U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended April 30, 1999
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to .
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Commission file number 0-29356
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Southern States Power Company, Inc.
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(Name of small business issuer in its charter)
Delaware 33-0312389
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(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
830 Havens Road, Shreveport, Louisiana 71107
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (318) 221-5703
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Securities Registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
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None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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(Title of Class)
(Continued on Following Page)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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. Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S- B in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB.
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The Company had no revenues from operations during the fiscal year ended April
30, 1999.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant (4,157,500 shares) is approximately $20,787,500. The aggregate market
value has been computed by reference to the average bid and asked prices of such
stock ($5.00 per share) as of August 30, 1999 (which date is within 60 days of
the filing of this Form 10-KSB).
The number of shares outstanding of the issuer's Common Stock as of April 30,
1999 was 10,907,500. Of these shares, 2,000,000 were freely tradable and
8,907,500 were restricted.
Documents incorporated by reference: None.
This Form 10-KSB consists of Thirty Three Pages
Exhibit Index is Located at Page Thirty Two
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
Southern States Power Company, Inc. ("SSPC" or the "Company") was formed in
March 1998 as a private Louisiana corporation to develop and market innovative
energy and power technologies with a concentration on those products and
services that either improve or preserve the environment on a global basis.
After formation of the private company, Company Management sought out a public
vehicle and executed a merger with Pascal Ventures, Inc., a public company
organized under the laws of the state of Delaware on August 31, 1988. The merger
was consummated on July 13, 1998. Pascal Ventures, Inc. then changed its name to
Southern States Power Company, Inc. and the private Louisiana corporation was
dissolved. The Company then set out to execute its business plan.
The initial efforts and resources of the Company were dedicated toward
establishing the base business ventures of advanced transportation technologies
and alternative fuels. The vehicle manufacturing project was begun in Otay Mesa,
Tijuana, Baja California, Mexico with joint venture partner, Environmental
Process Advanced, S.A. de C.V., ("EPA") a private Mexican corporation. The
project began as a three-way joint venture between the Company (40%), EPA (20%)
and Global Green Cars, Inc., ("GGC") a private domestic corporation (40%). Due
to inability to continue financial contributions to the project, GGC sold its
interest to the Company in exchange for $40,000 cash dedicated to paying debts
owed by GGC to various creditors for expenses related to the project. The
Company recognized this opportunity as a significant chance to expand its stake
in the project for a nominal price. The Company then established a sister
operation in Sinaloa, Mexico.
The vehicle project is concerned with manufacturing composite body vehicles
in two styles, a pickup truck model and a sport utility/all-terrain vehicle
known as the "Rhino." Both styles can be outfitted with either a diesel or a
gasoline engine. At present, Volkswagen engines are being used to power the
vehicles.
The Company has also received orders for "gliders," or vehicles without
engines. These orders were placed by participants in the mining industry as the
vehicles are much more resistant to the corrosive atmospheres inherent in
underground mines. The mining industry represents a large market niche for
specialty vehicles if both vehicles and engines can meet strict new regulatory
requirements. Regulations developed by the Mine Safety and Health Administration
(MSHA) require vehicles to meet height, ground clearance and other requirements.
The engines must meet strict emission requirements and must be certified for use
in underground mines. The regulations will go into full effect starting in
November, 1999. This will require replacement of mining vehicles in a very short
time period that do not meet chassis or emission requirements. There are over
15,000 underground mining vehicles of this type that have to be replaced by the
end of November in the U.S. and an
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even larger international market. This is an ideal market opportunity for SSPC's
technology and production capacity.
The Company also entered the alternative fuels market during fiscal year
1999 by commencing with the development of a biodiesel fuel division. Biodiesel
fuel is produced by combining vegetable or animal oils with standard diesel fuel
in an effort to eliminate or reduce particulates and other emissions associated
with the burning of straight diesel fuels.
One such blending oil is soybean oil. In recognition of this fact, the
Company located and purchased a soybean oil extraction plant in Culiacan,
Mexico. Thereafter, the Company located and leased a second facility. The lease
is for a ten-year period with an option to purchase at the end of the lease
term. The facilities were designed with state of the art equipment. The plants
are in excellent condition.
Equipment in the plants include oil extraction machinery, rail siding for
transportation, meal and seed/bean unloading and loading equipment, oil storage
tanks, boiler and steam generator equipment and offices and labs. The plants are
now fully refurbished and ready to enter into agricultural processing in the
near future. SSPC has reached confidential agreements with the farmers in the
region to allow purchase of soybeans at a set price for a 15 year period. This
will provide price certainty for raw material supplies that will help insure
plant profitability. Due to drought conditions that have prevailed in the area
of the processing facilities, the Company has not yet commenced operations.
By the end of fiscal year 1999, the Company had taken significant steps to
establish biodiesel blending facilities in the United States as a precursor to
entering the domestic biodiesel market. The decisions to develop biodiesel
divisions were based on favorable economic and political conditions.
Several laws and air quality management agreements that are just going into
effect in 1999 will sharply impact demand for biodiesel fuel:
1. The California Air Resources Board recently ruled that small
particulates are a toxic health hazard. New fines for exceeding smoke limits
will go into effect in April 1999 that will lead to $5000 fines for trucks on a
second violation, and forfeiture of the truck for failure to pay. Mexican trucks
crossing the border to deliver in Los Angeles will be a focus of enforcement
actions because engines and fuel are so dirty.
2. The Transportation Equity Act of the 21st Century allows fleets or heavy
duty equipment affected by alternative fuel mandates to meet requirements with a
diesel engine vehicle operating on 20% biodiesel, 80% petroleum. Off-road
heavy-duty equipment using alternative fuels will be given bid preferences and
equipment operating advantages on highway construction contracts. Funding is
available in the bill for purchase of biodiesel fuel and fueling facilities
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3. The Interstate Clean Transportation Corridor ("ICTC") consists of
interstate highway systems in four Western states (CA, AZ, NV, UT). The states
are working together to provide alternative fuel stations for trucks in the
ICTC. Many trucks may use biodiesel, particularly in California to avoid smoke
violation fines.
