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Executives

Tom Djokovich - President, CEO

XSUNX Inc. (OTCPK:XSNX) Wall Street Analyst Forum March 27, 2008 11:10 AM ET

Unidentified Analyst

Good morning ladies and gentlemen. In our ongoing attempt to adhere to the proper schedule, I would like to introduce the next company in this morning’s Alternative Energy and Clean Technology Company. XsunX has presented with us once before, about a year and half ago. Very interesting technology, in particular how they apply their solar technology is particularly intriguing. Based in California, XsunX is developing thin film photovoltaic amorphous silicon solar cell manufacturing processes, say that (inaudible) quick to produce TFPV solar modules. The company has began to build a multi megawatt TFPV solar module production facility in United States to meet the growing demands for solar cell products, using large scale commercial products, utility power fields and other on-grid applications. XsunX plans to grow production capacities to over 100 megawatts in 2010, by executing a phase build out of its manufacturing systems. And for further introduction, I would like to introduce Tom Djokovich, President and Chief Executive Officer of the company.

Tom Djokovich

Thank you very much. Is there a microphone? Can everyone hear me? Oh just speaking up. Okay, great. Sounds good. Well thank you very much for coming out today and giving me a chance to tell you a little about XsunX. As was noted, my name is Tom Djokovich, I am the Chief Executive Officer, President of the company.

We are engaged in an effort to commercialize thin-film photovoltaics in the form of a solar module and we are looking to build a manufacturing facility, start manufacturing and begin distribution. We are currently (inaudible) company and we are fully compliant. Our current trading symbol is XSNX; sector as renewable energy; industry is solar manufacturing.

Before I get going, you have probably heard this before. Please, we encourage everyone to look at all our filings and all our reports, press releases, 8-Ks, you name it, and we have got a lot of information out there. Probably a lot more than I am going to be able to present today, that will give you guys a little bit more insight as to what's going on with the company.

All right. Well, our background, as I mentioned, we are a thin film photovoltaic company. What that means is we're focused on developing the use of materials that are considered thin films, compared to conventional silicon wafer solar technologies. To give you an idea, it would be like comparing our technology: from a sheet of paper to a ream of paper, the ream of paper being the silicon wafer, the sheet of paper being our thin film amorphous.

Amorphous silicon has been around since probably around 1970, when a guy named Dave Carlson, one of the head of (inaudible) for RCA, for what's called a p-i-n junction, which is the fundamental design of a solar cell employing the use of amorphous silicon. That pattern by the way, is one of the reasons why there was not a lot of work done in the amorphous silicon's space for quite a few years. I mean, that's changing rapidly now.

I am sure as you all know; Applied Materials is in this space. They are focusing specifically on amorphous silicon, and there is reason for that, and I'll share that you with you momentarily.

We've got about three years of focused R&D with this particular material. Last year we went ahead and took what we knew and decided to develop a plant, to build the manufacturing facility and turn that R&D into actually a commercially marketable product. The actual product is a 125 watt thin film amorphous silicon solar module. That means that this module, which is 1 meter by 1.6 meters, when it's placed in the sun, will produce approximately 125 watts of power. If you want a gigawatt of power you go ahead and stack a couple of thousand of these together, and then boom, you are producing it; you know, a particular load requirement to satisfy our commercial or residential or utility grid power application needs.

As I mentioned, our plan for growth is a phased installation of 100 megawatts of production capacity. We are doing 25 megawatts at a time, and I will explain a little bit more about that in a moment. We are currently underway; we plan on building in the state of Oregon. We are currently underway with our first 25 megawatt line and we anticipate that that line will become functional in the January-February timeframe of 2009.

