Note 1 – Nature of Operations
Coronus Solar Inc. (“the Company”) was incorporated under the Canada Business Corporations Act on December 3, 2001 under the name “The LectureNet Learning Corporation” and was registered extra-provincially in the Province of British Columbia on January 24, 2002. The name of the Company was changed to InsightfulMind Learning, Inc. effective August 26, 2002 and was further changed to Coronus Solar Inc. on November 3, 2009.
The Company’s current business is to deploy and operate utility-scale solar power systems in the State of California, U.S.A. The Company is located in the City of Vancouver, Province of British Columbia, Canada.
On November 2, 2009, the Company completed an agreement (the “Share Purchase Agreement”) to acquire all of the issued and outstanding shares of Coronus Energy Corp. (“Coronus”), a start-up stage company founded to deploy and operate utility-scale solar power systems in the State of California. Under the Share Purchase Agreement, the Company acquired all of the outstanding shares of Coronus in exchange for 2,000,000 (post stock forward split) common shares of the Company, at a deemed value of $0.025 per share.
Under the Share Purchase Agreement, 2,025,000 common shares of the Company held by Mr. Jeff Thachuk, President of the Company, were transferred to Mr. Mark Burgert, the sole principal of Coronus, for $1, on August 19, 2009 and an aggregate of 905,000 (post stock forward split) stock options of the Company held by various persons were cancelled on August 10, 2009. Mr. Thachuk was appointed as a director and the Chairman, CEO, CFO, Secretary and Treasurer of Coronus, with Mr. Burgert continuing to hold the office of President of Coronus.
The transfer of the 2,025,000 common shares of the Company held by Mr. Thachuk to Mr. Burgert was treated, as a contribution by Mr. Thachuk, as part of the consideration for the acquisition of Coronus. Accordingly, a total of 4,025,000 common shares was determined as the consideration for the acquisition.
The Company engaged Mr. Burgert as a consultant, and in consideration for this engagement, granted to Mr. Burgert an aggregate of 350,000 options exercisable at a price of $0.065 per share. Additionally, the 9,050,000 common shares of the Company that are now collectively held between Messrs. Thachuk and Burgert have been placed into voluntary escrow, to be released to each of them on the basis of one common share each for each $0.50 earned in revenue by the Company on a consolidated basis.
The Company is considered a development stage company as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") Topic 915 “Development Stage Entities”. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States, which contemplate continuation of the Company as a going concern. The Company has accumulated losses since its inception and requires additional funds to maintain and expand its intended business operations. In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon the continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financing requirements, and the success of its future operations.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 2 – Basis of Presentation - Going Concern Uncertainties
The Company's ability to continue as a going concern is in substantial doubt and is dependent upon obtaining additional financing and/or achieving a sustainable profitable level of operations. Management plans to obtain additional financing through the issuance of shares, in order to allow the Company to complete its development phase and commence earning revenue. These consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities other than in the normal course of business.
The Company will seek additional equity as necessary and it expects to raise funds through private or public equity investment in order to support existing operations and expand the range of its business. There is no assurance that such additional funds will be available for the Company on acceptable terms, if at all.
Information on the Company’s working capital and deficit is:
| | | June 30, | | March 31, |
| | | 2013 | | 2013 |
| | | | | |
| Working capital | $ | 264,017 | $ | (2,874,589) |
| Deficit | | 1,817,715 | | 1,388,658 |
Note 3 – Summary of Significant Accounting Policies
(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of Coronus Solar Inc. and its 100% owned subsidiaries, Coronus Energy Corp. and Coronus 29-Palms Morongo LLC, and the 100% owned, subsidiaries of Coronus Energy Corp., namely, Coronus 29-Palms North 1 LLC, Coronus 29-Palms North 2 LLC, Coronus 29-Palms North 3 LLC, Coronus Yucca Valley East 1 LLC, Coronus Yucca Valley East 2 LLC, Coronus Yucca Valley East 3 LLC, Coronus Joshua Tree East 1 LLC, Coronus Joshua Tree East 2 LLC, Coronus Joshua Tree East 3 LLC, Coronus Joshua Tree East 4 LLC, Coronus Joshua Tree East 5 LLC, Coronus Apple Valley East 1 LLC, Coronus Apple Valley East 2 LLC, Coronus Adelanto West 1 LLC and Coronus Adelanto West 2 LLC, (collectively, the “Company”). All significant inter-company transactions and accounts have been eliminated in consolidation.
(b) Basis of presentation
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with the instructions from Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and notes normally provided in the audited financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for fiscal year ended March 31, 2013 filed with the United States Securities and Exchange Commission. The result of operations for the interim periods presented is not necessarily indicative of the results to be expected for the full year.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 3 – Summary of Significant Accounting Policies - Continued
The accompanying unaudited consolidated interim balance sheets, statements of operations and comprehensive income (loss), stockholders’ equity and cash flows reflected all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of the Company, at June 30, 2013, and the results of operations and cash flows for the three months ended June 30, 2013, and for the period from December 3, 2001 (Date of Commencement) to June 30, 2013.
Note 4 – Accounting Pronouncements Adopted During the Period
(a) Disclosures about offsetting assets and liabilities
On April 1, 2013, the Company adopted ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities”, which is in an effort to improve comparability between US GAAP and IFRS financial statements with regard to the presentation of offsetting assets and liabilities on the statement of financial position arising from financial and derivative instruments, and repurchase agreements. The ASU establishes additional disclosures presenting the gross amounts of recognized assets and liabilities, offsetting amounts, and the net balance reflected in the statement of financial position. Descriptive information regarding the nature and rights of the offset must also be disclosed. The adoption of the new guidance is not expected to have an impact on the Company’s financial statements.
(b) Comprehensive income
On April 1, 2013, the Company adopted ASU 2013-02, "Comprehensive Income (Topic 220); Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income." This updated guidance improves the reporting of significant items reclassified out of accumulated other comprehensive income and requires an entity to present, either on the face of the statement where net income is presented or in the notes, separately for each component of comprehensive income, the current period reclassifications out of accumulated other comprehensive income by the respective line items of net income affected by the reclassification. Other than requiring additional disclosures, the adoption did not have an effect on our consolidated financial statements.
Note 5 – New Accounting Pronouncements Not Yet Adopted
(a) Foreign currency
In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2013-05, "Foreign Currency Matters (Topic 830); Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This guidance applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. ASU No. 2013-05 is effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. We will adopt this guidance beginning with our fiscal quarter starting from April 1, 2014. We are currently reviewing the provisions of ASU No. 2013-05 on our consolidated financial statements.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 5 – New Accounting Pronouncements Not Yet Adopted - Continued
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.
Note 6 – Earnings (Loss) per Share
The calculation of basic and diluted loss per share for the period ended June 30, 2013 was based on the net loss attributable to common shareholders of $429,057 and a weighted average number of common shares outstanding of 17,219,486. 740,000 stock options and 533,666 stock purchase warrants were excluded from the diluted loss per share calculations as the effects would be anti-dilutive.
The calculation of basic and diluted earnings per share for the period ended June 30, 2012 was net income attributable to common shareholders of $598,490 and a weighted average number of common shares outstanding of 27,096,086 and 27,921,403, respectively.
Weighted average number of common shares calculations for basic and diluted earnings (loss) per share for the period ended June 30, 2013 and 2012 are as summarized as follows:
| | Three Months ended |
| | June 30, |
| | 2013 | 2012 |
| | | |
| Issued common share at beginning of period | 17,219,486 | 27,096,086 |
| | | |
Weighted average number of common shares at June 30 for basic earnings (loss) per share calculation | 17,219,486 | 27,096,086 |
| | | |
| Effect of share options on issue | - | 691,900 |
| Effect of share warrants on issue | - | 133,417 |
| | | |
Diluted Weighted average number of common shares at June 30 for diluted earnings (loss) per share calculation | 17,219,486 | 27,921,403 |
The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options and warrants was based on quoted market prices for the period during which the options were outstanding.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 7 – Prepaid expenses and deposits
Prepaid expenses and deposits at June 30, 2013 and March 31, 2013 were summarized as follows:
| | | June 30, | | March 31, |
| | | 2013 | | 2013 |
| Current | | | | |
| | Prepaid expenses | $ | 405 | $ | 766 |
| | Prepaid expenses - Utility Interconnection Studies | | - | | 25,900 |
| | Land deposit (a) | | 1,433 | | 1,000 |
| Long Term | | | | |
| | Development security deposit | | - | | 564,150 |
| | | $ | 1,838 | $ | 591,816 |
(a) Land deposit
On October 24, 2012, Coronus entered into a Vacant Land Purchase Agreement (the “29-Palms Morongo Agreement”) to acquire a 24.23 acre parcel of vacant land, situated north of 29-Palms, in the County of San Bernardino, California. The purchase price for the land is $86,683, all cash. Coronus deposited $1,000 into escrow and agreed to deposit an additional $85,683 within sufficient time to close escrow. Effective May 3, 2013, the parties amended the 29-Palms Morongo Agreement, wherein the parties agreed to an option arrangement where an option (the “Option”) to purchase the 24.23 acre parcel of vacant land was adopted, with the following terms: 1) Coronus 29-Palms Morongo LLC pays monthly payments equal to 6% per annum of the purchase price, or $433.42 per month, 2) the monthly payments are applied to the purchase price, provided Coronus 29-Palms Morongo LLC exercises the Option, otherwise the payments are forfeited to the seller, 3) the term of the Option is 24 months, 4) failure to make the monthly payment terminates the Option, and 5) during the term of the Option, the seller provides the necessary consent for Coronus 29-Palms Morongo LLC to apply for a conditional use permit from the County of San Bernardino.
