UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-K/A





Amendment No. 1





x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended May31, 2010





 ̈
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT





For the transition period from _________ to ________





Commission file number:     333-145910





SunSi Energies Inc.


(Exact name of registrant as specified in its charter)





Nevada

20-8584329(State or other jurisdiction of incorporation or

organization)

(I.R.S. Employer Identification No.)45 Main Street, Suite 309 Brooklyn, New York

11201(Address of principal executive offices)

(Zip Code)





Registrant’s telephone number:  646-205-0291





Securities registered under Section 12(b) of the Exchange Act:





Title of each class
Name of each exchange on which registeredNone
not applicable





Securities registered under Section 12(g) of the Exchange Act:





Title of each class
Name of each exchange on which registeredNone
not applicable





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ̈Nox





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ̈Nox





Indicate by checkmark whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo ̈





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ̈No ̈





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the 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





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ̈Nox





State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $26,931,250





Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  27,431,000 as of August 16, 2010





DOCUMENTS INCORPORATED BY REFERENCE





None.













EXPLANATORY NOTE





SunSi Energies Inc. (the “Company” or “SunSi”) is filing this Form 10-K/A to amend Part I, Item 1. Business, and Part 2, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data (Notes 10 and 11), and to add Exhibits 10.1, 10.2 and 10.3 to Part IV, Item 15. Exhibits, to its Annual Report on Form 10-K for the year ended May 31, 2010 that was originally filed on August 30, 2010 (the “Original Annual Report”), in response to comments received from the Securities and Exchange Commission (the “SEC”) regarding the Original Annual Report as part of the SEC’s comment letter dated February 23, 2011. In addition, as required by Rule 12b-15 under the Securities Exchange Act
of 1934, as amended, currently dated certifications by the Company’s principal executive officer and principal financial officer are being provided as exhibits to this Form 10-K/A.





The Original Annual Report has been revised solely to reflect the changes above. This Form 10-K/A speaks only as of the date the Original Annual Report was filed, and the Company has not undertaken herein to amend, supplement or update any information contained in the Original Annual Report to give effect to any subsequent events. Accordingly, this Form 10-K/A should be read in conjunction with the Original Annual Report and the Company’s other reports filed with the SEC subsequent to the filing of the Original Annual Report, including any amendments to those filings.


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PART I


Item 1.   Business





In General





The Company incorporated in Nevada on January 30, 2007.  On March 24, 2009, the Company changed its name to SunSi Energies Inc. (fka Bold View Resources, Inc.) and changed its business focus to the acquisition of Trichlorosilane (“TCS”) production facilities in China. TCS is a key raw materials required in the solar photovoltaic industry.  Our principal executive office is currently located in Brooklyn, New York and our website is www.sunsienergies.com.  Our common stock trades on the Over the Counter Bulletin Board under the ticker symbol “SSIE”.





SunSi is positioned to take advantage of one of the fastest growing trends and markets in the world today – the clean and renewable alternative energy market – specifically the solar energy market. SunSi’s goal is to acquire and develop a portfolio of high quality TCS distribution rights and production facilities that are strategically located and possess a potential for future growth and expansion. Relatively unknown, but essential to the solar energy industry, TCS is the main feedstock of the solar energy industry, used in the production of silicon, which in turn is used in the production of solar photovoltaic (“PV”) energy producing panels.





SunSi, through our wholly-owned subsidiary SunSi Energies Hong Kong Limited, a Hong Kong company (“SunSi HK”), plans to acquire Chinese TCS production facilities and distribution rights.





We believe that there will be growth in TCS demand and its geographic distribution throughout the world markets. Our objective is to buy TCS production facilities and increase their plant capacity after acquisition to a total capacity of over 125,000 metric tons (MT) within the next three years. Additionally, whenever possible we will also acquire distribution rights for TCS. We have already identified North America and Europe as high potential markets for its TCS. Countries, such as Germany and Spain, have led the demand for solar PV in recent years, while the United States is expected to experience a significant growth before 2012 in the renewable energy and solar markets. In addition, SunSi expects to become a key supplier to the emerging Chinese and Asian polysilicon and solar energy markets.





Going Concern





We have incurred operating losses since our inception resulting in an accumulated deficit of $833,798. Our ability to continue as a going concern is dependent on us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. To date we have funded our operation exclusively from the proceeds from the private placement of our equity. We believe we can continue to raise sufficient liquidity through the sale of equity although there can be no assurances. Additionally we intend to address our going concern issue by acquiring profitable TCS facilities in China although there can be no assurances that we can negotiate terms or raise sufficient capital to consummate such acquisitions. Our auditors issued a going concern opinion on our financial statements.




SunSi Business Plan





Since June 2009, we have actively spent all of our time, and devoted substantially all of or financial resources, to acquire TCS facilities and TCS distribution rights in China. During this period we have incurred significant operating losses resulting in an accumulated deficit of $833,798 as May 31, 2010.  Acquiring TCS facilities in China is an extensive process for a U.S. based company, and requires significant expenditures.





This identification and due diligence process requires us to spend significant funds to (a) travel frequently from the U.S. to China to locate suitable acquisition targets and negotiate acquisition terms with the shareholders of the target company, (b) engage qualified accounting firms to perform audits to ensure that the acquisition target’s financial statements conform to U.S Generally Accepted Accounting Principles(“GAAP”), (c) translate documents from Chinese to English, (d) and to secure Chinese and U.S. legal counsel to help us ensure that all documentation is in conformity with Chinese and U.S. law. Substantially all of our expenses have come from these four expense categories, in addition to the expenses that we have incurred to maintain our status as a U.S public company.


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We expect to continue this process until we are successful in acquiring these facilities and distribution rights, although there can be no assurance that we will be successful.





Acquisition of Zibo Baokai Commerce and Trade Co.