Thereafter, we have what's called the phase two, which starts essentially at the end of this year December-January timeframe, when we begin ordering our second, third and fourth system. By the way, we've designed our own system. We are not buying a system from Applied Materials or (inaudible) or Oerlikon, sort of the manufacturers of equipment out there. We have our own system; we are buying various components from different suppliers. One of these things we did was, we reached out to the glass, architectural glass industries. Very matured old industry and they do lots of high performance coatings. As a matter of fact, one of the coatings that they put on glass is one that we readily use in the manufacturing of our particular solar module. So we reached out to the architectural glass industry where we found a number of different vendors to get us glass cleaning machines, laser scribing devices, seaming devices, all different kinds of technology, even material handling technologies, which allow us to essentially not have to reinvent the [reel].

Well electricity, how much do we use? Globally, about 15 terawatts last time, you can find any kind of specific data in 2005 that had approximately a market value of about $5 trillion. John Doerr, venture capitalist at Silicon Valley has been quoted saying that clean energy is the mother of all markets, because it really -- you are looking at numbers of 2005; these numbers are even bigger today and they are going to be bigger tomorrow. The direction that the entire clean energy sector is going is enormous. We are looking at the wholesale revolutionary change in how we produce consumer electricity over the next 10, 15, 30, 50 years.

In 2006 electricity sales in the US generated $326 billion in sales, apart from the commercial customers. In just the last 10 years they have seen a 25% increase, that’s going to continue to go up, the main reason is peak demand. And that’s by the way when solar power works best; peak demand is during the middle part of the day, it's when the sunshine is the brightest. And it's that peak demand that’s really putting a critical strain on developed nations' infrastructure, such as United States and Europe, where those peak times during the day, when this demand is growing faster than supply it really causes burnouts, flatouts and things like that. And as for solar it really works as a great (inaudible).

US energy demand is expected to continue to increase 32% in the next 10 years to 12 years; that’s a staggering number. By the way I would like to show statistics. If China were to work, they invoked an renewable energy program a few years ago, their goal was to by 2010 have 10% of their new production, not their total production, just their new electrical production of requirements come from renewable energy. If China were to try doing that in the next two years they would absolutely consume. It will take more than double to total global capacity of solar production today. It would take twice that over the next two years, so as in we are talking about an enormous demand and a lot of the analysts are predicting, and I tend to side with them that once the Chinese start to deploy solar internally at an increasing rate, we are going to see instead of a net export we are going to see a net import. They are literally going to create a vacuum for their own solar module productions.

Now the solar markets we have been talking about, all the opportunities, consumption and things like that in the solar sector specifically here we are looking at about 5 gigawatts in 2008. The thin film portion of this market is the gold (inaudible) in about next say years thin films predicted -- its compound annual growth rate is supposed to be -- is predicted to be about 33% while crystal and PV technology is only about 25%. At the same time the overall market is increasing, so you are looking at compound growth year, tremendous opportunity. We are looking at a four fold or greater increase in the total amount of production capacity, that’s where we are trying tap into that market; there is demand and high demand for solar products. We think it’s a great opportunity.

Well in solar industry there have been constraints for years and years and years and those have led to the emergence of silicon, with the majority of the market right now, as you can see here in this lower little pie, between 83% to 93% of the market is controlled by crystal and wafer technologies. The main reason for that is essentially two fold. First, it's very well known technology, its simple, it's easy. They have been doing it for years; there is a lot of infrastructure. They have grown to scale. There is a process, it is well known, that’s why two of the Chinese companies went public last year, one of them made rubber tennis shoes before they belled into the solar industry. The other made aluminum sliding, the reason they were able to do that is because it’s very well known; if we tool together enough assets in here, raising our capitals and we will buy all the technology, and within 12 we can be making the same technology here, we wouldn’t have to reinvent anything whatsoever.

So it's very stable, also thin films have been a challenge for years, primarily because of the lack of technical capability to deploy the thin films correctly that has changed dramatically. Over the last 10 years there has been enormous influx of development dollar spend on thin films transistors with flat panel display. Here I am looking at our laptop, the flat panels on our walls, thin film transistors, memory devices; literally hundreds and millions of dollars have gone into those, into developing better tools to manufacture those kinds of devices. While uniquely a thin film transistor, this flat top panel display is essentially a thin film amorphous silicon solar cell. Its just all of the components in there have been arrange differently; the thickness of the different layers are little bit different, but other than that it's essentially the same. So, tapping into this wealth of recently realized knowledge and capability is now essentially creating what we call the reemergence or rebirth of amorphous silicon as a potential and tremendous powerful force in the solar industry.