Note 8 – Assets Held for Sale
During the period ended June 30, 2013, the Company recorded an assets held for sale of $4,314,917. The assets held for sale resulted from the Company and Coronus entered into a share purchase and development services agreement (the “Share Purchase and Development Services Agreement”) with Redwood Solar Development LLC (“Redwood”) [see Note 18(b)]. Redwood is an affiliate of Clean Focus. Under the Share Purchase and Development Services Agreement, the Company has agreed to sell 100% of the issued and outstanding shares of Coronus to Redwood, in addition to performing certain development services in respect of the twelve anticipated, utility-scale, solar PV projects of Coronus. The Company is scheduled to hold an annual and special meeting of its shareholders (the “Meeting”) on September 16, 2013, at which time, its shareholders will vote, by proxy or in person, on whether to approve the Share Purchase and Development Services Agreement. The closing date (the “Closing Date”) means the date on which the closing will occur, which will be not more than three business days following the date of the Meeting.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale – Continued
The assets held for sale are summarized as follows:
| | | June 30, |
| | | 2013 |
| | | |
| Prepaid expenses and deposits (a) and (b) | | 576,150 |
| Land (c) | | 92,758 |
| Project assets (d) | | 3,646,009 |
| | $ | 4,314,917 |
(a) Utility Interconnection Studies
(i) FAS Study Agreements for Projects Coronus Adelanto West 1 and 2
On February 27, 2013, Coronus entered into two Facilities Study Agreements (the “FAS Agreements for Adelanto West 1 and 2”) with SCE. The FAS Agreements relate to Coronus’ application for interconnection service and the CREST tariff for two 1.5 MW solar PV systems on the 40 acre parcel of vacant land, situated in the City of Adelanto, California, Coronus acquired on April 19, 2012 (Note 8(iii)).
The FAS Agreements set forth the terms and conditions for SCE to perform facilities studies to determine the impacts that would result from interconnecting the two PV systems and the adequacy of SCE’s electrical system to accommodate them. In addition, SCE shall make a refined determination of the required interconnection facilities and distribution system upgrades, and any other modifications or additions that would be needed, to accommodate the two PV systems. The estimated cost of each study is $15,000. On entering into the FAS Agreements, Coronus paid SCE the $30,000 in deposits which $28,000 has been amortized to expenses as at June 30, 2013.
(b) Development security deposit
(i) Power Purchase Agreements for Projects Coronus 29-Palms North 1, 2 and 3
On August 30, 2012 (the “29-Palms North PPAs Effective Date”), Coronus’ wholly-owned subsidiaries, Coronus 29-Palms North 1 LLC, Coronus 29-Palms North 2 LLC, and Coronus 29-Palms North 3 LLC, entered into three identical Power Purchase Agreements (the “29-Palms North PPAs”) with SCE. The 29-Palms North PPAs relate to Coronus’ applications for interconnection service and the CREST tariff for three 1.5 MW solar PV power systems (the “29-Palms North 1, 29-Palms North 2, and 29-Palms North 3 Projects”) on the 160 acre parcel of vacant land, situated north of Twentynine Palms, in the County of San Bernardino, California (the “29-Palms North Re-Site Property”), Coronus acquired on December 28, 2012.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(b) Development security deposit - Continued
The 29-Palms North PPAs are standardized, must-take, full buy/ sell, power purchase agreements, where SCE purchases all of the 29-Palms North 1, 29-Palms North 2, and 29-Palms North 3 Projects’ generation, net of station use. The term of the 29-Palms North PPAs is 20 years. The price SCE pays for the generation shall be premised on the adopted 2011 Market Price Referent, and shall be adjusted according to SCE’s time of delivery periods and energy allocation factors, as scheduled in the 29-Palms North PPAs. Initial operation of the 29-Palms North 1, 29-Palms North 2, and 29-Palms North 3 Projects must be no later than eighteen months from the 29-Palms North PPAs Effective Date. The 29-Palms North PPAs include, but are not limited to, provisions in respect of termination, facility operation, billing and payment, curtailment, and insurance. Additionally, on or before the thirtieth day following the 29-Palms North PPAs Effective Date, Coronus was required to post and maintain development fees (the “29-Palms North PPAs Development Securities”) equal to $38,250 per 29-Palms North PPA. If, on or before initial operation, Coronus demonstrates to SCE's satisfaction that it has installed all of the equipment or devices necessary for Coronus to satisfy the gross power rating of the generating facilities, SCE shall return the 29-Palms North PPAs Development Securities to Coronus within thirty days of each facility’s initial operation. On September 27, 2012, Coronus paid the 29-Palms North PPAs Development Securities.
(ii) Power Purchase Agreements for Projects Coronus Yucca Valley East 1 and 2
On August 30, 2012 (the “Yucca Valley East PPAs Effective Date”), Coronus’ wholly-owned subsidiaries, Coronus Yucca Valley East 1 LLC and Coronus Yucca Valley East 2 LLC, entered into two identical Power Purchase Agreements (the “Yucca Valley East PPAs”) with SCE. The Yucca Valley East PPAs relate to Coronus’ applications for interconnection service and the CREST tariff for two 1.5 MW solar PV power systems (the “Yucca Valley East 1 and Yucca Valley East 2 Projects”) on the 34.07 acre parcel of vacant land, situated east of Yucca Valley, in the County of San Bernardino, California (the “Yucca Valley East Property”), Coronus acquired on August 17, 2012, and on the adjacent 20 acre parcel of vacant land (the “Yucca Valley East #2 Property”), Coronus agreed to acquire on March 28, 2013.
The Yucca Valley East PPAs are standardized, must-take, full buy/ sell, power purchase agreements, where SCE purchases all of the Yucca Valley East 1 and Yucca Valley East 2 Projects’ generation, net of station use. The term of the Yucca Valley East PPAs is 20 years. The price SCE pays for the generation shall be premised on the adopted 2011 Market Price Referent, and shall be adjusted according to SCE’s time of delivery periods and energy allocation factors, as scheduled in the Yucca Valley East PPAs. Initial operation of the Yucca Valley East 1, Yucca Valley East 2, and Yucca Valley East 3 Projects must be no later than eighteen months from the Yucca Valley East PPAs Effective Date. The Yucca Valley East PPAs include, but are not limited to, provisions in respect of termination, facility operation, billing and payment, curtailment, and insurance. Additionally, on or before the thirtieth day following the Yucca Valley East PPAs Effective Date, Coronus was required to post and maintain development fees (the “Yucca Valley East PPA Development Securities”) equal to $37,604 per Yucca Valley East PPA. If, on or before initial operation, Coronus demonstrates to SCE's satisfaction that it has installed all of the equipment or devices necessary for Coronus to satisfy the gross power rating of the generating facilities, SCE shall return the Yucca Valley East PPA Development Securities to Coronus within thirty days of each facility’s initial operation. On September 27, 2012, Coronus paid the Yucca Valley East PPA Development Securities.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(b) Development security deposit - Continued
(iii) Power Purchase Agreement for Project Coronus Yucca Valley East 3
On January 15, 2013 (the “Yucca Valley East 3 PPA Effective Date”), Coronus’ wholly-owned subsidiary, Coronus Yucca Valley East 3 LLC entered into a Power Purchase Agreement (the “Yucca Valley East 3 PPA”) with SCE. The Yucca Valley East 3 PPA relates to Coronus’ application for interconnection service and the CREST tariff for a third 1.5 MW solar PV power system (the “Yucca Valley East 3 Project”) on the 34.07 acre parcel of vacant land, situated east of Yucca Valley, in the County of San Bernardino, California (the “Yucca Valley East Property”), Coronus acquired on August 17, 2012, and on the adjacent 20 acre parcel of vacant land, Coronus agreed to acquire on March 28, 2013.
(iii) Power Purchase Agreement for Project Coronus Yucca Valley East 3 - Continued
The Yucca Valley East 3 PPA is a standardized, must-take, full buy/ sell, power purchase agreement, where SCE purchases all of the Yucca Valley East 3 Project’s generation, net of station use. The term of the Yucca Valley East 3 PPA is 20 years. The price SCE pays for the generation shall be premised on the adopted 2011 Market Price Referent, and shall be adjusted according to SCE’s time of delivery periods and energy allocation factors, as scheduled in the Yucca Valley East 3 PPA. Initial operation of the Yucca Valley East 3 Project must be no later than eighteen months from the Yucca Valley East 3 PPA Effective Date. The Yucca Valley East 3 PPA includes, but is not limited to, provisions in respect of termination, facility operation, billing and payment, curtailment, and insurance. Additionally, on or before the thirtieth day following the Yucca Valley East 3 PPA Effective Date, Coronus was required to post and maintain a development fee (the “Yucca Valley East 3 PPA Development Security”) equal to $37,604. If, on or before initial operation, Coronus demonstrates to SCE's satisfaction that it has installed all of the equipment or devices necessary for Coronus to satisfy the gross power rating of the generating facility, SCE shall return the Yucca Valley East 3 PPA Development Security to Coronus within thirty days of the facility’s initial operation. On February 14, 2013, Coronus posted the Yucca Valley East 3 PPA Development Security.
(iv) Power Purchase Agreements for Projects Coronus Joshua Tree East 1, 2, 3, 4 and 5
On December 7, 2012 (the “Joshua Tree East PPAs Effective Date”), Coronus’ wholly-owned subsidiaries, Coronus Joshua Tree East 1 LLC, Coronus Joshua Tree East 2 LLC, Coronus Joshua Tree East 3 LLC, Coronus Joshua Tree East 4 LLC, and Coronus Joshua Tree East 5 LLC, entered into five identical Power Purchase Agreements (the “Joshua Tree East PPAs”) with SCE. The Joshua Tree East PPAs relate to Coronus’ applications for interconnection service and the CREST tariff for five 1.5 MW solar PV power systems (the “Joshua Tree East 1, Joshua Tree East 2, Joshua Tree East 3, Joshua Tree East 4, and Joshua Tree East 5 Projects”) on the 56.03 acre parcel of vacant land, situated east of Joshua Tree, in the County of San Bernardino, California (the “Joshua Tree East Property”), Coronus acquired on June 30, 2011.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(b) Development security deposit - Continued
(iv) Power Purchase Agreements for Projects Coronus Joshua Tree East 1, 2, 3, 4 and 5 - Continued
The Joshua Tree East PPAs are standardized, must-take, full buy/ sell, power purchase agreements, where SCE purchases all of the Joshua Tree East 1, Joshua Tree East 2, Joshua Tree East 3, Joshua Tree East 4, and Joshua Tree East 5 Projects’ generation, net of station use. The term of the Joshua Tree East PPAs is 20 years. The price SCE pays for the generation shall be premised on the adopted 2011 Market Price Referent, and shall be adjusted according to SCE’s time of delivery periods and energy allocation factors, as scheduled in the Joshua Tree East PPAs. Initial operation of the Joshua Tree East 1, Joshua Tree East 2, Joshua Tree East 3, Joshua Tree East 4, and Joshua Tree East 5 Projects must be no later than eighteen months from the Joshua Tree East PPAs Effective Date. The Joshua Tree East PPAs include, but are not limited to, provisions in respect of termination, facility operation, billing and payment, curtailment, and insurance. Additionally, on or before the thirtieth day following the Joshua Tree East PPAs Effective Date, Coronus was required to post and maintain development fees (the “Joshua Tree East PPAs Development Securities”) equal to $36,736 per Joshua Tree East PPA. If, on or before initial operation, Coronus demonstrates to SCE's satisfaction that it has installed all of the equipment or devices necessary for Coronus to satisfy the gross power rating of the generating facilities, SCE shall return the Joshua Tree East PPAs Development Securities to Coronus within thirty days of each facility’s initial operation. On January 4, 2013, Coronus paid the Joshua Tree East PPAs Development Securities.
