SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarter Ended March 31, 2007
Commission file number: 000-29621
XSUNX, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1384159
------------------------ ------------------
(State of incorporation) (I.R.S. Employer Identification No.)
65 Enterprise, Aliso Viejo, CA 92656
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (949) 330-8060
Securities registered pursuant to Section
12(b) of the Act:
Title of each class: None Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: None
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 the filing
requirements for at least the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 15, 2007 the number of shares outstanding of the registrant's only
class of common stock was 157,019,856.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
1
Table of Contents
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Independent Auditor's Report....................................................F-1
Balance Sheets March 31, 2006 (unaudited) and March 31, 2007....................F-2
Statements of Operations for the Six Months ended March 31, 2007
and 2006 (unaudited) and the period February 25, 1997 (inception) to
March 31, 2007..................................................................F-3
Statements of Stockholders Equity for the period February 25, 1997
(inception) to March 31, 2007 unaudited)....................................... F-4
Statements of Cash Flows for the Six Months ended March 31, 2007
and 2006 (unaudited) and the period February 27, 1997 (inception) to
March 31, 2006..................................................................F-5
Notes to Condensed Consolidated Financial Statements
(Unaudited).....................................................................F-7
Item 2. Management's Discussion and Analysis and Results of Operations..................4
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................6
Item 4. Controls and Procedures.........................................................6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...............................................................7
Item 1a. Risk Factors....................................................................7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.....................10
Item 3. Defaults upon Senior Securities.................................................10
Item 4. Submission of Matters to a Vote of Security Holders.............................10
Item 5. Other Information...............................................................10
Item 6. Exhibits........................................................................10
Signatures...............................................................................11
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
XSUNX, Inc,
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
March 31, 2007
(UNAUDITED)
3
JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
-----------------------------------------------------------------------------
9175 E. Kenyon Avenue, Suite 100
Denver, CO 80237
303-796-0099
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
XSUNX, INC.
Aliso Viejo, CA
We have reviewed the accompanying balance sheet of XSUNX, INC. (a development
stage company) as of March 31, 2007, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the three and six month
periods then ended. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). The review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the
consolidated financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States.
/s/ Jaspers + Hall, PC
Jaspers + Hall, PC
Denver, CO
May 10, 2007
F-1
XSUNX, INC.
(A Development Stage Company)
Balance Sheets
(Unaudited)
Unaudited Audited
March 31, September 30,
2007 2006
------------------ ----------------
ASSETS:
Current assets:
Cash $ 2,401,422 $ 4,305,105
Prepaid Research and Development Expense - 3,200
Prepaid Professional Expense 290,581 330,918
Prepaid Legal Expense 11,955 15,000
------------------ ----------------
Total current assets 2,703,958 4,654,223
------------------ ----------------
Fixed assets:
Office & Misc. Equipment 32,497 9,774
Research and Development Equipment 389,946 392,301
Leasehold Improvement 89,825 80,492
------------------ ----------------
Total Fixed Assets 512,268 482,567
Less Depreciation (128,702) (84,941)
------------------ ----------------
Total fixed assets 383,566 397,626
------------------ ----------------
Other assets:
Patents 40,000 40,000
Security Deposit 4,315 2,615
Accured Interest Earned 19,288
Note Receivable 812,500
Deferred Financing Costs
Marketable Prototype 1,765,000 1,765,000
------------------ ----------------
Total other assets 2,641,103 1,807,615
------------------ ----------------
TOTAL ASSETS $ 5,728,627 $ 6,859,464
================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable $ 481,269 $ 582,161
Accrued Expenses 20,222 6,538
------------------ ----------------
Total current liabilities 501,491 588,699
------------------ ----------------
Stockholders' Equity:
Preferred Stock, par value $0.01 per share; 50,000,000
shares authorized; no shares issued and outstanding - -
Treasury Stock, no par value; 26,798,418 issued and outstanding - -
Common Stock, no par value; 500,000,000 shares authorized;
157,019,856 shares issued and outstanding at March 31, 2007 13,278,869 13,290,869
and 157,169,856 shares were issued and outstanding at September 30, 2006
Common Stock Warrants 2,151,250 2,151,250
Deficit accumulated during the development stage (10,202,983) (9,171,354)
------------------ ----------------
Total stockholders' profit (deficit) 5,227,136 6,270,765
------------------ ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,728,627 $ 6,859,464
================== ================
See Accountants' Review Report
F-2
XSUNX, INC.
