SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended February 28, 2011 .
or
| ¨ | 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 000-52735
PHOTOVOLTAIC SOLAR CELLS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 20-8753132 | |
State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
c/o Sichenzia Ross Friedman Ference, LLP 61 Broadway, 32 Floor New York, NY 10006 |
| (Address of principal executive offices) |
Registrant’s telephone number, including area code ( 212 ) 930-9700
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $0.0001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act ¨ Yes x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x No
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. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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 ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x | |||
| (Do not check if a smaller reporting company) | ||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). x Yes ¨ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $0.00 as no market existed for our common stock at such time.
The number of shares outstanding of Registrant’s common stock, $0.0001 par value at May 13, 2011 was 494,405.
DOCUMENTS INCORPORATED BY REFERENCE
None
FORM 10-K
FOR THE YEAR ENDED FEBRUARY 28, 2011
INDEX
| Page | ||||
| PART I | ||||
| Item 1. | Business | 3 | ||
| Item 1A. | Risk Factors | 4 | ||
| Item 2. | Properties | 6 | ||
| Item 3. | Legal Proceedings | 6 | ||
| Item 4. | (Removed and Reserved) | 6 | ||
| PART II | ||||
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 6 | ||
| Item 6. | Selected Financial Data | 7 | ||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 7 | ||
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 8 | ||
| Item 8. | Financial Statements and Supplementary Data | 8 | ||
| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 9 | ||
| Item 9A. | Controls and Procedures | 9 | ||
| Item 9B. | Other Information | 10 | ||
| PART III | ||||
| Item 10. | Directors, Executive Officers and Corporate Governance | 10 | ||
| Item 11. | Executive Compensation | 11 | ||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 11 | ||
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 12 | ||
| Item 14. | Principal Accounting Fees and Services | 13 | ||
| PART IV | ||||
| Item 15. | Exhibits, Financial Statement Schedules | 13 | ||
2
We urge you to read this entire Annual Report on Form 10-K, including the” Risk Factors” section and the financial statements and related notes included herein. As used in this Annual Report, unless context otherwise requires, the words “we”, “us”, “our”, “the Company”, “Photovoltaic” and “Registrant” refer to Photovoltaic Solar Cells, Inc. Also, any reference to “common shares”, “Common Stock”, “common stock” or “Common Shares” refers to our $.0001 par value common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K constitute “forward-looking statements”. All statements included in this Annual Report, including those related to our cash, liquidity, resources and our anticipated cash expenditures, as well as any statements other than statements of historical fact, regarding our strategy, future operations, financial position, projected costs, prospects, plans and objectives are forward-looking statements. These forward-looking statements are derived, in part, from various assumptions and analyses we have made in the context of our current business plan and information currently available to us and in light of our experience and perceptions of historical trends, current conditions and expected future developments and other factors we believe are appropriate in the circumstances. You can generally identify forward looking statements through words and phrases such as “believe”, “expect”, “seek”, “estimate”, “anticipate”, “intend”, “plan”, “budget”, “project”, “may likely result”, “may be”, “may continue” and other similar expressions, although not all forward-looking statements contain these identifying words. We cannot guarantee future results, levels of activity, performance or achievements, and you should not place undue reliance on our forward-looking statements.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks described in Part I, Item 1A, “Risk Factors” and elsewhere in this Annual Report. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or strategic investments. In addition, any forward-looking statements represent our expectation only as of the day this Annual Report was first filed with the Securities and Exchange Commission (“SEC”) and should not be relied on as representing our expectations as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations change, except as may be required under applicable securities laws.
When reading any forward-looking statement you should remain mindful that actual results or developments may vary substantially from those expected as expressed in or implied by such statement for a number of reasons or factors. Each forward-looking statement should be read in context with and in understanding of the various other disclosures concerning our company and our business made elsewhere in this Annual Report as well as our public filings with the SEC. You should not place undue reliance on any forward-looking statement as a prediction of actual results or developments. We are not obligated to update or revise any forward-looking statements contained in this Annual Report or any other filing to reflect new events or circumstances unless and to the extent required by applicable law.
| ITEM 1. | BUSINESS |
We are a development stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915, originally incorporated in the State of Nevada on March 28, 2007. From inception until November of 2008, our business plan was to produce and market inexpensive solar cells.
In November of 2008, our board of directors determined that the implementation of our business plan was no longer financially feasible. At such time, we discontinued the implementation of our prior business plan and are now pursuing an acquisition strategy, whereby we will seek to acquire undervalued businesses with a history of operating revenues in markets that provide room for growth ("Acquisition Strategy").
The Company, based on proposed business activities, is a "blank check" company. The SEC defines those companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies." Under SEC Rule 12b-2 under the Securities Exchange Act of 1934, as amended, the Company also qualifies as a “shell company,” because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. The Company intends to comply with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, for so long as we are subject to those requirements.
On January 7, 2009, we entered into a stock purchase agreement and indemnification agreement with our controlling shareholders and Waterford Capital Acquisition Co. IX, LLC (“Waterford”). Pursuant to the agreements, Waterford purchased an aggregate of 410,000 previously issued and outstanding shares of our common stock, comprising approximately 83% of our issuance and outstanding capital stock, from the control shareholders.
Our Acquisition Strategy is focused on pursuing a strategy of growth by acquiring undervalued businesses with a history of operating revenues. We will utilize several criteria to evaluate prospective acquisitions including whether the business to be acquired (1) is an established business with viable services or products, (2) has an experienced and qualified management team, (3) has room for growth and/or expansion into other markets, (4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability, and (6) increases shareholder value.
3
Competition of Our Acquisition Strategy
In connection with our Acquisition Strategy, we expect to encounter intense competition from other entities having business objectives similar to ours, including: venture capital firms, blind pool companies, large industrial and financial institutions, small business investment companies and wealthy individuals. Many of these entities are well-established and have greater experience, financial resources and technical knowledge than us. Our limited financial resources may compel us to select certain less attractive acquisition prospects than those of our competitors.
