UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2010
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file # 333-149617
NOVAGEN SOLAR, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
98-0471927
(I.R.S. Employer Identification number)
1440-3044 BLOOR STREET WEST, TORONTO, ONTARIO M8X 2Y8
(Address of principal executive offices)
Registrant's telephone number, including area code: 647.628.5375
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common stock, $0.0001 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company in Rule 12b-2 of the Act (Check one):
[ ] Large Accelerated Filer [ ] Accelerated Filer
[ ] Non-accelerated Filer [ X ] 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 [X] No [ ]
As of March 31, 2011 the registrant had 43,675,900 shares of its Common Stock
outstanding.
FORWARD LOOKING STATEMENTS
Certain statements made in this Annual Report are "forward-looking statements"
(within the meaning of the Private Securities Litigation Reform Act of 1995)
regarding the plans and objectives of management for future operations. Such
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking
statements made in this Report are based on current expectations that involve
numerous risks and uncertainties. The Company's plans and objectives are based,
in part, on assumptions involving the growth and expansion of business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the forward-looking statements made in this
Report will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements made in this Report, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved.
As used in this annual report, the terms "we", "us", "our", "Company" and
"Novagen" means Novagen Solar Inc., unless otherwise indicated.
PART I
ITEM 1. BUSINESS.
OVERVIEW
Solar power systems are used in industrial, commercial and residential
applications to convert sunlight directly into electricity. Higher global energy
prices, increased environmental awareness and the desire for energy security are
accelerating the adoption of solar power. Governments around the world have also
implemented various tariffs, tax credits and other incentives designed to
encourage the use of solar power.
Novagen Solar Inc. is a full service solar power developer based in Toronto,
Ontario. Novagen will market, sell, design and install solar energy plants
across North America, with an emphasis on turnkey commercial power systems,
brownfield revitalization, land reclamation and off-grid community developments.
Novagen's flexible business model will utilize best-in-class products in
conjunction with innovative financial solutions to maximize solar yield and
generate substantial value for our stockholders while contributing to energy
security, social equity, and protection of the ecosystem upon which life
depends. Novagen is strategically positioned to capitalize on the
feed-in-tariff rates for photovoltaic energy currently in effect in Ontario,
Canada.
CORPORATE HISTORY
Novagen was incorporated in the State of Nevada on June 22, 2005 under the name
of Pickford Minerals Inc. We were originally engaged in the exploration of
mineral deposits in Labrador, Newfoundland, but due to higher than anticipated
costs were unable to implement our exploration program. Motivated by
developments in solar technology and believing that market conditions and
legislative incentives were favorable, our management made a strategic decision
in April 2009 to pursue opportunities in the solar industry.
On April 27, 2009, we entered into an agreement to acquire all the issued and
outstanding shares of Novagen Solar (Canada) Ltd., a privately held Canadian
corporation formed on February 14, 2009 ("NSC"). At the time of the
acquisition, NSC was engaged in the marketing, sale and distribution of a
portfolio of solar products based on leading technologies. On May 12, 2009, we
changed our name to Novagen Solar Inc. The acquisition of NSC closed on July
10, 2009. Since closing the acquisition of NSC, we have abandoned our mineral
exploration interests and focused our business operations exclusively on solar
energy.
The address for our head office is 1440-3044 Bloor Street West, Toronto, Ontario
M8X 2Y8. Our telephone number is (647) 456-9521. Our facsimile number is (647)
439-3785. Our common stock is quoted on the Pink OTC Markets OTCQB under the
symbol "NOVZ".
1
PRODUCTS AND SERVICES
We intend to offer a number of solar products and services that seek to generate
revenue from initial installation activities, as well as potential recurring
revenue from an installed base of customers.
SOLAR POWER PLANT DEVELOPMENT
Commercial Solar Installations. We plan to develop, finance, construct and
operate commercial solar installations in Ontario and throughout the rest of
North America, with a focus on rooftop and open-space systems that produce one
Megawatt of electricity or less. This is an area of the market that we believe
to be underserved. We believe this sector offers faster deployment and better
prospects for generating additional business from customers with multiple
locations. We will offer property owners a comprehensive range of participation
levels and financing packages, including leasing arrangements, that will have
the broadest possible appeal. As part of our turnkey system, we will design and
specify the appropriate system, manage its installation and maintenance, and
arrange for all of the necessary financing. We will also take care of the
required permitting and apply for subsidies. Additionally, we will arrange for
monitoring and maintenance to ensure installed systems are kept in peak
condition throughout their expected life.
Solar Power Plants. We intend to develop large scale (in excess of one
Megawatt), ground-mounted solar power plants, either alone or in partnership
with others. We plan to seek regulatory approval for a 10 Megawatt installation
in Ontario, Canada, by the end of 2011.
Brownfield Revitalization Brownfields are real property, the expansion,
redevelopment, or reuse of which may be complicated by the presence or potential
presence of a hazardous substance, pollutant, or contaminant. Cleaning up and
reinvesting in these properties protects the environment, reduces blight, and
takes development pressures off greenspaces and working lands. The U.S.
Environmental Protection Authority estimates that there are more than 450,000
brownfields in the U.S. The number of brownfields in Canada is not known, but
according to the Canadian Brownfields Network, many are held by municipalities.
We believe that solar energy technologies are well suited for use at brownfield
sites because they require very little maintenance and can be installed on the
ground without penetrating the surface or disturbing existing contamination. We
intend to work with property owners and municipalities to assist in the
revitalization of brownfields by providing turnkey solar energy solutions
utilizing best-in-class photovoltaic arrays and building integrated solar energy
systems.
Land Reclamation. Land reclamation refers to the restoration of land damaged by
mining, erosion, or some other activity or process. The process of reclamation
includes maintaining water and air quality, minimizing flooding, erosion and
damage to wildlife and aquatic habitats caused by surface mining. In respect of
former mining sites, reclamation generally involves filling in excavations,
grading the land to avoid leaving steep slopes, placing the original topsoil on
the graded surface, and planting the topsoil with vegetation. Through a
collaboration with our industry partners, we plan to provide mining companies
with sustainable solar energy solutions for responsible exploration and mining
practices, such as providing solar power for mining operations and reclamation
activities, and post-reclamation solar power plant development.
Off-Grid Communities. According to Natural Resources Canada, there are over 300
remote communities in Canada with a total population of 200,000. These
communities are not connected to the North American electrical grid or piped
natural gas network and are permanent or long-term settlements. Many of them
are very dependent on imported oil and pay energy costs that can be up to ten
times higher than in the rest of Canada. We intend to assist Canada's remote
communities to deploy solar solutions appropriate for their needs, including the
development of solar power plants to provide clean, reliable energy. In
addition to providing turnkey systems, we will assist communities to establish
and nurture a maintenance support infrastructure for their power plant(s). Such
an infrastructure, while not complex, must be functional and appropriate for the
size, complexity and sophistication of the system deployed. We will provide
training for local residents, documentation matched to local capabilities,
spare-parts inventory and component resupply. By providing communities with
appropriate technology and infrastructure training, we will improve their
self-sufficiency while creating jobs and supporting the local economy.
2
MANUFACTURING
We intend to engage in manufacture of PV products within the next two years of
operations, with a focus on modules, inverters and mounting/tracking systems
utilized in our solar plants. The determination as to which products we will
seek to manufacture will depend on market response, the availability of raw
materials, available capital, and our ability to obtain manufacturing rights on
a profitable basis. There can be no assurance that we will have access to
sufficient capital to develop manufacturing operations. If we are unable to
establish manufacturing operations, we will be entirely dependent upon third
parties for the supply of products, which could limit our growth and results of
operations.
COMPETITION
The solar market is intensely competitive and rapidly evolving. The number of
solar product resellers and integrators has rapidly increased due to the growth
of actual and forecast demand for solar products and the relatively low barriers
to entry. We have only recently commenced operations, and do not presently hold
a significant competitive market position in the solar market. Many of our
competitors are large, well established companies with substantially larger
operating staffs and greater capital resources than we have, which have been
engaged in the solar energy business for a much longer time than we have.
Our ability to compete will depend upon our ability to establish supply
relationships with wholesalers, OEM distributors and independent manufacturers
providing the most efficient solutions. Specifically, we will compete with
major PV module manufacturers, such as Sharp Corporation, Suntech Power, BP
Solar, GE Energy, Mitsubishi, and Sanyo; and integrated manufacturers of PV
products such as First Solar, Inc., Kyocera Corporation, Renewable Energy
Corporation, Solar World AG and Sun Power Corporation. We will also compete
with numerous regional and national solar installation companies, including
First Solar Inc., Skypower, Pod Generating Group and CarbonFree Technology Inc.
