UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2010
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to ______________
Commission File Number 000-49805
SOLAR3D, INC.
------------------------------------------
(Name of registrant in its charter)
DELAWARE 01-05922991
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6500 HOLLISTER AVENUE, SUITE 130, GOLETA, CALIFORNIA 93117
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone Number: (805) 690-9000
MACHINETALKER, INC., 513 DE LA VINA STREET, SANTA BARBARA, CALIFORNIA 93101
-------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes[__] No[_X_]
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(ss.232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes[__] No[_X_]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer (Do not check [___] Smaller reporting company [_X_]
if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes[__] No[_X_]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
The number of shares of registrant's common stock outstanding as of
November 19, 2010 was 97,889,803.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)...................... 2
Consolidated Balance Sheets..................................... 3
Consolidated Statements of Operations........................... 4
Consolidated Statements of Shareholders' Deficit................ 5
Consolidated Statements of Cash Flows........................... 6
Notes to the Consolidated Financial Statements.................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.........................................10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........15
ITEM 4. CONTROLS AND PROCEDURES............................................15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..................................................15
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS........15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES....................................15
ITEM 4. (REMOVED AND RESERVED).............................................15
ITEM 5. OTHER INFORMATION..................................................16
ITEM 6. EXHIBITS...........................................................16
SIGNATURES....................................................................16
-1-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
- -----------------------------
-2-
SOLAR3D, INC.
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
September 30, 2010 December 31, 2009
------------------------ ----------------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 91,180 $ 10,002
------------------------ ----------------------
TOTAL CURRENT ASSETS 91,180 10,002
------------------------ ----------------------
PROPERTY & EQUIPMENT, at cost
Machinery & equipment 13,080 13,080
Computer equipment 50,351 50,351
Furniture & fixture 4,670 4,670
------------------------ ----------------------
68,101 68,101
Less accumulated depreciation (67,774) (67,423)
------------------------ ----------------------
NET PROPERTY AND EQUIPMENT 327 678
------------------------ ----------------------
OTHER ASSETS
Security deposit 2,975 2,975
------------------------ ----------------------
TOTAL OTHER ASSETS 2,975 2,975
------------------------ ----------------------
TOTAL ASSETS $ 94,482 $ 13,655
======================== ======================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 10,110 $ 45,582
Accrued expenses 453,232 401,029
Accrued interest, other 23,075 17,225
Accrued interest, related parties 107,074 110,041
Convertible promissory note 65,000 65,000
Notes payable, related parties - 44,000
------------------------ ----------------------
TOTAL CURRENT LIABILITIES 658,491 682,877
------------------------ ----------------------
SHAREHOLDERS' DEFICIT
Common stock, $.001 par value;
550,000,000 authorized shares;
97,889,803 and 36,395,359 shares issued and outstanding, respectively 97,889 36,395
Additional paid in capital 7,567,105 7,220,377
Deficit accumulated during the development stage (8,229,003) (7,925,994)
------------------------ ----------------------
TOTAL SHAREHOLDERS' DEFICIT (564,009) (669,222)
------------------------ ----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 94,482 $ 13,655
======================== ======================
The accompanying notes are an integral part of
these consolidated financial statements
-3-
SOLAR3D, INC.