(v) Power Purchase Agreements for Projects Coronus Apple Valley East 1 and 2
On December 7, 2012 (the “Apple Valley East PPAs Effective Date”), Coronus’ wholly-owned subsidiaries, Coronus Apple Valley East 1 LLC and Coronus Apple Valley East 2 LLC, entered into two identical Power Purchase Agreements (the “Apple Valley East PPAs”) with SCE. The Apple Valley East PPAs relate to Coronus’ applications for interconnection service and the CREST tariff for two 1.5 MW solar PV power systems (the “Apple Valley East 1 and Apple Valley East 2 Projects”) on the 14.78 and 8.91 acre parcels of vacant land, adjacent to one another, situated east of Apple Valley, in the County of San Bernardino, California [the “Apple Valley East Re-Site (Nguyen) Property” and the “Apple Valley East Re-Site (McGee) Property”, respectively], Coronus acquired on January 7 and March 5, 2013, respectively.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(b) Development security deposit - Continued
(v) Power Purchase Agreements for Projects Coronus Apple Valley East 1 and 2 - Continued
The Apple Valley East PPAs are standardized, must-take, full buy/ sell, power purchase agreements, where SCE purchases all of the Apple Valley East 1 and Apple Valley East 2 Projects’ generation, net of station use. The term of the Apple Valley East PPAs is 20 years. The price SCE pays for the generation shall be premised on the adopted 2011 Market Price Referent, and shall be adjusted according to SCE’s time of delivery periods and energy allocation factors, as scheduled in the Apple Valley East PPAs. Initial operation of the Apple Valley East 1 and Apple Valley East 2 Projects must be no later than eighteen months from the Apple Valley East PPAs Effective Date. The Apple Valley East PPAs include, but are not limited to, provisions in respect of termination, facility operation, billing and payment, curtailment, and insurance. Additionally, on or before the thirtieth day following the Apple Valley East PPAs Effective Date, Coronus was required to post and maintain development fees (the “Apple Valley East PPAs Development Securities”) equal to $38,850 per Apple Valley East PPA. If, on or before initial operation, Coronus demonstrates to SCE's satisfaction that it has installed all of the equipment or devices necessary for Coronus to satisfy the gross power rating of the generating facilities, SCE shall return the Apple Valley East PPAs Development Securities to Coronus within thirty days of each facility’s initial operation. On January 4, 2013, Coronus paid the Apple Valley East PPAs Development Securities.
(vi) Power Purchase Agreements for Projects Coronus Adelanto West 1 and 2
On January 15, 2013 (the “Adelanto West PPAs Effective Date”), Coronus’ wholly-owned subsidiaries, Coronus Adelanto West 1 LLC and Coronus Adelanto West 2 LLC, entered into two identical Power Purchase Agreements (the “Adelanto West PPAs”) with SCE. The Adelanto West PPAs relate to Coronus’ applications for interconnection service and the CREST tariff for two 1.5 MW solar PV power systems (the “Adelanto West 1 and Adelanto West 2 Projects”) on the 40 acre parcel of vacant land, situated in the City of Adelanto, California (the “Adelanto West Property”), Coronus acquired on April 19, 2012.
The Adelanto West PPAs are standardized, must-take, full buy/ sell, power purchase agreements, where SCE purchases all of the Adelanto West 1 and Adelanto West 2 Projects’ generation, net of station use. The term of the Adelanto West PPAs is 20 years. The price SCE pays for the generation shall be premised on the adopted 2011 Market Price Referent, and shall be adjusted according to SCE’s time of delivery periods and energy allocation factors, as scheduled in the Adelanto West PPAs. Initial operation of the Adelanto West 1 and Adelanto West 2 Projects must be no later than eighteen months from the Adelanto West PPAs Effective Date. The Adelanto West PPAs include, but are not limited to, provisions in respect of termination, facility operation, billing and payment, curtailment, and insurance. Additionally, on or before the thirtieth day following the Adelanto West PPAs Effective Date, Coronus was required to post and maintain development fees (the “Adelanto West PPAs Development Securities”) equal to $37,604 per Adelanto West PPA. If, on or before initial operation, Coronus demonstrates to SCE's satisfaction that it has installed all of the equipment or devices necessary for Coronus to satisfy the gross power rating of the generating facilities, SCE shall return the Adelanto West PPAs Development Securities to Coronus within thirty days of each facility’s initial operation. On February 14, 2013, Coronus paid the Adelanto West PPAs Development Securities.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(b) Development security deposit - Continued
Provided the projects are entitled, all of the aforementioned projects are estimated to be online within one and one-half years.
(c) Land
(i) Newberry Springs
Such represents a 20 acre parcel of vacant land, situated in Newberry Springs, in the County of San Bernardino, California. The purchase price was $45,000. At this point in time, the Company has opted not to pursue interconnection agreements for solar PV power systems sited on this parcel.
(ii) 29-Palms North
On January 23, 2011, Coronus entered into a Vacant Land Purchase Agreement (the “29-Palms North Agreement”) to acquire a 39.25 acre parcel of vacant land, situated north of 29-Palms, in the County of San Bernardino, California. The purchase price was $40,000. The transaction closed on May 16, 2011. At this point in time, the Company has opted not to pursue interconnection agreements for solar PV power systems sited on this parcel.
(d) Project Assets
Project assets consisted of the following at June 30, 2013 and March 31, 2013:
| | June 30, 2013 | | March 31, 2013 |
| | | | | Project | | | | | | | Project | | |
| | | | | development | | | | | | | development | | |
| | | Land | | costs | | Total | | | Land | | costs | | Total |
| | | | | | | | | | | | | | |
| Joshua Tree East | $ | 241,350 | $ | 364,800 | $ | 606,150 | | $ | 226,579 | $ | 364,800 | $ | 591,379 |
| Adelanto West | | 436,100 | | 74,920 | | 511,020 | | | 420,738 | | 74,920 | | 495,658 |
| Yucca Valley East | | 210,867 | | 269,670 | | 480,537 | | | 189,769 | | 179,780 | | 369,549 |
| 29-Palms North Re-Site | | 417,657 | | 908,850 | | 1,326,507 | | | 405,649 | | 908,850 | | 1,314,499 |
Apple Valley East Re-Site (Nguyen & McGee) | | 417,995 | | 303,800 | | 721,795 | | | 403,035 | | 303,800 | | 706,835 |
| | $ | 1,723,969 | $ | 1,922,400 | $ | 3,646,009 | | $ | 1,645,770 | $ | 1,832,150 | $ | 3,477,920 |
Land
(i) Joshua Tree East
On May 9, 2011, Coronus entered into a Vacant Land Purchase Agreement (the “Joshua Tree East Agreement”) to acquire a 56.03 acre parcel of vacant land, situated east of Joshua Tree, in the County of San Bernardino, California. The purchase price was $200,000. The transaction closed on June 30, 2011.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(d) Project Assets - Continued
Land - Continued
(ii) Adelanto West
On September 23, 2011, Coronus entered into a Vacant Land Purchase Agreement (the “Adelanto West Agreement”) to acquire a 40 acre parcel of vacant land, situated in the City of Adelanto, County of San Bernardino, California. The purchase price was $400,000. The transaction closed on April 19, 2012.
(iii) Yucca Valley East
On October 9, 2011, Coronus entered into a Vacant Land Purchase Agreement (the “Yucca Valley East Agreement”) to acquire a 34.07 acre parcel of vacant land, situated east of Yucca Valley, in the County of San Bernardino, California. The purchase price was $170,000. The transaction closed on August 17, 2012.
(iv) 29-Palms North Re-Site
On December 6, 2012, Coronus entered into a Vacant Land Purchase Agreement (the “29-Palms North Re-Site Agreement”). Under the 29-Palms North Re-Site Agreement, Coronus agreed to acquire a 160 acre parcel of vacant land, situated north of 29-Palms, in the County of San Bernardino, California. The purchase price was $400,000. The transaction closed on December 28, 2012.
(v) Apple Valley East Re-Site (Nguyen) and (McGee)
On December 8, 2012, Coronus entered into a Vacant Land Purchase Agreement [the “Apple Valley East Re-Site Agreement (Nguyen)”] to acquire a 14.78 acre parcel of vacant land, situated east of Apple Valley, in the County of San Bernardino, California. The purchase price was $300,000. The transaction closed on January 7, 2013.
On February 8, 2013, Coronus entered into a Vacant Land Purchase Agreement [the “Apple Valley East Re-Site Agreement (McGee)”] to acquire a 8.91 acre parcel of vacant land, situated east of Apple Valley, in the County of San Bernardino, California. The purchase price was $100,000. The transaction closed on March 5, 2013.
Project developments costs
(i) Initial Posting of Interconnection Financial Security for Project Coronus 29-Palms North 1
On December 3, 2012, pursuant to the SCE interconnection request for solar PV project Coronus 29-Palms North 1, Coronus posted with SCE the initial interconnection financial security, in the amount of $29,500. This amount was determined by the results of the combined SIS/FAS study SCE commenced with Coronus on June 16, 2011.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(d) Project Assets - Continued
Project developments costs - Continued
(ii) Initial Posting of Interconnection Financial Security for Projects Coronus 29-Palms North 2 and 3
On December 26, 2012, pursuant to the Southern California Edison (“SCE”) interconnection requests for solar PV projects Coronus 29-Palms North 2 and 3, Coronus posted with SCE the initial interconnection financial securities, in the amounts of $373,300 and $208,900, respectively. The posting amount for the Coronus 29-Palms North 2 project was determined by the results of the combined SIS/FAS study SCE commenced with Coronus on June 16, 2011. The posting amount for the Coronus 29-Palms North 3 project was determined by the results of the combined SIS/FAS study SCE commenced with Coronus on February 29, 2012.
