Morningstar® Document Research℠ FORM 10-KSunworks, Inc. - SUNWFiled: March 31, 2011 (period: December 31, 2010)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. FORM 10-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2010 COMMISSION FILE NUMBER 000-49805 SOLAR3D, INC. ------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 01-05922991 ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 6500 HOLLISTER AVENUE, SUITE130, GOLETA, CALIFORNIA 93117 --------------------------------------------------------- (Address of principal executive offices) (Zip Code) (805) 690-9000 --------------------------------------------------------- Registrant's telephone number, including area code SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED---------------------------- ------------------------ COMMON STOCK OTC Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act. Yes |_| No |X| Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act. Yes |_| No |X| Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. |X| Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definitions of "large accelerated filer," "accelerated filer" and"smaller reporting company" in Rule 12b-2 of the Exchange Act.Large accelerated filer [___] Accelerated filer [___]Non-accelerated filer [___] Smaller reporting company [_X_](Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Yes |_| No |X| The aggregate market value of voting stock held by non-affiliates ofthe registrant was approximately $14,807,704 as of June 30, 2010 (computed byreference to the last sale price of a share of the registrant's Common Stock onthat date as reported by OTC Bulletin Board). There were 104,976,495 shares outstanding of the registrant's CommonStock as of March 21, 2011. TABLE OF CONTENTSPART 1ITEM 1 Business............................................................2ITEM 2 Properties..........................................................5ITEM 3 Legal Proceedings...................................................5ITEM 4 [Removed and Reserved]..............................................5PART IIITEM 5 Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities..................6ITEM 6 Selected Financial Data.............................................7ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of Operations...........................................7ITEM 8 Financial Statements and Supplementary Data........................12ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............................................29ITEM 9A Controls and Procedures............................................29ITEM 9B Other Information..................................................30PART IIIITEM 10 Directors, Executive Officers, and Corporate Governance............30ITEM 11 Executive Compensation.............................................34ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters....................................37ITEM 13 Certain Relationships and Related Transactions, and Director Independence..............................................38ITEM 14 Principal Accounting Fees and Services.............................38ITEM 15 Exhibits, Financial Statement Schedules............................39SIGNATURES....................................................................40 -1- PART IITEM 1. BUSINESS----------------GENERALSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Solar3D, Inc. is a Delaware corporation formed to engage in thebusiness of developing and marketing a new three-dimensional version of solarcell technology in order to maximize the conversion of sunlight intoelectricity. Conventional solar cells reflect a significant amount of incidentsunlight losing much of the solar energy that could have produced additionalelectrical power. Inspired by light management techniques used in fiber opticdevices, Solar3D is designing a new type of solar cell, one that utilizes athree-dimensional design to trap sunlight inside the photovoltaic structurewhere it is reflected multiple times until much more of the energy is absorbedinto the solar cell material. We have applied for patent protection on what webelieve to be a breakthrough design for the next generation in solar celltechnology with increased efficiency and resulting in a lower cost per watt ofelectricity produced.CORPORATE HISTORY We were originally formed in January 2002 as MachineTalker, Inc. inorder to pursue the development of new wireless process control technology. InAugust 2005, we filed a Registration Statement on Form SB-2 which was declaredeffective by the Securities and Exchange Commission on December 22, 2005. InSeptember 2010, we shifted our engineering and research focus to developing anew means for generating solar-produced electrical power which we plan to patentand perfect for use in the manufacture of highly efficient solar cells. In July2010, we changed our company name to Solar3D, Inc. in order to better reflectour new business plan.BACKGROUND OF SOLAR CELL TECHNOLOGY Solar cell efficiency is the measure of how much incident sunlight isconverted into electricity. Most solar cells today are made from silicon, aninexpensive and abundant raw material. Due to the physics of silicon, thetheoretical maximum efficiency of high-grade crystalline silicon solar cells isapproximately 29%. In commercial practice, the efficiency ranges from 12% to19%. We anticipate that our 3D solar cell technology will increase theefficiency of solar cells using low cost processes, in order to decrease theoverall cost per watt of solar electricity. Traditional solar cells are two-dimensional utilizing a single passsunlight conversion mechanism. There are two primary ways that these deviceslose light and electrons, or electron-hole pairs to be precise, which result ina conversion efficiency much less than the theoretical maximum. o SURFACE REFLECTION - Due to fundamental physics, approximately 30% of incident sunlight is reflected off the surface of silicon cells. o ELECTRON REABSORPTION - When a photon strikes the solar cell, an electron is "knocked loose" creating an electron-hole pair that moves through the cell material creating an electrical current. However, in conventional two-dimensional solar cell designs, these electron-hole pairs must travel a long distance before reaching a metal contact wire. As a result, they are reabsorbed by the material and do not contribute to the production of electrical current.OUR 3D SOLAR CELL TECHNOLOGY We are designing our three-dimensional solar cell from the ground up asan integrated optoelcetrical device that optimally reduces all primary energylosses in a solar cell to achieve the highest efficiency. By leveraging thescalability of conventional solar and semiconductor processes, we believe our 3Dsolar cell can deliver an unprecedented level of cost and conversion efficiency. Unlike conventional solar cells where sunlight passes through one time,our 3D solar cell design is planned to use a myriad of 3D micro-cells that trapsunlight inside photovoltaic structures where photons bounce around until theyare all converted into electricity. Our three-dimensional technology is expected -2-to combine thin- and thick-film technologies to achieve the high efficiencies ofcrystalline at the lower cost per watt of thin film. We believe the key features and benefits of our 3D solar cell designare:Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. o LIGHT COLLECTORS - Instead of allowing sunlight to bounce off the surface, to the new design uses an array of light collecting elements to guide all incident sunlight into a matching array of highly optimized 3D micro-photovoltaic structures. o 3D PHOTOVOLTAIC STRUCTURE - Conventional solar cells have one photon absorbing surface. to the new design uses a multi-facetted 3D photovoltaic structure where photons can bounce off many surfaces until all photons that can be absorbed by the material are absorbed. o THIN ABSORBING REGIONS - Our 3D photovoltaic structure is anticipated to be fabricated with very thin absorbing regions and designed to enhance charge carrier separation. Therefore, electron-hole pairs will travel short distances before reaching a contact wire where they will be quickly extracted to produce current. We believe this approach will lead to an overall height and silicon material reduction when compared to conventional crystalline silicon cells. o BELOW SURFACE CONTACTS - Unlike conventional solar cells where electrical contact wires run on the top of the cell, blocking sunlight, our design is expected to use a network of contact wires that run below the light collectors. We believe this approach will allow our 3D solar cells to trap and utilize nearly 100% of the incident light. o A NEW SOLAR CELL DESIGN - Almost all conventional solar cells are two-dimensional designs based on wafer or thin film manufacturing processes. As a result, their performance is naturally constrained by their physical structure. By redefining the problem in 3D, we expect that the new design will be able to break down the 2D constraints and develop a more efficient solution. Our initial commercialization objective is to create a low cost, highefficiency silicon solar cell based on our 3D technology. By keeping our focuson silicon, we believe we can leverage the tremendous silicon infrastructure andmanufacturing processes of the growing solar industry, as well as the mature andhighly optimized semiconductor industry. However, we anticipate that our 3Dtechnology will be able to be used to create multi-junction cells with exoticmaterials such as gallium arsenide to achieve efficiencies that may be greaterthan 50% for use in concentrated solar and high performance applications.BUSINESS AND REVENUE MODELS We recently began developing a working version of our proprietarythree-dimensional solar cell technology. Once we complete a working version, weplan to package the resulting device into solar cell arrays which we will marketto existing manufacturers of conventional solar panels. We believe that thesemanufactures will be able to use our device to increase the energy output oftheir existing products. We expect to earn revenue from licensing fees and bypartnering or joint venturing with entities who seek to use our proprietarythree-dimensional solar cell technology.INVESTMENT IN SENSE-COMM TECHNOLOGY LLC In November 2006, we issued 24,000 shares of our common stock (on apost reverse stock-split basis) to purchase 10% of Sense-Comm Technology LLC.Sense-Comm is a limited liability company formed in August 2006 by a small groupof individuals to become a distributor and reseller of our intelligent wirelessnetwork sensor controlling technology to the energy and petroleum industries.ACQUISITION OF WIDEBAND DETECTION TECHNOLOGIES, INC. On July 20, 2007, Wideband Detection Technologies, Inc., a Floridacorporation, UTEK Corporation, a Delaware corporation, and Solar3D entered intoan agreement and plan of acquisition pursuant to which Solar3D agreed to acquire100% of the total issued and outstanding stock of Wideband DetectionTechnologies from UTEK in exchange for 120,000 shares of Solar3D's common stock(on a post reverse stock-split basis) based on a value of $2.00 per share (on apost reverse stock-split basis) as of the close of business on July 20, 2007.These shares have piggyback registration rights. Upon the closing of theSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. agreement and plan of acquisition, which occurred on July 20, 2007, WidebandDetection Technologies became a wholly owned subsidiary of Solar3D.ACQUISITION OF MICRO WIRELESS TECHNOLOGIES, INC. On December 20, 2007, Micro Wireless Technologies, Inc., a Floridacorporation, UTEK Corporation, a Delaware corporation, and Solar3D entered intoan agreement and plan of acquisition pursuant to which Solar3D agreed to acquire -3-100% of the total issued and outstanding stock of Micro Wireless Technologiesfrom UTEK in exchange for 1,860,000 shares of Solar3D's common stock (on a postreverse stock-split basis) based on a value of $1.00 per share (on a postreverse stock-split basis) as of the close of business on December 20, 2007.These shares have piggyback registration rights. Upon the closing of theagreement and plan of acquisition, which occurred on December 31, 2007, MicroWireless Technologies became a wholly owned subsidiary of Solar3D.INTELLECTUAL PROPERTY We currently own the following registered trademarks and service marks:(i) United States Trademark Registration No. 2848438, issued by the UnitedStates Patent and Trademark Office on June 1, 2004 , covering the trademark"TALKER," (ii) United States Trademark Registration No. 2872244, issued by theUnited States Patent and Trademark Office on August 10, 2004, covering thetrademark "SMMP," (iii) United States Trademark Registration No. 2872243, issuedby the United States Patent and Trademark Office on August 10, 2004, coveringthe trademark "MACHINETALKER," (iv) United States Trademark Registration No.2882375, issued by the United States Patent and Trademark Office on September 7,2004, covering the trademark "MINITALKER," and (v) United States TrademarkRegistration No. 2897704, issued by the United States Patent and TrademarkOffice on October 26, 2004, covering the trademark "SIMPLE MACHINE MANAGEMENTPROTOCOL" with no claim made to the exclusive right to use "MACHINE MANAGEMENTPROTOCOL" apart from the entire mark, (vi) United States Trademark RegistrationNo. 3004886, issued by the United States Patent and Trademark Office on October4, 2005, covering the trademark "TAGTALKER," (vii) United States TrademarkRegistration No. 3329348, issued by the United States Patent and TrademarkOffice on November 6, 2007, covering the trademark "MACHINETALKER IRFID," (viii)United States Trademark Registration No. 3329347, issued by the United StatesPatent and Trademark Office on November 6, 2007, covering the trademark "IRFID"(word only), (ix) United States Trademark Registration No. 3344070, issued bythe United States Patent and Trademark Office on November 27, 2007, covering thetrademark "IRFID" (stylized), (x) United States Trademark Registration No.3288781, issued by the United States Patent and Trademark Office on September 4,2007, covering the trademark "CAP," (xi) United States Trademark RegistrationNo. 