U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: July 31, 2000
Commission File Number: 0-29356
SOUTHERN STATES POWER COMPANY, INC.
Exact name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
33-0312389
(IRS Employer Identification No.)
830 Havens Road
Shreveport, LA
(Address of principal executive offices)
71107
(Zip Code)
(318) 221-5703
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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
--- ---
The number of shares of the registrant's only class of common stock issued and
outstanding, as of the latest practicable date, July 31, 2000, was 8,768,419
shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three-month period
ended July 31, 2000, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Company's unaudited financial statements and notes thereto included herein.
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. The Company
disclaims any obligation to update forward-looking statements.
Overview
--------
The Company was originally organized as Pascal Ventures, Inc.
("Pascal") in the State of Delaware on August 31, 1988. In January 1998,
Pascal's Form 10-SB became effective and the Company became a reporting company
under the Securities Exchange Act of 1934, as amended. On July 13, 1998, the
shareholders of Pascal and Southern States Power Company, Inc., a Louisiana
corporation ("Southern States") approved the terms of a Share Exchange Agreement
and Plan of Reorganization between the two entities. As a result of the merger,
the total number of common shares outstanding as of July 13, 1998 (as of the
merger date) was 10,205,000. As a result of the Share Exchange agreement and
Plan of Reorganization between Pascal and Southern States, the shareholders of
Pascal authorized a 4 for 1 forward split of all pre-merger shares (from 500,000
to 2,000,000) and issued 8,205,000 shares of its restricted common stock to the
shareholders of Southern States. Accordingly, the Company had a total of
10,205,000 common shares of its stock outstanding after concluding the merger.
The Company changed its name from Pascal Ventures, Inc. to Southern States Power
Company, Inc.
Revenues
--------
The Company generated revenues of $4,531 from operations
during the three-month period ended July 31, 2000, as compared to $0 in the
three- month period ended July 31, 1999. Cost of revenues were $0 for the three
month period ended July 31, 2000 as compared to $0 for the same period in 1999.
Operating expenses were $868,828 for the three-month period
ended July 31, 2000, as compared to $263,426 for the same period in 1999, an
increase of $605,402. Most of this increase can be attributed to the NOPEC
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<PAGE>
investment. Funding to NOPEC has ceased even though SSPC has attempted to
perform under the terms of the agreement. NOPEC's management has also ceased
communication with the Company, making reconciliation or performance difficult.
As such, even though the Company is considering legal action, Management has
taken the position that the receivable may not be realizable and an allowance
for the receivable has been booked.
The net loss for the Company for the three-month period ended
July 31, 2000 was ($854,922) as compared to a net loss of ($263,324) for the
comparable period in 1999.
Plan of Operation
-----------------
During the first quarter of fiscal year 2001 the Company
continued to focus on developing its alternative fuel division. The management
of the Company has identified that division as the most promising and as such is
committed to concentrating personnel and resources on that division until such
time as the Company has become a substantial participant in the burgeoning
alternative fuels market.
The Company has amended its existing joint venture agreement
with Anuvu, Inc. to develop and market fuel cells. The entity known as Global
Fuel Cell Corporation was formed as a fifty/fifty joint venture between the two
companies with SSPC providing funding for Anuvu to complete its research and
development. No products have been introduced to the market as of this date and
Company management entered into an Agreement with Anuvu whereby investment
capital will be returned to the Company along with other valuable consideration.
The Company will also be awarded a membership position on the management board
of the joint venture entity, and will be licensed to further develop a portion
of the fuel cell technology.
In the area of environmentally safe waste remediation
processes, the Company has developed a conceptual project model for what has
been named an "Eco-Energy Park." The model is based on the principles of natural
ecosystems. In a natural ecosystem, the by- products of each plant and creature
provide essential materials for other members in the system. This same model can
work for an ecoenergy park. One company's waste might be useful for another
company or municipality in the park. For example, the waste and biosolids
collected by a municipality's water treatment plant could be processed by
another participant and turned into an energy-generating product. Another
participant could locate in the park and become a consumer of that product in
turn creating by-products that would be of use by another participant. The
EcoEnergy Park identifies and builds on the linkages between firms in the system
to coordinate the flows of energy and materials for maximum efficiency.
Resources and processes can be shared, such as refrigerated warehousing,
recycling/reclamation equipment, and heating and cooling systems. Joint
purchasing and sales of common products is more efficient and cost effective.