(iii) Initial Posting of Interconnection Financial Security for Projects Coronus Apple Valley East 1 and 2
On December 27, 2012, pursuant to the SCE interconnection requests for solar PV projects Apple Valley East 1 and 2, Coronus posted with SCE the initial interconnection financial securities, in the amounts of $270,900 and $32,900, respectively. The posting amounts for the Apple Valley East 1 and 2 projects were determined by the results of the SIS studies SCE commenced with Coronus on May 3, 2012.
(iv) Initial Posting of Interconnection Financial Security for Projects Coronus Joshua Tree East 1, 2, 3, 4 and 5
On January 9, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Joshua Tree East 1, 2, 3, 4 and 5, Coronus posted with SCE the initial interconnection financial securities, in the amounts of $41,200, $82,400, $41,200, $58,800 and $141,200, respectively. The posting amounts for the Joshua Tree East 1, 2 and 3 projects were determined by the results of the SIS studies SCE commenced with Coronus on February 23, 2012. The posting amounts for the Joshua Tree East 4 and 5 projects were determined by the results of the SIS studies SCE commenced with Coronus on June 25, 2012.
(v) Second Posting of Interconnection Financial Security for Project Coronus 29-Palms North 1
On February 1, 2013, pursuant to the SCE interconnection request for solar PV project Coronus 29-Palms North 1, Coronus posted with SCE the second interconnection financial security, in the amount of $14,750. This amount was determined by the results of the combined SIS/FAS study SCE commenced with Coronus on June 16, 2011.
(vi) Initial Posting of Interconnection Financial Security for Projects Coronus Adelanto West 1 and 2
On February 14, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Adelanto West 1 and 2, Coronus posted with SCE the initial interconnection financial securities, in the amounts of $36,660 and $38,260, respectively. The posting amounts for the Coronus Adelanto West 1 and 2 projects were determined by the results of the SIS studies SCE commenced with Coronus on April 13, 2012.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 8 – Assets Held for Sale - Continued
(d) Project Assets - Continued
Project developments costs - Continued
(vii) Initial Posting of Interconnection Financial Security for Project Coronus Yucca Valley East 3
On February 14 and April 15, 2013, pursuant to the SCE interconnection request for solar PV project Coronus Yucca Valley East 3, Coronus posted with SCE the initial and second interconnection financial securities, in the amounts of $84,500 and $42,250, respectively. These amounts were determined by the results of the SIS study SCE commenced with Coronus on June 25, 2012.
(viii) Second Posting of Interconnection Financial Security for Projects Coronus 29-Palms North 2 and 3
On February 20, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus 29-Palms North 2 and 3, Coronus posted with SCE the second interconnection financial securities, in the amounts of $156,350 and $126,050, respectively. The posting amount for the Coronus 29-Palms North 2 project was determined by the results of the combined SIS/FAS study SCE commenced with Coronus on June 16, 2011. The posting amount for the Coronus 29-Palms North 3 project was determined by the results of the combined SIS/FAS study SCE commenced with Coronus on February 29, 2012.
(ix) Initial Posting of Interconnection Financial Security for Projects Coronus Yucca Valley East 1 and 2
On February 25, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Yucca Valley East 1 and 2, Coronus posted with SCE the initial interconnection financial securities, in the amounts of $25,300 and $69,980, respectively. On April 26, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Yucca Valley East 1 and 2, Coronus posted with SCE the second interconnection financial securities, in the amounts of $12,650 and $34,990, respectively. The posting amounts for the Coronus Yucca Valley East 1 and 2 projects were determined by the results of the SIS studies SCE commenced with Coronus on February 2, 2012.
Note 9 – Property, Plant and Equipment
Property, plant and equipment at June 30, 2013 and March 31, 2013 were summarized as follows:
| | | | | Accumulated | | Net book |
| June 30, 2013 | | Cost | | depreciation | | value |
| | | | | | | |
| Office equipment | $ | 1,305 | $ | 1,195 | $ | 110 |
| Computer equipment | | 999 | | 976 | | 23 |
| Land* | | 33,197 | | - | | 33,197 |
| | $ | 35,501 | $ | 2,171 | $ | 33,330 |
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 9 – Property, Plant and Equipment - Continued
| | | | | Accumulated | | Net book |
| March 31, 2013 | | Cost | | depreciation | | value |
| | | | | | | |
| Office equipment | $ | 1,351 | $ | 1,231 | $ | 120 |
| Computer equipment | | 1,034 | | 1,008 | | 26 |
| Land* | | 126,856 | | - | | 126,856 |
| | $ | 129,241 | $ | 2,239 | $ | 127,002 |
*Land
(i) 29-Palms East
Such represents a 30 acre parcel of vacant land, situated east of 29-Palms, in the County of San Bernardino, California. The purchase price was $32,000. At this point in time, the Company has opted not to pursue interconnection agreements for solar PV power systems sited on this parcel.
Note 10 – Disposition of a subsidiary
On April 5, 2012, Coronus entered into a Solar Photovoltaic Asset Sale Agreement (the “Sycamore Solar PV Asset Sale Agreement”) with Sycamore Physicians Partners LLC (“Sycamore”). Under the Sycamore Solar PV Asset Sale Agreement, Coronus agreed to sell, assign and transfer to Sycamore, Coronus’ sole membership in Coronus Hesperia West 1 LLC. On March 19, 2012, Coronus Hesperia West 1 LLC entered into a Power Purchase Agreement (“PPA”) with Southern California Edison (“SCE”). The PPA relates to Coronus’ application for interconnection service and the CREST tariff for a 1.2 MW solar PV power system on a 20 acre parcel of vacant land, situated west of Hesperia, in the County of San Bernardino, California, Coronus agreed to acquire pursuant to a vacant land purchase agreement (the “Hesperia West Agreement”). Additionally, under the Sycamore Solar PV Asset Sale Agreement, Coronus agreed to assign to Sycamore, the Hesperia West Agreement. Further, under the Sycamore Solar PV Asset Sale Agreement, Coronus agreed to use its best efforts to obtain a second PPA from SCE in relation to the Hesperia West 20 acre parcel, and to sell this PPA (relating to a 1.5 MW solar PV system) to Sycamore if obtained.
Under the Sycamore Solar PV Asset Sale Agreement, Sycamore agreed to pay $1,726,219 (the “Basic Price”) to Coronus for the sole ownership in Coronus Hesperia West 1 LLC, the assignment of the Hesperia West Agreement, and the second PPA. On executing the Sycamore Solar PV Asset Sale Agreement, Sycamore agreed to pay $817,200 (paid) to Coronus, and Coronus agreed to transfer the sole membership in Coronus Hesperia West 1 LLC to Sycamore and to assign the Hesperia West Agreement to Sycamore. Under the Sycamore Solar PV Asset Sale Agreement, Sycamore agreed to pay the balance of the Basic Price, or $909,019 (paid), to Coronus on delivery of the second PPA.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 10 – Disposition of a subsidiary - Continued
The Company recorded a gain on the sale of Coronus Hesperia West 1 LLC and Coronus Hesperia West 2 LLC of $1,717,024 during the year ended March 31, 2013. Details are as follows:
| Cash consideration | $ | 1,726,219 |
| Less: net book value of assets sold | | 9,195 |
| | $ | 1,717,024 |
As at June 30, 2012, the Company recognized a gain on the sales of Coronus Hesperia West 1 LLC in the amount of $80,994.
Note 11 – Liabilities Held for Sale
The liabilities held for sale are summarized as follows:
| | | June 30, |
| | | 2013 |
| | | |
| Accounts payable and accrued liabilities | $ | 147,808 |
| Senior secured promissory note (a) | | 3,358,598 |
| Notes payable (b) | | 579,014 |
| | $ | 4,085,420 |
(a) Senior Secured Promissory Note
| | | June 30, |
| | | 2013 |
| | | |
| Principle | $ | 3,314,032 |
| Effective interest rate at 6.66% | | (206,280) |
| Net present value | | 3,107,752 |
| Interest accretion | | 250,846 |
| Total | $ | 3,358,598 |
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 11 – Liabilities Held for Sale - Continued
(a) Senior Secured Promissory Note - Continued
On December 20, 2012, Coronus and Coronus’ wholly-owned subsidiaries, Coronus 29-Palms North 1 LLC, Coronus 29-Palms North 2 LLC, Coronus 29-Palms North 3 LLC, Coronus Yucca Valley East 1 LLC, Coronus Yucca Valley East 2 LLC, Coronus Yucca Valley East 3 LLC, Coronus Joshua Tree East 1 LLC, Coronus Joshua Tree East 2 LLC, Coronus Joshua Tree East 3 LLC, Coronus Joshua Tree East 4 LLC, Coronus Joshua Tree East 5 LLC, Coronus Apple Valley East 1 LLC, Coronus Apple Valley East 2 LLC, Coronus Adelanto West 1 LLC, and Coronus Adelanto West 2 LLC (collectively the “Project Companies”), conducted a non-brokered private placement, issuing a senior secured, promissory note (the “Note”) to one investor, Clean Focus Financing Company, LP (“Clean Focus”), for proceeds of up to $4,000,000 (the “Loan”). Pursuant to collateral assignment and pledge agreements, and a security agreement, the Note is secured by a first and superior security interest in Coronus’ assets, inclusive of all of Coronus’ right, title and interest in, to and under the sole member of the Project Companies, and all of Coronus’ right, title and interest in, to, and under, if any, any contracts, permits, applications or other documents or agreements entered into or submitted by the Project Companies.
