Due from Related Party | | | (48,324 | ) | | 0 | |
| Inventory | | | 0 | | | 0 | |
| Other current assets | | | (57,370 | ) | | 4,222 | |
| Deferred Expenses | | | 60,000 | | | 60,000 | |
| Increase (decrease) in: | | | | | | | |
| Accounts payable and accrued expenses | | | 90,162 | | | (125,808 | ) |
| Billings in excess of cost and estimated earnings | | | (10,157 | ) | | (93,381 | ) |
Net cash used in operating activities | | | (111,558 | ) | | (533,988 | ) |
| | | | | | | | |
| Cash Flows from Investing Activities: | | | | | | | |
| Property, plants and equipment | | | (3,772,295 | ) | | (163,716 | ) |
| Advance payments for machinery | | | 0 | | | (58,706 | ) |
Net cash used in investing activities | | | (3,772,295 | ) | | (222,422 | ) |
| | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | |
| Repayment/Proceed of loans | | | 3,785,988 | | | 0 | |
| Bank loan | | | 433,590 | | | 0 | |
Net cash provided by financing activities | | | 4,219,578 | | | 0 | |
| | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | | 335,725 | | | (756,410 | ) |
| Effect of exchange rate changes on cash | | | (365,389 | ) | | (8,116 | ) |
| Cash and cash equivalents, beginning of the quarter | | | 3,429,033 | | | 6,016,666 | |
| Cash and cash equivalents, end of the quarter | | | 3,399,369 | | | 5,252,140 | |
| Supplemental cash flow information | | | | | | | |
| Cash paid for interest | | | 118,143 | | | 12,969 | |
| Supplemental disclosure of non-cash operating and investing activities | | | | | | | |
| Non cash transaction, Property, plants and equipment in account payable | | | 144,970 | | | 0 | |
See accompanying summary of accounting policies and the notes to the financial statements.
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Nature of Operations
Organization - SES SOLAR INC. (the “Company”, “SES USA”, “our”, “we” and “us”) is the result of a reverse acquisition accomplished on September 27, 2006 between SES USA, a Delaware company, which had no operations and net assets of $39,069, and Société d’Energie Solaire SA (“SES Switzerland”), a Swiss company. SES USA acquired all of the outstanding shares of SES Switzerland. For accounting purposes, the acquisition has been treated as a recapitalization of SES Switzerland with SES Switzerland as the acquirer (reverse acquisition). SES Switzerland acquired 10,668,000 of SES USA in the transaction. The historical financial statements prior to September 27 are those of SES Switzerland. The reverse acquisition resulted in a change of control of SES USA, with the former stockholders of SES Switzerland owning approximately 70% of SES USA and SES Switzerland becoming SES USA’s wholly owned subsidiary.
SES Switzerland was formed in 2001 for the purpose of researching, developing, manufacturing and selling innovative products to the solar photovoltaic market. From its inception, SES Switzerland has focused primarily on manufacturing and installing silicon photovoltaic solar cells panels. The principal source of revenue for the Company has been the sale of photovoltaic panels in turn-key installations, manufactured in house or purchased from subcontractors, to electric companies, local governmental agencies and private house owners.
2. Plan of Operations
SES Switzerland has experienced losses from operations and anticipates incurring losses in the near future. SES Switzerland has, however, developed and patented a new assembly technology for solar panels, which allow higher quality electrical contacts, better performance and reduced manufacturing costs resulting from the increased automation processes.
SES Switzerland’s current business plan includes the development of a new assembly line based on its proprietary technology and the construction of a manufacturing facility in the suburbs of Geneva, Switzerland to produce solar panels or modules and solar tiles at a lower cost. These activities require the Company to design and manufacture prototype panels, have them approved in accordance with European and other standards, manufacture in series and sell them in the main markets for solar photovoltaic cells. Costs incurred in manufacturing prototype panels have been expensed as research and development costs.
SES USA does not believe that it can achieve profitability until development, implementation, and commercialization of new products manufactured through the new assembling process are operational.
3. Basis of Presentation
The consolidated interim financial statements included herein are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The consolidated interim financial statements include the accounts of the Company and its wholly owned subsidiary, SES Switzerland. All significant inter-company accounts and transactions have been eliminated in consolidation.
These statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for fair presentation of the information contained herein. These consolidated interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. The Company adheres to the same accounting policies in preparation of its interim financial statements. As permitted under generally accepted accounting principles, interim accounting for certain expenses, including income taxes, are based on full year assumptions. Such amounts are expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon estimated annual income tax rates.
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, SES Switzerland. All significant inter-company accounts and transactions have been eliminated in the consolidation.
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures of the Company. Although these estimates are based on management’s knowledge of current events and actions that the Company may undertake in the future, actual results may differ from such estimates.