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMMENTS OF OPERATIONS
(Unaudited)
From Inception
Three Months Ended Nine Months Ended January 30, 2002
----------------------------- ----------------------------- through
September 30, September 30, September 30, September 30, September 30,
2010 2009 2010 2009 2010
------------- ------------- ------------- -------------- --------------
REVENUE $ - $ 10,000 $ - $ 34,510 $ 1,127,406
COST OF SERVICES - - - - 496,177
------------- ------------- ------------ ------------- -------------
GROSS PROFIT - 10,000 - 34,510 631,229
------------- ------------- ------------ ------------- -------------
OPERATING EXPENSES
Selling and marketing expenses - 49 - 25,077 1,264,814
General and administrative expenses 165,419 69,069 280,963 389,553 3,362,159
Research and development 12,098 - 14,478 1,830 1,454,343
Impairment loss - - - - 1,753,502
Depreciation and amortization expense 117 2,212 351 6,636 120,098
------------- ------------- ------------ ------------- -------------
TOTAL OPERATING EXPENSES 177,634 71,330 295,792 423,096 7,954,916
------------- ------------- ------------ ------------- -------------
LOSS FROM OPERATIONS (177,634) (61,330) (295,792) (388,586) (7,323,687)
------------- ------------- ------------ ------------- -------------
OTHER INCOME/(EXPENSES) BEFORE PROVISION
FOR INCOME TAXES
Interest income - 1 1 3 10,256
Interest expense (1,950) (2,031) (6,418) (13,598) (267,633)
Penalties - - - - (155)
Gain/(loss) on investment - - - 1,347 (73,121)
Loss on settlement of debt - - - (567,300) (567,300)
Gain/(loss) on sale of asset - - - - (963)
------------- ------------- ------------ ------------- -------------
TOTAL OTHER INCOME/(EXPENSES) (1,950) (2,030) (6,417) (579,548) (898,916)
------------- ------------- ------------ ------------- -------------
LOSS BEFORE PROVISION FOR INCOME TAXES (179,584) (63,360) (302,209) (968,134) (8,222,603)
PROVISION FOR INCOME TAXES (800) - (800) - (6,400)
------------- ------------- ------------ ------------- -------------
NET LOSS $ (180,384) $ (63,360) $ (303,009) $ (968,134) $ (8,229,003)
============= ============= ============ ============= =============
BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.04)
============= ============= ============ =============
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 86,610,969 36,395,359 61,464,356 23,799,929
============= ============= ============ =============
The accompanying notes are an integral part of
these consolidated financial statements
-4-
SOLAR3D, INC.
(formerly MACHINETALKER, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
Accumulated
Deficit During
Common stock Additional the
------------------------- Paid-in Development
Shares Amount Capital Stage Total
------------- ---------- ----------- ------------ ---------
Balance at December 31, 2009 36,395,359 $ 36,395 $ 7,220,377 $(7,925,994) $(669,222)
Issuance of common stock in February 2010 for cash
(16,000,000 shares of common stock issued at $0.0125 per share)
(unaudited) 16,000,000 16,000 184,000 - 200,000
Issuance of common stock in July 2010 for cash
(44,444,444 shares of common stock issued at $0.00225 per share)
(unaudited) 44,444,444 44,444 55,556 - 100,000
Issuance of common stock in August 2010 for cash
(1,050,000 shares of common stock issued at $0.010476 per share)
(unaudited) 1,050,000 1,050 9,950 - 11,000
Stock compensation cost (unaudited) - - 97,222 - 97,222
Net loss for the nine months ended September 30, 2010 (unaudited) - - - (303,009) (303,009)
------------- --------- ----------- ------------ ---------
Balance at September 30, 2010 (unaudited) 97,889,803 $ 97,889 $ 7,567,105 $(8,229,003) $(564,009)
============= ========= =========== ============ =========
The accompanying notes are an integral part of
these consolidated financial statements
-5-
SOLAR3D, INC.
