FORM 7 MONTHLY PROGRESS REPORT

Transcription

1 FORM 7 MONTHLY PROGRESS REPORT Name of CSE Issuer: QSolar Limited (the Issuer ). Trading Symbol: QSL Number of Outstanding Listed Securities: 73,748,912 Date: July 4, Report on Business 1. Provide a general overview and discussion of the development of the Issuer s business and operations over the previous month. Where the Issuer was inactive disclose this fact. QSolar Limited and its wholly-owned subsidiary, QSolar Ltd., (the Company ) and its wholly-owned subsidiary, QSolar (Shanghai) Photovoltaic Technology Co. Ltd. develop proprietary trade secret solar related processes and technologies, and manufacture and sell their own proprietary solar products. The Corporation currently manufactures solar photovoltaic (PV) panels in its manufacturing facilities in Shanghai, China using its proprietary Spraytek, ESS process, QLite, QLiteX, QSS and its own designs. On June 3, 2014, the Corporation provided an update on sales progress for May and during the second quarter and year to date. Approximately 1.02 megawatts ( MW ) in additional new sales for the month of May were secured and booked since the last sales press release dated April 29, 2014 when 1.19 MW of new sales were announced for the month of April 2014 bringing total sales to 2.21 MW for this current second quarter which ends June 30, This represents a good increase in sales two-thirds through the second quarter over the Corporation s previous first quarter. Together with the 0.87 MW sales previously announced in the press release dated February 25, 2014, the Corporation has generated sales totaling 3.08 MW as at May 31, 2014 and is a direct result of new sales initiatives and marketing efforts centralized out of Shanghai, China since the beginning of the year. It is expected that a full second quarter sales update will be reported in July. QSolar has now seen repeat solar panel orders from customers and a noticeable increase in sales demand for the QSF family of flexible, ultra-thin, high efficiency solar panels that addresses a new range of specialty solar applications not offered by other solar manufacturers. The Shanghai sales staff has sold sample orders of our QSS 250 watt solar panels, and QSF (flexible) and specialty solar panels ranging between 10 watts to 370 watts. Solar panel product has been shipped or is currently being coordinated for shipment from inventory on hand and is being sold at prices within pricing parameters commensurate with the region.

2 QSolar has developed new sales initiatives in the mass solar panel market competing with traditional glass solar panels and the Corporation continues to develop its solar products for the emerging specialty solar panel and product market. Upon completion of TUV SUD and TUV SUD UL certifications, QSolar anticipates entering and positioning into the mass rooftop market where competition is limited due to traditional glass solar panels being too heavy for the rooftops. QSolar offers a unique and proprietary solution due to the light weight and durability of its solar panels while being more efficient and less costly than thin film solutions currently being offered where rooftop loads will not support competitors' glass solar panels. On May 27, 2014, QSolar also provided an update pursuant to its November 12, 2013 and December 11, 2013 news releases regarding the testing of its newly developed high temperature QLX desert-ready photovoltaic ( PV ) solar panels. QSolar is testing its QLX desert ready photovoltaic ( PV ) solar panels, which utilize its proprietary polymer, Spraytek99, and non-glass QSS substrate, to compare their performance and durability against standard glass solar panels, under extreme desert conditions. The QSolar QLX desert-ready solar panels address the performance problems that standard glass solar panels have not been able to address successfully. The performance of standard glass solar panels degrade significantly under the extreme heat of the desert and performance is further reduced by numerous sand storms which cover the surface of the panels with dust or a mixture of sand and hydrocarbon micro particles in the air and settling on solar panels. The success of this pilot will be key for QSolar opening up the multibillion dollar solar power market in the Middle East and North Africa (collectively MENA countries), a very desirable market where the objective is to have an effective solution for efficiency, durability and extreme ultra-violet issues that currently degrade and discolor other manufacturers glass solar panels subjected to extreme heat conditions. GTM Research and the Emirates Solar Industry Association predict an annual volume of 3.5 gigawatts ( GW ) in the MENA region s solar market by By 2017, the demand is expected to exceed 10 GW. Successful conclusion of this project will also enable introduction of the QLX desert-ready PV solar panel into certain areas of the United States such as Arizona, eastern and southern California, Nevada, New Mexico and Texas where similar heat conditions exist as well as in the target countries of Pakistan and India. QSolar has been accumulating meaningful data results in June, now that desert temperatures are extremely high and exceeding 45 degrees Celsius. It is expected TUV SUD will return in the latter part of July to record the final results. Recent test results in June from the desert pilot site located in the desert approximately 50 miles from Dubai are confirming QSolar s laboratory indications of slower heating of the PV panel in higher heat conditions than standard competitor s glass PV solar panels. Severe sandstorms have been experienced and included in the testing procedure.

