ragmuff
14年前
QUARTERLY REPORT
FOR THE PERIOD ENDED SEPTEMBER 30, 2010
A Nevada corporation.
SOLARGEN ENERGY, INC.
20400 Stevens Creek Blvd., Suite 740
Cupertino, CA 95014
CUSIP: 83416J102
TRADING SYMBOL: SLGE.PK
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SOLARGEN ENERGY, INC.
QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2010
The information set forth below follows Guidelines for Providing Adequate Current Information; as
amended, outlined by PinkSheets OTC Markets, Inc., and generally follows the sequential format set
forth in those rules. THIS QUARTERLY REPORT HAS NOT BEEN FILED WITH THE SEC OR
ANY OTHER REGULATORY AGENCY.
This Quarterly Report contains certain forward looking statements, as defined in the Private Securities
Litigation Reform Act of 1995, including or related to our future results, events and performance
(including certain projections, business trends and assumptions on future financings), and our expected
future operations and actions. In some cases, you can identify forward-looking statements by the use of
words such as “may,” “should,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,”
“potential,” “continue,” “believe,” “expect” or “anticipate” or the negative of these terms or other similar
expressions. These forward-looking statements generally relate to our plans and objectives for future
operations and are based upon management’s reasonable estimates of future results or trends. In
evaluating these statements, you should specifically consider the risks that the anticipated outcome is
subject to, including the factors discussed under "RISK FACTORS" detailed in our Annual Report,
previously filed with the OTC Disclosure and News Service under our Company page on pinksheets.com.
Item. 1 Exact name of the issuer and the address of its principal executive offices.
Name: SOLARGEN ENERGY, INC.
Solargen Energy, Inc. was originally incorporated in Nevada on July 20, 1987 as “Swiss Cellular
Laboratories, Inc.” On June 15, 1995, we changed our name to “TMEX USA, Inc.” As a result of the
merger with Solargen Energy, Inc. on February 18, 2009, we amended our articles of incorporation and
changed our name to “Solargen Energy, Inc.”
Address of the issuer’s principal executive offices:
Solargen Energy, Inc.
20400 Stevens Creek Blvd., Suite 740,
Cupertino, CA 95014
Attn: Adam McAfee, Chief Financial Officer
Telephone: (408) 418-2415
Fax: (408) 510-6720
Email: amcafee@solargen-energy.com
Web Site: http://www.solargen-energy.com
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Item 2 Shares outstanding.
(i) AS OF NOVEMBER 15, 2010:
(ii) As of November 15, 2010, the issuer currently has an authorized capitalization consisting
of 500,000,000 shares of common stock, $0.0001 par value ("Common Stock"); and 100,000,000
authorized shares of Preferred Stock, including (a) 5,000,000 authorized shares of Series A
Preferred Stock, $0.0001 par value ("Series A Preferred Stock"), (b) 10,000,000 authorized shares
of Series B Preferred Stock, $0.0001 par value ("Series B Preferred Stock"), (c) 10,000,000
authorized shares of Series C Preferred Stock, $0.0001 par value ("Series C Preferred Stock"),
and (d) 75,000,000 remaining undesignated authorized shares of preferred stock ("Undesignated
Preferred Stock") (collectively, the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and the Undesignated Preferred Stock shall be collectively referred to herein as
the “Preferred Stock”).
(iii) There are 14,930,452 shares of Common Stock issued and outstanding, 4,817,500 shares
of Series A Preferred Stock issued and outstanding, 4,900,000 shares of Series B Preferred Stock
issued and outstanding, and no shares of Series C Preferred Stock or Undesignated Preferred
Stock issued or outstanding.
(iv) There were approximately 18,011 freely tradable shares.
(v) The issuer had approximately 402 beneficial shareholders.
(vi) The issuer had approximately 342 shareholders holding Common Stock and 62
shareholders holding Preferred Stock.
(i) AS OF SEPTEMBER 30, 2010:
(ii) As of September 30, 2010, the issuer had an authorized capitalization consisting of
500,000,000 shares of common stock, $0.0001 par value ("Common Stock"); and 100,000,000
authorized shares of Preferred Stock, including (a) 5,000,000 authorized shares of Series A
Preferred Stock, $0.0001 par value ("Series A Preferred Stock"), (b) 10,000,000 authorized shares
of Series B Preferred Stock, $0.0001 par value ("Series B Preferred Stock"), (c) 10,000,000
authorized shares of Series C Preferred Stock, $0.0001 par value ("Series C Preferred Stock"),
and (d) 75,000,000 remaining undesignated authorized shares of preferred stock ("Undesignated
Preferred Stock") (collectively, the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and the Undesignated Preferred Stock shall be collectively referred to herein as
the “Preferred Stock”).
(iii) There were 14,930,452 shares of Common Stock issued and outstanding, 4,817,500
shares of Series A Preferred Stock issued and outstanding, 4,416,539 shares of Series B Preferred
Stock issued and outstanding, and no shares of Series C Preferred Stock or Undesignated
Preferred Stock issued or outstanding.
(iv) There were approximately 18,011!freely tradable shares.
(v) The issuer had approximately 393 beneficial shareholders.
(vi) The issuer had approximately 342 shareholders holding Common Stock and 54
shareholders holding Preferred Stock.
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Item 3 Interim financial statements.
Prior to the merger with Solargen Energy, Inc. on February 18, 2009, the Company was inactive
and has been non-reporting since 2000.
The unaudited Balance Sheets as of September 30, 2010 and December 31, 2009, consolidated
statements of operations for the three and nine months ended September 30, 2010 and 2009 and
for the period from October 4, 2006 (current business plan date of inception) through September
30, 2010 and consolidated statements of cash flows for the three and nine months ended
September 30, 2010 and 2009 and for the period from October 4, 2006 (date of inception) through
September 30, 2010 are attached at the end of this Quarterly Report as Exhibit A, and are
incorporated herein by reference. These financial statements were prepared in accordance with
generally accepted accounting principles.
Item 4 Management’s Discussion and Analysis or Plan of Operation.