(formerly MACHINETALKER, INC.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended From Inception
--------------------------------- January 30, 2002
through
September 30, September 30, September 30,
2010 2009 2010
-------------- --------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (303,009) $ (968,134) $ (8,229,003)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 351 6,636 120,098
Issuance of common shares and warrants for services - 166,625 727,713
Issuance of common shares in conversion of debt - - 400,000
(Gain)/loss on investment - (1,347) 73,121
Stock Compensation Cost 97,222 - 167,000
Gain on sale of asset - - 963
Impairment loss - - 1,753,502
Loss on settlement of debt - 567,300 567,300
Changes in Assets and Liabilities
(Increase) Decrease in:
Prepaid expenses - 904 -
Patents - 656 -
Deposits and other assets - 5,000 2,025
Increase (Decrease) in:
Accounts payable (35,472) 30,165 89,610
Accrued expenses 55,086 103,597 583,381
Unearned revenue - (30,000) -
-------------- --------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (185,822) (118,598) (3,744,290)
-------------- --------------- --------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment - - (73,754)
Sale of asset - - 3,963
Investment in companies - 1,347 (6,121)
-------------- --------------- --------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES - 1,347 (75,912)
-------------- --------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable related parties - 19,000 1,127,342
Proceeds from convertible promissory note - - 129,000
Repayment of notes payable related party (44,000) - (137,000)
Contributed capital by shareholder - 6,485 19,197
Proceeds from subsidiary - - 300,000
Proceeds from issuance of common stock 311,000 100,000 2,465,193
-------------- --------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 267,000 125,485 3,903,732
-------------- --------------- --------------
NET INCREASE IN CASH 81,178 8,234 83,530
CASH, BEGINNING OF PERIOD 10,002 2,949 7,650
-------------- --------------- --------------
CASH, END OF PERIOD $ 91,180 $ 11,183 $ 91,180
============== =============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ - $ - $ 133,948
============== =============== ==============
Income taxes $ 800 $ - $ 6,400
============== =============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
During the nine months ended September 30, 2009, the Company issued 1,590,000 shares of common stock for
services and accounts payable at a fair value of $246,125; 7,320,000 shares of common stock with a fair
value of $933,300 were issued in conversion of $366,000 in debt resulting in a $567,300 loss on
settlement of debt.
The accompanying notes are an integral part of
these consolidated financial statements
-6-
SOLAR3D, INC.
(formerly MACHINETALKER, INC. AND SUBSIDIARY)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
SEPTEMBER 30, 2010
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all normal recurring adjustments considered necessary for a fair
presentation have been included. Operating results for the nine months
ended September 30, 2010 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2010. For further
information refer to the consolidated financial statements and footnotes
thereto included in the Company's Form 10-K for the year ended December 31,
2009.
GOING CONCERN
The accompanying consolidated financial statements have been prepared on a
going concern basis of accounting, which contemplates continuity of
operations, realization of assets and liabilities and commitments in the
normal course of business. The accompanying consolidated financial
statements do not reflect any adjustments that might result if the Company
is unable to continue as a going concern. The Company does not generate
significant revenue, and has negative cash flows from operations, which
raise substantial doubt about the Company's ability to continue as a going
concern. The ability of the Company to continue as a going concern and
appropriateness of using the going concern basis is dependent upon, among
other things, an additional cash infusion. The Company has obtained funds
from its shareholders since its inception through September 30, 2010. It is
Management's plan to generate additional working capital from investors,
and then continue to pursue its business plan and purposes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Solar3D, Inc. (formerly
MachineTalker, Inc.) is presented to assist in understanding the Company's
consolidated financial statements. The consolidated financial statements
and notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States of
America and have been consistently applied in the preparation of the
consolidated financial statements.
DEVELOPMENT STAGE ACTIVITIES AND OPERATIONS
The Company has been in its initial stages of formation and for the nine
months ended September 30, 2010, had insignificant revenues. A development
stage activity is one in which all efforts are devoted substantially to
establishing a new business and even if planned principal operations have
commenced, revenues are insignificant.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries Wideband Detection Technologies, Inc. and Micro
Wireless Technologies, Inc. All significant inter-company balances and
transactions have been eliminated.
CASH AND CASH EQUIVALENT
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
-7-
SOLAR3D, INC.
(formerly MACHINETALKER, INC. AND SUBSIDIARY)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
SEPTEMBER 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
REVENUE RECOGNITION
We recognize revenue upon delivery, provided that evidence of an
arrangement exists, title, and risk of loss have passed to the customer,
fees are fixed or determinable, and collection of the related receivable is
reasonably assured. We record revenue net of estimated product returns,
which is based upon our return policy, sales agreements, management
estimates of potential future product returns related to current period
revenue, current economic trends, changes in customer composition and
historical experience. We accrue for warranty costs, sales returns, and
other allowances based on our experience, which tells us we have less than
$25,000 per year in warranty returns and allowances. Generally, we extend
credit to our customers and do not require collateral. We perform ongoing
credit evaluations of our customers and historic credit losses have been
within our expectations. We do not ship a product until we have either a
purchase agreement or rental agreement signed by the customer with a
payment arrangement. This is a critical policy, because we want our
accounting to show only sales which are "final" with a payment arrangement.