So in short-term on the silicon wafer obviously most people realize there is a polysilicon shortage, it's an under performing technology, I'll share why with you in a moment. It's a multi step batch oriented process. That's why it works so well in China, it is very labor intensive. By the time an actual silicon wafer is made, their cost depending on where it is, is somewhere between $0.70 to about $1 per watt, all right. That's just as a cell (inaudible), they now have to interconnect them, they have to steam them, they have to put them in a panel, they have to laminate and they have to frame it, put a J-box, all kinds of things. So their base cost, even probably its maximum capacity production for a lot of manufacturers ranges anywhere from the low twos to the high twos per watt; it's just their cost, all right. And with silicon supplies being so constrained and so costly, those numbers you just throw those out of the window; most people are manufacturing at a loss right now.

This has now led to some alternatives to get the technology to employ a more material cost. We don't use raw silicon feedstock. Our silicon is made from a gas and the gas is readily available. We have engaged long-term contracts for our gas supplies.

It's a highly automated, scalable process. By the time we get to the point where we have manufactured a solar cell, our solar cell cost itself is down in the $0.30 range, in the mid 30s. Once we increase volumes and improve our production capacities, that price is going to come down even more. Our total anticipated cost in our first year for the entire module per watt is about $1.58 and by 2011 we hope to run that down to below $1.20.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

Well, the contractual relationship for this -- right now we are negotiating one with two major suppliers and they are both between six to seven year agreements. This technology is highly automated. What I was going to say is, we put a piece of glass in one end of the machine. When it comes out at the other end of the machine, its 1 meter by 1.6 meters of fully integrated array of solar cells on that device. It's now ready to be essentially wired, laminated, and framed and it's ready to go out of the door as a solar module. Total cost at the completed level is only roughly 50% more than most silicon wafer manufacturers at just the cell level. So it's substantial. And we are just one of the silicon companies out there. We work on amorphous; others work with cadmium telluride or CIGS. They have similar types of numbers as well.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

No. It's on a per watt level. Well per watt just at the cell level, we anticipate it somewhere in the mid $0.30 range. And then make it simple, about 75% of our cost is packaging; it's not making the solar cell. It's the cost associated with wiring it, putting the protective [encapsulate] on the back, putting the frame on it, putting the J-Box on it, testing it, packaging it, things like that. The majority of our cost is not at the solar cell level and that's the same for probably most of the companies. I can't speak for all of them, but that's the case for us.

The other thing is, we are in an early stage growth cycle. The technology is just going to get better. Yet this industry, especially amorphous silicon really hasn't been able to benefit from growth through scale, like the silicon wafer has. So we are starting already with lower production costs and we are just on that early growth over there. We anticipate that in the future, this is going to be much better for everyone in the thin-film sector.

Well, comparing solar technologies, value versus [price]. We would like to say that all solar is created equal. One of the things we throw out is would you buy a car based on gas efficiency to a certain speed, or will you buy a car based on looking at its speedometer, and comparing speedometer readings. This one says 220 miles an hour, this one says 120 miles an hour, and well you wouldn't do that. The fact is that the solar modules are just like cars. They operate differently, under different environments, hot cloudy, hazy locations, morning to afternoon, more in the southern latitudes. We like to save life on earth. All of these different aspects affect how the solar module works or how a particular solar cell or solar cell technology works.