We believe that our future is dependent upon the consummation of a merger, acquisition or other business combination between us and a viable operating entity. There can be no assurance that we will be able to complete any merger, acquisition or other business combination between us and a viable operating entity. Additionally, management believes that we may need to raise additional funds through equity or debt financing to complete a merger, acquisition or other business combination between us and a viable operating entity. There can be no assurance that we will be able to successfully complete an equity or debt financing to complete an acquisition, merger or other business combination between us and a viable operating entity.
Employees
We have a total of 1 employee which includes our Chief Executive Officer. Our employee is considered a part-time employee.
Where to Find More Information
We make our public filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all exhibits and amendments to these reports. These materials are available on the SEC’s web site, http://www.sec.gov . You may also read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Alternatively, you may obtain copies of these filings, including exhibits, by writing or telephoning us at: c/o Sichenzia Ross Friedman Ference, LLP, 61 Broadway, 32 Floor, New York, NY 10006, (212) 930-9700.
| ITEM 1A. | RISK FACTORS |
We have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Annual Report, may adversely affect our business, operating results and financial condition. The uncertainties and risks enumerated below as well as those presented elsewhere in this Annual Report should be considered carefully in evaluating our company and our business and the value of our securities. The following important factors, among others, could cause our actual business, financial condition and future results to differ materially from those contained in forward-looking statements made in this Annual Report or presented elsewhere by management from time to time.
Our limited resources may not be sufficient for us to implement our Acquisition Strategy.
We have limited resources. We are pursuing an acquisition strategy, whereby we will seek to acquire undervalued businesses. The implementation of our strategy is highly dependent on retaining professionals such as lawyers, accountants and investment bankers to consummate any proposed transaction. As a result of our limited resources, we may not have sufficient capital to retain such professions and as a result, may not be able to successfully implement our strategy.
We may not be able to continue as going concern
Based on our limited operations, lack of revenue and relatively minimal assets there can be no assurance that we will be able to continue as a going concern or complete a merger, acquisition or other business combination.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
Our financial statements as of February 28, 2011 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm issued a report that is included in this annual report includes an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is an issue raised as a result of us having no revenue source as we are a development stage company, we have incurred recurring losses since inception and ultimately we are dependent on our ability to obtain additional equity or debt financing to acquire businesses with a history of operating revenues in markets that provide room for growth. Our continued net losses and stockholders’ deficit increases the difficulty in meeting such goals and there can be no assurance that we will be able to successfully complete an equity or debt financing to implement our acquisition strategy. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We will need additional financing in order to execute our business plan and it may be extremely expensive
We are entirely dependent upon our limited available financial resources to implement our acquisition strategy. We cannot ascertain with any degree of certainty the capital requirements for the successful execution of our acquisition strategy. In the event that our limited financial resources prove to be insufficient to implement our acquisition strategy, we will be required to seek additional financing. Also, in the event of the consummation of an acquisition, we may require additional financing to fund the operations or growth of the target. Additionally, as we are considered a “shell” or “blank check” company, purchasers of our securities cannot currently rely on Rule 144 promulgated under the Securities Act with regard to the resale of their shares. Accordingly, any financing in the form of equity may be deeply discounted to compensate the investors for the added risk and inability to rely on Rule 144. Depending on such discount, our current shareholders may be substantially diluted.
4
Additional financing may not be available to us
There can be no assurance that additional financing will be available on acceptable terms, or at all. To the extent that additional financing proves to be unavailable when needed, we would, in all likelihood, be compelled to abandon plans of further acquisitions, and would have minimal capital remaining to pursue other targets. Our inability to secure additional financing, if needed, could also have a material adverse effect on our continued development or growth. We have no arrangements with any bank or financial institution to secure additional financing and there can be no assurance that any such arrangement, if required or otherwise sought, would be available on terms deemed to be commercially acceptable to us and in our best interests.
Competition for acquisitions
We expect to encounter intense competition from other entities having business objectives similar to ours. Many of these entities, including venture capital firms, partnerships and corporations, blind pool companies, large industrial and financial institutions, small business investment companies and wealthy individuals, are well-established and have extensive experience in connection with identifying and effecting acquisitions directly or through affiliates. Many of these competitors possess greater financial, technical, human and other resources than us and there can be no assurance that we will have the ability to compete successfully. Our financial resources will be limited in comparison to those of many of our competitors. This inherent competitive limitation may compel us to select certain less attractive acquisition prospects. There can be no assurance that such prospects will permit us to achieve our stated business objectives.
We may be subject to uncertainty in the competitive environment of a target
In the event that we succeed in completing an acquisition, we will, in all likelihood, become subject to intense competition from competitors of the target. In particular, certain industries which experience rapid growth frequently attract an increasingly large number of competitors, including competitors with greater financial, marketing, technical, human and other resources than the initial competitors in the industry. The degree of competition characterizing the industry of any prospective target cannot presently be ascertained. There can be no assurance that, subsequent to a consummation of an acquisition, we will have the resources to compete effectively in the industry of the target, especially to the extent that the target is in a high growth industry.
We may pursue an acquisition with a target operating outside the United States which will entail the additional risks relating to doing business in a foreign country
We may effectuate an acquisition with a target whose business operations or even headquarters, place of formation or primary place of business are located outside the United States. In such event, we may face the significant additional risks associated with doing business in that country. In addition to the language barriers, different presentations of financial information, different business practices, and other cultural differences and barriers that may make it difficult to evaluate such a target, ongoing business risks may result from the internal political situation, uncertain legal systems and applications of law, prejudice against foreigners, corrupt practices, uncertain economic policies and potential political and economic instability that may be exacerbated in various foreign countries.
Harvey Judkowitz, our CEO, is critical to our future success
Our ability to successfully carry out our business plan and to consummate additional acquisitions will be dependent upon the efforts of Mr. Judkowitz. Notwithstanding the significance of Mr. Judkowitz, we have not obtained any "key man" life insurance on his life. The loss of the services of Mr. Judkowitz would have a material adverse effect on our ability to successfully achieve our business objectives. If additional personnel are required, there can be no assurance that we will be able to retain such necessary additional personnel.