This MD&A Section contains forward-looking statements. These statements and other
statements contained in this MD&A Section that are not purely historical fact are forward-looking
statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and are
based on management’s beliefs, certain assumptions and current expectations. The market
opportunities, future plans and performance, objectives and expectations with respect to our
future operations and solar development activities and the financial projections and estimates and
their underlying assumptions, are all forward-looking statements subject to risks and
uncertainties, including, but not limited to: the timing and success of our solar development
efforts, and our ability to raise capital to pursue our business strategy. Readers are cautioned not
to place any undue reliance on these forward-looking statements. Actual results may differ
materially from those expressed in, or implied or projected by, the forward-looking information
and statements. The forward-looking statements contained in this MD&A Section are made as of
the date hereof, and we do not undertake any obligation to update any forward-looking statements
to reflect events or circumstances after the date on which any such statement is made or to reflect
the occurrence of unanticipated events.
A. Plan of Operation
Solargen Energy, Inc. (“the Company”) is a development stage solar power developer focused on
the development, acquisition, construction and operation of next-generation photovoltaic utilityscale
solar energy farms. We have been financed through the raising of equity capital and
anticipate that we will operate at a loss for some time. Currently we only have enough capital to
meet our needs through December 2010. For the foreseeable future, we expect to rely on funds
raised from debt and equity to provide our general operating capital, cover expenses of officers,
directors and consultants, acquire options on land for large scale solar farms, engage in feasibility
studies on solar farm locations, secure relationships with different suppliers of selected thin film
technologies, and to finance our solar projects. We currently have no binding commitments for
external or internal sources of additional liquidity. Our anticipated cash expenditures for 2010
are estimated at approximately $9.7 million for operations, under the Company’s current plan to
begin construction of the first 20 mega watt (MW) phase of a planned nominal capacity 399 MW
utility-scale solar farm in Panoche Valley, California. These anticipated expenditures are subject
to change, depending on the results of permitting and environmental assessments related to our
solar projects, financial liquidity, governmental regulation and approval, market prices for power,
and other risk factors detailed herein.
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Our plan is to develop, operate, and sell environmentally clean electricity to utility, municipal and
commercial enterprises. Following the business model of utility companies, we intend to develop,
own and operate large-scale solar farms as a Solar Independent Power Producer (SIPP)
throughout the United States. We anticipate using leading edge photovoltaic technology to lower
the levelized cost of energy compared to other SIPPs. Solargen has identified markets where
government mandates and incentives create superior opportunities. Currently the United States
Government offers a 30% investment tax credit (“ITC”) for renewable energy projects that meet
certain requirements. For projects completing five percent of construction or five percent “placed
in service” by December 2010, the United States Federal Government has past legislations
mandated under the American Recovery and Reinvestment Act to pay the ITC as a 30 percent
cash rebate on capital expenditures for renewable energy projects which meet the program’s
criteria. States such as California offer rebates and tax incentives for projects within their borders.
Our management believes building utility scale solar farms is necessary in order to meet the
Renewable Portfolio Standards set by the State of California. Utility scale solar farms will
provide the necessary production volume to drive solar technology improvement to help reduce
costs making solar more affordable to both commercial and residential users. The Company has
acquired control over significant acres of land in San Benito County, California. Substantial
progress has been made toward securing the necessary environmental, construction and
interconnect permits to break ground in the near term.
There are four phases involved in the development of a utility-scale solar farm:
Phase I - Site Control: Identification and securing developable land that has high solar
intensity, access to power lines and is near major population
centers
Phase II - Permitting: Carrying out the development work and obtaining the approvals
necessary to build an energy generation facility, connect to the
energy grid, and define off-take agreements
Phase III – PPA/Supply: Entering into panel supply and power purchase agreements
(PPA) in order to secure the necessary PV solar panels, balance
of systems components, engineering, construction and financing
for the project
Phase IV - Deployment: Large scale construction and interconnect of the solar farm to
transmission lines through substation transformers.
Site Control
Site control has been secured through options to purchase land. Our strategy is to select
previously disturbed, privately owned grazing land where environmental impacts can be
mitigated, land costs are reasonable and connection points to transmissions lines are in close
proximity. Our strategy is to pursue environmentally impacted land, such as farm and grazing
land and reduce potential disruption of natural habitat. As of September 30, 2010, we have
secured binding purchase options on 18,806 acres of farm and ranch land in Central California,
considered sufficient acreage to build a solar farm capable of producing up to an estimated 399
MW of electricity to the power grid when fully deployed. A significant portion of the optioned
land has been identified as potential set aside land for environmental mitigation. In addition, we
have an option to purchase an environmental easement on 10,864 additional acres that are
adjacent to the project site.
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Permitting
Permitting for solar installation in the United States is a detailed process involving land use,
building, and environmental compliance. Permitting processes are regulated with an estimated
average permitting duration of 12 to 24 months. We have already performed spring, summer, fall
and winter environmental surveys and a one-year long environmental study has been completed
to mitigate potential effects on local species. In our discussions with the California Department of
Fish and Game (CDFG), the regulatory agency expressed its initial support for using some
portion of land under our control for environmental mitigation. On June 28, 2010 San Benito
County made publically available the draft Environmental Impact Report (EIR) for our project.
On October 12, 2010 the San Benito County Board of Supervisors unanimously voted to certify
the final environmental impact report (“EIR”) for our 399 megawatt photovoltaic solar energy
generating facility proposed for the Panoche Valley, which is located in southeastern San Benito
County. This certification of the EIR brings San Benito County in compliance with the California
Environmental Quality Act (“CEQA”). On October 20, 2010 the San Benito County Planning
Commission held a public hearing and unanimously approved our Conditional Use Permit for the
project. We are pursuing additional required permits for construction of the Panoche Valley
required at the local, state and federal level.