Biodiesel fuel can be used in existing diesel engines with little or no
modifications as an alternative fuel. Use of the fuel leads to much lower
emissions while also improving engine lubricity and providing other benefits.
The recent change in the alternative fuel requirements that allows 20% biodiesel
to qualify will create a strong demand among the more than 8 million fleet
vehicles in the U.S. All of these fleet vehicles will be impacted in the near
future by alternative fuel rules. Some fleets such as federal, state and utility
fleets must purchase 75-90% alternative fuel vehicles starting this year.
Biodiesel is the lowest cost alternative fuel option for many fleets
because diesel vehicles can be utilized and fueling infrastructure costs are
very low compared to natural gas, ethanol, methanol or electricity. Over 12
million gallons of diesel fuel is consumed daily in California alone. Even a
very small shift in the consumption of diesel represents a tremendous market
opportunity for biodiesel.
At present, government regulations, both state and federal, mandate
deployment of alternative fuel vehicles for certain operators. In certain cases,
government agencies will subsidize the purchase of alternative fuels by
consumers in an effort to offset the increased costs associated with their
manufacture. Over time, as the number of alternative fuel producers and users
increases and a stable market is established, the standard price should
stabilize at a competitive level such that the subsidies can be removed without
adverse effects on this new market.
In addition to its base business, the Company expanded into related
technologies in fiscal year 1999 by forming Global Fuel Cell Corporation
("GFCC") as a fifty-fifty joint venture with ANUVU, Inc. GFCC is concerned with
development and manufacture of an advanced fuel cell that is lighter, more
compact and delivers more energy than other competing fuel cells. The near term
and long term production costs are much lower than other technologies, which
will allow GFCC to bring this fuel cell to market in a near term time frame.
This is expected to result in a zero emission vehicle that has equivalent range
and life cycle cost versus a gasoline vehicle. Demonstration runs are planned
with a fuel cell powered mini-van in the next several months.
Fuel cells run on hydrogen gas that can be produced from a variety of fuels
including natural gas, propane, bio-diesel, methanol, and gasoline. Natural gas
is the fuel of choice and presents the least amount of problems in conversion.
Unfortunately, automobiles cannot carry enough natural gas tanks and therefore
have range limitations.
However, fuel cells also have very large market applications as stationary
power generation units. Power generator fuel cells are not confronted with the
same technical
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hurdles as automobile fuel cells. For example, stationary fuel cells can run
indefinitely on natural gas supplied by local gas mains, which presently exist
in most US cities. Secondly, the space limitations in automobiles do not present
a problem in stationary fuel cell applications. A third advantage of stationary
applications is that fuel cells running on natural gas can be combined with a
natural gas powered cogeneration unit. The waste heat of the natural gas
generator can be utilized for fuel cell operations in conjunction with other
cogeneration features.
In addition to these advantages, stationary source fuel cell applications
have the additional benefits of high efficiency and no pollution. Fuel cells can
generate pollution-free power at the customer site with no requirements for
connecting to the electric power grid or power lines, and they are independent
from power company outages. Furthermore, fuel cells produce electricity through
a chemical cycle by combining hydrogen with oxygen (from air) to form H2O (pure
water). This chemical cycle doubles the energy conversion efficiency over a
conventional burning fuel cycle. Therefore, fuel cells offer lower electrical
fuel costs which are the single largest cost component in the production of
electrical power.
The markets for stationary fuel cell generation are very large and include
base-load applications in government, military services and industry, emergency
power backup for mission critical applications including telecommunications,
medical care and facilities management, and alternative energy for small and
large residential environments.
The Company also furthered its stake in the crude oil and natural gas
industry by making a key acquisition in Louisiana. A long-term crude oil and
natural gas supply was necessary for development of other Company projects
related to alternative fuels. As such, Management negotiated for and executed
the purchase of a majority of the membership interests in two private Delaware
limited liability companies with operations in Louisiana on April 1, 1999. The
LLC's, known as Gamm Project #2-9, LLC and Gamm Project #3-24, LLC, are involved
in exploiting proprietary swabbing technology wherein oil and gas are extracted
from shallow wells in the Caddo Pine Island Field of Northwest Louisiana near
Shreveport. This acquisition will enable the Company to enjoy a steady supply of
crude oil and natural gas for testing and product development. The acquisitions
were made by tendering 485,447 shares of the Company's common stock unto the
members of the LLC's.
TECHNOLOGY PROTECTION POLICY AND DISCLAIMERS
It is the Company's policy to protect its technology by, among other means,
filing patent applications to protect technology which it considers important to
the development of its business. The Company will also rely upon trade secrets
and improvements, unpatented know-how, and continuing technological innovation
to develop and maintain its competitive position. Despite the Company's policy
to seek patent protection wherever appropriate, there can be no assurance that
the Company's patent applications will result in further patents being issued or
that, if issued, the patents will afford protection against competitors with
similar technology. There can also be no assurance that any patent issued
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to the Company will not be infringed or circumvented by others or that others
will not obtain patents that the Company would need to license or circumvent.
There can be no assurance that licenses, which might be required for the
Company's processes or products, would be available on reasonable terms or that
patents issued to others would not prevent the Company from developing and
marketing its products. In addition, there can be no assurance that the patents,
if issued, would be held valid by a court of competent jurisdiction. To the
extent the Company also relies upon unpatented trade secrets, there can be no
assurance that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the Company's
trade secrets or disclose such technology.
CONFIDENTIALITY POLICY AND DISCLAIMERS
Company agents and officials interact with many different technology
development entities and concerns. It is the policy of the Company to obtain
executed confidentiality agreements from those persons or entities to whom
Company trade secrets are revealed. The standard agreement includes provisions
prohibiting disclosure of proprietary information, both patented and unpatented.
With respect to Company employees and consultants, the agreements include
provisions prohibiting competition with the Company. It should be noted that
these agreements do not provide an absolute protection against the
misappropriation of Company information and secrets.