(A Development Stage Company)
Statement of Operations
(Unaudited)
Feb. 25, 1997
Three-Months Ended Six-Months Ended (Inception) to
March 31st March 31st March 31,
--------------------------- --------------------------
2007 2006 2007 2006 2007
------------ ------------- ------------- ----------- ------------
Revenue
Service Income $ 6,880 $ - $ 6,880 $ 8,000 $ 14,880
Other Income - - - - $ -
------------ ------------- ------------- ----------- ------------
Total Revenue 6,880 - 6,880 8,000 14,880
------------ ------------- ------------- ----------- ------------
Expenses:
Advertising 18,223 90 43,470 439 $ 47,999
Bank Charges 204 115 229 179 $ 3,136
Conferences & Seminars 99 - 9,370 1,500 $ 20,637
Consulting 4,269 - 42,542 - $ 1,433,084
Depreciation 16,714 27,647 34,667 27,647 $ 148,315
Directors' Fees - - $ 11,983
Due Diligence - 13,000 $ 45,832
Dues and Subscriptions - - - - $ -
Equipment Rental - - $ 1,733
Filing Fees - 9,225 2,497 9,225 $ 6,425
Impairment loss - - $ 924,642
Insurance 31,049 - 34,585 - $ 38,047
Legal & Accounting 41,252 35,009 109,577 68,609 $ 554,572
Licenses & Fees 50 70 - $ 6,525
Loan Fees - $ 741,834
Meals & Entertainment - - $ 4,119
Miscellaneous 28 800 $ 7,822
Office Expenses 3,073 77 11,434 1,550 $ 35,716
Patent Fees - - $ 2,469
Postage & Shipping 1,972 278 2,698 736 $ 9,161
Printing 1,968 3,797 6,382 6,740 $ 27,489
Public Relations 670 25,168 27,300 58,520 $ 436,830
Research & Development -
Tech. License 109,236 238,409 320,331 403,012 $ 1,899,569
Rent 15,638 2,250 30,350 4,500 $ 76,319
Salaries 216,105 40,670 357,880 84,899 $ 1,287,131
Subscription Reports 109 193 $ 3,765
Taxes 504 - 504 - $ 5,161
Telephone 6,478 2,109 12,288 3,499 $ 66,262
Transfer Agent Expense 100 80 383 230 $ 20,748
Travel, Meals & Entertainment 38,376 7,162 75,581 12,022 $ 184,195
Warrant Option Expense - 364 951,250 $ 2,151,250
------------ ------------- ------------- ----------- ------------
Total Operating Expenses 505,980 392,195 1,122,530 1,648,550 10,202,770
------------ ------------- ------------- ----------- ------------
Other Income (Expense)
Interest Expense 364 160,500 364 160,500 $ 247,727
Interest Income (51,515) (1,224) (84,769) (1,224) $ (172,861)
Forgiveness of Debt - - - - $ (59,773)
------------ ------------- ------------- ----------- ------------
Total Other Income/Expense (51,151) 159,276 (84,405) 159,276 15,093
------------ ------------- ------------- ----------- ------------
Net (Loss) $ (447,949) $ (551,471) $ (1,031,245) $(1,799,826) $ (10,202,983)
============ ============= ============= =========== ============
Per Share Information:
Basic
common shares outstanding 157,046,230 128,401,012 156,249,529 123,876,739
============ ============= ============= ===========
Net Loss per Common Share $ (0.01) $ (0.01) $ (0.01) $ (0.02)
============ ============= ============= ===========
Fully Diluted
common shares outstanding 165,748,397 136,603,179 164,951,696 132,078,906
============ ============= ============= ===========
Net Loss per Common Share $ (0.01) $ (0.01) $ (0.01) $ (0.02)
============ ============= ============= ===========
See Accountants' Review Report
F-3
XSUNX, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
March 31, 2007
(Unaudited)
Deficit
Accumulated
Common During the
Treasury Stock Common Stock Stock Exploration
----------------------- --------------------------
# of Shares Amount # of Shares Amount Warrants Stage Totals
---------- ---------- ------------ ------------ --------- ------------ -----------
Inception February 25, 1997 - - - - - - -
Issuance of stock for cash - - 15,880 217,700 - - 217,700
Issuance of stock to Founders - - 14,110 - - - -
Issuance of stock for consolidation - - 445,000 312,106 - - 312,106
Net Loss for Year - - - - - (193,973) (193,973)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 1997 - - 474,990 529,806 - (193,973) 335,833
---------- ---------- ------------ ------------ --------- ------------ -----------
Issuance of stock for services - - 1,500 30,000 - - 30,000
Issuance of stock for cash - - 50,200 204,000 - - 204,000
Consolidation stock cancelled - - (60,000) (50,000) - - (50,000)
Net Loss for Year - - - - - (799,451) (799,451)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 1998 - - 466,690 713,806 - (993,424) (279,618)
---------- ---------- ------------ ------------ --------- ------------ -----------
Issuance of stock for cash - - 151,458 717,113 - - 717,113
Issuance of stock for services - - 135,000 463,500 - - 463,500
Net Loss for Year - - - - - (1,482,017) (1,482,017)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 1999 - - 753,148 1,894,419 - (2,475,441) (581,022)
---------- ---------- ------------ ------------ --------- ------------ -----------
Issuance of stock for cash - - 15,000 27,000 - - 27,000
Net Loss for year - - - - - (118,369) (118,369)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 2000 - - 768,148 1,921,419 - (2,593,810) (672,391)
---------- ---------- ------------ ------------ --------- ------------ -----------
Extinquishment of debt - - - 337,887 - - 337,887
Net Loss for year - - - - - (32,402) (32,402)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 2001 - - 768,148 2,259,306 - (2,626,212) (366,906)
---------- ---------- ------------ ------------ --------- ------------ -----------
Net Loss for year - - - - - (47,297) (47,297)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 2002 - - 768,148 2,259,306 - (2,673,509) (414,203)
---------- ---------- ------------ ------------ --------- ------------ -----------
Issuance of stock for Assets - - 70,000,000 3 - - 3
Issuance of stock for Cash - - 9,000,000 225,450 - - 225,450
Issuance of stock for Debt - 115,000 121,828 - - 121,828
Issuance of stock for Expenses - - 115,000 89,939 - - 89,939
Issuance of stock for Services - - 31,300,000 125,200 - - 125,200
Net Loss for year - - - - - (145,868) (145,868)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 2003 - - 111,298,148 2,821,726 - (2,819,377) 2,349
---------- ---------- ------------ ------------ --------- ------------ -----------
Issuance of stock for cash - - 2,737,954 282,670 - - 282,670
Issuance of Common Stock Warrants - - - - 1,200,000 - 1,200,000
