UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
DC 20549



FORM
10-Q



|[X]      | Quarterly
    Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|-------- | -------------------------------------------------------------------------------------------
|         |                                                                                            
|         | For
    the quarterly period ended June 30, 2012                                           
|         |                                                                                            
|[ 
    ] | Transition
    Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934       
|         |                                                                                            
|         | For
    the transition period from  to__________                                           
|         |                                                                                            
|         | Commission
    File Number: 333-150692                                                     



Sunvalley
Solar, Inc.(Exact name of registrant as specified in its charter)



|Nevada                                                             | 20-8415633                           
|------------------------------------------------------------------ | -------------------------------------
|(State
    or other jurisdiction of incorporation or organization) | (IRS
    Employer Identification No.)
|                                                                   |                                      



|398
    Lemon Creek Dr., Suite A, Walnut, CA 91789
|--------------------------------------------------
|(Address
    of principal executive offices)      



|(909)
    598-0618                                                                                                                          
|--------------------------------------------------------------------------------------------------------------------------------------------
|(Registrant’s
    telephone number)                                                                                                         
|                                                                                                                                            
|_____________________________________________________________________                                                                       
|(Former
                                                          name, former address and former fiscal year, if changed since last report)

Indicated
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [X] Yes [ ] No



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



|[
                                                                      ] Large accelerated filer
        [
        ] Non-accelerated filer | [
                                                                      ] Accelerated filer
        [X]
        Smaller reporting company
|------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                            |                                                                                                                                          

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No



State
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 9,800,623
common shares as of August 17, 2012.



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 (§ 229.405 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 [X]

1


Table of Contents




|                                    | TABLE
    OF CONTENTS                                                                     | Page
|----------------------------------- | ----------------------------------------------------------------------------------------- | ----
|                                    |                                                                                           |     
|PART
    I – FINANCIAL INFORMATION 
|Item
    1:                         | Financial
    Statements                                                                  | 3   
|Item
    2:                         | Management’s
    Discussion and Analysis of Financial Condition and Results of Operations | 4   
|Item
    3:                         | Quantitative
    and Qualitative Disclosures About Market Risk                            | 10  
|Item
    4:                         | Controls
    and Procedures                                                               | 10  
|PART
        II – OTHER INFORMATION
|                                    |                                                                                           | 11  
|Item
    1:                         | Legal
    Proceedings                                                                     | 11  
|Item
    1A:                        | Risk
    Factors                                                                          | 11  
|Item
    2:                         | Unregistered
    Sales of Equity Securities and Use of Proceeds                           | 11  
|Item
    3:                         | Defaults
    Upon Senior Securities                                                       | 11  
|Item
    4:                         | Mine
    Safety Disclosures                                                               | 11  
|Item
    5:                         | Other
    Information                                                                     | 12  
|Item
    6:                         | Exhibits                                                                                  | 12  

2


Table of Contents


PART
I - FINANCIAL INFORMATION



Item
1.	     Financial Statements



Our
financial statements included in this Form 10-Q are as follows:



|F-1 | Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011;                          
|--- | ----------------------------------------------------------------------------------------------------------------------
|F-2 | Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited);
|F-3 | Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited);          
|F-4 | Notes to Condensed Consolidated Financial Statements.                                                                 



These
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2012 are not necessarily
indicative of the results that can be expected for the full year.



3


Table of Contents




SUNVALLEY
SOLAR, INC.

Condensed
Consolidated Balance Sheets

(unaudited)





|ASSETS                                                                                                                               |  | June 30,    |            | December 31,
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ---------- | ------------
|                                                                                                                                     |  | 2012        |            | 2011        
|                                                                                                                                     |  | (unaudited) |            |             
|CURRENT ASSETS                                                                                                                       |  |             |            |             
|Cash and cash equivalents                                                                                                            |  | $           | 148,361    |             
|Restricted cash                                                                                                                      |  |             | 25,000     |             
|Accounts receivable, net                                                                                                             |  |             | 3,933,256  |             
|Inventory                                                                                                                            |  |             | 1,042,946  |             
|Costs in excess of billings on uncompleted contracts                                                                                 |  |             | 715,567    |             
|Other receivables                                                                                                                    |  |             | 1,798      |             
|Prepaid expenses and other current assets                                                                                            |  |             | 19,798     |             
|                                                                                                                                     |  |             |            |             
|Total current assets                                                                                                                 |  |             | 5,886,726  |             
|                                                                                                                                     |  |             |            |             
|PROPERTY AND EQUIPMENT, NET                                                                                                          |  |             | 93,319     |             
|                                                                                                                                     |  |             |            |             
|OTHER ASSETS                                                                                                                         |  |             |            |             
|Other assets                                                                                                                         |  |             | 27,859     |             
|                                                                                                                                     |  |             |            |             
|Total other assets                                                                                                                   |  |             | 27,859     |             
|                                                                                                                                     |  |             |            |             
|TOTAL ASSETS                                                                                                                         |  | $           | 6,007,904  |             
|                                                                                                                                     |  |             |            |             
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                 |  |             |            |             
|                                                                                                                                     |  |             |            |             
|CURRENT LIABILITIES                                                                                                                  |  |             |            |             
|Accounts payable and accrued expenses                                                                                                |  | $           | 3,873,936  |             
|Customer deposits                                                                                                                    |  |             | 698,738    |             
|Accrued warranty                                                                                                                     |  |             | 69,737     |             
|Current portion of long-term debt                                                                                                    |  |             | 29,460     |             
|Current portion of capital lease                                                                                                     |  |             | 2,536      |             
|Convertible debt, net                                                                                                                |  |             | 91,098     |             
|Related party notes payable                                                                                                          |  |             | 171,308    |             
|Factoring payable                                                                                                                    |  |             | 309,475    |             
|Derivative liability                                                                                                                 |  |             | 128,346    |             
|                                                                                                                                     |  |             |            |             
|Total current liabilities                                                                                                            |  |             | 5,374,634  |             
|                                                                                                                                     |  |             |            |             
|LONG-TERM LIABILITIES                                                                                                                |  |             |            |             
|Capital leases                                                                                                                       |  |             | 12,350     |             
|Notes payable                                                                                                                        |  |             | 52,927     |             
|                                                                                                                                     |  |             |            |             
|Total long-term liabilities                                                                                                          |  |             | 65,277     |             
|                                                                                                                                     |  |             |            |             
|TOTAL LIABILITIES                                                                                                                    |  |             | 5,439,911  |             
|                                                                                                                                     |  |             |            |             
|STOCKHOLDERS' EQUITY                                                                                                                 |  |             |            |             
|                                                                                                                                     |  |             |            |             
|Common stock, $0.001 par value, 5,000,000,000 shares authorized, 4,310,632 and 1,772,080 shares issued and outstanding, respectively |  |             | 4,311      |             
|Additional paid-in capital                                                                                                           |  |             | 2,259,901  |             
|Treasury stock                                                                                                                       |  |             | (104,000   | )           
|Accumulated deficit                                                                                                                  |  |             | (1,592,219 | )           
|                                                                                                                                     |  |             |            |             
|Total Stockholders' Equity                                                                                                           |  |             | 567,993    |             
|                                                                                                                                     |  |             |            |             
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                           |  | $           | 6,007,904  |             