3386280, issued by the United States Patent and Trademark Office on February19, 2008, covering the trademark "WEBTALKER," and (xii) United States TrademarkRegistration No. 77205781, issued by the United States Patent and TrademarkOffice on March 19, 2009, covering the trademark "GREENTALKER." In April 2002, a Patent Application to the United States Patent andTrademark Office entitled "Self Coordinated Machine Network" application No.20040114557 was filed, regarding a self coordinated machine network establishedby two or more machines in proximity with each other via a wired or wirelessnetwork infrastructure. The machines are configured to establish an ad hocnetwork between them for sharing information related to their commonapplications. New machines that come into proximity of the networkinfrastructure are configured to join an existing ad hoc network. Machines thatpower down or are removed from proximity of the network infrastructure areeliminated from the ad hoc network. Communications between the constituentmachines of the ad hoc network allow the machines to self coordinate the networkand redundantly store information pertaining to the common and disparateapplications of the various machines that comprise the self coordinated machinenetwork. An assignment of this application to us from the inventors, Roland F.Bryan, Mark P. Harris, and Christopher T. Kleveland was filed with the USPTO onApril 23, 2002. The patent was granted on February 27, 2007, as Patent No.: US7,184,423, B2, entitled "Self Coordinated Machine Network." All past employees and existing consultants have executed agreementsthat impose nondisclosure obligations on them and pursuant to which they haveagreed to assign to us (to the extent permitted by California law) allcopyrights and other inventions created by them during their engagement with -4-Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Solar3D. We have also implemented a trade secret protection policy thatmanagement believes to be adequate to protect our intellectual property andtrade secrets. All researchers maintain laboratory notebooks with dated pages tosupport any work done by them in furtherance of the solar energy patents forwhich we have applied and any work that produces new invention claims.COMPETITION The market for solar cell technology is highly competitive. There aremany companies throughout the world that manufacture solar cell arrays usingexisting technology and several other companies pursuing new methods to producemore energy efficiency using photovoltaic structures. Additionally, researchersat universities worldwide are currently working on new means to increasephotovoltaic efficiency. Many of these competitors have longer operatinghistories, greater name recognition, larger installed customer bases, andsubstantially greater financial and marketing resources than Solar3D. Ourability to compete successfully in this field will depend upon our completion ofdevelopment of our proprietary technique for production of more efficient solarcells and the adoption of our technology by major manufacturers in the field. Wecannot assure that we will be able to compete successfully in the solar celltechnology industry, or that future competition will not have a material adverseeffect on our business, operating results, and financial condition.GOVERNMENT REGULATION We are subject to various federal, state and local laws affectingwireless communication and security businesses. The Federal Trade Commission andequivalent state agencies regulate advertising and representations made bybusinesses in the sale of their products, which apply to us. Our business isalso subject to government laws and regulations governing health, safety,working conditions, employee relations, wrongful termination, wages, taxes andother matters applicable to businesses in general. Failure of Solar3D to complywith applicable government rules or regulations could have a material adverseeffect on our financial condition and business operations.EMPLOYEES As of December 31, 2010, we had two full time employees, our chiefexecutive officer and our chief financial officer. We also relied upon theservices of consultants to assist us with designing photovoltaic receptors toproduce electricity from that incident light energy.SEASONALITY Our operations are not expected to be affected by seasonalfluctuations, although our cash flow may be affected by fluctuations in thetiming of investment capital to support our research and product development.ITEM 2. PROPERTIES------------------ We currently lease approximately 522 square feet of office space at6500 Hollister Avenue, Suite 130, Goleta, California 93117 at a base rental rateof $2,500 per month pursuant to month to month lease.ITEM 3. LEGAL PROCEEDINGS------------------------- We are not currently a party to any material legal proceedings.ITEM 4. [REMOVED AND RESERVED]------------------------------ -5- PART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, ANDISSUER PURCHASES OF EQUITY SECURITIES--------------------------------------------------------------------------------Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMON STOCK Our common stock trades on the OTC Bulletin Board Market under thesymbol "SLTD." The range of high and low bid quotations for each fiscal quarterwithin the last two fiscal years was as follows: YEAR ENDED DECEMBER 31, 2010 HIGH LOW -------------------------------------- ----- ------ First Quarter ended March 31, 2010 $0.10 $0.04 Second Quarter ended June 30, 2010 $0.10 $0.05 Third Quarter ended September 30, 2010 $0.10 $0.01 Fourth Quarter ended December 31, 2010 $0.25 $0.05 YEAR ENDED DECEMBER 31, 2009 HIGH LOW -------------------------------------- ----- ------ First Quarter ended March 31, 2009 $0.05 $0.028 Second Quarter ended June 30, 2009 $0.04 $0.01 Third Quarter ended September 30, 2009 $0.012 $0.01 Fourth Quarter ended December 31, 2009 $0.05 $0.01----------------- The above quotations reflect inter-dealer prices, without retailmarkup, mark-down, or commission and may not necessarily represent actualtransactions. As of March 21, 2011, there were approximately 291 record holders ofour common stock, not including shares held in "street name" in brokerageaccounts which is unknown. As of March 21, 2011, there were approximately104,976,495 shares of common stock outstanding on record.DIVIDENDS We have not declared or paid any cash dividends on our common stock anddo not anticipate paying dividends for the foreseeable future.EQUITY COMPENSATION PLAN INFORMATION Effective February 15, 2002, our board of directors adopted theMachineTalker, Inc. 2002 Stock Option Plan for Directors, Officers, Employeesand Key Consultants under which a total of 160,000 shares of our common stock(on a post reverse stock-split basis) have been reserved for issuance pursuantto the grant and exercise of up to 160,000 stock options (on a post reversestock-split basis). The 2002 Stock Option Plan has been approved by the holdersof our outstanding shares. All of the stock options previously issued by us under our 2002 StockOption Plan for Directors, Officers, Employees, and Consultants have expired.For the fiscal year ended December 31, 2010, we issued no stock options pursuantto our 2002 Stock Option Plan. Effective July 22, 2010, we granted nonqualified stock options topurchase up to 15,000,000 shares of our common stock to James B. Nelson, ourchief executive officer, at an exercise price of $0.05 per share exercisableuntil July 22, 2017 in consideration for his services to us. These stock optionsvest 1/36th per month, commencing on August 21, 2010, on a monthly basis for aslong as Mr. Nelson is an employee or consultant of Solar3D. -6-WARRANTS For the fiscal year ended December 31, 2010, we issued no warrants topurchase shares of registered or unregistered common stock.UNREGISTERED ISSUANCE OF EQUITY SECURITIES The following is a list of the issuance of securities by us during thefiscal year ending December 31, 2010 in transactions exempt from registrationthat were not previously included in a Quarterly Report on Form 10-Q or in aCurrent Report on Form 8-K, the proceeds of which were generally used forworking capital:Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NUMBER OF DOLLAR AMOUNT SERVICES OR OTHER EXEMPTION FROM SHARES OF CONSIDERATION CONSIDERATION DATE OF SALE REGISTRATION---------- ---------------- ----------------- ----------------- -------------- 400,000 $20,000 Cash December 7, 2010 Rule 506 400,000 $20,000 Cash December 7, 2010 Rule 5062,000,000 $100,000 Cash December 21, 2010 Rule 506ITEM 6. SELECTED FINANCIAL DATA.-------------------------------- Not applicable.ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS--------------------------------------------------------------------------------CAUTIONARY STATEMENTS This Form 10-K contains financial projections and other"forward-looking statements," as that term is used in federal securities laws,about Solar3D Inc.'s financial condition, results of operations and business.These statements include, among others: statements concerning the potential forrevenues and expenses and other matters that are not historical facts. Thesestatements may be made expressly in this Form 10-K. You can find many of thesestatements by looking for words such as "believes," "expects," "anticipates,""estimates," or similar expressions used in this Form 10-K. Theseforward-looking statements are subject to numerous assumptions, risks anduncertainties that may cause our actual results to be materially different fromany future results expressed or implied by us in those statements. The mostimportant facts that could prevent us from achieving our stated goals include,but are not limited to, the following: (a) inability to complete research and development of the new Solar3D technology with little or no current revenue; (b) volatility or decline of our stock price; (c) potential fluctuation in quarterly results; (d) our failure to earn revenues or profits; (e) inadequate capital to continue business; (f) barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; (g) lack of demand for our products and services; (h) rapid and significant changes in markets; (i) litigation with or legal claims and allegations by outside parties; (j) insufficient revenues to cover operating costs; -7- (k) inability to start or acquire new businesses, or lack of success of new businesses started or acquired by us, if any; (l) inability to effectively develop or commercialize our new Solar3D technology; and (m) inability to obtain patent or other protection for our proprietary intellectual property. Because the statements are subject to risks and uncertainties, actualresults may differ materially from those expressed or implied by theforward-looking statements. We caution you not to place undue reliance on thestatements, which speak only as of the date of this Form 10-K. The cautionarystatements contained or referred to in this section should be considered inconnection with any subsequent written or oral forward-looking statements thatwe or persons acting on our behalf may issue.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We do not undertake any obligation to review or confirm analysts'expectations or estimates or to release publicly any revisions to anyforward-looking statements to reflect events or circumstances after the date ofthis Form 10-K or to reflect the occurrence of unanticipated events. The following discussion should be read in conjunction with ourcondensed financial statements and notes to those statements. In addition tohistorical information, the following discussion and other parts of thisquarterly report contain forward-looking information that involves risks anduncertainties.OVERVIEW On August 5, 2010, the holders of a majority of our outstanding votingstock voted by written consent to (1) effect a one-for-five reverse stock split,and (2) change our name to Solar 3D, Inc. Our new business focus will becentered on the acquisition, development, and commercialization of newproprietary technology to significantly increase the efficiency and energyproduction of solar photovoltaic cells that are currently offered in the marketand that may be developed in the future. In furtherance of our new businessfocus, we recently applied for patents covering a novel three-dimensional solarcell technology that is designed to maximize the conversion of sunlight intoelectricity. We believe our new technology will dramatically increase theefficiency of solar cells. Almost all conventional solar cells have a two-dimensional design whereup to 30 percent of incident is sunlight reflected off of each solar cell'ssurface and more light energy absorbed and lost inside the solar cell materialsthan is converted into energy. By contrast, our Solar3D design uses a matrix oflight-collecting elements that guide sunlight into a corresponding array ofthree-dimensional, micro-photovoltaic structures. The sunlight, in the form ofphotons, is trapped among these micro-structures, where it bounces around untilvirtually all of the energy is converted into electricity. Solar3D aims tocreate a better solar cell using this innovative technique by eliminatingsurface reflection and maximizing the conversion of photons into electrons toachieve greater efficiency and a lower cost per watt. We still own all of the MachineTalker technology. In May 2008, wesuccessfully interconnected our Talker(R) product line to our new "GuardDog"product which uses Ultra-Wide Band technology to detect any movement or motionin its vicinity. The combination of Talkers(R) and GuardDog employs Ultra-WideBand radar-like signals to detect movement within an area, either in the openspace or inside of a closed chamber like that of a shipping container. Inaddition, this new product can detect changes other than movement, such as abreak or hole being made in the side of a container. This product is aimed at aunique method of protection for goods in transit or in storage, and has beenproposed as part of a package to several potential customers. We currently have two full time employees, our chief executive officerand our chief financial officer. We also retain the services of several researchconsultants who are responsible for product developmentCRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results ofoperations are based upon our financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States ofAmerica. The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, -8-revenues and expenses, and related disclosures of contingent assets andliabilities. On an ongoing basis, we evaluate our estimates, including thoserelated to impairment of property, plant and equipment, intangible assets,deferred tax assets and fair value computation using the Black Scholes optionpricing model. We base our estimates on historical experience and on variousother assumptions, such as the trading value of our common stock and estimatedfuture undiscounted cash flows, that we believe to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying value of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates under differentassumptions or conditions; however, we believe that our estimates, includingSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. those for the above-described items, are reasonable.USE OF ESTIMATES In accordance with accounting principles generally accepted in theUnited States, management utilizes estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements as well as thereported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates. These estimates and assumptionsrelate to recording net revenue, collectability of accounts receivable, usefullives and impairment of tangible and intangible assets, accruals, income taxes,inventory realization, stock-based compensation expense and other factors.Management believes it has exercised reasonable judgment in deriving theseestimates. Consequently, a change in conditions could affect these estimates.FAIR VALUE OF FINANCIAL