We do not make consignment sales, nor inventory sales subject to a "buy
back" or return arrangement from customers. Accordingly, original equipment
manufacturers do not presently have a right to return unsold products to
us.
We also grant exclusive licenses for the use of the technology required to
operate our products. Software license revenue is recognized over the
contract period, for those contracts that either do not contain a service
component or that have services which are not essential to the
functionality of any other element of the contract.
LOSS PER SHARE CALCULATIONS
Loss per Share dictates the calculation of basic earnings per share and
diluted earnings per share. Basic earnings per share are computed by
dividing income available to common shareholders by the weighted-average
number of common shares available. Diluted earnings per share is computed
similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have
been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. No shares for employee options or
warrants were used in the calculation of the loss per share as they were
all anti-dilutive. The Company's diluted loss per share is the same as the
basic loss per share for the nine months ended September 30, 2010 and 2009
as the inclusion of any potential shares would have had an anti-dilutive
effect due to the Company generating a loss.
STOCK-BASED COMPENSATION
Share based payments applies to transactions in which an entity exchanges
its equity instruments for goods or services, and also applies to
liabilities an entity may incur for goods or services that are to follow a
fair value of those equity instruments. We will be required to follow a
fair value approach using an option-pricing model, such as the
Black-Scholes option valuation model, at the date of a stock option grant.
The deferred compensation calculated under the fair value method would then
be amortized over the respective vesting period of the stock option. The
adoption of share based compensation has no material impact on our results
of operations.
RECLASSIFICATION OF EXPENSES
Certain expenses for the period ended September 30, 2009 were reclassified
to conform to the expenses for the period ended September 30, 2010.
3. CAPITAL STOCK AND WARRANTS
On August 5, 2010, the holders of a majority of the issued and outstanding
shares of the Company's common stock approved a one-for-five reverse common
stock split, and these interim financial statements have been adjusted for
the effects of this reverse split.
-8-
SOLAR3D, INC.
(formerly MACHINETALKER, INC. AND SUBSIDIARY)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
SEPTEMBER 30, 2010
3. CAPITAL STOCK AND WARRANTS (Continued)
During the nine months ended September 30, 2010, the Company issued
16,000,000 shares of common stock at a price of $0.0125 per share for
$200,000 in cash; 44,444,444 shares of common stock at a price of $0.00225
per share for $100,000 cash; and 1,050,000 shares of common stock at a
price of $0.010476 per share for $11,000 cash. During the nine months ended
September 30, 2009, the Company issued 18,648,019 shares of common stock at
a price of $0.0053625 per share; 1,590,000 shares of common stock for
services and accounts payable at a fair value of $246,125; and 732,000
shares of common stock with a fair value of $933,300 for conversion of
$366,000 in debt resulting in the recognition of a $567,300 loss on
settlement of debt.
4. STOCK OPTIONS AND WARRANTS
During the period ended September 30, 2010, in consideration for services
as a director of the Company, the Board of Directors issued to Mr. Nelson a
nonqualified stock option to purchase up to 15,000,000 shares of the
Company's common stock. The stock options were granted on July 22, 2010 and
vest 1/36th per month commencing on a monthly basis for as long as he is an
employee or consultant of the Company. The stock options are exercisable
for a period of seven years from the date of grant at an exercise price of
$0.05 per share, as adjusted for the five for one reverse split of the
Company's common stock.