The
accompanying notes are an integral part of these condensed consolidated financial statements.



F-1


Table of Contents


SUNVALLEY
SOLAR, INC.

Condensed
Consolidated Statements of Operations

(unaudited)





|                                                                |  | For the Three Months Ended |           | For the Six Months Ended
|--------------------------------------------------------------- |  | -------------------------- | --------- | ------------------------
|                                                                |  | June 30,                   |           | June 30,                
|                                                                |  | 2012                       |           | 2011                    
|                                                                |  |                            |           |                         
|REVENUES                                                        |  | $                          | 763,612   |                         
|COST OF SALES                                                   |  |                            | 383,224   |                         
|                                                                |  |                            |           |                         
|GROSS PROFIT                                                    |  |                            | 380,388   |                         
|                                                                |  |                            |           |                         
|OPERATING EXPENSES                                              |  |                            |           |                         
|Salary and wage expense                                         |  |                            | 140,930   |                         
|Professional fees                                               |  |                            | 20,125    |                         
|Selling, general and administrative expenses                    |  |                            | 121,054   |                         
|                                                                |  |                            |           |                         
|Total operating expenses                                        |  |                            | 282,109   |                         
|                                                                |  |                            |           |                         
|INCOME (LOSS) FROM OPERATIONS                                   |  |                            | 98,279    |                         
|                                                                |  |                            |           |                         
|OTHER INCOME (EXPENSES)                                         |  |                            |           |                         
|Gain on sale of property                                        |  |                            | 9,481     |                         
|Gain (loss) on derivative liability                             |  |                            | 189,126   |                         
|Loss on conversion of debt                                      |  |                            | (183,634  | )                       
|Interest income                                                 |  |                            | 184       |                         
|Interest expense                                                |  |                            | (89,279   | )                       
|                                                                |  |                            |           |                         
|Total other expenses                                            |  |                            | (74,122   | )                       
|                                                                |  |                            |           |                         
|LOSS BEFORE TAXES                                               |  |                            | 24,157    |                         
|                                                                |  |                            |           |                         
|Provision for income taxes                                      |  |                            | —         |                         
|                                                                |  |                            |           |                         
|NET INCOME (LOSS)                                               |  | $                          | 24,157    |                         
|                                                                |  |                            |           |                         
|                                                                |  |                            |           |                         
|BASIC AND DILUTED LOSS PER SHARE                                |  | $                          | 0.02      |                         
|                                                                |  |                            |           |                         
|BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |  |                            | 1,361,231 |                         







The
accompanying notes are an integral part of these condensed consolidated financial statements.



F-2


Table of Contents


SUNVALLEY
SOLAR, INC.

Condensed
Consolidated Statements of Cash Flows

(unaudited)