So the issue is here, are you getting what you are paid for. We have the content, factory versus real world conditions. Now, the thing is that solar power is essentially, it's built in a factory, it's marketed by the watt, it's priced using the battery rated performance, which is essentially room temperature, okay, at one full sun of light, and boom, they are rated. It literally comes down the line, we do the same thing. It goes in a little area, boom, accumulated sun light flashes on it, you rate the power right there at room temperature. That module now goes out into the field, and it's going to encounter all these other kinds of conditions, the heat, haze, lower aperture of the sun, things like that and they will affect how that particular solar cell technology works. It literally takes a certain amount of incident light; it's a knock of photons. It's a knock on electron [loose] society, the solar cell material.

Until that happens, it just lays there as an inert device, okay. Once you start exciting those electrons, you start producing electricity. It takes most technologies, it takes virtually all technologies to take incident light than amorphous silicon to start working. That's why amorphous silicon is used on watches, calculators, things like that, because it works under much lower incident light conditions. So it starts working when the sun first starts peaking over the horizon, while the silicon wafer technology has to wait till the sun is at a certain angle, certain incidence in the sky, before it literally starts to work.

So the thing that the industry is going through, and we have heard from the utilities we have spoken to, they are looking at a concept called the levelized cost of electricity. It looks at all the factors, which are total insulation costs. They are long wiring, short wiring, your inverter costs, LAN costs, the amount of actual power produced at the module, everything. And that's what's driving their buying purchasing managers' decision making is what that level of cost of electricity is, what is the total cost. I am not going to listen to your fact related performance any more.

So we decided to take a look at how we rate XsunX stacks up using that factoring performance, I mean using levelized cost of electricity as an analysis. We hired a group out of Massachusetts called IBIS & Associates and asked them to go ahead and take a look at the number of different technologies at both silicon wafer and cadmium-telluride at CIGS and another amorphous silicon technology, which is triple junction or (inaudible) junction. And they did a -- they used the National Renewable Energy Laboratories, it was called cell module, it’s a solar advisory module. and it's a program that the National Renewable Energy Laboratories put out, that you put all the state in, that you put all your vertical overheads, your tax, you land and your engineering balance of systems cost and there is \everything you can think of, in there and analyze what you're actually gaining out of that device, based on where it's located, what your total cost per watt of ownership is.

An assimilated 1 megawatt installation in Phoenix Arizona compared to (inaudible) technologies the amorphous silicon modules that we are planning to make, even if sold at $3.20 a watt, we're still the lowest cost producer of power. We also had a study done Portland that came out, the numbers were higher in terms of the cost, but we still were the lowest costs providers. We're right now in the process of completing study in 40 other locations, which will be posted on our websites as well within the next month.

I will give you an idea of what we're looking at here is in the smaller bar here, the red line is [tandem] junction amorphous silicon solar cell over a monthly period, over 12 months. And you could see how much more power is actually produced, hours enough, the very next highest one on the graph the blue one is another amorphous technology the rest of them carries a turn (inaudible) the CIGS and silicon wafer falls I mean below that. The main reason for that is the infinite light and the heat, what happens if you look at the product brochure of most of every other manufacture out there they've are going to have this what is called a thermal coefficient, there is going to be a fraction over percentage that is a percent of power production degradation that occurs for every degree centigrade above room temperature. Well that mean (inaudible) -- that the solar module does not operate at room temperature, on a roof or a solar field somewhere operates much higher than that, typically about 40 degrees higher.

When you multiply that thermal coefficient by between 40 degrees to 50 degrees you come up with numbers as highs 20% and 25% degradation. To give you an idea silicon wafer technology made by let say Sharp or one of the other manufactures or SunTech all right 100 watt panels at new is going to produce 75 to 80 watts of power, because it is thermal degradation. Right you pay for a 100 you don't get your full 100. The other situation too, is it started working later in the morning it turned off early in evening when you add up those little bits that's what creates the increase in the total amount of power.

So even though our module is only design to make about 7.9% or 7.9 watts per square foot SunTech advertises 16.5, you look at the brochure it's 15.3 the reality is they are advertising more watts per square foot. You are paying for those more watts but you are not getting the return and when you look at the total cost to ownership the waste is so high that it causes your cost ownership to go way, way, way up.