INSTRUMENTS Our cash, cash equivalents, investments, accounts receivable andaccounts payable are stated at cost which approximates fair value due to theshort-term nature of these instruments.REVENUE RECOGNITION We will continue to recognize revenue in accordance with the Securitiesand Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognitionin Financial Statements" ("SAB 104"). We will continue to recognize revenue upondelivery, provided that evidence of an arrangement exists, title, and risk ofloss have passed to the customer, fees are fixed or determinable, and collectionof the related receivable is reasonably assured. We will continue to recordrevenue net of estimated product returns, which is based upon our return policy,sales agreements, management estimates of potential future product returnsrelated to current period revenue, current economic trends, changes in customercomposition and historical experience. We will continue to accrue for warrantycosts, sales returns, and other allowances based on our prior experience inservicing customers and products. We may extend credit to our customers basedupon credit evaluations and do not require collateral. We do not and will notship a product until we have either a purchase agreement or rental agreementsigned by the customer with a payment arrangement. This is a critical policy,because we want our accounting to show only sales which are "final" with apayment arrangement. We do not and will not make consignment sales or inventorysales subject to a "buy back" or return arrangement from customers.PROVISION FOR SALES RETURNS, ALLOWANCES AND BAD DEBTS We will continue to maintain a provision for sales allowances, returnsand bad debts. Sales returns and allowances result from equipment damaged indelivery or customer dissatisfaction, as provided by agreement. The provisionwill continue to be provided for by reducing gross revenue by a portion of theamount invoiced during the relevant period. The amount of the reduction willcontinue to be estimated based on historical experience.RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009REVENUE Total revenue for the year ended December 31, 2010 decreased by$(43,327) to $0 compared to $43,327 in the prior year ended December 31, 2009.This decrease in revenue was a result of our focusing on development of ourproduct. We are in our development stage. -9-COST OF SALES Cost of sales expenses decreased by $(41,607) to $0 for the year endedDecember 31, 2010 compared to $41,607 in the prior year ended December 31, 2009.This decrease in cost of sales expenses was primarily due to lack of salestransactions during the year ended December 31, 2010.SELLING AND MARKETING EXPENSES Selling and marketing expenses decreased by $(9,761) to $0 for the yearended December 31, 2010 compared to $9,761 in the prior year ended December 31,Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2009. This decrease in selling and marketing expenses was the result of adecrease in marketing exposure because we are in the process of developing ourthree-dimensional solar cell technology so we do not have a completed product tomarket.GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased by $120,707 to $571,895for the year ended December 31, 2010 compared to $451,188 in the prior yearended December 31, 2009. This increase in general and administrative expenseswas the result of an increase in non-cash stock compensation expense of$208,005. Overall, the remaining general and administrative expenses decreasedby $(87,298) due to lower professional fees.RESEARCH AND DEVELOPMENT Research and development costs increased by $36,042 to $36,042 for theyear ended December 31, 2010 compared to $0 in the prior year ended December 31,2009. This increase in research and development costs was the result of anincrease in testing and engineering cost related to the development of our solarcell technology.NET LOSS Net loss decreased by $(399,878) to $(616,906) for the year endedDecember 31, 2010, compared to $(1,050,064) in the prior year ended December 31,2009. This decrease in net loss in the current year was the result of losses onsettlement of debs not occurring during the current year while significantlosses were realized during the prior year. Currently operating costs exceedrevenue because sales are not yet sufficient to cover costs. We cannot assurewhen or if revenue will exceed operating costs.LIQUIDITY AND CAPITAL RESOURCES We had net cash of $3,311 at December 31, 2010, as compared to $10,002for the prior year ended December 31, 2009. During the year ended December 31, 2010, we used $(408,325) of cash foroperating activities, as compared to $(144,779) for the prior year endedDecember 31, 2009. The increase of $(263,546) in cash used in operatingactivities was a result of increased payments for operating expenses and prepaidexpenses that were partially offset by an increase in accrued expenses. Cash used in investing activities for the current year ended December31, 2010, was $(5,366) to purchase equipment, as compared to cash provided of$1,347 from a return on investment in the prior year ended December 31, 2009. Cash provided by financing activities during the year ended December31, 2010 was $407,000 as compared to $150,485 for the prior year ended December31, 2009. Our capital needs have primarily been met from the proceeds of equityfinancing, shareholder loans, and to a lesser extent, sales. We will have additional capital requirements during 2011 necessary inorder to complete research and development of working prototypes of ourthree-dimensional solar cells. We also expect that we will require additionalcapital in order to fabricate and market arrays of these 3-D solar cells.Although we cannot quantify these anticipated costs with specificity, weestimate that we will require approximately $700,000 in funding over the next 12 -10-months of operations, split almost evenly between product development and aconcerted marketing and sales efforts. We cannot assure that marketing andresearch and development costs in 2011 will not exceed or vary from those costsexpected by management. We intend to meet our cash requirements through the saleof shares of our common stock. We cannot assure that we will be able to raiseadditional capital or obtain additional financing for our business. We cannot assure that we will have sufficient capital to finance ourgrowth and business operations or that such capital will be available on termsthat are favorable to us or at all. We are currently incurring operatingdeficits that are expected to continue for the foreseeable future.GOING CONCERN QUALIFICATIONSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We have incurred significant losses from operations, and such lossesare expected to continue. Our auditors have included a "Going ConcernQualification" in their report for the year ended December 31, 2010. Inaddition, we have limited working capital. The foregoing raises substantialdoubt about our ability to continue as a going concern. Management's plansinclude seeking additional capital. We cannot guarantee that additional capitalwill be available when and to the extent required, or that if available, it willbe on terms acceptable to us. The financial statements do not include anyadjustments that might result from the outcome of this uncertainty. The "GoingConcern Qualification" may make it substantially more difficult to raisecapital.OFF-BALANCE SHEET ARRANGEMENTS We do not have any off balance sheet arrangements that are reasonablylikely to have a current or future effect on our financial condition, revenues,results of operations, liquidity or capital expenditures. -11-ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF SOLAR3D, INC.-------------------------------------------------------------------- SOLAR3D, INC. AND SUBSIDIARIES (formerly Machinetalker, Inc.) (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 CONTENTSReports of Independent Registered Public Accounting Firm .....................13Consolidated Balance Sheets as of December 31, 2010 and 2009..................14Consolidated Statements of Operations for the years ended December 31, 2010 and 2009....................................................15Consolidated Statements of Changes in Shareholders' Deficit for the years ended December 31, 2010 and 2009....................................16Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009 ...................................................20Notes to Consolidated Financial Statements ...................................21Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. -12- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and ShareholdersSolar3D, Inc. and Subsidiaries (formerly MachineTalker, Inc.)(A Development Stage Company)Santa Barbara, CaliforniaWe have audited the accompanying consolidated balance sheets of Solar3D, Inc.and subsidiaries (formerly MachineTalker, Inc.) (A Development Stage Company) asof December 31, 2010 and 2009, and the related consolidated statements ofoperations, shareholders' deficit, and cash flows for the years then ended, andfor the period from inception of the development stage on January 30, 2002through December 31, 2010. These financial statements are the responsibility ofthe Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.We conducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. The Company is not required tohave, nor were we engaged to perform an audit of its internal control overfinancial reporting. Our audit included consideration of internal control overfinancial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company's internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Solar3D, Inc. andsubsidiaries (formerly MachineTalker, Inc.) (A Development Stage Company) as ofDecember 31, 2010 and 2009, and the results of their operations and their cashflows for the years then ended and for the period from inception of thedevelopment stage on January 30, 2002 through December 31, 2010, in conformitywith U.S. generally accepted accounting principles.The accompanying financial statements have been prepared assuming that theCompany will continue as a going concern. As discussed in Note 1 to thefinancial statements, the Company does not generate significant revenue, it hasnegative cash flows from operations, and its total liabilities exceed its totalassets. This raises substantial doubt about the Company's ability to continue asa going concern. Management's plans in regard to these matters are alsodescribed in Note 1. The financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. /s/ HJ Associates & Consultants, LLPHJ Associates & Consultants, LLPSalt Lake City, UtahMarch 31, 2011 -13- SOLAR3D, INC. AND SUBSIDIARIES (formerly MACHINETALKER, INC.) (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS December 31, 2010 December 31, 2009 ------------------ ------------------- ASSETS CURRENT ASSETS Cash $ 3,311 $ 10,002 Prepaid expense 24,822 - ------------------ ------------------- TOTAL CURRENT ASSETS 28,133 10,002 ------------------ ------------------- PROPERTY & EQUIPMENT, at cost Machinery & equipment 13,080 13,080 Computer equipment 55,717 50,351 Furniture & fixture 4,670 4,670 ------------------ ------------------- 73,467 68,101 Less accumulated depreciation (67,923) (67,423) ------------------ ------------------- NET PROPERTY AND EQUIPMENT 5,544 678 ------------------ ------------------- OTHER ASSETS Security deposit 2,975 2,975 ------------------ ------------------- TOTAL OTHER ASSETS 2,975 2,975 ------------------ ------------------- TOTAL ASSETS $ 36,652 $ 13,655 ================== =================== LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 13,444 $ 45,582 Accrued expenses 453,232 401,029 Accrued interest, other 25,025 17,225 Accrued interest, related parties 107,074 110,041 Convertible promissory note 65,000 65,000 Notes payable, related parties - 44,000 ------------------ ------------------- TOTAL CURRENT LIABILITIES 663,775 682,877 ------------------ ------------------- SHAREHOLDERS' DEFICIT Common stock, $.001 par value; 550,000,000 authorized shares; 100,689,825 and 36,395,359 shares issued and outstanding, respectively 100,689 36,395 Additional paid in capital 7,815,088 7,220,377 Deficit accumulated during the development stage (8,542,900) (7,925,994) ------------------ ------------------- TOTAL SHAREHOLDERS' DEFICIT (627,123) (669,222) ------------------ ------------------- TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 36,652 $ 13,655 ================== =================== The accompanying notes are an integral part of these consolidated financial statements -14- SOLAR3D, INC. AND SUBSIDIARIES (formerly MACHINETALKER, INC.) (A DEVELOPMENT STAGE COMPANY)Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CONSOLIDATED STATEMENTS OF OPERATIONS From Inception Year Ended January 30, 2002 ----------------------------------- through December 31, 2010 December 31, 2009 December 31, 2010 ----------------- ----------------- ----------------- REVENUE $ - $ 43,327 $ 1,127,406 COST OF SERVICES - 41,607 496,177 ----------------- ----------------- ----------------- GROSS PROFIT - 1,720 631,229 ----------------- ----------------- ----------------- OPERATING EXPENSES Selling and marketing expenses - 9,761 1,264,814 General and administrative expenses 571,895 451,188 3,653,091 Research and development 36,042 - 1,475,907 Impairment loss - - 1,753,502 Depreciation and amortization expense 500 8,848 120,247 ----------------- ----------------- ----------------- TOTAL OPERATING EXPENSES 608,437 469,797 8,267,561 ----------------- ----------------- ----------------- LOSS FROM OPERATIONS (608,437) (468,077) (7,636,332) ----------------- ----------------- ----------------- OTHER INCOME/(EXPENSES) BEFORE PROVISION FOR INCOME TAXES Interest income - 4 10,255 Interest expense (8,469) (16,038) (269,684) Penalties - - (155) Gain/(loss) on investment - 1,347 (73,121) Loss on settlement of debt - (567,300) (567,300) Gain/(loss) on sale of asset - - (963) ----------------- ----------------- ----------------- TOTAL OTHER INCOME/(EXPENSES) (8,469) (581,987) (900,968) ----------------- ----------------- ----------------- LOSS BEFORE PROVISION FOR INCOME TAXES (616,906) (1,050,064) (8,537,300) PROVISION FOR INCOME TAXES - - (5,600) ----------------- ----------------- ----------------- NET LOSS $ (616,906)$ (1,050,064) $ (8,542,900) ================= ================= ================= BASIC AND DILUTED LOSS PER SHARE $ (0.01)$ (0.04) ================= ================= WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 70,364,029 26,974,667 ================= ================= The accompanying notes are an integral part of these consolidated financial statements -15- SOLAR3D, INC. AND SUBSIDIARIES (formerly MACHINETALKER, INC.) (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010 Accumulated Deficit During Common stock Additional the ---------------------- Paid-in Development Shares Amount Capital Stage Total ------------ --------- ------------ ------------ ----------- Balance from original Issuance at January 30, 2002($0.00425 per share) ($7,650 in cash and a patent