EMPLOYEES AND OFFICERS
The officers of the Company are Heber C. Bishop, President & Director,
William C. "Curt" Thurmon, Director, Robert B. Raines, Jr., Director, and
Antoinette Fowler, Secretary/Treasurer. None devotes their full time to Company
affairs. Generally, the officers of the Company have not been paid any regular
salaries or bonuses, although the Company occasionally has authorized
compensation to certain officers for services rendered and expenses personally
incurred on the Company's behalf. The officers and directors held stock in the
private corporation that merged with Pascal Ventures, Inc., and as such, became
shareholders in the Company as compensation for their efforts as officers and
directors. The Company employs a small staff at the Shreveport headquarters
(receptionist, investor relations director, corporate counsel).
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal place of business is located at 830 Havens Road,
Shreveport, Louisiana. This space is leased from Consolidated Energy
Investments, Inc. and includes an executive suite, a conference room, a file
area, and kitchen/bath facilities. The lease is month to month with automatic
reconduction absent notice from either the lessor or lessee of an intent to
terminate the lease.
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ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings which are pending or have been
threatened against the Company of which Management is aware.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The shareholders of the Company approved, by unanimous consent dated May
29, 1998, a (i) Share Exchange Agreement and Plan of Reorganization between the
Company and Southern States Power Company, Inc., a Louisiana corporation
("Southern"), wherein the Company issued an aggregate of 8,205,000 shares of its
"restricted" common stock to the former shareholders of Southern in exchange for
all of the issued and outstanding stock of Southern; and (ii) amending the
Company's Certificate of Incorporation to increase its authorized capitalization
to 50,000,000 shares of $.001 par value common stock and change the Company's
name to "Southern States Power Company, Inc."
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on the over-the-counter ("OTC") system
under the symbol "SSPC". The following table sets forth, for the periods
indicated, the closing high and low bid prices for the Common Stock. The prices
represent inter-dealer prices, without adjustment for retail markups, markdowns,
or commissions and may not represent actual transactions. The National Quotation
Bureau, Inc. has provided the information.
BID PRICE
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HIGH LOW
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Fiscal Year Ended April 30, 1999
First quarter* $ n/a $ n/a
Second quarter* n/a n/a
Third quarter* n/a n/a
Fourth quarter 7.50 3.25
Fiscal Year Ended December 31, 1997
First quarter* $ n/a $ n/a
Second quarter* n/a n/a
Third quarter* n/a n/a
Fourth quarter* n/a n/a
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* The Company's stock was not approved for trading until February 2, 1999.
On April 30, 1999, there were approximately 84 record owners of the
Company's Common Stock.
The Company has never paid a cash dividend and does not anticipate the
payment of cash dividends in the foreseeable future. Earnings are expected to be
retained to finance the Company's growth. Declaration of dividends in the future
will remain within the discretion of the Company's Board of Directors, which
will review its dividend policy from time to time.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: FISCAL YEAR 1999
The Company had no revenue from business operations during the fiscal year
1999. The Company incurred research and development expenses in the amount of
$326,770 and consulting fees in the amount of $881,287. General operating
expenses totalled $612,654 for fiscal year 1999. Approximately $1,183,598 was
invested in the automobile manufacturing joint venture described in PART I, Item
1 of this Report.
LIQUIDITY
The Company's net working capital position (current assets less current
liabilities) is $33,089. Of the Company's $17,439 in current liabilities,
approximately $2,200 results from rent, approximately $1,125 results from
utilities, approximately $10,000 results from legal fees and approximately
$3,000 results from payroll liabilities. None of these three groups (holding a
total of approximately $16,325 in current liabilities) has made or is expected
to make a demand for cash payments until the Company's cash position improves.
PRIVATE PLACEMENTS CLOSED
The Company closed the following private placements during fiscal year
1999:
During the second quarter of fiscal year 1999, the Company closed the
merger between Pascal Ventures, Inc. and Southern States Power Company, Inc.
(the private Louisiana corporation).
During the second quarter of fiscal year 1999, Joseph Wilhelm tendered
$150,000 for 150,000 shares of stock at $1.00 per share but did so via a
subscription agreement whereby the Company must issue the shares no later than
December 31, 1999.
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During the third and fourth quarters of fiscal year 1999, Hemisphere Group
tendered $270,000 for 270,000 shares of stock at $1.00 per share but did so via
a subscription agreement whereby the Company must issue the shares no later than
December 31, 1999. These shares were purchased pursuant to Hemisphere Group's
option agreement with the Company.
During the fourth quarter of fiscal year 1999, the Company sold 50,000
shares of stock for $50,000 at $1.00 per share to Hemisphere Group. These shares
were purchased pursuant to Hemisphere Group's option agreement with the Company.
Also during the fourth quarter of fiscal year 1999, the Company transferred
127,500 shares of stock to Thomas McBurnie, President of Thunder Ranch, Inc., in
exchange for ownership of automobile body design molds for use in the Company's
Otay Mesa composite vehicle manufacturing joint venture.
Subsequent to the end of fiscal year 1999, the Company purchased a majority
of the membership interests in Gamm Project #2-9, LLC and Gamm Project #3-24,
LLC in exchange for 485,447 shares of stock.
JOINT VENTURE ACTIVITIES
The Company entered into a joint venture agreement with ANUVU, Inc. to
develop, manufacture and market advanced fuel cells. Each participant owns fifty
percent of the venture. The Company provides monetary and technical support to
the project. It is anticipated that products will be available in the
marketplace in early 2000.
Composite Vehicle Manufacturing Venture
Initially, the Company entered into this venture as a forty percent
participant. Environmental Process Advanced, S.A. de C.V., a Mexican
corporation, owns twenty percent of the venture. Original forty percent
participant Global Green Cars, Inc. was unable to continue as a participant and
the Company purchased its interest by paying off accrued debts of GGC related to
the venture.
PATENT ACTIVITY
No patent applications were made during fiscal year 1999; however, research
was underway that should lead to patentable results. The Company will
aggressively pursue any patent opportunities as they arise.
ADDITIONAL FUNDING IS REQUIRED
The Company's business plan will require additional funding for future
development. The funds to be raised will be used in the following areas: 1)
buildout of the Company's
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biodiesel processing facilities, 2) relocation of the Company's composite
vehicle manufacturing facility, 3) entry into the composite body vehicle market,
4) development of the fuel cell venture, and 5) at such time as funds become
available, commencement of payment of salaries to Company officers.