Power Purchase Agreements
The Power Purchase Agreement (PPA) is a contract negotiated with a utility or commercial
customer for the sale of electricity. The agreements typically last for 20 or more years with
pricing schemes that include an annual percentage escalation on the price of energy. The process
of securing a PPA with a major utility can be time consuming, costly, and can take anywhere
from six months to 3 years. We intend to enter a bid into the next PG&E and Southern California
Edison request for offer (“RFO”) PPA solicitation, which we anticipate will be in the first quarter
of 2011.
As part of our back up plan, we intend to negotiate contracts with California’s Investor Owned
Utilities (IOUs) and to seek favorable off-take agreements with Municipal Utilities and rural
irrigation districts. Due to public policy goals from state and local governments, in most cases,
utilities are willing to pay a higher rate for electricity generated from renewable sources than
traditional hydrocarbon-based power generation sources. A completed and legally binding, longterm
off-take agreement, or power purchase agreement, is typically necessary to attract any
substantial amount of project financing, debt, or tax-equity investor to the project. Solargen
believes that such an off-take agreement and financing can be obtained; however, we can provide
no assurances that such off-take agreements and financing can be obtained in a timely fashion, at
an acceptable price, or at all.
Supply Agreements
Securing solar panels is necessary for permitting and project financing. We have a panel supply
agreement with NexPower to provide 50% of the panels for the project based on price and finance
ability of the panels, as well as non-binding letters of intent with leading solar panel
manufacturers to secure additional supply.
We are also seeking agreements with other major suppliers of inverters, racking, tracking and
balance of system providers.
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Project Financing
Long-term solar off-take agreements require proven technology and credit-worthy manufacturers
and engineering, procurement and construction (“EPC”) contractors to guarantee the quality of
their work. We believe that our projects will have low technology risk because we intend to
procure panels, inverters and other materials from reputable manufacturers who are well known
to financial institutions and have proven to be financeable. The financial strength of our suppliers
may be even more important than their being the lowest cost provider. Our management intends
to require our panel suppliers to provide price and performance guarantees, which we believe will
help mitigate technology risk as well as lower financing risk and costs. We also will seek to
select an EPC who can provide necessary guarantees and bonding during the building and
operation of the solar facility. We believe that such guarantees from credit-worthy suppliers and
EPC will enable us to finance a large percentage of the total project costs through outside project
equity, tax-equity and bank construction debt. Also, if we are successful in meeting the current
requirements for the 30% investment tax credit and cash grant, our project would be even more
attractive to third party investors and institutional investors who specialize in such financings.
We also believe our projects may also qualify for the US Department of Energy and other loan
guarantee programs, which, if available, could further reduce our cost of debt.
Deployment & Operation
Solargen is in the process of selecting an EPC contracting firm. It is expected that this project
EPC will bid the construction and deployment of the project and carry out the early operations of
the facility. Once the facility is built, Solargen will take over the operations and maintenance
(“O&M”) either through direct hire or by contracting with an O&M firm.
It is expected that union labor will be used in the project, which could increase the cost of the
installation. We have committed to a goal of 100% local labor from San Benito County. We will
work closely with the local IBEW (International Brotherhood of Electrical Workers) and our EPC
contractor to strive to accomplish this goal where ever possible.
C. Off-Balance Sheet Arrangement.
As of this date, there are no “Off-Balance Sheet” Arrangements. The Company has not entered
into any definitive agreement that is unconditionally binding or subject to customary closing
conditions that would create “off-balance sheet” arrangements in the future.
Item 5 Legal Proceedings
We are unaware of any current, past, pending or threatened legal proceedings or administrative
actions either by or against us that could have a material effect on our business, financial
condition, or operations and any current, past or pending trading suspensions by a securities
regulator.
Item 6 Defaults upon senior securities.
We are not in default of the terms of any note, loan, lease, or other indebtedness or financing
arrangement requiring the issuer to make payments.
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Item 7 Other Information.
Sale of Equity Securities
From June 25, 2010 to September 30, 2010 Solargen Energy, Inc. issued 4,416,539 shares of
Series B Preferred stock for an aggregate purchase price of $4,416,538, which consisted of
$3,295,000 in cash and $1,121,538 from the conversion of promissory notes and associated
accrued interest on notes. From October 1, 2010 to November 15, 2010, Solargen Energy, Inc.
raised $483,461 in gross cash proceeds before selling expenses by issuing 483,461 shares of
Series B Preferred Stock to accredited investors at $1.00 per share. In connection therewith, from
June 25, 2010 to November 15, 2010 Solargen Energy, Inc. issued to the same investors
4,900,000 Series B Preferred Stock warrants with a five-year term exercisable at $1.00 per share.
These shares and warrants and stock convertible thereunder all bear a restricted legend.
On August 31, 2010, the Company issued stock options to purchase 4,100,000 shares of Common
Stock to its Board of Directors and management, including 100,000 to G. Robert Powell,
Director, 1,680,000 to Michael L. Peterson, Chairman of the Board, President and CEO,
1,000,000 to Eric Cherniss, Vice President of Development, 660,000 to Adam McAfee, Chief
Financial Officer, and 660,000 to Steven Lee, Corporate Counsel. The Stock Options are
exercisable at $0.20 per share and vest over periods ranging from one year to four years with
accelerated vesting upon a change of control. These options and Common Stock convertible
thereunder all bear a restricted legend.
Item 8 Exhibits.
Quarterly Financial Statements for the period ended September 30, 2010 (see Item 3
above).
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Item 9 Certifications
I, Michael L. Peterson, certify that:
1. I have reviewed this Quarterly Report of Solargen Energy, Inc.;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information included or
incorporated by reference in this disclosure statement, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of, and for, the periods
presented in this disclosure statement.
/s/ Michael L. Peterson
Michael L. Peterson, President
Date: November 15, 2010.
SOLARGEN ENERGY, INC.
(A Development Stage Company)
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EXHIBIT A
September 30, 2010
Quarterly Financial Statements
and
Notes to Financial Statements
SOLARGEN ENERGY, INC.
20400 Stevens Creek Blvd., Suite 740
Cupertino, CA 95014
F-1
SOLARGEN ENERGY, INC.