During the past nine months we have been performing due diligence on and negotiating with shareholders to purchase the Zibo Commerce and Trade Co. (“ZBC”) a TCS production company with a TCS factory located in Zibo China. On December 12th 2009, prior to our determining whether or not we would buy ZBC, we secured the exclusive international distribution rights (“international rights”) for all of the TCS produced by the ZBC factory. These international rights which were secured by SunSi HK, for nominal consideration, were not contingent on our purchasing ZBC. The international rights entitle us to sell TCS produced by the ZBC factory outside of China only. It gave us no rights to sell ZBC’s production within
China. ZBC granted us these international rights because they were hopeful we could generate new customers for their TCS production outside of China.  Historically, substantially all of ZBC’s sales have been within China.
 
 Currently the exportation of TCS out of China is very minimal, since most of the Chinese production is used to supply the country’s demand. SunSi has already identified several potential foreign buyers for the TCS produced by ZBC, which would allow for higher margins that those generated in China. The lower cost of production in China is advantageous when competing over the globe; one that we intend to capitalize on to not only to increase our future profitability, but also our global client base. To date we have not recorded any revenue from these distribution rights.
  Recently, we determined that despite our best efforts over the past year, we could not acquire ZBC, as planned, on terms that would be beneficial to SunSi’s shareholders. Therefore, we discontinued our efforts to acquire the ZBC factory, and instead negotiated with ZBC to obtain the exclusive domestic distribution rights, for the TCS produced by ZBC within China, supplement the exclusive international distribution rights which we acquired on December 12, 2010 (described above).




On April 29th 2010, SunSi HK signed a definitive agreement to acquire 90% of Zibo Baokai Commerce and Trade Co. (“Zibo Baokai”). Zibo Baokai is the exclusive distributor for all of ZBC’s domestic production, but does not have any equity interest in ZBC. At the date of this report, we are waiting for the issuance of a business license in order to consummate this acquisition.  All other terms necessary to complete the acquisition were completed on July 31, 2010, when the Articles of Association and Joint Venture Agreement were signed. We expect the cost of the acquisition to be approximately $270,000. When completed, this acquisition will enable SunSi to generate revenue and to create a presence within the Chinese and other international TCS markets.





Upon the successful consummation of the acquisition of Zibo Baokai, we will hold the exclusive distribution rights to 100% of ZBC’s production both internationally and domestically; however, we will not have any interest or ownership position in the ZBC factory.





As part of the Zibo Baokai distribution rights, ZBC has agreed to sell all of its TCS production to us at a price of cost, plus a 10%-15% mark-up. The resale price of the TCS will be determined at our discretion.





ZBC





During our due diligence process on the ZBC facility, we determined that it had it been managed well by an experienced management team and generated profitable operations under United States Generally Accepted Accounting Principles (GAAP).





ZBC is strategically located in the Shandong province of China. Founded in 2000, the ZBC facility was originally a wholly-owned subsidiary of Baoxin Mining Company that focused on the research, development, production and marketing of organic silicon products. In 2003, the company obtained its license to produce TCS and started the construction of a new facility, which was built on a 24-acre property located in the city of Zibo, Shandong Province, China (approximately 50 miles east of Jinan).





ZBC started producing TCS in 2005. That same year, it sold approximately 67 MT of this new production.  Its production increased to over 500 MT in 2006 and to 2,000 MT the following year.  In late 2007, it began increasing the size of its production facility; an expansion plan that was completed in late 2008. This expansion triggered, during that year, an almost tripled production of TCS (6,000 MT). ZBC’s new production line brings the facility to a current capacity of 25,000 MT per year.


4


ZBC is ISO9001 certified and employs over 150 people. The expertise, commitment and dedication of its employees have allowed ZBC to only produce quality products; thus earning an outstanding reputation among its domestic customers.





Planned Acquisition and Capacity Expansion of Wendeng He Xie Silicon Co. Ltd





On August 3rd 2010, SunSi HK signed a letter of intent with Wendeng He Xie Silicon Co. Ltd. (“Wendeng”) for the acquisition of 60% of its existing 20,000 MT TCS facility, plus an increase of Wendeng’s capacity by an additional 40,000 MT.





Based upon the valuable experience we’ve gained in the unsuccessful ZBC acquisition process, we believe it will take approximately 4-6 months to obtain proper environmental and other permitting and licenses, and complete the US GAAP audits necessary to consummate the acquisition of Wendeng.





During the due diligence period the Company will be working on raising equity funding to acquire Wendeng and to expand Wendeng's capacity by 40,000 MT. The amount of funding to consummate the acquisition and complete such an expansion is currently indeterminable. If we are unable to raise this amount through the sale of equity securities, we will have to secure additional debt financing to complete the acquisition and the planned expansion project.  If necessary, we intend to negotiate terms revolving line of credit and conditions for a construction/term loan with various banking institutions.  However, there is no assurance that debt financing will be available or, if available, on terms that are favorable to us.    In addition, if we are unable to raise
sufficient equity capital to commence development of the plant expansion, we may pursue the plant expansion through alternative ownership structures, such as joint ventures with other entities. We currently have no commitment for either or equity or debt financing. There can be no assurances that the Company will be successful in raising sufficient funds to consummate the acquisition, or to raise expansion capital if the acquisition can be consummated.





Wendeng





We believe Wendeng is one of the largest TCS manufacturers in China, and is located in the Shandong province of China close to strategic ports including Weihai and Qingdao. It started producing TCS in 2009. The Wendeng facility was designed and is currently managed by Zhang Fahe, with over 30 years of experience in the Chinese chemical industry. Mr. Fahe has been working directly in the field of TCS since 2001 where he has developed efficient TCS production technology.





Wendeng has one major client to which it sells most of its current production. The facility is easily accessible via rail and major highways, in addition to be being well equipped for handling chemical products. We believe we can expand Wendeng’s client base after the acquisition is consummated.