Net Loss for Year - - - - - (1,509,068) (1,509,068)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - September 30, 2004 114,036,102 3,104,396 1,200,000 (4,328,445) (24,049)
---------- ---------- ------------ ------------ --------- ------------ -----------
F-4
XSUNX, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
March 31, 2007
(Unaudited)
Deficit
Accumulated
Common During the
Treasury Stock Common Stock Stock Exploration
----------------------- --------------------------
# of Shares Amount # of Shares Amount Warrants Stage Totals
---------- ---------- ------------ ------------ --------- ------------ -----------
Issuance of stock for cash - - 6,747,037 531,395 - - 531,395
Issuance of stock for services - - 3,093,500 360,944 - - 360,944
Issuance of stock for collateral 26,798,418 - - - - - -
Net Loss for Year - - - (1,400,969) (1,400,969)
---------- ---------- ------------ ------------ --------- ------------ -----------
26,798,418 - 123,876,639 3,996,735 1,200,000 (5,729,414) (532,679)
---------- ---------- ------------ ------------ --------- ------------ -----------
Issuance of stock for services - - 72,366 31,500 - - 31,500
Issuance of Common Stock Warrants - - - - 951,250 - 951,250
Issuance of stock for debenture conversion - - 21,657,895 5,850,000
Issuance of stock for interest expense - - 712,956 241,383
Issuance of stock for warrant conversion - - 10,850,000 3,171,250
Net Loss for Year - - - - - (3,441,940) (3,441,940)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance September 30, 2006 26,798,418 - 157,169,856 13,290,868 2,151,250 (9,171,354) (2,991,869)
---------- ---------- ------------ ------------ --------- ------------ -----------
Net Loss for Period - - - - - (583,680) (583,680)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance - December 31, 2006 26,798,418 - 157,169,856 13,290,868 2,151,250 (9,755,034) 5,687,084
Cancelation of Stock for Services Returned (150,000) (12,000) (12,000)
Release of Security Collateral (26,798,418)
(447,949) (447,949)
---------- ---------- ------------ ------------ --------- ------------ -----------
Balance March 31, 2007 - $ - 157,019,856 $ 13,278,868 $2,151,250 $(10,202,983) 5,227,136
========== ========== ============ ============ ========= ============ ===========
All shares have been adjusted for the 1 for
20 reverse split.
See Accountants' Review Report
F-5
XSUNX, INC.
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
Indirect Method
Feb. 25, 1997
Six-Months Ended (Inception) to
March 31, March 31,
---------------------------------
2007 2006 2007
-------------- -------------- ---------------
Cash Flows from Operating Activities:
Net Loss $(1,031,245) $(1,799,826) $(10,202,983)
Issuance of Common Stock for Services (12,000) 7,500 1,336,997
Issuance of Common Stock for Loan Inducement - - 310,117
Warrant Expense - - 2,151,250
Issuance of Stock for Interest - - 241,383
Depreciation 43,761 27,647 128,702
Written Off Equipment - -
Adjustments to reconcile net loss to cash used in -
operating activities: -
(Increase) Accounts Receivable - -
(Increase) Security Deposit (1,700) (4,315)
(Increase) in Prepaid Expense 46,582 (257,673) (302,535)
Increase in Accrued Expenses 13,684 79,849 20,222
(Decrease) in Accounts Payable (101,276) 1,150,342 481,269
-------------- -------------- ---------------
Net Cash Flows Used for Operating Activities (1,042,194) (792,161) (5,839,893)
-------------- -------------- ---------------
Cash Flows from Investing Activities:
Purchase of Equipment (29,701) (220,000) (512,268)
Equipment Written Off - -
Note Receivable (812,500) (812,500)
Accrued Interest earned (19,288) (19,288)
Purchase of Intangible Assets - (1,775,000) (1,805,000)
-------------- -------------- ---------------
Net Cash Flows Used for Investing Activities (861,489) (1,995,000) (3,149,056)
-------------- -------------- ---------------
Cash Flows from Financing Activities:
Proceeds from Notes Payable - (850,000)
Deferred Financing Costs - (500,000)
Proceeds from Debenture Conversion - 5,000,000 5,000,000
Issuance of Common Stock for Warrants 951,250 3,171,250
Issuance of Common Stock for cash - 2,979,330 3,219,121
-------------- -------------- ---------------
Net Cash Flows Provided by Financing Activities - 7,580,580 11,390,371
-------------- -------------- ---------------
Net Increase (Decrease) in Cash (1,903,683) 4,793,419 2,401,422
-------------- -------------- ---------------
Cash and cash equivalents - Beginning of period 4,305,105 175,869 -
-------------- -------------- ---------------
Cash and cash equivalents - End of period $ 2,401,422 $ 4,969,288 $ 2,401,422
============== ============== ===============
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ 364 $ 160,500 $ 71,710
============== ============== ===============
Income Taxes $ - $ - $ -
============== ============== ===============
NON-CASH TRANSACTIONS
Common stock issued in exchange for services $ (12,000) $ 7,500 $ 1,225,557
============== ============== ===============
See Accountants' Review Report
F-6
XSUNX, INC.
(A Development Stage Company
Notes to Financial Statements
March 31, 2007
(Unaudited)
Note 1 - Presentation of Interim Information:
In the opinion of the management of XSUNX, Inc., the accompanying unaudited
financial statements include all normal adjustments considered necessary to
present fairly the financial position as of March 31, 2007 and the results of
operations for the three and six-months ended March 31, 2007 and 2006 and for
the period February 25, 1997 (inception) to March 31, 2007, and cash flows for
the six-months ended March 31, 2007 and 2006 and the for the period February 25,
1997 (inception) to March 31, 2007. Interim results are not necessarily
indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in the Company's audited financial
statements and notes for the fiscal year ended September 30, 2006.
Note 2 - Lease - Golden Suite:
As of July 1, 2006 a new lease was signed for the Golden Office in the amount of
$1,687.50 per month plus a fee of $825.00 for utilities. This will increase to
$1,787.50 per month on 7/1/07 and $1,790.00 per month on 7/1/08. The lease
expires on 6/30/09.