2010
--------------------
Risk free interest rate 2.38%
Stock volatility factor 229%
Weighted average expected option life 7 years
Expected dividend yield None
A summary of the Company's stock option activity and related information
follows:
9/30/2010
----------------------------------
Weighted
Number average
of exercise
Options price
----------------------------------
Outstanding, beginning of period - $ -
Granted 15,000,000 0.05
Exercised - -
Expired - -
----------------------------------
Outstanding, end of period 15,000,000 $ 0.05
==================================
Exercisable at the end of period 972,222 $ 0.05
==================================
Weighted average fair value of
options granted during the period $ 0.05
=============
The stock-based compensation expense recognized in the statement of
operations during the period ended September 30, 2010 is $97,222.
WARRANTS
During the nine months ended September 30, 2010, the Company issued no
warrants. At September 30, 2010, the Company had a total of 866,400
warrants to purchase 866,400 shares of common stock outstanding.
-9-
SOLAR3D, INC.
(formerly MACHINETALKER, INC. AND SUBSIDIARY)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
SEPTEMBER 30, 2010
5. RETURN ON INVESTMENT
During the nine months ended September 30, 2009, the Company received
$1,347 on its initial investment in Listen4U, LLC.
6. RELATED PARTY TRANSACTION
During the year ended December 31, 2009, an investor loaned the Company
$37,000 for operating expenses. The note was due and payable upon demand,
and bore interest at 6% per annum. The note, including interest of $1,601
was paid off during the nine months ended September 30, 2010.
During the year ended December 31, 2009, the Company's President loaned
$7,000 to the Company for operating expenses. The note bore interest at 6%
per annum, and was paid off during the nine months ended September 30,
2010.
During the nine months ended September 30, 2009, the Company's President
forgave a note payable of $52,342 and contributed cash of $6,485, both of
which were recorded as contributed capital.
7. SUBSEQUENT EVENTS
Management evaluated subsequent events as of the date of the financial
statements pursuant to ASC TOPIC 855.
On October 4, 2010, Roland F. Bryan resigned as the Chief Executive Officer
of the Company and James B. Nelson was appointed as the Chief Executive
Officer and a director of the Company. Mr. Bryan remains the Chairman,
President, Chief Financial Officer, and Corporate Secretary of the Company.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
- --------------------------------------------------------------------------------
CAUTIONARY STATEMENTS
This Form 10-Q contains financial projections and other
"forward-looking statements," as that term is used in federal securities laws,
about Solar3D, Inc.'s ("Solar3D," "we," "us," or the "Company") financial
condition, results of operations and business. These statements include, among
others: statements concerning the potential for revenues and expenses and other
matters that are not historical facts. These statements may be made expressly in
this Form 10-Q. You can find many of these statements by looking for words such
as "believes," "expects," "anticipates," "estimates," or similar expressions
used in this Form 10-Q. These forward-looking statements are subject to numerous
assumptions, risks and uncertainties that may cause the Company's actual results
to be materially different from any future results expressed or implied by the
Company in those statements. The most important facts that could prevent the
Company from achieving its stated goals include, but are not limited to, the
following:
(a) inability to complete research and development of the new
Solar3D technology with little or no current revenue;
(b) volatility or decline of the Company's stock price;
(c) potential fluctuation in quarterly results;
(d) failure of the Company to earn revenues or profits;
(e) inadequate capital to continue business;
(f) barriers to raising the additional capital or to obtaining the
financing needed to implement its business plans;
(g) lack of demand for the Company's products and services;
(h) rapid and significant changes in markets;
(i) litigation with or legal claims and allegations by outside
parties;
(j) insufficient revenues to cover operating costs;
(k) inability to start or acquire new businesses, or lack of
success of new businesses started or acquired by the Company,
if any;
(l) inability to effectively develop or commercialize our new
Solar3D technology; and
(m) inability to obtain patent or other protection for the
Company's proprietary intellectual property.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. The Company cautions you not to place undue reliance
on the statements, which speak only as of the date of this Form 10-Q. The
cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that the Company or persons acting on its behalf may issue.
The Company does not undertake any obligation to review or confirm
analysts' expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this Form 10-Q or to reflect the occurrence of unanticipated events.