Foreign Currency Translation—The reporting currency of SES USA is the U.S. dollar whereas SES Switzerland’s functional currency is the Swiss Franc (CHF). The financial statements of SES Switzerland are translated to U.S. dollar equivalents under the current method in accordance with SFAS No. 52, “Foreign Currency Translation.” Assets and liabilities are translated into U.S. dollar equivalents at rates of exchange in effect at the balance sheet date. Average rates for the year are used to translate revenues and expenses. The cumulative translation adjustment is reported as a component of accumulated other comprehensive income (loss). Foreign currency differences from intercompany receivables and payables are recorded as Foreign Exchange Gains/Losses in the Statement of Operations.
The exchange rates used for translating the financial statements are listed below:
| Average Rates | | 2008 | | 2007 |
| | | CHF | | CHF |
| $ | | | 1.06789 | | | 1.23311 |
| | | 2008 | | 2007 |
| Balance Sheet period-end rates | | CHF | | CHF |
| $ | | | 0.99454 | | | 1.12566 |
Loss Per Share—Loss per share is presented in accordance with the provisions of SFAS No. 128, “Earnings Per Share”. Basic earnings per share does not include the effects of potentially dilutive stock options and is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share reflects, in periods in which they have a dilutive effect, commitments to issue common stock and common stock issuable upon exercise of stock options for periods in which the options’ exercise price is lower than the Company’s average share price for the period.
| | | Three Months Ended March 31, | |
| | | 2008 | | 2007 | |
| Basic Weighted average shares outstanding | | | 73,081,168 | | | 48,937,761 | |
| Diluted weighted average shares outstanding | | | 73,081,168 | | | 48,937,761 | |
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note: Due to the net loss, the calculation of the effect of common stock equivalents due to issuance of warrants is excluded because of anti-dilution. The number of shares of common stock includes 1,500,000 shares of common stock potentially issuable upon exercise of 1,500,000 common share purchase warrants. Each common share purchase warrant is exercisable until November 22, 2010 at an exercise price of $0.90 per share. As of the March 31, 2008 balance sheet date, the warrants were not yet exercised. Also, they are not included in the computation of diluted loss per share because their effect was anti-dilutive.
Revenue Recognition - The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104"). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller's price to the buyer is fixed and determinable; and (4) collection is reasonably assured.
Revenues and profits from general management of construction-type contracts are recognized on the completed-contract method and therefore when the project is completed. A contract is considered complete when all costs except insignificant items have been incurred and the installation is operating according to specifications or has been accepted by the customer. Contract costs include all direct materials and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Costs in excess of amounts billed are classified as current assets under Work in Progress. Billings in excess of cost are classified under current liabilities as Billings in Excess of Cost and Estimated Earnings. Any anticipated losses on contracts are charged to operations as soon as they are determinable. No unbilled revenue has been recognized so far.
For the three months ended March 31, 2008 and 2007, the Company has no billed or unbilled amount representing claims or other similar items subject to uncertainty concerning their determination or ultimate realization.
In January 2008, the Company commenced sales of photovoltaic electricity produced by solar modules on the roof of its new manufacturing facility to a local utility in Geneva. Revenues from such sales are recognized monthly based on the amount of electricity produced, which can vary greatly depending on the weather and the seasons.
Impact of Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS 141(R) requires all business combinations completed after the effective date to be accounted for by applying the acquisition method (previously referred to as the purchase method). Companies applying this method will have to identify the acquirer, determine the acquisition date and purchase price and recognize at their acquisition-date fair values the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree. In the case of a bargain purchase the acquirer is required to reevaluate the measurements of the recognized assets and liabilities at the acquisition date and recognize a gain on that date if an excess remains. SFAS 141(R) becomes effective for fiscal periods beginning after December 15, 2008. The Company is currently evaluating the impact of SFAS 141(R).
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value for financial accounting and reporting purposes, establishes a framework for measuring fair value and expands disclosures about fair value measurements but does not change the requirements to apply fair value in existing accounting standards. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or, in the absence of a principal, the most advantageous market. The standard clarifies that fair value should be based on the assumptions market participants would use when pricing the applicable asset or liability.
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SFAS No. 157 was effective and adopted by the Company as of January 1, 2008. The provisions of SFAS No. 157 are being applied prospectively. The adoption of SFAS No. 157 did not have a material impact on the Company’ results of operations, cash flows or financial positions. See Note 17 — Fair Value of Financial Assets and Liabilities for additional information regarding the adoption of SFAS No. 157.