|                                                                                    |  | For the Six Months Ended
|----------------------------------------------------------------------------------- |  | ------------------------
|                                                                                    |  | June 30,                
|                                                                                    |  | 2012                    
|                                                                                    |  |                         
|OPERATING ACTIVITIES:                                                               |  |                         
|                                                                                    |  |                         
|Net loss                                                                            |  | $                       
|Adjustments to reconcile net
    loss to net cash provided by operating activities: |  |                         
|Depreciation and amortization                                                       |  |                         
|Amortization of discount                                                            |  |                         
|(Gain) loss on re-measurement of derivative                                         |  |                         
|Loss on conversion of debt                                                          |  |                         
|(Gain) loss on sale of property                                                     |  |                         
|Stock-based compensation                                                            |  |                         
|Changes in operating assets and liabilities:                                        |  |                         
|Accounts receivable                                                                 |  |                         
|Inventory                                                                           |  |                         
|Prepaid expenses and other assets                                                   |  |                         
|Other receivables                                                                   |  |                         
|Costs in excess of billings on uncompleted contracts                                |  |                         
|Factoring line                                                                      |  |                         
|Other assets                                                                        |  |                         
|Accounts payable                                                                    |  |                         
|Accrued warranty expenses                                                           |  |                         
|Customer deposits                                                                   |  |                         
|                                                                                    |  |                         
|Net Cash(Used) in Operating Activities                                              |  |                         
|                                                                                    |  |                         
|INVESTING ACTIVITIES:                                                               |  |                         
|                                                                                    |  |                         
|Sale of property                                                                    |  |                         
|Purchase in property and equipment                                                  |  |                         
|                                                                                    |  |                         
|Net Cash Provided by (Used in) Investing Activities                                 |  |                         
|                                                                                    |  |                         
|FINANCING ACTIVITIES:                                                               |  |                         
|                                                                                    |  |                         
|Proceeds from related party notes payable                                           |  |                         
|Repayments of long term debt                                                        |  |                         
|Proceeds from factoring payable                                                     |  |                         
|Proceeds from convertible debt                                                      |  |                         
|Repayment of factoring line                                                         |  |                         
|Proceeds from sale of common stock                                                  |  |                         
|Proceeds from notes payable                                                         |  |                         
|                                                                                    |  |                         
|Net Cash Provided by Financing Activities                                           |  |                         
|                                                                                    |  |                         
|NET DECREASE IN CASH                                                                |  |                         
|CASH AT BEGINNING OF YEAR                                                           |  |                         
|                                                                                    |  |                         
|CASH AT END OF YEAR                                                                 |  | $                       
|                                                                                    |  |                         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                  |  |                         
|                                                                                    |  |                         
|CASH PAID FOR:                                                                      |  |                         
|Interest                                                                            |  | $                       
|Income taxes                                                                        |  | $                       
|                                                                                    |  |                         
|NON-CASH INVESTING AND FINANCING ACTIVITIES                                         |  |                         
|Derivative liability                                                                |  | $                       
|Common stock issued for debt                                                        |  | $                       
|Repuchase of shares for notes payable                                               |  | $                       







The
accompanying notes are an integral part of these condensed consolidated financial statements.



F-3


Table of Contents






SUNVALLEY SOLAR,
INC.

Notes
to the Condensed Consolidated Financial Statements

June
30, 2012 and December 31, 2011



NOTE
1 – CONDENSED FINANCIAL STATEMENTS



The
accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations,
and cash flows at June 30, 2012, and for all periods presented herein, have been made.



Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed
financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December
31, 2011 audited financial statements.  The results of operations for the periods ended June 30, 2012 and 2011 are not
necessarily indicative of the operating results for the full years.



NOTE
2 – GOING CONCERN



The
Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable
to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced
to cease operations.



In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan
is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet
its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that
the Company will be successful in accomplishing any of its plans.



The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.



NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES



Reclassification
of Financial Statement AccountsCertain amounts in the June 30, 2011 financial statements have been reclassified to conform to the presentation in
the June 30, 2012 financial statements.

Use
of Estimates

The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and 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.



Recent
Accounting Pronouncements

Management
has considered all recent accounting pronouncements issued since the last audit of the financial statements. The Company’s
management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.



F-4


Table of Contents


Inventory

Inventory
is stated at the lower of cost or net realizable value. Cost is determined on an average cost basis; and the inventory is comprised
of raw materials and finished goods. Raw materials consist of fittings and other components necessary to assemble the Company’s
finished goods.  Finished goods consist of solar panels ready for installation and delivery to customers.



NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



The
Company’s inventory consisted of the following at June 30, 2012 and December 31, 2011:



|                   |  | 2012 |           | 2011
|------------------ |  | ---- | --------- | ----
|Raw materials      |  | $    | 216,630   |     
|Work in Progress   |  |      | 84,326    |     
|Finished
    goods |  |      | 741,990   |     
|                   |  | $    | 1,042,946 |     



Loss
Per Common Share

Basic
net loss per common share is computed by dividing the net loss by the weighted average number of outstanding common shares (restricted
and free trading) during the periods presented. Basic loss per share and diluted loss per share are the same amount because the
impact of additional common shares that might have been issued under the Company’s outstanding and exercisable warrants
would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. There
were 4,767,480 and 382,471 such potentially dilutive shares excluded as of June 30, 2012 and December 31, 2011, respectively.



NOTE
4 – COSTS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS



The
Company is currentlyinvolved in certain major short-term solar panel installation projects.
The Company is accounting for revenue and expenses associated with these two contracts under the completed contract method of
accounting in accordance with ASC 605. Under ASC 605, income is recognized on when the contracts are completed or substantially
completed and billings and others costs are accumulated on the balance sheet. Under the completed contract method, no profit or
income is recorded before completion of substantial completion of the work.



As
of June 30, 2012 and December 31, 2011, the Company has capitalized $715,567 and $168,493 of costs incurred in relation to installation
projects. The Companyexpects a fewmajor projects to be completed or substantially completed
by December 31, 2012.



NOTE
5 – CAPITAL LEASE



The
Company leased equipment in September 2011 and such lease has been classified as a capital lease because it contained a beneficial
by-out option at the end of the lease.   The Company has used the discounted value of future payments as the fair
value of this asset and has recorded the discounted value of the remaining payments as a liability.

As
of June 30, 2012 the net book value of this leased asset is $15,267 as the Company recognizes $14,886 in remaining lease obligations.