YEAR 2000 ISSUE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. As a result, many companies will be required to undertake major projects
to address the Year 2000 issue. Because the Company has no assets, including any
personal property such as computers, it is not anticipated that the Company will
incur any negative impact as a result of this potential problem.
FORWARD-LOOKING STATEMENTS
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this report and in any other statement
made by, or on the behalf of the Company, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such statements may address future events and
conditions concerning, among other things, the Company's results of operations
and financial condition; the consummation of acquisition and financing
transactions and the effect thereof on the Company's business; capital
expenditures; litigation; regulatory matters; and the Company's plans and
objectives for future operations and expansion. The Company disclaims any
obligation to update forward looking statements.
ITEM 7. FINANCIAL STATEMENTS
The financial statements are filed at the end of this report and are
incorporated herein by reference.
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ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table identifies the name, ages, and positions of all
directors, officers, and persons nominated by management to become a director.
NAME AGE POSITION
Heber C. Bishop 70 President, Director
William C. Thurmon 41 Director
Robert B. Raines, Jr. 41 Director
Antoinette Fowler 38 Secretary/Treasurer
All current directors are serving one-year terms and are subject to
re-election at the annual meeting of shareholders. Officers are elected to
serve, subject to the discretion of the Board, until their successors are
appointed.
Heber C. Bishop, has been President and Director of Southern States Power
Company, Inc. since its inception in 1998. Mr. Bishop has spent fifty-two years
selling and promoting heavy equipment and machinery relating to the generation
of electricity, including Skinner Steam Engines, Union Iron Works steam
generators and all supporting structural steel, ductwork and breaching relating
to central power generating equipment. His career includes the sales of high
pressure pumps, valves and control equipment relating to the power plant
industry. In August 1990, Mr. Bishop embarked on the development of a major
electric co-generation plant. As a result of this 2 1/2 year effort, a 90
megawatt power plant was built in Henderson, Nevada at a cost of $110,000,000.
The plant has been generating power for the past six years for delivery to the
local utility. This co-generation plant is reputed to be one of the best and
most successful plants of its kind in the United States. In addition to these
activities, Mr. Bishop serves as Vice President and Marketing Consultant to
Magna Energy Systems/Magna Group of Companies. Those entities deal with several
fields, including natural gas, housing development and development of a unique
burner to dispose of used auto and truck tires.
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William Curtis Thurmon, has been a Director of Southern States Power
Company, Inc. since its inception in 1998. He received his B.S. in Petroleum
Engineering from Louisiana Tech University in 1980. After graduation, Mr.
Thurmon joined Amoco Production Company as an Engineer in Lafayette and New
Orleans, Louisiana, where his areas of expertise included management of daily
operations, drilling and development of oil fields and maximization of existing
production. While with Amoco, Mr. Thurmon achieved the classification of
Petroleum Engineer-Senior Grade. In 1984, Mr. Thurmon began a tenure with
Southland Royalty Company in Casper, Wyoming where he served as Operations
Manager for the Northern Rockies District. In 1986, Mr. Thurmon returned to
Louisiana and started his own oil and gas production company in the Caddo Pine
Island Field near Shreveport. There he assembled a package of over 1200
producing oil and gas wells. In time, Mr. Thurmon acquired and operated a
sixty-five mile gas gathering pipeline complete with a refrigeration plant and a
sales tape into a major national gas pipeline. In 1998, Mr. Thurmon sold his
business and joined Southern States Power Company.
Robert B. Raines, Jr., has been a Director of Southern States Power
Company, Inc. since its inception in 1998. He received his B.S. in Geology from
Northeast Louisiana University in 1982. In 1983 he began a five-year tenure with
Monroe Well Service, Inc. in Shreveport, Louisiana where he served as Chief
Geologist and Operations Manager for over 1,700 oil and gas wells. He served in
the same capacity for Gemini Exploration, Inc. in Shreveport in 1989 before
taking a position with Consolidated Energy Investments, Inc. where he worked as
a Petroleum/Operations Geologist in 1994. Thereafter, he joined ALTEC
Environmental Consultants, Inc. as an Environmental Geologist where he
specialized in solid and hazardous waste remediation, the remediation of soil
and groundwater at underground storage tank sites and environmental permit
processes.
Antoinette Fowler, has been Secretary/Treasurer of Southern States Power
Company, Inc. since its inception of 1998. She received her Fine Arts Degree
from Northwestern Michigan College in Traverse City, Michigan in 1981. In 1987
she joined the staff of the Crescent Hotel in Phoenix, Arizona as Special Events
Manager and On-Site Recycling Coordinator. From 1990 to 1997, Ms. Fowler owned
and managed East of Phoenix, a full-service laundry facility located in
Cedarville, Michigan. In 1998, she moved to Shreveport, Louisiana and joined
Southern States.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than ten percent of the Company's stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than tenpercent owners are required
by applicable regulations to furnish the Company with copies of all Section
16(a) forms that they file.
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Based solely on a review of the copies of such forms furnished to the
Company or written representations from certain persons, the Company believes
that during the 1999 fiscal year all filing requirements applicable to its
current officers and directors were complied with.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for services
rendered by certain officers for the fiscal years indicated.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Other Annual
Name and Position Year Salary Bonus Comp
----------------- ---- ------ ----- ----
Heber C. Bishop Fiscal 99 -0- -0- -0- (1)
President and Fiscal 98 N/A N/A N/A
Director Fiscal 97 N/A N/A N/A
William C. Thurmon Fiscal 99 -0- -0- -0- (2)
Director Fiscal 98 N/A N/A N/A
Fiscal 97 N/A N/A N/A
Robert B. Raines, Jr. Fiscal 99 -0- -0- -0- (3)
Director Fiscal 98 N/A N/A N/A
Fiscal 97 N/A N/A N/A
Antoinette Fowler Fiscal 99 -0- -0- -0- (4)
Secretary/Treasurer Fiscal 98 N/A N/A N/A
Fiscal 97 N/A N/A N/A
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(1) During 1998, 50,000 shares of stock in the Company were issued to Mr.
Bishop.
(2) During 1998, 30,000 shares of stock in the Company were issued to Mr.
Thurmon.