In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2, “Effective Date of FASB Statement No. 157” (FSP FAS 157-2), which delays the effective date of SFAS No. 157 for all nonrecurring fair value measurements of nonfinancial assets and liabilities until fiscal years beginning after November 15, 2008. The Company have elected to defer the adoption of the nonrecurring fair value measurement disclosures of nonfinancial assets and liabilities. The adoption of FSP FAS 157-2 is not expected to have a material impact on the Company’s results of operations, cash flows or financial positions.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (SFAS No. 159). SFAS No. 159 allows an entity to irrevocably elect fair value for the initial and subsequent measurement of certain financial instruments and other items that are not currently required to be measured at fair value. When the fair value option is elected and a company chooses to record eligible items at fair value, the company must report unrealized gains and losses on those items in results of operations at each subsequent reporting date. Additionally, the transition provisions of SFAS No. 159 permit a one-time election for existing positions at the adoption date, with a cumulative-effect adjustment included in opening retained earnings. All future changes in fair value will be reported in results of operations. Prior to this election, only the unrealized losses were recorded in the results of operations. The adoption of FSP FAS 159 is not expected to have a material impact on the Company’s results of operations, cash flows or financial positions.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (SFAS No. 160). SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires that changes in a parent's ownership interest in a subsidiary be reported as an equity transaction in the consolidated financial statements when it does not result in a change in control of the subsidiary. When a change in a parent's ownership interest results in deconsolidation, a gain or loss should be recognized in the consolidated financial statements. SFAS No. 160 must be applied prospectively as of January 1, 2009, except for the presentation and disclosure requirements, which are required to be applied retrospectively for all periods presented. The adoption of SFAS No. 160 will not have a material impact on the Company’s results of operations, cash flows or financial positions; however, it could impact future transactions entered into by the Company.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS No. 161). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), by requiring enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 will be effective for the Company as of January 1, 2009. As SFAS No. 161 provides only disclosure requirements, the adoption of this standard will not have a material impact on the Company’s results of operations, cash flows or financial positions.
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Inventory
Inventory is summarized as follows:
| | 3/31/2008 | | 12/31/2007 |
| | | $ | | $ |
| Raw Materials and Others | | | 109,969 | | | 97,159 |
| Finished Goods | | | 197,658 | | | 174,635 |
Total Inventory | | | 307,627 | | | 271,794 |
6. Borrowings Under Revolving Credit Facility, Short and Long-Term Loan
| Short-Term Loan | | 3/31/2008 | | 12/31/2007 | |
| | | | | | |
| Geneva (Switzerland) State Department of Energy | | | 974,792 | | | 861,248 | |
| Geneva (Switzerland) State Department of Energy | | | 4,524,705 | | | 3,997,665 | |
| UBS | | | 1,924,299 | | | 1,288,815 | |
| | | | 7,423,796 | | | 6,147,728 | |
| Long-Term Loan | | 3/31/2008 | | 12/31/2007 | |
| | | | | | |
| Banque Cantonale de Genève | | | 3,068,311 | | | 7,563 | |
| Geneva (Switzerland) State Department of Energy | | | 1,005,490 | | | 0 | |
| | | | 4,073,801 | | | 7,563 | |
On November 3, 2003, SES Switzerland received a loan from the Geneva (Switzerland) State Department of Energy (“ScanE”) of up to CHF1,000,000 ($1,005,490). The loan bears interest at a rate of 4%. SES Switzerland used CHF969,470 ($974,792) as at March 31, 2008, and CHF969,470 ($861,248) as at December 31, 2007. The loan, which is secured by 10,000,000 shares of common stock pledged by Christiane Erné, Jean-Christophe Hadorn and Claudia Rey pursuant to the Canton Geneva Escrow Agreement, became due on March 31, 2008. Although the loan matured on such date, the Company filed a request with ScanE to renew the loan for a period of 24 months on the same terms. ScanE has indicated to the Company that it intends to grant such renewal under the same terms for an additional 24 month period. Although a formal decision by ScanE has not yet been made, the Company is confident that the loan will be renewed in accordance with its request.
SES Switzerland was also granted a loan by ScanE in the amount of CHF500,000 ($502,745) on January 21, 2004 with the funds to be made available contingent upon SES Switzerland’s meeting certain conditions precedent, which were fulfilled by March 22, 2006. The loan had a term of 18 months and carried an interest rate of 5% with repayment due on September 21, 2007. Also on January 21, 2004, an additional credit facility of CHF 1 million ($1,005,490) was granted to finance the construction of our new manufacturing facility. Release of the loan proceeds was contingent upon the Company satisfying certain conditions precedent, which were fulfilled by November 13, 2007. As of January 8, 2008, we had utilized the full amount of the loan, which a fixed annual interest rate of 4%. The loan has a duration of 20 years and is secured by a mortgage certificate of CHF1,000,000 ($1,005,490) on the manufacturing facility. The loan will be reimbursed in 20 equal annual installments of CHF73,581.75 (approximately $74,000).
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A six month credit facility of CHF4,500,000 ($4,524,705 as of March 31, 2008 and $3,977,665 as of December 31, 2007) was signed on September 18, 2007 with ScanE. The loan bears interest at 5%. The proceeds were received on October 1, 2007 and became due on March 17, 2008. ScanE has extended the loan until June 20, 2008 under the existing loan agreement. This loan is secured by certain photovoltaic modules that are installed on the roof of the new manufacturing facility as well as by the 10,000,000 shares currently held in escrow.