The following discussion should be read in conjunction with our
condensed financial statements and notes to those statements. In addition to
historical information, the following discussion and other parts of this
quarterly report contain forward-looking information that involves risks and
uncertainties.
OVERVIEW
On August 5, 2010, the holders of a majority of the outstanding voting
stock of the Company voted by written consent to (1) effect a one-for-five
reverse stock split, and (2) change the name of the Company to Solar 3D, Inc.
Our new business focus will be centered on the acquisition, development, and
commercialization of new proprietary technology to significantly increase the
-11-
efficiency and energy production of solar photovoltaic cells that are currently
offered in the market and that may be developed in the future. In furtherance of
our new business focus, we recently applied for patents covering a novel
three-dimensional solar cell technology that is designed to maximize the
conversion of sunlight into electricity. We believe our new technology will
dramatically increase the efficiency of solar cells.
Almost all conventional solar cells have a two-dimensional design where
up to 30 percent of incident is sunlight reflected off of each solar cell's
surface and more light energy absorbed and lost inside the solar cell materials
than is converted into energy. By contrast, our Solar3D design uses a matrix of
light-collecting elements that guide sunlight into a corresponding array of
three-dimensional, micro-photovoltaic structures. The sunlight, in the form of
photons, is trapped among these micro-structures, where it bounces around until
virtually all of the energy is converted into electricity. Solar3D aims to
create a better solar cell using this innovative technique by eliminating
surface reflection and maximizing the conversion of photons into electrons to
achieve greater efficiency and a lower cost per watt.
We still own all of the MachineTalker technology. In May 2008, we
successfully interconnected our Talker(R) product line to our new "GuardDog"
product which uses Ultra-Wide Band ("UWB') technology to detect any movement or
motion in its vicinity. The combination of Talkers(R) and GuardDog employs UWB
radar-like signals to detect movement within an area, either in the open space
or inside of a closed chamber like that of a shipping container. In addition,
this new product can detect changes other than movement, such as a break or hole
being made in the side of a container. This product is aimed at a unique method
of protection for goods in transit or in storage, and has been proposed as part
of a package to several potential customers.
Another recently released product, the CBM6, has been proposed for use
in monitoring the vibration in high speed rotating spindles and slower speed
rotating fans and motors in oil refineries for wireless data acquisition in
support of Condition-Based Maintenance ("CBM"). This product has been packaged
within explosion-proof housings for use in oil refineries and in less costly
polycarbonate enclosures for other harsh environments. The CBM6 has been
designed to gather data from high speed sources and sensors, and to process that
data at a remote site prior to sending it by wireless means to a central
computer facility. Our Board of Directors is currently considering whether we
will retain the MachineTalker technology in light of our new business, or sell,
enter into joint ventures, or otherwise convey the MachineTalker assets.
We currently have two full time employees and one part-time research
scientist who is experienced in the area of semiconductor design and
development. In addition, we have a contract with a second scientist with
expertise in the application of photonics to the concentration of light energy.
We expect that he will contribute both design and guidance for the development
of our future three-dimensional products.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of property, plant and equipment, intangible assets,
deferred tax assets and fair value computation using the Black Scholes option
pricing model. We base our estimates on historical experience and on various
other assumptions, such as the trading value of our common stock and estimated
future undiscounted cash flows, that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions; however, we believe that our estimates, including
those for the above-described items, are reasonable.
USE OF ESTIMATES
In accordance with accounting principles generally accepted in the
United States, management utilizes estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting period. Actual
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results could differ from those estimates. These estimates and assumptions
relate to recording net revenue, collectability of accounts receivable, useful
lives and impairment of tangible and intangible assets, accruals, income taxes,
inventory realization, stock-based compensation expense and other factors.
Management believes it has exercised reasonable judgment in deriving these
estimates. Consequently, a change in conditions could affect these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Our cash, cash equivalents, investments, accounts receivable and
accounts payable are stated at cost which approximates fair value due to the
short-term nature of these instruments.