The uncertain structure of an acquisition may result in risks relating to the market for our common stock
We may form one or more subsidiary entities to effect an acquisition and may, under certain circumstances, distribute the securities of subsidiaries to our stockholders. There can be no assurance that a market would develop for the securities of any subsidiary distributed to stockholders or, if a market were to develop, no assurances as to the prices at which such securities might trade.
We expect to pay no cash dividends
We do not expect to pay dividends to the holders of common stock. Accordingly, any return on a stockholders’ investment will require the appreciation of our common shares. There can be no assurance that the value of our common shares will increase.
5
Indemnification of officers and directors
Our Certificate of Incorporation provides for the indemnification of our officers and directors to the fullest extent permitted by the laws of the State of Nevada. It is possible that the indemnification obligations imposed under these provisions could result in a charge against our earnings, if any, and thereby affect the availability of funds for other uses.
Taxation considerations may impact the structure of an acquisition and post-merger liabilities
Federal and state tax consequences will, in all likelihood, be major considerations for us in consummating an acquisition. The structure of an acquisition or the distribution of securities to stockholders may result in taxation of us, the target or stockholders. Typically, these transactions may be structured to result in tax-free treatment to both companies, pursuant to various federal and state tax provisions. We intend to structure any acquisition so as to minimize the federal and state tax consequences to both the us and the target. Management cannot assure that an acquisition will meet the statutory requirements for a tax-free reorganization, or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes, which may have an adverse effect on both parties to the transaction.
We may be deemed an investment company and subjected to related restrictions
The regulatory scope of the Investment Company Act of 1940, as amended (the "Investment Company Act"), which was enacted principally for the purpose of regulating vehicles for pooled investments in securities, extends generally to companies engaged primarily in the business of investing, reinvesting, owning, holding or trading in securities. The Investment Company Act may, however, also be deemed to be applicable to a company which does not intend to be characterized as an investment company but which, nevertheless, engages in activities which may be deemed to be within the definitional scope of certain provisions of the Investment Company Act. We believe that our anticipated principal activities, which will involve acquiring control of an operating company, will not subject us to regulation under the Investment Company Act. Nevertheless, there can be no assurance that at some future point we will not be deemed to be an investment company. If we are deemed to be an investment company, we may become subject to certain restrictions relating to our activities, including restrictions on the nature of our investments and the issuance of securities. In addition, the Investment Company Act imposes certain requirements on companies deemed to be within its regulatory scope, including registration as an investment company, adoption of a specific form of corporate structure and compliance with certain burdensome reporting, record keeping, voting, proxy, disclosure and other rules and regulations. In the event of the characterization of us as an investment company, our inability to satisfy such regulatory requirements, whether on a timely basis or at all, would, under certain circumstances, have a material adverse effect on us.
| ITEM 2. | PROPERTIES |
Our executive offices are located at the offices of our law firm, Sichenzia Ross Friedman Ference, LLP located at 61 Broadway, 32 Floor, New York, NY 10006. We do not pay any rent for the use of the facilities and our use of the facilities is minimal.
| ITEM 3. | LEGAL PROCEEDINGS |
As of the date of this Annual Report, there are no material pending legal or governmental proceedings relating to our company or properties to which we are a party, and to our knowledge there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.
| ITEM 4. | REMOVED AND RESERVED |
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our Common Stock is sporadically traded on the Over-the-Counter Bulletin Board under the symbol “PVSO”. As a result of our sporadic trading, lack of liquidity and limited public float, we have determined that no established public trading market for a class of common equity exists.
Holders
As of May 13, 2011 our common stock was held by approximately 38 record holders. Notwithstanding, we believe our actual number of shareholders may be significantly higher as 16,151 shares are currently being held in street name.
6
Dividends
We have not paid any cash dividends to date, and we have no plans to do so in the immediate future.
Recent Sales of Unregistered Securities.
We have not issued any securities during our 2011 fiscal year that were not registered under the Securities Act of 1933.
Equity Compensation Plan Information.
We have no equity compensation plan.
| ITEM 6. | SELECTED FINANCIAL DATA |
We are not required to provide the information as to selected financial data as we are considered a smaller reporting company.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview
From inception until November of 2008, our business plan was to produce and market inexpensive solar cells. In November of 2008, our board of directors determined that the implementation of our business plan was no longer financially feasible. At such time, we discontinued the implementation of our prior business plan and are now pursuing an acquisition strategy, whereby we will seek to acquire undervalued businesses with a history of operating revenues in markets that provide room for growth ("Acquisition Strategy").
Our Acquisition Strategy is focused on pursuing a strategy of growth by acquiring undervalued businesses with a history of operating revenues. We will utilize several criteria to evaluate prospective acquisitions including whether the business to be acquired (1) is an established business with viable services or products, (2) has an experienced and qualified management team, (3) has room for growth and/or expansion into other markets, (4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability, and (6) increases shareholder value.
Critical Accounting Policies
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:
Use of Estimates - These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, our management has estimated our net operating loss for tax purposes. Actual results could differ from those estimates.
Going Concern
We are currently in the process of implementing our new business plan, focusing on our acquisition strategy. At present, we have no cash on hand and are dependent on our majority stockholder to provide working capital advances. There can be no assurance that upon implementing our new business plan, we will be successful or that we will start producing sufficient revenues to maintain our operations. The foregoing matters raise substantial doubt about our ability to continue as a going concern.
Comparison of the Year Ended February 28, 2011 to the Year Ended February 28, 2010
As a result of the abandonment of our former business plan during November 2008, and the subsequent change in control and implementation of our new business plan in January 2009, a discussion of the changes in the results between the comparative periods are not meaningful.
Revenue
We have no revenue from continuing or discontinued operations for the years ended February 28, 2011 or 2010.
7
General and Administrative Expenses
General and administrative expenses related to continuing operations were $101,536 and $93,246 for the years ended February 28, 2011 and 2010, respectively. General and administrative expenses consist primarily of professional fees and due diligence expense related to potential acquisitions.