SES Switzerland also has a revolving credit line with UBS which was increased from CHF100,000 ($100,549) to CHF3,000,000 ($3,016,470) as of January 31, 2008, used mainly to cover short-term cash needs. The revolving credit line is secured by the short term deposits in US dollars with UBS, amounting to $3,155,000 as at March 31, 2008 and has not an expiration date. The credit line bears interest at the rate of 4.75%. The credit line can be cancelled by either party at any time. The credit facility was used for CHF1,913,793 ($1,924,299) as at March 31, 2008 and CHF1,450,764 ($1,288,815) as at December 31, 2007.
SES Switzerland also has a Construction Credit Agreement with Banque Cantonale de Genève (BCGE) dated December 20, 2006 in the amount of $4,826,352 (CHF4.8 million), which is intended for financing the construction of the new manufacturing facility. The loan was amended on November 13, 2007 and increased from CHF4.8 million to CHF8.5 million ($8,546,665). The amended agreement must be drawn down before the later of completion of the construction or December 11, 2008. We used $3,068,311 (CHF3,051,558) of the loan as at March 31, 2008, and $7,563 (CHF8,513) as at December 31, 2007. The loan bears interest at a rate of 3.5% and is secured by a second lien exclusive mortgage certificate of CHF 9,000,000 ($9,049,410) on the manufacturing facility.
7. Commitments and Contingencies
Operating Leases - Lease expenses for the three months ended March 31, 2008 and 2007 were $36,751 and $32,770, respectively.
The following table presents future minimum lease commitments (concerning the lease of a vehicle) under operating leases at March 31, 2008:
| | | Operating Leases | |
| | | $ | |
2008 | | | 12,549 | |
| 2009 | | | 14,032 | |
| Thereafter | | | - | |
Total | | | 26,581 | |
In addition to the amounts disclosed above, SES Switzerland has an operating lease for its office located at 129 Route de Saint-Julien, Plan-les-Ouates, Switzerland (a suburb of Geneva). The rent is CHF52,572 ($49,230) per year. The initial lease term ended on February 28, 2008. The lease has been renewed with the same conditions for the next 12 months.
SES Switzerland also leases a 1,654 square meter industrial facility in Härkingen, Switzerland. The monthly fixed rent is CHF7,232 (approximately $6,772). The lease has no specific termination date. The lease may be cancelled with six months notice at the end of the month, except for December, which requires an additional month notice.
On May 27, 2005, we received authorization from the State of Geneva to build a manufacturing facility on their property in Plan-les-Ouates, Switzerland and we received a lease for the land in February 2007. The lease for use of the land is for 60 years commencing on July 1, 2006.
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following are the lease commitments:
| | | Use of Land | |
| | | $ | |
| 2008 | | | 50,613 | |
| 2009 | | | 67,484 | |
| 2010 | | | 67,484 | |
| 2011 | | | 67,484 | |
| 2012 | | | 67,484 | |
| Thereafter | | | 3,610,390 | |
Total | | | 3,930,939 | |
SES Switzerland has no non-cancellable operating leases.
Litigation - The Company is from time to time subject to routine litigation incidental to its business. There are no such litigation currently pending.
Capital Commitments - At March 31, 2008, the Company has an outstanding purchase order of EUR448,600 ($708,790) for the future construction of a new machine to be used in the new plant for solar modules production. The Company has made an advance payment of EUR269,160 ($425,273) for the purchase of this machine. The balance due will be paid upon delivery of the machine. On March 27, 2008 the Company signed a purchase agreement for the manufacturing of the exterior walls of the new plant for CHF 2,800,000 ($ 2,815,372). An advance payment of CHF840,000 ($844,612) was made on April 1, 2008, the remaining amount will be paid at the end of the construction.
8. Business Segments
All of the Company’s operations until the fiscal year ended 2007 were conducted through its wholly owned subsidiary, SES Switzerland, and were limited to the assembly and installation of photovoltaic panels in Switzerland, which is the only business segment of the Company. Commencing January 2008, the Company now also sells photovoltaic electricity produced by the solar modules on the roof of its new manufacturing facility to a local utility in Geneva, based on a 20 year contract. The revenue generated from such electricity production represents a new business segment for the Company. No costs of goods sold are recorded in the income statement for the three months ended March 31, 2008 due to the fact that in the first quarter of 2008, the Company’s only revenue consisted of sales of electricity produced by these solar tiles and sold to a local utility in Geneva. The solar plant and the six month credit facility of CHF 4.5 million dated September 18, 2007 are the sole assets and liabilities, respectively, that comprise the electricity producing business segment.
9. Stockholders' Equity
Common Stock - The Company has 100,000,000 shares of common stock authorized, par value $0.001 per share, and 73,081,168 shares issued and outstanding.
During the quarter ended March 31, 2008, no stock purchase warrants were exercised.