Condensed Consolidated Financial Statements
(Unaudited)
Index to Condensed Consolidated Financial Statements
Page
F-1
Condensed Consolidated Financial Statements
Condensed consolidated balance sheets at September 30, 2010 and December 31, 2009 F-2
Condensed consolidated statements of operations for the three and nine months ended September 30, 2010 and
2009 and for the period from October 4, 2006 (date of inception) through September 30, 2010
F-3
Condensed consolidated statements of cash flows for the nine months ended September 30, 2010 and 2009 and
for the period from October 4, 2006 (date of inception) through September 30, 2010
F-4
Notes to condensed consolidated financial statements F-5
F-2
SOLARGEN ENERGY, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
The accompanying notes are an integral part of the condensed consolidated financial statements
F-3
SOLARGEN ENERGY, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
The accompanying notes are an integral part of the condensed consolidated financial statements
F-4
SOLARGEN ENERGY, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
The accompanying notes are an integral part of the condensed consolidated financial statements
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-5
1. Nature of Activities and Summary of Significant Accounting Policies.
Nature of Activities. The consolidated financial statements include the accounts of Solargen Energy, Inc., a Nevada corporation and its
subsidiaries, Solargen Energy, Inc., a Delaware corporation and Solargen Holdings, Inc., a Delaware corporation. We are in the business
of developing, owning and operating large-scale solar farms as a Solar Independent Power Producer. We are currently developing a solar
farm on approximately 4,717 acres in Panoche Valley, California with options to purchase approximately 18,806 acres of land for solar
development and environmental mitigation and an easement on an additional 10,864 acres.
Business Background. Solargen Energy, Inc. is a Nevada corporation formerly known as TMEX USA, Inc, and originally incorporated on
July 20, 1987 as “Swiss Cellular Laboratories, Inc.” TMEX USA, Inc. merged with Solargen Energy, Inc., a private development stage
solar company on February 18, 2009. Around the time of the merger TMEX USA, Inc. amended its articles of incorporation, changed its
name to “Solargen Energy, Inc.,” changed its trading symbol to SLGE.PK, and effectuated a reverse stock split on a 2,001:1 basis.
Development Stage Enterprise. We prepare our statements in accordance with the Development Stage Enterprise guidance as specified in
FASB Accounting Standards Codification (“ASC”) 915.
Principles of Consolidation. The condensed consolidated financial statements include the accounts of our parent company and its
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying condensed
consolidated balance sheets, the condensed consolidated statements of operations and the condensed consolidated statements of cash flows
are unaudited. The condensed consolidated financial statements in this report should be read in conjunction with the 2009 annual financial
statements and notes thereto included in the Company’s annual report for the year ended December 31, 2009. Except as noted below, the
significant accounting policies remain unchanged since December 31, 2009.
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States (U.S. GAAP) and pursuant to the rules and regulations of the Pinksheets market
exchange. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.
GAAP have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, the unaudited interim condensed consolidated financial statements for the three and nine months ended
September 30, 2010 and 2009 have been prepared on the same basis as the unaudited consolidated statements as of December 31, 2009
and reflect all adjustments, consisting primarily of normal recurring adjustments, necessary for the fair presentation of its statement of
financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2010
are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods.
Basic and Diluted Net Loss per Share. Basic loss per share is computed by dividing loss attributable to common shareholders by the
weighted average number of common shares outstanding for the period, net of shares subject to repurchase. Diluted loss per share reflects
the dilution of common stock equivalents such as convertible preferred stock and warrants to the extent the impact is dilutive. As we
incurred net losses for the three and nine months ended September 30, 2010 and 2009 and for the period from inception date on October 4,
2006 through September 30, 2010, all potentially dilutive securities have been excluded from the diluted net loss per share computations,
as their effect would be anti-dilutive.
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-6
The following table shows the weighted-average number of potentially dilutive shares excluded from the diluted net loss per share
calculation for the three and nine months ended September 30, 2010, and 2009 and for the period from October 4, 2006 (date of inception)
through September 30, 2010:
For the three months ended For the nine months ended
For the period
from October
4, 2006
(inception)
through
September 30,
2010 September 30,
2009 September 30,
2010 September 30,
2009
September 30,
2010
Series A preferred stock 4,817,500 1,121,793 4,722,555 514,048 1,193,191
Series A preferred stock warrants –– 96,522 94,945 32,527 116,651
Series B preferred stock 4,184,528 –– 1,500,754 –– 281,198
Series B preferred stock warrants 4,184,528 –– 1,500,754 –– 281,198
Common stock warrants 129,685 125,489 129,866 53,590 43,437
Stock options 2,487,735 –– 1,472,217 –– 335,838
Unvested restricted stock 515,301 894,768 609,125 632,297 370,326
Total weighted average number of
potentially dilutive shares excluded from
the diluted net loss per share calculation 16,319,277 2,238,572 10,030,216 1,232,462 2,621,839
Fair Value Measurement. Fair value, as defined in ASC Topic 820-10, is 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. The fair value of an asset should reflect
its highest and best use by market participants, whether an in-use or an in-exchange valuation premise. The fair value of a liability should
reflect the risk of nonperformance, which includes, among other things, our credit risk.
Valuation techniques are generally classified into three categories: the market approach, the income approach, and the cost approach. The
selection and application of one or more of the techniques requires significant judgment and are primarily dependent upon the
characteristics of the asset or liability, the principal (or most advantageous) market in which participants would transact for the asset or
liability and the quality and availability of inputs. Inputs to valuation techniques are classified as either observable or unobservable within
the following hierarchy:
Level 1 Inputs
These inputs come from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs
These inputs are other than quoted prices that are observable, for an asset or liability. This includes: quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than
quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable
market data by correlation or other means.
