Sunrise Solar (SSLR) 10-Q 2008 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

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 001-16173

SUNRISE SOLAR CORPORATION

(Exact name of small business issuer as specified in its charter)

Nevada	88-0460457
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4703 Shavano Oak, Suite 104
San Antonio, Texas	78249
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code: (210) 881-0850

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

There were 6,282,077 shares of the registrant’s common stock issued and outstanding as of November 14, 2008.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

IMPORTANT INFORMATION REGARDING THIS FORM 10-Q

Unless otherwise indicated, references to “we,” “us,” and “our” in this Quarterly Report on Form 10-Q refer to Sunrise Solar Corporation.

Readers should consider the following information as they review this Quarterly Report:

Forward-Looking Statements

The statements contained or incorporated by reference in this Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements” (as such term is defined in the Private Securities Litigation Reform Act of 1995), within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements.  Forward-looking statements include any statement that may project, indicate or imply future results, events, performance or achievements.  The forward-looking statements contained herein are based on current expectations that involve a number of risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as “believes,” “expect,” “may,” “will,” “should,” “intend,” “plan,” “could,” “estimate” or “anticipate” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties.

Given the risks and uncertainties relating to forward-looking statements, investors should not place undue reliance on such statements.  Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q and are not guarantees of future performance.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, such expectations may prove to have been incorrect.  All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

Subsequent Events

All statements contained in this Quarterly Report on Form 10-Q, including the forward-looking statements discussed above, are made as of November 14, 2008, unless those statements are expressly made as of another date.  We disclaim any responsibility for the accuracy of any information contained in this Quarterly Report on Form 10-Q to the extent such information is affected or impacted by events, circumstances or developments occurring after November 14, 2008 or by the passage of time after such date.  Except to the extent required by applicable securities laws, we expressly disclaim any obligation or undertakings to release publicly any updates or revisions to any statement or information contained in this Quarterly Report on Form 10-Q, including the forward-looking statements discussed above, to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement or information is based.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

CONTENTS

PART I - FINANCIAL INFORMATION
ITEM 1 - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Consolidated Balance Sheets as of September 30, 2008, and December 31, 2007	F-1 - F-2
(Unaudited) Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007, and from Re-entering the Development Stage to September 30, 2008	F-3
(Unaudited) Consolidated Statement of Changes in Stockholders’ Deficit for the nine months ended September 30, 2008 and the years ended December 31, 2007 and 2006	F-4
(Unaudited) Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 , and from Re-entering the Development Stage to September 30, 2008	F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	6 - 17
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18 - 20
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS	21
ITEM 4T - CONTROLS AND PROCEDURES	21
PART 2 - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS	23
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K	24

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

ASSETS
	(Unaudited)
	September 30, 2008		December 31, 2007
CURRENT ASSETS
Cash	$	3,040	$	19,776
Accounts Receivable, less allowance for doubtful
accounts of $0 and $59,925		-		-
Current Note Receivable		32,500		-
Prepaid Expenses		-		11,310
Total Current Assets		35,540		31,086
ASSETS HELD FOR SALE, Net		-		577,438
OTHER ASSETS
Deposits		-		85,000
Long Term Note Receivable		21,667		-
Total Other Assets		21,667		85,000
TOTAL ASSETS	$	57,207	$	693,524

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

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS 

LIABILITIES AND STOCKHOLDERS' DEFICIT
	(Unaudited)
	September 30, 2008			December 31, 2007
CURRENT LIABILITIES
Accounts Payable	$	1,675		$	278,409
Accounts Payable, Related Parties		-			154,716
Deferred Liability		70,000			70,000
Litigation Settlement Liability		307,500			307,500
Third Party Advances		44,500			-
Notes Payable and Accrued Interest		429,361			805,993
Notes Payable to Stockholders and Accrued Interest		-			5,750,942
Other Current Liabilities		38,085			119,566
Total Current Liabilities		891,121			7,487,126
TOTAL LIABILITIES		891,121			7,487,126
COMMITMENTS AND CONTINGENCIES		-			-
STOCKHOLDERS' DEFICIT
Preferred Stock, $.0001 par value, 5 million shares
authorized; no shares outstanding		-			-
Common Stock, $.0001 par value, 100 million shares
authorized; 6,282,077 and 4,138,077 shares outstanding		628			414
Additional Paid-in Capital		26,677,290			19,815,491
Accumulated Deficit from Prior Operations		(26,676,678	)		(26,609,507	)
Accumulated Deficit from the Development Stage		(835,154	)		-
TOTAL STOCKHOLDERS' DEFICIT		(833,914	)		(6,793,602	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	57,207		$	693,524