F-5


Table of Contents


NOTE
6 – RELATED PARTY TRANSACTIONS



During
the six months ended June 30, 2012, the Company borrowed $71,308 from two  of the officers of the Company. The
note accrues interest at 6.5 percent per annum, is unsecured and due on demand. As of December 31, 2011, the Company owes $100,000
for short-term related party loans with maturity dates of less than 1 year bearing an interest rate of 6.5%; per annum. During
May 2012, the Company converted a total of $104,000 loan payable from these two officers for the issuance of 821,812 shares of
common and recorded the loss on conversion of debt in the amount of $183,634. In June 2012, the Company bought back 821,812 shares
of common stock from these two officers as treasury stock with the short-term notes of $104,000 which accrue interest at 6.5 percent
per annum with maturity dates of less than 1 year. The accrued interest on the related party payables was $3,096 and $178, for
the six months ended June 30, 2012 and the year ended December 31, 2011, respectively.



NOTE
7 – CONVERTIBLE DEBT



On
July 21, 2011, the Company borrowed $100,000 in the form of a convertible note payable. The note is convertible at the holder’s
option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this
conversion feature, the Company recorded a discount on debt in the amount of $100,000 on the note date. The note is due on April
17, 2012, is unsecured, and bears an interest rate of 8%. As of June 30, 2012, the full amount of the note was converted to the
Company’s common stock along with $4,280 of accrued interest.



On
October 3, 2011, the Company borrowed $75,000 in the form of a convertible note payable. The note is convertible at the hold’s
option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this
conversion feature, the Company recorded a discount on debt in the amount of $30,313 on the note date. The note is due on June
27, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the full amount of the note was converted to the
Company’s common stock along with $3,426 of accrued interest.



On
October 26, 2011, the Company borrowed $75,000 in the form of a convertible note payable. The note is convertible at the holder’s
option at 61% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this
conversion feature, the Company recorded a discount on debt in the amount of $75,000 on the note date. The note is due on July
20, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the Company had recorded $4,077 in accrued interest
on the note. As of June 30, 2012 the Company had amortized $11,539 of the debt discount to interest expense, leaving $25,796 in
unamortized debt discount at June 30, 2012.



On
October 28, 2011, the Company borrowed $200,000 in the form of a convertible note. The note is convertible at the holder’s
option at 40% of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this
conversion feature, the Company recorded a discount on debt in the amount of $200,000 on the note date. The convertible debt is
due on July 18, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the Company had recorded $868 in accrued
interest on the note. As of June 30, 2012 the Company had amortized $29,871 of the debt discount to interest expense, leaving
$69,417 in unamortized debt discount at June 30, 2012.



On
February 22, 2012, the Company borrowed $78,500 of convertible debt. The debt is convertible at the holder’s option at 40%
of the average of the lowest three trading prices during the 10 trading days prior to conversion. Pursuant to this conversion
feature, the Company recorded a discount on debt in the amount of $78,500 on the note date. The convertible debt is due on November
21, 2012, is unsecured and bears an interest rate of 8%. As of June 30, 2012 the Company had recorded $2,220 in accrued interest
on the note. As of June 30, 2012 the Company had amortized $22,524 of the debt discount to interest expense, leaving $45,049 in
unamortized debt discount at June 30, 2012.



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Table of Contents


NOTE
8 – DERIVATIVE LIABILITY



Effective
July 31, 2009, the Company adopted ASC Topic No. 815-40 which defines determining whether an instrument (or embedded feature)
is solely indexed to an entity’s own stock. These debts are convertible at the holder’s option at 61% or 40% of the
average of the lowest three trading prices during the 10 days prior to conversion according to different note agreeemnts. The
number of shares issuable upon conversion of these debts are limited so that the Holder’s total beneficial ownership of
our common stock may not exceed 4.99% of the total issued and outstanding shares.



The
exercise price of these warrants are subject to “reset” provisions in the event the Company subsequently issues common
stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion
price of these notes. If these provisions are triggered, the conversion price of the note will be reduced.  As a result,
the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock
and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of
the note and recorded a derivative liability.



ASC
815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize
any change in the fair market value as another income or expense item.  The Company’s only asset or liability
measured at fair value on a recurring basis is its derivative liability associated with the above convertible debts.  At
June 30, 2012, the Company revalued the conversion features using the following assumptions: stock price of $0.0001, exercise
price of $0.0001, dividend yield of zero, years to maturity vary according to convertible note, risk free rate ranging from 0.04
to 0.16 percent, and annualized volatility ranging from 290 to 660 percent and determined
that, during the six months ended June 30, 2012, the Company’s derivative liability decreased by $373,280 to $128,346. The
Company recognized a corresponding gain on derivative liability in conjunction with this revaluation.



NOTE
9 – FACTORING LINE PAYABLE



During
the six months ended June 30 2012, the Company paid $833,926 to its factoring provider, inclusive of accrued fees, and the Company
borrowed a total of $726,741 from the factoring provider against its accounts receivable with a discount fee of approximately
0.95% for each 15-day period the accounts receivable remain unpaid. As of June 30, 2012, accrued interest and fees on this factoring
line totaled $309,475. The Company’s credit facility with the factoring company was increased to one million in June 2012.



NOTE
10 – COMMON STOCK



On
January 27, 2012, the Company issued 12,000 shares of its common stock for $19,530. On February 9, 2012, the Company issued
8,000 shares of its common stock for $11,160. On March 19, 2012, the Company issued 40,000 shares of its common stock for
$45,000.



During
the six months ended June 30, 2012 the Company issued 2,478,553 shares of the Company’s common stock upon conversion of
$602,572 of its debt. On June 25, 2012 the Company purchased 821,812 shares of its common stock for notes payable to related parties
of $104,000.



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Table of Contents


NOTE
11 – SUBSEQUENT EVENTS



Subsequent
to June 30, 2012 the Company issued 2,151,750 shares of its common stock upon the conversion of $76,990 of convertible debt.



