SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
CIK NO.: 0001039466
For Quarter Ended December 31, 2003
Commission File Number: 000-29621
XSUNX, INC.
-------------------
(Name of Small Business Issuer in its charter)
COLORADO 84-1384159
--------------------------------------------- -------------------------------
State of incorporation or organization IRS Employer ID Number
65 Enterprise, Aliso Viejo, CA 92656
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (949) 330-8060
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 February 12, 2004 the number of shares outstanding of the registrant's
only class of common stock was 111,298,148.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Balance Sheets as of December 31, 2003 (unaudited) and September 30, 2003............................F-1
Statements of Operations for the Three Months ended December 31, 2003
and 2002 (unaudited) and the period February 27, 1997 (inception) to December 31, 2003...............F-2
Statements of Stockholders Equity for the period February 27, 1997
(inception) to December 31, 2003 (unaudited).........................................................F-3
Statements of Cash Flows for the Three Months ended December 31, 2003
and 2002 (unaudited) and the period February 27, 1997 (inception) to
December 31, 2003....................................................................................F-4
Notes to Condensed Consolidated Financial Statements
(Unaudited)..........................................................................................F-5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................................3
Item 3 Controls and Procedures..............................................................................6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ...................................................................................6
Item 2. Changes in Securities................................................................................6
Item 3. Defaults upon Senior Securities......................................................................6
Item 4. Submission of Matters to a Vote of Security Holders..................................................6
Item 5. Other Information....................................................................................6
Item 6. Exhibits and Reports on Form 8-K.....................................................................6
Signatures....................................................................................................7
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
XSUNX, INC.
(FORMERLY SUN RIVER MINING, INC.)
(AN DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 2003
(UNAUDITED)
Michael Johnson & Co., LLC.
9175 Kenyon Ave., #100
Denver, CO 80237
Phone: 303-796-0099
Fax: 303-796-0137
ACCOUNTANTS' REVIEW REPORT
Board of Directors
XSUNX, Inc.
Denver, CO
We have reviewed the accompanying balance sheet of XSUNX, Inc. (A Develpment
Stage Company) as of December 31, 2003 and the related statements of operations
for the three-months ended December 31, 2003 and 2002 and the period February
27, 1997 (inception) to December 31, 2003 and cash flows and stockholders'
equity for the three-months ended December 31, 2003 and 2002 and for February
25, 1997 (inception) to December 31, 2003 included in the accompanying
Securities and Exchange Commission Form 10-QSB for the period ended December 31,
2003. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of person responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, the objective
of which is the expression of an opinion regarding the financial statements 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.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet as of September 30, 2003, and
the related statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein). In our report dated December 13,
2003, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheets as of
December 31, 2003 is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, conditions exist which raise substantial doubt about the
Company's ability to continue as a going concern unless it is able to generate
sufficient cash flows to meet its obligations and sustain its operations.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Michael Johnson & Co., LLC
Michael Johnson & Co., LLC
Denver, CO
February 14, 2004
F-1
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
December 31, September 30,
2003 2003