Wendeng Equipment Suppliers





The Wendeng facility is situated within a province that specializes in the chemical industry. Most standard equipment can therefore be sourced locally. Some equipment needs to be customized specifically for the production of TCS. This customization can also be achieved locally. The local management team already has experience working with the different suppliers and the suppliers are also well aware of the equipment requirements specific to TCS production.





Wendeng Site Selection





The Wendeng facility is strategically located for exportation and also gives us access to supply and product transportation due to the heavy truck and train volume in the area.





The Wendeng facility site includes utilities infrastructure and highway access.  When we assessed this acquisition, we considered the following:





·
Proximity to feedstock suppliers;·
Proximity to ports;·
Road, rail and water transportation infrastructure at the site;·
Existing storage and transfer infrastructure;·
TCS market proximity; and·
Skilled labor availability.





If we do not proceed with the Wendeng acquisition because we are unable raise sufficient capital or if our due diligence process discovers unforeseen problems; and decide to move forward with the acquisition of other TCS production facilities, this potential facility must meet the criteria above.


5


The Trichlorosilane Industry-





TCS is a colorless liquid containing silica powder, hydrogen and chlorine. It is the key intermediate compound used to produce  pure polysilicon, from which computer chips and solar cells are made.





The solar PV value chain (diagram shown below) consists in a number of specific and distinct steps from the production of TCS (first step in the value chain – Polysilicon) to the end use in projects (last in the value chain – Modules).  On a normalized scale (100%), TCS production and polysilicon manufacturing tend to achieve the highest profit, followed by the ingots and wafers.





The buyers of TCS, and other companies along the solar PV value chain, have enjoyed growth in the past few years, as China is trying to move away from coal power generation. Because of government incentives and the ‘go green’ attitude of local governments, this trend is expected to maintain itself in the near future.





According to Solarbuzz a leading solar industry publication outside of China, the solar energy industry growth has been even more dynamic. In fact, the global solar energy industry has grown by over 849% since 2000, from an installed capacity of 877 Mega Watts (MW) in 2000 to over 10,000 MW at the end of 2008. These figures represent a compounded annual growth rate (CAGR) of almost 40% for the same period.





The outlook and industry forecast for the next 4 years, as reported by Solarbuzz, is positive and is headed toward an additional growth spurt of 39% by the end of 2009. By 2012, it will be over 135% over the 2007 levels.





The five countries leading the way in the next five years are:





China
35.8 % CAGRThailand
35.7 % CAGRIndonesia
34.9 % CAGRIndia
34.3 % CAGRSouth Africa
29.7 % CAGR


6


Environmental and Other Regulatory Matters; Governmental Approvals





Before we begin any TCS manufacturing expansion project, we will be required to obtain various environmental, construction and operating permits. Permits for the expansion of an existing facility are generally easier to obtain than permits for new infrastructures. We will be responsible for obtaining all permits. If permitting delays occur, acquisition and subsequent expansion of an acquired plant may be delayed.





In addition, permitting and environmental and other regulatory requirements may change in the future.  Changes in permitting and regulatory requirements could make compliance more difficult and costly.  If we are unable to obtain necessary permits or to comply with the requirements of such permits or any other environmental regulations, our business may be adversely affected and we may not be able to construct or operate the plant.





Regulatory Permits





We will be subject to regulations and will need to obtain a number of permits, which may include zoning and building permits, environmental permits as well as work safety permits. To date, we have not begun the permitting process, but intend to commence that activity as soon as the necessary financing is in place.  Once we begin the permitting process, we believe that obtaining the necessary permits will generally take between three and four months.





All the permits above can be obtained in parallel to the construction work and should therefore not affect the realization of the expansion. If for any reason any of these permits are not granted, renovation costs for the plant may increase or the plant may not be operated at all.  In addition, the provincial and local governments could impose conditions or other restrictions in the permits that are detrimental to us or that increase permit requirements or the testing protocols and methods necessary to obtain a permit either before, during or after the permitting process.  The Regional Government of Wendeng could also modify the requirements for obtaining permits.  This would likely have a material adverse impact on our operations, cash flows and financial performance.





TCS Quality Testing Procedures





Quality targets are set in function of the required purity levels of TCS.  Purity levels are currently being tested prior to shipment as well as by the customer at the receiving end. Some impurities such as Calcium, Magnesium and Copper are currently not being tested as this is not required by China industry standards. To achieve our exportation objectives, new testing installations will have to be implemented to meet the requirements of western customers. There is currently an officer specifically assigned to quality control at the Wendeng facility as well as at The ZBC facility.


7


Sales and Marketing





Wendeng has one major client for its TCS: Jiangsu Zhong Neng Silicon Industry Technology Development Co. Ltd (GCL Silicon Technology Holdings Inc.). In 2009, GCL purchased approximately 20,000 MT of TCS from Wendeng. We believe that after acquisition we can expand Wendeng’s customer base to reduce its reliance and concentration on one customer





ZBC currently has three stable clients for its TCS and we intend to continue working with them in the future. Zibo Baokai owns the exclusive distribution rights of the entire production of the ZBC TCS facility.





ZBC Current TCS Customers:





1.
Luo Yang Zhong Silicon Hi-tech Technology Development Co. Ltd China Silicon Corporation Ltd.





2.
Jiangsu Zhong Neng Silicon Industry Technology Development Co. Ltd GCL Silicon Technology Holdings Inc. - http://www.gcl-silicon.com/





3.
LDK Solar Co., Ltd,Hi-Tech Industrial Park- www.ldksolar.com.





Inputs and Procurement Plan





Wendeng already has contracts with key suppliers of silica powder, chlorine liquid and methanol. Chlorine liquid, methanol and silica powder are currently sourced locally in Shandong .We foresee that our current suppliers will be able to meet the demand of the new production facility being developed. We believe Wendeng has purchase commitments from companies to purchase a portion of their TCS production, however, at this stage in the due diligence process, the amount is indeterminable.