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

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

													Re-entering
	Three Months Ended						Nine Months Ended						Development Stage to
	September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007			September 30, 2008
REVENUES	$	-		$	-		$	-		$	-		$	-
COST OF REVENUES		-			-			-			-			-
GROSS PROFIT		-			-			-			-			-
EXPENSES
Payroll, contract labor and consultants		89,149			88,602			506,954			319,283			437,181
Selling, general and administrative expenses		11,710			5,676			26,219			19,762			23,796
OPERATING LOSS FROM CONTINUING OPERATIONS		(100,859	)		(94,278	)		(533,173	)		(339,045	)		(460,977	)
Gain on disposal of assets		-			-			62,151			-			-
Interest income (expense)		75,608			(30,359	)		(35,132	)		(89,861	)		(16,638	)
NET LOSS FROM CONTINUING OPERATIONS		(25,251	)		(124,637	)		(506,154	)		(428,906	)		(477,615	)
DISCONTINUED OPERATIONS (Note 9)
Loss from discontinued operations		(164,840	)		(261,236	)		(396,171	)		(644,245	)		(357,539	)
NET LOSS	$	(190,091	)	$	(385,873	)	$	(902,325	)	$	(1,073,151	)	$	(835,154	)
NET LOSS PER SHARE:
Common Stock:
Basic and Diluted Net Loss Per Share	$	(0.00	)	$	(0.03	)	$	(0.08	)	$	(0.10	)
Basic and Diluted Net Loss Per Share
for Discontinued Operations	$	(0.03	)	$	(0.06	)	$	(0.07	)	$	(0.16	)
Total Basic and Diluted Net Loss Per Share	$	(0.03	)	$	(0.09	)	$	(0.15	)	$	(0.26	)
Denominator for Basic and Diluted Net Loss Per Share
Weighted Average Number of
Common Shares Outstanding		6,241,751			4,138,077			6,048,473			4,138,077

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

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED)

					Additional		Accumulated Defecit						Total
	Common Stock				Paid-In		Prior			Development			Stockholders'
	Shares		Amount		Capital		Operations			Stage			Deficit
BALANCE -- December 31, 2005		4,128,077	$	413	$	19,431,071	$	(23,721,232	)	$	-		$	(4,289,748	)
Shares Issued for Loan Incentive		10,000		1		5,499		--			--			5,500
Interest Imputed on Non-Interest Bearing Notes Payable		--		--		168,053		--			--			168,053
Net loss		--		--		--		(1,441,988	)		--			(1,441,988	)
.
BALANCE -- December 31, 2006		4,138,077		414		19,604,623		(25,163,220	)		-			(5,558,183	)
Interest Imputed on Non-Interest Bearing Notes Payable		--		--		210,868		--			--			210,868
Net loss		--		--		--		(1,446,287	)		--			(1,446,287	)
.
BALANCE -- December 31, 2007		4,138,077		414		19,815,491		(26,609,507	)		-			(6,793,602	)
Compensatory Element of Stock Issuance		500,000		50		99,950		--			--			100,000
Stock Issued for Consulting Services		1,644,000		164		372,237		--			--			372,401
Interest Imputed on Non-Interest Bearing Notes Payable		--		--		149,606		--			--			149,606
Debt & Interest Forgiven by Related Parties						6,240,006		--			--			6,240,006
Net loss		--		--		--		(67,171	)		(835,154	)		(902,325	)
.
BALANCE -- September 30, 2008		6,282,077	$	628	$	26,677,290	$	(26,676,678	)	$	(835,154	)	$	(833,914	)