Subsequent
to June 30, 2012 the Company cancelled 821,812 shares of treasury stock which were bought back from the two officers of the Company.



On
July 20, 2012 the Company effected an 1 to 500 reverse stock split, thus all the stock shares were stated as post-split in this
footnotes.



In
accordance with ASC 855, Company management reviewed all material events through the date of this report and there are no material
subsequent events to report.

F-8


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Item
2.     Management’s Discussion and Analysis or Plan of Operation



Forward-Looking
Statements



Certain
statements, 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.” 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. 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.





Company
Overview and Plan of Operation



We are a
California-based solar power technology and system integration company founded in January of 2007. We are focused on developing
our expertise and proprietary technology to install residential, commercial and governmental solar power systems. We offer turnkey
solar system solutions for owners, builders and architecture firms that include designing, building, operating, monitoring and
maintaining solar power systems. Our customers range from small private residences to large commercial solar power users. We have
the necessary licenses and expertise to design and install large scale solar power systems. We hold a C-46 Solar License from
CBCL (California Board of Contractor License). Some of the large scale commercial solar power systems that we have designed and
installed include large office buildings, manufacturing facilities and warehouses. Our proprietary technologies in solar installation
provide our customers with a high quality, low cost and flexible solar power system solutions.



We are working
to develop as an end-to-end solar energy solution provider by providing system solution, post-sale service, customer technical
support, solar system design and field installation.



Business
Development Plan



The
primary components of our growth strategy are as follows:



|- | Developing and commercializing
    our proprietary solar technologies including our coating and focusing technologies, racking and panel cleaning system. By
    deploying these new technologies into our PV panels and solar installation business, we hope to enhance the value provided
    to our customers and increase our profitability.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Promoting and enhancing our company’s
    brand and reputation in solar design and integration and expanding our installation business.                                                                                                                                                                                                         
|- | Developing a PV panel manufacturing capability
    to provide high efficiency and low cost solar panels to US market. This will complement our installation business and provide
    an implementation platform for our R&D.                                                                                                                    
|- | Getting involved in the private power
    providing business (Distributed Power Plants).  Developing this line of business will lead to higher profit margins
    and income to our business. In the future, this line of business could become one of our main income sources.                                                                 

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Expansion
of Installation Business



We
are planning to expand its installation business. We will continue to execute our marketing and sales strategy in Southern California
and, with additional capital, will be able to expand our business to cover Northern California, Arizona or other states.  The
planned expansion is expected to occur through acquiring smaller installation companies in these regions and/or through the establishment
of subsidiaries in these states and boost our installation profits. Our current intention is to establish two new offices located
in Northern California or other states and in San Diego. The estimated start-up cost for each new branch would be approximately
$500,000.



If
we are able to expand our installation business, it will assist us in gaining favorable terms from OEM international manufacturers
of our planned solar panel manufacturing operation.  In addition, an expanded installation business would allow us to
accelerate the introduction of our new technologies and solar parts and would generate additional revenue to fund initial investment
in our planned Distributed Power Plant business and to further fund our investments in R&D.



Commercialization
of Research and Development



Prior
to initiating our planned OEM manufacturing of Sunvalley-branded solar panels, we will need to commercialize our advanced panel
technology through the design, fabrication, and characterization of a prototype solar cell.  The total expense for planned
commercialization of our research and development will be approximately $500,000.The necessary equipment and facilities
will be accessed from University of California, San Diego. The Nano3 clean room facilities in the school of Engineering at UCSD
are equipped with state-of-the-art micro and nano fabrication equipment and facilities, and can be accessed by outside users with
a $107 hourly fee.



The
interference pattern that will be recorded in the solar cells will be obtained using an Argon laser operating at 362nm. This laser
and its associated equipment is available to us through a special arrangement with the administration office in the University
of California, San Diego, as well as the Ultrafast and Nano-scale Optics lab in the Department of Electrical and Computer Engineering
in UCSD.



Other
equipment will also be required, including coating machine for PV panel testing.



Initiate
OEM Manufacturing of Solar Panels



By
leveraging our solar panel installation business and R&D, we plan to procure OEM solar panels from selected Chinese manufacturers
and to market them in the U.S. under our brand name. We will be responsible for R&D, quality control, customer service, sales
and marketing activities, as well as panel certification in U.S.



The
estimated OEM panel cost is less than $0.60 per watt. As a reference, currently, the lowest panel price is around $1.00 per watt
(Mono-crystalline, Polycrystalline). We can use our own sales and installation platform to showcase the new panels and drive sales
of the new panels in the U.S market. Meanwhile, we will continue our R&D effort on panel coating and other advanced technologies
and apply the results to its panel manufacturing business. The goal will be to further improve the efficiency, lower the cost
of solar panels with our proprietary technologies, and to grow our market share.