Plan of Operation
We are pursuing an Acquisition Strategy, whereby we will seek to acquire undervalued businesses with a history of operating revenues in markets that provide room for growth. We will primarily engage in identifying, investigating and, if investigation warrants, acquiring companies that will enhance our revenues and increase shareholder value. Our Acquisition Strategy is focused on pursuing a strategy of growth by acquiring undervalued businesses with a history of operating revenues. We will utilize several criteria to evaluate prospective acquisitions including whether the business to be acquired (1) is an established business with viable services or products, (2) has an experienced and qualified management team, (3) has room for growth and/or expansion into other markets, (4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability, and (6) increases shareholder value.
Liquidity and Capital Resources
We have no cash on hand as of May 13, 2011. We currently are dependent on our majority stockholder to provide working capital advances. Accordingly, in the immediate future, management will need to raise additional funds in order to continue operating. There can be no assurances that we will be able to obtain additional funds if and when needed.
Additionally, as we are considered a “shell” or “blank check” company, purchasers of our securities cannot currently rely on Rule 144 promulgated under the Securities Act with regard to the resale of their shares. Accordingly, any financing in the form of equity may be deeply discounted to compensate the investors for the added risk and inability to rely on Rule 144.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial statements.
Off Balance Sheet Arrangements
None.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
We are not required to provide the information as to selected financial data as we are considered a smaller reporting company.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
INDEX TO FINANCIAL STATEMENTS
| Page | ||
| Report of RBSM, LLP, Independent Registered Public Accounting Firm | F-1 | |
| Balance Sheets | F-2 | |
| Statements of Operations | F-3 | |
| Statements of Stockholders’ Deficit | F-4 | |
| Statements of Cash Flows | F-5 | |
| Notes to Financial Statements | F-6 |
8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Photovoltaic Solar Cells, Inc.
We have audited the accompanying balance sheets of Photovoltaic Solar Cells, Inc. (the “Company”), a development stage company, as of February 28, 2011 and 2010, and the related statements of operations, stockholders' deficit, and cash flows for each of the two years in the period ended February 28, 2011 and the period from March 28, 2007 (date of inception) through February 28, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Photovoltaic Solar Cells, Inc. as of February 28, 2011 and 2010, and the results of its operations and its cash flows for each of the two years in the period ended February 28, 2011 and the period from March 28, 2007 (date of inception) through February 28, 2011, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the accompanying financial statements, the Company is a development stage company and has not commenced its planned principal operations, has suffered recurring losses since inception and is experiencing difficulty in generating sufficient cash flow to sustain its operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| /s/ RBSM LLP |
New York, New York
May 25, 2011
F-1
PHOTOVOLTAIC SOLAR CELLS, INC.
(A Development Stage Company)
BALANCE SHEETS
| February 28, | ||||||||
| 2011 | 2010 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | - | $ | - | ||||
| Total current assets | - | - | ||||||
| Total assets | $ | - | $ | - | ||||
| Liabilities and stockholders' deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 130,184 | $ | 68,799 | ||||
| Due to stockholder | 145,090 | 104,939 | ||||||
| Total current liabilities | 275,274 | 173,738 | ||||||
| Stockholders' deficit | ||||||||
| Preferred stock, par value $.0001 per share; 10,000,000 shares authorized, no shares issued and outstanding | - | - | ||||||
| Common stock, par value $.0001 per share; 50,000,000 shares authorized, 494,405 shares issued and outstanding as of February 28, 2011 and 2010, respectively | 49 | 49 | ||||||
| Additional paid-in capital | 413,621 | 413,621 | ||||||
| Deficit accumulated during the development stage | (688,944 | ) | (587,408 | ) | ||||
| Total stockholders' deficit | (275,274 | ) | (173,738 | ) | ||||
| Total liabilities and stockholders' deficit | $ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
F-2
PHOTOVOLTAIC SOLAR CELLS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
| Period from | ||||||||||||
| March 28, 2007 | ||||||||||||
| (Inception) to | ||||||||||||
| Years Ended February 28, | February 28, | |||||||||||
| 2011 | 2010 | 2011 | ||||||||||
| Revenue | $ | - | $ | - | $ | - | ||||||
| Expenses: | ||||||||||||
| General and administrative expenses | 101,536 | 93,246 | 211,462 | |||||||||
| Total expense | 101,536 | 93,246 | 211,462 | |||||||||
| Loss from continuing operations | (101,536 | ) | (93,246 | ) | (211,462 | ) | ||||||
| Loss from discontinued operations, net of tax | - | - | (356,457 | ) | ||||||||
| Loss on disposition of assets of discontinued operations, net of tax | - | - | (121,025 | ) | ||||||||
| Total loss from discontinued operations | - | - | (477,482 | ) | ||||||||
| Loss before income taxes | (101,536 | ) | (93,246 | ) | (688,944 | ) | ||||||
| Provision for income taxes | - | - | - | |||||||||
| Net loss | $ | (101,536 | ) | $ | (93,246 | ) | $ | (688,944 | ) | |||
| Net loss per common share, basic and diluted | $ | (0.21 | ) | $ | (0.19 | ) | ||||||
| Weighted average shares outstanding, basic and diluted | 494,405 | 494,405 | ||||||||||
The accompanying notes are an integral part of these financial statements.