We also expect to compete with new entrants to the solar market, including those
that offer more advanced technological solutions or that have greater financial
resources. Furthermore, the entire solar industry also faces competition from
conventional energy and non-solar renewable energy providers.
We believe that we will be able to successfully compete by integrating products
with our installation services to provide turnkey solar power solutions. By
providing strong technical, financial and regulatory expertise, while
capitalizing on our management's relationships with government, suppliers and
enterprise-level end users, we believe that Novagen will be able to establish
itself in North America as a significant full-service solar power developer.
SUPPLIERS
By establishing strategic partnerships with major component suppliers we will
ensure that every new project is designed and installed with the most advanced
technology appropriate for our customers. We will purchase PV panels used in
our solar power systems principally from PowerCom Co. Inc., Green Energy
Technology Inc., Day4Energy Inc., Kyocera Solar and Suntech America and we
purchase inverters principally from SatCon Power Systems, which components will
represent approximately two-thirds of our component requirements. Hardware and
other materials will be readily available for off-the-shelf purchase.
We intend to remain independent of any one technology or equipment vendor to
ensure that we will be able to offer our customers turnkey solutions best suited
to their individual needs. As such, we do not have supply agreements with our
suppliers, except for purchase orders on a case-by-case basis. Although PV
panels are manufactured world-wide, we are subject to market price fluctuation
and vendor lead time and inventory for the components that we purchase.
MARKETING
We will sell our solar power systems directly to commercial, industrial and
governmental customers, through an internal sales and marketing staff. We may
appoint additional sales representatives as independent contractors to solicit
business and identify potential development opportunities. We expect to rely
heavily on the relationships between our management and end users in our target
market.
We believe that, depending upon the size of the projects, it is likely that a
significant portion of our initial business will derive from a small number of
customers. There can be no assurance that the loss of any such customer would
not adversely affect our business or results of operations. We expect that our
customer mix will change as we expand our operations.
3
REGULATIONS
The market for electricity generation products is heavily influenced by
national, regional and local government regulations and policies concerning the
electric utility industry, as well as internal policies and regulations
promulgated by electric utilities. These regulations and policies often relate
to electricity pricing and technical interconnection of customer-owned
electricity generation. In Canada and in a number of other countries, these
regulations and policies are being modified and may continue to be modified.
Customer purchases of, or further investment in the research and development of,
alternative energy sources, including solar power technology, could be deterred
by these regulations and policies, which could result in a significant reduction
in the potential demand for our solar products.
Our operations are subject to a variety of national, federal, regional and local
laws, rules and regulations relating to worker safety and the use, storage,
discharge and disposal of environmentally sensitive materials. Because we
outsource and do not manufacture our solar power systems, we do not use,
generate, store or discharge toxic, volatile or otherwise hazardous chemicals
and wastes. We believe that we are in compliance in all material respects with
all laws, rules, regulations and requirements that affect our business.
Further, we believe that compliance with such laws, rules, regulations and
requirements does not impose a material impediment on our ability to conduct
business.
GOVERNMENT SUBSIDIES AND INCENTIVES
We believe that economic and national security issues, technological advances,
environmental regulations seeking to limit emissions by fossil fuel, air
pollution regulations restricting the release of greenhouse gasses, aging
electricity transmission infrastructure and depletion and limited supply of
fossil fuels, has made reliance on traditional sources of fuel for generating
electricity less attractive. Government policies, in the form of both regulation
and incentives, have accelerated the adoption of solar technologies by
businesses and consumers. For example, in the United States, the 2005 energy
bill enacted a 30% investment tax credit for solar, and in January 2006
California approved the largest solar program in the country's history that
provides for long term subsidies in the form of rebates to encourage use of
solar energy where possible. On October 1, 2009, the Province of Ontario
approved the highest feed-in-tariff subsidies in North America at that time.
Currently, the cost of solar power exceeds the cost of power furnished by the
electric utility grid in many locations. Various subsidies and tax incentive
program exist at the national, regional and local levels to encourage the
adoption of solar power including the following:
Capital Cost Rebates - provide funds to customers based on the cost of size of a
customer's solar power system.
Performance-Based Incentives - provide funding to customers based on the energy
produced by their solar energy system.
Feed-In Tariff Subsidies - government imposed prices set above market rates
(which may differ by system size or application) that utilities are required to
pay for renewable electricity generated by end-users for a guaranteed period of
time.
Tax Credits - reduce a customer's taxes at the time the taxes are due.
Net Metering - enables end-users to sell any excess electricity they generate
from solar energy to their local utility in exchange for a credit against their
utility bills (usually combined with rebates).
Renewable Portfolio Standards - government mandates that a certain portion of
electricity delivered to customers by utilities come from a set of eligible
renewable energy resources, and in some instances, that a portion of the
renewable energy quota must be generated by solar energy.
If any of these subsidies or incentives are discontinued, reduced or
substantially modified, if growth in any such subsidies or incentives is
reduced, or if renewable portfolio standards or similar production requirements
are changed or eliminated, demand for our solar products could decline or never
develop, and our results of operations and financial condition could be
materially and adversely affected as a result.
4
Despite the benefits of solar power, there are also certain risks and challenges
faced by solar power. Solar power is heavily dependent on government subsidies
to promote acceptance by mass markets. We believe that the near-term growth in
the solar energy industry depends significantly on the availability and size of
these government subsidies and on the ability of the industry to reduce the cost
of generating solar electricity. The market for solar energy products is, and
will continue to be, heavily dependent on public policies that support growth of
solar energy. There can be no assurance that such policies will continue. Any
decrease in the level of rebates, incentives or other government support for
solar energy would have an adverse affect on our ability to sell our products.
Incentives vary by country, region, and electric utility. Within the United
States, one national incentive is the federal 30% investment tax credit ("ITC")
and special depreciation rules. The ITC credit is capped at $2,000 for
residential customers while commercial customers are not subjected to any cap
while federally approved accelerated depreciation is limited to commercial
customers. The economic value in each given situation of the ITC and
accelerated depreciation depends on the tax status of the customer.
Additionally, several states offer various tax credits to commercial and
residential customers. Residential customers and commercial customers are often
eligible for different non-tax incentives such as rebates, grants, performance
based incentives and feed-in-tariffs, which vary greatly from state to state and
utility to utility and are often tiered according to a project's size and
eligibility. Support for solar energy projects outside the United States also
vary greatly based on different programs in each country.
Within Canada, the Province of Ontario has implemented a program for
feed-in-tariff subsidies ("FiT"). Under the FiT program, the Provincial
electric utility will purchase power generated through PV at premium rates for a
period of 20 years, guaranteed by the Provincial Government. Additional
provincial policies that will encourage the development of solar energy in
Canada are expected in 2011.
BUILDING CODES
We are required to obtain building permits and comply with local ordinances and
building codes for each project, the cost of which is included in our estimated
costs for each proposal.
RESEARCH AND DEVELOPMENT
We have not undertaken any research or development over the last two fiscal
years. We intend to establish cooperative research and development agreements
with certain universities, customers and suppliers with a view to developing new
solar products to which we will have sales rights. Our participation in any
such arrangement may be limited to financing and administration. We may conduct
the research or development ourselves, or in conjunction with others. When we
collaborate on the development of any intellectual property, we will seek
ownership of the intellectual property or the exclusive worldwide right to
exploit such intellectual property. We have not established a budget for
contributions to research and development. Where appropriate, we may also
acquire, commercialize and improve new or existing technologies.
INTELLECTUAL PROPERTY
We do not own any of the intellectual property rights to any of the products
that we sell.
ENVIRONMENTAL
Our planned operations are currently limited to the development and operation of
solar power stations. As such, we are not aware of any environmental laws that
are applicable to our business, or which could result in any material compliance
costs to us or effects on our business.
EMPLOYEES
We currently have no employees other than our sole officer and director, who
have not been paid for his services. As we implement our business plan, we
expect to add significant numbers of employees. We anticipate that by December
31, 2011, we will have approximately five full-time employees, of which two will
be sales-related, one will be an electrical engineer, one will be executive and
one will be administrative.
5
By March 31, 2011, we intend to engage the services of a construction
professional to oversee power plant development. We may also retain qualified
persons from time to time on a contract basis to further assist in power plant
development. We plan to keep our operating costs low by using supplemental
contract labor and subcontracting portions of work to installers and other
specialists, as is common in the construction industry.
By June 30, 2011, we intend to engage two new executive officers, being the
President and the Chief Financial Officer, and an additional external director.
While we do not presently have any employment agreements with our officers and
directors, we plan to enter into agreements with each of our key employees,
including executive officers, by June 30, 2011. We do not presently have
pension, health, annuity, insurance, stock options, profit sharing or similar
benefit plans; however, we may adopt such plans in the future. There are
presently no personal benefits available to our officers and directors. See
"Executive Compensation".