----------------- -----------------
ASSETS:
Current assets:
Cash $ 307 $ 2,346
----------------- -----------------
Total current assets 307 2,346
----------------- -----------------
Other assets:
Patents 3 3
Deposit - Lease 1,500 -
----------------- -----------------
Total other assets 1,503 3
----------------- -----------------
TOTAL ASSETS $ 1,810 $ 2,349
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable $ 8,596 $ -
Accrued Officers Salaries 27,500 -
Notes Payable 5,000 -
----------------- -----------------
Total current liabilities 41,096 -
----------------- -----------------
Stockholders' Equity:
Preferred Stock, par value $0.01 per share; 50,000,000
shares authorized; no shares issued and outstanding - -
Common Stock, no par value; 500,000,000 shares authorized;
111,298,148 shares issued and outstanding at December 31,
2003 and 768,148 outstanding at December 31, 2002 2,821,726 2,821,726
Deficit accumulated during the exploratory stage (2,861,012) (2,819,377)
----------------- -----------------
Total stockholders' profit (deficit) (39,286) 2,349
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,810 $ 2,349
================= =================
See Accountants' Review Report
F-2
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Stateents of Operations
(Unaudited)
Feb. 25, 1997
Three-Months Ended (Inception) to
December 31, December 31,
2003 2002 2003
------------ ----------- -------------
Revenue $ - $ - $ -
Expenses:
Abandoned Equipment - - 808
Bank Charges - - 1,712
Consulting - - 1,004,139
Depreciation - - 3,178
Directors' Fees - - 11,983
Due Diligence - - 45,832
Equipment Rental - - 1,733
Impairment loss - - 923,834
Legal & Accounting 5,346 884 166,503
Licenses & Fees - - 6,220
Meals & Entertainment 112 - 4,231
Office Expenses 2,621 - 16,602
Officer's Salaries 27,500 - 408,250
Postage & Shipping 144 - 3,361
Printing 129 - 5,709
Public Relations 465 - 104,791
Rent 2,905 - 10,963
Taxes - - 4,657
Telephone 641 - 31,186
Transfer Agent Expense 1,550 375 14,878
Travel 222 - 59,515
------------ ----------- -------------
Total Operating Expenses 41,635 1,259 2,830,085
Other Income (Expense)
Interest Expense - - 71,346
Interest Income - - (22)
Forgiveness of Debt - - (40,397)
------------ ----------- -------------
Net (Loss) $ (41,635) $ (1,259) $ (2,861,012)
------------ ----------- -------------
Per Share Information:
Weighted average number of
common shares outstanding 111,248,148 15,362,970
------------ -----------
Net Loss per Common Share * *
------------ -----------
* Less than $.01
See Accountants' Review Report
F-3
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
Indirect Method
Feb. 25, 1997
Three-Months Ended (Inception) to
December 31, December 31,
2003 2002 2003
-------------- -------------- -----------------
Cash Flows from Operating Activities:
Net Loss $(41,635) $ (1,259) $ (2,861,012)
Adjustments to reconcile net loss to cash used in
operating activities:
Issuance of Common Stock for Services - - 1,237,557
(Increase) in Deposits (1,500) - (1,500)
Increase in Accrued Expenses - Officers 27,500 - 27,500
Increase in Accounts Payable 10,942 1,259 8,596
-------------- -------------- -----------------
Net Cash Flows Used for Operating Activities (4,693) - (1,588,859)
-------------- -------------- -----------------
Cash Flows from Investing Activities:
Purchase of Intangible Assets - - (3)
-------------- -------------- -----------------
Net Cash Flows Used for Investing Activities - - (3)
-------------- -------------- -----------------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 5,000 - 5,000
Issuance of Common Stock - - 1,584,169
-------------- -------------- -----------------
Net Cash Flows Provided by Financing Activities 5,000 - 1,589,169
-------------- -------------- -----------------
Net Increase (Decrease) in Cash 307 - 307
-------------- -------------- -----------------
Cash and cash equivalents - Beginning of period - - -
-------------- -------------- -----------------
Cash and cash equivalents - End of period $ 307 $ - $ 307
============== ============== =================
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ - $ - $ 71,346
============== ============== =================
Income Taxes $ - $ - $ -
============== ============== =================
NON-CASH TRANSACTIONS
Common stock issued in exchange for services $ - $ - $1,237,557
============== ============== =================
See Accountants' Review Report
F-4
XSUNX, INC.
(Formerly Sun River Mining, Inc.)