Pursuant to a schedule of draw dates and amounts, Coronus was to request advances, in whole or in part, of up to the maximum amount of the Loan (each an “Advance”). The schedule of draw dates and amounts was as follows: $1,500,000 within two business days of signing of the Note and related loan documents; $500,000 on January 6, 2013; $1,000,000 on January 31, 2013; and $1,000,000 on February 28, 2013. On December 26, 2012, Coronus received the first Advance of $1,500,000, and on January 4, 2013, Coronus received the second Advance of $500,000. Pursuant to a guaranty of payment and completion (the “Guaranty”), the Company guarantees the punctual payment and performance when due, whether at stated maturity or by acceleration or otherwise, of the indebtedness and other obligations of Coronus and the Project Companies. Additionally, pursuant to the Guaranty, the Company guarantees that all obligations of Coronus and the Project Companies to continue development of the Project Companies’ projects shall be completed promptly when required, and that the proceeds of each Advance shall be used to pay certain obligations in furtherance of the Project Companies’ projects.
The Note bears interest at an annual rate of 6%, and such interest shall accrue until the Maturity Date.
In connection with the Loan, Coronus and the Project Companies shall pay up to $20,000 in costs and expenses incurred by Clean Focus in the preparation of the Note and the related loan documents. Additionally, with each Advance, and from the proceeds of each Advance, Coronus was to pay Clean Focus a fee equal to 2% of the principal amount of the Advance. In connection with the first Advance of $1,500,000 on December 26, 2012, Coronus paid Clean Focus the 2% fee, or $30,000, and in connection with the second Advance of $500,000 on January 4, 2013, Coronus paid Clean Focus the 2% fee, or $10,000. Further, in connection with the Loan, with each Advance, but not from the proceeds of each Advance, but from Coronus’ unallocated working capital, Coronus was to pay Earthlight Solar Inc. (“Earthlight”) a fee equal to 3% of the principal amount of the Advance. Mark Burgert, a shareholder of the Company, is the president and a control person of Earthlight. In connection with the Loan, on behalf of Coronus, Earthlight acted as agent. In connection with the first Advance of $1,500,000 on December 26, 2012, Coronus paid Earthlight the 3% fee, or $45,000, and in connection with the second Advance of $500,000 on January 4, 2013, Coronus paid Earthlight the 3% fee, or $15,000.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 11 – Liabilities Held for Sale - Continued
(a) Senior Secured Promissory Note - Continued
On January 31, 2013, the parties amended the mechanics of the draw dates and amounts under the Loan. Under the amended mechanics, Coronus was to provide Clean Focus with invoices, supportive of the schedule, and Clean Focus was to make the required payments direct to the payee, when due. With each direct payment, Coronus was to credit Clean Focus its fee equal to 2% of the principal amount of the payment. The parties amended the mechanics of the draw dates and amounts to facilitate Clean Focus’ reporting with the U.S. Citizenship and Immigration Services, as the source of the Loan is EB-5 immigrant investor funds. All other aspects of the Loan mechanics remained unchanged. Accordingly, consistent with the original agreement with Earthlight, on February 6, 2013, Coronus paid Earthlight its fee equal to 3%, or $30,000, of the originally scheduled principal amount of the third Advance, and on March 11, 2013, Coronus paid Earthlight its fee equal to 3%, or $30,000, of the originally scheduled principal amount of the fourth and final Advance.
The unpaid principal balance of the Note as at June 30, 2013 was $3,314,032. During the period ended June 30, 2013, $50,338 (2012: $nil) in interest expense has been accrued. As of June 30, 2013, the financing cost on the issuance of the senior secured promissory note, $206,280 [March 31, 2013: $200,032 ($120,000 paid to Earthlight and $80,032 paid to Clean Focus)], was capitalized and amortized over the life of the senior secured promissory note. During the period ended June 30, 2013, $100,003 (2012: $nil) was amortized.
On August 9, 2013, the Company and Coronus entered into a share purchase and development services agreement (the “Share Purchase and Development Services Agreement”) with Redwood Solar Development LLC (“Redwood”) [see Note 18(b)]. Under the Share Purchase and Development Services Agreement, the Company has agreed to sell 100% of the issued and outstanding shares of Coronus to Redwood, in addition to performing certain development services in respect of the twelve anticipated, utility-scale, solar PV projects of Coronus. The Company is scheduled to hold an annual and special meeting of its shareholders (the “Meeting”) on September 16, 2013, at which time, its shareholders will vote, by proxy or in person, on whether to approve the Share Purchase and Development Services Agreement. The closing date (the “Closing Date”) means the date on which the closing will occur, which will be not more than three business days following the date of the Meeting.
If the required percentages of shareholder votes are met under the Share Purchase and Development Services Agreement, upon the transfer of Coronus to Redwood, all then outstanding Advances under the Loan, together with all accrued but unpaid interest, will be assumed as part of the stock purchase price. In the event the required percentages of shareholder votes are not met under the Share Purchase and Development Services Agreement, the Company shall owe Redwood a break-up fee of $5,000,000, which will be immediately due and payable. In addition, the Loan will be in immediate default, and will become due and payable, with the Company confessing judgment to the immediate exercise of remedies allowed with respect to the default of the Loan, including, without limitation, a declaration of foreclosure on the Coronus land parcels and the seizure of all assets of Coronus.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 11 – Liabilities Held for Sale - Continued
(a) Senior Secured Promissory Note - Continued
On August 9, 2013, by way of addendum (the “Loan Addendum”), the Maturity Date under the Loan was extended. The Note is now due on the earlier of i) the date of the Meeting, in the event that the Share Purchase and Development Services Agreement is not approved at the Meeting, or ii) the close of business on the Closing Date as defined in the Share Purchase and Development Services Agreement [see Note 16(b)].
(b) Notes Payable
Notes payable at June 30, 2013 is summarized as follows:
| | | June 30, | | March 31, |
| Vacant Land | | 2013 | | 2013 |
| | | | | |
| Joshua Tree East | $ | - | $ | 170,000 |
| Adelanto West | | 235,534 | | 235,534 |
| Yucca Valley East | | 136,380 | | 136,380 |
| Newberry Springs | | - | | 37,100 |
| Newberry Springs | $ | 37,100 | $ | - |
| Joshua Tree East | | 170,000 | | - |
| 29-Palms North | | - | | 32,084 |
| AppleValley East (Nguyen) | | - | | 200,000 |
| | | | | |
| Total | $ | 579,014 | $ | 811,098 |
On March 17, 2011, Coronus completed the Newberry Springs Vacant Land Purchase Agreement to acquire a 20 acre parcel of vacant land, situated in Newberry Springs, in the County of San Bernardino, California. The vendor agreed to carry back the balance amount of $37,000 for two years at 6.5% per annum interest, with monthly payments of interest only. On May 9, 2013, the parties agreed on a one-year extension to the balance amount note. All other terms remain the same, and monthly interest will continue to be paid throughout the extension. At June 30, 2013, the Company has accrued interest payable of $100 (March 31, 2013: $100).
On May 16, 2011, Coronus completed the 29-Palms North Vacant Land Purchase Agreement to acquire a 39.25 acre parcel of vacant land, situated north of 29-Palms, in the County of San Bernardino, California. The vendor agreed to carry back the balance amount of $32,000 for two years at 6.5% per annum interest, with monthly payments of interest only. On May 17, 2013, Coronus paid the balance amount of $32,000, retiring the vendor's note. At June 30, 2013, the Company has accrued interest payable of $nil (March 31, 2013: $84).
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 11 – Liabilities Held for Sale - Continued
(b) Notes Payable - Continued
On June 30, 2011, Coronus completed the Joshua Tree East Vacant Land Purchase Agreement to acquire a 56.03 acre parcel of vacant land, situated east of Joshua Tree, in the County of San Bernardino, California. The vendor agreed to carry back the balance amount of $170,000 for three years at 6.5% per annum interest, with monthly payments of interest only. At June 30, 2013, the Company has accrued interest payable of $nil (March 31, 2013: $nil).
On April 19, 2012, Coronus completed the Adelanto West Vacant Land Purchase Agreement to acquire a 40 acre parcel of vacant land, situated in the City of Adelanto, County of San Bernardino, California. The vendor agreed to carry back the balance amount of $235,000 for three years at 6.5% per annum interest, with monthly payments of interest only. At June 30, 2013, the Company has accrued interest payable of $534 (March 31, 2013: $534).
On August 17, 2012, Coronus completed the Yucca Valley East Vacant Land Purchase Agreement to acquire a 34.07 acre parcel of vacant land, situated east of Yucca Valley, in the County of San Bernardino, California. The vendor agreed to carry back the balance amount of $136,000 for two years at 6.5% per annum interest, with monthly payments of interest only. At June 30, 2013, the Company has accrued interest payable of $380 (March 31, 2013: $380).
On December 8, 2012, Coronus entered into a Vacant Land Purchase Agreement [the “Apple Valley East Re-Site Agreement (Nguyen)”] to acquire a 14.78 acre parcel of vacant land, situated east of Apple Valley, in the County of San Bernardino, California. The purchase price was $300,000. Coronus paid $100,000 and the vendor agreed to carry back the balance amount of $200,000 for three months at 0% interest. The transaction closed on January 7, 2013, and on April 3, 2013, Coronus paid out the balance amount of $200,000, retiring the note.
Note 12 – Stockholders’ Equity
(a) Common Stock
On December 5, 2001, the Company (i) issued 6,750,000 common shares for cash to the founder and sole director of the Company at $0.0002 per share; (ii) issued 75,000 common shares for service to a party related to the founder of the Company at $0.0525 per share; and (iii) issued 300,000 common shares for cash to the sole director of the Company pursuant to a private placement at $0.0525 per share. The Company recorded the 6,750,000 shares issued to the founder at fair value at $0.0525 per share and recorded a stock based compensation of $352,337.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 12 – Stockholders’ Equity - Continued
(a) Common Stock - Continued
For the fiscal year ended March 31, 2003, the Company issued (i) 235,294 units for cash at $0.055 per unit for total proceeds of $12,916; (ii) issued 500,004 common shares for cash at $0.0725 per share for total proceeds of $36,326; (iii) issued 235,294 common shares upon the exercise of warrants for cash at $0.055 per share for total proceeds of $12,916; and (iv) issued 22,222 common shares for the settlement of debt at $0.0725 per share for the total debt of $1,615. In connection with the above unit issuance, each unit consisted of one common share and one share purchase warrant with an exercise price at $0.055 per share. The Company adopted the residual approach and allocated the total proceeds to the common shares and $nil to the share purchase warrants.
For the fiscal year ended March 31, 2004, the Company (i) issued 500,006 common shares for cash at $0.0835 per share for total proceeds of $41,644; and (ii) issued 66,666 common shares for the settlement of the debt at $0.0835 for the total debt of $5,552.