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
and are not required to provide the information required under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
and are not required to provide the information required under this item.
ITEM 2. PROPERTIES
We do not presently own or have an interest in any real property.
ITEM 3. LEGAL PROCEEDINGS
Neither Novagen nor any of its officers or directors is a party to any material
legal proceeding or litigation and such persons know of no material legal
proceeding or contemplated or threatened litigation. There are no judgments
against Novagen Solar Inc. or its officers or directors. None of our officers or
directors have been convicted of a felony or misdemeanour relating to securities
or performance in corporate office.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 11, 2009, the Company's Articles of Incorporation were duly amended and
the Company's name changed under Article 1 of the Articles of Incorporation from
"Pickford Minerals, Inc." to "Novagen Solar Inc." The amendment was made
effective on May 12, 2009 through the filing of a Certificate of Amendment with
the Secretary of State of Nevada. The amendment of the Company's Articles of
Incorporation was approved under section 78.320 of the Nevada Revised Statutes
and the Company's Bylaws, which provide that any action required or permitted to
be taken at a meeting of the stockholders may be taken without a meeting if
stockholders holding at least a majority of the voting power sign a written
consent approving the action. On April 26, 2009, the director of the Company
approved and recommended the amendment. On May 11, 2009, stockholders holding at
least a majority of the voting rights of all outstanding shares of the Company's
capital stock voted in favor of the amendment by written consent.
6
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Our shares trade under the symbol "NOVZ" on the Pink OTC Markets OTCQB. Very
limited trading activity with our common stock has occurred during the past two
years and the subsequent interim period; therefore, only limited historical
price information is available. The following table sets forth the high and low
bid prices of our common stock for the last two fiscal years, as reported by
Pink OTC Markets Inc. and represents inter dealer quotations, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions:
--------------------------------
QUARTER ENDED HIGH LOW
--------------------------------
December 31, 2010 $0.46 $0.11
September 30, 2010 $1.00 $0.13
June 30, 2010 $0.15 $0.15
March 31, 2010 $0.52 $0.15
December 31, 2009 $0.55 $0.05
September 30, 2009 $0.55 $0.01
June 30, 2009 $0.12 $0.01
March 31, 2009 $0.10 $0.01
--------------------------------
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 19, 2009, we issued 5,000,000 restricted common shares at $0.01 per
share to the former stockholders of NSC in exchange for all of their shares in
NSC in connection with our acquisition of all the issued and outstanding shares
of NSC. The shares were issued without registration in reliance on an exemption
provided by Regulation S promulgated under the Securities Act. No general
solicitation was made in connection with the offer or sale of these securities.
The common shares were surrendered to the Company on December 1, 2009, as part
of the rescission of the acquisition of NSC.
On September 8, 2009, the Company issued 200,000 common shares to a director of
the Company as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000. The shares were issued
without registration in reliance on an exemption provided by Regulation S
promulgated under the Securities Act. No general solicitation was made in
connection with the offer or sale of these securities. On March 31, 2010 the
director surrendered these shares to the Company.
On December 31, 2009, we issued to NSC a non-interest bearing note in an amount
equal to $50,000 that was convertible at the rate of the average volume weighted
closing price of the common shares on the NASD over-the-counter bulletin board
for a period of 10 business days prior to the surrender date and the conversion
is deemed to have been effected on the 61st day following the surrender date.
The note was issued as part of the rescission of our acquisition of NSC, to
reimburse NSC for $50,000 in costs and expenses incurred by it in the
acquisition of its sales license from RSi. The note was issued without
registration in reliance on an exemption provided by Regulation S promulgated
under the Securities Act. On August 10, 2010 we repaid the note in full. NSC
was formerly controlled by our sole officer and director, but on July 1, 2010,
he divested all his interest in the NSC and does not retain any beneficial
ownership of NSC whatsoever.
On August 16, 2010, we issued 15,138,800 shares of our common stock to a
creditor of Novagen at a price of $0.01 per share, in full and final settlement
of a debt of $151,388 owed by Novagen to the creditor. The shares were issued
without registration in reliance upon exemptions provided by Sections 4(2) and
4(6) of the Securities Act and Regulation D promulgated thereunder.
On August 16, 2010, we issued 230,000 shares of our common stock to a creditor
of Novagen at a price of $0.01 per share, in full and final settlement of a debt
of $2,300 owed by Novagen to the creditor. The shares were issued without
registration in reliance on an exemption provided by Regulation S promulgated
under the Securities Act.
On August 16, 2010, we issued 5,855,800 shares of our common stock to Ophion
Management Ltd., a company controlled by our sole officer and director, at a
price of $0.01 per share, in full and final settlement of a debt of $58,558 owed
by Novagen to our sole officer and director. The shares were issued without
registration in reliance on an exemption provided by Regulation S promulgated
under the Securities Act.
7
On August 16, 2010 we issued 10,000,000 shares of our common stock at a price of
$0.01 per share to five purchasers for total cash proceeds of $100,000. The
shares were issued without registration in reliance on an exemption provided by
Regulation S promulgated under the Securities Act. No general solicitation was
made in connection with the offer or sale of these securities. One of the
purchasers, who acquired 2,300,000 shares through the offering, is the mother of
our sole officer and director.
HOLDERS
On March 30, 2010, the stockholders' list of our shares of common stock showed
37 registered holders of our shares of common stock and 43,675,900 shares of
common stock outstanding. The number of record holders was determined from the
records of our transfer agent and does not include beneficial owners of shares
of common stock whose shares are held in the names of various security brokers,
dealers, and registered clearing agencies.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
CONVERTIBLE SECURITIES
As part of our acquisition of NSC, on July 10, 2009 we issued a non-interest
bearing convertible demand debenture for $30,000 to one of its former
stockholders. The convertible debenture was surrendered, unredeemed and
unconverted, to the Company on December 1, 2009, as part of the rescission of
the acquisition of NSC.
As part of the rescission of our acquisition of NSC, on December 31, 2009 we
issued a non-interest bearing convertible demand note for $50,000 to NSC. We
paid the note in full on August 10, 2010.
We have not otherwise issued and do not have outstanding any other securities
convertible into shares of our common stock or any rights convertible or
exchangeable into shares of our common stock.
PENNY STOCK REGULATION
Our shares must comply with the Penny Stock Reform Act of 1990, which may
potentially decrease our shareholders' ability to easily transfer their shares.
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated. Penny stocks generally are equity securities with a price of less
than $5.00. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that must comply with the
penny stock rules. Since our shares must comply with such penny stock rules,
our shareholders will in all likelihood find it more difficult to sell their
securities.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
and are not required to provide the information required under this item.
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR PLAN OF OPERATION SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE RELATED NOTES. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE
RISKS AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. OUR ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS.
OVERVIEW
Until July 10, 2009, our business plan was to explore our mineral property to
determine whether it contained commercially exploitable reserves of valuable
minerals. Our plan was to commence a mineral exploration program that would
have involved expanded geological mapping, and geochemical sampling that would
cover previously established grid areas, as well as other prospective sites that
might have been developed to delineate either base metals or industrial
minerals. Due to higher than anticipated fuel costs, we were unable to commence
our exploration program as planned in 2008. By the second quarter of 2009, we
had insufficient capital to initiate and complete our program. In light of
market conditions, our management determined in our second fiscal quarter of
2009 that it was in our best interests to review opportunities in the field of
solar energy.
On April 27, 2009, we entered into the Reorganization Agreement with the
stockholders of NSC to acquire all the issued and outstanding shares of NSC.
NSC was the exclusive sales agent in Canada of RSi, and a non-exclusive sales
agent for RSi everywhere else in the world. The acquisition of NSC was closed
on July 10, 2009. As a result of the acquisition, we abandoned our mineral
exploration interests and began pursuing the marketing, sale and distribution of
PV products as our primary business.
On November 10, 2009, we agreed with NSC and RSi to terminate the Sales License
granting NSC the right to sell photovoltaic products distributed by RSi. The
termination released all parties to the sales license from all claims and
obligations arising from the sales license or the termination thereof. On
December 1, 2009, the acquisition of NSC was rescinded, resulting in all issued
and outstanding shares of NSC being returned to the original NSC stockholders in
exchange for all securities issued by the Company as part of the acquisition.
As part of the rescission of our acquisition of NSC, on December 31, 2009 we
issued a non-interest bearing demand note for $50,000 to NSC for the acquisition
of the solar panels. On August 10, 2010, we repaid the demand note in full.
Our business is in the early stages of development. We presently do not have
sufficient funds to sustain minimal operations for the next 12 months. We do
not currently have any cash flows from operations and our available capital is
insufficient to implement our business plan and fund business operations long
enough to become cash flow positive or to achieve profitability. Our management
believes that a minimum of $600,000 will be required to execute our business
plan and secure development and regulatory approvals for solar power stations
over the next twelve months. Our currently available capital and cash flows
from operations are insufficient to execute our current business plan and fund
business operations long enough to become cash flow positive or to achieve
profitability. Our ultimate success will depend upon our ability to raise
capital.