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

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

							Re-entering
	Nine Months Ended			Nine Months Ended			Development Stage to
CASH FLOWS FROM OPERATING ACTIVITIES	September 30, 2008			September 30, 2007			September 30, 2008
Net Loss	$	(902,325	)	$	(1,073,151	)	$	(835,154	)
Loss from Discontinued Operations		396,171			644,245			357,539
Loss from Continuing Operations		(506,154	)		(428,906	)		(477,615	)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Imputed interest		149,606			153,216			130,089
Gain on Disposal of Assets		(62,151	)		(3,216	)		-
Issuance of Common Stock for Services		472,401			-			405,601
Changes in operating assets and liabilities:
Accounts Receivable		-			(146,065	)		-
Other Current Assets		-			(55	)		-
Accounts Payable		-			(131,120	)		-
Accrued Expenses		(42,002	)		271,774			(42,002	)
Prepaid Expenses		11,310						11,310
Litigation Settlement		-			(67,500	)		-
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		23,010			(351,872	)		27,383
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Fixed Assets		-			1,874			-
Principal Payments on Notes Receivable		10,833			-			9,024
NET CASH PROVIDED BY INVESTING ACTIVITIES		10,833			1,874			9,024
CASH FLOWS FROM FINANCING ACTIVITIES
Note Proceeds from Stockholders Loans		55,050			729,159			45,857
Note Proceeds from Other Loans		44,500			-			42,329
NET CASH PROVIDED BY FINANCING ACTIVITIES		99,550			729,159			88,186
DISCONTINUED OPERATIONS
Discontinued Operating Activities		(150,129	)		(405,810	)		(112,030	)
NET CASH USED IN DISCONTINUED OPERATIONS		(150,129	)		(405,810	)		(112,030	)
NET INCREASE (DECREASE) IN CASH		(16,736	)		(26,649	)		12,563
CASH– Beginning		19,776			33,077			(9,523	)
CASH– Ending	$	3,040		$	6,428		$	3,040
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	-		$	31,947		$	-
Income Taxes	$	-		$	-		$	-
Non-cash investing and financing activities:
Sale of ASPECT Business Segment for Notes Receivable	$	65,000		$	-		$	-
Debt Converted to Contributed Capital by Related Parties	$	6,240,006		$	-		$	-
Transfer of Deposit Rights to Note Holder	$	-		$	170,000		$	-

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

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Sunrise Solar Corporation (“SSC”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in SSC's financial statements filed with the SEC on Form 10-KSB for the year ended December 31, 2007. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2007 as reported in Form 10-KSB have been omitted.

NOTE 2 - GOING CONCERN

The Company sustained a substantial loss of approximately $902,000 during the nine months ended September 30, 2008, and as of September 30, 2008, had a combined accumulated deficit of approximately $27,512,000.

These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.

In addition to operational expenses, as the Company executes its business plan, it is incurring expenses related to complying with its public reporting requirements. In order to finance these expenditures, the Company has raised capital in the form of debt which will have to be repaid, as discussed in detail below.  The Company has depended on shareholder loans for much of its operating capital.  The Company will need to raise capital in the next twelve months in order to remain in business.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Management anticipates that significant dilution will occur as the result of any future sales of the Company’s common stock and this will reduce the value of its outstanding shares. The Company cannot project the future level of dilution that will be experienced by investors as a result of its future financings, but it will significantly affect the value of its shares.

Management has plans to address the Company’s financial situation as follows:

In the near term, management plans to continue to focus on raising the funds necessary to fully implement the Company’s business plan. Management believes that certain shareholders will continue to advance the capital required to meet the Company’s financial obligations. There is no assurance, however, that these shareholders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.

In the long term, management believes that the Company’s previously announced projects and initiatives will be successful and will provide significant profit to the Company which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability.  The Company’s long term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations and the ability of the Company to ultimately achieve adequate profitability and cash flows from operations to sustain its operations.

NOTE 3 -ACCOUNTING POLICIES

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE - Basic and diluted earnings (loss) per share equals net loss divided by weighted average shares outstanding during the period. Diluted earnings (loss) per share includes the impact of common stock equivalents using the treasury stock method when the effect is dilutive. There were no common stock equivalents at September 30, 2008.

DEVELOPMENT STAGE ENTERPRISE - As a result of the Company’s sale of SMS Envirofuels, Inc. and ASPECT, it’s only revenue source, the Company is now considered a development stage enterprise pursuant to FASB Statement number 7, which focuses on development stage companies. Users of the financial statements should be familiar with this statement and its effect on the financial statements.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - SALE OF SMS ENVIROFUELS, INC.

On August 20, 2008, the Company reached an agreement with certain affiliated parties to sell the company’s SMS Envirofuels, Inc. subsidiary. The terms of the agreement call for the forgiveness of all debts owed to said affiliated parties in return for 100% of SMSE’s stock. As a result of this transaction the Company classified SMSE as “Discontinued Operations” for the purposes of these financial statements in accordance with FASB Statement 144. Additional disclosure can be found in Note 10. As a result of the transaction the Company reduced Total Assets in the amount of $659,619 and reduced Total Liabilities in the amount of $6,899,625. The difference of $6,240,006 was accounted for as capital contributed by affiliated parties and was therefore added to Additional Paid-In-Capital.

NOTE 5 - SALE OF ASPECT BUSINESS SOLUTIONS, INC.