SES SOLAR INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Warrant transactions consisted of the following during the quarter ended March 31, 2008 :
| | | Exercisable Warrants | | Strike Price | |
| Warrants outstanding as of December 31, 2007 | | | 0 | | $ | 0 | |
| Warrants granted as consideration for agent's fee | | | 1,500,000 | | $ | 0.90 | |
| Exercise of warrants | | | 0 | | | 0 | |
| Warrants outstanding as of March 31, 2008 | | | 1,500,000 | | $ | 0.90 | |
Warrants outstanding expire as follows:
Year | | Warrants Expiring | | Strike Price ($) | |
| 2010 | | | 1,500,000 | | | 0.90 | |
| | | | 1,500,000 | | | | |
The Company granted registration rights to Lansing Securities including the right to include all or any part of the Warrant Shares (the “Registrable Securities”) in the next registration statement and subsequent registration statements that the Company files with the SEC from time to time (the “Registration Statement”) (other than a registration statement on Form S-8 or Form S-4) until all of the Registrable Securities have been duly registered.
On August 31, 2006, SES USA entered into an agreement with Standard Atlantic to advise SES USA and its stockholders in connection with the purchase of all of the shares of SES Switzerland. Pursuant to the terms of a Finder’s Agreement between SES USA and Standard Financial (the “Finder’s Agreement”) the parties agreed to a finder’s fee of $228,000 if a transaction were consummated. The Finder’s Agreement also provided that Standard Atlantic would continue to provide consulting services to the Company for a period of 24 months regarding investor relations matters for a monthly fee of $20,000. The two-year consulting fee was due and was paid to Standard Financial at closing. The Company recorded the total amount as of March 31, 2008, as deferred expense and amortizes the amount over the 24 months of the consulting agreement.
10. Subsequent Events
Other than as disclosed herein, no major events have occurred since March 31, 2008.
You should read the following discussion of our financial condition and results of operations together with the audited financial statements and the notes thereto included in our Annual Report on Form 10-KSB for the year ended December 31, 2007. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements, including those set forth in our Annual Report on Form10-KSB.
SES Solar Inc., a Delaware corporation (the “Company,” “SES USA,” “our,” “we,” and “us”), based in Geneva, Switzerland, is engaged in the business of designing, engineering, producing and installing solar panels or modules and solar tiles for generating electricity. We have developed a new assembly technology for solar panels that allow for higher quality electrical contacts, better performance and reduced costs resulting from our proprietary automation processes. We are constructing a manufacturing facility that will include a new assembly line based on our proprietary technology to complete the development and testing of our new products. To date, while we have been engaged in developing and testing our new solar panel assembly technology, we have been developing the sales and distribution portions of our business by selling solar panels produced by third parties and by responding to quotations for our solar tiles to electric companies, local governmental agencies and private home owners.
Overview and Plan of Operation
This Overview addresses our plan of operation and the trends, events, and uncertainties that have been identified by our management as those we believe are reasonably likely to materially affect the comparison of historical operating results reported herein to either past period results or to future operating results.
SES Switzerland, our wholly owned subsidiary, has developed and patented a new assembly technology for solar panels or modules and solar tiles. Our business plan includes the development of a new assembly line based on our proprietary technology, using a manufacturing facility in the suburbs of Geneva, Switzerland which is currently under construction, to produce solar panels or modules and solar tiles at a lower cost. We believe this new facility will enable us to produce customized solar photovoltaic (“PV”) modules that are larger than three square meters.
To implement our business plan, we will need to complete the design of the solar panels or modules and solar tiles, manufacture and test the prototype panels, have them approved in accordance with European and other standards, manufacture them in series and sell them in major markets in Europe and eventually other countries around the world. Our plan is to complete the manufacturing facility, manufacture the prototypes and have them tested and licensed in 2008, to commence production and sale of our new products on a limited basis in 2008, and to begin full capacity production and sale of our new products in 2009.
To date, we have generated only limited revenue from the sale of solar panels or modules and solar tiles manufactured by third parties and the related engineering services required to design and install the same. Once our manufacturing capabilities are operational, we will have available a product line for our SunTechTile® and Swisstile® solar tiles and in the future for a high power rated solar modules. Historically, we have relied upon third party vendors to supply us with component parts such as cells in order to manufacture and produce our products. As a result of our new manufacturing facility and our new proprietary technology for module assembly, we believe that we are positioning ourselves to manufacture and produce on a much larger scale solar products that are competitive in the solar energy market. In addition, and commencing January 2008, the Company also sells electricity produced by the solar PV modules on the roof of its new manufacturing facility to a local utility in Geneva.
SES Switzerland has experienced losses from its early stage operations, which have involved developing and testing our new solar panel technology and commencement of the sales and distribution portions of our business by selling custom solar panels or modules and solar tiles using an early stage technology. We anticipate incurring losses over the next few years as we complete the development, testing, prototypes and licensing of our new products and commence production. Our research and development costs and costs incurred in manufacturing prototype panels to date have been expensed. We do not believe that we can achieve profitability until development, implementation and commercialization of our new products manufactured through the new assembling processes are operational.
We believe the demand for solar panels and solar tiles ultimately will be substantial. According to the Energy Information Administration, global demand for electricity is expected to increase from 16.4 trillion kilowatt hours in 2004 to 30.3 trillion kilowatt hours in 2030. Over time, supply constraints, rising electricity prices, dependence on foreign countries for fuel feedstock and environmental concerns could limit the ability of many conventional sources of electricity and other alternative sources to supply this rapidly expanding global demand. According to the U.S. Department of Energy, solar energy is the only source of renewable power with a large enough resource base to supply a significant percentage of the world’s electricity needs over the next several decades.