at fair value of $5,100) 3,000,000 $ 3,000 $ 9,750 $ - $ 12,750Issuance of common stock in February and March 2002(100,000 shares at $1.25 per share in cash) 100,000 100 124,900 - 125,000Issuance of common stock in April 2002(8,000 shares at $1.25 per share in cash) 8,000 8 9,992 - 10,000Issuance of common stock in April 2002Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (8,000 shares as finders fees) 8,000 8 (8) - -Issuance of common stock in May 2002(56,000 shares at $1.25 per share in cash) 56,000 56 69,944 - 70,000Issuance of common stock in May 2002(8,000 shares as finders fees) 8,000 8 (8) - -Issuance of common stock in June 2002(20,000 shares at a price of $2.50 per share in cash) 20,000 20 49,980 - 50,000Net Loss for the year ended December 31, 2002 - - - (852,600) (852,600) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2002 3,200,000 3,200 264,550 (852,600) (584,850)Issuance of common stock in January 2003 (420,916 ata price of $0.3041 per share in cash) 420,916 421 127,579 - 128,000Issuance of common stock in March 2003 (32,884 at a price of $0.3041 per share in cash) 32,884 33 9,967 - 10,000Net Loss for the year ended December 31, 2003 - - - (394,115) (394,115) ----------- ---------- ------------ ------------ -----------Balance, December 31, 2003 3,653,800 3,654 402,096 (1,246,715) (840,965)Issuance of common stock in January 2004 (1,000 shares valued at $6,250 for services 1,000 1 6,249 - 6,250Issuance of common stock in June 2004 (640,000 shares at $0.625 per share in conversion debt) 640,000 640 399,360 - 400,000Issuance of common stock in June 2004 (400,000 shares at $0.625 per share for services) 400,000 400 249,600 - 250,000Issuance of common stock in July through December 31, 2004 for cash 982,400 982 613,018 - 614,000Net Loss for the year ended December 31, 2004 - - - (573,454) (573,454) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2004 5,677,200 5,677 1,670,323 (1,820,169) (144,169)Issuance of common stock in January 2005 (548,800 shares at $0.625 per share for cash) 548,800 549 342,451 - 343,000Issuance of common stock in March 2005 (12,000 shares at $0.50 per share for cash) 12,000 12 29,988 - 30,000 The accompanying notes are an integral part of these consolidated financial statements -16- SOLAR3D, INC. AND SUBSIDIARIES (formerly MACHINETALKER, INC.) (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010 Accumulated Deficit During Common stock Additional the ---------------------- Paid-in Development Shares Amount Capital Stage Total ------------ --------- ------------ ------------ -----------Issuance of 152,680 warrants for services - - 129,550 - 129,550Issuance of common stock in April 2005 (12,000 shares at $2.50 per share for cash) 12,000 12 29,988 - 30,000Issuance of common stock in May 2005 (10,682 shares at fair value for services) 10,682 10 8,058 - 8,068Issuance of common stock in May 2005 (58,000 shares at $2.50 per share for cash) 58,000 58 144,942 - 145,000Issuance of common stock in June 2005 (42,000 shares at $2.50 per share for cash) 42,000 42 104,958 - 105,000Issuance of 10,400 warrants for services - - 23,400 - 23,400Net Loss for the year ended December 31, 2005 - - - (1,068,190) (1,068,190) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2005 6,360,682 6,360 2,483,658 (2,888,359) (398,342)Common stock warrants exercised in March 2006 (12,600 common stock warrants exercised at $0.625) 12,600 13 7,862 - 7,875Private Placement in 2nd Qtr 2006 (16,000 shares at $3.75 per share for cash) 16,000 16 59,984 - 60,000Stock Compensation Cost - - 35,008 - 35,008Common stock warrants exercised in August 2006 (2,000 common stock warrants exercised at $0.625) 2,000 2 1,248 - 1,250Issuance of common stock in December 2006 (6,286 shares issued at $1.75 for cash) 6,286 6 10,994 - 11,000Investment in Sense Comm (24,000 common stock issued at $3.00 per share at FMV) 24,000 24 71,976 - 72,000Stock Compensation Cost - - 4,847 - 4,847Issuance of 24,800 warrants for services - - 46,861 - 46,861Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net Loss for the year ended December 31, 2006 - - - (611,967) (611,967) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2006 6,421,568 6,421 2,722,438 (3,500,326) (771,468)Common stock warrants exercised in January 2007 (1,273 common stock warrants exercised for cash at $3.00) 1,273 1 3,817 - 3,818Issuance of common stock in January 2007 (33,143 shares at $1.75 per share for cash) 33,143 33 57,967 - 58,000Issuance of common stock in February 2007 (8,000 shares at $1.75 per share for cash) 8,000 8 13,992 - 14,000Issuance of 24,000 warrants for services - - 49,487 - 49,487Issuance of common stock in April 2007 (32,000 shares at $1.75 per share for cash) 32,000 32 55,968 - 56,000 The accompanying notes are an integral part of these consolidated financial statements -17- SOLAR3D, INC. AND SUBSIDIARIES (formerly MACHINETALKER, INC.) (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010 Accumulated Deficit During Common stock Additional the ---------------------- Paid-in Development Shares Amount Capital Stage Total ------------ --------- ------------ ------------ -----------Issuance of common stock in April 2007 (1,530 shares at $2.50 per share for services) 1,530 2 3,824 - 3,826Exercise of stock options in June 2007 (10,000 shares at $0.625 per share for cash) 10,000 10 6,240 - 6,250Conversion of note to common stock in June 2007 (114,286 shares at $1.75 per share in conversion of debt) 114,286 114 199,886 - 200,000Issuance of common stock in June 2007 (16,000 shares at $1.25 per share for cash) 16,000 16 19,984 - 20,000Issuance of common stock in July 2007 (61,600 shares at $1.25 per share for cash) 61,600 62 76,938 - 77,000Issuance of common stock in July 2007 (120,000 shares at $2.00 per share for purchase of investment) 120,000 120 239,880 - 240,000Issuance of common stock in August 2007 (4,000 shares at $1.25 per share for cash) 4,000 4 4,996 - 5,000Issuance of common stock in September 2007 (19,200 shares at $1.25 per share for cash) 19,200 19 23,981 - 24,000Issuance of 8,333 warrants for services - - 12,345 - 12,345Stock compensation cost - - 17,092 - 17,092Issuance of common stock in October 2007 (40,000 shares at $1.25 per share for cash) 40,000 40 49,960 - 50,000Issuance of common stock in November 2007 (3,425 shares at $1.50 per share for services) 3,425 3 5,133 - 5,136Issuance of common stock in December 2007 (345,000 shares at $1.00 per share for license fees) 345,000 345 344,655 - 345,000Issuance of common stock in December 2007 (1,515,000 shares at $1.00 per share for purchase of subsidiary) 1,515,000 1,515 1,513,485 - 1,515,000Net Loss for the year ended December 31, 2007 - - - (1,025,773) (1,025,773) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2007 8,746,025 8,745 5,422,068 (4,526,099) 904,714Issuance of common stock in March 2008 (2,649 shares at $1.25 per share for services) 2,649 3 3,308 - 3,311Issuance of common stock in July 2008 (14,667 shares at $0.625 per share for services) 14,667 15 9,153 - 9,168Issuance of common stock in September 2008 (60,000 shares at $0.175 per share for services) 60,000 60 10,440 - 10,500Stock compensation cost - - 12,831 - 12,831Issuance of common stock in September 2008 (14,000 shares at $0.2275 per share for services) 14,000 14 3,171 - 3,185 The accompanying notes are an integral part of these consolidated financial statements -18-Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SOLAR3D, INC. AND SUBSIDIARIES (formerly MACHINETALKER, INC.) (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT FROM INCEPTION (JANUARY 30, 2002) THROUGH DECEMBER 31, 2010 Accumulated Deficit During Common stock Additional the ---------------------- Paid-in Development Shares Amount Capital Stage Total ------------ --------- ------------ ------------ -----------Contributed capital by shareholder - - 448,712 - 448,712Net Loss for the year ended December 31, 2008 - - - (2,349,831) (2,349,831) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2008 8,837,341 8,837 5,909,683 (6,875,930) (957,410)Issuance of common stock in April 2009(1,240,000 shares at $0.1625 per share issued for services) 1,240,000 1,240 200,260 - 201,500Issuance of common stock in May 2009(18,648,018 shares at $0.0053625 per share issued for cash) 18,648,018 18,648 81,352 - 100,000Issuance of common stock in May 2009(350,000 shares at $0.1275 per share issued for services) 350,000 350 44,275 - 44,625Issuance of common stock in May 2009(380,000 shares at $0.1275 per share issued for conversion of promissory note) 380,000 380 48,070 - 48,450Issuance of common stock in May 2009(6,940,000 shares at $0.1275 per share issued for conversion of promissory note) 6,940,000 6,940 877,910 - 884,850Contributed capital by shareholder - - 58,827 - 58,827Net Loss for the year ended December 31, 2009 - - - (1,050,064) (1,050,064) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2009 36,395,359 36,395 7,220,377 (7,925,994) (669,222)Issuance of common stock in February 2010 for cash(16,000,000 shares of common stock issued at $0.0125 per share) 16,000,000 16,000 184,000 - 200,000Issuance of common stock in July 2010 for cash(44,444,444 shares of common stock issued at $0.00225 per share) 44,444,444 44,444 55,556 - 100,000Issuance of common stock in August 2010 for cash(1,050,000 shares of common stock issued at $0.010476 per share) 1,050,000 1,050 9,950 - 11,000Issuance of common stock in December 2010 for cash(2,800,000 shares of common stock issued at $0.05 per share) 2,800,000 2,800 137,200 - 140,000Rounding shares 22 - - - -Stock compensation cost - - 208,005 - 208,005Net loss for the year ended December 31, 2010 - - - (616,906) (616,906) ----------- ---------- ------------ ------------ -----------Balance at December 31, 2010 100,689,825 $ 100,689 $ 7,815,088 $(8,542,900) $ (627,123) =========== ========== ============ ============ =========== The accompanying notes are an integral part of these consolidated financial statements -19- SOLAR3D, INC. AND SUBSIDIARIES (formerly MACHINETALKER, INC.) (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS From Inception Year Ended January 30, 2002 ------------------------------------- through December 31, 2010 December 31, 2009 December 31, 2010 ----------------- ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (616,906) $ (1,050,064) $ (8,542,900) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 500 8,848 120,247 Issuance of common shares and warrants for services - 166,625 727,713 Issuance of common shares in conversion of debt - - 400,000 (Gain)/loss on investment - (1,347) 73,121 Stock Compensation Cost 208,005 - 277,783 Gain on sale of asset - - 963 Impairment loss - - 1,753,502 Loss on settlement of debt - 567,300 567,300 Changes in Assets and Liabilities (Increase) Decrease in: Inventory - 39,598 - Prepaid expenses (24,822) 904 (24,822) Patents - 656 - Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Deposits and other assets - 5,000 2,025 Increase (Decrease) in: Accounts payable (32,138) 34,036 92,944 Accrued expenses 57,036 122,482 585,331 Unearned revenue - (38,817) - ----------------- ----------------- ----------------- NET CASH USED IN OPERATING ACTIVITIES (408,325) (144,779) (3,966,793) ----------------- ----------------- ----------------- NET CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of property and equipment (5,366) - (79,120) Sale of asset - - 3,963 Investment in companies - 1,347 (6,121) ----------------- ----------------- ----------------- NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (5,366) 1,347 (81,278) ----------------- ----------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable related parties - 47,000 1,127,342 Proceeds from convertible promissory note - - 129,000 Repayment of notes payable related party (44,000) (3,000) (137,000) Contributed capital by shareholder - 6,485 19,197 Proceeds from subsidiary - - 300,000 Proceeds from issuance of common stock 451,000 100,000 2,605,193 ----------------- ----------------- ----------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 407,000 150,485 4,043,732 ----------------- ----------------- ----------------- NET INCREASE IN CASH (6,691) 7,053 (4,339) CASH, BEGINNING OF PERIOD 10,002 2,949 7,650 ----------------- ----------------- ----------------- CASH, END OF PERIOD $ 3,311 $ 10,002 $ 3,311 ================= ================= ================= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 3,536 $ - $ 137,484 ================= ================= ================= Income taxes $ - $ - $ 5,600 ================= ================= ================= SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS During the year ended December 31, 2009, the Company issued 1,590,000 shares of common stock for services and accounts payable at a fair value of $246,125; 7,320,000 shares of common stock with a fair value of $933,300 were issued in conversion of $366,000 in debt resulting in a $567,300 loss on settlement of debt. Also, a shareholder forgave a loan in the amount of $52,342, and was recorded as additional paid in capital. The accompanying notes are an integral part of these consolidated financial statements -20- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 20091. ORGANIZATION AND LINE OF BUSINESS ORGANIZATION Solar3D (formerly MachineTalker, Inc.) (the "Company") was incorporated in the state of Delaware on January 30, 2002. The Company, based in Santa Barbara, California, began operations on January 30, 2002. We were originally formed in January 2002 as MachineTalker, Inc. in order to pursue the development of new wireless process control technology. In September 2010, we shifted our engineering and research focus to developing a new means for generating solar-produced electrical power which we plan to patent and perfect for use in the manufacture of highly efficient solar cells. In July 2010, we changed our company name to Solar3D, Inc. in order to better reflect our new business plan. LINE OF BUSINESS The Company is currently in the stage of developing and marketing a new three-dimensional version of solar cell technology in order to maximize the conversion of sunlight into electricity. Conventional solar cells reflect a significant amount of incident sunlight losing much of the solar energy that could have produced additional electrical power. Inspired by light management techniques used in fiber optic devices, Solar3D is designing a new type of solar cell, one that utilizes a three-dimensional design to trap sunlight inside the photovoltaic structure where it is reflected multiple times until much more of the energy is absorbed into the solar cell material. We have applied for patent protection on what we believe to be a breakthrough design for the next generation in solar cell technology with increased efficiency and resulting in a lower cost per watt ofSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. electricity produced. GOING CONCERN The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company's obligations as they become due, and will allow the development of its core of business.