Transportation of goods and products becomes less expensive. In some cases, the
participants could share employees and consulting costs could be spread over
several budgets. In addition to saving time and money for the companies
involved, all of the above possibilities radically reduce the impact of industry
on the local environment.
ITEM 3. Liquidity and Capital Resources
Net cash used for operating activities for the three months
ended July 31, 2000 was $88,200 compared with $214,766 for the same period
during 1999. The change is attributed to provisions for doubtful accounts not
present over the same period last year.
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The Company's investing activities for the three months ended
July 31, 2000 provided cash of $17,900 compared with ($1,606) for the same
period last year. The increase is due to a loan made to the Company by a related
party. The Company also allowed OceanAir Environmental, LLC to make a direct
payment to NOPEC Corporation of $50,000, for which 25,000 shares of common stock
in the Company were issued to OceanAir.
The Company's financing activities are limited to private
placements of the Company's common stock pursuant to option agreements. For the
three month period ended July 31, 2000, the company received $70,300 from the
Hemisphere Group pursuant to an option agreement. This compares to $240,000 for
the same period in 1999. The difference is attributed to the individual option
holders' decisions whether to exercise their options. All proceeds derived from
the option placements were used for operating expenses.
At present the Company has no committed lines of credit.
Cash and cash equivalents at present are $1,000. The Company
anticipates that future cash flow from operations plus funds derived from the
private placement of common stock pursuant to option agreements will be adequate
to support the cash requirements of the Company.
The Company's common stock trades on the OTC Bulletin Board
under the symbol "SSPC." The Company's securities have been moderately traded
during this reporting period.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 30, 1999, the Company was named as a defendant in
a civil action filed in the Superior Court of the State of California, County of
San Diego, Central Judicial District in a case captioned Emerson Nichols, an
individual, versus B.A.T. International, a Utah corporation, and other named
defendants. The case number is GIC 739485. The plaintiff asserted claims for
breach of contract, fraud, unfair business practices and alter ego liability
arising out of a contractual relationship he had with defendant BAT
International, a former shareholder of the Company. The Company responded to the
complaint with a demurrer alleging that there is no cause of action for the
plaintiff against the Company. The demurrer was sustained and the plaintiff
filed an amended complaint. The Company responded with a general denial to the
claims and the matter was settled in July with no liability or exposure to the
Company.
In May 1999, the Company was named as a defendant in Norman F.
Alvis and Team Alvis, LLC v. B.A.T. International, et al.; Case #99AS06972;
Sacramento Superior Court. The suit was filed in December 1999 and was based on
factors similar to the above litigation; however, in this case former SSPC
President Heber C. Bishop was named as a defendant. Additionally, this plaintiff
alleges that SSPC and Bishop interfered with plaintiff's dealings with the stock
transfer agent when B.A.T. assigned some of its SSPC shares to plaintiff to pay
a debt to plaintiff then proceeded to cancel the assignment by telling the
transfer agent to hold the issuance. SSPC personnel and officers were in no way
involved and SSPC personnel and officers were never aware of the transactions
until the lawsuit was served on SSPC/Bishop in May 2000. The Company filed a
demurrer to the claims and an amended complaint was filed prior to the hearing
on the demurrer. The Company filed a general denial answer. No trial dates have
been set and the case is presently in the discovery phase. Prospects for
successful outcome are high and the exposure for potential loss is minimal.
Plaintiff is seeking damages for breach of contract, punitive damages, attorney
fees and costs.
4
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On January 25, 2000, the Company had entered into an executory
contract with NOPEC Corporation of Lakeland, Florida wherein loans were made by
the Company to NOPEC to fund operations of NOPEC pending purchase of NOPEC by
the Company. If the transaction were to be consummated, the loan payments would
be applied toward the purchase agreement price. The loans were secured by
promissory notes made by NOPEC. The Company has attempted to perform under the
terms of the agreement, and still considers the agreement to be valid and
enforceable. However, in recent weeks, it has been brought to the attention of
Company management that an unidentified third party has been negotiating with
NOPEC to effectuate the transfer of technology and assets from the NOPEC
holdings during the pendency of the agreement. NOPEC has ceased to communicate
with the Company, making reconciliation or performance difficult. As such, the
Company is considering options, which may involve potential legal action to
preserve the rights of the Company under the terms of the agreement.
ITEM 2. CHANGES IN SECURITIES
On June 2, 2000, the Company issued 25,000 shares of stock to
OceanAir Environmental pursuant to an option agreement wherein OceanAir tendered
$50,000 to the Company. Also, in the first quarter the Hemisphere Group
exercised an option of $70,300 at the option price of $1.00 per share and these
shares have not been issued to date.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for
the three month period ended July 31, 2000.