We will be required to pursue sources of additional capital through various
means, including joint venture projects and debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, and the issuance of
warrants or other derivative securities, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital and
financing, including investment banking fees, legal fees, accounting fees,
printing and distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities we may issue,
such as convertible notes and warrants, which will adversely impact our
financial condition.
Our ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the renewable energy
industry, and the fact that we have not been profitable, which could impact the
availability or cost of future financings. If the amount of capital we are able
to raise from financing activities, together with our revenue from operations,
is not sufficient to satisfy our capital needs, even to the extent that we
reduce our operations accordingly, we may be required to cease operations.
9
There is no assurance that we will be able to obtain financing on terms
satisfactory to use, or at all. We do not have any arrangements in place for
any future financing. If we are unable to secure additional funding, we may
cease or suspend operations. We have no plans, arrangements or contingencies in
place in the event that we cease operations.
We have not earned revenue since inception and we presently have no solar power
installations in operation. Since inception, we have suffered recurring losses
and net cash outflows from operations, and our activities have been financed
from the proceeds of share subscriptions and loans from management and
non-affiliated third parties. We expect to continue to incur substantial losses
to implement our business plan. We have not established any other source of
equity or debt financing and there can be no assurance that we will be able to
obtain sufficient funds to implement our business plan. As a result of the
foregoing, our auditors have expressed substantial doubt about our ability to
continue as a going concern in our financial statements for the year ended
December 31, 2010. If we cannot continue as a going concern, then investors may
lose all of their investment.
RESULTS OF OPERATIONS
We recorded a net loss of $64,209 for the year ended December 31, 2010, compared
with a net loss of $396,673 for the year ended December 31, 2009. Operating
expenses consisted of professional fees, consulting fees and other general
corporate expenses.
Professional fees were $39,828 for the year ended December 31, 2010, compared
with $17,905 for the year ended December 31, 2009. Professional fees incurred
in fiscal year 2010 consist of legal and accounting fees associated with a
registration statement filed with the SEC on August 27, 2010, preparation of our
audited financial statements and our periodic reporting obligations.
Consulting fees for the year ended December 31, 2010 were $15,667, compared with
$2,300 for the year ended December 31, 2009. All consulting fees incurred by
Novagen in fiscal 2010 were related to Novagen's corporate development
initiatives.
General office expenses were $5,199 for the year ended December 31, 2010,
compared with office expenses of $7,684 for the year ended December 31, 2009.
LIQUIDITY AND CAPITAL RESOURCES.
As of December 31, 2010, our total liabilities decreased to $7,993 comprised of
$3,968 in trade debt arising from professional fees and $4,025 owing to a
director for expenses incurred on our behalf. As of December 31, 2009, total
liabilities were $248,501 comprised of $155,850 in trade debt, $50,000 in
convertible note and $42,651 owning to a director for expenses incurred on our
behalf. On August 10, 2010, we repaid the convertible note owing to NSC in
full.
On August 16, 2010, we issued 21,224,600 shares of our common stock in full and
final satisfaction of $212,246 in debt, of which $58,558 was owed to our sole
director and officer. Our management believes that the retirement of the
outstanding debt obligations will improve Novagen's ability to obtain financing.
On August 16, 2010, Novagen issued a total of 10,000,000 shares of our common
stock at $0.01 per share for gross proceeds of $100,000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
and are not required to provide the information required under this item.
10
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
NOVAGEN SOLAR INC.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Stockholders Equity
Statements of Operations and Comprehensive Loss
Statements of Cash Flows
Notes to Financial Statements
11
CHANG LEE LLP
Chartered Accountants
606-815 Hornby Street
Vancouver, B.C., V6Z 2E6
Tel: 604-687-3776
Fax: 604-688-3373
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
NOVAGEN SOLAR INC.
(A development stage company)
We have audited the accompanying balance sheets of Novagen Solar Inc. (a
development stage company) as at December 31, 2010 and 2009 and the related
statements of stockholders' equity, operations and comprehensive loss and cash
flows for the years then ended and for the period from June 22, 2005 (date of
inception) to December 31, 2010. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as at December 31,
2010 and 2009 and the results of its operations and its cash flows for the years
then ended and for the period from June 22, 2005 (date of inception) to December
31, 2010, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company incurred losses from operations since inception, has not
attained profitable operations and is dependent upon obtaining adequate
financing to fulfil its intended business venture. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Vancouver, Canada "Chang Lee LLP"
March 24, 2011 Chartered Accountants
12
NOVAGEN SOLAR INC.
(A development stage company)
Balance Sheets
December 31, 2010 and 2009
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------------------------
December 31 December 31
2010 2009
--------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ - $ 304
Prepaid expenses 7,833 -
--------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 7,833 $ 304
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 3,968 155,850
Convertible debenture - related party - 50,000
Due to a related party 4,025 42,651
--------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 7,993 248,501
--------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL
Authorized:
50,000,000 preferred shares at a par value of $0.0001 per share
Issued and outstanding: Nil
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 43,675,900 common shares 4,367 1,265
(December 31, 2009: 12,651,300)
ADDITIONAL PAID-IN CAPITAL 497,935 188,791
(DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE (502,462) (438,253)
--------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (160) (248,197)
--------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 7,833 $ 304
==================================================================================================
The accompanying notes are an integral part of these financial statements.
13
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Stockholders' Equity (Deficiency)
For the period from June 22, 2005 (inception) to December 31, 2010
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------------------------------------------
Deficit
accumulated Total
Additional during shareholder's
Preferred Stock Common Stock paid-in exploration equity
Shares Amount Shares Amount capital stage (deficiency)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005 - $ - 11,251,300 $ 1,125 $ 18,931 $ (6,418) $ 13,638
-----------------------------------------------------------------------------------------------------------------------------------
Net (loss) and comprehensive (loss) for the year - - - - - (5,935) (5,935)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2006 - $ - 11,251,300 $ 1,125 $ 18,931 $ (12,353) $ 7,703
-----------------------------------------------------------------------------------------------------------------------------------
Net income and comprehensive income for the year - - - - - 372 372
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2007 - $ - 11,251,300 $ 1,125 $ 18,931 $ (11,981) $ 8,075
-----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash - - 1,200,000 120 59,880 - 60,000
on August 6, 2008 at $0.05 per share
Net (loss) and comprehensive (loss) for the year - - - - - (29,599) (29,599)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2008 - $ - 12,451,300 $ 1,245 $ 78,811 $ (41,580) $ 38,476
-----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock - - 3,000,000 300 17,968 - 18,268
on July 10, 2009 at $0.006 per share
Rescind issuance of common stock at $0.006 per share - - (3,000,000) (300) (17,968) - (18,268)
Issuance of common stock for service - - 200,000 20 109,980 - 110,000
on September 8, 2009 at $0.55 per share
Net (loss) and comprehensive (loss) for the year - - - - - (396,673) (396,673)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2009 - $ - 12,651,300 $ 1,265 $ 188,791 $ (438,253) $ (248,197)
-----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock - - 10,000,000 1,000 99,000 - 100,000
in August 16, 2010 at $0.01 per share
Issuance of common stock for debt settlement in - - 21,224,600 2,122 210,124 - 212,246
August 16, 2010 at $0.01 per share
Cancellation of common stock - - (200,000) (20) 20 - -
Net (loss) and comprehensive (loss) for the year - - - - - (64,209) (64,209)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2010 - $ - 43,675,900 $ 4,367 $ 497,935 $ (502,462) $ (160)
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
14
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Operations
(Expressed in U.S. Dollars)
---------------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005
(inception) to Year ended Year ended
December 31, 2010 December 31, 2010 December 31, 2009
---------------------------------------------------------------------------------------------------------------
EXPENSES
Bank charges $ 411 $ 150 $ 67
Consulting fees 19,379 15,667 2,300
Director fees 110,000 - 110,000
Interest expenses 1,811 - -
Marketing expenses 184,591 - 184,591
Office expenses 15,801 5,199 6,920
Professional fees 83,685 39,828 17,905
Resource property acquisition and exploration costs 7,568 - -
Transfer expenses 3,039 455 803
Travel expenses 17,211 628 16,583
Write-off Exploration program security deposit 7,610 - 7,610
Project investigation 50,000 - 50,000
Foreign exchange loss (gain) 1,356 2,282 (106)
LOSS FROM OPERATIONS 502,462 (64,209) 396,673
NET LOSS AND COMPREHENSIVE LOSS FOR THE YEAR $ (502,462) $ (64,209) $ (396,673)
BASIC AND DILUTED LOSS PER SHARE $ (0.03) $ (0.03)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
- Basic and diluted 24,220,533 12,513,766
===============================================================================================================
The accompanying notes are an integral part of these financial statements
15
NOVAGEN SOLAR INC.