On January 15, 2008, the Company reached an agreement with certain affiliated parties to sell the company’s Aspect, Inc. subsidiary. The terms of the agreement call for the payment of approximately $65,000 to the Company in return for 100% of Aspect’s stock. The $65,000 is being paid over 24 months in the form of a note receivable with monthly payments of $2,708 per month which began on February 15, 2008, and included the first payment due at closing. In addition, the Company agreed to continue assuming Aspect’s outstanding debt as of the date of the sale which was already previously consolidated. As a result of this transaction the Company classified Aspect as “Discontinued Operations” for the purposes of these financial statements in accordance with FASB Statement 144 and recorded a “Gain on Disposal of Assets” of $62,151 which represented the value of the assets given up of $2,849 less the consideration received. Additional disclosure can be found in Note 9. The total debt assumed by the Company and not part of the sale was approximately $2,385,000, which was subsequently forgiven (see Note 4).

NOTE 6 - NOTES PAYABLE TO OTHERS

On February 3, 2006, SMS borrowed $500,000 from an independent lender. The security pledged for this note is equipment recently purchased plus the deposit placed on equipment currently being prepared for delivery in the future. The interest rate on the unpaid balance is 18%. The Company is in default on this note. On February 8, 2007, an agreement to transfer deposit rights and partial release of the promissory note was signed by the Company and the independent note holder. In the agreement, the Company has transferred the rights to the deposit placed by the Company on 4 pieces of equipment that were to be used by its subsidiary SMSE, a value of $170,000, in exchange for a release and discharge of $240,000 of the promissory note. In addition, the Company has the right to further release of $15,000 for any future transfer to note holder of the rights in the deposits of 2 additional pieces of equipment, a value of $85,000. At September 30, 2008, the deferred liability is $70,000 and the principal balance on the note is $260,000 with interest accrued of $169,360. As indicated in Note 4, on August 20, 2008, the Company sold its SMSE subsidiary, some of the assets of which were used to collateralize this promissory note. At this time the Company cannot accurately forecast the ramifications of this default.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On October 5, 2006, SMSE received an LOI, from EBOF, for the purchase of assets associated with its production facility in Poteet. The initial terms of the LOI enabled SMSE to sign a promissory note with EBOF for a line of credit not to exceed $788,000. The expiration date of this note was February 2, 2007. SMSE is in default on this note. The terms of the LOI were not met by the purchaser and the LOI expired with no sale. The interest rate on the unpaid balance is 18%. As of August 20, 2008, the principal balance on the note was $350,000 and interest accrued was $93,005. As part of the sale of SMSE this liability was transferred to the new owners of SMSE.

NOTE 7 - NOTES PAYABLE TO STOCKHOLDERS

On April 15, 2003, the predecessor to SSC signed a one-year promissory note with a stockholder for a line of credit up to $2,000,000. This note was extended for an additional one-year term on April 15, 2004. On March 7, 2006, the line was reduced to $500,000 and extended to December 31, 2006. On December 31, 2006, the note was extended to February 28, 2008 with an increase in the line amount to $1,000,000. On February 28, 2008 the note was extended until February 28, 2009. The note bears 10% interest, is payable on demand and has no collateral. As of August 20, 2008, the principal balance was $622,634 and accrued interest was $147,741.

On February 24, 2003, SMSE signed a one-year promissory note with a stockholder for a line of credit up to $1,000,000. This note was extended for an additional one-year term on February 24, 2004. On March 7, 2006, the credit line was increased to $2,000,000 and extended to December 31, 2006. On December 31, 2006, the note was extended to February 28, 2008 and the line was increased to $2,500,000. On February 28, 2008 the note was extended until February 28, 2009. The line of credit bears 10% interest, is payable on demand and has no collateral. As of August 20, 2008, the principal balance was $2,078,652 and accrued interest was $745,893.

The stockholder also advanced money to ASPECT on an as-needed basis. The advances were assumed by SSC on January 15, 2008. On August 20, 2008 these advances were forgiven as part of the sale of SMSE. As of August 20, 2008 these advances totaled $2,343,810.

During the nine months ended September 30, 2008, the company borrowed an additional $55,000 against these credit facilities. All of these stockholder credit facilities have been cancelled and all balances due to stockholders forgiven in consideration for the sale of SMSE on August 20, 2008. More information can be found in Notes 4&10.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - ADVANCES FROM THIRD PARTIES

As of September 30, 2008 the Company had received net, non-interest bearing advances from certain third parties totaling $44,500. These advances are not collateralized and are due on demand.

NOTE 9 - EQUITY

During the nine months ended September 30, 2008, the Company issued 500,000 shares of its common stock to its new Chairman and CEO for services rendered valued at $100,000 based on the quoted market price of the Company’s common stock on the date of issuance.