REVENUE RECOGNITION
We will continue to recognize revenue in accordance with the Securities
and Exchange Commission ("SEC") Staff Accounting Bulletin No. 104, "Revenue
Recognition in Financial Statements" ("SAB 104"). We will continue to recognize
revenue upon delivery, provided that evidence of an arrangement exists, title,
and risk of loss have passed to the customer, fees are fixed or determinable,
and collection of the related receivable is reasonably assured. We will continue
to record revenue net of estimated product returns, which is based upon our
return policy, sales agreements, management estimates of potential future
product returns related to current period revenue, current economic trends,
changes in customer composition and historical experience. We will continue to
accrue for warranty costs, sales returns, and other allowances based on our
prior experience in servicing customers and products. We may extend credit to
our customers based upon credit evaluations and do not require collateral. We do
not and will not ship a product until we have either a purchase agreement or
rental agreement signed by the customer with a payment arrangement. This is a
critical policy, because we want our accounting to show only sales which are
"final" with a payment arrangement. We do not and will not make consignment
sales or inventory sales subject to a "buy back" or return arrangement from
customers.
PROVISION FOR SALES RETURNS, ALLOWANCES AND BAD DEBTS
We will continue to maintain a provision for sales allowances, returns
and bad debts. Sales returns and allowances result from equipment damaged in
delivery or customer dissatisfaction, as provided by agreement. The provision
will continue to be provided for by reducing gross revenue by a portion of the
amount invoiced during the relevant period. The amount of the reduction will
continue to be estimated based on historical experience.
RESERVE FOR OBSOLETE/EXCESS INVENTORY
We own certain inventory from products which we no longer sell. These
inventories are stated at the lower of cost or market. We regularly review our
inventories and, when required, will record a provision for excess and obsolete
inventory based on factors that may impact the realizable value of our inventory
including, but not limited to, technological changes, market demand, regulatory
requirements and significant changes in our cost structure. If ultimate usage
varies significantly from expected usage, or other factors arise that are
significantly different than those anticipated by management, inventory
write-downs or increases in reserves may be required.
RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED
TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009
REVENUE
Total revenue for the three months ended September 30, 2010 decreased
by $(10,000) to $0 compared to $10,000 for the three months ended September 30,
2009. Total revenue for the nine months ended September 30, 2010 decreased by
$(34,510) to $0 compared to $34,510 for the nine months ended September 30,
2009. The decrease in revenue was the result of deferred income being fully
recognized in the prior periods, and the Company is in its development stage.
COST OF SALES
There was no cost of sales for the three and nine months ended
September 30, 2010 and 2009, respectively. This was a result of recognition of
previously deferred income with no related purchases of materials.
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SELLING AND MARKETING EXPENSES
Selling and marketing ("S&M") expenses decreased by $(49) to $0 for the
three months ended September 30, 2010 compared to $49 for the three months ended
September 30, 2009. S&M expenses decreased by $(25,077) to $0 for the nine
months ended September 30, 2010 compared to $25,077 for the nine months ended
September 30, 2009. This decrease in S&M expenses was the result of a decrease
in outside service expenses and a reduction in investor relations services.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative ("G&A") expenses increased by $96,350 to
$165,419 for the three months ended September 30, 2010 compared to $69,069 for
the three months ended September 30, 2009. G&A expenses decreased by $(108,590)
to $280,963 compared to $389,553 for the nine months ended September 30, 2009.
The overall decrease in G&A expenses was the result of a decrease in
professional fees.
RESEARCH AND DEVELOPMENT
Research and Development ("R&D") costs increased by $12,098 to $12,098
for the three months ended September 30, 2010 compared to $0 for the three
months ended September 30, 2009. R&D costs increased by $12,648 to $14,478 for
the nine months ended September 30, 2010 compared to $1,830 for the nine months
ended September 30, 2009. This increase in R&D costs was the result of an
increase in consulting fees due to a change in focus of our technology.