Level 3 Inputs
These are unobservable inputs for the asset or liability, which require our own assumptions. As required by ASC Topic 820-10, financial
assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of
the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of
assets and liabilities and their placement within the fair value hierarchy levels. Our only financial asset carried at fair value is cash held in
a commercial bank accounts with short-term maturities. We consider the statements we receive from the bank as a quoted price (Level 1
measurement) for cash and measure the fair value of this asset using the bank statements. Both the carrying amount and the fair market
value (Level 1) at September 30, 2010 and December 31, 2009 were $36,671 and $1,035,868, respectively.
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-7
Recent Accounting Pronouncements.
We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying financial statements.
2. Ability to Continue as a Going Concern.
The accompanying financial statements have been prepared on the going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. We have experienced net losses since inception of $9,422,078 and net cash
used in operations since inception of $7,539,278. Our activities are developmental in nature, and as such, we have yet to generate any
revenues. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern
and carry out our business plan is dependent on several factors, including the ability to raise a significant amount of capital for project
development, capital expenditures, and operating expenses. We need to raise significantly more capital and secure a significant amount of
debt to complete our business plan and continue as a going concern.
Management believes that it will be able to raise additional capital through equity offerings and debt financings to construct and operate
our next generation utility-scale solar project.
3. Equipment.
Equipment consists of the following:
September 30,
2010
December 31,
2009
Equipment $ 26,176 $ 26,176
Less accumulated depreciation (11,634 ) (5,090 )
Total net equipment $ 14,542 $ 21,086
For the three and nine months ended September 30, 2010, we recorded $2,181, and $6,544, respectively, in depreciation. For the three
and nine months ended September 30, 2009 and for the period from October 4, 2006 (date of inception) through September 30, 2010, we
recorded $1,583, $527 and $9,452, respectively, in depreciation.
4. Land Options.
We have acquired options to purchase 18,806 acres of land in Central California and options to purchase an easement on an additional
10,864 acres. The terms of these options are typically from two years to four years and provide us the right to acquire the land at a set
price per acre subject to the satisfaction, in our sole discretion, of our due diligence. Future payments under options granting the right to
acquire land at September 30, 2010 are as follows:
Option
Payments
2010 $ 65,000
2011 485,000
2012 300,000
Total $ 850,000
The aggregate purchase price of land currently under this option, if all options are exercised, is $26,054,200. We are currently evaluating
each site as to the adequacy of zoning, environmental remediation, permits, solar suitability and the like and the exercise of any option
will depend upon the results of our analysis and other factors.
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-8
5. Convertible Promissory Notes.
During the months of March 2010 through June 2010, we issued convertible promissory notes in the amount of $1,109,960 with interest at
the rate of 6% per annum and maturity dates of 90 days from the date of note issuance. On June 25, 2010, the convertible promissory
notes and accrued interest of $11,579 were converted to 1,121,539 shares of Series B preferred stock at a conversion price equal to the
price per share paid by Series B investors.
6. Operating Leases.
In July 2009, we entered into a non-cancelable operating lease with AE Biofuels, Inc. for approximately 3,000 square feet of office space
in Cupertino, California. This lease expires May 31, 2012 and requires payment of lease plus our share of operating expenses. We record
rent expense on a straight-line basis. Future minimum operating lease payments as of September 30, 2010 are as follows:
Rental
Payments
2010 $ 21,418
2011 85,670
2012 35,696
Total $ 142,784
For the three months ended September 30, 2010 and 2009, we recorded rent expense of $22,617 and $20,805, respectively. For the nine
months ended September 30, 2010 and 2009 and for the period from October 4, 2006 (date of inception) through September 30, 2010, we
recorded rent expense of $65,828, $20,805 and $107,040, respectively. See Note 12 Related Party Transactions.
7. Commitments and Contingencies.
Solargen Energy, Inc. assumed delinquent payroll tax liabilities for the periods from March 31, 2001 to December 1, 2001 when it merged
with TMEX USA in February 2009. The IRS and State of California Employment Development Department liens were placed prior to
TMEX USA’s bankruptcy. At September 30, 2010 and December 31, 2009, we have recorded the tax liability reported to us by the
governing taxing authorities along with the accrued interest and penalties in the amount of $146,438 and $140,027, respectively. The
liability was initially recognized in October 2006 in the amount of $113,050. A settlement has been proposed and rejected by the IRS.
This tax matter is currently on appeal with the IRS.
8. Stockholders’ Equity.
Common Stock Reserved for Issuance
Our authorized capital includes 500,000,000 shares of common stock, $0.0001 par value ("Common Stock"). Shares of common stock
reserved for future issuance were as follows:
September 30,
2010
Convertible Series A preferred stock 4,817,500
Convertible Series B preferred stock 4,416,539
Series B preferred stock warrants 4,416,539
Common stock warrants 129,685
Stock options 5,206,213
Stock options available for future issuance 793,787
Total 19,780,263
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-9
Convertible Preferred Stock
On June 25, 2010, after obtaining the requisite board and stockholder approval, the Company filed its Third Amended and Restated
Articles of Incorporation with the State of Nevada. The Third Amended and Restated Articles of Incorporation (the “Amended Articles”),
among other things, authorized us to issue up to 100,000,000 shares of preferred stock, $0.0001 par value, in one or more classes or series
within a class upon authority of the board without further stockholder approval, including (a) 5,000,000 designated shares of Series A
Preferred Stock, $0.0001 par value, (b) 10,000,000 designated shares of Series B Preferred Stock, $0.0001 par value, (c) 10,000,000
designated shares of Series C Preferred Stock, $0.0001 par value, and 75,000,000 remaining undesignated authorized shares of preferred
stock ("Undesignated Preferred Stock") (collectively, the Series A, Series B and Series C Preferred Stock and the Undesignated Preferred
Stock shall be collectively referred as the “Preferred Stock”).
From June 25, 2010 to September 30, 2010 Solargen Energy, Inc. issued 4,416,539 shares of Series B Preferred stock for an aggregate
purchase price of $4,416,538, which consisted of $3,295,000 in cash and $1,121,538 from the conversion of promissory notes and
associated accrued interest on notes. From October 1, 2010 to November 15, 2010, Solargen Energy, Inc. raised $483,461 in gross cash
proceeds before selling expenses by issuing 483,461 shares of Series B Preferred Stock to accredited investors at $1.00 per share. In
connection therewith, from June 25, 2010 to November 15, 2010 Solargen Energy, Inc. issued to the same investors 4,900,010 Series B
Preferred Stock warrants with a five-year term exercisable at $1.00 per share. See Note 14 Subsequent Events. These shares and warrants
and stock convertible thereunder all bear a restricted legend.