Additionally, the Company issued 1,644,000 shares of its common stock to four consultants for services rendered during the Company’s transition valued at $372,401 based on the quoted market price of the Company’s common stock on the date of issuance.

Interest imputed on related party notes during the nine months ended September 30, 2008 was $149,606.

On August 20, 2008, the Company reached an agreement with certain affiliated parties to sell the company’s SMS Envirofuels, Inc. subsidiary. The terms of the agreement call for the forgiveness of all debts owed to said affiliated parties in return for 100% of SMSE’s stock. More information can be found in Notes 4 & 9.

On May 2, 2008, the Company’s Board of Directors approved an amendment, subject to shareholder approval, to the Company’s Articles of Incorporation to effect a reverse stock split at the ratio of 1 for 5. On May 5, 2008, the majority stockholders of the Company approved the same resolution.

The Company has authorized capital consisting of 100,000,000 shares of common stock of which 30,690,386 shares of common stock were outstanding on May 5, 2008. Pursuant to the reverse stock split, the 30,690,386 shares of common stock previously outstanding were automatically converted into approximately 6,138,077 shares of common stock.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - DISCONTINUED OPERATIONS

SMSE

SMSE, a subsidiary of the Company, ceased production in December 2006 and its assets located in Poteet, Texas were classified as Held for Sale at December 31, 2006. On August 20, 2008, the Company sold SMSE to certain affiliated parties (see Note 4).

SMSE’s activity represented the entirety of the Company’s alternative fuels segment (see Note 12). SMSE’s sales, reported in discontinued operations, for the nine months ended September 30, 2008 and 2007 are $0 and $10,200, respectively. SMSE’s pretax loss from operations, reported in discontinued operations, for the nine months ended September 30, 2008 and 2007 were $302,795 and $433,952, respectively. Prior year financial statements been restated to present the operations of SMSE as a discontinued operation. Below is a table of all assets and liabilities for the discontinued operations of SMSE:

	At		At
	September 30,		December 31,
Assets of discontinued operations:	2008		2007
Cash	$	--	$	2,561
Inventory		--		--
Property and Equipment, net		--		574,619
Other Assets		--		9,392
Total Assets	$	--	$	586,572
Liabilities of discontinued operations:
Accounts Payable		--		252,281
Accounts Payable - related parties		--		154,716
Accrued Expenses		--		51,438
Total Liabilities	$	--	$	458,435

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Aspect

Aspect, a subsidiary of the Company, was sold pursuant to a Stock Purchase Agreement with certain affiliated individuals of the Company on January 15, 2008 (see Note 5). As a result of this transaction the Company classified Aspect as “Discontinued Operations” for the purposes of these financial statements.

Aspect’s activity represents the entirety of the Company’s software sales and programming segment (see Note 12). Aspect’s sales, reported in discontinued operations, for the nine months ended September 30, 2008 and 2007 are $0 and $339,795, respectively. Aspect’s pretax gain from operations, reported in discontinued operations, for the nine months ended September 30, 2008 and 2007 were $93,936 and $210,294, respectively. Prior year financial statements have been restated to present the operations of Aspect as a discontinued operation. Below is a table of all assets and liabilities for the discontinued operations of Aspect:

	At		At
	September 30,		December 31,
Assets of discontinued operations:	2008		2007
Cash	$	--	$	17,184
Prepaid Expenses		--		612
Property and Equipment, net		--		2,819
Total Assets	$	--	$	20,615
Liabilities of discontinued operations:
Accounts Payable		--		22,094
Accounts and Notes Payable - related parties		--		2,343,413
Accrued Expenses		--		60,220
Total Liabilities	$	--	$	2,425,727

NOTE 11 - INTERNAL REVENUE SERVICE TAX LIEN

During the second and third quarters of 2005, ASPECT, one of the Company’s former subsidiaries, did not have the funds necessary to cover all the payroll taxes. In January 2006, the Internal Revenue Service (“IRS”) placed a lien on ASPECT assets. A third party accounting firm which represented ASPECT in the due process hearing negotiated an installment plan to settle the outstanding liability. Payments were tendered from this third party firm on behalf of the Company’s largest shareholder and holder of a line of credit with ASPECT. The balance due at September 30, 2008 is $38,086.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - OPERATING RESULTS AND SEGMENT INFORMATION