NET LOSS
Net Loss increased by $(117,024) to $(180,384) for the three months
ended September 30, 2010 compared to $(63,360) for the three months ended
September 30, 2009. Net Loss decreased by $(665,125) to $(303,009) for the nine
months ended September 30, 2010 compared to $(968,134) for the nine months ended
September 30, 2009. The overall decrease in Net Loss was the result of decrease
in professional fees and other expenses. The decrease in other expenses resulted
from the Company recognizing no losses on settlement of debt during the current
period compared to a loss of $567,300 recognized during the prior year.
Currently operating costs exceed revenue because sales are not yet significant.
We cannot assure when or if revenue will exceed operating costs.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2010, we had a working capital deficit of
$(567,311) as compared to $(672,875) at December 31, 2009. This decrease in
working capital deficit of $(105,564) was due primarily to an increase in cash
from investors.
Cash flow used in operating activities was $(185,822) for the nine
months ended September 30, 2010, as compared to cash used of $(118,598) for the
nine months ended September 30, 2009. This increase of cash used in operating
activities of $(67,224) was primarily attributable to the payment of accounts
payable, and accrued expenses.
Cash provided by investing activities was $0 for the nine months ended
September 30, 2010 as compared to cash provided of $1,347 for the nine months
ended September 30, 2009. The decrease of cash provided by investing activities
was due to no investment returns being experienced during the current period.
Cash provided from financing activities during the nine months ended
September 30, 2010 was $267,000 as compared to cash provided of $125,485 for the
nine months ended September 30, 2009. The increase of $141,515 was primarily due
to an increase in equity financing.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that are reasonably
likely to have a current or future effect on our financial condition, revenues,
results of operations, liquidity or capital expenditures.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES.
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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed by the Company is recorded,
processed, summarized, and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.
Our management, under the direction of our Chief Executive Officer and
Principal Financial Officer, has evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as such terms are defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30,
2010. As part of such evaluation, management considered the matters discussed
below relating to internal control over financial reporting. Based on this
evaluation our management, including the Company's Chief Executive Officer and
Principal Financial Officer, has concluded that the Company's disclosure
controls and procedures were effective as of September 30, 2010.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company's Chief Executive Officer and Principal Financial Officer,
are responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes of accounting
principles generally accepted in the United States. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance of achieving their control objectives.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in the Company's internal control over financial
reporting identified in connection with the evaluation of it that occurred
during the quarter ended September 30, 2010 that materially affected or are
reasonably likely to materially affect the Company's internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
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In addition to the sales of equity reported by us on Form 8K during the
third quarter, we issued 1,050,000 shares of our common stock to one investor
for $11,000 pursuant to the private placement exemption available under Rule 506
of Regulation D of the Securities Act of 1933, as amended. The proceeds from the
sale of these shares are being used for general working capital.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
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None.
ITEM 4. (REMOVED AND RESERVED).
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ITEM 5. OTHER INFORMATION.
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As reported in the Form 8K filed by us with the Securities and Exchange
Commission on October 6, 2010, we appointed Mr. James Nelson as an officer and
director of the Company, effective October 4, 2010. Mr. Nelson was appointed as
a director and Chief Executive Officer of the Company. Mr. Roland Bryan remains
the Chairman of our Board of Directors and the President of the Company.
ITEM 6. EXHIBITS.
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EXHIBIT DESCRIPTION
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10.1 Form of Stock Purchase Agreement, dated July 22, 2010*
10.2 Nonstatutory Stock Option Agreement, dated July 22, 2010*
31.1 Section 302 Certification of Principal Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32.1 Section 906 Certification of Principal Executive Officer
32.2 Section 906 Certification of Chief Financial Officer
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*Incorporated by reference from the Report on Form 8-K filed by the
Company with the Securities and Exchange Commission, dated August 3, 2010.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SOLAR3D, INC.
Dated: November 19, 2010 By:/s/Roland F. Bryan
--------------------------------------------
Roland F. Bryan, Chairman of the Board and
President (Principal Executive Officer)
Dated: November 19, 2010 By:/s/Roland F. Bryan
--------------------------------------------
Roland F. Bryan, Chief Financial Officer
(Principal Financial Officer)
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