For the fiscal year ended March 31, 2005, the Company (i) issued 1,200,000 units for cash at $0.039 per unit for total proceeds of $47,054; and (ii) issued 1,910,000 common shares for cash at $0.039 per share for total proceeds of $74,895. Each unit consisted of one common share and one share purchase warrant with an exercise price at $0.039 per share. The Company adopted the residual approach and allocated the total proceeds to the common stocks and $nil to the share purchase warrants
For the fiscal year ended March 31, 2006, the Company (i) issued 300,000 common shares at $0.042 per share pursuant to the exercise of warrants for total proceeds of $12,578; and (ii) issued 395,600 common shares at $0.042 per share for the settlement of debt of $16,586.
For the fiscal year ended March 31, 2007, the Company issued 1,000,000 common shares for cash at $0.044 per share for total proceeds of $43,948.
For the fiscal year ended March 31, 2008, the Company issued 52,500 common shares at $0.0485 per share for the settlement of debt of $2,548.
On November 2, 2009, the Company issued 2,000,000 common shares in connection with the acquisition of all the issued and outstanding shares of Coronus at a deemed value of $0.025 per share. These shares were recorded, proportionately with the shares transferred by Mr. Jeff Thachuk to Mr. Mark Burgert, based on the fair value of the assets acquired.
On January 21, 2011, the Company completed a non-brokered private placement, issuing 212,500 shares of common stock to eleven investors, at a price of CAD$0.402 per share, for gross proceeds of CAD$85,000. In connection with the completion of the private placement, the Company paid CAD$7,500 in finder’s fees in cash, to certain arm’s length parties, and CAD$6,807 in legal, accounting, transfer agent and filing fees.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 12 – Stockholders’ Equity - Continued
(a) Common Stock - Continued
On March 31, 2011, the Company and its wholly-owned subsidiary, Coronus Energy Corp. (“Coronus”), entered into a purchase agreement for utility-scale, ground-mount, solar photovoltaic (“PV”) power systems (the “Solar Power Systems Agreement”) with Belectric, Inc. (“Belectric”). Under the Solar Power Systems Agreement, Coronus agreed to acquire a total of 21 MW ac of utility-scale, ground-mount, solar PV power systems from Belectric, for total consideration of $76,818,000, exclusive of taxes (the “Basic Price”). On entering into the Solar Power Systems Agreement, the Company paid 15% of the Basic Price, or $11,522,700, by way of issuing 10,974,000 shares of its common stock to Belectric, at a deemed value of $1.05 per share. The fair value per share at the date of issuance was $0.60. As a result, $6,584,400 was recorded under shareholders’ equity and construction in progress.
On May 10, 2011, the Company completed a non-brokered private placement of 350,000 units at a price of CAD $0.60 per unit for proceeds of CAD $210,000. Each unit was comprised of one common share in the capital of the Company and one non-transferrable share purchase warrant. Each warrant entitles the holder thereof to purchase a further common share at an exercise price of CAD $0.75 for a period of five years. The value assigned to the underlying warrants was CAD$90,000 ($93,652).
On October 24, 2011, the Company completed a non-brokered private placement of 17,000 units at a price of CAD$0.60 per unit for gross proceeds of CAD$10,200. Each unit is comprised of one common share in the capital of the Company and one non-transferrable share purchase warrant. Each warrant entitles the holder thereof to purchase a further common share at an exercise price of CAD $0.75 for a period of five years. The value assigned to the underlying warrants was CAD$4,470 ($4,452).
On August 15, 2012, the Company amended the purchase agreement for utility-scale, ground-mount, solar photovoltaic (PV) power systems (the “Solar Power Systems Agreement”), the Company entered into with Coronus and Belectric Inc. (“Belectric”), on March 31, 2011 [see Note 8]. Under the amended agreement (the “Amended Solar Power Systems Agreement”), 9,876,600 of the Original Payment Shares were cancelled on August 15, 2012, at the deemed price of $1.05 per share. The fair value per share at the date of cancellation was $0.60.
As at June 30, 2013, 10,226,900 (March 31, 2013: 10,226,900) shares of the Company’s common stock were restricted shares.
(b) Stock Options
Since inception, the Company has entered into various stock option agreements with its directors, employees and consultants.
During the period ended June 30, 2013 and year ended March 31, 2013, there were no options granted or exercised.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 12 – Stockholders’ Equity - Continued
(b) Stock Options - Continued
Changes in stock options for the period ended June 30, 2013 and year ended March 31, 2013 are summarized as follows:
| | Options Outstanding |
| | | | |
| | Number of | | Weighted average |
| | shares | | exercise price |
| | | | |
| Balance, March 31, 2012 | 745,000 | $ | 0.065 |
| Expired | (5,000) | | 0.105 |
| Balance, March 31, 2013 and June 30, 2013 | 740,000 | $ | 0.065 |
The Company has the following options outstanding and exercisable at June 30, 2013:
| | | Outstanding | | Exercisable |
| | | | | Weighted | | | | | | |
| | | Number | | Average | | Weighted | | Number | | Weighted |
| Range of | | Outstanding at | | Remaining | | Average | | Exercisable at | | Average |
| Exercise | | June 30, | | Contractual | | Exercise | | March 31, | | Exercise |
| Prices | | 2013 | | Life (Years) | | Price | | 2013 | | Price |
| | | | | | | | | | | | | |
| $ | 0.065 | | 740,000 | | 2.40 | $ | 0.065 | | 740,000 | | $ | 0.065 |
The Company has the following options outstanding and exercisable at March 31, 2013:
| | | Outstanding | | Exercisable |
| | | | | Weighted | | | | | | |
| | | Number | | Average | | Weighted | | Number | | Weighted |
| Range of | | Outstanding at | | Remaining | | Average | | Exercisable at | | Average |
| Exercise | | March 31, | | Contractual | | Exercise | | March 31, | | Exercise |
| Prices | | 2013 | | Life (Years) | | Price | | 2013 | | Price |
| | | | | | | | | | | | | |
| $ | 0.065 | | 740,000 | | 2.65 | $ | 0.065 | | 740,000 | | $ | 0.065 |
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 12 – Stockholders’ Equity - Continued
(c) Warrants
On May 10, 2011, the Company completed a non-brokered private placement, issuing 350,000 units (the “Units”), at a price of CAD$0.60 per Unit, for proceeds of CAD$210,000. Each Unit was comprised of one common share in the capital of the Company and one non-transferrable share purchase warrant. Each warrant entitles the holder thereof to purchase a further common share at an exercise price of CAD$0.75 for a period of five years. The Company determined the fair value of the warrants to be $0.257 per warrant using the Black-Scholes option pricing model.
On October 24, 2011, the Company completed a non-brokered private placement of 17,000 units at a price of CAD$0.60 per unit for gross proceeds of CAD$10,200. Each unit is comprised of one common share in the capital of the Company and one non-transferrable share purchase warrant. Each warrant entitles the holder thereof to purchase a further common share at an exercise price of CAD $0.75 for a period of five years. The Company determined the fair value of the warrants to be $0.263 per warrant using the Black-Scholes option pricing model.
On February 2, 2012, the Company issued a convertible promissory note for CAD$50,000 and 83,333 transferrable warrants for gross proceeds of CAD$50,000. On February 23, 2012, the Company issued a second convertible promissory note for CAD$50,000 and a further 83,333 transferrable warrants for gross proceeds of CAD$50,000. These convertible promissory notes, totalling CAD$100,000, matured on February 2, 2013, and bore an annual interest rate of 12%. The holders of the notes could convert the note and accrued interest, at or before the maturity date, into common shares of the Company at CAD$0.60 each. Each warrant entitles the holder thereof to purchase a further common share of the Company at an exercise price of CAD$0.75 for a period of five years. The Company determined the fair value of the warrants to be CAD$0.7816 per warrant using the Black-Scholes option pricing model.
The relative estimated fair value of the warrants in relation to the private placements in May 2011, October 2011, and February 2012 were CAD$90,000 (USD$90,628), CAD$4,470 (USD$4,501), and CAD$56,571 (USD$56,966), respectively, and were allocated to the additional paid-in capital.
During the period ended June 30, 2013 and year ended March 31, 2013, the Company did not issue any warrants. At June 30, 2013, 533,666 (March 31, 2013: 533,666) warrants remained outstanding.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 12 – Stockholders’ Equity - Continued
(c) Warrants - Continued
The Company has the following warrants outstanding at June 30, 2013:
| | | | | | | | | Exercise | Average |
| Balance | Issued | Exercised | Cancelled | Balance | | Exercise | | price | Remaining |
| as at | during the | during the | during the | as at | | price | | (USD | Contractual |
| 2013-03-31 | period | period | period | 2013-06-30 | | (CAD) | | equivalent) | Life in Years |
| | | | | | | | | | |
| 350,000 | - | - | - | 350,000 | $ | 0.75 | $ | 0.75 | 2.86 |
| 17,000 | - | - | - | 17,000 | $ | 0.75 | | 0.75 | 3.32 |
| 166,666 | - | - | - | 166,666 | $ | 0.75 | | 0.75 | 3.60 |
| 533,666 | - | - | - | 533,666 | $ | 0.75 | $ | 0.75 | 3.11 |
The Company has the following warrants outstanding at March 31, 2013:
| | | | | | | | | Exercise | Average |
| Balance | Issued | Exercised | Cancelled | Balance | | Exercise | | price | Remaining |
| as at | during the | during the | during the | as at | | price | | (USD | Contractual |
| 2012-03-31 | period | period | period | 2013-03-31 | | (CAD) | | equivalent) | Life in Years |
| | | | | | | | | | |
| 350,000 | - | - | - | 350,000 | $ | 0.75 | $ | 0.75 | 3.11 |
| 17,000 | - | - | - | 17,000 | $ | 0.75 | | 0.75 | 3.57 |
| 166,666 | - | - | - | 166,666 | $ | 0.75 | | 0.75 | 3.85 |
| 533,666 | - | - | - | 533,666 | $ | 0.75 | $ | 0.75 | 3.37 |
The warrants are not a derivative instrument.
Note 13 – Contingent Liabilities
Management of the Company has opted for the Company to self-insure against business and liability risks rather than purchase third party insurance coverage. Consequently the Company is exposed to financial losses or failure as a result of these risks.