Unidentified Audience Member

(Question inaudible)

Tom Djokovich

No, that was not, that was not all amorphous, there was crystal silicon in there, there was another device from (inaudible) there was a device from First Solar there was a device from Global Solar and there was device from Energy Conservation Devices Pardon me.

Unidentified Audience Member

Those are thin films?

Tom Djokovich

Well yes, other thin films have the same framework, has better thermal qualification characteristic an

Unidentified Audience Member

Those are all thin films there was no …

Tom Djokovich

No, there was short -- let me go back if I can.

Unidentified Audience Member

Did you do sun power?

Tom Djokovich

No, we didn’t do sun power, this was our business associated told us to do, because although we paid for the study, we paid mostly for marketing purpose. Because we are marketing our device at a higher cost per watt than other people, are let say its First Solar, they are marketing it at a lower price per watt. We go talk to installers and integrators and they say why should I pay you more? If they are selling it for less, and we say wait you got to look at the total cost of installation and are you getting what you paid for basically. --

Unidentified Audience Member

(Question Inaudible)

Tom Djokovich

No, this was just simply an analysis, that even at $3.20 it was the low price, we are actually in 2009 are planning to sell at $2.60, and (inaudible) that was the guidance we've given to the market. The actually module itself is essentially 125 to 127.5 watts is what it is? 20 plus year warranty, 7.9% stabilize efficiency, green point factor, it is environmentally friendly, there are no heavy metals, there is toxic material if you take this and throw it away in a landfill. It doesn't transmit any toxic or heavy metals into the environment whatsoever. There is no -- as a matter of fact we are building our manufacturing facility, we are even using hydroelectric electricity to produce all these. So it’s a close to let say zero footprint is possible, the dimension is 1 meter by 1.6 meters.

Our target markets are solar farms, utility companies, large government contracts, some agencies, department of defense things like that. What we have done is we've developed a sort of presales and brand development program where we are talking to qualified parties that are looking to reserve our 2009, 2010, 2011 anticipated production amounts. And into that program, we gone ahead and signed about 145 megawatts of production for delivering in the '09, '10 and '11 periods.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

Pardon me

Unidentified Audience Member

Is there a price attached to those orders?

Tom Djokovich

Well the prices attached to those orders, the way our agreement is structured is it's tied to the guidance we have given to market which is $2.60 in '09, $2.40 and $2.10 and $2 in 2011 or prevailing market rate. So we have the option to go ahead and charge more if we can prove that we are still saving their money.

We have also given these particular clients, the idea that if prevailing market rates actually come down, we will go ahead and compete with them at that level. So kind of like a more (inaudible) clause. Addressing potential risks, the challenges associated with this endeavor of ours, the technology risk. I have discussed the fact as amorphous, that's the compound symbol for amorphous silicon, ASI, the volume manufacturing for it has been improving. There is a number of outfits out there doing it. You could see Oerlikon in the space, heavy; Applied Materials is in the space, heavy, ECE has been doing it for years. There is a number of other smaller amorphous solar cell manufacturers out there. It's a proven technology. The work here that's been done in the thin film transistor process improvement, it makes the project even more viable.

The material supply risk, gas and capsules are readily available. Since this presentation is in [May], I do have to make a note, glass is a potential issue in the future, and we are working on that right now. Right now the supplies are readily available, but there is a big influx of people moving into the solar space, and getting good solar glass, meaning the future becomes an issue. But we are working to secure long term contracts. Right now we have two primary vendors, they are capable of delivering the kind of glass that we need. Yes.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

It's completely different because we need a certain degree of surface uniformity, so when in the piece of glass passes through our machines, they can count on a certain degree of uniformity in terms of what's the distance from the plasma glass and the surface of the glass. And literally right now, the use of most tempered glass, we can't because its so wavy. So we're using a [new] glass and there is a special reflected coating on it that helps amplify essentially allows the sun to bounce back into the device, kind of reabsorbed energy, if you will. So there is a limited number of suppliers, but there are suppliers out there. We're not sharing vendor names with the market right now, we don't want to give anyone looking to get in this space, any idea as to where to go shopping.