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of MachineTalker, Inc. is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries Wideband Detection Technologies, Inc. and Mirco Wireless Technologies, Inc. All significant inter-company balances and transactions have been eliminated. DEVELOPMENT STAGE ACTIVITIES AND OPERATIONS The Company has been in its initial stages of formation and for the year ended December 31, 2010, had insignificant revenues. A development stage activity is one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant. -21- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 20092. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) REVENUE RECOGNITION We recognize revenue upon delivery, provided that evidence of an arrangement exists, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. We record revenue net of estimated product returns, which is based upon our return policy, sales agreements, management estimates of potential future product returns related to current period revenue, current economic trends, changes in customer composition and historical experience. We accrue for warranty costs, sales returns, and other allowances based on our experience, which tells us we have less than $25,000 per year in warranty returns and allowances. Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluations of our customers and historic credit losses have been within our expectations. We do not ship a product until we have either a purchase agreement or rental agreement signed by the customer with a payment arrangement. This is a critical policy, because we want our accounting to show only sales which are "final" with a payment arrangement. We do not make consignment sales, nor inventory sales subject to a "buy back" or return arrangement from customers. Accordingly, original equipment manufacturers do not presently have a right to return unsold products to us.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We also grant exclusive licenses for the use of the technology required to operate our products. Software license revenue is recognized over the contract period, for those contracts that either do not contain a service component or that have services which are not essential to the functionality of any other element of the contract. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options. Actual results could differ from those estimates. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, and are depreciated using the straight line method over its estimated useful lives: Machinery & equipment 5 Years Furniture & fixtures 5-7 Years Computer equipment 3-5 Years Depreciation expense as of December 31, 2010 and 2009 was $500 and $8,848 respectively. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair Value of Financial Instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2010 and 2009, the amounts reported for cash, accounts receivable, accounts payable, accrued interest and other expenses, and notes payable approximate the fair value because of their short maturities. INVENTORY Inventories are stated at the lower of cost (first-in, first-out basis) or market, and consists of raw materials. There was no inventory for the years ended December 31, 2010 and 2009. -22- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 20092. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) STOCK-BASED COMPENSATION Share based payments applies to transactions in which an entity exchanges its equity instruments for goods or services, and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We will be required to follow a fair value approach using an option-pricing model, such as the Black-Scholes option valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. The adoption of share based compensation has no material impact on our results of operations. ADVERTISING The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2010 and 2009 were $5,472 and $0, respectively. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. These costs consist primarily of salaries and direct payroll related costs. The costs for the years ended December 31, 2010 and 2009 were $36,042 and $0, respectively. LOSS PER SHARE CALCULATIONS Loss per Share dictates the calculation of basic earnings per share andSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. No shares for employee options or warrants were used in the calculation of the loss per share as they were all anti-dilutive. The Company's diluted loss per share is the same as the basic loss per share for the years ended December 31, 2010 and 2009, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. A reconciliation of the numerators and denominators used in the computation of loss per share for the years ended December 31, 2010 and 2009 is as follows: 2010 2009 ------------- -------------- Numerators $ (616,906) $ (1,050,064) Denominators 70,364,029 26,974,667 INCOME TAXES The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized. -23- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 20092. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) GOODWILL Goodwill represents the excess of the purchase price over the fair value assigned to identifiable net assets acquired of subsidiary companies. Goodwill is tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired. The Company does not have the funds to pursue the technologies, which resulted in impairment. Goodwill impairment is measured as the excess of the carrying amount over the implied fair value. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Management reviewed accounting pronouncements issued during the three months ended December 31, 2010, and no pronouncements were adopted during the period.3. INCOME TAXES The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2008. Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain. Included in the balances at December 31, 2010 and 2009, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred taxSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the periods ended December 31, 2010 and 2009, the Company did not recognize interest and penalties.4. DEFERRED TAX BENEFIT The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the year ended December 31, 2010 and 2009 due to the following: 2010 2009 ---------------- -----------------Book Income $ (253,418) $ (420,026)Depreciation - 1,373Meals & Entertainment 105 12Related Party Accrual - 45,162Non deductible Impairment Expenses - 15,839Stock for Services 83,202 66,650Loss on Settlement of Debt - 226,920Valuation Allowance 170,111 64,070 ---------------- -----------------Income tax expense $ - $ - ================ ================= -24- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 20094. DEFERRED TAX BENEFIT (Continued) Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax liabilities consist of the following components as of December 31, 2010 and 2009: 2010 2009 ------------- ------------- Deferred tax assets: NOL carryover $ 1,811,794 $ 1,687,962 R & D 128,369 125,695 Contributions 692 692 Related party accruals 224,122 203,709 Depreciation - 1,813 Deferred tax liabilities: Depreciation (1,414) - Less valuation allowance (2,163,563) (2,019,871) ------------- ------------- Net deferred tax asset $ - $ - Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ============= ============= Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.5. CAPITAL STOCK On August 5, 2010, the holders of a majority of the issued and outstanding shares of the Company's common stock approved a one-for-five reverse common stock split, and these financial statements have been adjusted for the effects of this reverse split. During the year ended December 31, 2010, the Company issued 16,000,000 shares of common stock at a price of $0.0125 per share for $200,000 in cash; 44,444,444 shares of common stock at a price of $0.00225 per share for $100,000 cash; 1,050,000 shares of common stock at a price of $0.010476 per share for cash; 2,800,000 shares of common stock at a price of $0.05 per share for $140,000 cash. During the year ended December 31, 2009, the Company effected a one for five reverse split of its common stock. Also, the Company issued 18,648,018 shares of common stock at a price of $0.0053625 per share for $11,000 cash; 1,590,000 shares of common stock for services and accounts payable at a fair value of $246,125; 7,320,000 shares of common stock at a fair value of $933,300 for the conversion of $366,000 in debt resulting in the recognition of a $567,300 loss on settlement of debt; the Company's President forgave a note payable of $52,342 and cash contributed during the period of $6,485 to contributed capital. The financial statements have been retroactively adjusted for the effects of the stock split. -25- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 20096. STOCK OPTIONS AND WARRANTS During the year ended December 31, 2010, in consideration for services as a director of the Company, the Board of Directors issued to Mr. Nelson a nonqualified stock option to purchase up to 15,000,000 shares of the Company's common stock. The stock options were granted on July 22, 2010 and vest 1/36th per month commencing on a monthly basis for as long as he is an employee or consultant of the Company. The stock options are exercisable for a period of seven years from the date of grant at an exercise price of $0.05 per share. These share amounts and exercise price have been adjusted for the one for five reverse split of the Company's common stock. 2010 ---------------- Risk free interest rate 2.38% Stock volatility factor 229% Weighted average expected option life 7 years Expected dividend yield None A summary of the Company's stock option activity and related information follows: 12/31/2010 ----------------------------- Weighted Number average of exercise Options price -----------------------------Outstanding, beginning of period - $ -Granted 15,000,000 0.05Exercised - -Expired - -Outstanding, end of period 15,000 000 $ 0.05 =============================Exercisable at the end of period 2,083,333 $ 0.05 =============================Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Weighted average fair value of options granted during the period $ 0.05 ============== The stock-based compensation expense recognized in the statement of operations during the period ended December 31, 2010 is $208,005. WARRANTS A summary of the Company's warrant activity and related information follows: 2010 2009 ------------------------------------------------------------ Weighted Weighted Number average Number average of exercise of exercise Warrants price Warrants price ------------------------------------------------------------ Outstanding, beginning of period 173,280 $ 0.11 173,280 $ 0.11Granted - - - -Exercised - - - -Expired (41,666) (0.06) - -Outstanding, end of period 131,614 $ 0.12 173,280 $ 0.11 ============================= =============================Exercisable at the end of period 131,614 $ 0.12 173,280 $ 0.11 ============================= =============================Weighted average fair value of options granted during the period $ - $ - ============== ============== -26- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 20096. STOCK OPTIONS AND WARRANTS (Continued) WARRANTS (Continued) --------- At December 31, 2010, the weighted average remaining contractual life of warrants outstanding: Weighted Average Remaining Exercisable Warrants Warrants Contractual Prices Outstanding Exercisable Life (years) ------------------- ------------------ ------------------------------------ $ 0.12 7,614 7,614 0.75 $ 0.12 100,000 100,000 0.85 $ 0.12 20,000 20,000 1.00 $ 0.15 4,000 4,000 1.02 ------------------ ------------------- 131,614 131,614 ================== =================== 7. CONVERTIBLE PROMISSORY NOTES During the year ended December 31, 2007, the Company entered into a two (2) year convertible promissory note that matured October 16, 2009. The principal amount of the note is $65,000, and bears interest at 12% per annum. The principal is convertible into shares of common stock at $0.25 per share. The Company is in default and the promissory note is due. During the year ended December 31, 2009, the Company received a loan of $37,000 from an investor. The loan bears interest at 6% per annum. The principal of $37,000 was paid in full during the year ended December 31,Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2010.8. RENTAL LEASE The Company moved to a new facility on October 1, 2010 and leases its premises on a month-to-month basis. The rent expense for the years ended December 31, 2010 and 2009 amounted to $15,494 and $12,873, respectively for each year.9. RELATED PARTY TRANSACTIONS During the year ended December 31, 2009, the Company's President forgave a note payable of $52,342 and cash of $6,485 to contributed capital. During the year ended December 31, 2009, the Company's President loaned $7,000 to the Company for operating expenses. During prior years, the Company's President and Chief Executive officer loaned the Company $349,342. The note bore interest at 6% per annum. The outstanding principal balance of this loan was settled during the year ended December 31, 2009, through the issuance of 6,940,000 shares of common stock. No accrued interest was settled in this transaction. The balance of interest due as of December 31, 2010 and 2009 was $107,074 and $108,962, respectively. During the year ended December 31, 2009, an investor loaned the Company $37,000 for operating expenses. The note bears interest at 6% per annum, and is due and payable upon demand. This loan and all accrued interest were paid in full during the year ended December 31, 2010. -27- SOLAR3D, INC. AND SUBSIDIARY (formerly MACHINETALKER, INC.) (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2010 and 200910. SUBSEQUENT EVENTS Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following: During January and February, an investor loaned the Company $47,000 for operating expenses, which was repaid during the same period. As of March 2011, the Company issued 4,286,670 shares of common stock at prices of $0.05 and $0.075 per share for a total of $284,000 in cash.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. -28-ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE.-------------------------------------------------------------------------------- None.ITEM 9A. CONTROLS AND PROCEDURES--------------------------------EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We carried out an evaluation, under the supervision and with theparticipation of our management, including our principal executive officer andprincipal financial officer, of the effectiveness of our disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Basedupon that evaluation, our principal executive officer and principal financialofficer concluded that, as of the end of the period covered in this report, ourdisclosure controls and procedures were not effective to ensure that informationrequired to be disclosed in reports filed under the Securities Exchange Act of1934, as amended, is recorded, processed, summarized and reported within therequired time periods and is accumulated and communicated to our management,including our principal executive officer and principal financial officer, asappropriate to allow timely decisions regarding required disclosure. Our management, including our principal executive officer and principalfinancial officer, does not expect that our disclosure controls and proceduresor our internal controls will prevent all error or fraud. A control system, nomatter how well conceived and operated, can provide only reasonable, notabsolute, assurance that the objectives of the control system are met. Further,the design of a control system must reflect the fact that there are resourceconstraints and the benefits of controls must be considered relative to theircosts. Due to the inherent limitations in all control systems, no evaluation ofcontrols can provide absolute assurance that all control issues and instances offraud, if any, have been detected. To address the material weaknesses, weperformed additional analysis and other post-closing procedures in an effort toensure our consolidated financial statements included in this annual report havebeen prepared in accordance with generally accepted accounting principles.Accordingly, management believes that the financial statements included in thisreport fairly present in all material respects our financial condition, resultsof operations and cash flows for the periods presented.MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequateinternal control over financial reporting as defined in Rule 13a-15(f) under theSecurities Exchange Act of 1934, as amended. Our management assessed theeffectiveness of our internal control over financial reporting as of December31, 2010. In making this assessment, our management used the criteria set forthby the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")in Internal Control-Integrated Framework. Based on this assessment, managementbelieves that, as of December 31, 2010, our internal control over financialreporting was effective based on those criteria. There have been no changes ininternal control over financial reporting since December 31, 2010 that havematerially affected or are reasonably likely to materially affect our internalcontrol over financial reporting.NO ATTESTATION REPORT BY INDEPENDENT REGISTERED ACCOUNTANT The effectiveness of our internal control over financial reporting asof December 31, 2010 has not been audited by our independent registered publicaccounting firm by virtue of our exemption from such requirement as a smallerreporting company.CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTINGSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. There have been no changes in our internal control over financialreporting through the date of this report or during the quarter ended December31, 2010, that materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting. -29-CORRECTIVE ACTION Management plans to make future investments in the continuing educationof our accounting and financial staff. Specifically, we plan to seek specificpublic company accounting training during 2011. Improvements in our disclosurecontrols and procedures and in our internal control over financial reportingwill, however, depend on our ability to add additional financial personnel andindependent directors to provide more internal checks and balances, and toprovide qualified independence for our audit committee. We believe we will beable to commence achieving these goals once our sales and cash flow grow and ourfinancial condition improves.ITEM 9B. OTHER INFORMATION-------------------------- None. PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE---------------------------------------------------------------- The following table lists our executive officers and directors as ofDecember 31, 2010:NAME AGE POSITION------------------- --- ------------------------------------------------Roland F. Bryan (1) 76 President, Chief Financial Officer, Secretary, and Chairman of the Board of DirectorsJames B. Nelson 58 Chief Executive Officer and DirectorMark J. Richardson 56 Director ----------------(1) Member of audit committee. Mr. Bryan is not an independent director and he may not qualify as a financial expert for the purposes of satisfying the requirements of the Securities and Exchange Commission that audit committees be comprised of independent directors, at least one of whom is a financial expert. Management believes that our small size and limited resources has so far hindered us from attracting a fourth director who can serve on the audit committee as an independent financial expert. Nevertheless, we will continue to seek such a candidate. ROLAND F. BRYAN has been the president and chairman of the board ofdirectors of Solar3D since our inception in January 2002, the chief financialofficer of Solar3D since November 2003, the secretary of Solar3D since May 2006,and the chief executive officer of Solar3D from inception to October 2010. Forthe six years prior to founding Solar3D, Mr. Bryan was self employed as anindependent advisor to several high-tech companies on corporate organization,management, marketing and product development. Mr. Bryan's professionalbackground is in the areas computer science research and process control throughcomputer automation. During the last 25 years he has built up and sold severalhigh-tech companies in the fields of telecommunications networking, militarycomputer systems and commercial equipment for network access. In 1974, hefounded Associated Computer Consultants, Inc., a company that implementedinterconnections to the first packet network for many United States governmentagencies. In 1983, the name of the company was changed to Advanced ComputerCommunications, Inc. and continued to produce networking products for bothmilitary and commercial applications. Advanced Computer Communications made theInc. 500 List of Fastest Growing Companies in 1984. In 1991, the company wassplit into two separate businesses, one to concentrate on military products, theother to concentrate on commercial products. Advanced Computer Communicationswas acquired by Ericsson in 1998 for $265 million. In September 1994, WIREDMAGAZINE honored Mr. Bryan and 18 others, as the "Creators of the Internet."Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mr. Bryan's qualifications: o Leadership experience - Chairman of the board, founder and chief executive officer of Solar3D since our inception in January 2002. -30- o Finance experience - As founder and president, and chief financial officer, Mr. Bryan has supervised our financial management since our inception. o Industry experience - Mr. Bryan is the founder of Solar3D who has developed and implemented our business plan since inception. o Government experience - Mr. Bryan has secured a number of long-term government contracts for the provision of products and consulting engineering services to the U.S. military and other government agencies. o Technology and education experience - Mr. Bryan is an inventor of our proprietary MachineTalker technology and an advisor to the researchers involved in development of our new 3-D solar cell technology. Mr. Bryan holds a number of patents in computer science and communications technology. JAMES B. NELSON has been a director and chief executive officer ofSolar3D since October 2010. Mr. James Nelson began his executive career 30 yearsago at Bain and Company, a business strategy consulting firm, where he managed ateam of consultants on four continents solving CEO-level programs for globalcompanies. Prior to joining Solar3D, he spent 20 years working in the privateequity industry as both a capital partner and operating CEO to portfoliocompanies. Mr. Nelson was a general partner at Peterson Partners (2007-2009) andat Millennial Capital Partners (1991-2010--previously known as Invest WestCapital). In addition to his responsibilities in acquisition and divestiture,Mr. Nelson worked as an executive of a number of portfolio companies. He servedas chief executive officer of Euro-Tek Store Fixture, LLC, chairman of the boardof American Retail Interiors, chairman of the board and chief executive officerof Panelview Inc. and chairman of the board of Critical Power Exchange, as wellas sitting on numerous boards both in and out of the private equity funds'portfolios. Prior to his years in private equity, Mr. Nelson served as VicePresident of Marketing at Banana Republic/The Gap, where he managed company-widemarketing, as well as the initial international expansion of Banana Republic. Hewas also general manager for Banana Republic's highly profitable catalogdivision. He also served as Vice President of Marketing and CorporateDevelopment at Saga Corporation, a multi-billion dollar food service company.Mr. Nelson received his MBA from Brigham Young University, where he graduatedsumma cum laude and was named the Outstanding Master of Business AdministrationGraduate. Mr. Nelson's qualifications: o Leadership experience - Chief executive officer since October 2010, and previously general partner at Peterson Partners (2007-2009) and at Millennial Capital Partners (1991-2010--previously known as Invest West Capital). He has also served as the chief executive officer of Euro-Tek Store Fixture, LLC and Panelview Inc. o Industry experience - Mr. Nelson has worked in the solar industry since October 2010. o Education experience - Mr. Nelson received his MBA from Brigham Young University, where he graduated summa cum laude and was named the Outstanding Master of Business Administration Graduate. MARK J. RICHARDSON has been a director of Solar3D since October 2008.Mr. Richardson has been a business lawyer since he graduated from the Universityof Michigan Law School in 1978. He practiced as an associate and partner inlarge law firms until 1993, when he established his own practice under the nameRichardson & Associates. He has been the principal securities counsel on avariety of equity and debt placements for corporations, partnerships, and realestate companies. His practice includes public and private offerings, venturecapital placements, debt restructuring, compliance with federal and statesecurities laws, representation of publicly traded companies, Nadsaq filings,corporate law, partnerships, joint ventures, mergers, asset acquisitions, andSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. stock purchase agreements. As a partner in a major international law firm in the1980's, Mr. Richardson participated in the leveraged buyout and recapitalizationof a well known producer of animated programming for children, financed byPrudential Insurance and Bear Stearns, Inc. He was also instrumental inrestructuring the public debentures of a real estate company without resortingto a bankruptcy proceeding. From 1986 to 1993 Mr. Richardson was a contributingauthor to State Limited Partnerships Laws - California Practice Guide, PrenticeHall Law and Business. Prior to receiving his juris doctor degree cum laude fromthe University of Michigan Law School in 1978, Mr. Richardson received abachelor of science degree summa cum laude in Resource Economics from theUniversity of Michigan School of Natural Resources in 1975, where he earned theBankstrom Prize for academic excellence and achieved Phi Beta Kappa honors. Mr.Richardson is an active member of the Los Angeles County and California StateBar Associations, including the Section on Corporations, Business and Financeand the Section on Real Estate. Richardson & Associates is outside corporatelegal counsel for Solar3D and certain of our affiliates. -31- Mr. Richardson's qualifications: o Leadership experience - Established his own law practice under the name Richardson & Associates in 1993. o Industry experience - Mr. Richardson's practice includes public and private offerings, venture capital placements, debt restructuring, compliance with federal and state securities laws, representation of publicly traded companies, Nasdaq filings, corporate law, partnerships, joint ventures, mergers, asset acquisitions, and stock purchase agreements. o Education experience - Mr. Richardson received his juris doctor degree cum laude from the University of Michigan Law School in 1978 and a bachelor of science degree summa cum laude in Resource Economics from the University of Michigan School of Natural Resources in 1975, where he earned the Bankstrom Prize for academic excellence and achieved Phi Beta Kappa honors. No officer or director is required to make any specific amount orpercentage of his business time available to us. Each of our officers intends todevote such amount of his or her time to our affairs as is required or deemedappropriate by us.LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS Under Delaware General Corporation Law and our articles ofincorporation, our directors will have no personal liability to us or ourstockholders for monetary damages incurred as the result of the breach oralleged breach by a director of his "duty of care." This provision does notapply to the directors' (i) acts or omissions that involve intentionalmisconduct or a knowing and culpable violation of law, (ii) acts or omissionsthat a director believes to be contrary to the best interests of the corporationor our shareholders or that involve the absence of good faith on the part of thedirector, (iii) approval of any transaction from which a director derives animproper personal benefit, (iv) acts or omissions that show a reckless disregardfor the director's duty to the corporation or our shareholders in circumstancesin which the director was aware, or should have been aware, in the ordinarycourse of performing a director's duties, of a risk of serious injury to thecorporation or our shareholders, (v) acts or omissions that constituted anunexcused pattern of inattention that amounts to an abdication of the director'sduty to the corporation or our shareholders, or (vi) approval of an unlawfuldividend, distribution, stock repurchase or redemption. This provision wouldgenerally absolve directors of personal liability for negligence in theperformance of duties, including gross negligence. The effect of this provision in our articles of incorporation is toeliminate the rights of Solar3D and our stockholders (through stockholder'sderivative suits on behalf of Solar3D) to recover monetary damages against adirector for breach of his fiduciary duty of care as a director (includingbreaches resulting from negligent or grossly negligent behavior) except in thesituations described in clauses (i) through (vi) above. This provision does notlimit nor eliminate the rights of Solar3D or any stockholder to seeknon-monetary relief such as an injunction or rescission in the event of a breachof a director's duty of care. In addition, our Articles of Incorporation providethat if Delaware law is amended to authorize the future elimination orSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. limitation of the liability of a director, then the liability of the directorswill be eliminated or limited to the fullest extent permitted by the law, asamended. Delaware General Corporation Law grants corporations the right toindemnify their directors, officers, employees and agents in accordance withapplicable law. Our bylaws provide for indemnification of