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
December 31, 2003
(Unaudited)
Deficit
Accumulated
During the
Common Stock Exploration
# of Shares Amount Stage Totals
------------- ------------ ------------ -----------
Inception - February 25, 1997 - $ - $ - $ -
Issuance of stock for cash 3/97 5,000 100 - 100
Issuance of stock for cash 3/97 5,590 111,800 - 111,800
Issuance of stock to Founders 3/97 14,110 - - -
Issuance of stock for Consolidation 4/97 445,000 312,106 - 312,106
Issuance of stock for cash 8/97 2,900 58,000 - 58,000
Issuance of stock for cash 9/97 2,390 47,800 47,800
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 11/97 1,500 30,000 - 30,000
Issuance of stock for cash 9/98 50,000 200,000 - 200,000
Consolidation stock cancelled 9/98 (60,000) (50,000) - (50,000)
Issuance of stock for cash 9/98 200 4,000 - 4,000
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 10/98 21,233 159,367 - 159,367
Issuance of stock for services 1/99 40,000 40,000 - 40,000
Issuance of stock for cash 1/99 37,500 296,125 - 296,125
Issuance of stock for services 1/99 25,000 276,500 - 276,500
Issuance of stock for cash 2/99 7,500 70,313 - 70,313
Issuance of stock for cash 4/99 45,225 122,108 - 122,108
Issuance of stock for salaries 6/99 70,000 147,000 - 147,000
Issuance of stock for cash 9/99 40,000 69,200 69,200
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 9/00 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 7/03 70,000,000 3 - 3
Issuance of stock for Cash 8/03 9,000,000 225,450 - 225,450
Issuance of stock for Debt 9/03 115,000 121,828 - 121,828
Issuance of stock for Accruals 9/03 115,000 89,939 - 89,939
Issuance of stock for Services 9/03 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
------------- ------------ ------------ -----------
Net Loss for period - - (41,635) (41,635)
------------- ------------ ------------ -----------
Balance - December 31, 2003 111,298,148 $2,821,726 $(2,861,012) $ (39,286)
============= ============ ============ ===========
All shares have been adjusted for the 1 for
20 reverse split.
See Accountants' Review Report
F-5
XSUNX, INC.
(FORMERLY SUN RIVER MINING, INC.)
Notes to Financial Statements
December 31, 2003
(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 December 31, 2003 and the results of
operations for the three-months ended December 31, 2003 and 2002 and for the
period February 25, 1997 (inception) to December 31, 2003, and cash flows for
the three-months ended December 31, 2003 and 2002 and the for the period
February 25, 1997 (inception) to December 31, 2003. 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, 2003.
Note 2 - Going Concern:
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
The Company is in the exploration state and has not earned any revenue from
operations. The Company's ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital or locate a merger
candidate and ultimately, achieve profitable operations. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties. Management is seeking new capital to revitalize
the Company.
The Company has made substantial investments this last year in the development
of intellectual property assets as part of a business-restructuring plan. The
purpose of these investments was to acquire patented solar electric glass
technology. The Company believes that its patented solar electric technology has
a number of marketing opportunities in the multi-billion dollar worldwide
architectural glass markets.
F-6
Item 2. MANAGEMENT'S DISCUSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary and Forward Looking Statements
In addition to statements of historical fact, this Form 10-QSB 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 busi-
ness, inability to raise additional capital or financ
-ing 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-QSB and Annual Report on Form 10-KSB
filed by the Company in 2003 and any Current Reports on Form 8-K filed by the
Company.
Financial Condition and Changes in Financial Condition
The Company has made equity investments in the development of
intellectual property assets as part of a business-restructuring plan. The
purpose of these investments was to acquire patented solar electric glazing
technology. The Company believes that its patented solar electric glazing
technology has a number of market opportunities in the multi-billion dollar
worldwide architectural glass markets.
The Company intends to continue to make investments in the commercial
development of these patents through the course of the next year. To finance
these development efforts we are currently engaged in on going capital formation
efforts to fund the Company's projected deficits for development costs in the
current year.
Through the successful commercial development of these patents the
Company anticipates being able to take advantage of commercial opportunities to
provide governments, developers, businesses and architects with a commercially
viable method for converting large areas of architectural glass into electrical
power producing systems. Upon the completion of our commercialization process
the Company anticipates the majority of revenues to be derived from the
licensing of our technology.