Pursuant to the terms of the Company’s Amended Articles, the rights, preferences, and limitations of the Preferred Stock and Common
Stock are summarized as follows:
Liquidation Preference. In the event of any liquidation or winding up of the Company, the holders of the Series A Preferred
Stock, pari-pasu with other series of Preferred Stock, shall be entitled to receive in preference to the holders of Common Stock
an amount equal to one times (1x) the Series A Preferred Original Purchase Price ($1.00), plus any dividends accrued but unpaid
on the Preferred Stock. In the event of any liquidation or winding up of the Company, holders of the Series B Preferred Stock,
pari-pasu with other series of Preferred Stock, shall be entitled to receive in preference to the holders of Common Stock an
amount equal to two times (2x) the Series B Preferred Original Purchase Price ($1.00), plus any dividends accrued but unpaid on
the Preferred Stock. In the event of any liquidation or winding up of the Company, holders of the Series C Preferred Stock, paripasu
with other series of Preferred Stock, shall be entitled to receive in preference to the holders of Common Stock an amount
equal to one times (1x) the Series C Preferred Original Purchase Price ($3.00), respectively, plus any dividends accrued but
unpaid on the Preferred Stock. After full payment of the liquidation preference under a liquidation or winding up of the
Company, any remaining proceeds shall be paid to the holders of Common Stock.
Qualified Sale. In the event that the holders of two-thirds of the then outstanding shares of Preferred Stock (voting together) so
elect by a written consent, the voluntary sale, conveyance, lease, exchange or transfer of a majority of the assets of the
Corporation on a consolidated basis, or of a majority of the assets of any subsidiary of the Corporation, or a consolidation or
merger of the Corporation, or any subsidiary of the Corporation, with one or more other corporations or other entities (where, as
the result of such merger or consolidation, the stockholders of the Corporation, or any subsidiary of the Corporation, shall own
less than 50% of the voting securities of the surviving corporation), shall be deemed to be a “Qualified Sale.” Upon a “Qualified
Sale,” the holders of Series A and Series B Convertible Preferred Stock shall be entitled to receive a distribution on each share of
Series A or Series B Convertible Preferred Stock then held by them equal to the Liquidation Preference for such share of Series
A or Series B Convertible Preferred Stock. In such event, the Series A and the Series B Convertible Preferred Stock shall be paid
their Liquidation Preference of their proportionate share on a pari-pasu basis.
Dividends. Annual 5% non-cumulative dividends on Series A, Series B, and Series C Preferred Stock, payable when, as and if
declared by the Board, and prior and in preference to any declaration or payment of dividends on other shares of capital stock.
Payment of any dividends to the holders of the Preferred Stock shall be on a pro rata, pari-passu basis in proportion to the
dividend rates for each series of Preferred Stock. For any other dividends or similar distributions, Preferred Stock participates
with Common Stock on an as-converted basis.
Voting Rights. The Series A, Series B, and Series C Preferred Stock will vote together with the Common Stock and not as a
separate class, except as specifically provided or as otherwise required by law. Each share of Series A, Series B, and Series C
Preferred Stock shall have a number of votes equal to the number of shares of Common Stock then issuable upon conversion of
such share of Series A, Series B, and Series C Preferred Stock.
Protective Provisions. So long as any shares of Series A, Series B, and Series C Preferred Stock are outstanding, the Company
shall not without first obtaining the approval (by written consent, as provided by law) of the holders of at least two-thirds of the
then outstanding shares of Preferred Stock, voting together as a class: (i) authorize a total liquidation, dissolution, winding up,
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-10
recapitalization or reorganization of the Company; (ii) effect an exchange, reclassification, or cancellation of all or a part of the
Series A, Series B, and Series C Preferred Stock; (iii) increase or decrease (other than by redemption or conversion) the total
number of authorized shares of Series A, Series B, and Series C Preferred Stock; (iv) effect an exchange, or create a right of
exchange, of all or part of the shares of another class of shares into shares of Series A, Series B, and Series C Preferred Stock; or
(v) alter or change the rights, preferences or privileges of the shares of Series A, Series B, and Series C Preferred Stock so as to
affect adversely the shares of such series, including the conversion rate.
Optional Conversion. The holders of the Series A, Series B, and Series C Preferred Stock shall have the right to convert their
shares of Series A, Series B, and Series C Preferred Stock, at any time, into shares of Common Stock at the then effective
conversion rate. The conversion rate of the Series A, Series B, and Series C Preferred Stock is one share of Common Stock
shares for each share of Series A, Series B, and Series C Preferred Stock, respectively, subject to adjustment as provided in the
Amended Articles.
Mandatory Conversion. Each share of Series A, Series B, and Series C Preferred Stock shall be automatically converted to
Common Stock if the Company: (a) consummates the sale of its capital stock at a sale price equal to or exceeding $3.00 per share
and the aggregate proceeds to the Company equal to or exceed $20,000,000, and (b) becomes a publicly reporting company
under the Securities and Exchange Act of 1934, as amended and the Corporation’s Common Stock is traded on a national
exchange;
Further, each share of Series A, Series B, and Series C Preferred Stock shall be automatically converted to Common Stock if the
holders of the majority of the then outstanding shares of Preferred Stock elect to consummate an automatic conversion.
Additionally, each share of Series B Preferred Stock shall be automatically converted to Common Stock, if the Liquidation
Preference of the outstanding Series B Preferred Stock has been paid in full pursuant to one or more Qualified Sales.