Government Incentives and Regulations





China





We believe China supplies half the world's solar panels, it contributes very little to demand as the cost of tapping solar energy to generate electricity remains steep and investors find little economic sense in pursuing solar projects in China where incentives are few. To improve the situation, China's government announced in March that it would offer to pay 20 yuan ($2.90) per watt of solar systems fixed to roofs and which have a capacity of more than 50 kilowatt peak (kwp). The subsidy, which could cover half the cost of installing the system, attracted applications equivalent to the building of 1 gigawatt of solar power.





China is expected to raise its 2020 solar power generation target more than fivefold to at least 10 GW. With incentives, analysts expect over 2 GW in new solar capacity will be installed as early as 2011, up from just over 100 MW in 2008. To further attract investors, we believe Beijing may align its solar energy policy with an incentive scheme used in Europe and the United States called "feed-in tariff," which guarantees above-market prices for generating solar power. Beijing's proposed tariff and other perks should help generate decent returns given that local labor and equipment costs are cheap.





United States





The U.S. federal government and various state governments have created incentive programs to encourage electricity production from renewable energy sources including solar.  The federal incentive programs include corporate tax credits and federal grant programs. State incentive programs include tax exemptions and credits for U.S. producers as well as feed-in tariff programs in particular states such as California. These various incentives are expected to benefit electricity producers but also equipment manufacturers and polysilicon makers due to increased demand.


8


The most important recent development in the world of U.S renewable energy incentives is the American Recovery and Reinvestment Act. Some of the highlights include:





·
Renewable Energy Grants through the Department of Treasury:Provides grants equal to 30 percent of the cost of solar property placed in service during 2009 and 2010, in lieu of the section 48-investment tax credit.





·
Renewable Energy Loan Guarantee Program: Establishes a temporary DOE loan guarantee program for renewable energy projects, renewable energy manufacturing facilities and electric power transmission projects. Appropriates $6 billion to pay the credit subsidy costs which should support $60 billion worth of loan guarantees. Eligible renewable projects are those that generate electricity or thermal energy and facilities that manufacture related components.





·
Renewable Energy Manufacturing Investment Credit:Provides up to $2.3 billion to fund 30 percent investment tax credit for manufacturing assets used to manufacture advanced energy property.





·
Solar on Federal Property Program:Appropriates $5.5 billion to be deposited into the Federal Buildings Fund for expenditures to construct, repair and make alterations on federal buildings to increase the energy efficiency, including installing solar energy equipment.





·
Department of Energy Funding:Appropriates $16.8 billion to DOE’s Office of Energy Efficiency and Renewable Energy, including $2.5 billion for applied research, development, demonstration and deployment projects.





·
New Clean Renewable Energy Bonds:Provides an additional $1.6 billion for new clean renewable energy bonds to finance facilities that generate electricity from renewable energy sources including solar facilities.





The combination of these incentives is expected to drive an increase in the demand for solar energy related equipment and components.





Europe





Countries such as Germany and Spain have feed-in tariff programs to boost electricity production from solar, wind and other renewable energy. In a typical feed-in tariff program, utilities are required to buy all the electricity generated from renewable sources, such as solar and wind, and pay rates that are higher than the prices for conventional power.  Such programs have turned Germany and Spain into lucrative markets for solar equipment makers. France, which is big on nuclear power generation, recently expanded its feed-in tariff program. The French government said it would allow solar power projects on commercial rooftops to get 45 euro cents per kilowatt hour, higher than the rates set for 2009 in Germany. The UK government is also in the process of creating a feed-in tariff program to boost electricity
production from renewable energy.





Competition





We believe  to be in direct competition with producers of TCS.  Many of these producers have significantly greater resources than we do.  We also expect the number of competitors to increase significantly in the future.  The development of other TCS plants, particularly those in close proximity to the plant, will increase the supply of TCS and may result in lower local TCS and glycerin prices and higher costs for feedstock.


9


We will be in direct competition with numerous other TCS plants that produce the same products that we do.  We plan to compete with other TCS producers on the basis of price of TCS, delivery service, decreased transportation costs and our commitment to sustainability.





Currently, we believe there are approximately 25 TCS producers which capacities are relatively small, and less than 10 have a production capacity of over 2,000 MT per year.





Today, the price of TCS in China is approximately between $1,100 and $1,250 per MT and we believe the number of producers has grown to over 20, holding a total production capacity exceeding 145,000 MT per year. China’s TCS producers are mainly located in Jiangxi, Tangshan of Hebei, Zibo of Shandong, Chongqing of Sichuan, Wuhan of Hubei, and Shanghai. We believe the following table gives the top six major producers:





Zibo Baoyun Chemical Plant, Zibo

25,000 MT / yearLeshan Yongxiang Resins Co., Ltd., Sichuan

25,000 MT / yearWendeng He Xie Silicon Co. Ltd., Wendeng

20,000 MT / yearTangshan Sunfar Silicon Industries Co., Ltd.

20,000 MT / yearHuaxiang Chemical Industry Co., Ltd., Hubei

15,000 MT / yearKaihua Synthetic Material Co., Ltd., Zhejiang

10,000 MT / year





Employees





We have 2 full-time and 1 part-time employees.





Research and Development Expenditures





We have not incurred any research or development expenditures since our incorporation.





PART II





Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations





Forward-Looking Statements





Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,”
“will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These
risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.


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Overview





SunSi’s goal is to acquire and develop a portfolio of high quality TCS distribution rights and producing facilities that are strategically located and possess a potential for future growth and expansion. TCS is the main feedstock of the solar energy industry, used in the production of silicon, which in turn is used in the production of solar PV energy producing panels.





Acquisition of TCS Distribution Rights and Production Facilities





Recently, we determined that despite our best efforts over the past year, we could not acquire as planned the ZBC TCS production factory on terms that would be beneficial to SunSi’s shareholders; therefore we changed directions, ended our efforts to acquire ZBC and instead obtained distribution rights to all of ZBC’s TCS production in the following manner:





On December 12th 2009, SunSi HK secured the exclusive distribution rights for ZBC TCS for the international market. At this time, exportation of TCS out of China is minimal, as most of the Chinese production is used to supply the country’s demand. SunSi has already identified several potential foreign buyers, which would allow for higher margins. The lower cost of production in China is advantageous when competing over the globe; one that SunSi intends to capitalize on to not only increases its profits, but also its global client base.