Note 14 – Related Party Transactions
During the period ended June 30, 2013, the Company paid $293 (2012: $300) in director fees to the directors of the Company.
During the period ended June 30, 2013, $24,571 (2012: $25,113) of compensation were paid to a director and shareholder.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 14 – Related Party Transactions - Continued
As at June 30, 2013, included in accounts payable, $229 (March 31, 2013: $2,586) was owed to directors and/or principals of the Company.
Other related party transactions
(i) Industry Solar PV Asset Sale Agreement
On October 24, 2012, Coronus entered into a Solar Photovoltaic Asset Sale Agreement (the “Industry Solar PV Asset Sale Agreement”) with Solar Krafte Utilities Inc. (“Solar Krafte”). Solar Krafte held a contract to purchase Industry Solar Power Generation Station 1 LLC (“Industry”). Under the Industry Solar PV Asset Sale Agreement, Coronus agreed to purchase Industry from Solar Krafte for $1,250,000 (the “Cash Price”). Industry was a party to a Power Purchase Agreement (the “Industry PPA”) with SCE, under the CREST tariff, for a 1.5 MW concentrated photovoltaic power system (the “Industry System”). On entering into the Industry Solar PV Asset Sale Agreement, Coronus deposited $40,000 with Solar Krafte, refundable to Coronus if SCE refused to approve 1) the design change to the Industry System, 2) the invocation of Section 2.9(c) of the Industry PPA, or 3) the relocation of the generating facility to Coronus’ Adelanto West Parcel. Not having received SCE’s approval, on March 27, 2013, Coronus exercised its right to terminate the Industry Solar PV Asset Sale Agreement, and on March 27, 2013, Solar Krafte refunded the $40,000 deposit. Jeff Thachuk, the Company’s president and a control person of the Company, is the chairman, chief executive officer, and a control person of Solar Krafte. Mark Burgert, a shareholder of the Company, is the president and a control person of Solar Krafte. On October 24, 2012, the Company’s board of directors approved Coronus’ entry into the Industry Solar PV Asset Sale Agreement, and on March 27, 2013, the Company’s board of directors approved Coronus’ termination of the Industry Solar PV Asset Sale Agreement. As a director of the Company, Mr. Thachuk declared his interest in the transaction and abstained from voting on both the approval and termination of the Industry Solar PV Asset Sale Agreement.
(ii) Earthlight Agency Fee
On December 20, 2012, Coronus and Coronus’ wholly-owned subsidiaries, Coronus 29-Palms North 1 LLC, Coronus 29-Palms North 2 LLC, Coronus 29-Palms North 3 LLC, Coronus Yucca Valley East 1 LLC, Coronus Yucca Valley East 2 LLC, Coronus Yucca Valley East 3 LLC, Coronus Joshua Tree East 1 LLC, Coronus Joshua Tree East 2 LLC, Coronus Joshua Tree East 3 LLC, Coronus Joshua Tree East 4 LLC, Coronus Joshua Tree East 5 LLC, Coronus Apple Valley East 1 LLC, Coronus Apple Valley East 2 LLC, Coronus Adelanto West 1 LLC, and Coronus Adelanto West 2 LLC (collectively the “Project Companies”), conducted a non-brokered private placement, issuing a senior secured, promissory note (the “Note”) to one investor, Clean Focus Financing Company, LP (“Clean Focus”), for proceeds of up to $4,000,000 (the “Loan”). Pursuant to a schedule of draw dates and amounts, Coronus was to request advances, in whole or in part, of up to the maximum amount of the Loan (each an “Advance”).
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 14 – Related Party Transactions - Continued
Other related party transactions - Continued
In connection with the Loan, with each Advance, but not from the proceeds of each Advance, but from Coronus’ unallocated working capital, Coronus was to pay Earthlight Solar Inc. (“Earthlight”) a fee equal to 3% of the principal amount of the Advance. Mark Burgert, a control person of the Company, is the president and a control person of Earthlight. In connection with the Loan, on behalf of Coronus, Earthlight acted as agent. Coronus paid the 3% fee to Earthlight as follows: on December 26, 2012, Coronus paid Earthlight $45,000; on January 4, 2013, Coronus paid Earthlight $15,000; on February 12, 2013, Coronus paid Earthlight $30,000; and on March 11, 2013, Coronus paid Earthlight $30,000.
(iii) Earthlight Consultancy
On December 26, 2012, effective January 1, 2013, Coronus agreed to engage Earthlight to provide Coronus with advisory and consulting services (the “Services”) in respect of Coronus’ solar photovoltaic business. Under the engagement, Coronus is to pay Earthlight $8,000 per month (the “Fee”) for the Services, with the Fee due and payable at the end of each month. During the period ended June 30, 2013, the Company paid $24,000 to Earthlight (2012: $nil).
(iv) Transfer of Vacant Land Purchase Agreement and Interconnection Request
On October 24, 2012, Coronus entered into a Vacant Land Purchase Agreement (the “29-Palms Morongo Agreement”) to acquire a 24.23 acre parcel of vacant land, situated north of 29-Palms, in the County of San Bernardino, California, which, effective May 3, 2013, the parties amended, agreeing to an option arrangement where an option to purchase the 24.23 acre parcel of vacant land was adopted. On January 31, 2013, the parties to the 29-Palms Morongo Agreement replaced Coronus as purchaser with the Company’s wholly-owned subsidiary Coronus 29-Palms Morongo LLC. Additionally, on March 31, 2013, Coronus assigned the interconnection request for project Coronus 29-Palms Morongo to Coronus 29-Palms Morongo LLC.
Note 15 – Commitments
(a) Master Services Agreement
On March 20, 2013, Coronus entered into a Master Services Agreement with solar PV systems integrator Belectric, Inc. (“Belectric”), which allows Belectric to perform Conditional Use Permit (“CUP”) application pre-engineering services for Coronus projects Adelanto West, Apple Valley East, 29-Palms North, Yucca Valley East, and Joshua Tree East. The services to be performed for each project are limited to, and may include, ALTA/ topographical surveys, geotechnical reports, water quality management plans, and hydrology studies. The services shall be completed within approximately eight weeks. In respect of invoicing and payment, Belectric shall submit its standard monthly invoice describing the services performed and expenses incurred during the preceding month. Coronus shall make payment of all undisputed portions within thirty calendar days from the date of the invoice. The Company estimates the services will cost approximately $30,000 to $35,000 per project.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 15 – Commitments – Continued
(b) Acquisition of Vacant Land
(i) Phelan South Agreement
On April 25, 2012, Coronus entered into a Vacant Land Purchase Agreement (the “Phelan South Agreement”) to acquire a 40 acre parcel of vacant land, situated in Phelan, an unincorporated community in the County of San Bernardino, California. The purchase price was $350,000, all cash. Coronus deposited $1,000 into escrow and agreed to deposit an additional $349,000 within sufficient time to close escrow. Close of escrow was scheduled March 15, 2013. Between September 30, 2012, and March 15, 2013, Coronus expensed $11,278 of non-refundable payments to the seller, separate and distinct from the purchase. Coronus’ board of directors did not approve the purchase. Effective April 22, 2013, the parties mutually terminated the Phelan South Agreement.
(ii) Yucca Valley East Agreement #2
On March 28, 2013, Coronus entered into a Vacant Land Purchase Agreement (the “Yucca Valley East Agreement #2”) to acquire a 20 acre parcel of vacant land, situated east of Yucca Valley, in the County of San Bernardino, California. The purchase price is $100,000. Close of escrow is October 31, 2013. Coronus deposited $10,000 into escrow and agrees to deposit an additional $90,000 within sufficient time to close escrow. The Yucca Valley East Agreement #2 is subject to Coronus receiving permit approval for its solar PV projects Coronus Yucca Valley East 1, 2 and 3 from the County of San Bernardino. See also note 7(a).
(c) Interconnection Financial Security Postings
(i) Second Posting of Interconnection Financial Security for Project Coronus Yucca Valley East 3
On April 15, 2013, pursuant to the SCE interconnection request for solar PV project Coronus Yucca Valley East 3, Coronus posted with SCE the second interconnection financial security, in the amount of $42,250. This amount was determined by the results of the SIS study SCE commenced with Coronus on June 25, 2012.
(ii) Second Posting of Interconnection Financial Security for Projects Coronus Yucca Valley East 1 and 2
On April 26, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Yucca Valley East 1 and 2, Coronus posted with SCE the initial interconnection financial securities, in the amounts of $12,650 and $34,990, respectively. The posting amounts for the Coronus Yucca Valley East 1 and 2 projects were determined by the results of the SIS studies SCE commenced with Coronus on February 2, 2012.
(iii) Second Posting of Interconnection Financial Security for Project Coronus Apple Valley East 2
On July 27, 2013, pursuant to the SCE interconnection requests for solar PV project Apple Valley East 2, Coronus shall post with SCE the second interconnection financial security, in the amount of $24,580. The posting amount for the Apple Valley East 2 project was determined by the results of the FAS study SCE commenced with Coronus on December 18, 2012.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 15 – Commitments – Continued
(c) Interconnection Financial Security Postings - Continued
(iv) Second Posting of Interconnection Financial Security for Projects Coronus Joshua Tree East 1 and 5
On August 14, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Joshua Tree East 1 and 5, Coronus shall post with SCE the second interconnection financial securities, in the amounts of $66,950 and $171,550, respectively. The posting amount for the Joshua Tree East 1 project was determined by the results of the SIS study SCE commenced with Coronus on February 23, 2012. The posting amount for the Joshua Tree East 5 project was determined by the results of the FAS study SCE commenced with Coronus on January 25, 2013.
(v) Second Posting of Interconnection Financial Security for Projects Coronus Joshua Tree East 2, 3 and 4
On September 3, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Joshua Tree East 2, 3 and 4, Coronus shall post with SCE the second interconnection financial securities, in the amounts of $63,250, $48,650, and $105,450, respectively. The posting amounts for the Joshua Tree East 2 and 3 projects were determined by the results of the SIS studies SCE commenced with Coronus on February 23, 2012. The posting amount for the Joshua Tree East 4 project was determined by the results of the SIS study SCE commenced with Coronus on June 25, 2012.