(A development stage company)
Statements of Cash Flows
(Expressed in U.S. Dollars)
------------------------------------------------------------------------------------------------------------
Cumulative from
June 22, 2005
(inception) to Year ended Year ended
December 31, 2010 December 31, 2010 December 31, 2009
------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income (loss) for the period $ (502,462) $ (64,209) $ (396,673)
Adjustment for items not involving cash:
- Project investigation 50,000 - 50,000
- Director fees 110,000 - 110,000
- Write-off Exploration program security deposit - - 7,610
Changes in operating assets and liabilities
- (increase) decrease in prepaid expenses (7,833) (7,833) -
- accounts payable and accrued liabilities 157,656 1,806 141,459
------------------------------------------------------------------------------------------------------------
NET CASH FROM (USED IN) OPERATING ACTIVITIES (192,639) (70,236) (44,953)
CASH FLOWS FROM FINANCING ACTIVITIES
Convertible debenture - related party (50,000) - (50,000)
Due to a related party 62,583 19,932 42,651
Proceeds from issuance of common stock 180,056 100,000 -
------------------------------------------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES 192,639 69,932 -
------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - (304) (44,953)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - 304 45,257
------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ - $ 304
============================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
INTEREST PAID IN CASH $ - $ - $ -
------------------------------------------------------------------------------------------------------------
INCOME TAX PAID IN CASH $ - $ - $ -
------------------------------------------------------------------------------------------------------------
NON-CASH FLOWS INFORMATION:
ISSUANCE OF COMMON SHARES FOR SETTLEMENT OF DEBT $ 212,246 $ 212,246 $ -
============================================================================================================
The accompanying notes are an integral part of these financial statements
16
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Novagen Solar Inc. (hereinafter "the Company"), was incorporated in the State of
Nevada, U.S.A., on June 22, 2005 under the name of Pickford Minerals, Inc. The
Company's fiscal year end is December 31. On May 12, 2009, the Company changed
its name to Novagen Solar Inc.
The Company was originally engaged in the exploration of mineral deposits in
Labrador, Newfoundland, but was unable to implement its exploration program. In
April 2009, the Company began to pursue business opportunities relating to
photovoltaic solar energy.
On April 27, 2009, the Company entered into a Share Purchase Agreement (the
"Reorganization Agreement") with Novagen Solar (Canada) Ltd., a privately held
Canadian corporation formed on February 14, 2009 ("NSC"). Upon the closing of
the Reorganization Agreement on July 10, 2009, the shareholders of NSC delivered
all of their equity interests in NSC to the Company in exchange for 3,000,000
shares of common stock in the Company and 3,000,000 convertible securities of
the Company, as a result of which NSC became a wholly-owned subsidiary of the
Company (the "Reorganization"). The note is non-interest bearing, convertible
at the rate of $0.01 per share at the option of the holder. NSC is a sales
company engaged in the business of selling a variety of photovoltaic products.
At the time of the Reorganization, NSC had the exclusive right in Canada and the
non-exclusive right elsewhere to sell a line of photovoltaic products
distributed by Rainbow Solar Inc, a Delaware corporation ("RSI"). The RSI sales
license was terminated by mutual consent on November 10, 2009.
On December 1, 2009, the Reorganization Agreement was rescinded, with the former
shareholders of NSC exchanging all securities received under the Reorganization
Agreement for all the issued and outstanding shares of NSC (the "Rescission").
As part of the Rescission, on December 1, 2009 the Company issued a non-interest
bearing convertible demand note for $50,000 to NSC for the sample solar panels
used by the Company. The Company paid the note in full on August 10, 2010.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America applicable to a
going concern which assume that the Company will realize its assets and
discharge its liabilities in the normal course of business. The Company has
incurred accumulated losses of $502,462 since inception and has not generated
any revenue. The future of the Company is dependent upon its ability to develop
profitable sales and distribution operations. These factors create doubt as to
the ability of the Company to continue as a going concern. Realization values
may be substantially different from the carrying values as shown in these
financial statements should the Company be unable to continue as a going
concern. Management is in the process of identifying sources for additional
financing, or will provide the necessary financial support, to fund the ongoing
development of the Company's business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
the generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates that have been made using careful judgment. The
financial statements have, in management's opinion been properly prepared within
reasonable limits of materiality and within the framework of the significant
accounting policies summarized below:
Accounting Method
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses for the reporting period. The
Company reviews its estimates on an ongoing basis. The estimates were based on
historical experience and on various other assumptions that the Company believes
to be reasonable under the circumstances. Actual results could differ from
these estimates. The Company believes the judgments and estimates required in
its accounting policies to be critical in the preparation of the Company's
financial statements.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments and short-term debt instruments with original maturities of
three months or less to be cash equivalents. As at December 31, 2010 and 2009,
there were no cash equivalents.
17
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality
financial institutions in uninsured accounts.
Foreign Currency Transactions
The Company is located and operating outside of the United States of America.
It maintains its accounting records in U.S. Dollars as follows:
At the transaction date each asset, liability, revenue and expense is translated
into U.S. dollars by the use of the exchange rate in effect at that date. At
the period end, monetary assets and liabilities are re-measured by using the
exchange rate in effect at that date. The resulting foreign exchange gains and
losses are included in operations.
Fair Value of Financial Instruments
The Company's financial instruments as defined by Accounting Standards
Codification ("ASC") 825, "Disclosures about Fair Value of Financial
Instruments," include cash and cash equivalents, accounts payable and accrued
liabilities, convertible note and due to a related party. Fair values were
assumed to approximate carrying value for these financial instruments, except
where noted. Management is of the opinion that the Company is not exposed to
significant interest or credit risks arising from these financial instruments.
The Company is operating outside the United States of America and has
significant exposure to foreign currency risk due to the fluctuation of currency
in which the Company operates and U.S. dollars.
Long-lived assets impairment
Long-lived assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360, Accounting for the
Impairment or Disposal of Long-Lived Assets.
Management considers assets to be impaired if the carrying value exceeds the
future projected cash flows from related operations (undiscounted and without
interest charges). If impairment is deemed to exist, the assets will be written
down to fair value. Fair value is generally determined using a discounted cash
flow analysis.
Stock-Based Compensation
The Company adopted ASC 718, "Share-Based Payment", to account for its stock
options and similar equity instruments issued. Accordingly, compensation costs
attributable to stock options or similar equity instruments granted are measured
at the fair value at the grant date, and expensed over the expected vesting
period. ASC 718 requires excess tax benefits be reported as a financing cash
inflow rather than as a reduction of taxes paid.
The Company did not grant any stock options during the years ended December 31,
2010.
Comprehensive Income
The Company adopted ASC 220, Reporting Comprehensive Income, which establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. The Company is disclosing this information on its
Statement of Stockholders' Equity. Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. The
Company has no elements of "other comprehensive income" for the years ended
December 31, 2010 and 2009.
Income Taxes
The Company has adopted ASC 740, Accounting for Income Taxes, which requires the
Company to recognize deferred tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the Company's financial
statements or tax returns using the liability method. Under this method,
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
18
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic and Diluted Loss Per Share
In accordance with ASC 260 - "Earnings Per Share", the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would be outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. As at December 31, 2010, the basic loss
per share was equal to diluted loss per share as there was no dilutive
instrument.
Business Combinations
ASC 805 applies the acquisition method of accounting for business combinations
established in ASC 805 to all acquisitions where the acquirer gains a
controlling interest, regardless of whether consideration was exchanged. ASC
805 establishes principles and requirements for how the acquirer: a) recognizes
and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree; b)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase; and c) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. The adoption of the standard did not have
a material impact on the Company
Non-controlling Interests in Consolidated Financial Statements
ASC 160 requires companies with noncontrolling interests to disclose such
interests clearly as a portion of equity but separate from the parent's equity.
The noncontrolling interest's portion of net income must also be clearly
presented on the Income Statement.
Disclosure about Derivative Instruments and Hedging Activities
ASC 815-10 requires companies with derivative instruments to disclose
information that should enable financial-statement users to understand how and
why a company uses derivative instruments, how derivative instruments and
related hedged items are accounted for under ASC 815 "Accounting for Derivative
Instruments and Hedging Activities" and how derivative instruments and related
hedged items affect a company's financial position, financial performance and
cash flows.