Universal market challenges, market acceptance, you already have 145 megawatts of capacity of pure reserve. Our unique challenge is, is at an execution production risk. We have a pretty experienced production team. Two of our senior staff members have been involved in a successful commercial startup. One with BP solar, with an amorphous device, brought this commercialization, actual commercial sales. The other one with CIGS technology, from scratch, from empty drawing boards or commercially producing CIGS modules which is very difficult to do. Very few manufacturers with CIGS out there, one of our senior scientists out there, and then the third executive member involved in the hard disk drive industry back in the 80s and 90s, he was in charge of setting up several different hard disk drive manufacturing facilities, he is our Chief Operations Officer, and he is up one in Malaysia, and one here in United States. So a lot of experience in that sector as well.

Using latest generation proven equipment, and we have primary and secondary vendors in line. There is a lot going on, but to say, this is our plant operations timeline. Right now we are in phase one, which is the 2008 timeframe. We are going to put our first 25 megawatt line. Then in 2009, we are going to start adding a second and third line. If you look on the chart down below here, we eventually put a total of four lines in, which will lead to essentially 100 megawatts of production capacity. Our initial annualized module production on these 20 lines is about 190,000 modules. Once those lines are optimized, that number comes up closer to about 220,000-230,000 modules per year per line. So the 100 megawatt actually goes to about 125, 130 megawatts eventually. This is what we are anticipating.

Oregon manufacturing facility. There is great benefits why we chose to go to Oregon. This is actually a picture of the facility we are currently trying to close negotiations on, as of lease. That is the design and layout of our equipment that we had done to make sure to fit in there correctly. One of the reasons why we went to Oregon is, I will start at the top on the right here, they have a tremendous incentive program. The Department of Energy in Oregon has equipment loan program, specifically targeted to renewable energy endeavors, such as ours, that will end up to $20 million. We haven't qualified for it yet, but it's something that we are obviously working to try to secure.

They have a business energy tax credit, which they call the BETC program. Specifically also targeted towards [end] prices like ours to attract companies like ours into the state, which gives you up to a 50% tax credit of your investment. The limit used to be $10 million, I heard it just went to $40 million, that's the tax credit that we can use to offset tax liability, or they also allow you to sell it at 65% face value to other Oregon enterprises. So that could also be a source of just straight cash generation out of the issuance of any kind of a debt device or sale of equity, once again we haven't qualify for that but it something in the process we are working on. The government has the discretionary fund grand we are working on and also enterprise loan tax credit, which just give us abetment for property tax and things like that. But everything all adds up it’s a very important package all together that we think will help give us a little bit edge in terms of operating, get off the ground, become a revenue generating company.

Other benefits, there is a large existing infrastructure semi fabs for lease, lot of companies way in there in the 90s build facilities, a number of them never even occupied, because there was a downturn in the semi fab business here in the mid 90s early 2000. And so there is lot of facilities that we are able to choose from a lot of really nice existing infrastructure, we are going to be hopefully be able to leverage.

Cost per square foot are very inexpensive, they are ranging anywhere from about $0.50 to about $1 square a foot and power up their very inexpensive (inaudible). The number down here $1.9 million, $7.6 million, $1.9 million is what the annual additional cost for power in State of New York would be for us as appose for New York, with just our 25 megawatt line. $7.6 million is what our annualized cost for full 100 megawatts would cost us if we were to set up a facility here in New York. We are looking at the IBM facility out in (inaudible) and we are seeing New York is offering us great incentive. The cost operations here was just prohibitive, electrical powers quite is high, those numbers have to be factored back into the per watt cost for our modules. That's another reason we choose Oregon.