On April 29th 2010, SunSi HK signed a definitive agreement to acquire 90% of Zibo Baokai Commerce and Trade Co. (“Zibo Baokai”). At the date of this report, we are waiting for the issuance of a business license in order to consummate this acquisition.  All other terms necessary to complete the acquisition were completed on July 31, 2010, when the Articles of Association and Joint Venture Agreement were signed. When completed this acquisition will enable SunSi to generate revenue and to create a presence within the  Chinese and other international TCS markets.





Additionally, on August 3rd 2010, SunSi HK signed a letter of intent with Wendeng He Xie Silicon Co. Ltd. (“Wendeng”) for the acquisition of 60% of its existing 20,000 MT TCS facility. The final acquisition price for Wendeng is being negotiated. Immediately subsequent to acquisition, and based on a formal expansion plan prepared by the management of Wending,  SunSi plans to invest an additional RMB 60,000,000 (approximately $ 8,800,000 USD) in capital expenditures on plant, equipment and infrastructure to increase Wendeng’s capacity by an additional 40,000 MT, thereby tripling its current capacity.  There can be no assurance that the company will be able to raise sufficient capital to fund these capital
expenditures or that the expansion plan will be successful.


11


Results of Operations for the fiscal years ended May 31, 2010 and 2009





Revenues.We did not earn any revenues from inception through the period ending May 31, 2010. As noted above under  the section “Acquisition of TCS Distribution Rights and Production Facilities”. On April 29th 2010, SunSi HK signed a definitive agreement to acquire 90% of Zibo Baokai Commerce and Trade Co. (“Zibo Baokai”).  We anticipate to begin earning revenues commencing in September 2010 from the acquisition of Zibo Baokai, however, there can be no assurances on the timing of commencing revenue, or that we will be able obtain the business license necessary to consummate the acquisition.





Operating Expenses.





We incurred operating expenses for the years ended May 31, 2010 and 2009 of $621,835 and $169,855, respectively. Operating expenses for the year ended May 31, 2010 included general and administrative expenses of $40,854 and professional fees and expenses $580,981. Operating expenses for the year ended May 31, 2009 included general and administrative expenses of $45,420 and professional fees expenses of $124,435.  The increase in operating expenses from 2009 to 2010 is attributable to the increased cost of locating and conducting due diligence on TCS manufacturing facilities for acquisition.





Gross Profit (Loss).We incurred a net loss for the years ended May 31, 2010 and 2009 in the amounts of $621,835 and $169,855, respectively. Our losses for all periods are attributable to operating expenses and our lack of revenue.





Liquidity and Capital Resources





As of May 31, 2010, we had cash on hand of $598,468 and a working capital surplus of $212,278.





The Company is pre-revenue and therefore to implement its business plan of acquiring 90% of the Zibo Baokai distribution company, and a 60% interest in the Wendeng manufacturing facilities, it will need to raise capital and negotiate favorable acquisition terms with the shareholders of each entity. Based on preliminary due diligence we have performed, we believe that the current profitable operating performance of ZBC and Wendeng will aid us in raising the necessary capital, either in the form of equity or debt, to close these transactions.





We expect the cost of the Zibo Baokai transaction to cost $270,000. Currently we have approximately $598,000 of cash on hand. Based on our on hand cash balances, our current fund raising efforts, and our projected expenses, we believe will have sufficient cash on hand to close the Baokai acquisition, although there can be no assurances. We expect the cost of the Wendeng acquisition to be between $6.0 and $8.0 million. We are attempting to negotiate deferred payment terms with the seller of Wendeng that would enable us to pay a significant portion of the acquisition consideration after closing, and to accept Sunsi common stock as part of the acquisition consideration. Additionally, we are working with potential investors to raise either equity or debt financing.  There can be no assurances that we will be
able to secure the financing, or, negotiate favorable terms necessary to close the Wendeng transaction.





The Company believes that its existing sources of liquidity, along with cash expected to be generated from the issuance of debt and/or equity securities, will be sufficient to fund its operations, anticipated capital expenditures, working capital and other financing requirements through May 31, 2011. In order to fund capital expenditures or increase working capital above the current plan, or complete any acquisitions, the Company may seek to obtain additional debt or equity financing. It may also need to obtain additional debt or equity financing if it experiences downturns or cyclical fluctuations in its business that are more severe or longer than anticipated, or if the Company fails to achieve anticipated revenue, experiences significant increases in the costs associated with products sales, or if it engages
in additional strategic transactions. However, the Company cannot provide assurance that such financing will be available to it on favorable terms, or at all. If, after utilizing the existing sources of capital available to the Company, further capital needs are identified and the Company is not successful in obtaining the financing, it may be forced to curtail its existing or planned future operations





Critical Accounting Policies





We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.


12


The methods, estimates, and judgment we use in applying our most critical accounting policies have significant impact on the results we report in our financial statements. The SEC has defined "critical accounting policies" as those accounting policies that are most important to the portrayal of our financial condition and results, and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based upon this definition, our most critical estimates are described below under the heading "Revenue Recognition." We also have other key accounting estimates and policies, but we believe that these other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less
likely that they would have a material impact on our reported results of operations for a given period. Although we believe that our estimates and assumptions are reasonable, they are based upon information presently available, and actual results may differ significantly from these estimates.





Financial Instruments





Cash is the only asset on the Company’s balance sheet. The carrying value of cash approximates its fair value because of the short-term maturity of these instruments.




13




Concentration of Credit Risk





Financial instruments that potentially subject the Company to credit risk consist principally of cash.  Cash is deposited with HSBC in Hong Kong and RBC Centura Bank in Florida two high quality financial institutions.





