XML 34 R8.htm IDEA: XBRL DOCUMENT

Note 2 - Going Concern Considerations and Management's Plan

6 Months Ended

Jun. 30, 2014

Policy Text Block [Abstract]

Liquidity Disclosure [Policy Text Block]

2. Going Concern Considerations and Management’s Plan

As shown in the accompanying Condensed Consolidated Financial Statements, the Company incurred a net loss of $2.2 million during the six months ended June 30, 2014 and has an accumulated deficit of $58.2 million as of June 30, 2014. Working capital levels have improved from negative $36.6 million at December 31, 2013 to negative $26.9 million at June 30, 2014. In February 2014, the Company’s parent company, LDK Solar Co., Ltd. (“LDK”), which owned approximately 59.3% and 42.4% of the Company’s outstanding Common Stock as of June 30, 2014 and the date of this filing, respectively, announced that LDK filed an application for provisional liquidation in the Cayman Islands in connection with its plans to resolve its offshore liquidity issues. It is unknown at this time if LDK’s joint provisional liquidation will require or result in the Company disposing of assets in an orderly manner, in a liquidation scenario or at all. If the Company is required to dispose of assets to satisfy LDK’s creditors, it could result in the Company incurring losses.

The Company is experiencing the following risks and uncertainties in the business:

●

As of June 30, 2014 and December 31, 2013, the Company has accounts payable due to LDK of $38.7 million and $50.9 million. All of the accounts payable due to LDK are currently past due and payable to LDK. Although there are no formal agreements, prior to May 2014, LDK had verbally indicated that it would not demand payment until the receivable from the customer has been collected. During the three months ended June 30, 2014, the Company received $11.0 million from the issuance of a convertible bond to a private investor and $6.5 million for the sale of common stock to a private investor. LDK required $8.2 million of these cash proceeds to be used to pay down accounts payable due to LDK. In May 2014, the Company entered into a Settlement and Mutual Release Agreement with LDK under which LDK offered a waiver of $18.4 million of the Company’s payables to LDK. $4 million of such waiver was duly executed and the remaining potion is still subject to the consent of the Joint Provisional Liquidator of LDK. In light of LDK's recent filing for liquidation, it is unclear whether or not LDK will be able to continue to allow the Company to defer repayment of the remaining accounts payable to LDK. Should LDK change its position and demand payment for the remaining past due amount prior to collection of the related receivable from the customer, the Company does not have the ability to make the payment currently due without additional sources of financing or accelerating the collection of outstanding receivables. With LDK as a significant shareholder, the significant risks and uncertainties associated with their filing for liquidation by LDK could have a significant negative impact on the financial viability of Solar Power, Inc. as well as indicate an inability for LDK to support the Company's business.

●

China Development Bank (“CDB”) has provided financing for construction and project financing on certain development projects in the past. They have also executed non-binding term sheets for other projects, but there is no assurance that the projects in process will be funded. CDB has been financing the Company’s projects primarily as a result of the fact that the Company’s significant shareholder is LDK and CDB has a long-term relationship with LDK. Due to LDK’s financial difficulties, certain financing of the Company’s projects have been delayed. If CDB will no longer provide financing for the projects, the Company will need to seek construction financing from other sources. The company has completed projects in Greece with a customer that is requesting debt term financing from CDB. Because CDB has not yet provided the term financing, the Company will collect its outstanding receivables from the operation’s cash proceeds over an extended period of time of up to six years and has reflected the receivables as noncurrent on the balance sheet. However, the customer continues to have discussions with CDB and other commercial banks about financing, and if financing is obtained, collection of our receivables may be accelerated. The company has also completed an additional commercial scale project in New Jersey with KDC Solar, which is currently seeking debt term financing from CDB and other commercial banks. Because CDB has not yet provided the term financing, the Company will collect its outstanding notes receivables from the operation’s cash proceeds over an extended period of time of up to fifteen years and has reflected the receivables as noncurrent on the balance sheet. However, the customer continues to have discussions with CDB and other commercial banks about financing, and if financing is obtained, collection of our receivables may be accelerated.

●

A key term of existing project financing with CDB is that the Company must use solar panels manufactured by LDK. Currently, however, LDK has demanded payment in advance in order to procure their solar panels. If the Company is unable to make advance payments required, the Company has and will continue to need to request its customers to make the required cash payments for the LDK solar panels to be utilized in projects under development. The Company continues to maintain relationships with other solar panel manufacturers when circumstances call for an alternative to LDK’s line of solar panels

The significant risks and uncertainties described above have a significant negative impact on the financial viability of the Company and raise substantial doubt about the Company’s ability to continue as a going concern.

●

Management has made changes to the Company’s business model by managing cash flow through cost cutting measures, securing project financing before commencing further project development, and requesting that the Company’s customers make cash payments for solar panels for projects under development.

●

In the second quarter of 2014 and through July 2014, the Company raised $21.75 million through the issuance of common stock and convertible bonds. In July 2014, the Company entered into another private placement agreement to sell $25.0 million of common stock and pursuant to the agreement, the closing is expected to occur by the end of September 2014. Management may seek to obtain additional debt and equity financing in order meet its working capital needs.

There is no assurance that management’s plans to accelerate the collection of outstanding receivables or to obtain additional debt or equity financing will be successfully implemented, or implemented on terms favorable to the Company. As of June 30, 2014, the Company had $5.9 million in cash and cash equivalents. The Condensed Consolidated Financial Statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might result from the outcome of this uncertainty.

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

+ References+ Details