So what's projected production revenue plan here in 2009, we are just going to have one line up and running, we anticipate we may get as much as 22 megawatt produce next year, selling in at 260 watt and generating revenue about $57 million, we anticipate our cost to be about $1.58 gross profit approximately $22 million. In 2010 if we are successful in getting the rest of the lines up and running we will probably get out at about say 75 megawatts conservatively. We anticipate probably somewhere around 240 generating about a $108 million in gross revenue costs. In that time period as $1.35 for us because we are trying to bring out cost down and gross profit about $78 million. Now how we've kind of forecasted our numbers, as we anticipate each one of our line is only going to be about 58% efficient when it first comes out. So only having about 58% utilization in year one on a line that we get (inaudible). So we’ve kind of looked ahead and said we are going have to get machines tuned and running well.

So what we are looking to do is increase production output from 58% to 80% over the 2009 period moving into 2010 and then continue to work on improving cell efficiencies and factory efficiencies. There is a lot of little nickels and dimes that you can saved here and there. So I mentioned you earlier one of the things that we market to our reservation list, to customers that are in entering our reservation program is you are getting what you paid for. That's what we tell the clients to ask themselves and that’s what we essentially ask the investment community as well. If you look at the existing solar company out there we see XsunX, we see a lot of disadvantages, when you have limited underperforming technologies and I have explained with some of those limited aspects of those technologies already. Some more co-efficient, haze things like that a lack of access to sufficient materials, also the fact that they don’t start working till later in the day, they require more incident light to start working. That we believe they are underperforming technologies so we think the choice really is XsunX, we have (inaudible) designed performance that really we believe addresses market needs in the large utility and solar farm application space. We believe it has a lowest technology risk for vendors. Experience management a high compound annual growth rate predicted for thin films and last thing we believe, we had lowest evaluation relative to our peer group in the manufacturing, solar manufacturing space.

This is the last slide, and hopefully we are not running out of time here. This is that takes the 15 terawatt the little red dots is the 15 terawatt the total global consumptions for electricity.

The yellow box 89,000 terawatt is amount of solar energy delivered annual around the globe. All we need is 2100 of percent of that, and we would satisfy all the worlds needs of power so it's quite compelling concept when you think about it.

Thank you. Do you have any questions?

Question-and-Answer Session

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

Actually right now we have 174 million shares outstanding.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

Yes.

Unidentified Audience Member

(Question Inaudible)

Tom Djokovich

We have $20 million available on the balance of that commitment.

Unidentified Audience Member

Is that bank money?

Tom Djokovich

No, it's not bank money, it's a fund out of Chicago, and that money comes in basically at market price, so if we were to sell all of the shares at today's prices then you can do the math on that. We'd probably be out another couple of $20 million shares of -- I imagine 30 million shares I'm not quite sure, somewhere around there. And if the price improves and obviously dilution goes down, but we can't predict that at this point. Any other questions? Yes?

Unidentified Audience Member

(Question Inaudible)

Tom Djokovich

Yes.

Unidentified Audience Member

(Question Inaudible)

Tom Djokovich

Yes.

Unidentified Audience Member

What was the big impairment charge that you talked about?

Tom Djokovich

It was not an impairment charge last year, it was impairment charge for when the company was reorganized in 2003 that's been carried on the book.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

Well, we've been spending a lot of money on it. The question was, we have cut R&D a lot, what was that all about? We've been spending a lot of money on various forms of R&D. Last year, we chose to go ahead and essentially back up on the research and development. We felt we go into to a point where we could develop a plan to build a solar module manufacturing facility.

So essentially, there has been a lot of money spent last year, that really didn't go into the R&D column that in some sense maybe should have. And that was money spent on developing the plan, hiring third-parties to bet the plan for us, running down, betting all the different material suppliers, primary and secondary vendors getting the proposals, hiring design groups in engineering optimization companies to look at the designs and run [calcs] on it, to see if things would work, things like that.