Note 3 - Technology Development and Licensing Agreement
On January 1, 2007, XSUNX, Inc. issued a secured, seven year, 10% note to
Sencera, LLC in the amount up to $1,500,000. Under the terms, the company
provided Sencera, LLC with $400,000 at the time of signing and $137,500 per
month for up to eight months. These funds are to be used to develop Technology
and obtain licenses in agreement with the Technology Development and License
Agreement between Sencera and XSUNX, Inc also signed on January 1, 2007. The
note may be converted into a membership interest in Sencera, LLP and an
extension of the license for a period of three years. The security consists of
the license rights, the ability to exercise the conversion and all other rights
and remedies provided by law. As of March 31, 2007 the current balance of the
note receivable was $812,500.00 plus accrued interest earned of $19,288.
F-7
XSUNX, INC.
(A Development Stage Company
Notes to Financial Statements
March 31, 2007
(Unaudited)
Note 4 - Settlement with Service Provder
In December 2006 the Company entered into a settlement agreement with a service
provider in which the service provider returned to the Company 150,000 of the
300,000 shares of common stock issued to the service provider in the period
ended March 31, 2005. The shares were received and cancelled effective January
2007. As a result of the return and cancellation of these shares the Company
will record a credit to expenses in the amount of $12,000 and a debit to paid in
capital of $12,000 for the period ending March 31, 2007.The $12,000 dollars
represents one half of the monetary value expensed by the Company in the period
in which the shares were issued.
Note 5 - Employment and Consulting Agreements
Effective January 1, 2007, XSUNX, Inc. entered into two year Employment
Agreements with the following individuals:
Joseph Grimes Chief Operating Officer $150,000.00
Jeff Huitt Chief Financial Officer $135,000.00
Robert Wendt Vice President of Engineering $150,000.00
Kurt Laetz Vice President of Global Sales $120,000.00
Effective January 26, 2007, XSUNX, Inc. entered into a two year Consulting and
Advisory Agreement with Dr. John Moore to become the Chairman of the Company's
Scientific Advisory Board.
Effective February 22, 2007, XSUNX, Inc. entered into a two year Consulting and
Advisory Agreement with Dr. Edward Yu to become a member of the Company's
Scientific Advisory Board.
The company authorized employment incentive option grants to the following
employees on January 26th 2007 at an exercise price per share of $0.46 with a
first vesting date of April 1, 2007:
Joseph Grimes 500,000 Option Shares
Jeff Huitt 500,000 Option Shares
Robert Wendt 500,000 Option Shares
F-8
XSUNX, INC.
(A Development Stage Company
Notes to Financial Statements
March 31, 2007
(Unaudited)
The common vesting schedules for the above grantee's is:
(a) The Option shall become exercisable in the amount of 50,000
shares upon the First Vesting Date. Thereafter, the Option shall
vest and become exercisable at the rate of 50,000 Shares per
calendar quarter up to a total of 400,000 shares.
(b) This Option shall become exercisable in the amount of 50,000
shares for each of the first two sales/licensure of an XsunX
system
Kurt Laetz 250,000 Option Shares
Kurt Laetz vesting schedule is:
(c) The Option shall become exercisable in the amount of 15,000
shares upon the First Vesting Date. Thereafter, the Option shall
vest and become exercisable at the rate of 15,000 Shares per
calendar quarter.
(d) During the second year of employment of Optionee by XsunX the
Option will vest and become exercisable at the rate of 22,500
Shares per calendar quarter, or any apportioned amount thereof,
during the term of the second year of employment by XsunX, Inc.
of the Optionee.
(e) This Option shall become exercisable in the amount of 50,000
shares for each of the first two sales/licensure of an XsunX
system.
Consultant Option Grant. The Company authorized the issuance of an option grant
on January 26, 2007 to a consultant in the amount of 150,000 option shares at an
option exercise price of $0.46 with a first vesting date of April 26, 2007 with
following vesting schedule:
(a) The Option shall become exercisable in the amount of 18,750
shares upon the First Vesting Date. Thereafter, the Option shall
vest become exercisable at the rate of 18,750 Shares per calendar
quarter, or any apportioned amount thereof, during the term of
engagement by XsunX, Inc. of the Optionee.
F-9
XSUNX, INC.
(A Development Stage Company
Notes to Financial Statements
March 31, 2007
(Unaudited)
Consultant Option Grant. The Company authorized the issuance of an option grant
on February 22, 2007 to a consultant in the amount of 100,000 option shares at
an option exercise price of $0.53 with a first vesting date of May 23, 2007 with
following vesting schedule:
(a) The Option shall become exercisable in the amount of 12,500
shares upon the First Vesting Date. Thereafter, the Option shall
vest become exercisable at the rate of 12,500 Shares per calendar
quarter, or any apportioned amount thereof, during the term of
engagement by XsunX, Inc. of the Optionee.
Note 6 - Stock Option Plan
The Company has adopted a Stock Option Plan to enable the company to obtain and
retain the services of the types of Employees, Consultants and Directors who
will contribute to the Company's long rang success and to provide incentives
which are linked directly to increases in share value which will inure to the
benefit of all stockholders of the Company. A total of 20,000,000 shares of
common stock are authorized under the plan.
Note 7 - Agreement to Purchase Assets
Effective March 23, 2007 XsunX, Inc. entered into a binding letter of intent
with a manufacturer of photovoltaic products for the purchase of certain net
assets of the manufacturer for the amount of five million dollars ($5,000,000)
USD in a cash transaction. The purpose of the letter of intent, and interest in
the acquisition by XsunX, was driven by what XsunX anticipates is the
opportunity to expand its current operations to include technologies and
manufacturing capabilities for silicon wafer, conversion of wafers to solar
cells, complete solar module manufacturing, and module mounting components. The
operating assets are comprised of approximately twenty plus (20+) megawatts of
annual polysilicon wafer manufacturing capabilities, and approximately fifteen
(15) megawatts of solar cell and module manufacturing capabilities. While the
wafer and cell conversion systems provide separate and distinct additions to the
Company's product offering XsunX believes that the facilities back end module
manufacture and assembly systems and reliability testing equipment provide an
expansion opportunity for use by XsunX in the commercialization of its thin film
technologies.