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<TABLE>
SOUTHERN STATES POWER COMPANY, INC.
BALANCE SHEET - July 31, 2000
<CAPTION>
Unaudited
July 31, 2000
-------------
<S> <C> <C>
ASSETS:
Current assets:
Cash $ 1,000
Accounts receivable 4,531
Other receivables 30,853
----------
Total current assets $ 36,384
Property and equipment, net 8,638
Goodwill, net 447,400
Notes receivable - NOPEC 675,000
Less allowance for doubtful accounts (675,000)
----------
Total notes receivable - NOPEC -
-------------
$ 492,422
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities-
Accounts payable and accrued expenses $ 38,523
Loan payable, related party 17,900
Notes payable, OceanAir Environmental, LLC,
due on demand 375,000
----------
$ 431,423
Common stock subscribed 103,300
Stockholders' deficiency:
Common stock; $0.001 par value, 50,000,000
shares authorized, 8,768,419 shares issued
and outstanding 8,768
Additional paid-in capital 8,163,531
Accumulated deficit (8,101,766)
Accumulated other comprehensive loss (112,834)
----------
Total stockholders' equity (42,301)
----------
$ 492,422
==========
</TABLE>
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<PAGE>
<TABLE>
SOUTHERN STATES POWER COMPANY, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
For the three For the three
months ended months ended
July July
31, 2000 31, 1999
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Revenues $ 4,531 $ -
Cost of Revenues - -
----------- -----------
Gross profit 4,531 -
Operating expenses:
Research and development - 26,200
Provision for doubtful accounts 675,000 -
Consulting fees 30,642 24,618
Loss on investment in joint
venture in Mexico
with related party - 13,680
General and administrative
expenses 163,186 198,928
----------- -----------
868,828 263,426
----------- -----------
Loss from operations (864,297) (263,426)
Interest and dividend income 16,875 102
Interest expense (7,500) -
----------- -----------
9,375 102
----------- -----------
Net loss $ (854,922) $ (263,324)
=========== ===========
Net loss per share -
basic and diluted $ (0.10) $ (0.02)
=========== ===========
Weighted average number
of shares outstanding -
basic and diluted 8,755,919 11,494,449
=========== ===========
</TABLE>
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<TABLE>
SOUTHERN STATES POWER COMPANY
STATEMENTS OF CASH FLOWS
<CAPTION>
For the three For the three
months ended months ended
July July
31, 2000 31, 1999
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows provided by (used for)
operating activities:
Net loss $ (854,922) $ (263,324)
----------- -----------
Adjustments to reconcile net income
(loss) to net cash provided by (used for)
operating activities:
Depreciation 831 -
Amortization of goodwill 116,600 116,667
Provision for doubtful accounts 675,000 -
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 27,549 -
Prepaid expenses - (11,147)
Other receivables (14,880) (50,000)
Notes receivable, NOPEC Corporation - -
(Increase) decrease in assets:
accounts payable and accrued expenses (38,378) (6,962)
----------- -----------
Total adjustments 766,722 48,558
----------- -----------
Net cash used for operating activities (88,200) (214,766)
Cash flows provided by (used for)
investing activities:
Acquisitiion of property and equipment - (1,606)
Loan payable, related party 17,900 -
----------- -----------
Net cash provided by (used for)
investing activities 17,900 (1,606)
----------- -----------
Cash flows provided by (used for)
financing activities:
Proceeds from issuance of common stocks - 240,000
Common stock subscribed 70,300 -
----------- -----------
Net cash provided by financing activities 70,300 240,000
----------- -----------
Net increase (decrease) in cash - 23,628
Cash, beginning of year 1,000 (775,097)
----------- -----------
Cash, end of year $ 1,000 $ (751,469)
=========== ===========
Supplemental disclosure of non-cash
investing and financing activities:
Issuance of common stock for
investment in GAMM projects $ - $ 1,700,000
=========== ===========
Direct payment made by OceanAir
Environmental, LLC to NOPEC Corporation
on behalf of the Company. OceanAir
received shares of common stock from the
Company for this payment $ 50,000 $ -
=========== ===========
</TABLE>
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Southern States Power Company, Inc.
(Registrant)
Date: October 13, 2000
S/Lawrence W. Taggart
-----------------------------------
Lawrence W. Taggart, President
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