such persons to thefull extent allowable under applicable law. These provisions will not alter theliability of the directors under federal securities laws. We intend to enter into agreements to indemnify our directors andofficers, in addition to the indemnification provided for in our bylaws. Theseagreements, among other things, indemnify our directors and officers for certainexpenses (including attorneys' fees), judgments, fines, and settlement amountsincurred by any such person in any action or proceeding, including any action byor in the right of Solar3D, arising out of such person's services as a directoror officer of Solar3D, any subsidiary of Solar3D or any other company orenterprise to which the person provides services at the request of Solar3D. Webelieve that these provisions and agreements are necessary to attract and retainqualified directors and officers. Insofar as indemnification for liabilities arising under the SecuritiesAct may be permitted to directors, officers or persons controlling Solar3Dpursuant to the foregoing provisions, Solar3D has been informed that in the -32-opinion of the Securities and Exchange Commission, such indemnification isagainst public policy as expressed in the Securities Act and is thereforeunenforceable.BOARD COMMITTEES Our board of directors has appointed an audit committee. As of March15, 2011, the sole member of the audit committee is Roland F. Bryan, who may notbe considered to be independent as defined in Rule 4200 of Nasdaq's listingstandards. The board of directors has adopted a written charter of the auditcommittee. The audit committee is authorized by the board of directors toreview, with our independent accountants, our annual financial statements priorto publication, and to review the work of, and approve non-audit servicesperformed by, such independent accountants. The audit committee will make annualrecommendations to the board for the appointment of independent publicaccountants for the ensuing year. The audit committee will also review theeffectiveness of the financial and accounting functions and our organization,operations and management. The audit committee was formed on February 8, 2005.The audit committee held one meeting during fiscal year ended December 31, 2010. Our board of directors does not have a compensation committee so alldecisions with respect to management compensation are made by the whole board.Our board of directors does not have a nominating committee. Therefore, theselection of persons or election to the board of directors was neitherindependently made nor negotiated at arm's length.REPORT OF THE AUDIT COMMITTEE Our audit committee has reviewed and discussed our audited financialstatements for the fiscal year ended December 31, 2010 with senior management.The audit committee has also discussed with HJ Associates & Consultants, LLP,Certified Public Accountants, our independent auditors, the matters required tobe discussed by the statement on Auditing Standards No. 61 (Communication withAudit Committees) and received the written disclosures and the letter from HJrequired by Independence Standards Board Standard No. 1 (Independence Discussionwith Audit Committees). The audit committee has discussed with HJ theindependence of HJ as our auditors. Finally, in considering whether theindependent auditors provision of non-audit services to us is compatible withthe auditors' independence for HJ, our audit committee has recommended to theboard of directors that our audited financial statements be included in ourAnnual Report on Form 10-K for the fiscal year ended December 31, 2010 forfiling with the United States Securities and Exchange Commission. Our auditcommittee did not submit a formal report regarding its findings. AUDIT COMMITTEE ROLAND F. BRYAN Notwithstanding anything to the contrary set forth in any of ourSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. previous or future filings under the United States Securities Act of 1933, asamended, or the Securities Exchange Act of 1934, as amended, that mightincorporate this report in future filings with the Securities and ExchangeCommission, in whole or in part, the foregoing report shall not be deemed to beincorporated by reference into any such filing.CODE OF CONDUCT We have adopted a code of conduct that applies to all of our directors,officers and employees. The text of the code of conduct has been posted onSolar3D's internet website and can be viewed at www.Solar3D.com. Any waiver ofthe provisions of the code of conduct for executive officers and directors maybe made only by the audit committee and, in the case of a waiver for members ofthe audit committee, by the board of directors. Any such waivers will bepromptly disclosed to our shareholders.COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT Section 16(a) of the Exchange Act requires our officers and directors,and certain persons who own more than 10% of a registered class of our equitysecurities (collectively, "Reporting Persons"), to file reports of ownership andchanges in ownership ("Section 16 Reports") with the Securities and Exchange -33-Commission. Reporting Persons are required by the SEC to furnish us with copiesof all Section 16 Reports they file. Based solely on our review of the copies of such Section 16 Reportsreceived by us, or written representations received from certain ReportingPersons, all Section 16(a) filing requirements applicable to our ReportingPersons during and with respect to the fiscal year ended December 31, 2010 havebeen complied with on a timely basis.ITEM 11. EXECUTIVE COMPENSATION-------------------------------COMPENSATION DISCUSSION AND ANALYSIS The following Compensation Discussion and Analysis describes thematerial elements of compensation for our executive officers identified in theSummary Compensation Table ("Named Executive Officers"), and executive officersthat we may hire in the future. As more fully described below, our board ofdirectors makes all decisions for the total direct compensation of our executiveofficers, including the Named Executive Officers. We do not have a compensationcommittee, so all decisions with respect to management compensation are made bythe whole board.COMPENSATION PROGRAM OBJECTIVES AND REWARDS Our compensation philosophy is based on the premise of attracting,retaining, and motivating exceptional leaders, setting high goals, workingtoward the common objectives of meeting the expectations of customers andstockholders, and rewarding outstanding performance. Following this philosophy,in determining executive compensation, we consider all relevant factors, such asthe competition for talent, our desire to link pay with performance in thefuture, the use of equity to align executive interests with those of ourstockholders, individual contributions, teamwork and performance, and eachexecutive's total compensation package. We strive to accomplish these objectivesby compensating all executives with total compensation packages consisting of acombination of competitive base salary and incentive compensation. While we have only hired one additional executive since inceptionbecause our business has not grown sufficiently to justify additional hires, weexpect to grow and hire in the future. One of our Named Executive Officers hasbeen with us for many years and his compensation has basically been static,based primarily on the level at which we can afford to retain him and hisresponsibilities and individual contributions. To date, we have not applied aformal compensation program to determine the compensation of the NamedExecutives Officers. In the future, as we and our management team expand, ourboard of directors expects to add independent members, form a compensationcommittee comprised of independent directors, and apply the compensationphilosophy and policies described in this section of the 10K.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The primary purpose of the compensation and benefits described below isto attract, retain, and motivate highly talented individuals when we do hire,who will engage in the behaviors necessary to enable us to succeed in ourmission while upholding our values in a highly competitive marketplace.Different elements are designed to engender different behaviors, and the actualincentive amounts which may be awarded to each Named Executive Officer aresubject to the annual review of the board of directors. The following is a briefdescription of the key elements of our planned executive compensation structure. o Base salary and benefits are designed to attract and retain employees over time. o Incentive compensation awards are designed to focus employees on the business objectives for a particular year. o Equity incentive awards, such as stock options and non-vested stock, focus executives' efforts on the behaviors within the recipients' control that they believe are designed to ensure our long-term success as reflected in increases to our stock prices over a period of several years, growth in our profitability and other elements. o Severance and change in control plans are designed to facilitate a company's ability to attract and retain executives as we compete for talented employees in a marketplace where such protections are commonly offered. We currently have not given separation benefits to any of our Name Executive Officers. -34-BENCHMARKING We have not yet adopted benchmarking but may do so in the future. Whenmaking compensation decisions, our board of directors may compare each elementof compensation paid to our Named Executive Officers against a report showingcomparable compensation metrics from a group that includes both publicly-tradedand privately-held companies. Our board believes that while such peer groupbenchmarks are a point of reference for measurement, they are not necessarily adetermining factor in setting executive compensation as each executive officer'scompensation relative to the benchmark varies based on scope of responsibilityand time in the position. We have not yet formally established our peer groupfor this purpose.THE ELEMENTS OF SOLAR3D'S COMPENSATION PROGRAMBASE SALARY Executive officer base salaries are based on job responsibilities andindividual contribution. The board reviews the base salaries of our executiveofficers, including our Named Executive Officers, considering factors such ascorporate progress toward achieving objectives (without reference to anyspecific performance-related targets) and individual performance experience andexpertise. None of our Named Executive Officers have employment agreements withus. Additional factors reviewed by the board of directors in determiningappropriate base salary levels and raises include subjective factors related tocorporate and individual performance. For the year ended December 31, 2010, allexecutive officer base salary decisions were approved by the board of directors. Our board of directors determines base salaries for the Named ExecutiveOfficers at the beginning of each fiscal year, and the board proposes new basesalary amounts, if appropriate, based on its evaluation of individualperformance and expected future contributions. We do not have a 401(k) Plan, butif we adopt one in the future, base salary would be the only element ofcompensation that would be used in determining the amount of contributionspermitted under the 401(k) Plan.INCENTIVE COMPENSATION AWARDS The Named Executives have not been paid bonuses and our board ofdirectors has not yet established a formal compensation policy for thedetermination of bonuses. If our revenue grows and bonuses become affordable andjustifiable, we expect to use the following parameters in justifying andquantifying bonuses for our Named Executive Officers and other officers ofSolar3D: (1) the growth in our revenue, (2) the growth in our earnings beforeinterest, taxes, depreciation and amortization, as adjusted ("EBITDA"), and (3)our stock price. The board has not adopted specific performance goals and targetSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. bonus amounts for any of our fiscal years, but may do so in the future.EQUITY INCENTIVE AWARDS Effective February 15, 2002, our board of directors adopted theMachineTalker, Inc. 2002 Stock Option Plan for Directors, Officers, Employeesand Key Consultants (the "Plan") under which a total of 160,000 shares of ourcommon stock (on a post reverse stock-split basis) have been reserved forissuance pursuant to the grant and exercise of up to 160,000 stock options (on apost reverse stock-split basis). The Plan has been approved by the holders ofour outstanding shares. We believe that stock option awards motivate ouremployees to work to improve our business and stock price performance, therebyfurther linking the interests of our senior management and our stockholders. Theboard considers several factors in determining whether awards are granted to anexecutive officer, including those previously described, as well as theexecutive's position, his or her performance and responsibilities, and theamount of options, if any, currently held by the officer and their vestingschedule. Our policy prohibits backdating options or granting themretroactively.BENEFITS AND PREREQUISITES At this stage of our business we have limited benefits and noprerequisites for our employees other than health insurance and vacationbenefits that are generally comparable to those offered by other small privateand public companies or as may be required by applicable state employment laws.We do not have a 401(k) Plan or any other retirement plan for our Named -35-Executive Officers. We may adopt these plans and confer other fringe benefitsfor our executive officers in the future if our business grows sufficiently toenable us to afford them.SEPARATION AND CHANGE IN CONTROL ARRANGEMENTS We do not have any employment agreements with our Named ExecutiveOfficers or any other executive officer or employee of Solar3D. None of them areeligible for specific benefits or payments if their employment or engagementterminates in a separation or if there is a change of control.EXECUTIVE OFFICER COMPENSATION The following table sets forth the total compensation paid in all formsto the executive officers and directors of Solar3D during the periods indicated: SUMMARY COMPENSATION TABLE---------------------- ------- ------------ -------- ---------- --------------- ---------------- ------------- ---------- Non-Equity Non-QualifiedName and Incentive DeferredPrincipal Position Option Plan Compensation All Other(1) Year Salary Bonus Awards Compensation Earnings Compensation Total---------------------- ------- ------------ -------- ---------- --------------- ---------------- ------------- ---------- James B. Nelson, 2009 $0 0 0 0 0 0 $0Chief Executive 2010 $50,000 (1) 0 $208,005 0 0 0 $258,005OfficerRoland F. Bryan, 2009 $120,000 (2) 0 0 0 0 0 $120,000President and Chief 2010 $ 90,000 (2) 0 0 0 0 0 $90,000Financial Officer Officers as a Group 2009 $120,000 0 0 0 0 0 $120,000 2010 $140,000 0 $208,005 0 0 0 $348,005--------------------------- (1) Based on an annual salary of $200,000 per year. (2) Mr. Bryan deferred and accrued the entire amount of his salary in 2009 and $54,000 of his salary in 2010. Effective July 1, 2010, Mr. Bryan's annual salary decreased from $120,000 per year to $60,000 per year.EMPLOYMENT AGREEMENTS We have not entered into any employment agreements with our executiveofficers to date. We may enter into employment agreements with them in theSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. future.OUTSTANDING EQUITY AWARDS The following table sets forth information with respect to unexercisedstock options, stock that has not vested, and equity incentive plan awards heldby our executive officers at December 31, 2010. OPTION AWARDS-------------------------------------------------------------------------------------------------------------- Number of Securities Number of Securities Underlying Unexercised Underlying Unexercised Options Options Option Option Expiration Name Exercisable Unexercisable Exercise Price Date-------------------------------------------------------------------------------------------------------------- James B. Nelson, 2,083,335(1) 12,916,665 $0.05 July 22, 2017Chief Executive Officer---------------------------------------------------------------------------------------------------------------------------------- (1) On July 22, 2010, Mr. Nelson received nonqualified stock options to purchase 15,000,000 shares of our common stock at an exercise price of $0.05 per share exercisable until July 22, 2017 in consideration for his services to us. These stock options vest 1/36th per month, commencing on August 21, 2010, on a monthly basis for as long as Mr. Nelson is an employee or consultant of Solar3D. -36-OPTION EXERCISES AND STOCK VESTED None of our executive officers exercised any stock options or acquiredstock through vesting of an equity award during the fiscal year ended December31, 2010.DIRECTOR COMPENSATION No compensation was paid to our directors and no stock or option awardsfor directors were outstanding on December 31, 2010.