Adjustments. The conversion rate of the Series A, Series B, and Series C Preferred Stock will be adjusted in the event of any
subdivisions or combinations of the Company’s Common Stock. The applicable Dividend Rate, Original Issue Price and
Liquidation Preference of the Preferred Stock will be adjusted for any subdivisions or combinations of the Company’s Preferred
Stock.
Preemption. The holders of Series A, Series B, and Series C Preferred Stock have no preemptive rights; however, certain holders
of Series A and Series B Preferred Stock have negotiated a right of first refusal on sales of future equity offerings of the
Company under the Stockholders Agreement referenced above.
Redemption. The Company has no obligation to redeem the Common Stock or Series A, Series B and Series C Preferred Stock;
provided however, that each share of Series A Preferred Stock (but not less than all) shall be considered automatically redeemed
and cancelled upon the full payment of the Liquidation Preference to all outstanding holders of Series A Preferred Stock pursuant
to one or more Qualified Sales.).
Undesignated Preferred. The Undesignated Preferred stock was authorized without additional description or details and may be
amended by the Board of Directors. There are no dividends, voting, conversion, or liquidation rights of the Undesignated
Preferred Stock at this time.
9. Private Placement Preferred Stock Warrants and Advisor Warrants.
Weighted-average fair value calculations for warrants granted within the periods indicated below were made using the Black-Scholes-
Merton option-pricing model with the following assumptions:
For the three months ended For the nine months ended
For the period
from October 4,
2006 (inception)
through
September 30,
2010 September 30,
2009 September 30,
2010 September 30,
2009
September 30,
2010
Risk-free interest rate —— — — — 2.16-3.06%
Expected volatility —— — — — 91.45%
Expected life (years) —— — — — 5-7
Fair value of common stock — — — — — $0.45
Dividend Yield — — — — — —%
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-11
In June, September and October, 2009, we issued warrants to purchase 60,000 shares of Common Stock to placement agents at an exercise
price of $1.00 per share exercisable for a period of seven years from the date of issuance with provisions for immediate vesting, net
exercise and transferability. We recorded issuance costs against Series A Preferred Stock for the year ended December 31, 2009 in the
amount of $15,701 for the fair value of these warrants. This charge was estimated using the Black-Scholes-Merton model and the
assumptions stated above.
For the three and nine months ended September 30, 2010, the placement agents exercised warrants to purchase 0, and 7,076 shares,
respectively, of common stock issued in connection with sales of our Series A Preferred Stock. No warrants were issued to the placement
agent prior to September 30, 2009.
In May 2009 we issued warrants to purchase 85,000 shares of Common Stock in connection with services provided under advisor
agreements at an exercise price of $1.00 per share exercisable for a period of seven years from the date of issuance. We recorded an
expense for the year ended December 31, 2009 of $26,850 for the value of these warrants using the Black-Scholes-Merton model using
assumptions stated above.
In August 2009 we issued warrants to purchase 1,480,000 shares of Series A Preferred Stock to an investor in connection with an
investment made by this investor. The warrants were issued at an exercise price of $1.00 per share and were exercisable for a period of
two years from the date of issuance. On December 31, 2009 and February 24, 2010, this investor exercised 1,000,000 and 480,000,
respectively, of these warrants.
In June 2010 we issued warrants to purchase 4,121,539 shares of Series B Preferred Stock and in September 2010 we issued warrants to
purchase an additional 295,000 shares of Series B Preferred Stock to investors in connection with their investment in Series B Preferred
Stock. The warrants were issued at an exercise price of $1.00 per share and were exercisable for a period of five years from the date of
issuance.
The warrants issued provide the holder with the right to purchase restricted shares of our stock for a period of either five or seven years.
The restrictions lapse once we register the shares with the Securities and Exchange Commission. Thereafter, the shares may trade
according to Rule 144 of the Securities Act.
10. Stock-Based Compensation.
Stock Incentive Plan
Weighted-average fair value calculations for options granted within the periods indicated below were made using the Black-Scholes-
Merton option-pricing model with the following assumptions:
For the three months ended For the nine months ended
For the
period from
October 4,
2006
(inception)
through
September 30,
2010
September 30,
2009
September 30,
2010
September 30,
2009
September 30,
2010
Risk-free interest rate 1.41-1.64% — 1.41-2.26% — 1.41-3.00%
Expected volatility 88.75% — 88.75-91.45% — 88.75-91.45%
Expected life (years) 5.3-6.1 — 5.3-6.1 — 5.3-6.1
Fair value of common stock $0.10 — $0.10-0.45 — $0.10 -0.45
Dividend Yield 0% — 0% — 0%
During 2009, we adopted the 2009 Equity Incentive Plan (“the 2009 Stock Plan”). The 2009 Stock Plan provides for the grant of the
following awards: incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards and stock
appreciation rights. A total of 4,000,000 shares were authorized under the 2009 Stock Plan. On June 22, 2010, the stockholders approved
an increase of 2,000,000 shares authorized under the 2009 Stock Plan. The authorized shares under the 2009 Stock Plan is subject to
automatic share increases beginning 2011 of a maximum of 1,000,000 shares per year (or 3% of the total number of shares outstanding),
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-12
subject to approval by the Board of Directors. Stock options generally expire ten years from the date of grant and are exercisable at any
time after the date of the grant, subject to vesting. Shares issued upon early exercise are subject to a right of repurchase, which lapses
according to the vesting schedule of the original option. Exercise price may not be less than 100% of the fair value of shares on the date
of grant. During the three months ended September 30, 2010, stock options were issued with vesting terms of 1 or 4 years.