F-3
PHOTOVOLTAIC SOLAR CELLS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT MARCH 28, 2007 (INCEPTION) to FEBRUARY 28, 2011
| Deficit | ||||||||||||||||||||
| Accumulated | ||||||||||||||||||||
| Additional | During the | |||||||||||||||||||
| Common Stock | Paid-in | Development | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Stage | Deficit | ||||||||||||||||
| Common stock issued for patent and cash at $0.18 per share | 310,005 | $ | 31 | $ | 56,139 | $ | - | $ | 56,170 | |||||||||||
| Common stock sold for cash at $1.00 per share | 10,000 | 1 | 9,999 | - | 10,000 | |||||||||||||||
| Common stock issued for professional services at $0.10 per share | 85,000 | 9 | 8,491 | - | 8,500 | |||||||||||||||
| Common stock sold for cash at $2.00 per share | 61,500 | 6 | 122,994 | - | 123,000 | |||||||||||||||
| Common stock issued for professional services at $0.10 per share cancelled by the board of directors | (35,000 | ) | (4 | ) | (3,496 | ) | - | (3,500 | ) | |||||||||||
| Common stock issued in exchange for equity investment | 60,000 | 6 | 179,994 | - | 180,000 | |||||||||||||||
| Net loss | - | - | - | (115,330 | ) | (115,330 | ) | |||||||||||||
| Balance, February 29, 2008 | 491,505 | 49 | 374,121 | (115,330 | ) | 258,840 | ||||||||||||||
| Common stock issued for professional services at $15.00 per share | 2,500 | - | 37,500 | - | 37,500 | |||||||||||||||
| Common stock sold for cash at $5.00 per share | 400 | - | 2,000 | - | 2,000 | |||||||||||||||
| Net loss | - | - | - | (378,832 | ) | (378,832 | ) | |||||||||||||
| Balance, February 28, 2009 | 494,405 | 49 | 413,621 | (494,162 | ) | (80,492 | ) | |||||||||||||
| Net loss | - | - | - | (93,246 | ) | (93,246 | ) | |||||||||||||
| Balance, February 28, 2010 | 494,405 | 49 | 413,621 | (587,408 | ) | (173,738 | ) | |||||||||||||
| Net loss | - | - | - | (101,536 | ) | (101,536 | ) | |||||||||||||
| Balance, February 28, 2011 | 494,405 | $ | 49 | $ | 413,621 | $ | (688,944 | ) | $ | (275,274 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
F-4
PHOTOVOLTAIC SOLAR CELLS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
| Period from | ||||||||||||
| March 28, 2007 | ||||||||||||
| (Inception) to | ||||||||||||
| Years Ended February 28, | February 28, | |||||||||||
| 2011 | 2010 | 2011 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | $ | (101,536 | ) | $ | (93,246 | ) | $ | (688,944 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Issuance of equity investments for services | - | - | 180,000 | |||||||||
| Expenses paid by stockholder/officer | 40,151 | 38,629 | 103,565 | |||||||||
| Stock issued for professional services | - | - | 42,500 | |||||||||
| Loss on disposition of assets | - | - | 121,025 | |||||||||
| Changes in operating assets and liabilities | ||||||||||||
| Increase in accounts payable and accrued expenses | 61,385 | 54,617 | 133,184 | |||||||||
| Net cash used in operating activities | - | - | (108,670 | ) | ||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of equipment under construction | - | - | (13,104 | ) | ||||||||
| Purchase of intangible assets | - | - | (14,853 | ) | ||||||||
| Net cash used in investing activities | - | - | (27,957 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Repayment to officer, net | - | - | (3,083 | ) | ||||||||
| Advances from shareholder | - | - | 4,510 | |||||||||
| Proceed from the sale of common stock | - | - | 135,200 | |||||||||
| Net cash provided by financing activities | - | - | 136,627 | |||||||||
| Net decrease in cash | - | - | - | |||||||||
| Cash, beginning of period | - | - | - | |||||||||
| Cash, end of period | $ | - | $ | - | $ | - | ||||||
| Supplemental cash flow information: | ||||||||||||
| Cash paid for interest | $ | - | $ | - | ||||||||
| Cash paid for income taxes | $ | - | $ | - | ||||||||
| Non-Cash Financing Activities: | ||||||||||||
| Transfer of assets in settlement of debt to officer | $ | - | $ | - | $ | 135,000 | ||||||
| Officer loan assigned to stockholder | - | - | 49,100 | |||||||||
| Common stock issued for patent | - | - | 55,970 | |||||||||
| Equipment under construction paid for by officer | - | - | 171,081 | |||||||||
| Prepaid insurance paid by officer | - | - | 1,896 | |||||||||
| Trademark application paid by officer | - | - | 1,025 | |||||||||
| Issuance of equity investments for services | - | - | 180,000 | |||||||||
| Common stock issued for equity investments | - | - | 180,000 | |||||||||
The accompanying notes are an integral part of these financial statements.
F-5
PHOTOVOLTAIC SOLAR CELLS, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2011 and 2010
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Photovoltaic Solar Cells, Inc. ("we", "us", "our”, “PVSO” or “the Company") was incorporated in the State of Nevada on March 28, 2007 primarily to engage in manufacturing solar cells for use as an alternative method of producing energy (i.e., electricity).
Nature of Operations
From its inception the Company conducted limited operations according to its business plan, which called for the development of a production line capable of producing solar cells for resale. Members of management loaned working capital funds to the Company, along with contributing a variety of intellectual property, i.e., one U.S. Patent and seven patent applications (provisional patents) or Patent Cooperation Treaty Applications.
We are a development stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915.
During the year ended February 28, 2009, the sudden and rapid collapse of the energy markets precipitated our reexamination of the likelihood that the Company had the ability to raise enough working capital to complete our production equipment and begin to generate revenues. We determined that the national and international economic decline made it virtually impossible for Photovoltaic Solar Cells, Inc. to continue our planned corporate development.
In June 2008 we established a Florida corporation as our wholly owned subsidiary, Solar-Technologies, Inc. (“Solar-Tech”). Prior to deciding to terminate all operations management had, as of September 16, 2008, assigned all of our assets and corresponding liabilities to Solar-Tech. This transaction was designed to make PVSO a holding company for energy related assets and simplify future operations and transactions. As part of its reexamination of the Company’s business prospects, management reversed this transfer in November of 2008 and dissolved the subsidiary.
On January 7, 2009, the Company entered into a Stock Purchase Agreement and Indemnification Agreement (the “Agreements”) by and among the Control Shareholders of the Company, the Company, and the Purchaser, Waterford Capital Acquisition Co. IX, LLC a Delaware Limited Liability Corporation (“Waterford”).
Pursuant to the Agreements, Waterford purchased an aggregate of 410,000 previously issued and outstanding shares of our common stock, comprising approximately 83% of the issued and outstanding capital stock of the Company, for the aggregate purchase price of $275,510 (which included the assumption of certain unpaid company expenses and liabilities). As a result of the sale, a former officer and director resigned and our current officer and director was appointed.