3 The net effect is that QSolar s proprietary polymer panels is expected to deliver increased efficiency compared to a tier 1 competitor s panel. As a result of the initial Dubai indications, QSolar has made further trade secret enhancements to the QSolar QLX desert-ready PV solar panel. The desert pilot installation now includes PV panels from two tier 1 manufacturers and competitors along with the QSolar QLX desert-ready PV proprietary solar panel. The desert installation also expanded the number of panels per manufacturer in order to enhance the statistical accuracy of the results. The QSolar QLX desert-ready PV solar panel is being tested utilizing heat sink technology and incorporates a device that effectively assists in cooling the surface of the panels, and as a result produces more power efficiency in higher heat conditions than standard glass panels. The significance of the enhancements made to the proprietary QSolar solar panel is that any improvement in efficiency of the output of the solar panel translates to significant improvements into the economics and returns of a solar installation, especially in these extreme desert conditions. The QSolar proprietary technology and design addresses a significant issue occurring under desert conditions. One of the main components of a solar panel is the solar cell made of silicon materials. Silicon efficiency degrades by approximately 0.43% per degree celsius of each degree of temperature increase. The QSolar desert design therefore is addressing keeping the proprietary polymer solar panels relatively cooler while the efficiency of the panel is maintained for extended times beyond that produced from standard PV glass panels. TUV SUD (Jiangsu TUV Product Service Ltd., Shanghai Branch) ( TUV SUD ) continues to be engaged on the testing of this project and will assess performance and durability comparisons to standard glass panels, including confirming the expanded system configuration, recording components and evaluating power measurement results. It is intended that TUV SUD will prepare an independent technical report on the comparison and performance of QSolar QLX desert-ready solar panels against the standard solar glass panels of the two tier 1 manufacturers. On June 6 and 9, 2014, QSolar issued press releases and had noted unusually high trading volume and decline in share price on the Canadian Securities Exchange ( CSE ). QSolar advised that it has come to its attention that there is potential misinformation circulating regarding potential undisclosed news and in particular, regarding the outcome of TUV SUD and TUV SUD UL certification results. The Corporation reiterated its statement which was press released on June 6, 2014 that it has no further certification updates to provide at this date, no further positive or negative certification results have been obtained and there is no new or revised corporate or business information which would explain the recent trading volume and share price fluctuations. The Corporation has provided, and will continue to provide, complete disclosure and updates with respect to any events affecting the business of QSolar as they occur.

4 On June 23, 2014, the Corporation provided an update pursuant to its December 17, 2013, January 7, 2014 and May 13, 2014 news releases regarding the development of the QSS solar module range of products currently undergoing testing in the independent TUV SUD contract laboratory in the United States. The Corporation reported that TUV SUD, (Jiangsu TUV Product Service Ltd., Shanghai Branch)( TUV SUD ), has advised upon inquiry by the Corporation, that TUV SUD and TUV SUD UL certification results, are not anticipated to occur any earlier than the week of July14, 2014 based on current testing to date. The revised estimated timing for results is based on TUV SUD s best estimate of available personnel and resources. TUV SUD has confirmed that one of the more stringent tests under certification commenced May 23, 2014 and requires approximately 1,000 hours or approximately 42 days to complete this particular test under TUV SUD protocols. QSolar has been further advised that, as part of the certification procedures, upon completion of successful United States laboratory testing, a factory audit will be performed on QSolar s manufacturing processes which produce the QSS250W. This audit will be conducted in the QSolar s Shanghai manufacturing facility. TUV SUD advised this procedure would be scheduled by TUV SUD on a priority basis, subject to available personnel and resources. 2. Provide a general overview and discussion of the activities of management. The main activities are as described above as the Corporation focuses its efforts in developing its sales and partnering initiatives to move the Corporation from its main product family development to sales. The Corporation is also focusing on its speciality product area where it sees good opportunity for entry as this market develops and emerges. The gross margins of these speciality products are significantly higher than standard mass market products. In addition, the Corporation has taking steps to reduce various overheads while certification is being undertaken to establish technological validation and sales initiatives move forward validating increasing customer acceptance. This was the primary focus of management for the previous month. 3. Describe and provide details of any new products or services developed or offered. For resource companies, provide details of new drilling, exploration or production programs and acquisitions of any new properties and attach any mineral or oil and gas or other reports required under Ontario securities law. Not applicable or as described above in Note 1 other than the Corporation s research and development. 4. Describe and provide details of any products or services that were discontinued. For resource companies, provide details of any drilling, exploration or production programs that have been amended or abandoned. Not applicable. 5. Describe any new business relationships entered into between the Issuer, the Issuer s affiliates or third parties including contracts to supply products or services,