So, there is still research and development going on, but it's more associated with developing a specific plan to build a facility, to start bringing product to market and not just pure R&D

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

Until April 3, 2006, I was the only employee. I outsourced all R&D through some research and development contracts that I had negotiated. In April 3, 2006, he would have let me hire him on April 1st, our Chief Operation Officer came onboard. And since that time, in the last April, I think we went to five or six or seven employees. Still very small firm, essentially we are all generals, every one at the executive level and that was the reason for the increase.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

One of the reasons is, we brought on a CFO. That CFO went back into the books with our auditors, looked it all and also we had a previous auditor that in mid-2006 timeframe, essentially went out of the businesses. They decided to sell the business to the new auditor. The new auditor, new CFO got together, went back through and chose to write that off. It was something that was part of a mining enterprise, it was debunked. It was non-operating reporting shell. This is not a reverse merger, it was a new organization. And in that process, I think there was just number of expenses that they listed as impaired and wrote it off, or didn't write it off at that time. We wrote it off last year. Yes.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

The question is, are the contingencies associated with the --

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

As long as the shares don't go below 20. The question is if you put the stock, then they have to give us the money. The agreement is structured in a way, that that is the case. But there is a floor of $0.20, which we hope to never reach, I mean, we are at the decision whether or not to go ahead and make a call or not for the capital based on how the markets performing for us. So obviously, it's just kind of a double edged sword. We need the money to pay for equipment facility improvement, things like that. At the same time, we have a fiduciary responsibility to kind of monitor, we have dilution well in excess.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

Well, the guidance we have given to market, in our report and also yesterday only, we just filed. We noted that we may have to raise as much as another $25 million to complete phase one.

Unidentified Audience Member

In addition to the $25 million.

Tom Djokovich

In addition to the $20 million that we still have coming in. That's why the reason is why we have looked at Oregon, because of the Department of Energy, loan structure there, and their willingness to use the equipment that we are going to be putting in place as a collateralized piece for their loan program, which we are obviously hoping to use a debt structure, rather than equity structure to go in plan for us, but that's not a guarantee, like I said, something we are applying for.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

I agree. It is. It's not your typical PIPE transaction. The question was, it's unusual to get this kind of structure, where we can sell shares today at $0.38 and if the stock is at $1.38, tomorrow we sell them at $1.38. This is not a debt structure. This particular company, if you are using capital out of Chicago, this is a program, I think they have had in place for a number of years. There was 11 different companies I looked at, and I called eight of them and spoke to their Chief Executive Officers and I got regular reports and that all of the clients were able to access the full amount of funds available, and then number of instances done secondarily, and even occasionally third rounds of financing.

It's just a structure they use, they kind of fundamentally and this is just their words not mine, they prefer to bet on the upside of the company in terms of buying at a market price, giving the company the money they need, and anticipating that they are going to turn that into a positive result, and the stock price is going improve. Now obviously, that's something everyone anticipates. It is not always a fact, but their deal structure certainly points in that direction. So we look at them more as a fundamental investor, than a PIPE transaction. At least, that was our opinion. Yes.

Unidentified Audience Member

(Question Inaudible).

Tom Djokovich

No. The agreement with Fusion Capital can be terminated by the company at any time. The question was, if someone were to come along and make a bid offer to purchase XsunX, is there anything in our agreement in Fusion Capital, the current financing in place that will prevent some of that occurring, and the answer is no. We can terminate any time, there is no penalty. The only requirement is, we have to register the initial shares that they bought, and which is something we're doing right now. And then register the balance of the underlying shares, that we would then in the future, sell to them. But the transaction could be terminated at any time with no cost, or no additional cost I guess. Okay.

Unidentified Analyst

Any one would like to continue we can have another breakout session, it's down the hall.

Tom Djokovich

By the way I forgot to show my prop. This is a sample amorphous silicon film, so this is obviously a very small piece of what the 1 meter by 1.6 meter module would look like. Sorry about, well I have it with me, if anyone wants to take a look. Thank you.

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