(3) During 1998, 20,000 shares of stock in the Company were issued to Mr.
Raines.
(4) During 1998, 5,000 shares of stock in the Company were issued to Ms. Fowler.
There are no long-term compensation arrangements for officers and
directors.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth the holdings of Common Stock (the Company's
sole class of stock) as of April 30, 1999 by (i) each person who held of record,
or was known by the Company to own beneficially, more than five percent of the
outstanding Common Stock of the Company, (ii) each director, (iii) each director
nominee, and (iv) all directors and officers as a group. Unless otherwise
indicated, all shares are owned directly. Common Stock that is "beneficially
owned" includes all the Common Stock that the person has the right to acquire
within 60 days of April 30, 1999, and stock for which the person has voting
rights alone. The percentage ownership for any person assumes that all the stock
that could be acquired by that person, by option or warrant exercise or
otherwise, is in fact outstanding and that no other stockholder has exercised a
similar right to acquire additional shares. The number of shares of stock in
this table is 6,160,000 which includes 6,160,000 shares outstanding on April 30,
1999, plus all shares represented by options or warrants currently held by the
directors listed in the table.
BENEFICIAL OWNERS OF COMMON STOCK
Names and Addresses Amount of Percentage
of Certain Beneficial Owners Beneficial Ownership of Class
- ---------------------------- -------------------- --------
Heber C. Bishop 50,000 .48%
6283 Tall Oaks Lane
Salt Lake City, UT 84121
William Curtis Thurmon 30,000 .29%
5701 Lakefront Drive
Shreveport, LA 71119
Robert B. Raines, Jr. 20,000 .19%
3707 Truett Blvd.
Shreveport, LA 71107
Antoinette Fowler 5,000 .04%
4440 Old Mooringsport Road
Shreveport, LA 71107
B.A.T. International 4,100,000 48.90%
477 Marina Parkway, Suite 218
Chula Vista, CA 91910
15
<PAGE>
Names and Addresses Amount of Percentage
of Certain Beneficial Owners Beneficial Ownership of Class
- ---------------------------- -------------------- --------
Southern States Gas 1,150,000 11.20%
Gathering System, LLC
830 Havens Road
Shreveport, LA 71107
Southern States Oil 700,000 6.80%
Production, LLC
830 Havens Road
Shreveport, LA 71107
All Officers and 105,000 1.00%
Directors as a
Group (4 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation S-B.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by Item 601 of Regulation S-B.
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1* Certificate of Incorporation
3.2* Bylaws
3.3 Certificate of Amendment of Certificate of Incorporation
EX-27 Financial Data Schedule
*Filed with the Securities and Exchange Commission in the Exhibits to Amendment
No. 2, Form 10-SB, filed on January 22, 1998, and are incorporated by reference
herein.
(b) Reports on Form 8-K.
The Company filed three reports on Form 8-K during its fiscal year ended
April 30, 1999 as follows:
16
<PAGE>
Form 8-K Report dated July 24, 1998, wherein it reported that (i) effective
July 13, 1998, pursuant to a definitive agreement, the Company acquired all of
the issued and outstanding shares of Southern States Power Company, a Louisiana
corporation, in exchange for the issuance of 8,205,000 shares of its
"restricted" common stock; and (ii) change of the Company's name to "Southern
States Power Company, Inc."
Form 8-K Report dated October 15, 1998, wherein it reported (i) the
formation of a Mexican joint venture subsidiary named "Southern States Power
Company - Mexico, S.A. de C.V. to promote the Company's technologies and
products; (ii) the entering into of an agreement with Environmental Process
Advanced, S.A. de C.V. and Global Green Cars, Inc. to clarify the relationships,
rights and obligations with respect to a vehicle manufacturing joint venture in
Mexico; (iii) change in the Company's fiscal year end from April 30 to December
31; and (iv) provided the consolidated financial statements of the Company
following consummation of its stock purchase agreement with Southern States
Power Company, a Louisiana corporation.
Form 8-K Report dated February 9, 1999, wherein it reported that, after
consultation with the Company's accountants, the Company rescinded the change in
its fiscal year end previously adopted by the Board of Directors and
reestablished April 30 as the Company's fiscal year end.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Southern States Power Company, Inc.
/s/ Heber C. Bishop
--------------------------------------
Heber C. Bishop, President
Date: October 12, 1999
In accordance with 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.
Signatures Capacity in Which Signed Date
---------- ------------------------ ----
/s/ Heber C. Bishop President and Director October 12, 1999
- -----------------------------
Heber C. Bishop
/s/ Antoinette Fowler Secretary/Treasurer October 12, 1999
- -----------------------------
Antoinette Fowler
/s/ William C. Thurmon Director October 12, 1999
- -----------------------------
William C. Thurmon
/s/ Robert B. Raines, Jr. Director October 12, 1999
- -----------------------------
Robert B. Raines
18
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
FINANCIAL STATEMENTS
YEAR ENDED APRIL 30, 1999
CONTENTS
Page
Independent Auditors' Report 1
Financial Statements:
Balance Sheet 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-12
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Southern States Power Company, Inc.
Shreveport, Louisiana
We have audited the accompanying balance sheet of Southern States Power Company,
Inc. as of April 30, 1999, and the related statements of operations,
stockholders' equity and cash flows for the year then ended and for the period
from inception on March 13, 1998 to April 30, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southern States Power Company,
Inc. as of April 30, 1999, and the results of its operations and its cash flows
for the year then ended and for the period from inception on March 13, 1998 to
April 30, 1998 in conformity with generally accepted accounting principles.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
September 15, 1999
1
20
<PAGE>
<TABLE>
SOUTHERN STATES POWER COMPANY, INC.
BALANCE SHEET - APRIL 30, 1999
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 50,153
Prepaid expenses 375
----------
Total current assets $ 50,528
Property and equipment, net 32,000
Notes receivable:
B.A.T. and Subsidiaries, related parties 93,000
Other 7,721
----------
100,721
Less allowance for doubtful accounts 100,721
----------
Total notes receivable -
Goodwill, net 1,030,000
----------
$1,112,528
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities -
accounts payable and accrued expenses $ 17,439
Stockholders' equity:
Common stock; $0.001 par value, 50,000,000
shares authorized, 10,907,500 shares issued
and outstanding $ 10,907
Additional paid-in capital 4,061,343
Accumulated deficit (2,977,161)
----------
Total stockholders' equity 1,095,089
----------
$1,112,528
==========
See accompanying independent auditors' report and notes to financial statements.