5 joint venture agreements and licensing agreements etc. State whether the relationship is with a Related Person of the Issuer and provide details of the relationship. Not applicable for the previous month other than as described in Note 1 above. 6. Describe the expiry or termination of any contracts or agreements between the Issuer, the Issuer s affiliates or third parties or cancellation of any financing arrangements. Not applicable for the previous month. 7. Describe any acquisitions by the Issuer or dispositions of the Issuer s assets that occurred during the preceding month. Provide details of the nature of the assets acquired or disposed of and provide details of the consideration paid or payable together with a schedule of payments if applicable, and of any valuation. State how the consideration was determined and whether the acquisition was from or the disposition was to a Related Person of the Issuer and provide details of the relationship. Not applicable. 8. Describe the acquisition of new customers or loss of customers. Invoiced and paid sample orders continue to increase and be sent to potential new repeat order customers. Eleven new customers: from the United States, Africa, the United Kingdom, Morocco, France, Canada, Mexico, Slovakia and China, placed paid and sample orders for the previous month. 9. Describe any new developments or effects on Intangible products such as brand names, circulation lists, copyrights, franchises, licenses, patents, software, subscription lists and trade-marks. Not applicable for the previous month other than during the month the Corporations; board of directors has secured the Spraytek trade secret and associated written processes, liquid sample vials, independent report, pictures and marked samples with the Corporations legal counsel in their secured vault accessible to the Corporations board of directors only by corporate board resolution. 10. Report on any employee hirings, terminations or lay-offs with details of anticipated length of lay-offs. Not material for the current month. The Shanghai factory employed approximately thirty six workers (thirty-one full-time including 10 administrative staff and five considered temporary) at the end of the month. The Company employs temporary workers from time to time, however these workers may not be engaged at month end but utilized throughout the month. The Company deals with a government hiring agency in Shanghai for factory workers with no current constraints on hiring when needed. It is the Companies opinion that it now has the minimum number of workers to maintain close to full functionality of the factory and ececute orders in a timely fashion without impairing the operations. 11. Report on any labour disputes and resolutions of those disputes if applicable. Not applicable.

6 12. Describe and provide details of legal proceedings to which the Issuer became a party, including the name of the court or agency, the date instituted, the principal parties to the proceedings, the nature of the claim, the amount claimed, if any, if the proceedings are being contested, and the present status of the proceedings. As outlined in the March 2012 Form 7, on February 14, 2012 the Company advised that it had been made aware via news release of a claim by Stockhouse Publishing Ltd. alleging unpaid bills. At the time, the Company had not been served with any claim in this regard and approximately one week later the registered office received a statement of claim. The Corporation answered the suit on March 27, 2012, filing both a defence response and counterclaim. The counterclaim seeks damages for the failures under the advertising agreement. Specifically, QSolar claims that as a result of the failed campaign, it was unable to complete a private placement that it had planned for June, The company seeks $123,768, and asks that the Stockhouse suit be dismissed with costs. On April 17, 2012 Stockhouse filed a response to the counterclaim. On October 10, 2013, the Company received from the Plaintiff s counsel, the Plaintiff s Notice of Intention to Proceed which was filed October 4, No new material developments have occurred in the previous month. The Company received on December 13, 2012 a copy of statement of claim filed with the court in Ontario but was not served on the Company, from a former accountant, Russell Lazarus Professional Corporation and Russell Lazarus, claiming non-payment for services rendered of $28,250, an amount for nonrendered services, reimbursement of a travel expense of $478, alleging breach of contract and punitive damages of specified amounts, and requesting reinstatement of cancelled stock options and issuance of a second set of stock options previously not issued. QSolar agreed to service of the statement of claim in Ontario approximately February 19, QSolar, after further review filed a statement of defence approximately March 20, No new developments have occurred in the previous month. QSolar filed on July 23, 2013 a statement of claim in Alberta on Russell Lazarus and Russell Lazarus Professional Corporation (collectively Lazarus ) claiming certain breaches on a joint and several basis: damages for fees incurred as a result of breach of Agreement of $259,875, damages for loss of capital that would have been secured but for the breach of Agreement for $3,000,000, and interest and costs of the Action. To date no response has been filed by Lazarus, other than a filing of an application November 22, 2013 by Lazarus legal counsel to challenge jurisdiction and seek to stay the proceedings in Alberta in favour of the Ontario action above. A special chamber hearing on the jurisdiction issue and a ruling on staying the proceedings was held April 2, Subsequent to this date, the Alberta court ruled in favour of QSolar on jurisdiction and ruled that due to similarities of aspects and the source of the actions of Lazarus and QSolar arising out of each respective suits that the courts interest would be best served to stay the proceedings in Alberta, but allow QSolar to file a counter suit in Ontario. QSolar intends to proceed with this course of action in Ontario. No other new developments have occurred in the previous month.