However, over the near term there are significant competitive concerns with solar energy. As the cost of producing electricity from grid connected PV installations is higher than the current cost of electricity from fossil or nuclear plants, the PV market relies heavily on government subsidies and regulation concerning independent power producers. These regulations favor PV electricity in some, but not all, countries. Existing regulations are subject to change due to local political factors affecting the energy market, especially in Europe, where the process has been ongoing for 10 years. The major PV market in Europe is Germany where the EEG law governs. We expect France will play a strong role in the future due to recently enacted laws. Other countries, including Italy, Spain and Greece, have similar but less favorable laws. The PV market is heavily dependent on public policies and, as a result, such policies present the greatest uncertainties for our products. Anticipated reductions of the feed-in tariff in Germany and Switzerland by 9% or 8%, respectively, per year could affect our sales. Spain has already spoken of decreasing the tariff during 2008 by 20%. Without continued and/or enhanced governmental support in the form of favorable laws and subsidies, the projected growth of the PV market will not exist. Our primary market for our Swisstile® product will be Switzerland, which recently enacted a new feed in tariff that become effective May 2008. This tariff has 10 different values depending on PV integration and size. Due to the properties of our Swisstile®, we believe that it will get the highest value, which will be favorable for us. The tariff will decrease for new entrants by 8% every year starting in 2010.
Worldwide, annual installations by the PV industry grew from 0.4GW in 2002 to 1.7GW in 2006, representing an average annual growth rate of over 42%, and 2.9 GW at the end of 2007, representing a 70% increase in one year. Cumulative installed capacity reached just below 10GW at the end of 2007. Despite this growth, solar electricity still represents a small fraction of the supply of electricity. So long as governments and the market are focused on the ability of manufacturers to develop new technologies that reduce the cost of solar electricity, we believe that the demand for solar energy products will continue to grow significantly. This growth projection is based on continued governmental support, on the success of such manufacturing efforts to reduce the gap between the cost of solar electricity and more conventional and established methods of generating electricity, and on other developments affecting the world energy market. In addition to the uncertainties associated with government subsidies and these other factors, it is also possible that breakthrough technologies might emerge in other areas that will reduce demand for new solar energy products. Furthermore, even within the solar energy area, it is possible that developments in thin films or nanoscience could reduce the cost of PV cells or that continued shortages in the supply of polysilicon, an essential raw material in the production of our PV cells, could impact our proposed new products and adversely affect our plan of operation.
We are in ongoing discussions with strategic partners, including cell manufacturers, PV line manufacturers and special machine manufacturers to assist us with our new technology for module assembly. We are also progressing with construction of our new manufacturing facility, which is expected to be fully operational in late 2008 or early 2009.
During the three month period ended March 31, 2008, we continued to market our solar tiles, and we quoted solar PV turn-key installations to prospects , although no projects were completed such that no revenues or costs of goods sold were recorded during the period. As of the end of fiscal year 2007, the Solar Plant, which comprises our manufacturing facility, is operational, and, as of January 2008, we have begun generating revenue from the sale of electricity produced by the modules on the roof of the manufacturing facility.
Based on current and ongoing custom installation projects that will be completed during fiscal year 2008 as well as from the revenue that will be generated from the sale of electricity produced by the solar modules on the roof of the manufacturing facility to the local utility in Geneva, we believe that our cash flow from operating activities during 2008 will be greater than our cash flow from operating activities during 2007. As previously reported, and in light of these projects and our new electricity production revenue stream, we believe that our operating expenses in fiscal 2008 will be approximately $2 million, which we anticipate financing through revenue generated from sales and with available cash. Management anticipates total capital expenditures of approximately $14 million for the new manufacturing facility and $3.5 million for the assembly line and machinery over 2008 and 2009. We anticipate financing these capital expenditures through available cash, loans and lines of credit, but we will likely also need additional financing to expand our operations once our manufacturing facility is fully operational. We do not have any current agreements in place to secure such financing. In addition, we entered into a credit facility of CHF4,500,000 ($4,524,705) on September 18, 2007 with ScanE. The proceeds were received on October 1, 2007 and became due on March 17, 2008. ScanE has extended the loan repayment period until June 20, 2008.
We expect to continue to experience losses from operations until we can generate revenue from manufacturing our new products. As a result of our continuing need to expand our operations and develop and market our new products, we expect to continue to need additional capital over the long term in order to continue as a going concern.