As of February 28, 2011 we are pursuing an acquisition strategy, whereby we will seek to acquire undervalued businesses with a history of operating revenues in markets that provide room for growth ("Acquisition Strategy"). We will engage in identifying, investigating and, if warranted, acquiring companies that will enhance our revenues and increase shareholder value. We will utilize several criteria to evaluate prospective acquisitions including whether the business to be acquired (1) is an established business with viable services or products, (2) has an experienced and qualified management team, (3) has room for growth and/or expansion into other markets, (4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability, and (6) increases shareholder value.
F-6
Going Concern
The financial statements have been prepared on a going concern basis, and do not reflect any adjustments related to the uncertainty surrounding our recurring losses or accumulated deficit
We currently have no revenue source and are incurring losses. These factors raise substantial doubt about our ability to continue as a going concern.
We will pursue an acquisition strategy whereby we will seek to acquire businesses with a history of operating revenues in markets that provide room for growth. We will engage in identifying, investigating and, if warranted, acquiring companies that will enhance revenues and increase shareholder value. In the event that our limited financial resources prove to be insufficient to implement our acquisition strategy, we will be required to seek additional financing, through either equity or debt financing. However, there can be no assurance that we will be able to successfully complete an equity or debt financing to implement our acquisition strategy.
Cash Equivalents
For purposes of balance sheet classification and the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less and any certificates of deposit that do not contain material early withdrawal penalties to be cash equivalents.
Use of Estimates
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from such estimates.
Net Loss Per Share
The Company follows ASC Topic 260, "Earnings Per Share" in calculating the basic and diluted loss per share. We compute basic loss per share by dividing net loss and net loss attributable to common shareholders by the weighted average number of common shares outstanding. Diluted loss per share considers the effect of common equivalent shares. There were no common share equivalents at February 28, 2011 or 2010.
Fair Value of Financial Instruments
Our short-term financial instruments, including accrued expenses and payables to stockholder, consist primarily of instruments without extended maturities the fair value of which, based on management’s estimates, reasonably approximate their book value.
Income Taxes
We utilize ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial statements.
F-7
NOTE 2 - STOCKHOLDERS’ DEFICIT
The Company is authorized to issue 50,000,000 shares of $0.0001 par value common stock and 10,000,000 shares of $0.0001 par value preferred stock.
On November 29, 2010, pursuant to corporate actions approved by a joint consent of stockholders holding a majority of shares of common stock entitled to vote on the proposed actions and our Board of Directors, the Company adopted resolutions approving the following corporate actions:
| 1. | To effect a reverse split of the Company's issued and outstanding common stock in a ratio of one new share for every ten shares issued and outstanding; and |
| 2. | To amend and restate the Company's Articles of Incorporation to authorize an increase of our authorized shares to 160,000,000 shares, consisting of: (i) 150,000,000 shares of common stock; and (ii) 10,000,000 shares of blank check preferred stock. |
The 1 for 10 reverse split became effective January 20, 2011. The amendment to the Articles of Incorporation was effective on May 25, 2011.
All share and per share amounts have been retroactively restated to reflect the reverse split.
NOTE 3 – DISCONTINUED OPERATIONS
As a result of our determination that the national and international economic decline has made it virtually impossible for Photovoltaic Solar Cells, Inc. to continue our planned corporate development, we have decided not to continue with our alternative energy business plan. As of January 7, 2009 we began pursuing an acquisition strategy whereby we will seek to acquire businesses with a history of operating revenues in markets that provide room for growth. All prior operations have been presented as discontinued operations in accordance with ASC 205-20, “Discontinued Operations”.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the years ended February 28, 2011 and 2010 our majority shareholder, Waterford, made certain net payments on behalf of the Company aggregating $40,151 and $38,629, respectively. These advances are noninterest bearing. The total amount due to Waterford at February 28, 2011 is $145,090.
NOTE 5 – SETTLEMENT AGREEMENT
The Company had entered into a nonbinding letter of intent with regard to the reverse acquisition of PVSO by Jinpeng Poly Chem, Inc. (“Jinpeng”). During May, 2010 we reached a settlement agreement with Jinpeng whereby the letter of intent was terminated. Pursuant to the settlement agreement, Jinpeng made a cash payment of $20,000 representing partial reimbursement of expenses incurred by us. This payment was received by Waterford, which had paid the expenses on our behalf. Jinpeng also issued us 16,000 shares of its common stock. We have assigned no value to these common shares as Jinpeng is a privately held company with no current market for its shares. The Jinpeng common shares have no readily ascertainable fair value.
NOTE 6 – INCOME TAXES
We utilize ASC 740 “Income Taxes”, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.
F-8
Net operating losses for tax purposes of approximately $689,000 at February 28, 2011 are available for carryover, subject to Internal Revenue Code Section 382 change of control limitations. The net operating losses will expire from 2028 through 2031. We have provided a 100% valuation allowance for the deferred tax benefits resulting from the net operating loss carryover due to our limited operating history. In addressing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The valuation allowance increased by $39,000 and $35,000 during the years ended February 28, 2011 and 2010, respectively. A reconciliation of the statutory Federal income tax rate and the effective income tax rate for the years ended February 28, 2011 and 2010 follows.
Significant components of deferred tax assets and liabilities are as follows:
| 2011 | 2010 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforward | $ | 262,000 | $ | 223,000 | ||||
| Valuation allowance | (262,000 | ) | (223,000 | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
| Statutory federal income tax rate | (34 | )% | (34 | )% | ||||
| State income taxes, net of federal taxes | (4 | )% | (4 | )% | ||||
| Valuation allowance | 38 | % | 38 | % | ||||
| Effective income tax rate | 0 | % | 0 | % | ||||
NOTE 7 – SUBSEQUENT EVENTS
The amendment to our Articles of Incorporation was effective on May 25, 2011 (See Note 2).
F-9
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Not applicable.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Based on management’s evaluation (with the participation of our CEO and Chief Financial Officer (Principal Accounting Officer)), as of the end of the period covered by this report, our CEO and Principal Accounting Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management Report on Internal Control Over Financial Reporting
The management of Photovoltaic Solar Cells, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal accounting officers to provide reasonable assurance to the Company’s management regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
| · | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| · | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
| · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of February 28, 2011. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) as a guide. Based on this assessment, our management concluded that, as of February 28, 2011, our internal control over financial reporting were effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit smaller reporting companies to provide only the management’s report in this annual report.