7 The Company acknowledged service of a statement of claim on September 27, 2013 filed by Fanti Raoul on QSolar Ltd. in the High Court of Justice Queen s Bench Division, London Mercantile Court in London, England issued September 12, In summary form, alleging product purchased by Fanti Raoul from QSolar Ltd. did not meet particular Italian certification standards. QSolar has provided notice of filing and service of defence that it is defending this claim on the basis it made no representations and warranties regarding the particular Italian certifications. QSolar filed the statement of defence prior to November 14, Under the rules of the British court, a case management conference and application must be undertaken by the plaintiff. Fanti s counsel failed to make the applicable applications within the time frames specified. After receiving permission from the courts for Fanti to proceed, with no objection from QSolar, a case management conference had been scheduled with the London courts for April 29, On April 28, 2014, QSolar received confirmation from its UK counsel, that the London Court advised that the case management conference scheduled for April 29, 2014 has now been vacated. QSolar has been advised this is due to UK counsel for QSolar agreeing to various dates with Fanti's solicitor in respect to the next steps for disclosure in the litigation process. It is expected QSolar will be advised on the next steps by UK counsel and is considering a settlement mediation process in conjunction with Canadian counsel. No other new developments have occurred in the previous month. 13. Provide details of any indebtedness incurred or repaid by the Issuer together with the terms of such indebtedness. Other than as previously described in March 2014 CNSX Form 7 note 1, describing the pay-out and extension of the previous convertible debenture financing described below, the Company has no other indebtedness other than accounts payable, and advances to and from officers, made from time to time, that are approved and or in the normal course of business operations. 14. Provide details of any securities issued and options or warrants granted. Not applicable for the previous month. N/A Security Number Issued Details of Issuance Use of Proceeds (1) (1) State aggregate proceeds and intended allocation of proceeds. Provide details of any loans to or by Related Persons.

8 15. Provide details of any loans to or by Related Persons. During the previous month and from time to time, certain officers and or directors of the Company advance amounts to and receive amounts from the Company or transacts on behalf of the Company. The Company to date has no formal credit facilities. These transactions are none interest bearing, are approved, or in the normal course of operations and are measured at the exchange amount of consideration established and agreed to by the related parties. 16. Provide details of any changes in directors, officers or committee members. Not applicable for the previous month. 17. Discuss any trends which are likely to impact the Issuer including trends in the Issuer s market(s) or political/regulatory trends. No new trends to disclose. Please see the Issuer s CNSX Form 2A Listing Statement filed March 2011 and Interim and Annual Audited Financial Statements and MD&A filed on SEDAR for disclosure regarding market trends.

9 Certificate Of Compliance The undersigned hereby certifies that: 1. The undersigned is a director and/or senior officer of the Issuer and has been duly authorized by a resolution of the board of directors of the Issuer to sign this Certificate of Compliance. 2. As of the date hereof there were is no material information concerning the Issuer which has not been publicly disclosed. 3. The undersigned hereby certifies to CSE (formerly CSE) that the Issuer is in compliance with the requirements of applicable securities legislation (as such term is defined in National Instrument ) and all CSE (formerly CNSX) Requirements (as defined in CSE (formerly CNSX) Policy 1). 4. All of the information in this Form 7 Monthly Progress Report is true. Dated July 4, 2014 Preston J. Maddin Name of Director or Senior Officer _ Preston J. Maddin Signature Chief Financial Officer Official Capacity Issuer Details Name of Issuer QSolar Limited Issuer Address Suite 2110, th Avenue S.W. City/Province/Postal Code Calgary, Alberta T2P 0R4 Contact Name Preston J. Maddin Contact Address [email protected] For Month End June 30, 2014 Issuer Fax No. N/A Contact Position CFO Web Site Address Date of Report July 4, 2014 Issuer Telephone No. (403) Contact Telephone No. (403)