Determination of the Useful Life of Intangible Assets
The Company adopted FSP No. 142-3, "Determination of the Useful Life of
Intangible Assets" ("FSP 142-3"), as codified in ASC subtopic 350-30,
Intangibles - Goodwill and Other: General Intangibles Other than Goodwill (ASC
350-30) and ASC topic 275, Risks and Uncertainties (ASC 275), which amends the
factors an entity should consider in developing renewal or extension assumptions
used in determining the useful life of recognized intangible assets under FASB
Statement No. 142, as codified in ASC topic 350, Intangibles Goodwill and Other
(ASC 350). This new guidance applies prospectively to intangible assets that are
acquired individually or with a group of other assets in business combinations
and asset acquisitions.
Accounting for Convertible Debt Instruments
The Company adopted FASB Staff Position ("FSP") APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)", as coded in ASC 470 "debt". ASC 470
specifies that issuers of convertible debt instruments that may be settled in
cash upon conversion (including partial cash settlement) should separately
account for the liability and equity components in a manner that will reflect
the entity's nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods.
Accounting for Financial Guarantee Insurance Contracts
The Company adopted ASC 944-20, "Accounting for Financial Guarantee Insurance
Contracts" (formerly SFAS No. 163, Accounting for Financial Guarantee Insurance
- an interpretation of FASB Statement No. 60, Accounting and Reporting by
Insurance Enterprises). ASC 944-20 requires that an insurance enterprise
recognize a claim liability prior to an event of default (insured event) when
there is evidence that credit deterioration has occurred in an insured financial
obligation. The adoption of ASC 944-20 has no effect on the Company's financial
reporting at this time.
19
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share-Based Payments Transactions
The Company adopted ASC 260-10, "Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities." ASC 260-10
provides that unvested share-based payment awards that contain non-forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. Upon adoption, a company is required
to retrospectively adjust its earnings per share data (including any amounts
related to interim periods, summaries of earnings and selected financial data)
to conform with the provisions of ASC 260-10.
Equity Method Investment Accounting Considerations
On April 1, 2009, the Company adopted ASC 323-10, "Equity Method Investment
Accounting Considerations" that addresses how the initial carrying value of an
equity method investment should be determined, how an impairment assessment of
an underlying indefinite-lived intangible asset of an equity method investment
should be performed, how an equity method investee's issuance of shares should
be accounted for, and how to account for a change in an investment from the
equity method to the cost method. The adoption of ASC 323-10 did not have a
material impact on our financial condition or results of operations.
Fair Value Measurement and Disclosures
The Company adopted ASC 820 Fair Value Measurements and Disclosures ("ASC 820").
As defined in ASC 820, fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In order to increase
consistency and comparability in fair value measurements, ASC 820 establishes a
fair value hierarchy that prioritizes observable and unobservable inputs used to
measure fair value into three broad levels, which are described below:
- Level 1: Quoted prices (unadjusted) in active markets that are accessible
at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
- Level 2: Inputs other than quoted prices within Level 1 that are
observable for the asset or liability, either directly or indirectly.
- Level 3: Unobservable inputs that are used when little or no market data
is available. The fair value hierarchy gives the lowest priority to Level 3
inputs
In determining fair value, the Company utilizes valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible as well as considers counterparty credit risk in
its assessment of fair value.
The Company's financial instruments consist principally of cash and cash
equivalents, accounts payable and accrued liabilities, convertible debenture -
related party, and due to a related party. Pursuant to ASC 820, the fair value
of cash and cash equivalents is determined based on "Level 1" inputs, which
consist of quoted prices in active markets for identical assets. The recorded
values of all other financial instruments approximate their current fair values
because of their nature and respective maturity dates or durations.
New Accounting Pronouncements
In October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605),
Multiple-Deliverable Revenue Arrangements amending ASC 605. ASU 2009-13 requires
entities to allocate revenue in an arrangement using estimated selling prices of
the delivered goods and services based on a selling price hierarchy. ASU 2009-13
eliminates the residual method of revenue allocation and requires revenue to be
allocated using the relative selling price method. ASU 2009-13 is effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. The Company is currently
evaluating the impact of ASU 2009-13, but does not expect its adoption to have a
material impact on the Company's financial position or results of operations.
In January 2010, the FASB issued ASU No. 2010-06 Fair Value Measurements and
Disclosures Topic 820 "Improving Disclosures about Fair Value Measurements."
This ASU requires certain new disclosures and clarifies existing disclosure
requirements about fair value measurement as set forth in Codification Subtopic
820-10. The FASB's objective is to improve these disclosures and, thus, increase
the transparency in financial reporting. This ASU is effective for fiscal years
beginning on or after December 15, 2009, and interim periods within those fiscal
years. The adoption of this ASU did not have a material impact on the Company's
financial statements.
In February 2010, the FASB issued ASC No. 2010-09, "Amendments to Certain
Recognition and Disclosure Requirements", which eliminates the requirement for
SEC filers to disclose the date through which an entity has evaluated subsequent
events. ASC No. 2010-09 is effective for its fiscal quarter beginning after 15
December 2010. The adoption of ASC No. 2010-09 is not expected to have a
material impact on the Company's financial statements.
20
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On March 5, 2010, the FASB issued ASU No. 2010-11 Derivatives and Hedging Topic
815 "Scope Exception Related to Embedded Credit Derivatives." This ASU clarifies
the guidance within the derivative literature that exempts certain credit
related features from analysis as potential embedded derivatives requiring
separate accounting. The ASU specifies that an embedded credit derivative
feature related to the transfer of credit risk that is only in the form of
subordination of one financial instrument to another is not subject to
bifurcation from a host contract under ASC 815-15-25, "Derivatives and Hedging -
Embedded Derivatives - Recognition." All other embedded credit derivative
features should be analyzed to determine whether their economic characteristics
and risks are "clearly and closely related" to the economic characteristics and
risks of the host contract and whether bifurcation is required. The adoption of
this ASU did not have a material impact on the Company's financial statements.
In April 2010, the FASB issued ASU 2010-13, "Compensation-Stock Compensation
(Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security
Trades," or ASU 2010-13. This ASU provides amendments to Topic 718 to clarify
that an employee share-based payment award with an exercise price denominated in
currency of a market in which a substantial portion of the entity's equity
securities trades should not be considered to contain a condition that is not a
market, performance, or service condition. Therefore, an entity would not
classify such an award as a liability if it otherwise qualifies as equity. The
amendments in this ASU are effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2010. The Company
does not expect the adoption of ASU 2010-13 to have a significant impact on its
financial statements.
In April 2010, the FASB codified the consensus reached in Emerging Issues Task
Force Issue No. 08-09, "Milestone Method of Revenue Recognition." FASB ASU No.
2010-17 "Revenue Recognition - Milestone Method (Topic 605)" provides guidance
on defining a milestone and determining when it may be appropriate to apply the
milestone method of revenue recognition for research and development
transactions. FASB ASU No. 2010 - 17 is effective for fiscal years beginning on
or after June 15, 2010, and is effective on a prospective basis for milestones
achieved after the adoption date. The Company does not expect this ASU will have
a material impact on its financial position or results of operations.
In May 2010, the FASB issued Accounting Standards Update 2010-19 (ASU 2010-19),
Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency
Exchange Rates. The amendments in this Update are effective as of the
announcement date of March 18, 2010. The Company does not expect the provisions
of ASU 2010-19 to have a material effect on the Company's financial position,
results of operations or cash flows of the Company.
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 3 - PREPAID EXPENSES
On August 24, 2010, the Company entered into a consulting agreement with a
shareholder of the Company for corporate development services and fund raising
for a period of six months commencing on September 1, 2010. The Company agreed
to pay $23,500 for the service in advance. As at December 31, 2010, the Company
made the payment of $23,500 of which $15,667 was expensed in consulting fees in
fiscal 2010.
NOTE 4 - CONVERTIBLE NOTE - RELATED PARTY
The Company issued a non-interest bearing note in an amount equal to $50,000
that is convertible at the rate of the average volume weighted closing price of
the common shares on the NASD over-the-counter bulletin board for a period of 10
business days prior to the surrender date and the conversion is deemed to have
been effected on the 61st day following the surrender date. In accordance with
EITF 98-5 "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios", the Company determined
that the convertible notes contained no embedded beneficial conversion feature
as the convertible notes were issued with a conversion price the same as the
fair market value of the Company's common shares at the time of issuance, being
$0.53 per share. The carrying value of the convertible notes is equal to the
fair value as they are non-interest bearing and due on demand. The note was
paid in full by the Company on August 10, 2010.
NOTE 5 - PREFERRED AND COMMON STOCK
The Company has 50,000,000 shares of preferred stock authorized and none issued.
The Company has 100,000,000 shares of common stock authorized, of which
43,675,900 shares are issued and outstanding. All shares of common stock are
non-assessable and non-cumulative, with no preemptive rights.
On September 8, 2009, the Company issued 200,000 common shares to a director of
the Company as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000. On March 31, 2010 the former
director surrendered these shares to the Company.