On or about April 27, 2007 the Company was notified by the seller of a change in
direction and decision not to honor the sales agreement. XsunX continues to work
towards a successful completion of the transaction and has engaged legal counsel
to assist in enforcing its rights under the agreement.
F-10
XSUNX, INC.
(A Development Stage Company
Notes to Financial Statements
March 31, 2007
(Unaudited)
Note 8 - Planned Expansion of Business Operations
In March XsunX launched efforts to expand the scope of business development
efforts to include the planned establishment of a solar energy module
manufacturing facility to be located in the United States. The Company intends
to employ the use of certain of its technologies, and those under license, for
use in the manufacture and sale of finished solar energy products. The Company
is planning the manufacturing line around a 5 megawatt modular design allowing
operations to scale from 5 to 20 to 50 megawatts of production capacity in 2008,
2009, and 2010 respectively.
Note 9 - Release of Security Collateral
The Company's obligations under a July 2005 and December 2005 Securities
Purchase Agreements had provided as security substantially all of the Company's
assets. As further security for its obligations there under, the Company had
deposited into escrow 26,798,418 shares of Common Stock. In addition, Tom
Djokovich, the Company's Chief Executive Officer, had granted a security
interest in 925,000 shares of Common Stock that he owns to secure the Company's
obligations under the July Agreement only. As of December 2006 XsunX had
received notice from the secured party of the release of the security interest
in the above listed security shares and assets. On January 18, 2007 the
26,798,418 security shares were cancelled.
Note 10 - Subsequent Events
CONSULTING AGREEMENT
Effective April 23, 2007, XSUNX, Inc. entered into a two year Consulting and
Advisory Agreement with Dr. Richard Ahrenkiel to become a member of the
Company's Scientific Advisory Board.
The company authorized the issuance of an option grant on April 23, 2007 to a
consultant in the amount of 100,000 option shares at an option exercise price of
$0.45 with a first vesting date of July 23, 2007 with following vesting
schedule:
(a) The Option shall become exercisable in the amount of
12,500 shares upon the First Vesting Date. Thereafter, the
Option shall vest become exercisable at the rate of 12,500
Shares per calendar quarter, or any apportioned amount
thereof, during the term of engagement by XsunX, Inc. of
the Optionee.
F-11
XSUNX, INC.
(A Development Stage Company
Notes to Financial Statements
March 31, 2007
(Unaudited)
LEGAL EFFORT TO ENFORCE AGREEMENT
In connection with the Company's efforts to complete the purchase of certain
solar product manufacturing assets as specified by a binding letter of intent
between XsunX and the seller dated March 23, 2007, the Company filed a complaint
against the seller and related entities in the United States District Court for
the District of Massachusetts on May 10th, 2007, alleging breach of contract and
other claims.
SALE AGREEMENT
The Company has entered into agreements for the sale of certain vacuum
deposition technology equipment valued at $41,800,000, excluding royalty
payments based on per watt annualized production totals. The agreements,
consisting of a systems sale and a royalty based manufacturing license
agreement, provide for thin film photovoltaic production equipment and two
product development tools specializing in the fabrication of micro-crystalline
and amorphous thin film silicon solar cells. Manufacture of the product
development tools is scheduled to begin in June 2007 upon receipt of initial
payments from the buyer with delivery beginning in January 2008, and the balance
of systems slated to begin deliveries in late 2008.
F-12
Item 2. MANAGEMENT'S DISCUSION AND ANALYSIS AND RESULTS OF OPERATIONS
CAUTIONARY AND FORWARD LOOKING STATEMENTS
In addition to statements of historical fact, this Form 10-Q contains
forward-looking statements. The presentation of future aspects of XsunX, Inc.
("XsunX", the "Company" or "issuer") found in these statements is subject to a
number of risks and uncertainties that could cause actual results to differ
materially from those reflected in such statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. Without limiting the
generality of the foregoing, words such as "may", "will", "expect", "believe",
"anticipate", "intend", or "could" or the negative variations thereof or
comparable terminology are intended to identify forward-looking statements.
These forward-looking statements are subject to numerous assumptions,
risks and uncertainties that may cause XsunX's actual results to be materially
different from any future results expressed or implied by XsunX in those
statements. Important facts that could prevent XsunX from achieving any stated
goals include, but are not limited to, the following:
Some of these risks might include, but are not limited to, the
following:
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue or expand its business, inability to
raise additional capital or financing to implement its business
plans;
(e) failure to commercialize its technology or to make sales;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by outside parties;
(h) insufficient revenues to cover operating costs.
There is no assurance that the Company will be profitable, the Company
may not be able to successfully develop, manage or market its products and
services, the Company may not be able to attract or retain qualified executives
and technology personnel, the Company's products and services may become
obsolete, government regulation may hinder the Company's business, additional
dilution in outstanding stock ownership may be incurred due to the issuance of
more shares, warrants and stock options, or the exercise of warrants and stock
options, and other risks inherent in the Company's businesses.
The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should carefully review the factors described in other
documents the Company files from time to time with the Securities and Exchange
Commission, including the Quarterly Reports on Form 10-Q and Annual Reports on
Form 10-K filed by the Company and any Current Reports on Form 8-K filed by the
Company.