Our
marketing strategy for its planned OEM solar panels is as follows:



|- | Set-up a platform to
    showcase our innovative solar panel technologies and make Sunvalley solar panels a household name.
|- | ---------------------------------------------------------------------------------------------------------------------------



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Unlike
other merchandise, solar panel is very unique in that it requires very high level of quality assurance and customer satisfaction.
Providing satisfactory customer service and technical support is absolutely vital in solar panel sales. As the first step, we
will strive to make its brand a household name. The Sunvalley solar panel will be used by our installation business as well as
several other installation companies which have partnerships with us. We do not currently have partnerships with other solar installation
companies, but we plan to pursue them after introducing the panels to the market through our own installation business. A marketing
campaign aimed at other solar installation companies will help to achieve this goal. We will use our own installation business
as the platform to showcase the product quality and build up consumer awareness of its brand.



|- | Penetrate into the
    main stream distribution network
|- | -------------------------------------------------------



By
leveraging early successes and customer trust earned from our initial installations, we plan to penetrate into the mainstream
distribution network with our OEM solar panels.



|- | Further sale activities
|- | -----------------------



Once
our brand name solar panels become well known, our sales team will begin an aggressive marketing campaign to connect the individual
sales points (distributors and venders) to form a distribution network. The marketing campaigns will also include attending trade
shows, advertising in the media (TV commercials and newspaper advertisement) and designating local representatives to boost the
market share and brand awareness.



|- | Offer a low cost, high
    efficiency solar panel derived from advanced research
|- | --------------------------------------------------------------------------------



To
boost our solar panel market share, our R&D team will work with our OEM partner to apply selective coating technique and other
cutting edge technologies to further reduce the manufacturing cost and improve the panel efficiency.



The
total capital required to initiate our planned panel manufacturing business would be approximately $2,000,000which
can be categorized into three parts:



|- | Registration and Certification of OEM
    panels with our brand – $300,000, including UL certification fees, CEC registration fees, and lab testing fees.                                                                                                                                                                                                                                                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Initial Inventory – $1,500,000.  We
    will need to keep 4-5 containers of PV panels in the warehouse in order to support sales of 5~10M watts per year, which means
    we will need to have over $1,000,000 in inventory for PV panels only. An additional $300,000 in inventory would be needed
    in order to keep the requisite amount of inverters and racking and panel cleaning systems. In addition, we anticipate providing
    variable payment terms to different customers based on their creditworthiness; this will add additional cash flow pressure.
|- | OEM Management costs – $200,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



Develop
Distributed Power Plant Business



With
our resources and experience gained from large scale solar power system designs, installation and other related business, we believe
we have unique advantages in the design and installation of large roof-top power plant systems. We are aggressively proposing
our Distributed Power Plant solution to utility companies in Southern California. We believe that by collaborating with us on
this approach, utility companies will benefit in the form of free installation, field space, and our expertise on large commercial
solar system designs, installation and maintenance services, as well as our technical and management experience. By collaborating
with us, utility companies can help to achieve their alternative energy requirements under California law.

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We
are among the few companies in California that has the permit and expertise to install large-scale commercial and/or government
solar power systems, together with roof constructional design and building interior/exterior electrical designs. We believe additional
advantages are provided by our experience in filing solar power system permit applications and rebate applications and our expertise
gained through our experience with governments and utility companies.



Expected
Changes In Number of Employees, Plant, and Equipment



We
do not currently plan to purchase specific additional physical plant and significant equipment within the immediate future. We
do not currently have specific plans to change the number of our employees during the next twelve months.



Results
of Operations for the three and six months ended June 30, 2012 and 2011



During the
three months ended June 30, 2012, we generated gross revenues of $763,612. Total cost of sales was $383,224, resulting in gross
profit of $380,388. Total operating expenses were $282,109, and consisted of salary and wage expenses of $140,930, selling, general
and administrative expenses of $121,054, and professional fees of $20,125. We experienced interest expense of $89,279, interest
income of $184, a gain on sale of property of $9,481, a gain of $189,126 due to the change in value of a derivative liability,
and a loss on conversion of debt in the amount of $183,634. Our net profit for the three months ended June 30, 2012 was therefore
$24,157.



By comparison,
during the three months ended June 30, 2011, we generated gross revenues of $1,940,573. Total cost of sales was $1,496,381 resulting
in gross profit of $444,192. Total operating expenses were $228,362, and consisted of salary and wage expenses of $139,013, selling,
general and administrative expenses of $72,343, and professional fees of $17,006. We experienced interest expense of $5,251, interest
income of $7,200, and a loss due to the change in value of a derivative liability of $9,169. The net profit for the three months
ended June 30, 2011 was therefore $208,610.



During the
six months ended June 30, 2012, we generated gross revenues of $941,708. Total cost of sales was $553,184, resulting in gross
profit of $388,524. Total operating expenses were $613,815, and consisted of salary and wage expenses of $316,692, selling, general
and administrative expenses of $253,630, and professional fees of $43,493. We experienced interest expense of $295,893, interest
income of $653, a gain on sale of property of $9,481, a gain of $460,201 due to the change in value of a derivative liability,
and a loss on conversion of debt in the amount of $183,634. Our net loss for the six months ended June 30, 2012 was therefore
$234,429.



By comparison,
during the six months ended June 30, 2011, we generated gross revenues of $2,738,383. Total cost of sales was $2,179,287 resulting
in gross profit of $558,556. Total operating expenses were $541,603, and consisted of salary and wage expenses of $281,915, selling,
general and administrative expenses of $216,195, and professional fees of $43,493. We experienced interest expense of $8,616,
interest income of $9,591, and a loss due to the change in value of a derivative liability of $11,822. The net profit for the
three months ended June 30, 2011 was therefore $6,106.



Our revenues
decreased significantly for the three and six months ended June 30, 2012 compared to the first half of last year. This change
is due to the fact that we have been implementing several large commercial solar systems which are scheduled to be completed in
the later part of 2012. Under the completed contract method of accounting, no profit or income is recorded before substantial
completion of the work. The revenue for these projects will therefore be recognized after their completion. Due to the implementation
periods for different size of projects, revenue fluctuations like the one experienced during this quarter are a normal occurrence
for construction companies, including solar system integration companies.