	(Discontinued)			(Discontinued)
	Software Sales			Alternative
	& Programming			Fuels			All Other			Total
9 Months Ended September 30, 2008
Revenues from operations	$	14,634		$	--		$	--		$	14,634
Net operating loss from operations		--			--			(537,371	)		(534,371	)
Loss from discontinued operations		(93,376	)		(302,795	)		--			(396,171	)
Assets held for sale		--			--			--			--
Capital Expenditures		--			--			--			--
Current Depreciation (included in gain on disposal)		2,819			--			--			2,819

9 Months Ended September 30, 2007
Revenues from operations	$	339,795	$	10,200		$	--		$	349,995
Net operating loss from operations		--		--			(428,906	)		(428,906	)
Loss from discontinued operations		(210,293		(433,952	)		--			(644,245	)
Assets held for sale		3,923		574,619			--			578,542
Capital Expenditures		1,726		--			--			1,726
Depreciation		5,251		--			--			5,251

The Company reports its operations by segments, which for the Company, relates to specific subsidiaries that are individually managed and have separate financial results that are viewed by the Company’s chief operating decision-maker. Profit from operations is net sales less cost of sales and selling, general and administrative expenses. There are two segments: Software sales and programming, and alternative fuels. In addition, the Company reports certain administrative activities under the corporate segment labeled “All Other.”

As previously discussed, the Company sold its SMSE business segment on August 20, 2008. The results of SMSE are presented herein as discontinued operations.

Also, as previously discussed, the Company sold its ASPECT business segment on January 15, 2008. The results of ASPECT are presented herein as discontinued operations.

SUNRISE SOLAR CORPORATION

AND SUBSIDIARIES

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - RELATED PARTY TRANSACTIONS

On August 20, 2008, the Company sold its SMSE subsidiary to certain affiliated parties in return for the forgiveness of certain debts (see Note 4).

The Company is located in office space which is sub-leased from our largest shareholder. This space is approximately 1,500 square feet, with an average monthly rent of $2,300.

NOTE 14 - RECLASSIFICATION

Certain accounts from prior periods have been reclassified to conform to current period presentation.

ITEM 2:MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements may be identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will" or words of similar meaning and include, but are not limited to, statements about the expected future business and financial performance of the Company.  Forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.  Actual outcomes and results may differ materially from these expectations and assumptions due to changes in global political, economic, business, competitive, market, regulatory and other factors.  We undertake no obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise.

The following discussion and analysis should be read in connection with the Company’s consolidated financial statements and related notes thereto, as included in this report, as well as the Company’s Annual Report filed on form 10-KSB.

Overview

Sunrise Solar Corporation intends to develop and commercialize leading edge solar power technologies. We will bring solar power products to the consumer market primarily by utilizing our Internet presence. We also intend to distribute products to large public and commercial purchasers through wholesale channels.

In our early history, our revenue was derived principally from software services and BioFuel production. Both of these prior businesses are now considered discontinued operations. Currently, significant resources have been used in the establishment of our corporate structure for finance, reporting, and governance, and we would anticipate that such expenses will decrease, as a percentage of revenue, as our business increases.

On May 5, 2008, we changed our name from Systems Management Solutions, Inc. to Sunrise Solar Corporation, and effected a one-for-five reverse stock split. For purposes of discussion and disclosure, we refer to the organization, both pre and post name change as Sunrise Solar Corporation.

Management is considering the impact of the following industry trends as they impact the manufacturing of complete photovoltaic systems and planned business model:

·   Solar cell pricing trends around the world: Recently the key material in the production of solar cells (silicon) has been in limited supply. Consequently, prices and availability of solar modules have been limited. Solar cells are the major component cost in a photovoltaic module. The Company has responded by seeking long-term supply agreements for solar cells where pricing is adjusted quarterly to market rates. To date the Company has not entered into any long-term supply agreements for solar cells. Our intent is secure ample solar cell supply to meet our growth needs and to avoid the risk of long-term contract pricings with suppliers whose products are expected to see a decline in the average selling price. Industry experts believe that additional planned expansion of silicon processing factories coming on line over the next 18 months will produce enough raw materials to create an oversupply on projected demand. Failure to effectively manage our supply will hinder our expected growth and our component costs may have an adverse affect on the Company’s profitability; and

·   Government subsidies: Federal and State subsidies relating directly to solar installations are an important factor in the planned growth of the solar industry. These subsidies are very important to growing the market for photovoltaic systems because they provide a significant economic incentive to all buyers. Without these incentives, industry growth would likely stall. These regulations are constantly being amended and will have a direct effect on our rollout of our planned franchise network among those states that offer superior incentives to the solar industry.