Income Taxes





Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted FASB ASC 740 as of its inception. Pursuant to FASB ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in the financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.





Basic and Diluted Net Income (Loss) Per Share





The Company computes net income (loss) per share in accordance with ASC 260 “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti-dilutive.





Revenue Recognition





The Company is a development stage entity and has not recognized any revenues since inception. The Company is in the process of acquiring a facility in China that produces trichlorosilane (“TCS”) and certain byproducts. In the event this acquisition is successfully consummated the Company will generate revenues from the sales of TCS and certain by products. Revenue will be recognized when all of the following elements are satisfied (i) there are no uncertainties regarding customer acceptance;(ii) there is persuasive evidence that an agreement exists; (iii) delivery has occurred; (iv) legal title to the products has transferred to the customer; (v) the sales price is fixed or determinable; and (vi) collectability is reasonably assured.





Off Balance Sheet Arrangements





As of May 31, 2010, there were no off balance sheet arrangements.





Item 8.
Financial Statements and Supplementary Data





See the financial statements annexed to this annual report.





PART IV





Item 15.    Exhibits, Financial Statement Schedules





See Exhibit Index below.


14


SIGNATURES





In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





SUNSI ENERGIES INC.By:/s/ David NatanDavid NatanChief Executive and Financial OfficerMarch 23, 2011





In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:





By:/s/ Kebir RatnaniKebir RatnaniDirectorMarch 23, 2011/s/ Richard St-JulienRichard St-JulienSecretary and DirectorMarch 23, 2011/s/ David NatanDavid NatanChief Executive and Financial Officer,

DirectorMarch 23, 2011


15


EXHIBIT INDEX





Exhibit

Number

Description10.1

Distribution Agreement (1)10.2

Equity Transfer Agreement dated November 22, 2010 (2)10.3

Letter Agreement dated December 15, 2010 (3)31

Certification of Chief Executive Officer and Chief Financial pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





(1)
Incorporated by reference to Exhibit 10 of the Company’s current report on Form 8-K filed on December 15, 2009 with the SEC.


(2)
Incorporated by reference from Exhibit 10.1 of the Company’s current report on Form 8-K filed on March 10, 2011 with the SEC.


(3)
Incorporated by reference from Exhibit 10.2 of the Company’s current report on Form 8-K filed on March 10, 2011 with the SEC.


16


Index to Financial Statements





Audited Financial Statements:





F-1

Report of Independent Registered Public Accounting FirmF-2

Consolidated  Consolidated Balance Sheets as of May 31, 2010 and 2009F-3

Consolidated Statements of Operations for years ended May 31, 2010 and 2009, and from inceptionF-4

Consolidated Statement of Stockholders’ Equity (Deficit) for years ended May 31, 2010 and 2009, and from inceptionF-5

Consolidated Statements of Cash Flows for years ended May 31, 2010 and 2009, and from inceptionF-6

Notes to Consolidated Financial Statements


17


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Officers and Directors

SunSi Energies Inc.



We have audited the accompanying consolidated balance sheets of SunSi Energies Inc. ( a Nevada development  stage  company) as of May 31, 2010 and 2009, and the related consolidated statements of operations,  stockholders’  equity  (deficit), and cash flows for the  years ended May 31, 2010 and 2009, and for the period from inception on January 30, 2007 through May 31, 2010.   These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.




In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SunSi Energies Inc. as of May 31, 2010 and 2009, and the results of its operations, and its cash flows for the years ended May 31, 2010 and 2009, and for the period of January 30, 2007 (date of inception) through May 31, 2010, in conformity with accounting principles generally accepted in the United States of America.



The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has cash flow constraints, an accumulated deficit, and has suffered recurring losses from operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/Child, Van Wagoner & Bradshaw, PLLC

Child, Van Wagoner & Bradshaw, PLLC

Certified Public Accountants

Salt Lake City, Utah

August 30, 2010


F-1


SUNSI ENERGIES INC.


(A Development Stage Company)


Consolidated Balance Sheets





(Expressed in US dollars)





May 31,


May 31,2010


2009AssetsCurrent assetsCash
$
598,468


$
4,190Total current assets

598,468



4,190Total Assets
$
598,468


$
4,190Liabilities and Stockholders' Equity (Deficit)Current liabilitiesAccounts payable
$
149,538


$
143,741Accounts payable-related party

0



20,836Advances payable

230,981



0Compensation payable-related party

5,671



0Total current liabilities

386,190



164,577Stockholders' equity (Deficit)Common stock, $0.001 par value, 75,000,000 shares authorized, 27,312,500 and 26,760,000 issued and outstanding in 2010 and 2009 respectively

27,312



26,760Additional paid in capital

1,018,764



24,816Accumulated deficit

(833,798
)


(211,963
)Total stockholders' equity (deficit)

212,278



(160,387
)Total Liabilities and Stockholders' Equity
$
598,468


$
4,190





See accompanying notes to financial statements


F-2


SUNSI ENERGIES INC.


(A Development Stage Company)


Consolidated Statements of Operations





(Expressed in US dollars)





Year Ended

May 31, 2010


Year Ended

May 31, 2009


From inception

(January 30, 2007)

to May 31, 2010Revenue

$
—


$
—


$
—OperationMining exploration


—



—



9,440Professional fees


580,981



124,435



705,416General and administrative


40,854



45,420



118,942621,835



169,855



833,798(Loss)


(621,835
)


(169,855
)


(833,798
)Income taxes


—



—



—Net (Loss)

$
(621,835
)

$
(169,855
)

$
(833,798
)Net (Loss) Per Common Share Basic

$
(0.02
)

$
(0.01
)WEIGHTED AVERAGE NUMBER OF COMMON SHARES


26,972,486



26,760,000





See accompanying notes to financial statements


F-3


SUNSI ENERGIES INC.