</TABLE>
2
21
<PAGE>
<TABLE>
SOUTHERN STATES POWER COMPANY, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
Period from
inception on
Year ended March 13, 1998 to
April 30, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Revenue $ - $ -
Cost of revenue - -
----------- -----------
Gross profit - -
----------- -----------
Operating expenses:
Research and development 326,770 -
Consulting fees 881,287 -
Loss on investment in joint venture in Mexico
with related party 1,183,598 -
General and administrative expenses 612,654 -
----------- -----------
3,004,309 -
----------- -----------
Loss before dividend income (3,004,309) -
Dividend income 27,148 -
----------- -----------
Net loss $(2,977,161) $ -
=========== ===========
Net loss per share - basic and diluted $ (0.30) $ -
=========== ===========
Weighted average number of shares outstanding -
basic and diluted 9,910,123 7,860,000
=========== ===========
See accompanying independent auditors' report and notes to financial statements.
</TABLE>
3
22
<PAGE>
<TABLE>
SOUTHERN STATES POWER COMPANY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED APRIL 30, 1999
<CAPTION>
Additional Total
Common stock paid-in stockholders'
Shares Amount capital Deficit equity
---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sale of common stock
and options 1,000,000 $ 1,000 $ 999,000 $ $ 1,000,000
Issuance of stock in exchange
for technology rights at
inception 5,000,000 5,000 (5,000)
Issuance of stock in exchange
for services 10,000 10 9,990 10,000
Net loss for the period from
inception to April 30, 1998 - -
---------- -------- ---------- ----------- -----------
Balance at April 30, 1998 6,010,000 6,010 1,003,990 1,010,000
Issuance of stock in exchange
for oil and gas volume
purchase rights at inception 1,850,000 1,850 (1,850)
Sale of common stock 387,000 387 386,613 387,000
Issuance of stock in exchange
for services 235,500 235 825,015 825,250
Issuance of common stock per
stock exchange agreement 2,000,000 2,000 1,398,000 1,400,000
Exercise of common stock
options 425,000 425 449,575 450,000
Net loss for the year ended
April 30, 1999 (2,977,161) (2,977,161)
---------- -------- ---------- ----------- -----------
Balance at April 30, 1999 10,907,500 $ 10,907 $4,061,343 $(2,977,161) $ 1,095,089
========== ======== ========== =========== ===========
See accompanying independent auditors' report and notes to financial statements.
</TABLE>
4
23
<PAGE>
<TABLE>
SOUTHERN STATES POWER COMPANY, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Period from
inception on
Year end March 13, 1998 to
April 30, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Cash flows provided by (used for) operating activities:
Net loss $(2,977,161) $ -
----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities
Stocks issued in exchange for services 825,250 -
Amortization of goodwill 370,000 -
Write off of organization costs 10,000 -
Changes in assets and liabilities:
(Increase) decrease in assets -
prepaid expenses (375) -
Increase (decrease) in liabilities -
accounts payable and accrued expenses 17,439 -
----------- -----------
Total adjustments 1,222,314 -
----------- -----------
Net cash used for operating activities (1,754,847) -
Cash flows used for investing activities -
purchase of property and equipment (32,000) -
Cash flows provided by financing activities -
proceeds from issuance of common stock 837,000 1,000,000
----------- -----------
Net increase (decrease) in cash (949,847) 1,000,000
Cash, beginning of year 1,000,000 -
----------- -----------
Cash, end of year $ 50,153 $ 1,000,000
=========== ===========
Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock in exchange for services $ 825,250 $ 10,000
=========== ===========
Issuance of common stock during business combination $ 1,400,000 $ -
=========== ===========
See accompanying independent auditors' report and notes to financial statements.
</TABLE>
5
24
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED APRIL 30, 1999
(1) Summary of Significant Accounting Policies:
General:
Southern States Power Company, Inc. (the "Company") was
incorporated in the State of Louisiana on March 13, 1998 and has
elected April 30 as its year-end.
Merger with Pascal Ventures, Inc.:
On July 13, 1998, the Company entered into a Share Exchange
Agreement and Plan of Reorganization with Pascal Ventures, Inc.
Pursuant to this share exchange agreement, the Company merged into
Pascal Ventures, Inc. a publicly held corporation with no material
assets and liabilities, and no operations, in a stock for stock
exchange. The shareholders of Southern States Power Company
maintained effective control through ownership of shares
outstanding after the merger with Pascal Ventures, Inc. and
therefore, for accounting purposes, Southern States Power Company,
Inc. was treated as the acquirer. The name of Pascal Ventures,
Inc. was then changed to Southern States Power Company, Inc. and
is the surviving company.
This acquisition was accounted for using the purchase method of
accounting, and accordingly, the purchase price was allocated to
the assets purchased and liabilities assumed based upon their
estimated fair values on the date of acquisition. The excess
of the purchase price over the estimated fair values of the
net assets acquired was approximately $1.4 million, and was
recorded as goodwill, which is being amortized straight line over
3 years from the date of purchase.
Business Activity:
The Company plans to utilize agricultural products and "yellow
grease" reclamation by-products to produce and distribute
bio-diesel fuels in exchange for fees from customers. The
Company also plans to generate and distribute energy efficient
electric power supply to individual consumers and industrial
markets in exchange for fees from customers. During fiscal
1999, the Company had attempted to develop an electric vehicle
manufacturing plant through a joint venture in Otay Mesa,
Mexico. Such plans were abandoned resulting in a write off of
$1,184,000.
Summary of Analysis of Corporate Business Activity:
The Company is principally involved in four areas of product
development:
1. The distribution of biodiesel fuels under the name
brand OxyG B-60 Biodiesel utilizing agricultural
products and used vegetable oils from restaurants to
produce biodiesel;
2. Research and development of products to reduce diesel
engine emissions, and development of fuel cell
technology;
See accompanying independent auditors' report.