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

Expenses. Our expenses for continuing operations increased slightly, when comparing 2008 to 2007 for the three month period ending September 30. The increase is attributed mainly to costs related to the continued implementation of our solar business model As of September 30, 2008, the Company had 2 full-time employees and was relying on contractors to meet its financial and regulatory reporting requirements.

Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

Expenses. Our expenses for continuing operations increased substantially, when comparing 2008 to 2007 for the nine month period ending September 30. The increase is attributed to two major factors: 1) expenses related to our exiting of the software business segment, and 2) expenses related to stock compensation granted to our new CEO and certain outside consultants.

Results of Operation

SSC incurred a net loss of approximately $902,000 for the nine months ended September 30, 2008, and had a working capital deficit of approximately $856,000 as of September 30, 2008. These conditions create an uncertainty as to SSC’s ability to continue as a going concern.

Cash provided by continuing operations was approximately $23,000 for the nine months ended September 30, 2008.  Cash used by discontinued operations was approximately $150,000 for the same period.  The funds to cover these uses of cash were received against the note payable and advance agreement the Company maintains from a shareholder.

SSC continues to rely on advances from third parties to fund operating shortfalls and does not foresee a change in this situation in the immediate future. There can be no assurance that SSC will continue to have such advances available. SSC will not be able to continue operations without them. SSC is pursuing alternate sources of financing.

Critical Accounting Policies

The financial reports for the period contained one additional critical accounting policy which was also an initial adoption of accounting policy that had a material impact. Below is a brief discussion of events that materially affected our financial statements and the basis in which the transactions were recorded.

DEVELOPMENT STAGE ENTERPRISE - As a result of the Company’s sale of ASPECT and SMSE, the Company is now considered a development stage enterprise pursuant to FASB Statement 7, which focuses on development stage companies. Users of the financial statements should be familiar with this statement and its effect on the financial statements.

Internal Revenue Service Tax Lien

During the second and third quarters of 2005, ASPECT, one of the Company’s former subsidiaries, did not have the funds necessary to cover all the payroll taxes. In January 2006, the Internal Revenue Service (“IRS”) placed a lien on ASPECT assets. A third party accounting firm which represented ASPECT, in the due process hearing, negotiated an installment plan to settle the outstanding liability. Payments were tendered from this third party firm on behalf of the Company’s largest shareholder and holder of a line of credit with ASPECT. The balance due at September 30, 2008 is approximately $38,000.

Liquidity and Capital Resources

Cash provided by operating activities was approximately $23,000 for the nine months ended September 30, 2008. During the nine months ended September 30, 2008, the Company borrowed and additional approximately $55,000 from a shareholder. In addition, the Company received advances under a finance agreement from a third-party in the amount of $44,500.

Risk Factors

You should consider the following discussion of risks as well as other information regarding our common stock. The risks and uncertainties described below are not the only ones. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business could be harmed.

Competition

SSC’s business strategy is to be a leading supplier of solar products and technologies, both domestically and internationally. SSC believes the following to be the keys and risks to its success: marketing of solar technologies through aggressive promotional campaigns to both commercial and consumer users, achieving economies of scale, research and development of solar and other alternative energy technologies, and establishing a rapport with distributors and installers interested in alternative energy systems. The alternative energy industry is relatively new, and a suitable customer base is not currently adequately defined. Given that the customer base may be narrow, it is possible that other solar technology providers may provide significant competition for these markets.

Reliance on Key Personnel

While certain of SSC’s officers and employees have extensive experience in business management, none of them have any prior experience in advising or managing an enterprise such as SSC.

Sales Channels

Sales channels for the distribution of solar technologies historically have been non-existent as solar systems have not been marketed on a state, regional or national level until just recently. There can be no assurance that SSC will create distribution channels large enough and financially strong enough to distribute its product at sufficient levels to attain profitability.

Limited Operating History: Operating Losses

Despite factors that indicate an increasing acceptance and desire to use solar power technologies in certain segments of the industry and government, SSC cannot be assured of their continued demand. While SSC believes that demand for such alternative energy sources exists, SSC cannot assure that it will have success in marketing its products to its customer groups. The inability of SSC to successfully market and sell its products to these customer groups would have an adverse effect on SSC’s profitability.

Going Concern

The Company’s ability to continue as a going concern is an issue raised as a result of the significant operating losses incurred during the nine months ended September 30, 2008 and 2007 and its negative working capital. The Company continues to experience net operating losses. The ability to continue as a going concern is subject to the Company’s ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of securities, increasing sales or obtaining loans and grants from various financial institutions where possible.

Additional Financing

Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.