4
CURRENT OVERVIEW
XsunX develops and markets proprietary Thin Film Photovoltaic (TFPV)
solar cell designs and core solar cell manufacturing systems, enabling licensees
to manufacture TFPV solar devices on various substrates. We function as a
strategic solar technology partner, supplying the advanced thin film solar cell
manufacturing know-how and capabilities that will enable original equipment
manufacturers ("OEM") customers to address the expanding market for thin film
solar products.
The product of the Company's development efforts is intended to deliver
two aspects of deliverable technologies in the form of an integrated solution
providing, a) commercially scalable manufactured processes and equipment
designed for the specific manufacture of the Company's thin film solar
technologies, and, b) proprietary thin film solar cell designs that address new
application opportunities in the growing field of Building Integrated
Photovoltaics.
XsunX is positioning itself as a provider of TFPV device designs and core
manufacturing products to an expanding global group of existing and new entrant
solar product manufacturers. The company is working to establish an environment
in which XsunX products and technologies are viewed as advanced core support
infrastructure to manufacturers increasing their opportunities for success in
servicing their regional solar markets.
In March XsunX launched efforts to expand the scope of business
development efforts to include the planned establishment of a solar energy
module manufacturing facility to be located in the United States. The Company
intends to employ the use of certain of its technologies, and those under
license, for use in the manufacture and sale of finished solar energy products.
The Company is planning the manufacturing line around a 5 megawatt modular
design allowing operations to scale from 5 to 20 to 50 megawatts of production
capacity in 2008, 2009, and 2010 respectively.
Management believes the summary data presented herein is a fair
presentation of the Company's results of operations for the periods presented.
Due to the Company's change in primary business focus in October 2003 and new
business opportunities these historical results may not necessarily be
indicative of results to be expected for any future period. As such, future
results of the Company may differ significantly from previous periods.
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2007 COMPARED
TO THE SAME PERIOD IN 2006
The Company generated minimal revenues of$6,880 from a licensing
agreement in the period ended March 31, 2007 as compared to zero revenue in the
same period in 2006.
The Company incurred operating expenses totaling $500,935 for the
three months ending March 31, 2007 compared to $392,195 for the same period in
2006. Primary sources for the increase to operating expense of $108,740 include:
Salaries increased by $175,435 to 216,105 from $40,670 in the same period in
2006 as a result of the continued growth of the company workforce., Insurance
expense increase $31,049 to $31.049 as compared to $0 in the same period in
2006, Travel expenses increased $31,214 to $38,376 from $7,162 as compared to
the same period in 2006. These were offset by a decrease in Research and
Development expenses of $129,173 to $109,236 as compared to $238,409 for the
same period in 2006.The $1,356,484 operating expenses includes non-cash charges
of $16,714 for depreciation.
The net loss for the three months ending March 31, 2007 was
($442,904) as compared to a net loss of ($551,471) for the same period 2006. The
decreased net loss of $108,567 includes (i) The operating expense changes
discussed above, (ii) a decrease in interest expense of $160,136 related to the
conversion of a debenture in the prior period to common stock, and (iii) an
increase in interest income of $50,291 resulting from the investment of cash
balances in interest bearing accounts and the Sencera note.
The Company incurred net losses of ($442,904) and ($551,471) in the
three-month period ended March 31, 2007 and 2006 respectively. The associated
net loss per share was $(0.01) for the three month period ended March 31, 2007
5
and $(0.01) for the same period in 2006. The Company anticipates the trend of
losses to continue in future quarters until the Company can recognize sales of
significance of which there is no assurance.
RESULTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2007 COMPARED TO
THE SAME PERIOD IN 2006
The Company generated minimal revenues of $6,880 from a licensing
agreement in the period ended March 31, 2007 as compared to $8,000 in the same
period in 2006.
The Company incurred operating expenses totaling $1,122,530 for the
six months ending March 31, 2007 compared to $1,648,550 for the same period in
2006. Primary sources for the decrease to operating expense of $526,020 include:
A decrease of $950,886 in Warrant Option Expenses and a decrease in Research and
Development expenses of $82,681 to $320,331 for the six months ending March 31,
2007 as compared to $403.012 for the same period in 2006. These decreases to
operating expenses were partially offset by an increase to Salaries of $272,981
to $357,880 from $84,899 in the same period in 2006 as a result of the continued
growth of the company workforce, Insurance expense increase $34,585 to $34,585
as compared to $0 in the same period in 2006, Travel expenses increased $63,559
to $75,581 from $12,022 as compared to the same period in 2006, Advertising
increased $43,031 to $43,470 as compared to 439 in the same period in 2006,
Legal and Accounting fees increased by $40,968 to $109,577 as compared to
$68,609 in the same period in 2006 and Consulting increased $42,542 to $42,542
as compared to zero in 2006. The $1,122,530 operating expenses includes non-cash
charges of $34,667 for depreciation.
The net loss for the six months ending March 31, 2007 was
($1,031,245) as compared to a net loss of ($1,799,826) for the same period 2006.
The decreased net loss of $768,581 includes (i) The operating expense changes
discussed above, (ii) a decrease in interest expense of $160,136 related to the
conversion of a debenture in the prior period to common stock, and (iii) an
increase in interest income of $83,545 resulting from the investment of cash
balances in interest bearing accounts and the Sencera note.