(A Development Stage Company)


Statement of Stockholders' Equity (Deficit)


From Inception to May 31, 2010





Common StockShares


Amount


Additional

paid in Capital


Accumulated

(Deficit)


Total

Stockholders'

Equity (Deficit)Balance at inception on January 30, 2007


0


$
—


$
—


$
—


$
—Issuance of common stock in March 2007 for cash at $0.0001 per share


18,000,000



18,000



(16,500
)


0



1,500Issuance of common stock in March 2007 for cash at $0.004 per share


4,080,000



4,080



12,920



0



17,000Issuance of common stock in April 2007 for cash at $0.004 per share


4,680,000



4,680



14,820



0



18,500Loss to May 31, 2007


—



—



—



(7,731
)


(7,731
)Balance at May 31, 2007


26,760,000



26,760



11,240



(7,731
)


10,769Loss to May 31, 2008


0



0



0



(34,377
)


(34,377
)Balance at May 31, 2008


26,760,000



26,760



11,240



(42,108
)


(4,108
)Capital contribution by officer


—



—



13,576



0



13,576Loss to May 31, 2009


0



0



0



(169,855
)


(169,855
)Balance at May 31, 2009


26,760,000



26,760



24,816



(211,963
)


(160,387
)Issuance of common stock in September 2009 for cash at $2.00 per share


12,500



12



24,988



0



25,000Issuance of common stock in October 2009 for cash at $2.00 per share


300,000



300



599,700



0



600,000Issuance of common stock in February 2010 for cash at $2.00 per share


37,500



37



74,963



0



75,000Issuance of common stock in March 2010 for cash at $2.00 per share


50,000



50



99,950



0



100,000Issuance of common stock in May 2010 for cash at $2.00 per share


152,500



153



304,847



0



305,000Costs of issuance










(110,500
)






(110,500
)Loss to May 31, 2010














(621,835
)


(621,835
)Balance at May 31, 2010


27,312,500


$
27,312


$
1,018,764


$
(833,798
)

$
212,278


F-4


SUNSI ENERGIES INC.


(A Development Stage Company)


Consolidated Statements of Cash Flows





(Expressed in US dollars)





Year Ended

May 31, 2010


Year Ended

May 31, 2009


From inception

(January 30, 2007)

to May 31, 2010Cash flow from operating activities:Net income (loss) for the period

$
(621,835
)

$
(169,855
)

$
(833,798
)Adjustments to reconcile net loss to net cash (used in) operationsChanges in operating assets and liabilities:Accounts payable


5,797



50,928



149,538Accounts payable-related party


(20,836
)


20,836



—Compensation payable-related party


5,671



—



5,671Net cash (used in) operating activities


(631,203
)


(98,091
)


(678,589
)Cash flows from investing activities:Net cash provided by (used in) investing activities


0



0



0Cash flows from financing activities:Issuance of common stock


1,105,000







1,143,000Advances Payable


120,481



88,000



120,481Capital contributions


0



13,576



13,576Net cash provided by financing activities


1,225,481



101,576



1,277,057NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


594,278



3,485



598,468Cash and cash equivalents at beginning of period


4,190



705



—CASH & CASH EQUIVALENTS AT END OF PERIOD

$
598,468


$
4,190


$
598,468SUPPLEMENTAL NON-CASHFinancing activityAccrual of cost of issuance in advances payable


110,500


$
—



110,500Supplemental disclosures of cash flow information Cash paid during period forInterest

$
—


$
—


$
—Income taxes

$
—


$
—


$
—


F-5


SUNSI ENERGIES INC.


(A Development Stage Company)


Notes to Consolidated financial statements


May 31, 2010


(Expressed in U.S. dollars)





1.
NATURE AND CONTINUANCE OF OPERATIONS





The Company was incorporated in the State of Nevada on January 30, 2007.  The Company is a Development Stage Company as defined by ASC Topic 915.





2.
GOING CONCERN





The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has had no revenues and has generated losses from operations.





The Company has incurred losses since inception resulting in an accumulated deficit of $833,798. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to address the going concern issue by funding future operations through the sale of equity capital and by director loans, if needed.





3.
SIGNIFICANT ACCOUNTING POLICIES





Basis of Presentation





The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States and are expressed in U.S. Dollars. The Company’s fiscal year-end is May 31. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary SunSi Energies Hong Kong Ltd., which had no activity through May 31, 2010 other than incorporation, legal and professional fees and start-up costs.





Use of Estimates





The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.





Financial Instruments





Cash is the only asset on the Company’s balance sheet. The carrying value of cash approximates its fair value because of the short-term maturity of these instruments.


F-6


SUNSI ENERGIES INC.


(A Development Stage Company)


Notes to Consolidated financial statements


May 31, 2010


(Expressed in U.S. dollars)





3.
SIGNIFICANT ACCOUNTING POLICIES (continued)





Concentration of Credit Risk





Financial instruments that potentially subject the Company to credit risk consist principally of cash.  Cash is deposited with a high quality credit institution. On occasion, cash balances exceed the FDIC limit.





Income Taxes





Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted FASB ASC 740 as of its inception. Pursuant to FASB ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in the financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.





Basic and Diluted Net Income (Loss) Per Share





The Company computes net income (loss) per share in accordance with ASC 260 “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti-dilutive.





Revenue Recognition





The Company is a development stage entity and has not recognized any revenues since inception. The Company is in the process of acquiring a facility in China that produces trichlorosilane (“TCS”) and certain byproducts. In the event this acquisition is successfully consummated the Company will generate revenues from the sales of TCS and certain byproducts. Revenue will be recognized when all of the following elements are satisfied (i) there are no uncertainties regarding customer acceptance;(ii) there is persuasive evidence that an agreement exists; (iii) delivery has occurred; (iv) legal title to the products has transferred to the customer; (v) the sales price is fixed or determinable; and (vi) collectability is reasonably assured.