9
Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and Principal Accounting Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
On November 29, 2010, our board of directors and holders of a majority of our issued and outstanding shares entitled to vote approved an amendment to our articles of incorporation. The action was previously disclosed in our information statement filed on form DEF 14C with the United States Securities and Exchange Commission on December 20, 2010. The purpose of the amendment was to increase the number of authorized shares. On May 23, 2011, we filed the amendment with the Secretary of State of Nevada. The amendment is effective as of May 25, 2011.
PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Directors
The following sets forth our current directors and information concerning their ages and background. All directors hold office until the next annual meeting of stockholders and until their respective successors are elected, except in the case of death, resignation or removal:
| Name | Principal Occupation | Age | Director Since | |||
| Harvey Judkowitz | Certified Public Accountant | 66 | 4/07 | |||
| Richard Friedman | Attorney | 48 | 1/09 |
Harvey Judkowitz, Director: Harvey Judkowitz, is a Certified Public Accountant licensed in both New York and Florida. From 1988 to date, Mr. Judkowitz has conducted his own CPA practice. Mr. Judkowitz was the Chairman of the Board and CEO of UniPro Financial Services, Inc. (UPRO) from June, 2003 until the Company was sold in September, 2005. He currently serves on the Board of Directors and is chairman of the audit committees for the following publicly traded companies: The Singing Machine, Inc. (SMDM), Phoenix Biopharm, Inc. (PXBM) and Photovoltaic Solar Cells, Inc. (PVSO). He was a Director of PVSO from inception until November 5, 2008 and from January 15, 2009 until present. During the past five years, Mr. Judkowitz was also a member of two publicly traded companies: Cavit Sciences, Inc. (CVIT) through March 10, 2007 and Hard to Treat Diseases, Inc. (HTDS) through December 31, 2008. Mr. Judkowitz graduated from Pace University in 1967 with a BBA in Accounting. Over the past 25 years, Mr. Judkowitz has been a consultant to assist several companies in going public and arrange short term financing until the public money could be raised.
Richard Friedman, Director: Mr. Friedman has served as a Director of the Company since January, 2009. Since May 1998, Mr. Friedman has been the managing partner of Sichenzia Ross Friedman Ference, a New York City based law firm that provides representation in all matters involving the securities industry, as well as in all general corporate and litigation matters. Mr. Friedman received his Juris Doctor degree from Hofstra University School of Law in 1987 and his Bachelor of Arts Degree in Economics from the State University of New York at Binghamton (Harpur College) in 1984.
Executive Officers and Significant Employees
The following sets forth our current executive officers and information concerning their age and background:
| Name | Position | Age | Position Since | |||
| Harvey Judkowitz | Chief Executive Officer and Chief Financial Officer | 66 | 1/09 |
Harvey Judkowitz. – See Bio in Directors Section
10
Code of Ethics
We have not adopted a "Code of Ethics” as a result of our shell status, limited management and limited number of transactions, if any, conducted by the company.
Committees
There are no committees of the Board of Directors. The Company’s By-laws provide that the size of the Board of Directors may be changed by resolution of the Board. Members of the Board serve until the next annual meeting of shareholders and until their successors are elected and qualified. Meetings of the Board are held when and as deemed necessary or appropriate. Officers are appointed by and serve at the discretion of the Board.
Board Leadership Structure
The Board does not have a policy on whether the same person should serve as both the chief executive officer and chairman of the board or, if the roles are separate, whether the chairman should be selected from the non-employee directors or should be an employee. The Board believes that it should have the flexibility to make these determinations at any given point in time in the way that it believes best to provide appropriate leadership for our company and business at that time. The Board believes that its current leadership structure, with Mr. Judkowitz serving as both chief executive officer and board chairman, is appropriate given Mr. Judkowitz’s past experience serving in these roles, the efficiencies of having the chief executive officer also serve in the role of chairman, and our limited number of employees. Our board is however comprised of a majority of independent members, all of who serve on our standing committees.
Our risk management program is overseen by our Chief Executive Officer. Material risks are identified and prioritized by management, and each prioritized risk is referred to a Board Committee or the full Board for oversight. For example, strategic risks are referred to the full Board while financial risks are referred to the audit Committee. The Board regularly reviews information regarding our liquidity and operations, as well as the risks associated with each. Also, the Compensation Committee periodically reviews the most important risks to our business to ensure that compensation programs do not encourage excessive risk-taking and promote our goals and objectives.
Compliance with Section 16(a) of the Exchange Act
During the fiscal year ended February 28, 2011, all Section 16(1a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.
| ITEM 11. | EXECUTIVE COMPENSATION |
Executive Compensation
Summary Compensation
The following table sets forth information for our two most recently completed fiscal years concerning the compensation of (i) the Principal Executive Officer and (ii) all other executive officers of Photovoltaic Solar Cells, Inc. who earned over $100,000 in salary and bonus during the two most recently completed fiscal years ended February 28, 2011 (together the “Named Executive Officers”). No other employees earned a salary over $100,000 in the two most recently completed fiscal years.
Name and principal position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e) | Option Award ($) (f)(2) | Nonequity Incentive Plan compensation ($) (g) | Non-qualified deferred compensation earning ($) (h) | All other Compensation ($) (i)(1) | Total ($) (j) | |||||||||||||||||||||||||
| Harvey Judkowitz | 2011(1) | 5,000 | - | - | - | - | - | 5,000 | ||||||||||||||||||||||||||
| Principal Executive Officer | 2010(1) | 5,000 | - | - | - | - | - | - | 5,000 | |||||||||||||||||||||||||
(1) We have accrued for GAAP reporting purposes an annual salary of $5,000 to Mr. Judkowitz
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Securities authorized for issuance under equity compensation plans
Information regarding shares authorized for issuance under equity compensation plans approved and not approved by stockholders required by this Item is incorporated by reference from Item 5 of this Annual Report from the section entitled “Equity Compensation Plan Information ”.