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 and new business
opportunities these results may not necessarily be indicative of results to be
expected for any future period. As such, future results of the Company may, in
the future, differ significantly from previous periods.
Results of Operations for the Three-Month Period Ended December 31, 2003
Compared to the Same Period in 2002
The Company incurred expenses totaling $41,635 for the three months ending
December 31, 2003 compared to $1,259 for the same period in 2002. The increase
of $40,367 resulted primarily from the increase to general and administrative
expenses due to a change of operations necessary for the development of the
Company's new business plan as a provider of patented solar electric
technologies. The Company generated no revenues in this period as well as for
the same period in 2002. The net loss for the three months ending December 31,
2003 was $(41,635) as compared to a net loss of ($1,259) for the same period
2002. Operating costs in the development of the Company's business plan are
expected to continue for the foreseeable future as the Company continues to
increase expenditures in the commercial development of its new business
opportunities.
Liquidity and Capital Resources
The Company had net working capital (deficit) at December 31, 2003 of
$(39,286) as compared to a working capital of $2,346 at September 30, 2003.
There were no cash flows provided from operations during the three months ended
December 31, 2003. For the three months ended December 31, 2003 the Company's
capital needs have been met by loans and the issuance of notes to senior
executives of the company.
Cash and cash equivalents at December 31, 2003 were $1,810, a decrease of
$536 from September 30, 2003. During the three-month period ended, December 31,
2003, the Company used $41,635 net cash in operating activities as compared to
using $1,259 for the same period 2002. This increase of cash used in operations
of $40,376 was primarily a result of the increase in general and administrative
expenses due to a change of operations necessary for the development of the
Company's new business plan.
We had, at December 31, 2003, working capital of $307. We anticipate that
there will be no cash generated from operations in the current year necessary to
fund our current and anticipated cash requirements. We plan to obtain additional
financing from equity and debt placements. We have been able to raise capital in
a series of equity and debt offerings in the past. While 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, we believe that
sufficient capital can be raised in the foreseeable future.
Subsequent Events
The Company intends to continue to make investments in the development
and commercialization of its patented solar electric glazing processes. To
finance these efforts the Company is currently engaged in on going capital
formation efforts to fund these capital requirements for development,
commercialization, general and administrative costs in the current year.
In furtherance of these financing efforts the Company entered into a
private placement agreement on December 19, 2003 for the sale of up to 3,000,000
shares of common stock pursuant to Regulation S of the Act. The purchaser will
have to and until December 31, 2004 to deliver one or more purchase notices to
the Company. The agreement provided for a variable purchase price based on a
percentage of the five-day average closing price on the date of a purchase with
a floor price of $.25 cents net to the Company. The Company may terminate this
agreement upon 3 days notice to the purchaser. The Company anticipates, but
cannot be assured, that should the entire 3,000,000 shares be placed the
approximate net proceeds to the Company may total $750,000. The purchaser
intends to acquire the shares for their own account with no present intention of
dividing their interest with others or of reselling or otherwise disposing of
all or any portion of the shares. The shares were offered in a private
transaction, which was not part of a distribution of the shares. As of the date
of this report there have been no shares issued or purchased subject to this
private placement.
Item 3. 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.
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 - None.
Item 2. Changes in securities - 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 and reports on Form 8-K
A. Exhibits: 31 Sarbanes Oxley Certification
32 Sarbanes Oxley Certification
B. Reports filed on Form 8-K
8-K filed 10/2/03
8-K/A filed 10/29/03
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: February 13, 2004 XSUNX, INC.
By: \s\ Tom M. Djokovich
Tom M. Djokovich, Chief Executive Officer,
President and acting Chief Financial Officer
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Directors
By: \s\ Brian Altounian Dated: February 15, 2004
---------------------------------------
Chairman of the Board, Secretary
By: \s\ Tom Djokovich Dated: February 13, 2004
---------------------------------------
Director, President, CEO and acting CFO
By: \s\ Thomas Anderson Dated: February 15, 2004
---------------------------------------
Director