We
use the Black-Scholes option pricing model to value our derivative liabilities upon issuing convertible notes with derivatives
and the subsequent remeasurement of our convertible notes at each reporting report. Due to these accounting procedures relating
to our convertible notes, we recognized $295,893 as interest expenses, a gain on derivative liabilities of $460,201, and a loss
on conversion of debt in the amount of $183,635 during the six months ended June 30, 2012.

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During
2011, due to the incentives provided by utility companies’ rebate programs and the Federal Recovery Act’s cash grant
program, we were able to obtain more large commercial installation projects than we did in 2010. We implemented over 1M watts
in solar installation projects in 2011, We have signed installation contracts for over 1.5M watts in solar systems for 2012 and
they are currently under implementation. We expect these projects to be completed before the end of Q4, 2012.



Liquidity
and Capital Resources



As of June
30, 2012, we had current assets in the amount of $5,886,726, consisting of cash in the amount of $148,361, accounts receivable
of $3,933,256, inventory in the amount of $1,042,946, costs in excess of billings on uncompleted contracts of $715,567, prepaid
expenses and other current assets of $19,798, other receivables of $1,798, and restricted cash of $25,000. As of June 30, 2012,
we had current liabilities in the amount of $5,374,634. These consisted of accounts payable and accrued expenses in the amount
of $3,873,936, a derivative liability of $128,346, customer deposits of $698,738, a factoring payable of $309,475, convertible
debt of $91,098, related party notes payable of $171,308, accrued warranty of $69,737, the current portion of long term debt in
the amount of $29,460, and the current portion of a capital lease in the amount of $2,536. Our working capital as of June 30,
2012 was therefore $512,092.



Our accounts
payable and accrued expenses as of June 30, 2012 consisted of the following:



|Accounts
    Payable  |  | $ | 3,582,699 | 
|--------------------- |  | - | --------- | 
|Credit Card payable   |  |   | 26,743    | 
|Accrued vacation      |  |   | 24,193    | 
|Other accrued expense |  |   | 97,174    | 
|Payroll liabilities   |  |   | 10,400    | 
|Sales tax payable     |  |   | 132,727   | 
|Total                 |  | $ | 3,873,936 | 



As of June
30, 2012, our long-term liabilities were $65,277, which consisted of a loan owing to East West Bank with a long term portion of
$52,927 and the remaining long term obligations of a capital lease in the amount of $12,350. The principal amount outstanding
under the East West Bank loan accrues annual interest at the bank's variable index rate. The East West Bank loan is collateralized
by all business assets.



In September
2011, we entered a lease-to-own purchase agreement. We evaluated the lease at the time of purchase and determined that the agreement
contained a beneficial by-out option wherein we have the option to buy the equipment for $1 at the end of the lease term. Under
the guidance in ASC 840, we have classified the lease as a capital lease.   We used the discounted value of future
payments as the fair value of this asset and have recorded the discounted value of the remaining payments as a liability. As of
June 30, 2012 the capital lease payable outstanding was $14,866.



In addition,
we have received debt financing from Asher Enterprises, Inc. under a series of Convertible Promissory Notes. The notes, both converted
and currently outstanding, are as follows:



|Amount  |  | Issue
    date |          | Due
    date |  | Shares
    issued upon conversion |          | Conversion
    date (s) |  | Principal
    amount outstanding
|------- |  | -------------- | -------- | ------------ |  | --------------------------------- | -------- | ----------------------- |  | --------------------------------
|$75,000 |  |                | 10/03/11 |              |  |                                   | 6/27/12  |                         |  |                                 
|$75,000 |  |                | 10/26/11 |              |  |                                   | 7/20/12  |                         |  |                                 
|$78,500 |  |                | 02/15/12 |              |  |                                   | 11/21/12 |                         |  |                                 
|        |  |                |          |              |  |                                   |          |                         |  |                                 



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All Notes
issued to Asher Enterprises, Inc. bear interest at a rate of 8% per year and are convertible at a conversion price equal to 61%
or 40% of the Market Price of our common stock on the conversion date according to different note agreements.  For purposes
of the Notes, “Market Price” is defined as the average of the 3 lowest closing prices for our common stock on the
10 trading days immediately preceding the conversion date.  The number of shares issuable upon conversion of the Notes
is limited so that the holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued
and outstanding shares. This condition may be waived at the option of the holder upon not less than 61 days notice.



We have
determined that the conversion feature of these notes is not considered to be solely indexed to our own stock and is therefore
not afforded equity treatment. In accordance with ASC 815, we have bifurcated the conversion feature of the notes and recorded
a derivative liability. As of June 30, 2012 the value of the derivative liability was $128,346 and we recognized a gain on the
derivative of $460,201 for the quarter ended June 30, 2012.



In addition,
we have also recently received debt financing from Tonaquint, Inc. in the amount of $200,000 under a Convertible Promissory Note
as follows:





|Amount   |  | Issue
    date |          | Due
    date |  | Shares
    issued upon conversion |         | Conversion
    date (s) |  | Principal
    amount outstanding
|-------- |  | -------------- | -------- | ------------ |  | --------------------------------- | ------- | ----------------------- |  | --------------------------------
|$200,000 |  |                | 10/28/11 |              |  |                                   | 7/18/12 |                         |  |                                 
|         |  |                |          |              |  |                                   |         |                         |  |                                 





The note
issued to Tonaquint, Inc. bears interest at a rate of 8% per year and is convertible at a conversion price equal to 61% of the
Market Price of our common stock on the conversion date.  For purposes of the Note, “Market Price” is defined
as the average of the 3 lowest closing prices for our common stock on the 10 trading days immediately preceding the conversion
date.  The number of shares issuable upon conversion of the Note is limited so that the holder’s total beneficial
ownership of our common stock may not exceed 9.99% of the total issued and outstanding shares. This condition may be waived at
the option of the holder upon not less than 61 days notice.