The following table summarizes stock option activity under the 2009 Stock Plan:
Shares
Available For
Grant
Number of
Shares
Outstanding
Weighted-
Average
Exercise
Price per
share
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Balance as of December 31, 2009 3,050,000 950,000 $ 1.00
Authorized — — —
Granted — — —
Balance as of March 31, 2010 3,050,000 950,000 $ 1.00
Authorized 2,000,000 — —
Granted (156,213 ) 156,213 $ 1.00
Balance as of June 30, 2010 4,893,787 1,106,213 $ 1.00
Granted (4,100,000 ) 4,100,000 $ 0.20
Outstanding as of September 30,
2010 793,787 5,206,213 $ 0.37 9.74 $ 50,187,878
Exercisable at September 30,
2010 607,443 $ 0.63 9.49 $ 5,696,392
Vested and expected to vest at
September 30, 2010 4,976,274 $ 0.37 9.49 $ 47,963,400
The aggregate intrinsic value of the shares outstanding at December 31, 2009 was $8,559,500. The aggregate intrinsic value represents the
total pretax intrinsic value, based on the excess of our closing OTC market stock price at September 30, 2010 and December 31, 2009 of
$10.01, over the option holders’ strike price, which would have been received by the option holders had all option holders exercised their
options as of that date. The intrinsic value based on the excess of fair value of our stock, as determined by independent common stock
valuation, over stock option strike price at September 30, 2010 and December 30, 2010 was zero. Included in stock compensation
expense during the three months ended September 30, 2010 is $121 related to 286,213 stock options issued to non-employees.
We incurred non-cash stock based compensation expense of $50,876 and $102,472 for the three and nine months ended September 30,
2010, for options granted to our general and administrative employees, a director and a consultant. All stock option expense was classified
as general and administrative expense.
As of September 30, 2010, we had $391,312 of total unrecognized compensation costs related to stock options. These costs are expected
to be recognized over the next four years.
Restricted Stock Awards
On December 1, 2008 and January 15, 2009, we issued to employees 1,050,000 shares of common stock at $0.0001 per share and to
consultants 120,000 shares of common stock at $0.05 per share under restricted stock purchase agreements. These shares were issued as
an incentive to retain key consultants, employees and officers and ratably vest over three years on a monthly basis. Restricted stock
awards are valued using the fair market value of our common stock as of the date of grant. We recognize compensation expense on a
straight-line basis over the requisite service period of the award. The remaining unvested shares are subject to repurchase and restrictions
on sale, or transfer, up until the vesting date. Unvested shares are included in diluted net loss per share calculations.
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-13
The following table summarizes rights issued under the restricted stock awards:
Number of
Shares
Outstanding
Weighted
Average
Grant Date
Fair Value
Per Share
Restricted shares subject to repurchase as of December 31, 2009 766,370 $0.0070
Shares vested (96,822) ($0.0001)
Restricted shares subject to repurchase as of March 31, 2010 669,548 $0.0071
Shares vested (92,658) ($0.0001)
Restricted shares subject to repurchase as of June 30, 2010 576,890 $0.0071
Shares vested (95,780) ($0.0001)
Restricted shares subject to repurchase as of September 30, 2010 481,110 $0.0072
11. Deficit Accumulated During the Development Stage (Quasi-reorganization October 31, 2006).
In recognition of the change in ownership of TMEX USA, and the restructuring of operations to pursue a new business plan, TMEX USA
instituted a quasi-reorganization effective October 31, 2006. Accordingly, all assets, of which there were none, and accumulated deficit
were retroactively restated to zero dollars as of October 31, 2006. As a result, we offset the negative accumulated deficit arising from
TMEX USA’s operations prior to exiting bankruptcy against the paid-in capital account. Certain acquired tax liabilities were stated at fair
value with estimates for accrued interest and penalties. As a result of the quasi reorganization, the deficit accumulating during the
development stage of Solargen Energy, Inc. contains only operating results from Solargen Energy, Inc. private, for the years 2006, 2007
and 2008. As a result of the TMEX USA quasi-reorganization, only results from Solargen Energy Inc. private appear in inception to date
calculations beginning October 4, 2006. “Inception” in titles refers to the beginning of Solargen Energy Inc. private operations and not
TMEX USA operations prior to October 31, 2006. TMEX USA expenditures from December 2003 to October 31, 2006 were reclassified
to additional paid-in capital.
12. Related Party Transactions.
Eric A. McAfee, an officer and member of our board of directors, owns 100% of McAfee Capital. McAfee Capital bills us for certain
expense reimbursements, principally in connection with actual services provided by McAfee Capital paralegal and administrative
personnel. For the three months ended September 30, 2010 and 2009 we paid McAfee Capital $25,384 and $80,168, respectively. For the
nine months ended September 30, 2010 and 2009 and for the period from October 4, 2006 (date of inception) through September 30,
2010, we paid McAfee Capital $76,436, $175,056 and $273,183 respectively.
Eric A. McAfee, a member of our board of directors, owns 50% of CM Consulting. CM Consulting bills us for direct use of its charter
airplane service. For the three months ended September 30, 2010 and 2009 we made no payments. For the nine months ended September
30, 2010 and 2009 and for the period from October 4, 2006 (date of inception) through September 30, 2010, we paid CM Consulting $0,
$20,725 and $20,725, respectively.
We entered into an agreement with Eric A. McAfee, a member of our board of directors, pursuant to which we pay Mr. McAfee a monthly
salary of $10,000 per month for services rendered to us as a Board member. Beginning April 2010, this monthly salary was reduced to
$5,000 per month. For the three months ended September 30, 2010 and 2009 we paid or accrued to Mr. McAfee $15,000 and $30,000,
respectively, pursuant to this agreement. For the nine months ended September 30, 2010 and 2009 and for the period from October 4,
2006 (date of inception) through September 30, 2010, we paid or accrued to Mr. McAfee $60,000, $90,000, and $190,000, respectively,
pursuant to this agreement.
We are billed by Cagan McAfee Capital Partners for certain expense reimbursements, principally in connection with services provided by
Eric A. McAfee and his administrative personnel. For the three months ended September 30, 2010 and 2009 we made no payments to
Cagan McAfee Capital Partners. For the nine months ended September 30, 2010 and 2009 and for the period from October 4, 2006 (date
of inception) through September 30, 2010, we paid Cagan McAfee Capital Partners $0, $14,050, and $14,661, respectively. Eric A.
McAfee and Laird Cagan, a significant shareholder, together own 100% of Cagan McAfee Capital Partners.
SOLARGEN ENERGY, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
F-14
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