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FORWARD LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this annual report on Form 10-K. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this annual report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this annual report on Form 10-K, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this annual report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
OTHER PERTINENT INFORMATION
References in this annual report to “we,” “us,” and words of like import refer to Xodtec LED, Inc. and its wholly-owned subsidiaries, Xodtec Technology Co., Ltd. (“Xodtec”); Targetek Technology Co., Ltd. (“Targetek”); UP Technology Co., Ltd. (“UP”).
Our business is conducted in the Republic of China (Taiwan), using New Taiwan dollars “NTD,” the currency of the Republic of China, and our financial statements are presented in United States dollars. In this annual report, we refer to assets, obligations, commitments and liabilities in our financial statements in United States dollars. These dollar references are based on the exchange rate of NTD to United States dollars, determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of United States dollars which may result in an increase or decrease in the amount of our obligations (expressed in dollars) and the value of our assets, including accounts receivable (expressed in dollars).
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. BUSINESS.
Through our subsidiaries, we are engaged in the design, marketing and selling of advanced lighting products which are designed to use less energy and have a longer life than traditional incandescent, halogen, fluorescent light sources. We design, market and sell advanced LED lighting products. Our products cover a broad range of technically innovative outdoor lighting, indoor general and accent lighting, and color-changing lighting lamps and fixtures that are used for applications in commercial, architectural, residential, hospitality, entertainment and consumer markets. We generate revenue from selling our lighting products into commercial, architectural, residential and other markets.
Organization
We are a Nevada corporation incorporated on November 29, 2006, under the name Sparking Events, Inc. On June 28, 2009, our corporate name was changed to “Xodtec Group USA, Inc.” and on May 17, 2010, our corporate name was changed to “Xodtec LED, Inc.”
Our wholly-owned subsidiaries, Xodtec, Targetek and UP, are organized under the laws of the Republic of China. We also own a 35% interest in Radiant Sun Development S.A., a company organized under the laws of the Independent State of Samoa (“Radiant Sun”), which is inactive.
Our corporate offices are located at 2F., No.139, Jian 1st Rd., Jhonghe City, Taipei County 235, Taiwan (R.O.C.), and our telephone number is (886) 2-2228-6276. Our website is http://www.xodtec.com.tw/eng/. Information on our website or any other website is not a part of this report.
Our Business
We, through our subsidiaries design, manufacture, market and sell advanced lighting solutions, including light emitting diode (LED) lighting and other energy-saving lighting. We offer a wide range of technically innovative indoor white light, color-changing and outdoor lighting solutions that are used for applications in public, commercial, architectural, residential, gardening, and entertainment markets. Our solutions provide many benefits over traditional incandescent, halogen, fluorescent, and compact fluorescent (CFL) light sources, including lower energy consumption, longer life spans, and absence of hazardous materials, lower maintenance costs and greater design flexibility.
In addition to our robust line-up of Ares series white light LED products, we have added a variety of color-changing lighting solutions -- the Venus series. Further, we have recently introduced our Apollo series of outdoor lighting solutions. The Apollo series street lamps have been installed in several locations since March 2008. According to our recent measurement, the luminous decay over 1 year is less than 2%.
We design, manufacture and sell high quality, reliable, and cost competitive products. For example, our color-changing accent light solutions are designed to allow home users using remote controller to changing colors or setting control schemes. We achieve this by embedding our proprietary remote control chip into our light products. To guarantee reliable and high quality products, we produce our products in ISO 9001-accredited factories. To deliver cost competitive solutions, we invest in technology advancements, leverage purchasing volume, capitalize on strategic vendor relationships and migrate high volume products to our automated manufacturing process.
Our advanced LED lighting solutions are based on proprietary designs and patented technologies associated with industrial design, electrical, optical, mechanical and thermal engineering. We have developed domain expertise and applications knowledge for end-user requirements in diverse markets. As a result, we are able to offer total lighting solutions, which provide better performance and lower overall cost to users. We offer a wide range of LED lighting solutions to the market. This includes over 50 distinct product types targeted at four distinct markets. We have expanded our LED product lines to include a range of white light solutions for commercial, residential and entertainment lighting applications. However, as the market for LED products has developed, they are presently considered commodity products that are sold based on the price of the products.
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LED Lighting Industry Trends
LEDs are semiconductor-based devices that emit light. As the cost of LEDs decreases and their performance improves, we expect that they will continue to compete more effectively in the general illumination market versus traditional lighting. According to the survey made by Strategies Unlimited, there were more than $1.86 billion of LED lighting products sold worldwide in 2008 and the compound annual growth rate during 2009 to 2012 will be around 28% -- a figure which is forecasted to grow to $5 billion by 2012. Specialist in Business Information, another market research company, even predicts to grow up to $14 billion in 2013. We believe the LED lighting industry may experience the following trends:
Technological innovations expand LED functionalities. Since its introduction in the 1960s, LED has offered an increasingly wide variety of colored lighting. The initial applications of LEDs included traffic lights, automotive brake lights and indicator lights. In the mid-1990s, LEDs became capable of emitting blue light. In 1993, GaN series blue light LED was developed, white light LED then become a feasible product.
White light refers to the light obtained by mixing many lights of different colors, such as second wavelength long light (blue light + yellow light) or third wavelength light (blue light + green light + red light). White light LED technology can effectively save energy and reduce the emission of carbon dioxide when use in general lighting. Thus, with the increasing awareness of the need for environmental protection, we believe that lighting devices using white light LED as the light source will proliferate dramatically.
Advancements in LEDs’ performance stimulate adoption in general lighting. Technological advancements in LED lighting have resulted in a new breed of LEDs that can meet specifications previously only satisfied by traditional lighting sources. LED lighting solutions were historically regarded as expensive in relation to their delivered light output.
In an effort to lower energy consumption, lighting companies are focused on increasing the luminous flux -- lumens per watt. Traditional incandescent lighting sources can produce between 10 and 35 lumens per watt, while fluorescent and HID light sources can produce output near 100 lumens per watt. Today’s LEDs have overwhelmed incandescent performance and are exceeding 100 lumens per watt, making them comparable to and even exceeding fluorescent and HID light sources.
Unique capabilities of LEDs broaden applications and create new lighting alternatives . Key LED features, including quality of light output, long life, low power consumption, low heat output and full digital control are accelerating adoption and expanding market opportunities. Additional attributes, including design flexibility, color-changing effects, digital dimming capabilities, remote control, smaller size and rapid start-up time are creating new lighting applications for LEDs in commercial, architectural, residential, and entertainment markets.
High energy costs and conservation efforts drive LED adoption. High energy costs have resulted in increased demand for more energy-efficient lighting solutions, which has inspired a shift to LEDs. LED lighting technology is inherently more energy-efficient and can result in more than 75% in power savings over traditional incandescent and fluorescent solutions, respectively. In addition, unlike other alternatives such as compact fluorescent bulbs (CFL), LED lighting solutions are free of hazardous materials such as mercury, which can be harmful to the environment.
Regulatory influences spur market adoption of energy-efficient LED lighting. Government regulations, such as initiatives by the United States Department of Energy and the Environmental Protection Agency’s EnergyStar Certification Program, are driving adoption of more energy-efficient lighting solutions. EnergyStar sets industry-wide international standards for lighting products that outline efficiency and performance criteria, helping manufacturers promote their products and consumers better understand lighting products. Legislation and the trend toward environmental consciousness are critical drivers of lighting demand, as governments, industry associations, and industrial and residential consumers move toward employing lighting solutions that comply with regulatory requirements, conserve energy and present no threat to the environment when disposed.