21
Under the terms of the Reorganization, on July 10, 2009, the Company issued
3,000,000 common shares at deemed value of $0.006 per share to the shareholders
of Novagen Solar (Canada) Ltd. The shares were surrendered to the Company on
December 1, 2009, as part of the Rescission.
On August 16, 2010, the Company issued 21,224,600 shares of common stock to
three of its creditors at a price of $0.01 per share, in full and final
settlement of a debt of $212,246 owed to the creditors. One of the creditors
was the sole director of the Company, and he received 5,855,800 shares of common
stock in full and final settlement of $58,558 owed to him by the Company for
expenses incurred on the Company's behalf.
On August 16, 2010 the Company issued 10,000,000 shares of common stock at a
price of $0.01 per share to five purchasers for total cash proceeds of $100,000.
NOTE 6 - SEGMENT INFORMATION
The Company currently conducts all of its operations in Canada.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the fiscal year 2009, the Company issued 200,000 common stock to one of
its directors as consideration for his services as a director at the fair market
value of $0.55 per share for a total of $110,000. On March 31, 2010 these
shares were surrendered to the Company and recorded as additional paid-in
capital.
On August 16, 2010, the Company issued 5,855,800 shares of common stock to its
sole director at a price of $0.01 per share, in full and final settlement of a
debt of $58,558 owed to him by the Company for expenses incurred on the
Company's behalf.
In connection with the issuance of 10,000,000 common shares at a price of $0.01
to five purchasers, 2,300,000 shares of common stock were issued to the mother
of our sole director for total proceeds of $23,000.
On August 16, 2010 the Company issued 15,368,800 shares of common stock at a
price of $0.01 per share to a creditor in full and final settlement of a debt of
$153,688. Upon the issuance, the creditor owned 36% of the Company.
As at December 31, 2010 the Company owed $4,025 (December 31, 2009 - $42,651) to
the sole director of the Company, for expenses he paid on behalf of the Company.
See Note 4.
NOTE 8 - INCOME TAXES
At December 31, 2010, the Company had deferred tax assets of approximately
$175,900 principally arising from net operating loss carryforwards for income
tax purposes. As our management cannot determine that it is more likely than not
that we will realize the benefit of the deferred tax asset, a valuation
allowance equal to the deferred tax asset has been established at December 31,
2010. The significant components of the deferred tax asset at December 31, 2010
and 2009 were as follows:
--------------------------------------------------------------------------
December 31, 2010 December 31, 2009
--------------------------------------------------------------------------
Net operating loss carryforwards $ 175,900 $ 153,400
Valuation allowance (175,900) (153,400)
Net deferred tax asset $ - $ -
--------------------------------------------------------------------------
At December 31, 2010, we had net operating loss carryforwards of approximately
$502,462, which expire in the year 2026 through to 2031.
22
NOTE 9 - SUBSEQUENT EVENTS, COMMITMENT AND CONTINGENCY
None noted.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of December 31, 2010, we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer (who are one and the same person), of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended. Based solely on the material
weaknesses described below, our Chief Executive Officer and Chief Financial
Officer concluded that, as of December 31, 2010 the Company's disclosure
controls and procedures were not effective:
1. The Company presently has only one officer and no employees. Inasmuch as
there is no segregation of duties within the Company, there is no management
oversight, no one to review control documentation and no control documentation
is being produced.
CHANGES IN DISCLOSURE CONTROLS AND PROCEDURES
There were no changes in disclosure controls and procedures that occurred during
the period covered by this report that have materially affected, or are
reasonably likely to materially effect, our disclosure controls and procedures.
We will not be implementing any changes to our disclosure controls and
procedures until there is a significant change in our operations or capital
resources.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS
Our management, including our CEO and CFO (who are one and the same person),
does not expect that our disclosure controls and internal controls will prevent
all errors and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of a simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management or board override of the
control.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
CEO AND CFO CERTIFICATIONS
Appearing immediately following the Signatures section of this report there are
Certifications of our CEO and CFO (who are one and the same person). The
Certifications are required in accordance with Section 302 of the Sarbanes-Oxley
Act of 2002 (the Section 302 Certifications). This Item of this report is the
information concerning the Evaluation referred to in the Section 302
Certifications and this information should be read in conjunction with the
Section 302 Certifications for a more complete understanding of the topics
presented.
23
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Our internal control over financial reporting is a process designed
to provide reasonable assurance to our management and board of directors
regarding the reliability of financial reporting and the preparation of the
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company;
and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting
may not prevent or detect misstatements. All internal control systems, no matter
how well designed, have inherent limitations, including the possibility of human
error and the circumvention of overriding controls. Accordingly, even effective
internal control over financial reporting can provide only reasonable assurance
with respect to financial statement preparation. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2010. In making this assessment, it used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework. Based solely on the
material weaknesses described below, our management has concluded that, as of
December 31, 2010, the Company's internal control over financial reporting was
not effective. Management has identified the following deficiencies that, when
aggregated, may possibly be viewed as a material weakness in our internal
control over financial reporting as of December 31, 2010:
1. We do not have an Audit Committee - While not being legally obligated to
have an audit committee, it is our management's view that such a committee,
including a financial expert member, is an utmost important entity level control
over our financial statements. To date we have not established an audit
committee.
2. Insufficient documentation of financial statement preparation and review
procedures - We employ policies and procedures in reconciliation of the
financial statements and the financial information based on which the financial
statements are prepared. Notwithstanding, the controls and policies we employ
are not sufficiently documented.
3. We did not maintain proper segregation of duties for the preparation of
our financial statements - As of December 31, 2010 the majority of the
preparation of financial statements was carried out by one person.
Additionally, we currently only have two officers/directors having oversight on
all transactions. This has resulted in several deficiencies including:
a. Significant, non-standard journal entries were prepared and approved by
the same person, without being checked or approved by any other personnel.
b. Lack of control over preparation of financial statements, and proper
application of accounting policies.
4. We lack sufficient information technology controls and procedures - As of
December 31, 2010 we lacked a proper data back up procedure, and while backup
did take place in actuality, we believe that it was not regulated by methodical
and consistent activities and monitoring.
24
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
We have also established and evaluated our internal control over financial
reporting, and there have been no significant changes in our internal controls
or in other factors that could significantly affect those controls subsequent to
the date of their last evaluation. Nor have there have been any changes in our
internal control over financial reporting during the last fiscal quarter. We do
not intend to implement any changes to our internal control over financial
reporting until there is a significant change in our level of operations and
capital resources.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting. We
are not required to provide an attestation report by our registered public
accounting firm pursuant to the rules of the Securities and Exchange Commission.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND OFFICERS
The following sets forth our directors, executive officers, promoters and
control persons, their ages, and all offices and positions held. Directors are
elected for a period of one year and thereafter serve until their successor is
duly elected by the stockholders. Officers and other employees serve at the
will of the Board of Directors.
-------------------------------------------------------------------------------
TERM SERVED AS
NAME AND ADDRESS POSITION AGE DIRECTOR/OFFICER
-------------------------------------------------------------------------------
Thomas Mills Chief Executive Officer, 42 2009 to present
1440-3044 Bloor Street West, President,
Toronto, Ontario M8X 2Y8 Chief Financial Officer
and a director
================================================================================
Thomas Mills is presently our sole officer and a director since July 10, 2009.
Mr. Mills was the co-founder of Thrust Energy Corp., an oil and gas exploration
company in June 2005, and has been its Chief Executive Officer, President, Chief
Financial Officer and a director since inception. Mr. Mills was also the
co-founder of AMP Productions Ltd., a motion picture production company in March
2003, and has served as its Chief Executive Officer, President, Chief Financial
Officer and a director since its inception. Mr. Mills was the co-founder of
Kingston Mines Ltd., a mineral exploration company in June 2005, and was its
Vice-President, Chief Financial Officer and a director until April 2008. Mr.
Mills also served as the President of Kingston Mines Ltd. from January 2008
until April 2008. From 2001 to September 2004, Mr. Mills was the Chief
Executive Officer and President of Torrent Energy Corp., a natural gas
exploration company, acting as its Chief Financial Officer from March 2004 to
September 2004. He received his Bachelor of Laws degree from the University of
British Columbia in 1996, and holds a Bachelor of Arts degree with an emphasis
on management and organizational behavior, obtained from the University of
Waterloo, Waterloo, Ontario in 1992. Mr. Mills was called to the Bar of British
Columbia in 1997, and remains a part-time practicing member.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past ten years none of our directors, executive officers, promoters
or control persons have:
(1) had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
(2) been convicted in a criminal proceeding or subject to a pending criminal
proceeding;
(3) been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) been found by a court of competent jurisdiction in a civil action, the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
25
COMMITTEES OF THE BOARD
All proceedings of the board of directors for the fiscal year ended December 31,
2010 were conducted by resolutions consented to in writing by our board of
directors and filed with the minutes of the proceedings of our board of
directors. Novagen does not have nominating, compensation or audit committees
or committees performing similar functions nor does our company have a written
nominating, compensation or audit committee charter. Our board of directors does
not believe that it is necessary to have such committees because it believes
that the functions of such committees can be adequately performed by the board
of directors.