6
25
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED APRIL 30, 1999
(1) Summary of Significant Accounting Policies, Continued:
Summary of Analysis of Corporate Business Activity, Continued:
3. Manufacturing of alternative fuel vehicles for niche
or specialty markets not serviced by major
automakers; and
4. Electric power generation for the new energy
deregulation utility markets, and improved energy
production from renewable energy sources. The United
States Environmental Protection Agency (USEPA) and
the California Air Resources Board (CARB) have
approved OxyG B-60 Biodiesel for sales and marketing
in California and the United States.
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.
Fair Value:
Unless otherwise indicated, the fair values of all reported
assets and liabilities which represent financial instruments,
none of which are held for trading purposes, approximate
carrying values of such amounts.
Cash:
Equivalents
For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original
maturities of three months or less which are not securing any
corporate obligations.
Concentration
The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts.
See accompanying independent auditors' report.
7
26
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED APRIL 30, 1999
(1) Summary of Significant Accounting Policies, Continued:
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of:
The Company evaluates the recoverability of its long-lived
assets in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of."
SFAS 121 requires recognition of impairment of long-lived
assets in the event the net book value of these assets exceeds
the future undiscounted cash flows attributable to these
assets. The Company assesses potential impairments to its
long-lived assets when there is evidence that events or
changes in circumstances have made recovery of the asset's
carrying value unlikely. Should an impairment exist, the
impairment loss would be measured based on the excess of the
carrying value of the asset over the asset's fair value or
discounted estimates of future cash flows.
During the year ended April 30, 1999, the Company recorded
losses of approximately $1,184,000, related to its Otay Mesa,
Mexico joint venture. The Company had entered into a joint
venture with a subsidiary of B.A.T. International, Inc., a
founding shareholder, providing cash investments for the
development of an electric vehicle and fuel efficient
manufacturing plant. Due to operating difficulties, the plant
eased operations in early 1999, and all investments were
written off to expense. The Company believes that it can
utilize the experience gained with the Otay Mesa plant, to
re-establish facilities at the former Norton Air Force Base in
San Bernardino, California. Subsequent to year end, limited
production commenced at this plant, with management plans to
expand the facility to approximately 80,000 square feet.
Income Taxes:
Deferred income taxes are reported using the liability method.
Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax basis. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
As of April 30, 1999, the Company had net federal and state
operating loss carryforwards totaling approximately
$2,660,000, expiring in various years through 2019. Deferred
tax assets resulting from the net operating losses are reduced
in full by a valuation allowance.
Net Loss Per Share:
The Company has adopted Statement of Financial Accounting Standard
No. 128, Earnings per Share ("SFAS No. 128"), which is effective
for annual and interim financial statements issued for periods
ending after December 15, 1997. SFAS No. 128 was issued to
simplify the standards for calculating earnings per share ("EPS")
previously in APB No. 15, Earnings Per Share. SFAS No. 128
replaces the presentation of primary EPS with a presentation of
basic EPS. The new rules also require dual presentation of basic
and diluted EPS on the face of the statement of operations.
See accompanying independent auditors' report.
8
27
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED APRIL 30, 1999
(1) Summary of Significant Accounting Policies, Continued:
Net Loss Per Share, Continued:
Common stock equivalents have been excluded from the net loss
per share calculations because their effect would reduce loss
per share.
Accounting For Stock-Based Compensation:
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, which applies the fair value method
of accounting for stock-based compensation plans. In
accordance with this recently issued standard, the Company
expects to continue to account for stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. Proforma information
regarding net income and earnings per share under the
fair-value method has not been presented as the amounts are
immaterial.
New Accounting Pronouncements:
The Company has adopted Statements of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" and 131
"Disclosures about Segments of an Enterprise and Related
Information".
In April 1998, Statement of Position 98-5 "Reporting on the
Costs of Start-Up Activities" ("SOP 98-5") was issued. SOP
98-5 provides guidance on the financial reporting of start-up
costs and organization costs. The SOP is effective for
financial statements for fiscal years beginning after December
15, 1998. The FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", effective for
fiscal years beginning after June 15, 2000. Management does
not believe that adoption of these pronouncements will
materially affect the financial statements.
(2) Notes Receivable, Related Parties and Others:
The notes bear no interest and are due on demand. Management believes
that the amounts will not be collected within one year.
See accompanying independent auditors' report.
9
28
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED APRIL 30, 1999
(3) Goodwill:
A summary is as follows:
Goodwill $ 1,400,000
Less accumulated amortization 370,000
-----------
$ 1,030,000
===========
Amortization expense amounted to $370,000 for the year ended April 30,
1999 (none in the prior year).
(4) Investment in Joint Venture:
On September 25, 1998, the Company entered into a joint venture with
ANUVU, Inc., Rancho Cordova, California to commercialize the technology
for fuel cells. The joint venture was formed with a cash contribution
of $200,000 for a 50% non-controlling interest in the joint venture by
the Company and technology contributed by ANUVU. Net profits and losses
will be shared equally between the Company and ANUVU.
Included in the accompanying statement of operations is approximately
$326,000, including the $200,000 conveyed to ANUVU and approximately
$126,000 relating to an unrelated new project in Culiacan, Mexico, for
total research and development expense for the year ended April 30,
1999.
(5) Stockholders' Equity:
At inception, the Company issued 5,000,000 shares of its common stock
to B.A.T. International, Inc. in exchange for an exclusive worldwide
license to utilize the B.A.T. Dolphin Pulse Charge Technology for use
in its power generation and natural gas pumping applications.
In March of 1998, the Company entered into two agreements to exchange
1,150,000 and 700,000 shares, respectively, for oil and gas volume
purchase rights, the shares for which were issued in fiscal 1999. The
Company entered into a five-year agreement with Southern States Gas
Gathering System, LLC to purchase up to 3,250,000 cubic feet of natural
gas per day at $2,600 per million cubic feet in exchange for 1,150,000
shares of its common stock. The Company may extend this agreement for
another five years, at the end of the initial term, at a price of 5%
below the spot price of natural gas. The Company also entered into a
five-year agreement with Southern States Oil Production, LLC to
purchase up to 4,200 gallons of Louisiana light sweet crude oil per day
at a fixed price of $0.38 per gallon in exchange for 700,000 shares of
its common stock. The Company may extend this agreement for another
five years, at the end of the initial term, at a price of 5% below the
spot price of Louisiana light sweet crude oil.