On November
10, 2011, we entered into a Factoring and Security Agreement (the “Agreement”) with CapFlow Funding Group Managers
LLC (“CapFlow”). The Agreement is a credit facility for the purpose of factoring our accounts receivable. The cost
of this funding is a discount of 1.85% of the gross amount of each receivable factored for the first 30 days, and an additional
0.95% for each additional 15 day period thereafter until the factored account receivable is closed. Under the Agreement, 20% to
25% of the amount of the purchased invoices is reserved. Our obligations to CapFlow under the Agreement are secured by substantially
all of our assets. The total available credit line under the Agreement is $1,000,000. As of June 30, 2012, we had received total
advances under the Agreement of $1,041,381 on factored invoices totaling $1,321,838. As of June 30, 2012, accrued interest and
fees on this factoring line totaled $309,475. Our current available credit under the Agreement is $1,000,000. To date, discount
rates for invoices factored to CapFlow under the Agreement have ranged from 1.85% to 8.50%.



In order
to move forward with our business development plan set forth above, we will require additional financing in the approximate amount
of $4,500,000, to be allocated as follows:



|Initiate
    OEM Manufacturing                          |  | $ | 2,000,000 | 
|------------------------------------------------------- |  | - | --------- | 
|R&D Commercialization
    Costs                         |  | $ | 500,000   | 
|Expansion of Installation
    Business (3 new branches) |  | $ | 1,500,000 | 
|Additional working
    capital and general corporate    |  | $ | 500,000   | 
|Total
    capital needs                                 |  | $ | 4,500,000 | 





We will
require substantial additional financing in the approximate amount of $4,500,000 in order to execute our business expansion and
development plans and we may require additional financing in order to sustain substantial future business operations for an extended
period of time.  We currently do not have any firm arrangements for financing and we may not be able to obtain financing
when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible.

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We are currently
seeking additional financing through the sale of common equity, including the sale of common equity to Auctus Private Equity Fund,
LLC through an existing Draw-Down Equity Financing Agreement, and/or the issuance of short-term debt convertible to common equity
as discussed above. If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned
future growth of our operations.



Off
Balance Sheet Arrangements



As
of June 30, 2012, there were no off balance sheet arrangements.



Going
Concern



We have
experienced recurring losses from operations and had an accumulated deficit of $1,592,219 as of June 30, 2012. To date, we have
not been able to produce sufficient sales to become cash flow positive and profitable on an ongoing basis. The success of our
business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of
operations and/or upon obtaining additional financing. For these reasons, our auditor has raised substantial doubt about our ability
to continue as a going concern.



Critical
Accounting Policies



In
December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management
Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the
portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
We do not believe that any accounting policies currently fit this definition.



Recently
Issued Accounting Pronouncements



Our
management has considered all recent accounting pronouncements issued since the last audit of our financial statements. Our management
believes that these recent pronouncements will not have a material effect on our financial statements.



Item
3. Quantitative and Qualitative Disclosures About Market Risk



A
smaller reporting company is not required to provide the information required by this Item.



Item
4. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2012. This
evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Zhijian (James) Zhang
and our Chief Financial Officer, Mandy Chung. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of June 30, 2012, our disclosure controls and procedures are not effective. There have been no changes in our
internal controls over financial reporting during the quarter ended June 30, 2012.

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Management
determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and
number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation
and control procedures not regularly performed due to the lack of staff and resources.



Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure.



Limitations
on the Effectiveness of Internal Controls



Our
management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily
prevent all fraud and material error.   Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by
the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The
design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time,
control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate.

PART
II – OTHER INFORMATION



Item
1. Legal Proceedings



We
are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers,
directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse
to us.



Item
1A. Risk Factors



A
smaller reporting company is not required to provide the information required by this Item.



Item
2. Unregistered Sales of Equity Securities and Use of Proceeds



None.



Item
3. Defaults upon Senior Securities



None



Item
4. Mine Safety Disclosures



Not
applicable.



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Item
5. Other Information



After
the reporting period, on July 24, 2012, our board of directors and a majority of our shareholders approved an amendment to our
Articles of Incorporation which increased our authorized common stock to 7.5 billion shares. In addition, our board of directors
and a majority of our shareholders approved a reverse split of our issued an outstanding common stock on a basis of 1 for 500.
The reverse split was effective August 10, 2012. In connection with the reverse split, our common stock was assigned the following
new CUSIP number: 86802Y203.



Item
6. Exhibits



|Exhibit
    Number | Description
    of Exhibit                                                                                                                                                           
|------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1                | Certificate
    of Amendment                                                                                                                                                         
|31.1               | Certification
    of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002                            
|31.2               | Certification
    of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002                            
|32.1               | 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



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SIGNATURES



Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



|      | Sunvalley
    Solar, Inc.                                                                                                                                                                     
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                               
|Date: | August
                                                          20, 2012                                                                                                                     
|      |                                                                                                                                                                                               
|      | By:       /s/
                                                          Zhijian (James) Zhang
        Zhijian
        (James) Zhang
        Title:Chief
        Executive Officer and Director
|      |                                                                                                                                                                                               
|Date: | August
                                                          20, 2012                                                                                                                     
|      |                                                                                                                                                                                               
|      | By:       /s/
                                                          Mandy Chung
        Mandy
        Chung
        Title:Chief
        Financial Officer                                 



13