Limited Trading Market

Currently only a very limited trading market exists for SSC common stock. The common stock trades on the OTCBB under the symbol "SSLR." The OTCBB is a limited market and subject to substantial restrictions and limitations in comparison to the NASDAQ system. Any broker/dealer that makes a market in the Company stock or other person that buys or sells the stock could have a significant influence over its price at any given time. The Company cannot assure its shareholders that a market for its stock will be sustained. There is no assurance that its shares will have any greater liquidity than shares that do not trade on a public market.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4T:CONTROLS AND PROCEDURES

Management’s Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended.  Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007 as seen in our 10KSB. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  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.  We identified the following material weaknesses.

1.   As of December 31, 2007, we did not maintain effective controls over the control environment.  Specifically, we have not formally adopted a written code of business conduct and ethics that governs to the Company’s employees, officers and directors.  Additionally, we have not developed and effectively communicated to our employees its accounting policies and procedures.  This has resulted in inconsistent practices.  Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.  Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

2.   As of December 31, 2007 we did not maintain effective controls over financial statement disclosure.  Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.   Accordingly, management has determined that this control deficiency constitutes a material weakness.

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2007, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

Changes in Internal Control Over Financial Reporting.   

No change in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2008, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Corrective Action

None.

PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

Other than as disclosed below, we know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation.  There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

In early 2005, the landlord for the offices occupied by YCO Holdings, Inc. and its subsidiaries filed suit in the 295^th District Court of Harris County, Texas Cause No. 2005-04423 captioned WKB Value Partners, LP vs. Systems Management Solutions, Inc., alleging that the Company was obligated on the lease even though no authorized officer of the Company had signed the same. This lawsuit was dismissed in February, 2006 pursuant to a Comprehensive Settlement Agreement which required the Company to make payments to WKB Value Partners, LP in the amount of $470,000. The payment schedule called for $20,000 initial payment, followed by monthly payments of $7,500 for 60 months. The Company is currently in default under the terms of the settlement agreement. As of September 30, 2008 the liability to WKB was approximately $307,500.

In December of 2006, Cargill Incorporated (“Cargill”), a Delaware corporation, filed suit in the Judicial District Court of Bexar County, Texas Cause No. 2006-CI-19096, against subsidiary SMS Envirofuels, Inc., and certain related and unrelated companies and individuals, claiming non payment for amounts due Cargill by SMSE. The SMSE payable to Cargill as of October 5, 2006 is $608,387, which included $528,387 for material received and $80,000 for the hedge loss incurred by cancellation of the open physical contracts. On that same date, SMSE entered into an agreement to sell certain assets located at its production plant in Poteet, Texas. The purchaser, Earth Biofuels, Inc. (“EBOF”), as part of the agreement, expressly agreed to assume this debt to Cargill and provide additional working capital to SMSE. In return, SMSE signed a promissory note to EBOF for a line of credit not to exceed $788,000. Cargill agreed to this arrangement with EBOF but reserved the right to pursue any and all claims against SMSE upon failure of EBOF to adhere to the terms outlined in the agreement between EBOF and Cargill. EBOF subsequently made partial payments totaling $250,000 to Cargill, leaving a balance of $358,387. As of this filing, the purchase of the certain assets by EBOF has not occurred and there is not an expectation that a sale will occur in the future. Cargill was awarded a declaratory judgment in its favor. In July of 2007, Cargill reached a payout agreement with SMSE and certain related individuals. The balance, which includes interest and legal fees, totaled $380,000. The agreement required one payment of $75,000 due July 27, 2007 and monthly payments of $25,000 due the 1st of every month until the balance is paid in full, beginning with September 1, 2007. If in the event that SMSE or its certain related individual defaults on this agreement, Cargill will file and execute its judgment as it was awarded. During 2007, SMSE and its affiliates made net payments of $128,000 towards the Cargill obligation. This liability was assumed by the new owners of SMSE when it was sold on August 20, 2008.

On May 14,2008 the former CEO of the Company was served with a lawsuit, on behalf of the Company, relating to an unpaid Promissory Note between the Company and a shareholder. Current management has received a copy of this lawsuit and has begun discussions with the note holder’s representatives as to a potential settlement and can therefore make no statement as to the potential liability related thereto.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Exhibit No. Description

31.1 Section 302 Certification - Eddie Austin, Jr.

32.1 Section 906 Certification - Eddie Austin, Jr.

(b) Reports on Form 8-K:

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sunrise Solar Corporation

By:  /s/ Eddie Austin, Jr.

Eddie Austin, Jr.

Chairman & CEO

(Principal Executive Officer and Principal Accounting Officer)

Date: November 14, 2008