Inasmuch as there was no cost basis at inception to the transfers of
the technology or oil and gas rights no amounts were recorded therefor
in the accompanying financial statements.
See accompanying independent auditors' report.
10
29
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED APRIL 30, 1999
(6) Stockholders' Equity, Continued:
During March 1998, the Company raised $1,000,000 through the issuance
of 1,000,000 shares of its common stock to The Hemisphere Group. An
option to purchase an additional 1,500,000 shares of the Company's
common stock were also granted, with an exercise price of $1.00 each
which equaled fair value at the date of grant, and expires in March
2000. During the year ended April 30, 1999, 25,000 options were
cancelled, no options were granted, 425,000 options were exercised at
approximately $1.00 each and 1,050,000 options were outstanding as of
April 30, 1999. Subsequent to April 30, 1999, the Hemisphere Group
exercised an additional 270,000 options for gross proceeds of $270,000.
(6) Commitments:
The Company leases its office space in Shreveport, Louisiana.
The following is a schedule by years of future minimum rental payments
required under operating leases that have noncancellable lease terms in
excess of one year as of April 30, 1999:
Year ending April 30,
2000 $ 3,000
2001 3,000
2002 3,000
2003 2,750
-----------
$ 11,750
===========
Rent expense under all leases amounted to $3,250 for the year ended
April 30, 1999.
(7) Subsequent Events:
Investment in GAMM Projects
---------------------------
Subsequent to April 30, 1999, the Company issued approximately 485,000
shares of its restricted common stock to acquire lease rights to
recover Louisiana crude oil from approximately 35 stripper oil wells
including 3 miles of new gas pipeline and refurbished storage and
separation oil facilities on 135 acres of land. As no readily
determinable fair market value of the lease rights is available, this
investment will be recorded at cost, measured by the estimated fair
value of the stock of $1.7 million.
Land Purchase Agreement
-----------------------
Subsequent to April 30, 1999, the Company entered into an agreement to
purchase 90 acres of land in the City of Rialto and State of California
Recycle Market Development Zone. The total purchase price of
approximately $4.7 million consists of $2,050,000 in future cash
payments and $2,650,000 in common stock issuance to be distributed over
18 months. The Company plans to use this site for multiple
environmental energy projects including production of biofuels from
recycled vegetable oils and electric power generation from waste
products.
See accompanying independent auditors' report.
11
30
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED APRIL 30, 1999
(7) Subsequent Events, Continued:
Sales Contract
--------------
Subsequent to April 30, 1999, the Company entered into an agreement
with an Arizona school district bus service to provide OxyG B-60
bio-diesel fuel for all buses in that district. The Company has
delivered its first shipment of 6,000 gallons of OxyG B-60 Biodiesel to
the Deer Valley Unified School District, the largest school district in
Arizona. United States Environmental Protection Agency and the
California Air Resources Board have also approved OxyG B-60 Biodiesel
for sales and marketing distribution in the United States and
California. .
Production Plant
----------------
The Company entered into a three-year lease agreement to occupy a
manufacturing plant in San Bernardino, California. Pursuant to this
agreement, the Company leases 40,000 square feet (option to expand up
to 80,000 square feet upon notification) at a monthly rate of $0.16 a
square feet. The Company plans to manufacture specialized automobiles
using its self developed alternative fuel technology.
Exclusive Distribution
----------------------
Subsequent to April 30, 1999, the Company entered into five one-year
agreements through assignment with NOPEC Corporation, a Florida
Corporation, to process, market and exclusively distribute up to four
million gallons of bio-diesel fuel in Arizona, California, Louisiana,
New Mexico, Nevada, Texas, Utah and Mexico. Pursuant to this agreement,
the Company will pay NOPEC a fixed price per pound of "yellow grease"
processed during the initial one-year period and the volume and price
will be renegotiated for each succeeding one-year term, thereafter. The
Company plans to sell its bio-diesel fuel in the industrial markets in
the above mentioned states and Mexico.
See accompanying independent auditors' report.
12
31
<PAGE>
SOUTHERN STATES POWER COMPANY, INC.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED APRIL 30, 1999
EXHIBITS Page No.
3.3 Certificate of Amendment of Certificate of Incorporation............33
EX-27 Financial Data Schedule ............................................34
32
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/01/1998
981208445 - 2171196
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
PASCAL VENTURES, INC., a corporation organized and existing by virtue of
the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That at a meeting of the Board of Directors of said corporation,
resolutions were duly adopted setting forth proposed amendments of the
Certificate of Incorporation of said corporation, declaring said amendments to
be advisable and calling a special meeting of the stockholders of the
corporation for consideration thereof. The resolution setting forth the
amendments is as follows:
Resolved that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FIRST" so that, as amended,
said Article shall be and read as follows: "THE NAME OF THIS CORPORATION SHALL
BE SOUTHERN STATES POWER COMPANY, INC."
Resolved that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FOURTH" so that, as amended,
said Articles shall be and read as follows: "THE TOTAL AUTHORIZED CAPITAL STOCK
OF THIS CORPORATION IS 50,000,000 SHARES OF $.001 PAR VALUE COMMON STOCK."
SECOND: That thereafter, pursuant to a resolution of the Board of
Directors, a special meeting of the stock holders of said corporation was duly
called and held upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 243 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendments.
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed on
this 27th day of May 1998.
BY: s/Bruce Crawford
----------------------------------------
Bruce Crawford, President
-------------------------------------------
PRINT NAME AND TITLE OF OFFICER
33
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED APRIL 30, 1999, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> APR-30-1999
<CASH> 50,153
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,528
<PP&E> 32,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,112,528
<CURRENT-LIABILITIES> 17,439
<BONDS> 0
0
0
<COMMON> 10,907
<OTHER-SE> 1,084,182
<TOTAL-LIABILITY-AND-EQUITY> 1,112,528
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,004,309
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,977,161)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,977,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,977,161)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