Novagen does not have any defined policy or procedure requirements for
stockholders to submit recommendations or nominations for directors. The board
of directors believes that, given the stage of our development, a specific
nominating policy would be premature and of little assistance until our business
operations develop to a more advanced level. Our company does not currently have
any specific or minimum criteria for the election of nominees to the board of
directors and we do not have any specific process or procedure for evaluating
such nominees. The board of directors will assess all candidates, whether
submitted by management or stockholders, and make recommendations for election
or appointment.
A shareholder who wishes to communicate with our board of directors may do so by
directing a written request addressed to our President, Thomas Mills, at the
address appearing on the first page of this registration statement.
AUDIT COMMITTEE FINANCIAL EXPERT
We do not have a standing audit committee. Our directors perform the functions
usually designated to an audit committee. Our board of directors has determined
that we do not have a board member that qualifies as an "audit committee
financial expert" as defined in Item 407(d)(5) of Regulation S-K, nor do we have
a board member that qualifies as "independent" as the term is used in Item
7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as
amended, and as defined by Rule 4200(a)(14) of the NASD Rules.
We believe that our board of directors is capable of analyzing and evaluating
our financial statements and understanding internal controls and procedures for
financial reporting. Our board of directors does not believe that it is
necessary to have an audit committee because management believes that the
functions of an audit committees can be adequately performed by the board of
directors. In addition, we believe that retaining an independent director who
would qualify as an "audit committee financial expert" would be overly costly
and burdensome and is not warranted in our circumstances given the stage of our
development and the fact that we have not generated any positive cash flows from
operations to date.
As we generate revenue in the future, we intend to form a standing audit
committee and identify and appoint a financial expert to serve on our audit
committee.
INDEMNIFICATION
Under our Articles of Incorporation and Bylaws, we may indemnify an officer or
director who is made a party to any proceeding, including a law suit, because of
his position, if he acted in good faith and in a manner he reasonably believed
to be in our best interest. We may advance expenses incurred in defending a
proceeding. To the extent that the officer or director is successful on the
merits in a proceeding as to which he is to be indemnified, we must indemnify
him against all expenses incurred, including attorney's fees. With respect to a
derivative action, indemnity may be made only for expenses actually and
reasonably incurred in defending the proceeding, and if the officer or director
is judged liable, only by a court order. The indemnification is intended to be
to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of
1933, which may be permitted to directors or officers under Nevada law, we are
informed that, in the opinion of the Securities and Exchange Commission,
indemnification is against public policy, as expressed in the Act and is,
therefore, unenforceable.
26
ITEM 11. EXECUTIVE COMPENSATION
To date we have no employees other than our sole officer and director. No
compensation has been awarded, earned or paid to our sole officer and director.
We have no employment agreements with our officer. We do not contemplate
entering into any employment agreements until such time as we have positive cash
flows from operations.
There is no arrangement pursuant to which any of our directors has been or is
compensated for services provided as one of our directors.
There are no stock option plans, retirement, pension, or profit sharing plans
for the benefit of our officers or directors. We do not have any long-term
incentive plans that provide compensation intended to serve as incentive for
performance.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDERS MATTERS
The following table sets forth, as of March 28, 2010, information concerning
ownership of the Company's securities by (i) each Director, (ii) each executive
officer, (iii) all directors and executive officers as a group; and (iv) each
person known to the Company to be the beneficial owner of more than five percent
of each class:
The number and percentage of shares beneficially owned includes any shares as to
which the named person has sole or shared voting power or investment power and
any shares that the named person has the right to acquire within 60 days.
--------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP
NAME OF BENEFICIAL OWNER COMMON PERCENTAGE
SHARES OF CLASS
--------------------------------------------------------------------------------
Thomas Mills 14,855,800 34.0%
All directors and executive officers, as a group 14,855,800 34.0%
Gisela Mills (1) 2,840,000 6.5%
Fahrinsland Capital LLC 15,738,800 36.0%
All beneficial owners of more than 5% of the 18,578,800 42.5%
Company's common stock, as a group
================================================================================
(1) Gisela Mills is the mother of Thomas Mills, our sole officer and director.
The mailing address for all directors, executives officers and beneficial owners
of more than 5% of our common stock is 3044 Bloor Street West, Suite 1440,
Toronto, ON M8X 2Y8.
Unless otherwise noted, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them. For purposes hereof, a person is considered to be
the beneficial owner of securities that can be acquired by such person within 60
days from the date hereof, upon the exercise of warrants or options or the
conversion of convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that any such warrants, options or
convertible securities that are held by such person (but not those held by any
other person) and which can be exercised within 60 days from the date hereof,
have been exercised.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
As part of the rescission of the acquisition of NSC, we agreed to reimburse NSC
for $50,000 in costs and expenses incurred by it in the acquisition of its sales
license from RSi. On December 31, 2009, we issued to NSC a non-interest bearing
convertible debenture in an amount equal to $50,000. On August 10, 2010, we
repaid the debenture in full. Thomas Mills, our sole director and officer, was
a controlling shareholder of NSC until July 1, 2010, when he divested himself of
all beneficial ownership of it.
27
As at August 1, 2010, the Company owed $58,558 to Thomas Mills, our sole officer
and director, for disbursements he incurred on behalf of the Company. On August
4, 2010, we agreed to issue 5,855,800 shares of our common stock to Ophion
Management Ltd., a company controlled by Mr. Mills, at a price of $0.01 per
share, in full and final settlement of the amount owing to Mr. Mills. The
shares were issued on August 16, 2010.
On August 4, 2010, we accepted a subscription for 2,300,000 shares of our common
stock from Gisela Mills at $0.01 per share, for gross proceeds of $23,000. The
shares were issued on August 16, 2010. Gisela Mills is the mother of Thomas
Mills, our sole officer and director.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT FEES
The aggregate fees billed by Chang Lee LLP Chartered Accountants for
professional services rendered for the audit of our annual financial statements
included in this Annual Report on Form 10-K for the fiscal years ended December
31, 2010 and 2009 were $7,358 and $5,000 respectively.
AUDIT RELATED FEES
For the fiscal years ended December 31, 2010 and 2009, the aggregate fees billed
for assurance and related services by Chang Lee LLP relating to our quarterly
financial statements (and the pro-forma financial statements included in our
current report on Form 8-K filed July 15, 2009), which are not reported under
the caption "Audit Fees" above, were $7,811 and $13,533, respectively.
TAX FEES
For the fiscal years ended December 31, 2010 and 2009, the aggregate fees billed
for tax compliance, by Chang Lee LLP were nil.
ALL OTHER FEES
For the fiscal years ended December 31, 2010 and 2009, the aggregate fees billed
by Chang Lee LLP for other non-audit professional services, other than those
services listed above, totaled nil.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that
require that before Chang & Lee is engaged by us or our subsidiaries to render
any auditing or permitted non-audit related service, the engagement be:
-approved by our audit committee; or
-entered into pursuant to pre-approval policies and procedures established by
the audit committee, provided the policies and procedures are detailed as to the
particular service, the audit committee is informed of each service, and such
policies and procedures do not include delegation of the audit committee's
responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves
all services provided by our independent auditors. All of the above services and
fees were reviewed and approved by the entire board of directors either before
or after the respective services were rendered.
28
PART IV
ITEM 13. EXHIBITS
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EXHIBIT TITLE
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3.1 Articles of Incorporation, Novagen Solar Inc., incorporated by
reference from the amended Form 10-K filed May 17, 2010 (1)
3.2 Amended and Restated Bylaws, Novagen Solar Inc., incorporated by
reference from the amended Form 10-K filed May 17, 2010 (1)
4.1 Form of Stock certificate, Novagen Solar Inc. (2)
14.1 Code of Ethics for Senior Financial Officers, Novagen Solar Inc. (2)
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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(1) Previously included as an exhibit to the Registration Statement on Form S-1
filed August 27, 2010.
(2) Previously included as an exhibit to the Annual Report on Form 10-K filed
March 31, 2010.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NOVAGEN SOLAR INC.
Date: March 28, 2011 By:/s/ Thomas Mills
Thomas Mills
Chief Executive Officer, President,
Chief Financial Officer and
Principal Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/s/ Thomas Mills Chief Executive Officer, President, March 28, 2011
Thomas Mills Chief Financial Officer,
Principal Accounting Officer & a director