The Company incurred net losses of ($1,031,245) and ($1,799,826) in
the six-month period ended March 31, 2007 and 2006 respectively. The associated
net loss per share was $(0.01) for the three month period ended March 31, 2007
and $(0.01) for the same period in 2006. The Company anticipates the trend of
losses to continue in future quarters until the Company can recognize sales of
significance of which there is no assurance.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash at March 31, 2007 of $2,401,422 and prepaid
expenses in the amount of $311,896 as compared to cash of $4,305,105 and prepaid
expenses in the amount of $349,117 as of September 30, 2006. The Company had a
net working capital of $2,210,609 as compared to a working capital of $4,065,523
at September 30, 2006. Cash flow used in operating activities during the
six-month period ended, March 31, 2007, was ($1,042,194) as compared to a use of
cash of ($792,161) for the same period 2006. The increase of cash used in
operations of $250,033 included (i) the decrease in net loss resulting primarily
from decreased interest expense of $160,136 relating to the conversion of a
debenture in prior periods to common stock, (ii) increased cash flow on interest
income of $50,291 of which $19,288 was a non-cash accrual of interest relating
to the Sencera note, and (iii) the operation changes discussed above. The
current period ending March 31, 2007 also included a non-cash depreciation
expense of $43,761 compared to $27,647 in the same period in 2006. Additionally,
a non-cash reduction to expense of $12,000 was realized in the period associated
with the return of common shares for services that were not performed.
6
For the six-months ended March 31, 2007, the Company's capital needs
have been met from the use of working capital provided by the proceeds of (i)
the issuance of Common Stock for Debenture conversion and; (ii) the issuance of
Common Stock for warrant conversion which both occurred in the fiscal year ended
September 30, 2006.
We had, at March 31, 2007, cash and cash equivalents of $2,713,318 and net
working capital of $2,210,609.
DEVELOPMENT STAGE COMPANY
The Company is in the development stage and as of the period ending
March 31, 2007, did not have any significant revenues. We have begun marketing
efforts and anticipate the sale of licenses in the 2007 period however the cash
flow requirements associated with the transition to revenue recognition may
exceed cash generated from operations in the current and future periods. We may
seek to obtain additional financing from equity and/or debt placements. As such,
the Company's ability to secure additional financing on a timely basis is
critical to its ability to stay in business and to pursue planned operational
activities.
While we have been able to raise capital in a series of equity and debt
offerings in the past there can be no assurances that we will be able to obtain
such additional financing, on terms acceptable to us and at the times required,
or at all.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might seek to
compensate providers of services by issuances of stock in lieu of cash.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not have any market risk sensitive instruments. Since all operations are
in U.S. dollar denominated accounts, we do not have foreign currency risk. Our
operating costs are reported in U.S. dollars.
The Company does not invest in term financial products or instruments or
derivatives involving risk other than money market accounts, which fluctuate
with interest rates at market.
Item 4. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chairman have evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended) as of the end of the period covered by this quarterly report and, based
on this evaluation, have concluded that the disclosure controls and procedures
are effective.
7
There have been no changes in the Company's internal control over
financial reporting that occurred during the Company's first fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is currently not aware of nor has any knowledge of any legal
proceedings or claims that we believe will have, individually or in the
aggregate, a material adverse affect on our business, financial condition or
operating results.
Item 1A. RISK FACTORS
An investment in our shares involves a high degree of risk. Before making an
investment decision, you should carefully consider all of the risks described on
this Form 10-Q and Annual Reports on Form 10-K and Form 10KSB previously filed
by the Company and any Current Reports on Form 8-K filed by the Company. If any
of the risks discussed in these reports actually occur, our business, financial
condition and results of operations could be materially and adversely affected.
If this were to happen, the price of our shares could decline significantly and
you may lose all or a part of your investment. The risk factors described below
are not the only ones that may affect us. Our forward-looking statements in this
prospectus are subject to the following risks and uncertainties. Our actual
results could differ materially from those anticipated by our forward-looking
statements as a result of the risk factors below. See "Cautionary and
Forward-Looking Statements."
RISKS RELATED TO OUR BUSINESS
-----------------------------
WE HAVE NOT GENERATED ANY SIGNIFICANT REVENUES AND MAY NEVER ACHIEVE
PROFITABILITY
We are a development stage company and, to date, have not generated any
significant revenues. From inception through March 31, 2007, we had an
accumulated deficit of $10,202,983. For the quarter ended March 31, 2007 and
2006, we incurred net losses of $447,949 and $551,471 respectively. We cannot
assure you that we can achieve or sustain profitability in the future. Our
operations are subject to the risks and competition inherent in the
establishment of a business enterprise. There can be no assurance that future
operations will be profitable. Revenues and profits, if any, will depend upon
various factors, including whether our product development can be completed, and
if it will achieve market acceptance. We may not achieve our business objectives
and the failure to achieve such goals would have an adverse impact on us.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE
TERMS OR AT ALL
In the future, we may be required to raise additional funds, particularly if we
are unable to generate positive cash flow as a result of our operations. There
can be no assurance that financing will be available in amounts or on terms
acceptable to us, if at all. The inability to obtain additional capital may
reduce our ability to continue to conduct business operations. If we are unable
to obtain additional financing, we will likely be required to curtail our
research and development plans. Any additional equity financing may involve
substantial dilution to our then existing shareholders.
WE MAY NOT BE ABLE TO SUCCESSFULLY COMMERCIALIZE OUR TECHNOLOGIES WHICH WOULD
RESULT IN CONTINUED LOSSES AND MAY REQUIRE US TO CURTAIL OR CEASE OPERATIONS
As is the case with any new technology, we expect the development process to
continue. We cannot assure that our engineering resources will be able to modify
8
the product fast enough to meet market requirements. We can also not assure that
our product will gain market acceptance and that we will be able to successfully
commercialize the technologies. The failure to successfully commercialize the
technologies would result in continued losses and may require us to curtail or
cease operations
OUR REVENUES ARE DEPENDENT UPON ACCEPTANCE OF OUR PRODUCTS BY LICENSEES; THE
FAILURE OF WHICH WOULD CAUSE TO CURTAIL OR CEASE OPERATIONS
We believe that virtually all of our revenues will come from the licensing of
our proprietary technologies to major manufacturers. We intend to offer
non-exclusive licensing rights. As a result, we will continue to incur
substantial operating losses until such time as we are able to generate revenues
from licensing and service fees for our products through our distribution
partners. There can be no assurance that businesses and customers will adopt our
technology and products, or those businesses and prospective customers will
agree to pay the licensing and service fees for our products. In the event that
we are not able to significantly increase the number of customers that license
our products, or if we are unable to charge the necessary license fees, our
financial condition and results of operations will be materially and adversely
affected.