11
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of May 13, 2011, information regarding beneficial ownership of our capital stock by:
| · | each person, or group of affiliated persons, known by us to be the beneficial owner of 5% or more of any class of our voting securities; |
| · | each of our current directors and nominees; |
| · | each of our current named executive officers; and |
| · | all current directors and named executive officers as a group. |
Beneficial ownership is determined according to the rules of the SEC. Beneficial ownership means that a person has or shares voting or investment power of a security and includes any securities that person or group has the right to acquire within 60 days after the measurement date. This table is based on information supplied by officers, directors and principal stockholders. Except as otherwise indicated, we believe that each of the beneficial owners of the common stock listed below, based on the information such beneficial owner has given to us, has sole investment and voting power with respect to such beneficial owner’s shares, except where community property laws may apply.
| Common Stock | ||||||||||||||||
| Name and Address of Beneficial Owner(1) | Shares | Shares Underlying Convertible Securities(2) | Total | Percent of Class(2) | ||||||||||||
| Directors and named executive officers | ||||||||||||||||
| Harvey Judkowitz | 10,000 | — | 10,000 | 2.02 | % | |||||||||||
| Beneficial Owners of 5% or more | ||||||||||||||||
| Waterford Capital Acquisition Co. IX, LLC (3) | 410,000 | — | 410,000 | 82.93 | % | |||||||||||
| Perkins Capital Management, Inc. (4) | 55,000 | — | 55,000 | 11.12 | % | |||||||||||
| (1) | Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is c/o Sichenzia Ross Friedman Ference, LLP Atn: Richard Friedman – 61 Broadway, 32 nd Floor, New York, NY 10006 |
| (2) | Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrant. There are 494,405 shares of common stock issued and outstanding as of May 13, 2011. |
| (3) | Craig Rosato has sole voting and dispositive power over the 410,000 shares owned by Waterford Capital Acquisition Co. IX, LLC. |
| (4) | Perkins Capital Management, Inc., a Minnesota Business Corporation owned by Richard W. Perkins, is the beneficial owner of 17,500 common shares and has sole dispositive power over 37,500 shares owned by its clients. Mr. Perkins is the beneficial owner of 17,500 common shares, and has sole power to vote or direct the vote over an additional 37,500 shares, held of record on behalf of investment clients. The individual and corporate shareholders are both registered with the Securities and Exchange Commission as investment advisors. Mr. Perkins' address is: 730 East Lake Street, Wayzata, MN 55391-1769 |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Transactions with our former Chief Executive Officer and Majority Shareholder
In November of 2008, we transferred the majority of our assets to Lawrence F. Curtin, our Chief Executive Officer at the time, in satisfaction of monies due by us to Mr. Curtin. For a detailed description of the transaction, refer to Note 1 of the notes to our financial statements.
Through November 30, 2008, Lawrence F. Curtin made certain advances to and payments on behalf of the Company and agreed to forego reimbursement until such time as our working capital was sufficient to cover our operations. The advances were noninterest bearing. As described above, certain assets, valued at an aggregate of $135,000, were transferred to Mr. Curtin as partial repayment of the advances, leaving a balance remaining due and owing of $49,100. This remaining balance was assigned to Waterford pursuant to the Stock Purchase Agreement referenced below.
12
On January 7, 2009, we entered into a stock purchase agreement and indemnification agreement with Waterford and certain control shareholders who were also officers and directors at the time. We incorporate by reference the description of the transaction contained in our Quarterly Report on Form 10-Q filed with the SEC on January 13, 2009.
Between January 7, 2009 and the date of this report, we have borrowed $95,990 from our majority shareholder, Waterford. The loan is a demand obligation that can be called by Waterford. We anticipate the loan will be converted into shares of common stock.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The following table summarizes the approximate aggregate fees billed to us or expected to be billed to us by our independent auditors for our 2011 and 2010 fiscal years:
| Type of Fees | 2011 | 2010 | ||||||
| Audit Fees | $ | 13,000 | $ | 19,000 | ||||
| Audit Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
| Total Fees | $ | 13,000 | $ | 19,000 | ||||
Pre-Approval of Independent Auditor Services and Fees
Our board of directors reviewed and pre-approved all audit and non-audit fees for services provided by RBSM, LLP and has determined that the provision of such services to us during fiscal 2011 is compatible with and did not impair independence. It is the practice of the audit committee to consider and approve in advance all auditing and non-auditing services provided to us by our independent auditors in accordance with the applicable requirements of the SEC. RBSM, LLP did not provide us with any services, other than those listed above.
PART IV
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
| 1. | Financial Statements: See “Index to Financial Statements” in Part II, Item 8 of this Form 10-K. |
| 2. | Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K. |
Certain of the agreements filed as exhibits to this Form 10-K contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
| · | may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements; |
| · | may apply standards of materiality that differ from those of a reasonable investor; and |
| · | were made only as of specified dates contained in the agreements and are subject to later developments. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and investors should not rely on them as statements of fact.
13
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PHOTOVOLTAIC SOLAR CELLS, INC. | ||||
| Dated: May 25, 2011 | By: | /S/ Harvey Judkowitz | ||
Harvey Judkowitz Chief Executive Officer, Director | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the following capacities and on the dates indicated.
| Name | Title | Date | ||
| /s/ Harvey Judkowitz | Chief Executive Officer and Principal Accounting Officer and Director | May 25, 2011 | ||
| Harvey Judkowitz | (Principal executive officer and Principal financial and accounting officer) | |||
| /s/ Richard Friedman | Director | May 25, 2011 | ||
14
INDEX TO EXHIBITS
| Incorporated by Reference | ||||||||||||
Exhibit No. | Description | Filed Herewith | Form | Exhibit No. | File No. | Filing Date | ||||||
| 3.01(i) | Amended and Restated Articles Of Incorporation Of Photovoltaic Solar Cells, Inc. | * | ||||||||||
| 3.02(ii) | Bylaws | SB-2 | 3.02 | 333-144377 | 07/06/2007 | |||||||
| 4.01 | Specimen Common Stock Certificate | SB-2 | 4.01 | 333-144377 | 07/06/2007 | |||||||
| 31.1 | Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | * | ||||||||||
| 31.2 | Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | * | ||||||||||
| 32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. § 1350 | * | ||||||||||
| 32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. § 1350 | * | ||||||||||
15