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS-------------------------------------------------------------------------------- The following table sets forth the names of our executive officers anddirectors and all persons known by us to beneficially own 5% or more of theissued and outstanding common stock of Solar3D at March 15, 2011. Beneficialownership is determined in accordance with the rules of the Securities andExchange Commission. In computing the number of shares beneficially owned by aperson and the percentage of ownership of that person, shares of common stocksubject to options held by that person that are currently exercisable or becomeexercisable within 60 days of March 15, 2011 are deemed outstanding even if theyhave not actually been exercised. Those shares, however, are not deemedoutstanding for the purpose of computing the percentage ownership of any otherperson. The percentage ownership of each beneficial owner is based on104,416,495 outstanding shares of common stock. Except as otherwise listedbelow, the address of each person is c/o Solar3D, Inc., 6500 Hollister Avenue,Suite 130, Goleta, California 93117. Except as indicated, each person listedbelow has sole voting and investment power with respect to the shares set forthopposite such person's name as of March 15, 2011.NAME, TITLE, AND ADDRESS OF STOCKHOLDER NUMBER OF SHARES PERCENTAGE BENEFICIALLY OWNED (1) OWNERSHIP----------------------------------------- ----------------------- -------------Roland F. Bryan, President, Chief 15,722,495(2) 15.03%Financial Officer, and ChairmanJames B. Nelson, Chief Executive 3,750,000(3) 3.47%Officer and DirectorMark J. Richardson, Director 2,304,000 2.20%1453 Third Street Promenade, Suite 315Santa Monica, California 90401Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. All Current Executive Officers as a 21,776,495 20.09% Group (Three Persons)Cumorah Capital, Inc. 26,695,950 25.79%Pearl Innovations, LLC 23,565,950 22.77%------------------------------- (1) Except as pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned. The total number of issued and outstanding shares and the total number of shares owned by each person does not include unexercised warrants and stock options, and is calculated as of March 15, 2011. (2) Includes 940,000 shares owned by the Bryan Family Trust. Mr. Bryan holds an option to purchase 216,000 shares from two existing shareholders at $2.50 per share, after accounting for reverse stock splits. (3) Includes 3,750,000 shares which may be purchased pursuant to stock options that are exercisable within 60 days of March 15, 2011. -37-ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE-------------------------------------------------------------------------------- As of March 15, 2011, our sole member of the audit committee is RolandF. Bryan, who may not be considered to be independent as defined in Rule 4200 ofthe National Association of Securities Dealers' listing standards.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES----------------------------------------------- HJ Associates & Consultants, LLP, Certified Public Accountants is ourprincipal auditing accountant firm. HJ has provided other non-audit services tous. The audit committee approved the engagement of HJ before HJ rendered auditand non-audit services to us. Each year the independent auditor's retention to audit our financialstatements, including the associated fee, is approved by the Board before thefiling of the previous year's Annual Report on Form 10-K.HJ FEES 2010 2009 ---------------------------- Audit Fees(1) $23,500 $27,500(1) Audit Related Fees -0- -0- Tax Fees(2) 751 1,618(2) All Other Fees -0- -0- ---------------------------- $24,251 $29,118 ============================------------------------------- (1) Audit fees consist of fees for the audit of our financial statements and review of the financial statements included in our quarterly reports. (2) Tax fees consist of fees for the preparation of original federal and state income tax returns and fees for miscellaneous tax consulting services.PRE-APPROVAL POLICIES AND PROCEDURES OF AUDIT AND NON-AUDIT SERVICES OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The audit committee's policy is to pre-approve, typically at theSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. beginning of our fiscal year, all audit and non-audit services, other than deminimis non-audit services, to be provided by an independent registered publicaccounting firm. These services may include, among others, audit services,audit-related services, tax services and other services and such services aregenerally subject to a specific budget. The independent registered publicaccounting firm and management are required to periodically report to the fullboard of directors regarding the extent of services provided by the independentregistered public accounting firm in accordance with this pre-approval, and thefees for the services performed to date. As part of the board's review, theboard will evaluate other known potential engagements of the independentauditor, including the scope of work proposed to be performed and the proposedfees, and approve or reject each service, taking into account whether theservices are permissible under applicable law and the possible impact of eachnon-audit service on the independent auditor's independence from management. Ataudit committee meetings throughout the year, the auditor and management maypresent subsequent services for approval. Typically, these would be servicessuch as due diligence for an acquisition, that would not have been known at thebeginning of the year. The audit committee has considered the provision of non-audit servicesprovided by our independent registered public accounting firm to be compatiblewith maintaining their independence. The audit committee will continue toapprove all audit and permissible non-audit services provided by our independentregistered public accounting firm. -38-ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES------------------------------------------------EXHIBITS Exhibit No. Description----------- ------------------------------------------------------------------------------------------------------------------- 3.1 Certificate of Incorporation (1) 3.2 Amendments to Certificate of Incorporation (1) 3.3 Amendment to Certificate of Incorporation (7) 3.4 Bylaws (1) 4.1 Specimen Certificate for Common Stock (1) 4.2 2002 Stock Option Plan (1) 4.3 Form of Incentive Stock Option Agreement (1) 4.4 Form of Non Qualified Stock Option Agreement (1) 4.5 Form of Lock-Up Agreement entered into by us with Wings Fund, Inc., Roland F. Bryan, Mark J. Richardson, and Chris Outwater, dated as of May 2, 2009 (6) 4.6 Stock Option Agreement with James B. Nelson (8) 10.1 Lease Agreement by and between MachineTalker, Inc. and SecureCoin, Inc., dated August 20, 2003 (1) 10.2 Agreement No. CA-00062 by and between MachineTalker, Inc. and Kellogg, Brown & Root Services, Inc., dated December 20, 2004 (2) 10.3 Agreement by and between MachineTalker, Inc. and Science Applications International Corporation, dated July 1, 2004 (1) 10.4 Acquisition Agreement for Wideband Detection Technologies, Inc. dated July 20, 2007 (4) 10.5 Acquisition Agreement for Micro Wireless Technologies, Inc. dated December 28, 2007 (5) 10.6 Stock Purchase Agreement with Wings Fund, Inc., a Nevada corporation, and Pearl Innovations, LLC, a Nevada limited liability company, dated as of May 5, 2009 (6) 14.1 Code of Conduct (3) 31.1 Section 302 Certification of Principal Executive Officer 31.1 Section 302 Certification of Principal Accounting Officer 32.1 Section 906 Certification of Principal Executive Officer 32.2 Section 906 Certification of Principal Accounting Officer--------------- (1) Incorporated by reference to the Form SB-2 Registration Statement filed with the Securities and Exchange Commission dated August 1, 2005. (2) Incorporated by reference to Amendment No. 4 to the Form SB-2 Registration Statement filed with the Securities and Exchange Commission dated November 2, 2005. (3) Incorporated by reference to the Form 10-KSB filed with the Securities and Exchange Commission dated April 14, 2007. (4) Incorporated by reference to the Form 8K filed with the Securities and Exchange Commission dated July 20, 2007. (5) Incorporated by reference to the Form 8K filed with the Securities and Exchange Commission dated January 3, 2008.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (6) Incorporated by reference to the Form 8K filed with the Securities and Exchange Commission dated May 13, 2009. (7) Incorporated by reference to the Form 10K filed with the Securities and Exchange Commission dated July 15, 2009. (8) Incorporated by reference to the Form 10K filed with the Securities and Exchange Commission dated October 4, 2010. -39- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, as amended, the Registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.Dated: March 31, 2011 SOLAR3D, INC. By: /s/ James B. Nelson ------------------------------------------ James B. Nelson, Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, asamended, this report has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.By: /s/ James B. Nelson Dated: March 31, 2011 ------------------------------------------------------ James B. Nelson, Director and Chief Executive Officer (Principal Executive Officer)By: /s/ Roland F. Bryan Dated: March 31, 2011 ------------------------------------------------------ Roland F. Bryan, Chairman of the Board, President, and Chief Financial Officer (Principal Accounting Officer)By: /s/ Mark J. Richardson Dated: March 31, 2011 ------------------------------------------------------ Mark J. Richardson, Director -40-Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.1 SECTION 302 CERTIFICATION EXHIBIT 31.1 CERTIFICATIONSI, James B. Nelson, certify that:1. I have reviewed this Annual Report on Form 10-K of Solar3D, Inc.;2. Based on my knowledge, this report 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 report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.5. The registrant's other certifying officer(s) and I have disclosed, based on Solar3D's most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (of persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the smallSource: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. business issuer's internal control over financial reporting.Dated: March 31, 2011By: /s/ James B. Nelson -------------------------------------------------- James B. Nelson, Chief Executive Officer (Principal Executive Officer)Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.2 SECTION 302 CERTIFICATION EXHIBIT 31.2 CERTIFICATIONSI, Roland F. Bryan, certify that:1. I have reviewed this Annual Report on Form 10-K of Solar3D, Inc.;2. Based on my knowledge, this report 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 report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.5. The registrant's other certifying officer(s) and I have disclosed, based on Solar3D's most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (of persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Dated: March 31, 2011By: /s/ Roland F. Bryan ---------------------------------------------------------- Roland F. Bryan, Chief Financial Officer (Principal Accounting Officer)Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.1 SECTION 906 CERTIFICATION Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Solar3D, Inc. (the "Company")on Form 10-K for the period ending December 31, 2010 (the "Report") I, James B.Nelson, Chief Executive Officer of the Company, certify, pursuant to 18 USCSection 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, that to the best of my knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Dated: March 31, 2011By: /s/ James B. Nelson -------------------------------------------------- James B. Nelson, Chief Executive Officer (Principal Executive Officer) This certification accompanies the Report pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002 and shall not, except to the extent required bythe Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes ofSection 18 of the Securities Exchange Act of 1934, as amended.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.2 SECTION 906 CERTIFICATION Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Solar3D, Inc. (the "Company")on Form 10-K for the period ending December 31, 2010 (the "Report") I, Roland F.Bryan, Chief Financial Officer of the Company, certify, pursuant to 18 USCSection 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, that to the best of my knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Dated: March 31, 2011By: /s/ Roland F. Bryan ---------------------------------------------------------- Roland F. Bryan, Chief Financial Officer (Principal Accounting Officer) This certification accompanies the Report pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002 and shall not, except to the extent required bythe Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes ofSection 18 of the Securities Exchange Act of 1934, as amended.Source: Sunworks, Inc., 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.