Selected Financial Data
Balance Sheets | | March 31, 2008 | | December 31, 2007 | |
| | (unaudited) | | (audited) | |
| | | in $ | |
| Total current assets | | | 4,693,768 | | | 4,472,884 | |
| Total long-term assets | | | 11,368,059 | | | 9,858,585 | |
| Total current liabilities | | | 8,595,895 | | | 10,366,547 | |
| Total long-term liabilities | | | 4,073,801 | | | 7,563 | |
| Total liabilities and stockholders' equity | | | 16,061,827 | | | 14,331,469 | |
Statement of Operations (unaudited)
| | For the Three months ended March 31, | |
| | | 2008 | | 2007 | |
| | | in $ | |
| Total revenues | | | 83,138 | | | 0 | |
| Total cost of goods sold (exclusive of depreciation shown separately below) | | | (0 | ) | | (0 | ) |
| Personnel | | | 138,427 | | | 85,385 | |
| Rent and lease expenses | | | 36,751 | | | 32,770 | |
| Research and development | | | 152,832 | | | 110,473 | |
| Depreciation and amortization | | | 66,656 | | | 12,596 | |
| General and administrative expenses | | | 201,042 | | | 190,625 | |
| Interest expense | | | (118,143 | ) | | (12,969 | |
| Interest income | | | 22,645 | | | 48,500 | |
| Foreign exchange gain /(loss) | | | 395,543 | | | 4,701 | |
| Total other income (expense) | | | 300,045 | | | 40,232 | |
| Taxes | | | (0 | ) | | (0 | |
| Net loss | | | (212,525 | ) | | (391,617 | |
| Other comprehensive income: translation adjustment | | | (352,703 | ) | | (3,716 | |
| Comprehensive loss | | | (565,228 | ) | | (395,333 | |
RESULTS OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED MARCH 31, 2008 AND 2007
Net Loss
Our net loss for the three months ended March 31, 2008 was $212,525 compared to a net loss of $391,617 for the three months ended March 31, 2007. The decrease in net loss during the period ended March 31, 2008 was due to the revenue generated by the sale of electricity in the amount of $83,138 and to the decrease of the currency exchange rate between the Swiss franc and the US dollar resulting in a foreign exchange gain of $395,543, and offset by an increase in operating expenses ($163,859) and an increase of interest expense due to increased borrowings ($105,174).
Revenues and Cost of Goods Sold
The Company recognizes revenue on the completed-contract method, and therefore when projects are completed. No projects were completed during the three months ended March 31, 2008 or 2007, and therefore no revenue or costs of goods sold was recorded for the respective periods from completion of such projects
The solar plant, which is housed in our manufacturing facility, has been operational since the end of 2007, and as of January 2008, it now generates revenue through the sale of electricity. For the three months ended March 31, 2008, revenue generated from such sales totaled $83,138.
Operating Expenses
Operating expenses for the three months ended March 31, 2008 were $595,708 and $431,849 for the three months ended March 31, 2007, which represents a 38% increase. Personnel, rent, research and development, general and administrative expenses, and depreciation and amortization expenses constitute the components of our operating expenses.
The majority of the increase was related to personnel costs to develop the new activities of our subsidiary (increase of $53,042), additional research and development expenses (increase of $42,359), and increased general and administrative expenses, including expenses associated with preparation and SEC compliance of various public filings (increase of $10,416) and depreciation and amortization (increase of $54,060).
We expect that as we continue to implement our business plan these expenses will increase accordingly.
Other Income (Expense)
Interest expense increased to $118,143 for the three months ended March 31, 2008 compared with $12,969 for the three months ended March 31, 2007. The increase in interest expense was primarily attributable to the increase of loans from ScanE and from Banque Cantonale de Genève (“BCGE”).
Interest income for the three months ended March 31, 2008 was $22,645 compared to $48,500 for the three months ended March 31, 2007. The interest income earned during the period was received from time deposits.
Foreign exchange gain for the three months ended March 31, 2008 was $395,543 as compared to $4,701 for the three months ended March 31, 2007. Our wholly owned subsidiary, SES Switzerland, conducts substantially all its business and incurs substantially all its costs in Swiss francs.
Liquidity and Capital Resources
Our principal cash requirements are for operating expenses, including consulting, accounting and legal costs, staff costs, and accounts payable.
As of March 31, 2008, we had negative working capital of $3,902,127 compared with a negative working capital of $5,893,663 as of December 31, 2007, and our cash and cash equivalents decreased to $3,399,369 as of March 31, 2008 compared to $3,429,033 as of December 31, 2007. This decrease is the result of increased operating expenses with limited revenues for the period. The large decrease in Swiss francs is tempered by the evolution of the exchange rate.
As of March 31, 2008, we had accounts payable of $609,114 compared to $3,711,775 as of December 31, 2007. This large decrease is the result of amounts paid to creditors for construction costs relating to our manufacturing facility. We made these payments utilizing loan proceeds received from BCGE and ScanE.
At March 31, 2008, we had short-term debt in the amount of $7,423,796 compared to $6,147,728 as of December 31, 2007.
We believe that our negative working capital situation is temporary, as we expect in the near term to restructure our capital financing arrangements into longer term loans with more favorable terms.