4.
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS





Statement of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic 855), "Subsequent Events", SFAS No. 166 (ASC Topic 810), "Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140", SFAS No. 167 (ASC Topic 810), "Amendments to FASB Interpretation No. 46 (R)", and SFAS No. 168 (ASC Topic 105), "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162" were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant


F-7


SUNSI ENERGIES INC.


(A Development Stage Company)


Notes to Consolidated financial statements


May 31, 2010


(Expressed in U.S. dollars)





Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU's No. 2009-2 through ASU No. 2010-24 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.





5.
ADVANCES PAYABLE





During the period the Company received advances and accruals amounting to $230,981 from two non-affliated stockholders to help fund the operations of the Company until proceeds were received from the Company’s Stock Offering. The advances were made to the Company on an interest free basis. Therefore no interest has been accrued in the Company’s financial statements.





6.
INCOME TAXES





Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has incurred a net operating loss of $833,798, which expires in 2030. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.





The components of the net deferred tax asset at May 31, 2010, the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are indicated below:





May 31, 2010$Net Operating Loss


833,798Statutory Tax Rate


35
%Effective Tax Rate


—Deferred Tax Asset


291,829Valuation Allowance


(291,829
)Net Deferred Tax Asset


—





The Company follows the provisions of uncertain tax positions as addressed in FASB ASC 740-10-65-1. The Company recognized approximately no increase in the liability for unrecognized tax benefits.





The Company has no tax positions at May 31, 2010 and 2009 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at May 31, 2010 or 2009.


F-8


SUNSI ENERGIES INC.


(A Development Stage Company)


Notes to Consolidated financial statements


May 31, 2010


(Expressed in U.S. dollars)





7.
STOCKHOLDERS’ EQUITY





The Company is authorized to issue 75 million shares of common stock at a par value of $0.001 and had 27,312,500 shares of common stock issued and outstanding as of May 31, 2010. On March 24, 2009, the Board of Directors approved a 12 for 1 forward stock split. The split has been reflected in the consolidated financial statements for all periods presented.





The Company has been conducting a private placement of its common stock since September 10, 2009 at a price of $2.00 per share, with a maximum issuance of 8,000,000 shares (‘Offering’). During the year, the Company accepted subscription agreements from investors and correspondingly issued 552,500 shares of its common stock pursuant to the Offering, and received $1,105,000 in gross proceeds. The cost of this issuance was $110,500.





8.
RELATED PARTY TRANSACTIONS





The Company owes $5,671 to its Chief Financial Officer for compensation and expenses. During the year $28,100 was paid to his entity.





9.
COMMITMENTS





SunSi Energies Inc. entered into various engagement agreements for advisory and consulting services on a non-exclusive basis to obtain equity capital. In the event that the Company completes a financing from a funding source provided by one of the consultants, then such consultant will receive a finders or referral fee at closing ranging from seven percent (7%) to ten percent (10%) of the amount received by the Company. The total financing sought is in the amount of $16,000,000 in equity. The maximum potential amount of fee paid that can be paid amounts to $1,600,000. These fees have been accrued at May 31, 2010. The terms and condition of financing are subject to Company approval.





On November 10, 2009 and February 9, 2010 the Company entered in agreements with its Director of Business Development and Chief Financial Officer, respectively, to pay each of these individuals $60,000 per year plus any documented out of pocket business expenses.





10.
OTHER EVENTS





The Company incorporated on April 7, 2009 a wholly-owned subsidiary in Hong Kong in the name of “SunSi Energies Hong Kong Limited” (“Sunsi HK”) and the Company entered into two (2) Joint Venture Agreements with ZBC, respectively on June 18 and June 19, 2009. SunSi Energies Hong Kong had no activity from the date of incorporation through August 30, 2010 other than incorporation, legal and professional fees and start-up costs.





In June 2009, subject to the successful completion of due diligence and other conditions, SunSi Energies Hong Kong committed to invest a total of $10,000,000 in exchange for 90% of the capital stock in the newly formed PRC Joint Venture Company which would have received all of the assets, expertise and technology of Zibo Commerce and Trade Co. (“ZBC”) as well as ZBC’s affiliated trucking and transportation company.  On August 30, 2010, concurrent with the acquisition of Zibo Baokai (see Subsequent Events), the Company discontinued its efforts to
purchase ZBC.


F-9


SUNSI ENERGIES INC.


(A Development Stage Company)


Notes to Consolidated financial statements


May 31, 2010


(Expressed in U.S. dollars)





10.
OTHER EVENTS (Continued)





Currently, SunSi Energies is in the process of evaluating additional acquisition opportunities in China including one candidate with high growth potential. One of the targeted facilities comes with an off-take agreement for the sale of over 20,000 MT of TCS per year to one of China’s largest polysilicon makers.





11.
SUBSEQUENT EVENTS





Subsequent to May 31, 2010 the Company has repaid $161,000 of the advances payable discussed in Note 5.





Subsequent to May 31, 2010 the Company has received $262,000 from the sale of 131,000 shares of comma stock.





On April 29th 2010, SunSi HK signed a definitive agreement to acquire 90% of Zibo Baokai Commerce and Trade Co. (“Zibo Baokai”) for approximately 1.8 million RMB, or approximately $270,000. At the date of this report, the company is waiting for the issuance of a business license in order to consummate this acquisition.  All other terms necessary to complete the acquisition were completed on July 31, 2010, when the Articles of Association and Joint Venture Agreement were signed. When completed, this acquisition will enable SunSi to generate revenue and to create a presence within the Chinese and other international TCS markets.





On August 3rd 2010, SunSi HK signed a letter of intent with Wendeng He Xie Silicon Co. Ltd. (“Wendeng”) for the acquisition of 60% of its existing 20,000 MT TCS facility, plus an increase of Wendeng’s capacity by an additional 40,000 MT.





The Company has evaluated subsequent events from the balance sheet through the date the financial statements were issued, and determined there are no other events to disclose







F-10