IF WE LOSE KEY EMPLOYEES AND CONSULTANTS OR ARE UNABLE TO ATTRACT OR RETAIN
QUALIFIED PERSONNEL, OUR BUSINESS COULD SUFFER.
Our success is highly dependent on our ability to attract and retain qualified
scientific and management personnel. We are highly dependent on our management,
including Mr. Tom Djokovich who has been critical to the development of our
technologies and business. The loss of the services of Mr. Djokovich could have
a material adverse effect on our operations. We do not have an employment
agreement with Mr. Djokovich. Accordingly, there can be no assurance that he
will remain associated with us. His efforts will be critical to us as we
continue to develop our technology and as we transition from a development stage
company to a company with commercialized products and services. If we were to
lose Mr. Djokovich, or any other key employees or consultants, we may experience
difficulties in competing effectively, developing our technology and
implementing our business strategies.
THE LOSS OF STRATEGIC RELATIONSHIPS USED IN THE DEVELOPMENT OF OUR PRODUCTS AND
TECHNOLOGY COULD IMPEDE OUR ABILITY TO COMPLETE OUR PRODUCT AND RESULT IN A
MATERIAL ADVERSE EFFECT CAUSING THE BUSINESS TO SUFFER.
We have established a plan of operations under which a portion of our operations
rely on strategic relationships with third parties, to provide general
facilities, personnel, and expertise in research, development, systems design,
assembly and support. A loss of any of our third party relationships for any
reason could cause us to experience difficulties in implementing our business
strategy. There can be no assurance that we could establish other relationships
of adequate expertise in a timely manner or at all.
WE CANNOT GUARANTEE YOU THAT OUR PATENTS ARE BROAD ENOUGH TO PROVIDE ANY
MEANINGFUL PROTECTION NOR CAN WE ASSURE YOU THAT ONE OF OUR COMPETITORS MAY NOT
DEVELOP MORE EFFECTIVE TECHNOLOGIES, DESIGNS OR METHODS WITHOUT INFRINGING OUR
INTELLECTUAL PROPERTY RIGHTS OR THAT ONE OF OUR COMPETITORS MIGHT NOT DESIGN
AROUND OUR PROPRIETARY TECHNOLOGIES.
We have been granted, and exclusively own, three patents from the United States
Patent and Trademark Office. We have also been granted a license to a patent and
technology portfolio relating to photovoltaic technology design, manufacturing
processes, and the development of technology. These patents and licenses may not
protect us against our competitors, and patent litigation is very expensive. We
may not have sufficient cash available to pursue any patent litigation to its
conclusion because currently we do not generate revenues.
We cannot rely solely on our current patents to be successful. The standards
that the U.S. Patent and Trademark Office and foreign patent office's use to
grant patents, and the standards that U.S. and foreign courts use to interpret
patents, are not the same and are not always applied predictably or uniformly
9
and can change, particularly as new technologies develop. As such, the degree of
patent protection obtained in the U.S. May differ substantially from that
obtained in various foreign countries. In some instances, patents have been
issued in the U.S. while substantially less or no protection has been obtained
in Europe or other countries.
We cannot be certain of the level of protection, if any, that will be provided
by our patents. If we attempt to enforce them and they are challenged in court
where our competitors may raise defenses such as invalidity, unenforceability or
possession of a valid license. In addition, the type and extent of any patent
claims that may be issued to us in the future are uncertain. Our patents may not
contain claims that will permit us to stop competitors from using similar
technology.
THE FOLLOWING RISKS RELATE PRINCIPALLY TO OUR COMMON STOCK AND ITS MARKET VALUE:
THERE IS A LIMITED MARKET FOR OUR COMMON STOCK WHICH MAY MAKE IT MORE DIFFICULT
FOR YOU TO DISPOSE OF YOUR STOCK
Our common stock is quoted on the OTC Bulletin Board under the symbol "XSNX."
There is a limited trading market for our common stock. Accordingly, there can
be no assurance as to the liquidity of any markets that may develop for our
common stock, the ability of holders of our common stock to sell our common
stock, or the prices at which holders may be able to sell our common stock.
OUR STOCK PRICE MAY BE VOLATILE
The market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including:
o technological innovations or new products and services by us or our
competitors;
o additions or departures of key personnel;
o sales of our common stock;
o our ability to integrate operations, technology, products and services;
o our ability to execute our business plan;
o operating results below expectations;
o loss of any strategic relationship;
o industry developments;
o economic and other external factors; and
o period-to-period fluctuations in our financial results.
Because we have a limited operating history with limited revenues to date, you
may consider any one of these factors to be material. Our stock price may
fluctuate widely as a result of any of the above listed factors.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may also
materially and adversely affect the market price of our common stock.
WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE
FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK
We have never paid cash dividends on our common stock and do not anticipate
paying cash dividends in the foreseeable future. The payment of dividends on our
common stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant. If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if its stock price
appreciates.
10
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS - None.
Item 3. DEFAULTS UPON SENIOR SECURITIES - None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
Item 5. OTHER INFORMATION - None
Item 6. EXHIBITS - 31 Sarbanes-Oxley Certification
32 Sarbanes-Oxley Certification
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: May 15, 2007 XSUNX, INC.
By: /s/ Tom M. Djokovich
----------------------------------------
Tom M. Djokovich, Chief Executive
Officer, President
12