We currently have several loans outstanding with ScanE. The first such loan in the amount of up to $1,005,490 was made on November 3, 2003 and carries a principal balance of $974,792. The loan bears interest at 4%. Although the loan matured on March 31, 2008, the Company filed a request with ScanE to renew the loan for a period of 24 months on the same terms. ScanE has indicated to the Company that it intends to grant such renewal request under the same terms for an additional 24 month period. Although a formal decision by ScanE has not yet been made, the Company is confident that the loan will be renewed in accordance with its request.
On January 21, 2004, we obtained a CHF1 million ($1,005,490) credit facility from ScanE to finance the construction of our new manufacturing facility. Release of the loan proceeds was contingent upon the Company satisfying certain conditions precedent, which were fulfilled by November 13, 2007. As of January 8, 2008, we had utilized the full amount of the loan, which a fixed annual interest rate of 4%.
A new six month credit facility of CHF4,500,000 ($4,524,705) was signed on September 18, 2007 with ScanE. The loan bears interest at 5%. The proceeds were received on October 1, 2007 and were to be reimbursed on March 17, 2008. ScanE has extended the loan until June 20, 2008 under the existing loan agreement. This loan is secured by certain PV modules that are installed in the power plant on the roof of the new manufacturing facility as well as by the 10,000,000 shares currently held in escrow. However, given that SES is currently negotiating the sale of the PV roof installation, reimbursement has been postponed pending the result of the sale negotiations.
SES Switzerland also has a revolving credit line with UBS which was increased from CHF100,000 ($100,549) to CHF3,000,000 ($3,016,470) as of January 31, 2008, used mainly to cover short-term cash needs. The credit line is secured by the short term deposits in US dollars with UBS, amounting to $3,155,000 as at March 31, 2008 and has not an expiration date. The credit line bears interest at the rate of 4,75%. The credit line can be cancelled by either party at any time. The credit facility was used for CHF1,913,793 ($1,924,299) as at March 31, 2008 and CHF1,450,764 ($1,288,815) as at December 31, 2007.
SES Switzerland also has a Construction Credit Agreement with BCGE dated December 20, 2006 in the amount of $4,826,352 (CHF4.8 million), which is intended for financing the construction of our new manufacturing facility. The loan was amended on November 13, 2007 and increased from CHF4.8 million to CHF8.5 million ($8,546,665). The amended agreement must be drawn down before the later of completion of the construction or December 11, 2008. We used $3,068,311 (CHF3,051,558) of the credit line as at March 31, 2008, and $7,563 (CHF8,513) as at December 31, 2007. The loan bears interest at a rate of 3.5% and is secured by a second lien exclusive mortgage certificate of CHF 9,000,000 ($9,049,410) on the facility.
Our ability to meet our financial commitments in the near term will be primarily dependent upon continued revenue from the sale of custom manufactured solar panels or modules when available and solar tiles and the related engineering services required to design and install the same, the sale of electricity produced by the solar roof on our manufacturing facility, and the continued extension of credit from existing or new lenders.
Management believes that our cash and cash equivalents, cash provided by operating activities, and cash available from existing loans will be sufficient to meet our working capital requirements for the next twelve months. If our future revenues do not increase significantly to a level sufficient to cover our net losses, we will continue to need to raise additional funds to expand our operations. In addition, we may need to raise additional funds sooner than anticipated to respond to competitive pressures, to develop new or enhanced products or services, to fund our expansion or to make acquisitions. We may not be able to find financing on acceptable terms or at all.
Operating Activities
Investing Activities
Net cash used in investing activities was $3,772,295 during the three months ended March 31, 2008, as compared to ($222,422) provided in investing activities during the three months ended March 31, 2007. The increase in investing activities is mostly due to investments for the construction of the manufacturing plant.
We expect total capital expenditure of approximately CHF17,500,000 ($17,596,075) as we build our new manufacturing facility and purchase additional equipment.
Financing Activities
Net cash provided by financing activities was $4,219,578 for the three months ended March 31, 2008, as compared to $0 for the three months ended March 31, 2007.
The increase financing was received from bank loans granted to build the new plant from BCGE and ScanE and from cash utilized for current operations from our line of credit with UBS.
Off-Balance Sheet Arrangements
We have no outstanding derivative financial instruments, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
At March 31, 2008, we had an outstanding purchase order of EUR448,600 ($708,790, using the exchange rate of 0.63291 at March 31, 2008) for the future construction of a new machine to be used in the new manufacturing plant for solar modules production. We made an advance of EUR269,160 ($425,273) for the purchase of this machine. The balance due will be paid upon delivery of the machine.
Not applicable to “smaller reporting companies” under Item 305(e) of regulation S-K.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act, is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and which also are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
Exhibits | | |
| | | |
| 31.1 | | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | |
| 31.2 | | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | |
| 32.1 | | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | | |
| 32.2 | | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: May 15, 2008 | | SES SOLAR INC. (Registrant) |
| | | |
| Dated: May 15, 2008 | By: | /s/ SANDRINE CRISAFULLI |
| |
Sandrine Crisafulli Chief Financial Officer and Chief Operating Officer (principal financial officer and principal accounting officer) |