(vi) Second Posting of Interconnection Financial Security for Projects Coronus Adelanto West 1 and 2
On or around September 3, 2013, pursuant to the SCE interconnection requests for solar PV projects Coronus Adelanto West 1 and 2, Coronus shall post with SCE the second interconnection financial securities, in the amounts of $18,330 and $19,130, respectively. The posting amounts for the Coronus Adelanto West 1 and 2 projects were determined by the results of the SIS studies SCE commenced with Coronus on April 13, 2012.
(d) Biological Habitat & Cultural Assessments
On November 24, 2012, Coronus entered into a Biological Habitat Assessment Agreement (the “Bio Assessment Agreement”) with Phoenix Biological Consulting, LLC (“Phoenix”), where Phoenix was to conduct field work and prepare biological habitat assessment technical reports (the “Scope of Services”) for Coronus projects Adelanto West, Apple Valley East, Phelan South, Yucca Valley East, Joshua Tree East, 29-Palms North, and 29-Palms Morongo, for submittal to the city and/or county planning department to satisfy the initial biological studies component of the California Environmental Quality Act. The estimated cost for performing the Scope of Services was $32,500. Coronus paid $16,250 on entering into the Bio Assessment Agreement. The balance was due within thirty business days after receipt of the technical reports. Coronus received the technical reports on January 17, 2013, and paid the balance due on January 28, 2013.
On November 24, 2012, Coronus entered into a Cultural Resources Assessment Agreement (the “Cultural Assessment Agreement”) with Phoenix, where Phoenix was to perform cultural records searches, conduct field work, and prepare cultural resources assessment technical reports (the “Scope of Services”) for Coronus projects Adelanto West, Apple Valley East, Phelan South, Yucca Valley East, Joshua Tree East, 29-Palms North, and 29-Palms Morongo, for submittal to the city and/or county planning department to
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 15 – Commitments – Continued
(d) Biological Habitat & Cultural Assessments- Continued
satisfy the initial cultural studies component of the California Environmental Quality Act. The estimated cost for performing the Scope of Services was $24,900. Coronus paid $12,450 on entering into the Cultural Assessment Agreement. The balance was due within thirty business days after receipt of the technical reports. Coronus received the technical reports on January 17, 2013, and paid the balance due on January 28, 2013.
On January 26, 2013, Coronus entered into a Biological Survey Agreement (the “Biological Survey Agreement”) with Phoenix, where Phoenix is to perform focused biological surveys for Coronus projects Adelanto West, 29-Palms North, Joshua Tree East, Yucca Valley East, and Apple Valley East. The focused biological survey scope of work includes surveys for desert tortoise, burrowing owl, Mohave ground squirrel, and rare plants. Additionally, the scope of work includes lake and streambed delineation, as well as the development of Joshua tree relocation and management plans. The estimated total cost for performing the work is $137,310. The work was expected to begin, and did, in March, 2013, and will continue up through July, 2013. Coronus is billed at the end of each month for the services rendered during that month, and Coronus pays, and agrees to pay, Phoenix within one month after receiving each invoice.
Note 16 – Subsequent Events
(a) San Bernardino County Moratorium on Approval of Commercial Solar Energy Generation Projects
On June 12, 2013, the San Bernardino County Board of Supervisors approved a 45-day temporary moratorium on approval of commercial solar energy generation projects. The purpose of the moratorium was to prevent establishment of commercial solar energy generation projects that may be incompatible with existing land uses, while the County contemplate potential amendments to the Development Code for the purpose of ensuring and enhancing compatibility between solar energy generation projects and surrounding land uses. Coronus projects 29-Palms North, Yucca Valley East, Joshua Tree East, and Apple Valley East are subject to the moratorium. Coronus project Adelanto West is not.
On July 23, 2013, the Board of Supervisors extended the moratorium for 10 months and 15 days, but said they hoped to put new regulations in place and lift the ban sooner than that. San Bernardino County Land Use Services Department Planning Director Terri Rahhal said the planners are working with a consultant and hope to return to the Board of Supervisors in three to six months with new regulations that would include location criteria, design standards and rules for processing applications. The Board of Supervisors could lift the moratorium at that time.
As a consequence of the moratorium extension, Coronus formally withdrew its SCE interconnection requests for Coronus solar PV systems 29-Palms North 2 and 3. The interconnection time stipulated in the combined system impact and facility study reports for these two systems is 12 months. To meet these interconnection timelines, without exceeding the drop dead timelines of the systems' power purchase agreements (“CREST PPAs”), Coronus would need to start construction now, without delay. In the face of the San Bernardino County permit approval moratorium, this is not possible. As a consequence of the interconnection request withdrawals, Coronus is entitled to a release of the interconnection financial
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 16 – Subsequent Events – Continued
(a) San Bernardino County Moratorium on Approval of Commercial Solar Energy Generation Projects- Continued
security postings Coronus deposited with SCE in respect of these two projects, in the cumulative amount of $864,600, less the costs, if any, SCE charged to these two projects.
As a consequence of the moratorium extension, Coronus also put a formal request to SCE to terminate the CREST PPAs in respect of these two projects, and asked SCE to return to Coronus the development securities Coronus posted with SCE under the CREST PPAs, in the amounts of $38,250 and $38,250, respectively.
(b) Second Posting of Interconnection Financial Security for Project Coronus Apple Valley East 2
On July 27, 2013, pursuant to the SCE interconnection requests for solar PV project Apple Valley East 2, Coronus posted with SCE the second interconnection financial security, in the amount of $24,580. The posting amount for the Apple Valley East 2 project was determined by the results of the FAS study SCE commenced with Coronus on December 18, 2012.
(c) Share Purchase and Development Services Agreement & Senior Secured Promissory Note
On August 9, 2013, the Company and Coronus entered into a share purchase and development services agreement (the “Share Purchase and Development Services Agreement”) with Redwood Solar Development LLC (“Redwood”).
Under the Share Purchase and Development Services Agreement, the Company has agreed to sell 100% of the issued and outstanding shares of Coronus to Redwood, in addition to performing certain development services in respect of the twelve anticipated, utility-scale, solar PV projects of Coronus, for $8,775,000 (the “Contract Price”). Redwood shall pay the Contract Price by issuing to the Company, a non-interest bearing, secured debenture (the “Redwood Debenture”). The Company’s obligation to complete the sale is subject, in part, to 1) the Company receiving a release from Clean Focus in respect of any further obligations under or in connection with the Loan [see Note 11(a)]; and 2) the approval of the Share Purchase and Development Services Agreement by the Company’s shareholders holding not less than two-thirds of its shares. Redwood’s obligation to complete the purchase is subject, in part, to 1) Redwood receiving lock-up agreements and proxies from the Company’s shareholders holding not less than 80% of the Company’s shares; and 2) the approval of the Share Purchase and Development Services Agreement by the Company’s shareholders holding not less than 80% of the Company’s shares.
Prior to executing the Share Purchase and Development Services Agreement, Redwood received lock-up agreements and proxies from eleven of the Company’s shareholders, who, in aggregate, hold 79.9% of the Company’s shares. On August 14, 2013, Redwood received a further lock-up agreement and proxy from a shareholder who holds 117,000 shares, which now gives rise to lock-up agreements and proxies from twelve of the Company’s shareholders, who, in aggregate, hold 80.6% of the Company’s shares.
The Company is scheduled to hold an annual and special meeting of its shareholders (the “Meeting”) on September 16, 2013, at which time, the Company’s shareholders will vote, by proxy or in person, on whether to approve the Share Purchase and Development Services Agreement. The closing date (the “Closing Date”) means the date on which the closing will occur, which will be not more than three business days following the date of the Meeting.
CORONUS SOLAR INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period Ended June 30, 2013
Note 16 – Subsequent Events – Continued
(c) Share Purchase and Development Services Agreement & Senior Secured Promissory Note - Continued
In the event the required percentages of the shareholder votes are met under the Share Purchase and Development Services Agreement, upon the transfer of Coronus to Redwood, all then outstanding advances under the Loan, together with all accrued but unpaid interest, will be assumed as part of the transfer. In the event the required percentages of our shareholder votes are not met under the Share Purchase and Development Services Agreement, we shall owe Redwood a break-up fee of $5,000,000, which will be immediately due and payable. In addition, the Loan will be in immediate default, and will become due and payable, with us confessing judgment to the immediate exercise of remedies allowed with respect to the default of the Loan, including, without limitation, a declaration of foreclosure on the Coronus land parcels and the seizure of all assets of Coronus.
The Contract Price is the agreed upon price of $0.39/Wp, which is the estimated final output capacity of the twelve anticipated, utility-scale, solar PV projects of Coronus, and is based on the aggregate of the value of the installed solar PV systems and the value of the development services to be performed by the Company. The payment of the Contract Price, and the corresponding retirement of the Redwood Debenture, is as follows: 1) $1,000 was paid to the Company on the execution of the Share Purchase and Development Services Agreement; 2) $9,000 shall be paid to the Company on the Closing Date; 3) after four solar PV systems have met certain conditions, inclusive of the receipt of conditional use permits, a payment of 5% of the Contract Price, per solar PV system, shall be paid to the Company, estimated to be $36,563 per system; and 4) the balance of the Contract Price shall be pro-rated among the twelve solar PV systems with each pro-rata portion paid to the Company on permanent financial close in connection with the construction of each system.
Under the Share Purchase and Development Services Agreement, the Contract Price is subject to adjustment, upwards or downwards, as appropriate, based, in part, on the following parameters: installed capacity; development expense budget true-up; interconnection refund true-up; and Coronus financial statements true-up. Under the Share Purchase and Development Services Agreement, forward looking, Redwood agrees to fund, and the Contract Price reflects Redwood funding, certain development expenses that are separate and aside from the Contract Price. The Company understand and agree that the Redwood Debenture security interests received by the Company will be subordinate and junior to the interests securing the Loan, as well as subordinate and junior to all future draws under the Loan where the proceeds are used to fund those certain development expenses.
On August 9, 2013, by way of addendum (the "Loan Addendum"), the Maturity Date under the Loan was extended. The Note is now due on the earlier of i) the date of the Meeting, in the event that the Share Purchase and Development Services Agreement is not approved at the Meeting, or ii) the close of business on the Closing Date as defined in the Share Purchase and Development Services Agreement.
Note 17 – Comparative Figures
Certain figures for the prior period have been reclassified to conform to the current period consolidated financial statements presentation.
